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.
Minnesota Couple Sentenced For Multi-Million-Dollar Income Tax Refund Fraud Scheme
On Nov. 17, 2016, in St. Paul, Minn., 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 Oct. 26, 2016, in Montgomery, Ala., 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 Oct. 25, 2016, in White Plains, NY, 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 Oct. 20, 2016, in Oklahoma City, Okla., Ricky Costello Williams, of Lawton, Okla., 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 Oct. 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.