The owner of a New Jersey tax practice who primarily serviced expatriate clients has been sentenced to 24 months in prison for willfully preparing false tax returns for clients.
Sharif Mahfouz, 50, the owner of Expat Focus Consulting, which he operated out of his home in Brick, N.J., was also ordered by U.S. District Judge Joel A. Pisano to serve one year of supervised release and pay $1,152,253 in restitution to the Internal Revenue Service.
Mahfouz pleaded guilty last September to a charge of aiding and assisting in the preparation of false tax returns (see Tax Preparer Admits Preparing False Tax Returns for Expat Clients). His clients were mainly expatriated individuals who provided him with their financial information so he could prepare their tax returns. For tax years 2007 through 2012, Mahfouz admitted that he prepared some false tax returns by reporting either fabricated or inflated foreign earned income exclusion amounts and foreign tax credits. Mahfouz allegedly did not tell his clients the inflated tax refunds were being generated and kept the money for his own personal use.
In order to carry out the refund fraud, when Mahfouz prepared and submitted the false tax returns, he provided the IRS with an EFC Bank of America bank account and a mailing address for EFC in Nanuet, N.Y. When the IRS issued refunds based on these false tax returns, the refunds were either directly deposited into the EFC bank account or a refund check was mailed directly to the EFC address in Nanuet. Mahfouz had the mail forwarded from the Nanuet address to his residence in Brick, N.J. For the refunds issued by check, Mahfouz allegedly forged his clients’ signatures and deposited the checks into the EFC bank account. Mahfouz would then transfer the money from the EFC bank account to his personal bank account.
In some instances, Mahfouz also prepared accurate versions of his clients’ tax returns to show his clients, who reviewed and approved them. If the return showed a refund due, Mahfouz advised the client to apply the refund as a credit to the following year’s income taxes. If the return showed a tax due, Mahfouz instructed the client to write a check payable to EFC, which he was supposed to use to pay the IRS on behalf of the client. Instead, Mahfouz used the money for his own personal use.
In total, Mahfouz prepared and submitted to the IRS approximately 26 fraudulent tax returns on behalf of his clients, resulting in a tax loss to the IRS of approximately $1,152,253.
“As this year’s tax filing season begins, those who might consider preparing false tax returns should be aware of the extremely negative consequences as evidenced today,” said Jonathan D. Larsen, acting special agent in charge of IRS-Criminal Investigation’s Newark Field Office, in a statement. “Today’s sentencing of Mr. Mahfouz again emphasizes that the Internal Revenue Service and U.S. Attorney’s Office will continue our aggressive pursuit of those who would attempt to defraud America’s tax system.”
The investigation was conducted by IRS-Criminal Investigation’s Newark Field Office, under Larsen’s direction and the U.S. Attorney’s Office, under the direction of U.S. Attorney Paul J. Fishman. The government was represented by Assistant U.S. Attorney Sarah Wolfe.
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