IRS Tackles Return Preparer Fraud

21 March 2011 – Agency cautions taxpayers to be careful of return preparer fraud and other scams and schemes

As the tax filing season is in full swing, it’s important for taxpayers to find honest, qualified tax professionals if they need tax preparation assistance. Taxpayers are legally responsible for what’s on their own tax returns even if prepared by someone else. Choosing a dishonest tax preparer can be costly as dishonest tax professionals may, for example, place fictitious information or false deductions on their client’s tax returns resulting in an inflated refund.

The IRS website at http://www.irs.gov/index.html provides various tips in what to look for – and what to look out for – when choosing a tax professional. Tax professionals must now have a Preparer Tax Identification Number (PTIN) number. Use of the PTIN is required on all federal returns prepared by paid tax return preparers starting on January 1, 2011.

“Return Preparer fraud is a priority for IRS Criminal Investigation and we have committed many resources to investigating and prosecuting these types of cases,” said Leslie P. DeMarco, Special Agent in Charge, IRS-Criminal Investigation-Los Angeles Field Office. “Taxpayers should be very careful when choosing a return preparer. You should be as careful as you would in choosing a doctor or lawyer. It is important to know that even if someone else preparers your return, you are ultimately responsible for all the information on the tax return.”

In addition to being on the alert for abusive return preparers, the IRS encourages taxpayers to visit the IRS website for the latest updates on tax schemes and scams and what to avoid. Some of these scams include fictitious emails supposedly from the IRS. The IRS does not send out unsolicited e-mails or ask for detailed personal and financial information via email. Taxpayers should also be careful of employment tax schemes where an employer wrongfully classifies the employee to eliminate the withholding and payment of employment taxes. This scheme can affect the employee directly who may see future benefits such as social security, unemployment compensation and Medicare greatly reduced or eliminated.

In the greater Southern California area, IRS-Criminal Investigation special agents are actively investigating those involved in alleged criminal violations of the Internal Revenue Laws and related Federal Offenses. United States District Court records reveal the following recent legal actions pertaining to return preparer fraud:

Tax Preparer Serving Life Sentence Gets 37 Months – After receiving a life sentence for his involvement in attempting to overthrow the Cambodian government, Yasith Chhun was sentenced yesterday afternoon in federal court to 37 months imprisonment, to be served concurrently, for tax fraud charges.

On November 13, 2008, Chhun pleaded guilty to charges that he conspired to defraud the United States and that he aided and assisted in the preparation of false tax returns.

Chhun was the owner of CCC Professional Accounting Services in Long Beach, California, a tax preparation business. Chhun prepared federal income tax returns for members of the Cambodian community who were often on welfare or another form of government assistance. Chhun assisted in the preparation of federal income tax returns for clients that falsely stated the clients earned between $8,000 and $10,000 as income for sewing work – and requested an Earned Income Credit (EIC) of between $2,000 and $3,000 per return – when, in fact, the clients did not earn such income and were not entitled to the requested EIC. In total, the improperly claimed credit from the numerous fraudulent federal income tax returns was more than $400,000.

San Bernardino Preparer Sentenced to Serve 5 ½ Years in Federal Prison – Robert Dean Larsen, a tax return preparer who operated a return preparation business in Apple Valley, was sentenced on February 7, 2011 to spend 66 months in federal prison after pleading guilty to charges that he conspired to defraud the United States and that he aided and assisted in the preparation of false tax returns.

Larsen, who operated Larsen’s Tax Pros at various locations in San Bernardino County and operated Laza’s Tax Service in Apple Valley, admitted in his plea agreement that, from 2002 to 2006, tax return preparers at his businesses filed at least 1,162 tax returns with the Internal Revenue Service that were false claiming refunds totaling over $3.6 million.

El Segundo Tax Return Preparer Sentenced to 24 Months in Federal Prison – Gene S. Wong, who operated a tax return preparation and bookkeeping business known variously as “TaxLAX”, “Tax 4 Less”, and “GW Accounting & Bookkeeping Center” was sentenced on August 9, 2010 to spend 24 months in federal prison after previously pleading guilty to charges that he willfully failed to file his personal income tax return for 2005 and that he filed false claims for tax refunds on behalf of his clients. Wong was further ordered by United States District Judge Christina A. Snyder to pay restitution totaling $255,236 to the Internal Revenue Service.

According to his plea agreement, Wong filed at least 92 false claims for tax refunds with the Internal Revenue Service on behalf of third parties claiming false refunds totaling over $255,000.

The false claims for refunds filed by Wong claimed fraudulent tax credits including general business tax credits, fuel tax credits, and alternative vehicle tax credits. In his plea agreement, Wong admitted that there was no basis for the tax credits claimed on the false returns he prepared.

West Covina Man Pleads Guilty to Preparing a False Tax Return Filed with the IRS – Nestor Bermudez pleaded guilty on January 24, 2011 to preparing and submitting a false tax return in the name of another individual to the Internal Revenue Service.

In his plea agreement, Bermudez admitted that he agreed to prepare false and fraudulent tax returns in exchange for a fee of up to $500 per tax return. Thereafter, another individual provided Bermudez with the names, dates of birth and social security numbers for 127 persons in whose names Bermudez prepared tax returns. The returns were false in that they falsely reported filing status, income, and number of dependants and falsely claimed tax refunds based upon the earned income tax credit, child care credit and/or recovery rebate credit. The information reported on the tax returns, including filing status, amount of income, and number of dependants was necessary to determine whether any tax was due.

When sentenced on June 20th, Bermudez faces a statutory maximum three years in federal prison and fines totaling $250,000.

Placentia Tax Preparer Sentenced for Tax Evasion – Joseph Usunubu Aluya was sentenced on February 18, 2011 to 27 months in federal prison.

On June 23, 2010, Aluya pleaded guilty to four counts of tax evasion and one count of possessing stolen government money. According to the plea agreement, Aluya devised a scheme that defrauded his clients by preparing two sets of federal income tax returns for each client. On the tax return Aluya provided to his client, Aluya usually inflated the amount of tax making the refund amount lower than it should be. Aluya would then file a correct tax return with the IRS reporting a higher refund amount. Aluya received the higher refund amount from the IRS, paid the lower refund amount to his client, and kept the difference in the refund amounts for himself. Aluya carried out his scheme without the clients’ knowledge and consent. The plea agreement states that Aluya agrees to pay full restitution to victims estimated at $380,705.39.

Former IRS Revenue Officer Sentenced to Spend 41 Months in Federal Prison – Anthony Pendleton, a former IRS Revenue Officer, was sentenced on July 7, 2010 to spend 41 months in federal prison after being convicted at trial of conspiracy to defraud the United States by filing tax returns that fraudulently sought tax refunds. In addition, Pendleton was ordered by Judge Otis D. Wright II to pay restitution totaling $179,037 to the Internal Revenue Service.

According to court papers, Pendleton, along with co-conspirators Christopher Edwards and Asha Lenard, conspired to file false claims for tax refunds with the IRS. The three, while working at Pendleton’s tax preparation business, Payless Tax Services in Inglewood, California, submitted tax returns for individuals claiming refunds for which they were not entitled to receive. The claims for refunds included, among other things, falsified employment income and dependents.

Edwards and Lenard previously pleaded guilty to the same charge. Edwards was sentenced to serve a term of one year and one day in federal prison. Lenard must serve three years of supervised release, including four months of home detention with electronic monitoring.

Fountain Valley Tax Return Preparer Pleads Guilty to Filing a False Tax Return with IRS – Mac Huy Nguyen, the operator of MacTax, a tax preparation and bookkeeping business located in Fountain Valley, pleaded guilty on February 23, 2011 to one count of subscribing to a false tax return.

According to Nguyen’s plea agreement, Nguyen received substantially greater gross receipts from MacTax during 2003, 2004 and 2005 than what he had reported on his personal income tax returns for those years. Nguyen’s false statements as to his gross receipts on the 2003, 2004, and 2005 tax returns caused a total tax loss of approximately $86,628.

When sentenced, Nguyen faces a statutory maximum three years in federal prison and fines totaling $250,000. Nguyen is scheduled to be sentenced by United States District Judge Cormac J. Carney on July 18, 2011.

Moreno Valley Tax Preparer Convicted of Filing False Tax Return, Wire Fraud, and Identity Theft – On July 7, 2010, Willena Stargell, 39, of Moreno Valley, was convicted by a federal jury on federal charges, including aggravated identity theft, for the preparation of false returns. The evidence at trial revealed that Stargell filed fraudulent tax returns claiming nearly $600,000 in illegitimate tax refunds.

According to court documents, Stargell, who was preparing tax returns when she was affiliated with Liberty Tax Service and Liberty Bell Tax Service, engaged in rampant tax fraud designed to generate tax refunds. She prepared and filed numerous tax returns containing material misstatements of fact, including false wages, withholding amounts, education expenses, child credits, and dependents. Stargell also engaged in identity theft by stealing the identities of others, including some of her former taxpayer clients, in an effort to obtain tax returns that she kept entirely for her own use. Finally, Stargell generated and deposited counterfeit bank checks in connection with her tax fraud.

As a result of the conviction, Stargell faces a statutory maximum sentence of 176 years in prison and a mandatory minimum sentence of two years in prison when she is sentenced on June 20th, 2011.

Santa Paula Tax Return Preparer Pleads Guilty to Tax and Wire Fraud Charges – Benjamin Aparicio, the owner of B.A. Income Tax located in Santa Paula, pleaded guilty on October 25, 2010 to charges that he aided and assisted in the preparation of false tax returns and committed wire fraud with respect to mortgage loans.

Specifically, Aparicio aided and assisted in the preparation of a false partnership tax return and a false individual income tax return for the tax year 2003. Furthermore, Aparicio falsely verified by telephone the contents of a tax reference letter used to secure a residential home loan for an unidentified individual, knowing that the tax reference letter contained false information and causing the home loan to be funded.

When sentenced on March 28th, Aparicio faces a statutory maximum 26 years in federal prison and fines totaling $750,000.

Where Do You Report Suspected Tax Fraud Activity? – If you suspect tax fraud or know of an abusive return preparer, you can report the subject directly to IRS – Criminal Investigation in person at one our local offices or over the phone. In the Los Angeles area, you can call (213) 576-3232 and in San Diego (619) 615-9079 to report suspected tax fraud.

Additionally, you can report suspected tax fraud online using IRS Form 3949-A, Information Referral. You can download Form 3949-A from the Web site at http://www.irs.gov/index.html or call 1-800-829-3676 to order the form by mail. Send the completed form, or a letter detailing the alleged fraudulent activity, to Internal Revenue Service, Fresno, CA 93888. Please include specific information about who you are reporting, the activity you are reporting and how you became aware of it, when the alleged violation took place, the amount of money involved and any other information that might be helpful to an investigation. Although you are not required to identify yourself, it is helpful to do so. Your identity can be kept confidential. You may also be entitled to a reward.

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