Arizona tax preparer pleads guilty to filing false tax returns as part of a nationwide abusive-trust tax shelter scheme


Date: May 20, 2024


An Arizona man pleaded guilty on Friday to two counts of assisting in the preparation of false tax returns for individuals who used an abusive-trust tax shelter to underreport their income and tax liabilities.

According to court documents and statements made in court, from 2017 to 2023, Kent Ellsworth operated Ellsworth Stauffer P.C., a return preparation business. During that time, Ellsworth participated in a scheme to defraud the IRS that involved the promotion, sale and implementation of a fraudulent tax shelter. Ellsworth participated by preparing and filing over 500 false tax returns for approximately 60 clients nationwide who used the tax shelter to conceal income from the IRS and not pay tax. Ellsworth intentionally caused more than $60 million in income to be fraudulently sheltered from the IRS, which resulted in a tax loss to the IRS of approximately $17 million.

Ellsworth prepared the false tax returns to further the abusive-trust tax shelter scheme carried out by others. Clients who purchased the tax shelter – most of whom were successful business owners – were directed to assign or “donate” nearly all of their income to sham trusts and a so-called “private family foundation” to create the illusion that the income was not theirs. However, the sham trusts and foundations were nothing more than bank accounts designed to hold funds the clients earned and continued to control.

To carry out the scheme, Ellsworth was taught how to prepare tax returns utilizing the scheme’s fraudulent methods. He was instructed to report all income assigned to a sham trust as income of the trust and to offset that income by deducting all expenses paid for by the trust, including the clients’ personal living expenses. Ellsworth was paid fees for preparing the returns by the clients participating in the tax shelter.

Ellsworth is scheduled to be sentenced on Aug. 14. He faces a maximum penalty of three years in prison for each count of preparing and filing false tax returns. Ellsworth also faces a maximum fine of $250,000, a period of supervised release and the costs of prosecution for each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Special Agent in Charge Andy Tsui of IRS Criminal Investigation’s (IRS CI) Denver Field Office made the announcement.

IRS CI is investigating the case.

Trial Attorneys Amanda R. Scott and Lauren K. Pope and Senior Litigation Counsel Corey J. Smith of the Tax Division are prosecuting the case.

CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.