New York tax preparer Rafael Alvarez, a.k.a. "the Magician," has pleaded guilty to one count of conspiracy to defraud the U.S. and steal government funds and one count of aiding and assisting in the preparation of a false and fraudulent U.S. individual income tax return in a record-setting fraud.
Alvarez, 61, of Cortland Manor, New York, and whose practice was in the Bronx, orchestrated a decade-long, $145 million scheme to file tens of thousands of federal individual income tax returns that included false information to fraudulently reduce clients' taxes.
"Alvarez became known as 'the Magician' by his customers for his supposed ability to make their tax burden disappear," said U.S. Attorney Edward Kim, adding that the case was one of the largest-ever tax frauds by a tax return preparer.
From at least around 2010 to around 2020, Alvarez was CEO, owner and manager of ATAX New York LLC (also d.b.a. ATAX New York-Marble Hill, ATAX Marble Hill, ATAX Marble Hill NY and ATAX Corporation). ATAX was a high-volume tax prep company that prepared some 90,000 federal returns for clients.
Alvarez both prepared returns for ATAX clients, and recruited, supervised and directed other ATAX personnel who prepared returns for clients. He oversaw what authorities called "a sweeping fraudulent scheme" where he and his employees submitted false information to the IRS in tax returns. This information included, among other things, bogus itemized tax deductions, made-up capital losses, phony business expenses and fraudulent tax credits.
Alvarez admitted he was a leader of the scheme and attempted to obstruct or impede the investigation when he and an ATAX employee lied to an IRS agent. His operation helped ATAX generate some $12 million in fraudulent proceeds.
Alvarez agreed to pay the IRS $145 million in restitution and forfeit more than $11.84 million in fraudulent proceeds he received from his criminal conduct.
He pleaded guilty before U.S. District Judge Paul Oetken to one count of conspiracy to defraud the U.S. and steal government funds, which carries a maximum of five years in prison, and one count of aiding and assisting in the preparation of a false and fraudulent U.S. individual income tax return, which carries a maximum sentence of three years.
Sentencing is scheduled for April 11.
