Some of our favorite recent tax fraud cases
Jacksonville, Fla.: Preparer Thomas Bandzul has been arrested and charged with 19 counts of assisting in preparing a false return, 13 counts of wire fraud, two counts of filing a false return and one count of aggravated ID theft.
According to the indictment, between January 2008 and May 2011, Bandzul allegedly false claimed deductions and credits for his clients that resulted in additional refunds. The indictment alleges that Bandzul prepared and furnished one return to clients, then made fraudulent claims on separate returns he e-filed.
By pre-arrangement, Bandzul allegedly was paid a specified fee by his clients out of the anticipated refunds. He then allegedly channeled the additional higher refunds through a bank clearinghouse as additional prep fees without his clients’ knowledge or consent. To avoid detection by the IRS, Bandzul allegedly used various IDs besides his own to e-file returns.
Tax loss is alleged to exceed $100,000.
Additionally, the indictment alleges that Bandzul committed tax fraud on his individual returns by claiming a total income of $14,945 on his amended 2008 return when actually he was paid $208,967 in fees, and by claiming $9,536 in total income on his 2009 tax return when he was paid $335,452 in fees.
Finally, according to the indictment, Bandzul committed aggravated ID theft by using a client’s name and Social Security number to e-file a fraudulent return as a preparer and commit wire fraud.
If convicted, he faces a maximum of three years in prison for each count of assisting in preparing a false return and each count of filing a false return. On each wire fraud count he faces up to 20 years in prison and he faces two years in prison for the aggravated ID theft charge, to be served consecutive to the wire fraud sentence. Bandzul was released on $25,000 bail.
Dallas: Preparer Shannon Tecoko Mays, 36, has been indicted on charges of conspiracy to commit wire fraud, according to published reports.
Reports said an investigation began in August 2012 after complaints to state and federal authorities from citizens in Port Arthur, Anahuac, Nacogdoches and Lufkin, Texas, regarding returns being fraudulently prepared on their behalf. Investigators reportedly learned that Mays was operating numerous offices nationwide under the names Syam Tax Services and Baby Momma Tax.
Although the principal office was in Dallas, Mays also operated or sought to operate satellite offices in numerous locations, including Fort Worth, Texas; Houston; New Orleans; Memphis, Tenn.; Atlanta; Chicago; and Los Angeles, reports added.
The indictment reportedly alleges that Mays targeted individuals generally exempt from having to file income tax returns because they would be less likely to discover a fraudulent return had been filed on their behalf. To further the scheme, Mays reportedly used “recruiters,” paying them $50 to $100 for every client they brought into Syam Tax.
Mays also allegedly altered taxpayers’ addresses and phone numbers on the returns to block IRS calls or correspondence and also used electronic deposits to ensure paper checks would not be mailed to the taxpayer, reports said, adding that for tax year 2011, Mays filed 4,226 returns claiming some $3,150,406.
If convicted, he faces up to 20 years in prison, reports added.
Natchitoches, La.: Preparer Lashanda E. Harris, 38, has received 18 months in prison and a year of supervised release for aiding and assisting in making and subscribing a false return.
According to evidence, from January 2012 to April 2012, Harris helped clients prepare returns for tax year 2011 that contained falsehoods concerning W-2s, federal withholdings, the EITC and the American Opportunity Tax Credit. Based on the returns, taxpayers obtained more than $100,000 in fraudulent refunds from which Harris received “kickbacks.”
Harris was also ordered to pay $101,795 in restitution. She pleaded guilty last October.
Tucson, Ariz.: Preparer Margarita Gomez, 32, has been sentenced to 30 months of imprisonment after pleading guilty to corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws.
Authorities said Gomez operated M & M Tax Service and schemed to obtain more than $200,000 in federal refunds through the preparation and filing of returns that falsified refund claims.
Gomez admitted to soliciting clients who did not have legal status to work or reside in the U.S., preparing false W-7s, and manufacturing other fraudulent documentation. She also intentionally filed clients’ federal individual income tax returns without signing them and directed some clients’ refunds to either her personal bank account or to a mail drop she controlled.
Gomez was also ordered to pay $200,408 in restitution to the IRS.
Mansfield, Texas: Preparer Michelle Johnson, 37, has received three years in prison and been ordered to pay more than $1.6 million in restitution following her guilty plea to one count of aiding and assisting in the preparation of false returns.
According to case documents, in January 2010 Johnson, owner of 3D Tax Services, prepared an individual’s 2009 federal return that inflated expenses associated with the taxpayer’s auto-detailing business. The actual expenses were thousands of dollars less than what Johnson claimed on the Schedule C that she prepared and attached to the return without the taxpayer’s knowledge.
New York: Preparer Joseph Barrios Jr., 50, will serve six months in jail in connection with filing false corporate tax returns. Barrios, a resident of Mahwah, N.J., who owns JB Tax (a.k.a. All Options Services) in the Bronx, pleaded guilty to aiding and assisting the preparation of false returns on behalf of clients.
From 2009 to 2013, the New York State Department of Taxation and Finance audited more than 5,000 returns filed by Barrios and stopped or recovered more than $6 million in fraudulent refunds claimed on those returns.
Under the terms of the plea bargain, Barrios agreed to a six-month jail sentence and five years of probation, during which he must refrain from preparing returns. He will also pay a $20,000 fine.
Durham, N.C.: A federal court permanently barred preparer Sharon D. Rhodes and her businesses, R&S Freedom Tax Service and Changing Faces Annoited Tax Services, from preparing returns for others.
According to the complaint, Rhodes prepared more than 600 returns for the 2008 through 2010 tax years. The complaint alleges that she prepared returns claiming false charitable deductions and false credits such as the EITC and education credits. Rhodes also allegedly improperly understated clients’ federal tax liabilities by listing phony businesses and fabricating expenses and losses for them.
The federal government contends that the false items inflated refunds for her clients and that the losses to the U.S. Treasury could reach $3 million.
Rhodes consented to the injunction without admitting guilt.
Douglas, Ga.: CPA and preparer Robin Hurst has been indicted on six felony counts for filing false returns, according to published reports.
Reports cite the Georgia Department of Revenue as being contacted last year by local CPA firm Hurst & Hurst about an employee they hired to run an “offsite walk-in tax-preparation business named Robin Hood Tax Service.” A week after hiring the employee, Robin Hurst (unrelated to anyone at Hurst & Hurst), the firm’s executives reportedly discovered that her returns were full of mistakes and fraud.
Robin Hurst was immediately fired, reports said, adding, “The investigation revealed that Robin Hurst had manipulated the returns to increase the refunds for unsuspecting taxpayers in an attempt to inflate her fees and to get the word out on the street that she could get bigger returns, thus increasing her client base.”
“The investigation focused on six of the most suspicious returns and revealed that they were all completed by Robin Hurst and without the consent of the taxpayer, and all were submitted to the state with fraudulent information and undocumented deductions. In these six specific incidents, the loss to the state was $6,869,” reports added.
Stone Mountain, Ga.: Preparer Joan Leger and her company have been permanently barred from preparing federal income tax returns.
The complaint alleges that Leger, who does business through The 1804 Tax Group Inc. and Liberty Tax Service and previously did business through J & Co., did since 2009 prepare almost 6,000 returns and understated clients’ tax liabilities and inflated their refunds by creating or inflating deductions, wages, income, expenses or credits to maximize the EITC. She also allegedly wrongly claimed other credits and deductions, including fabricated losses for non-existent businesses or businesses not owned and operated by the taxpayer and falsely claimed unreimbursed business expenses and educational tax credits.
The complaint alleges that Leger’s activities may have cost the federal government more than $2 million.
Leger and The 1804 Tax Group consented to the injunction. The judgment also requires she send copies of the injunction to her clients.
Rocky Mount, N.C.: Preparer Larry D. Hill Jr., 41, has been sentenced to 100 months of imprisonment to be followed by three years of supervised release. Hill pleaded guilty last August to one count of conspiring to submit false claims for federal income tax refunds to the IRS and one count of filing a false 2010 federal income tax return.
Investigators said Hill, owner and operator of Hill’s Tax Service with multiple offices in North Carolina, joined with co-conspirators to file more than 2,000 federal returns for clients between 2010 and 2012 that claimed, collectively, more than $14 million in refunds. Authorities said that many of the returns reported materially false information, including false dependents, income and withholdings, to maximize the EITC and inflate refunds.
Hill and his co-conspirators pocketed a portion of every fraudulent refund issued, according to the investigation, with Hill collecting an average of $1,000 or more from each unlawful refund.
Holly Hill, Fla.: Preparer Fane Dacosta, 40, has been found guilty of 25 counts of aiding in the preparation of false returns and of three counts of failure to file his personal tax returns.
According to evidence, Dacosta, owner of More Than Enaf Refund & Affordable Tax Services, prepared returns for tax years 2006 through 2009 for individuals on which he falsified deductions and credits to inflate clients’ refunds. In particular, he fraudulently claimed education credits for clients who never attended college and inflated itemized deductions. The IRS issued over $500,000 in undeserved refunds.
He also failed to file his personal returns in 2007, 2008 and 2009, despite earning a total of more than $600,000 in those years.
Dacosta, indicted last April, faces a maximum of three years of imprisonment for each count of aiding in the preparation of false returns and one year in prison for each count of failing to file a personal return. Sentencing is April 24.
Milwaukee: Published reports said that preparer Sunday Uwubiti has been charged with two counts of aiding and abetting the filing of false returns and that prosecutors have filed a plea agreement for Uwubiti, who ran Trustee Tax Service.
Authorities said he filed thousands of returns based on phony claims of self-employment that generated as much as $1 million in undeserved refunds, reports added.
According to the charges stemming from an undercover IRS investigation launched in 2011, Uwubiti and his staff falsely claimed self-employment, complete with fake records of expenses in made-up Schedule Cs, supposedly engaged in by clients, reports said. The returns usually claimed self-employment as barbers, hair stylists, nail technicians, hair braiders, cleaners, musicians and other occupations, reports added.
The returns were reportedly drafted to maximize claims for the EITC as well as the Additional Child Tax, Making Work Pay and American Opportunity credits. The business reportedly grew from 36 returns in 2008 to more than 800 in 2011, seeking more than $3.4 million in returns.
Reports said that in April 2011 agents raided Trustee and collected records that led to interviews with 79 clients. Those clients reportedly said that their returns were falsified and that Uwubiti or his employees would usually make up a name for a filer’s supposed business and fill in handwritten notes of expenses on blank forms they then would have customers sign.
The customers said Uwubiti charged $300, skimmed off refunds, and offered $35 to $50 for referring other customers to Trustee, reports said.
Uwubiti reportedly faces up to three years in prison and a $250,000 fine on each of the two counts to which he agreed to plead guilty.
Wilmington, N.C.: Preparer Eugenio M. David-Martinez, 55, has received 57 months in prison followed by three years of supervised release after pleading guilty last summer to making false statements to a federal agency and making false claims of U.S. citizenship.
According to the investigation, David-Martinez came to the U.S. from Cuba in 1980 and since then has lived illegally in this country. As a Cuban national, however, he is not deportable.
Since at least January 2007, he provided tax and accounting services to clients who were also mostly residing in the U.S. illegally. To file income tax returns, David-Martinez’s clients required ITINs; to obtain an ITIN, applicants must submit proof of ID and a tax reason for filing, which includes earning wages in the U.S. The IRS authorizes acceptance agents to help ITIN applicants, and to become an agent one must prove U.S. citizenship or legal residency and pass a suitability background check. In his applications to become an acceptance agent, David-Martinez lied that he was a U.S. citizen and bypassed the background check by lying that he had been authorized to practice before the IRS as an EA.
For the years 2007 through 2012, he filed some 18,536 ITIN applications for which he received $15 per application. He also filed approximately 12,985 returns for individuals with ITINs, for which he charged an average of $90 per return.
He also negotiated the IRS refund checks issued to the ITIN taxpayers. To advertise or offer this service for a fee, David-Martinez required a check-cashing license issued by the North Carolina Office of the Commissioner of Banks, and on his application again falsely claimed to be a U.S. citizen.
Aitkin, Minn.: Preparer Todd William Sterling, 45, has reportedly pleaded guilty to a felony charge of failure to pay his own taxes in 2009.
Reports said the charges stemmed from an investigation by the Minnesota Department of Revenue that concluded Sterling failed to pay taxes or file a return for the 2006, 2008 and 2009 tax years. The department reportedly said Sterling, owner of Aitkin Tax Service, told investigators that he completes about 400 to 500 returns annually and charges an average of $125 per return.
An investigator determined that $425,325 was deposited in Sterling’s bank accounts between 2005 and 2010, during three of the years he was accused of not filing returns, reports said. He did reportedly file a 2007 individual income tax return that showed he had sole-proprietorship gross receipts of more than $75,000 from a consulting business, sole-proprietorship gross receipts of more than $13,000 as a fishing, and rental income from a local property.
An investigator obtained IRS wage and income transcripts for Sterling that detailed gross income of $18,073 in 2008 and $55,840 in 2009, but showed no income from Sterling’s tax prep business, reports said.
Published reports added that Sterling must now pay more than $18,000 to his state government. Five additional felony charges were dismissed by the prosecution, reports added. A district judge also reportedly stayed imposition of a sentence, which allows the felony to be reduced to a misdemeanor conviction on Sterling’s record if he follows terms of probation for five years.
Sterling will pay $18,163.99 in restitution and serve 30 days in jail or complete 60 days of electronic monitoring, said reports, which added that he also must complete a gambling assessment and stay away from all gambling facilities until the restitution is paid.
