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Why Tax Preparers Get Prosecuted | the annual IRS list

The annual listing of successful prosecution against fraudulent tax preparers is presented below, straight for the IRS site.  We’ve compiled what appears to be a silly summary list of reasons tax preparers get into trouble. But it only takes reading a few cases to feel the incredible greed.

“Remember that the taxpayer is responsible for their own income tax return.  While not implicitly stated, the taxpayers involved in the prosecutions below probably received IRS attention too.” 
Gary Bode CPA | Wilmington NC Tax Preparer and Accountant | (910) 399-2705

Summary List of Tax Preparer Prosecution

  • As CPAs and tax preparers, we rely on information taken from client documentation for tax preparation.  Generally if we have written tax preparation info, and use it accurately, CPAs and accountants have fulfilled their duty.  Unless we know something is mis-represented. 
  • We can’t lie for the client to justify increased bookkeeping, accounting and tax preparation fees. 
  • W-2s just can’t be manufactured by the tax preparer.
  • Tax preparers shouldn’t forge signatures.
  • Tax preparers can’t skim money from tax refunds.
  • Citizens of foreign nations doing tax preparation are cited in several cases are cited.  We’re all Americans here at Gary L. Bode, MSA, CPA, PC by the way.
  • The tax preparation has to produce tax returns for actual people.
  • The tax preparation has to produce tax returns, generally speaking, living people.
  • CPAs, tax preparers and accountants have to report their  fees on their own tax returns.
  • If you’re trying to hide large fees from illegal and falsified tax preparation, be smart about it.
  • Beware if your tax preparer has your refund directed to their address.
  • Tax preparers shouldn’t facilitate identity theft.
  • Any dependents claimed by the tax preparer have to be alive and real.  Tax preparers shouldn’t make up dependents.
  • Tax preparers shouldn’t sell real living dependent information for use in falsified claims.

So the annual list of prosecuted tax preparers is just mostly secondary to greed on both the tax preparer and tax payer side.  Remember you, the client, sign off on the return.  On any falsified tax preparation below, the client, if actually alive and real (wink), is responsible for any unpaid tax, interest and penalties.  Probably criminal charges too in some cases.

If you need a free initial consult from a Wilmington NC tax accountant and CPA, please call us at (910) 399 – 2705.

The following examples of abusive return preparer investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Dallas Tax Preparers Receive Lengthy Federal Prison Sentences for Roles in Conspiracy

On September 30, 2009, in Dallas, Texas, Dallas resident Fabian Muyaba was sentenced to ten years in federal prison following his conviction in June for conspiracy to aid and assist in the preparation and presentation of false and fraudulent income tax returns. Also sentenced was Joseph Mudekunye, a part-time Dallas resident, and Como, Texas resident Nichelle Henson. Mudekunye was sentenced to 97 months in prison and ordered to pay $422,000 in restitution and Henson was sentenced to 48 months in prison.  In addition to stating their residences, the indictment states that Mudekunye and Muyaba are citizens of Zimbabwe. The government presented evidence at trial that the defendants, who worked as tax preparers at Reliable Express Tax Service and Reliable Professional Tax Service, at 9203 Skillman Street in Dallas, and two of whom also worked at Efficient Tax Service and/or Proficient Tax Services LLC, conspired together to prepare and file IRS Individual Tax Returns, Forms 1040 and 1040A, which were false and fraudulent. In addition, the defendants profited from these fraudulent filings. The government presented further evidence that the defendants willfully and fraudulently reduced the amount of tax that was due to the IRS for their clients by falsely claiming: head of household status, dependents, business expenses, education credits, earned income credit and federal telephone excise tax credits. In some instances, Mudekunye unlawfully used the name and Social Security Number of another person to falsely claim those individuals as dependents of some tax payers. For their services, the defendants collected substantial cash payments from clients for the return preparation, some clients paying up to $1,900 for the preparation of a simple Form 1040 or 1040A. The defendants concealed the fact from their clients that they deducted substantial fees from the clients’ Refund Anticipation Loan checks. In addition, the government presented evidence that the defendants submitted returns using others’ electronic filer identification numbers, rather than their own, to prevent the conspiracy from being discovered.

Teacher Sentenced For Preparing Fraudulent Tax Returns

On September 29, 2009, in Miami, Fla., Georgia Gaines of Lake Worth, Florida was sentenced to one year and a day in prison, one year of supervised release, and ordered to pay nearly $249,000 in restitution to the IRS.  According to court documents, Gaines pleaded guilty to five counts of assisting and preparing fraudulent tax returns for others and five counts of filing fraudulent personal tax returns.  Gaines, while employed as a school teacher in Palm Beach County, prepared Individual Tax Returns claiming tax refunds for herself, and on behalf of various taxpayers, claiming hugely inflated itemized deductions or large business losses.  Gaines’ tax fraud scheme resulted in fraudulent deductions or business loss claims of more than $1.1 million on the returns she prepared for others.   On her own tax returns, Gaines failed to report income totaling more than $200,000, which she earned between 2002 and 2006 by preparing tax returns for others, according to the Indictment and court statements.

Bismark Man Sentenced For Tax Evasion

On September 29, 2009, in Bismark, N.D., Donald Glasser, was sentenced to four years and three months in prison, to be followed by two years of supervised release, for tax evasion.  According to court documents, Glasser served as the business manager/controller of Westcon, Inc., and Power Industries, Inc. from 2003 through 2006.  As controller, Glasser had sole access to the accounting books and records of these businesses and would bill Westcon, Inc., for salaries and other expenses associated with Power Industries, Inc.   Glasser would inflate the invoices by a few thousand dollars and pocket the excess money. Glasser also cut company checks to a bogus business that he created, Properties, LLC, and deposited the funds to its bank account. Glasser used the funds for personal investments in real estate and vehicles, including purchasing properties in Bismarck and Oskaloosa, Iowa, and investing in ethanol ventures in Wyoming and Richardton, North Dakota. Glasser also reimbursed himself from the company’s account for personal expenses that he charged off as business expenses. Glasser admitted to embezzling $1,223,000 in 2003; $478,000 in 2004; $328,000 in 2005; and more than $2 million in 2006.  None of the embezzled funds were reported on Glasser’s income tax returns from 2003 through 2006.

Nebraska Tax Return Preparer Sentenced for Preparing False Returns

On September 21, 2009, in Omaha, Neb., Siyad Warsame Ali, a citizen of Somalia, was sentenced to 33 months in prison for aiding in the preparation of false tax returns.  If he is not deported, Ali will serve one year of supervised release upon the completion of his imprisonment.  According to court documents, Ali prepared a large number of tax returns under the business name Cedar Tax Services for Sudanese immigrants. In preparing the returns, Ali either provided the clients with fraudulent dependent information to include the name of a foster child and his/her social security number, or in other instances, offered to use the clients’ relatives as dependents without determining whether they qualified.  By falsely claiming dependency exemptions, earned income, child care and fuel tax credits, the taxpayers were able to significantly increase the amount of their tax refunds.  The false returns prepared by Ali typically requested a Refund Anticipation Loan.  Frequently, a false return would claim a tax refund of up to $5,000 and Ali would take anywhere from $500 to $3,000 per refund check. The investigation identified at least 30 tax returns involving 23 individuals whose tax returns were fraudulently prepared by Ali.  Those individual taxpayers were audited by the Internal Revenue Service and have either repaid or are in the process of repaying the fraudulent amount of their 2003 and 2004 returns.

New York Tax Return Preparer Filed Fraudulent Tax Returns in the Name of Deceased Taxpayers

On September 18, 2009, in Manhattan, N.Y., Adolphus Quaye was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $370,241 in restitution to the Internal Revenue Service (IRS). Quaye pleaded guilty in January 2009 to five counts of making false claims against the United States. Quaye owned and controlled Capital First Management, a tax-preparation service in Yonkers, New York. According to court documents, in 2002, Quaye prepared and filed with the IRS numerous fraudulent tax returns where the names he listed as the taxpayers and their purported minor dependents were names of deceased individuals, and the numbers he used on the returns were just numbers that resulted in the IRS paying out a tax refund. 

Guam Tax Preparer Sentenced to 18 Months in Prison

On September 9, 2009, in Saipan, Guam, Luciano L. Dereas, aka Julius Dereas, was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay a $100 special assessment fee.  Dereas pleaded guilty in June 2009 to aiding and assisting the preparation of false tax returns. According to the plea agreement, Dereas prepared ninety federal tax returns for Commonwealth of the Northern Mariana Islands (CNMI) residents for the 2004 and 2006 tax years. Dereas falsely stated on the tax returns that the CNMI residents resided in the continental United States and falsely claimed the Earned Income Tax credits which entitled the taxpayers to refunds.

Georgia Man Sentenced for False Claims Against the Government

On September 9, 2009, in Macon, Ga., Derrick Jackson was sentenced to 42 months in prison, three years of supervised release and ordered to pay restitution of nearly $78,000.  According to information presented in court, Jackson represented himself as a tax preparer under different company names in different locations and falsified taxpayer claims to the IRS, including fictitious employment data.  Jackson filed 15 fraudulent tax returns with claims totaling more than $106,000.

Louisiana Tax Preparer Sentenced for Tax Fraud

On September 2, 2009, in New Orleans, La., Anthony Batiste was sentenced to 21 months in prison, one year of supervised release, and ordered to pay more than $80,000 in restitution for falsifying tax returns.  Batiste pleaded guilty on May 27, 2009, to aiding and assisting in the preparation and presentation of false and fraudulent tax returns.   According to court records, Batiste provided customers of AJ’s Tax Service with names and social security numbers so that clients with no children could claim child exemptions.

Chicago Tax Preparer Sentenced on Tax Fraud, Identity Theft, and Mail Fraud Charges

On August 27, 2009, in Chicago, Ill., Nga Nguyen was sentenced to 46 months in prison and ordered to pay $827,582 in restitution to her victims and the IRS. Nguyen pleaded guilty in June 2009 to mail fraud, filing false refund claims with the IRS, and identity theft. According to her plea declaration, from 2001 to 2004, Nguyen operated a tax return business from her residence.  During those four years she filed 935 false tax returns, in the names of 455 clients.  The returns were false and fraudulently claimed refunds that her clients were not entitled to receive. When Nguyen mailed the tax returns to the IRS, she directed the IRS to change clients’ addresses to her home address.  She forged her clients’ signatures on the tax returns without their consent or knowledge.  Nguyen also forged her clients’ signatures on the IRS refund checks and then deposited them into either her bank account or her husband’s business bank account.

Fraudulent Tax Return Preparer Sentenced to 33 Months in Prison

On September 2, 2009, in Greenbelt, Md., Lawrence Sperling was sentenced to 33 months in prison for preparing false tax returns for clients.  Sperling pleaded guilty in April 2009 to one count of aiding and assisting in the preparation and presentation of a false tax return.  According to the plea agreement and court records, Sperling is a former attorney (now disbarred), who owned and operated a tax preparation business in Silver Spring, Md., that operated under several names, including American Tax Service, American Tax Institute, JAMAR LLC and American Tax Professional Associates Inc.  According to court records, from approximately January 2002 through at least May 2003, Sperling prepared tax returns for his clients that contained false items including medical expenses, charitable contributions, miscellaneous employment-related expenses, and child care credits.  Sperling conceded that his practice of preparing false tax returns resulted in a tax loss to the United States of $804,335. In addition, Sperling admitted in his plea agreement that he impeded the Internal Revenue Service (IRS) with respect to his individual taxes.  Beginning in 1988, Sperling failed to file tax returns for eleven years.  In 2001, the IRS penalized Sperling and fined him $10,000 for “willful or reckless understatement of taxpayer’s tax liability” with respect to his tax preparation business.  The IRS sent him more than two dozen notices of taxes and penalties due and other warning letters.  Beginning in at least 1998, Sperling used a nominee to file the tax returns for his clients and to collect his preparation fees.  The nominee held these funds and made disbursements to Sperling or others at Sperling’s request.  Sperling never reported or paid taxes on these funds, although he used a portion of them to pay business expenses.  As a result, Sperling caused a tax loss of $130,847.  The total tax loss related to all of his conduct is $935,183.

California Tax Preparer Sentenced to 18 Months for Filing False Tax Returns

On August 24, 2009, in Los Angeles, Calif., Maria Ophelia Pinzon-Virula was sentenced to 18 months in prison to be followed by one year of supervised release, and ordered to pay approximately $223,709 in restitution. Pinzon-Virula pleaded guilty to preparing and filing false income tax returns with the Internal Revenue Service (IRS). According to the plea agreement, during the years 2002 through 2006, Pinzon-Virula operated a tax preparation business named Public Assistant Income Tax, located in Long Beach, California.  From April 15, 2003 to April 15, 2007, Pinzon-Virula prepared at least 103 tax returns which contained false information such as false deductions, false credits, false expenses, false claims for refunds, and false claims for Earned Income Credits, resulting in false claims for refunds, each ranging from $1,797 to $4,085.  Pinzon-Virula knew that her clients were not entitled to these refund amounts.

Florida Return Preparer Sentenced in Tax Preparation Fraud Scheme

On August 19, 2009, in Miami, Fla., Beaudelaire Telfort was sentenced to18 months in prison, to be followed by one year of supervised release, and ordered to pay $67,524 in restitution. Telfort pleaded guilty in June 2009 to one count of aiding and assisting in the filing of a false tax return. According to court documents, Telfort managed his own business, Nation Tax 1, in Miami, where he prepared tax returns for other individuals and filed them electronically with the Internal Revenue Service (IRS).  Telfort received fees for the preparation and filing of those returns. On April 24, 2009, a twenty-six count indictment was unsealed against the defendant, charging him with tax fraud in connection with the preparation of false Forms 1040 for numerous individuals during calendar tax years 2002 and 2003.  The tax returns contained false information regarding wages, income and withholding amounts. In total, the fraudulent tax filings claimed more than $80,061 in fraudulent tax refunds. During his plea hearing, Telfort admitted to preparing and filing a tax return for a client in which he misrepresented the client’s wages and income, and the amount of federal taxes withheld.  Telfort also admitted to filing a fictitious W-2 form, which suggested that the client had worked for a second employer and earned a salary working for that employer. The material misrepresentations resulted in a claimed tax refund that was significantly greater than what the client was legitimately entitled to receive.