Examples of Abusive Return Preparer Investigations - Fiscal Year 2014
The following examples of abusive return preparer investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
South Carolina Woman Sentenced for Tax Fraud
On November 22, 2013, in Columbia, S.C., Penny Maria Smith, aka Penny Maria Gardner, aka Penny Gardner Faile, of Kershaw, S.C. was sentenced to 30 months in prison, three years of supervised release and ordered to pay $82,665 in restitution. Smith pleaded guilty to fraud related to identification documents. According to evidence presented at the change of plea hearing, Smith, a tax preparer, filed false tax returns using others’ identifying information without their authority. Some of the victims had employed Smith as their tax preparer to file their taxes in previous years. However, Smith used their information or their dependents’ identifying information during additional tax years without their permission. Smith admitted to filing 86 false claims with the IRS, totaling $82,665 in loss.
Iowa Return Preparer Sentenced for Preparing and Filing Fraudulent Tax Returns
On November 19, 2013, in Cedar Rapids, Iowa, Victoria Jones, of Waterloo, was sentenced to 15 months in prison, one year of supervised release and ordered to pay $4,833 in restitution to the IRS. On August 16, 2013, Jones pleaded guilty to one count of aiding and assisting the preparation and filing of a false and fraudulent tax return. According to court documents, Jones, who owned and operated a tax return preparation business, prepared and filed a false tax return on behalf of a client, fraudulently increasing the amount of the client’s refund by falsely claiming inflated business expenses and itemized deductions and falsely claiming the client was entitled to a tax credit. Jones also filed multiple similarly false tax returns between 2007 and 2010. Finally, Jones admitted that the false and fraudulent tax returns she prepared and filed resulted in at least $30,000 in unwarranted refunds for her clients.
Owner of Mo’ Money Tax Franchise Sentenced on Conspiracy Charges
On November 19, 2013, in St. Louis, Mo., Jimi Clark, of Memphis, Tenn., was sentenced to 20 months in prison, three years of supervised release and ordered to pay $352,224 in restitution to the IRS. In July 2013, Clark pleaded guilty to conspiracy to commit tax fraud and aiding and abetting the preparation of false tax returns. According to court documents, Jimi Clark supervised the preparation of tax returns at his Mo' Money Tax franchise. The office filed at least 47 returns with false and inflated American Opportunity (AO) Credit line items. On each of the 47 returns, the taxpayers did not incur the educational expenses claimed and were not entitled to the AO credits. On the vast majority of the line items on which AO credits were claimed on the false returns, Clark and his preparers claimed exactly $3,765 in qualified education expenses. Out of 494 tax returns prepared for the 2009 tax year at Clark’s franchise, 288 returns claimed AO credits.
Texan Sentenced for Federal Tax Violations
On November 8, 2013, in Tyler, Texas, Racyna Antoinette Henry, of Longview, Texas, was sentenced to 24 months in prison and ordered to pay $277,364 in restitution. Henry pleaded guilty on May 14, 2013, to aiding and assisting in the preparation of fraudulent tax returns. According to information presented in court, in 2006, Henry began working out of her home as a tax return preparer with a company known as Preyear’s Tax and Check Cashing Services, LLC, which is based in Alabama. Around October 2007, Henry also managed and operated a company known as Henry’s Tax Service LLC out of her home. At some point in 2006, Henry admits that she began assisting in the preparation of false federal income tax returns. The false items contained false dependents, false child tax credits, false child and dependent care expenses, false losses on farming activities, and false earned income tax credits. The estimated tax loss related to the false federal income tax returns prepared with assistance from Henry from 2006 to 2010 was between $200,000 and $400,000.
Owner of Tax Service Sentenced for Tax Crimes
On November 5, 2013, in Columbus, Ohio, Neville Lyimo was sentenced to 18 months in prison, one year of supervised release and ordered to pay $4,471 in restitution to the IRS. On May 21, 2013, Lyimo was convicted of 10 counts of aiding and assisting in the filing of false federal income tax returns with the IRS. According to court documents, from 2003 through 2007, Lyimo was the owner, operator and a tax return preparer at Netask Tax Services located in Columbus, Ohio. Lyimo willfully prepared and filed his clients’ tax returns claiming false exemptions, deductions and credits for tax years 2004, 2005 and 2006. Lyimo did not review or explain the false items to his clients after the preparation was complete. The clients relied upon Lyimo to accurately prepare their tax returns. The false items resulted in larger refunds. Lyimo benefited from the larger refunds by receiving increased word-of-mouth referrals, which generated increased business volume and preparation fees.
Tax Preparer Sentenced for Filing More Than 1,300 Fraudulent Tax Returns
On November 5, 2013, in Tacoma, Wash., Cleo J. Reed, a tax preparer, was sentenced to 30 months in prison, three years of supervised release, of which six months will be served as home detention, and ordered to pay $2.4 million in restitution. Reed pleaded guilty in March 2013. According to court documents, Reed operated We 'B' Tax Service from October 2007 until July 2010. During that time period Reed filed more than 1,300 fraudulent tax returns resulting in a tax loss of $4.2 million. Reed had co-conspirators recruit low income clients for whom he could prepare false tax returns. He paid the recruiters a fee for each person they brought in to the scheme. Reed would inflate the wages that clients allegedly earned, so they could maximize their refund under the Earned Income Tax Credit. He submitted their tax returns at times without even meeting or speaking to the client.
Pennsylvania Tax Preparer Sentenced for Tax Fraud
On October 30, 2013, in Philadelphia, Pa., Friday James, of Yeadon, Pa., was sentenced to 36 months in prison and one year of supervised release. James was previously convicted on 26 counts of willfully aiding and assisting in the preparation of materially false federal income tax returns which attempted to defraud the government of more than $200,000. James was the owner of Frika Tax Services, which has since been barred from preparing federal tax returns for others. James prepared materially false federal income tax returns for tax years 2008 and 2009 which claimed that his clients were entitled to the First Time Homebuyer’s Credit and that they had incurred unreimbursed business expenses which resulted in tax refunds that the filers were not entitled to receive.
Nebraska Accountant Sentenced for Preparing Fraudulent Returns
On October 28, 2013, in Lincoln, Neb., Donald Ray Ondrak, of Lexington, was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay a $5,000 fine. According to court documents, Ondrak was a Certified Public Accountant in Lexington, Neb., who prepared tax returns for many farmers, businessmen, and businesses. In 2007, Ondrak filed a Form 1120 tax return for a medical equipment business that reflected a fraudulent $800,000 management fee expense as a “cost of labor.” This had the effect of lowering taxable income for the business, thereby reducing its tax liability by $254,715.
Michigan Tax Preparer Sentenced for Aiding In Fraudulent Returns
On October 17, 2013, in Detroit, Mich., Anthony Womack was sentenced to 12 months and one day in prison and ordered to pay $74,000 in restitution. Womack was previously convicted for preparing and filing false income tax returns. According to court documents, from 2008 through 2010, Womack prepared tax returns in Southfield, Michigan, under the name “Tax Consultants Inc.” Womack prepared and filed federal income tax returns in the name of various taxpayers for 2008 through 2010, which he knew were fraudulent. The returns were filed with inflated charitable contributions, false unreimbursed employee expenses and false education credits. In addition, Womack did not claim the income from his tax preparation business on his personal income tax returns.
Former Alabama Tax Return Preparer Sentenced for Tax Fraud and Aggravated Identity Theft
On October 24, 2013, in Montgomery, Ala., Bridgett Terry-Sankey was sentenced to 24 months and one day in prison. Terry-Sankey pleaded guilty on June 18, 2013, to one count of filing a false claim and one count of aggravated identity theft. According to court documents, Terry-Sankey worked as a tax preparer at a professional tax business in Montgomery. She prepared and electronically filed four false 2010 federal income tax returns using the means of identification of actual individuals without their knowledge or permission. Terry-Sankey then caused the false refunds to be deposited onto debit cards or issued as refund anticipation loans. She used the false refunds for her personal benefit.
Tax Preparer Sentenced for Defrauding the IRS
On October 21, 2013, in Los Angeles, Calif., Peter Chavez, a return preparer, was sentenced to 37 months in prison. In May 2013, Chavez pleaded guilty to two counts of aiding and assisting in the preparation of fraudulent tax returns. According to court documents, Chavez operated Tax Care 4 Less and later known as Tax Care For Less, in Burbank, Calif. Between 1999 and 2002, Chavez prepared, or supervised the preparation of, thousands of federal income tax returns for clients of his business, which he filed by electronic means with the IRS. In preparing these tax returns, Chavez claimed false or fraudulent itemized deductions, including false mortgage interest expenses, inflated state, local and personal property tax deductions, inflated deductions for charitable contributions and miscellaneous deductions, and false educational credits, which resulted in a reduced tax liability for Chavez’ client-taxpayers and inflated tax refunds.
Virginia Accountant Sentenced for Tax Fraud and Making False Statements to the Government
On October 18, 2013, in Alexandria, Va., Mohammad T. Al-Suqi, of Annandale, Va., was sentenced to 36 months in prison, two years of supervised release and ordered to pay $73,870 in restitution to the IRS. Al-Suqi was convicted by a trial jury on July 12, 2013, of aiding the preparation of a false income tax return, filing his own false income tax returns, and making false statements to federal agents. According to court records and evidence at trial, Al-Suqi owned and operated the tax preparation businesses, Ideal Accounting Solution and Mass Accounting and Tax Corp. For the tax years 2007 through 2010, Al-Suqi prepared and filed on behalf of his clients federal income tax returns that contained materially false and fraudulent information, including false itemized deductions on Schedule A and fraudulent education credits on Form 8863, all of which resulted in large tax refunds for the taxpayers. Al-Suqi received fees of between $100 and $250 per return and prepared thousands of federal income tax returns during the relevant time period. Al-Suqi also prepared a fraudulent tax return in 2011 for an undercover IRS agent posing as a taxpayer. In addition, Al-Suqi included false and fraudulent expenses and credits on his own 2008 and 2009 federal income tax returns. In 2013, after the IRS revoked his ability to file electronic tax returns, Al-Suqi continued to prepare and electronically file tax returns using an electronic filing number assigned to his wife. He lied to IRS agents when questioned about the activities.
Return Preparer Sentenced for Submitting False Claims
On October 2, 2013, in Madison, Wis., Rosella Collins, of Hollywood, Fla., was sentenced to 30 months in prison, three years of supervised release and ordered to pay $224,293 in restitution to the IRS and the Wisconsin Department of Revenue. Collins pleaded guilty on June 11, 2013, to submitting a false claim to the IRS. According to court documents, Collins, formerly of Janesville, held herself out as a tax preparer. Collins prepared accurate returns that she showed to her clients, but then never submitted to the IRS or the Wisconsin Department of Revenue. She then prepared and filed false returns with fictitious business expenses, withholdings, and other false entries that inflated the amount of the tax refund. Collins directed that the electronic payment of the refund be split into two amounts to go to two different accounts. One payment would go to the client and reflected the amount the client expected to see and the remainder went to an account belonging to Collins.