Examples of Abusive Return Preparer Investigations - Fiscal Year 2017

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. 

Tax Preparation Business Owner Sentenced for Filing False Tax Returns
On April 26, 2017, in Sacramento, California, Teresa Marty was sentenced to 120 months in prison, two years of supervised release and ordered to pay $9,500,492 in restitution to the IRS. Marty was the owner of Advanced Financial Services (AFS), a tax return preparation business. Marty conspired with her staff, Pamela Harris and Rebecca Bandera-Marty, to file fraudulent federal tax returns that claimed more than $60 million in refunds. Marty and Harris recruited clients by falsely representing that the clients could legally receive large refunds by filing tax returns using IRS Forms 1099-OID. AFS prepared false Forms 1099-OID that reported the clients’ debts as income, and used the  same amount as income tax withheld, resulting in significant claims for refunds to which the clients were not entitled. The scheme included clients from 26 states and caused the IRS to pay out over 40 tax refunds, totaling more than $9 million. Clients of AFS have been prosecuted in Arizona, Colorado, Florida, Georgia, Missouri, Oregon and Washington for filing false claims for refund that Marty and AFS prepared.

California Return Preparer Sentenced for Filing Fraudulent Tax Returns
On April 21, 2017, in San Diego, California, Marla Lynn Cunningham, a San Diego tax return preparer was sentenced to 37 months in prison, one year of supervised release and ordered to pay $91,867 in restitution to the Internal Revenue Service (IRS). Cunningham owned and operated Cunningham’s Tax Service, a tax preparation business located in El Cajon, California. From 2010 through 2012, Cunningham prepared fraudulent returns for her clients that reported fake business losses, charitable contributions, and medical, dental, education and unreimbursed employee expenses.  Cunningham caused a tax loss of approximately $1,237,943.

Mississippi Tax Return Preparers Sentenced for Filing Fraudulent Returns        
On April 20, 2017, in Gulfport, Mississippi, Allen Brice and Jeremi Washington were sentenced to 63 and 46 months in prison, respectively, for preparing fraudulent tax returns. In addition, Brice and Washington were ordered to serve one and three years of supervised release, respectively. Brice was ordered to pay restitution of $1,919,820 to the IRS and Washington was ordered to pay $1,954,352. Washington was a tax return preparer who owned and operated Flash Financial, and Brice was Washington’s sole employee. From 2009 through 2011, the two men filed fraudulent tax returns for multiple clients with the IRS that included bogus education expenses and retirement contributions, which they never discussed with their clients.  As a result, the clients received refunds they were not entitled to.  

Texas Tax Preparer Sentenced for Filing False Tax Returns, Again
On March 24, 2017, in Houston, Texas, Cedric Keith Oliphant, a local tax return preparer, was sentenced to 36 months in prison for a second time for preparing false tax returns and obstructing the IRS. Oliphant will also serve one year of supervised release and pay restitution of $400,457. Oliphant was previously sentenced to 33 months in prison on charges he prepared dozens of false 2006-08 client tax returns though Oliphant Tax Services. He was released on bond in that case under a condition that he had no further involvement in the preparation of tax returns other than his own. However, Oliphant resumed tax return preparation and continued to claim the same false deductions for unsuspecting clients while awaiting sentencing in the earlier case. As part of the scheme, Oliphant changed the name of his business to "Tax Services" to make it appear he had stopped preparing client tax returns and that someone else was the owner of his tax preparation business. Oliphant allegedly attributed the fees to the nominal owner of his tax office but manipulated those tax returns to make it appear the tax office had produced almost no taxable income. Oliphant established a series of bank accounts in the names of other in order to deposit the fees into these accounts. He then transferred those fees through these intermediate accounts to accounts in his own name. This scheme enabled Oliphant to conceal his personal use of the fees generated by the business during the course of the prosecution on the first case according to the plea agreement. Through this scheme, Oliphant generated $2 million in fees and a total loss to the IRS of another $400,457. Oliphant's plea agreement requires that he surrender approximately $205,000 in bank accounts linked to the scheme, his personal residence and three automobiles valued at $32,600 as restitution to the IRS in both cases.

Texas Return Preparer Sentenced for Filing False Tax Returns
On February 22, 2017, in Dallas, Texas, Lourdes Ramirez, a Mexico national unlawfully residing in the United States was sentenced to serve 22 months in prison, one year of supervised release and ordered to pay $128,958 in restitution to the Internal Revenue Service for preparing false tax returns. Ramirez operated TX ASAP Tax Services and Fiesta Tax Service located in Greenville. From 2011 through 2014, Ramirez prepared approximately 1,163 federal tax returns that included fraudulent business income, losses, credits and deductions and sought refunds to which her clients were not entitled. Ramirez intended to cause a tax loss of approximately $1,155,383.  Ramirez will be deported to Mexico following her sentence.

Georgia Tax Return Preparer Sentenced for Filing Fraudulent Returns
On January 31, 2017, in Atlanta, Georgia, Cheryl Singleton, of Atlanta, was sentenced to 150 months in prison, three years of supervised release and ordered pay restitution of $4,944,524 to the Internal Revenue Service (IRS) for filing tax returns. Singleton owned and operated Advanced Tax Services, a tax preparation business with multiple locations throughout the Atlanta area. Singleton hired and trained employees to prepare fraudulent tax returns and encouraged them to manipulate the numbers to maximize their clients’ refunds.

Texas Tax Return Preparer Sentenced for Tax Fraud/Identity Theft Scheme
On January 26, 2017, in Tyler, Texas, Jefferson Kincade, of Palestine, was sentenced to 102 months in prison for tax fraud and aggravated identity theft. Kincade also agreed to a cash forfeiture of $110,919. Kincade prepared tax returns for individuals at a tax preparation business, EZ Tax, and devised a scheme to prepare false tax returns, steal clients' refunds, and use the clients' and other individuals' identities to accomplish the theft.  Kincade's made false statements and representations in the tax returns that he submitted in order to increase the amount of tax refunds to which the taxpayer would be entitled.  Kincade was able to intercept the government tax refunds for his own benefit by printing the refund checks, not giving them to his clients, and then cashing them with the assistance of two individuals who were not associated with EZ Tax.  

Missouri Tax Preparer Sentenced For Fraud Scheme, Failure to Pay Taxes
On January 25, 2017, in Jefferson City, Missouri, David Lee Keithley, of Columbia, was sentenced to 24 months in prison and ordered to pay $291,041 in restitution to his victims. Keithley owned and operated Keithley and Associates, offering tax preparation and payroll tax services in Columbia. Keithley was hired by his clients to prepare proper tax returns, as well as send the tax deposits to the government. After accepting funds from his clients, Keithley used the money for his own personal benefit instead of paying his client’s taxes. When clients contacted Keithley after receiving letters from the IRS indicating these returns had not been filed or taxes had not been paid, he told his clients he would contact the IRS to correct it. The total amount of these misappropriated funds is $120,354. Keithley also admitted that he willfully failed to file federal income tax returns for tax years 2009 through 2013.

Idaho Return Preparer Sentenced for Defrauding the IRS
On January 24, 2017, in Boise, Idaho, Mary Galan, of Twin Falls, Idaho, was sentenced to 24 months in prison, three years of supervised release, and ordered to forfeit and pay restitution of $336,926 to the IRS. From around 2006, Galan owned and operated Galan Accounting in Twin Falls and prepared tax returns for clients. In about 2013 and through about 2015, Galan conspired to defraud the IRS by claiming education credits through the American Opportunity Credit on clients’ tax returns knowing that they did not qualify to claim the credit. Galan and her co-conspirators prepared 187 tax returns for 165 taxpayer clients claiming $342,901 in education credits, with a tax loss of $336,926. For some taxpayer clients, Galan prepared tax returns directing the IRS to deposit refunds – belonging to taxpayer clients – into personal bank accounts belonging to Galan and her co-conspirators. In total, Galan received direct deposits of taxpayer client refunds of $219,490.

Oklahoma Tax Return Preparer Sentenced For Tax Fraud Scheme
On January 23, 2017, in Oklahoma City, Oklahoma, Laquinta Q. Fisher, of Lawton, was sentenced to 18 months in prison, three years of supervised release and ordered to pay $133,955 in restitution to the IRS for an earned income credit tax fraud scheme. Fisher was a self-taught tax return preparer who worked in the Lawton area for tax years 2010 through 2014.  She recruited clients by word of mouth and distribution of flyers.  Fisher advised her clients that all they needed was a dependent child in order to receive a refund from the government.  She then falsified returns for clients by adding fictitious income to increase the earned income credit (EIC) and by adding false dependents to maximize the EIC, which resulted in false refund claims. Fisher prepared and submitted the returns for her clients electronically to the IRS.

Texas Tax Return Preparer Sentenced for Filing False Tax Returns
On January 11, 2017, in Sherman, Texas, Sandra Morgan was sentenced to 18 months in prison and ordered to pay restitution in the amount of $152,471 to the Internal Revenue Service (IRS). Morgan was in the business of preparing federal income tax returns and admitted to preparing and presenting to the IRS, false tax returns for tax years 2009 through 2012.  The returns falsely represented that the taxpayers was entitled to claim deductions for losses from a business on Schedule C and losses for rental property on Schedule E.  In addition, some of the false tax returns included fraudulent tax deductions for things such as Education Credits, American Opportunity Credits, Charitable Contributions, Unreimbursed Employee Expenses, Medical and Dental Expenses, Loses for Rental Property, and Losses from a Business.  

Massachusetts Tax Preparer Sentenced for Tax and Identity Fraud
On January 5, 2017, in Boston, Massachusetts, Claudia Carredano, of Lynn, was sentenced to 30 months in prison, three years of supervised release and ordered to pay restitution of $320,760 and forfeiture. Carredano co-owned Maya Multi Services, a tax return preparation business. From 2008 to 2011, Carredano filed dozens of false tax returns for her clients that included fraudulent dependents—real people who were not the dependents of her clients—intended to increase the tax refund amount, generally without her clients’ knowledge.  Carredano then directed the inflated portion of the refunds to be deposited into her bank account.  In order to conceal the scheme, Carredano gave her clients versions of their tax returns that did not reflect the fraudulent dependents and sought smaller refunds than the returns she actually filed with the IRS.

Former Oklahoma Tax Preparer Sentenced for Filing False Tax Returns
On December 21, 2016, in Oklahoma City, Oklahoma, Burundi Nachelle Lolles, of Smyrna, Georgia, pleaded guilty to submitting a false income tax return to the IRS and was sentenced to 33 months in prison. In addition, Lolles will serve one year of supervised release and pay $263,665 in restitution to the IRS, as well as to her victims. Lolles, a former resident of Oklahoma City, admitted to filing a false income tax return for the 2009 calendar year that contained a fabricated W-2 listing $12,000 in wages and $2,000 in withholding, as well as a false Form 1040 Schedule C that claimed $165 in expenses for a cleaning business, where no such business actually existed.  

Owner of New Jersey Accounting Business Sentenced for Swindling Clients Out of Tax Refunds
On December 14, 2016, in Camden, New Jersey, Doreen Gentile, of Toms River, was sentenced to 37 months in prison, three years of supervised release and ordered to pay $1,863,013 in restitution. Gentile owned and operated an accounting business, Doreen A. Gentile & Associates, LLC (DAG & Associates). Gentile admitted that, as part of her scheme, she would show her clients a tax return that indicated that they had no tax or refund due, owed a minimal amount of tax, or were due a refund that was far less than the amount to which they were entitled. Gentile then prepared a second set of tax returns, signed without her clients’ permission, which she submitted to the IRS or the State of New Jersey for the full tax refund. The IRS or the State of New Jersey issued tax refund checks care of DAG & Associates and Gentile then deposited the tax refund checks into the DAG & Associates bank account without her clients’ permission. Gentile used the funds to pay for personal expenses. Gentile admitted that from 2006 through 2009, she failed to report to the IRS all of her income generated from DAG & Associates, including funds she stole as part of her refund scheme, resulting in tax losses of approximately $188,811.

Texas Tax Return Preparer Sentenced for Tax Fraud
On November 29, 2016 in Dallas, Texas, Kevin Troy Jernigan was sentenced to 36 months in prison and ordered to pay more than $112,000 in restitution for aiding or assisting in the preparation or presentation of a false or fraudulent individual income tax return. Jernigan was the owner and a return preparer at The Parks 11 located in Dallas.  During tax years 2007 through 2012, Jernigan prepared and filed more than 1,300 tax returns that contained false and inflated deductions and credits which were intended to produce a fraudulently inflated refund to be paid by the IRS. The fraudulently income tax returns caused a tax loss of approximately $2,250,780 to the United States Treasury.

Minnesota Couple Sentenced For Multi-Million-Dollar Income Tax Refund Fraud Scheme
On November 17, 2016, in St. Paul, Minnesota, Mark Arlin Hammerschmidt, and his wife, Ornella Angelina Hammerschmidt, of Prior Lake, Minn. were sentenced to 135 months and 48 months in prison, respectively. In addition Mark Hammerschmidt was ordered to pay $1,832,986 in restitution and Ornella Hammerschmidt was ordered to pay $45,365 in restitution, for their roles in orchestrating a multi-million-dollar tax fraud scheme. From January 2011 through February 2013, Mark and Ornella Hammerschmidt operated an immigration and tax preparation business, called American Group, located in Shakopee, Minn. and Winter Garden, Fla., which they utilized to prepare and file more than 1,000 fraudulent federal income tax returns. The defendants attracted customers to American Group by misrepresenting their professional credentials and certifications. Most notably, Ornella Hammerschmidt falsely represented herself as a licensed immigration attorney. As part of the scheme, the defendants attempted to conceal their involvement as fraudulent return preparers by intentionally not signing the tax returns on the part of the form meant to be signed by paid preparers. The defendants also falsely reported their business addresses and bank accounts controlled by them as the addresses and bank accounts of their taxpayer clients. In connection with this part of the scheme, the defendants sought approximately $200,000 in fraudulent tax refund payments. Many of the defendants’ clients were non-or-limited English speakers, who relied on the defendants to properly and legally prepare their taxes. The false returns filed on behalf of the taxpayer clients caused substantial harm to them, both in terms of problems with the IRS and problems with immigration status. In addition, tax returns were filed by Mark Hammerschmidt who obtained the personal identification information (PII) of hundreds of Guatemalan citizens. Mark Hammerschmidt then prepared and filed with the IRS applications for Individual Taxpayer Identification Numbers (“ITINs”) in the names of the Guatemalan citizens. Once he obtained the ITINs, Mark Hammerschmidt filed multiple years’ worth of false tax returns in the Guatemalan citizens’ names, seeking refunds based on false information. Mark Hammerschmidt also used the PII to file false Minnesota state income tax returns. In connection with this part of the scheme, the defendant sought approximately $1.8 million in tax refunds based on the fraudulent tax returns he filed.

Alabama Tax Return Preparer Sentenced for Fraudulent Tax Returns
On October 26, 2016, in Montgomery, Alabama, Nicole Coleman, of Montgomery, was sentenced to 36 months in prison. Coleman was the owner and operator of Community Tax Associates, LLC, a Montgomery income tax return preparation business. Through that business, Coleman filed federal income tax returns for herself and clients. When she filed those returns, she made knowingly false entries intending to drive up the amount of refunds the filer would receive.  Coleman then took a portion of all refunds as a fee.  Between 2014 and 2015, Coleman obtained an estimated $1,654,781 in fraudulent refunds from the United States.

New York Tax Preparer Sentenced for Filing False Tax Returns
On October 25, 2016, in White Plains, New York, Samuel Gentle, of Mount Vernon, was sentenced to 51 months in prison, one year of supervised release and ordered to pay a $125,000 fine and to pay the IRS over $295,000 in back taxes. Gentle was a tax preparer and the owner of tax preparation businesses named GenGen, Inc., and GenGen Financial, Inc. From 2010 through 2014, Gentle’s business prepared and submitted to the IRS, on average, 3,200 tax returns each year. These tax returns contained a pattern of false and fraudulently inflated deductions for business expenses and gifts to charity. Gentle also failed to report on his own personal and business tax returns nearly half of the $1 million in receipts that he received for his tax preparation services from 2010 through 2014. He spread the receipts across eight bank accounts at five banks, and he failed to issue required IRS forms to himself or his employees, further concealing from the IRS the amount of receipts he and his business had received. Gentle’s crimes resulted in a loss to the IRS of more than $550,000.

Oklahoma Tax Preparer Sentenced for False Federal Tax Returns
On October 20, 2016, in Oklahoma City, Oklahoma, Ricky Costello Williams, of Lawton, was sentenced to 30 months in prison, one year of supervised release and ordered to pay $240,361 in restitution for tax fraud. For a number of years, Williams prepared tax returns for others under the business name W&B Financial.  A criminal investigation by the IRS determined that in 2010 and 2011, he knowingly prepared returns with fraudulent deductions and falsified credits in order to illegally obtain refunds from the Internal Revenue Service.  Williams had previously been convicted of preparing false tax returns in North Carolina and South Carolina.

North Carolina Man Sentenced for Tax Fraud, Cashing False Refund Checks      
On October 5, 2016, Oscar Barahona Fiallos, of Smithfield, North Carolina, was sentenced to 20 months in prison, three years of supervised release and ordered to pay restitution of $2.8 million to the IRS. Fiallos owned and operated a tax preparation business in Smithfield under the names El Caracol Inc. and Oscar’s Income Tax Service. In 2011 and 2012, Fiallos cashed large numbers of U.S. Treasury checks that were issued as a result of fraudulent tax returns filed with the IRS in the names of third parties. The checks were provided to Fiallos by co-conspirators and Fiallos never met the third-party payees, who purportedly lived in New York, New Jersey and North Carolina. Fiallos deposited the checks into his bank account and then, after taking a fee, gave the co-conspirators the balance. After a bank account was closed, Fiallos obtained a check cashing license so he could continue cashing checks for his co-conspirators. He also prepared Individual Taxpayer Identification Number applications and filed false tax returns for third parties he did not meet and who did not sign the documents.  

Fiscal Year 2015 - Abusive Return Preparer Investigations

 


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