LawFuel.com – The Legal Announcement Service
PREPARER FRAUD FACT SHEET
IRS – Criminal Investigation, Los Angeles and San Diego
For Immediate Release
Contact: Angie Ortanez, Special Agent
Public Information Officer
Office: (619) 615-9036
Mobile: (619) 770-9310
IRS CRACKS DOWN ON RETURN PREPARER FRAUD
Chino Hills Tax Preparer Sentenced to 11 Years in Prison
LOS ANGELES – While the majority of tax return preparers provide honest professional service, the Internal Revenue Service urges people to be very wary of potential red flags that can get them in trouble when filing their tax returns this year. Last month, Abdul Wahid, 57, a Chino Hills tax preparer, who operated Global Accounting and Tax Service in Los Angeles, was sentenced to serve 11 years in prison and ordered to pay over $2 million to the unwitting victims he defrauded. In 2008, Wahid pleaded guilty to three counts of mail fraud, one count of theft of government property, one count of aggravated identity theft and five counts of attempted tax evasion. As part of Wahid’s scheme to defraud clients of his tax return preparation business, he formed companies with names like Internal Recovery Systems, Inc. (IRS), along with other DBAs – FTB, EDD and BOE – that were all acronyms for government taxing agencies. After Wahid prepared personal and business tax returns that usually showed thousands of dollars of taxes due, Wahid instructed clients to write checks for the amounts due made out to the appropriate taxing authorities or to Wahid personally. But instead of submitting the checks to the appropriate taxing agency, Wahid deposited the checks into bank accounts he controlled, for example, his “IRS” account. Wahid also failed to file his personal federal income tax returns for the years 2002 through 2006. By not filing his tax returns, Wahid attempted to evade the payment of nearly $1 million in federal income taxes. According to court documents, Wahid used the money obtained through his scheme to finance his lavish lifestyle.
“Taxpayers should be diligent and take as much care in selecting a tax preparer as they would in selecting a financial planner or doctor,” said Leslie P. DeMarco, Special Agent in Charge for IRS – Criminal Investigation in Los Angeles. “Ultimately, the responsibility falls on the taxpayer when they sign their tax return and file it with the IRS, so it’s important to go over the tax return with your preparer and ask questions if you don’t understand or agree with what is being reported,” added DeMarco.
Preparing fraudulent returns is a risky crime, a felony, punishable by three years imprisonment and a $100,000 fine. Criminal activity by return preparers is referred by the IRS to the Department of Justice for prosecution and/or asserting appropriate civil penalties. Some return preparers have been convicted of, or have pleaded guilty to, felony charges.
According to the Justice Department’s tax Division records, since 2001 the Justice Department’s Tax Division has obtained injunctions against more than 355 tax fraud promoters and unscrupulous tax preparers.
Information about these cases is available at: http://www.usdoj.gov/tax/taxpress2008.htm or on the Justice Department Web site
IRS Criminal Investigation Statistical Information on Return Preparer Fraud, National Figures
Avg. Months to Serve
*Incarceration may include prison time, home confinement, electronic monitoring or a combination.
Reputable preparers will ask to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so, they are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
NOTE TO EDITORS: THE FOLLOWING CASE SUMMARIES FOR PREPARER FRAUD PROSECUTIONS IN THE SOUTHERN CALIFORNIA AREA COMES FROM FILED PUBLIC COURT DOCUMENTS
Rebecca Tyree, Roosevelt Kyle, COA Financial Group LLC and Eagle Financial Services in San Diego Barred from Preparing Tax Returns
WASHINGTON, October 2, 2008 – A federal court in San Diego has permanently barred COA Financial Group, Eagle Financial Services, Roosevelt Kyle and Rebecca Tyree from preparing tax returns for others, the Justice Department announced today. The United States sued Tyree and Kyle and their businesses in November 2007, alleging that they prepared fraudulent tax returns for customers. In February of this year the court preliminarily enjoined Kyle from preparing tax returns.
Orders permanently enjoining Kyle, COA Financial Group and Eagle Financial Services, were signed by Chief Judge Irma E. Gonzalez of the U.S. District Court for the Southern District of California in July and September of 2008. Judge Gonzalez signed the permanent injunction against Tyree Wednesday.
The permanent injunction order against Kyle noted that the Internal Revenue Service (IRS) examined more than 200 returns prepared between 2002 and 2007 by Kyle, COA Financial Group and Eagle Financial Services. All but approximately eight of those returns understated the customer’s tax liability. The court found that COA Financial Group and Eagle Financial Services “intentionally and/or recklessly understated customers’ tax liabilities by including fabricated or inflated deductions” on their returns.
The court noted that in 2007 Kyle fabricated deductions for employee business expenses and charitable contributions on a tax return he prepared for an undercover IRS agent posing as a customer. The court said the IRS estimated that Kyle, COA Financial Group and Eagle Financial Services caused tax losses totaling $18 million.
Los Angeles Woman Sentenced to 14 Months in Federal Prison
For Tax Fraud Scheme
LOS ANGELES – On September 29, 2008, United States District Judge Christina A. Snyder sentenced a Los Angeles woman to 14 months in federal prison, followed by three years of supervised release, for filing over 100 false federal income tax returns with the Internal Revenue Service.
In addition to her prison term, Quatana Naisha Reese, who is also known as Tana Reese, was ordered by Judge Snyder to pay restitution to the Treasury Department totaling $89,055.00. According to the indictment filed in this case, Reese filed over 100 false income tax returns with the Internal Revenue Service for the tax years 1998, 1999, and 2000, all of which claimed refunds. The total loss claimed by Reese in connection with this scheme to defraud the Internal Revenue Service was $585,061.
Mother, Son, and Individual Sentenced for Preparing False Income
Tax Returns, Making False Statements to Federal Agents,
and Delivering False Information to IRS
LOS ANGELES – February 23, 2009 – Alma J. Batson and son Kelcee L. Batson, operators of tax preparation business located in Riverside, California were sentenced in federal court today by U.S. District court Judge Percy Anderson.
Alma Batson was sentenced to serve 12 months in custody followed by 1 year supervised release, and ordered to pay a fine of $6,000. She previously pleaded guilty to one count of Title 26 United States Code, Section 7206(2), aiding and assisting in the preparation of false income tax returns. Kelcee Batson was sentenced to serve 3 years supervised release, including a term of 6 months home detention and ordered to pay a fine of $5,000. He previously pleaded guilty to one count of Title 18 United States Code, Section 1001(a)(2), making a false statement in a matter within the jurisdiction of the executive branch of the government of the United States of America, specifically, the Internal Revenue Service.
According to the nine-count indictment, Alma Batson conspired to aide and assist in the preparation of false income tax returns for the years 2002, 2003, and 2004, in violation of Title 18 U.S.C. § 371 and Title 26 U.S.C. § 7206(2). Both Alma and Kelcee Batson were also charged with making materially false statements to Special Agents of the Internal Revenue Service when each stated that Alma Batson did not prepare tax returns at the tax preparation business, when in truth, as they both knew, she had prepared tax returns, in violation of Title 18 U.S.C. § 1001 (a)(2).
According to the indictment, beginning in or about April 10, 2003, and continuing to on or about April 6, 2006, in Riverside County, Alma Batson and an unnamed co-conspirator, and others, knowingly combined, conspired, and agreed to defraud the United States by impeding, impairing, obstructing, and defeating the lawful governmental functions of a the Internal Revenue Service, by deceitful and dishonest means.
As part of the conspiracy, Alma Batson, the unnamed co-conspirator, and others operated tax preparations business Enterprise Tax Service in Riverside, California wherein Alma Batson, the unnamed co-conspirator, and others, would charge clients a flat fee ranging from $45 to $125 for preparing their tax returns. Their clients dropped off their tax-related information, including, among other things, information relating to their taxable income, Schedule C businesses, itemized deductions, standard deductions, and tax credits, at the tax preparation business. On occasion, Alma Batson met face-to-face with clients to obtain their tax-related information.
Alma Batson then falsified or inflated, among other things, one or more of the following items on the clients’ tax returns:
1. Tax credits for child and dependent care expenses;
2. Hope and lifetime learning tax credits;
3. Deductions for charitable contributions;
4. Deductions for unreimbursed employment expenses;
5. Schedule C business losses;
6. Deductions for tuition and fees;
7. Schedule E rental real estate losses; and,
8. Tax preparer information.
To conceal Alma Batson’s tax fraud, she had other employees at the tax preparation business sign the tax returns that she had herself prepared.
Between tax years 2001 and 2004, Alma Batson and her employees prepared almost 500 fraudulent tax returns, leading to a tax loss of almost $1M. These returns that were prepared falsely in that they claimed inflated or completely false Schedule C business losses; deductions for charitable contributions; deductions for unreimbursed employee expenses, deductions for tuition and fees; and tax credits for child and dependent care expenses; and hope and lifetime learning tax credits.
As part of concealing Alma Batson’s involvement in preparing and filing fraudulent tax returns, in or about June 2005, Alma Batson and her son Kelcee Batson, made false statements to Special Agents of the Internal Revenue Service about each other’s involvement in inputting tax information and preparing tax returns at Enterprise Tax Service, in violation of Title 18 U.S.C. 1001(a)(2).
On December 8, 2008, Chastity M. Chapman, one of Alma Batson’s employees at the tax preparation business, was sentenced to 3 years probation for her role in delivering or causing to be delivered a false or fraudulent tax return to any officer or employee of the Internal Revenue Service, in violation of Title 26, United States Code, Section 7207. Chapman was sentenced before United States District Court Judge Margaret Nagle in the Central District of California.
Tax Business Associate Sentenced for her Role in
Conspiracy to Prepare False Income Tax Returns
LOS ANGELES – On March 9, 2009, Kimberly Walker, a resident of Long Beach and Compton, was sentenced to serve 6 months in custody followed by 3 years of supervised release for her role in preparing false personal tax returns for clients at a business named I.M.C. Financial Services. Walker, along with Charles Vernon Brown, and Donald Ray Hearn of Long Beach, operated several tax preparation businesses, including I.M.C. Financial Services, located in Long Beach, California, Walker Tax and Financial Services and WIB Financial Services, both located in Bellflower, California.
Walker admitted that between December 2000 and April 2003, she, Brown, and Hearn conspired to and, separately and together, prepared clients income tax returns for the years 2000, 2001, 2002, and 2003 that contained false forms W-2, false itemized deductions, including deductions for charitable contributions, medical expenses, job related expenses, as well as false education credits.
In addition to the conspiracy charge, the indictment also alleges that Walker, Brown, and Hearn assisted in the preparation of thirty-four specific income tax returns that claim false deductions and credits.
San Bernardino Tax Preparer Sentenced for Preparing False
Income Tax Returns
LOS ANGELES – On December 1, 2008, Julie Yaun-Lih Sheaffer pleaded guilty and was sentenced to serve 6 months in federal prison and 6 months home confinement, and one year of supervised release for preparing false income tax returns for her clients, in violation of Title 26 U.S.C. Section 7206(2). Sheaffer pleaded guilty and was sentenced before U.S. District Court Judge Percy Anderson.
According to the filed indictment, Sheaffer, owner of Application Specialists, located in San Bernardino, California, prepared federal income tax returns which were false and fraudulent in that they returns overstated the amount of one or more itemized deductions claimed on Schedule A. Sheaffer knew at the time the returns were prepared, that the taxpayers for whom she prepared the returns were not entitled to claim such itemized deductions in the amounts that were stated on the tax returns. The twenty counts of false deductions were claimed in tax years 1999 through 2003, ranging from various dates from December 31, 2001 through April 1, 2004.
Reverend of Corinthian Baptist Church and Tax Preparer Plead Guilty To Assisting In the Preparation of False Federal Income Tax Returns
LOS ANGELES – Henry W. Johnson, 70, a resident of Hesperia, California, and Jesse A. Felix, 54, a resident of Monterey Park, California, pleaded guilty to one count of willfully assisting or advising another person in the preparation of an income tax return that was false, in violation of Title 26 U.S.C. Code section 7206(2). Johnson pleaded guilty on January 27, 2009, and Felix pleaded guilty on January 28, 2009, before U.S. District Court Judge George H. King in the Central District of California.
According to Johnson’s plea agreement, during the years 2001 to 2006, Johnson was a pastor and reverend at the Corinthian Baptist Church in Los Angeles, and during such time possessed stationary for the Church, documents for the preparation of financial receipts for the Church, and a stamp and seal for the Church to officiate documents.
As early as 2001, Johnson provided a number of individuals with false and grossly inflated fictitious receipts for purported charitable donations to the Church. Johnson knew during the entire time, that these individuals would use the “false receipts” to substantiate false charitable deductions on their tax returns. Johnson received payment for the “false receipts” he made and provided to these individuals. The “false receipts” indicating the charitable donations were several times the amount that the individuals had paid Johnson. Johnson used a portion of the payments he received from these individuals for his own personal expenditures, and also used a portion for the church.
During 2001 through 2006, Johnson created and provided “false receipts” for charitable contributions that were used for over forty false tax returns filed with the IRS. The tax losses generated from Johnson’s “false receipts” scheme was approximately $110,000.00.
According to Felix’ plea agreement, during the years 2001 to 2006, Felix prepared individual income tax returns on a part-time basis, for at least twelve individual clients. During this time, Felix was acquainted with Reverend Henry W. Johnson of Corinthian Baptist Church in Los Angeles. Also during this time period, Felix arranged for a number of his tax preparation clients to obtain “false receipts” for tax deductible charitable contribution from Johnson, that were then used by Felix in the preparation of his clients’ false income tax returns, which claimed the fraudulent charitable contributions amount. During the years 2001 to 2006, Felix prepared false returns that amounted to losses of approximately $110,000.00.
According to both Johnson’s and Felix’ plea agreements, one of the false tax returns filed with IRS was the 2003 federal income tax return for an individual referred to in the filed information as “A.L.” The return for “A.L.” was filed with the IRS on or about February 28, 2005, and the tax return for “A.L.” falsely reported that “A.L.” had made tax deductible charitable contributions of $19,912.00 during 2003, when in truth; “A.L.” had made no such charitable contributions during 2003.
Johnson is scheduled to be sentenced on April 27, 2009 and Felix is scheduled to be sentenced on May 4, 2009. Both Johnson and Felix will be sentenced before U.S. District Court Judge George H. King in the Central District of California. Each defendant faces up to 3 years in prison and a fine of $100,000.00 or twice the gross gain or gross loss resulting from the offense.
Cerritos CPA Pleads Guilty to Filing a Tax Return Knowing
the Return Contained False Information
SANTA ANA – On March 24, 2009, Anthony Antonio Tiongson entered a guilty plea before U.S. District Court Judge Andrew Guilford for filing false information with the Internal Revenue Service (IRS), in violation of Title 26 U.S.C. Section 7207. On the same day, Tiongson was also sentenced to twelve months of probation and ordered to report his guilty plea and nature of his offense to the California Accountancy Board.
According to the filed indictment, Tiongson was a Certified Public Accountant, and operated a tax return preparation business under the name “Anthony A. Tiongson, CPA” in Cerritos, California. Beginning in 1999, Tiongson submitted to the IRS tax returns for clients who lived and worked in California. Tiongson included the clients’ income on the Forms 1040. He attached to the returns Forms 2555 (for foreign earned income) in which he reported that the income was foreign earned income, claiming that California was not part of the United States as defined in the Internal Revenue Code, and therefore income earned in California was not subject to taxation in the United States. On November 11, 2002, Tiongson aided and assisted in the preparation and presentation to the IRS false and fraudulent U.S. Individual Income Tax Returns, Forms 1040 and Forms 2555, for taxpayers for tax year 2001. The tax return prepared by Tiongson represented that California was not part of the United States as defined in the Internal Revenue Code. Tiongson well knew that IRS considered California part of the United States for tax purposes.
La Mesa Tax Preparer Pleads Guilty to
Preparing a False Tax Return
On December 10, 2008, Peter R. Turner pleaded guilty before United States Magistrate Judge Anthony J. Battaglia, in the Southern District of California, to one count of Aiding and Assisting in the Preparation and Presentation of a False Income Tax Return for tax year 2002, in violation of Title 26, United States Code, Section 7206(2), subject to final acceptance of the plea by United States District Court Judge M. James Lorenz, at the time of sentencing.
According to Turner’s plea agreement, he owned and operated Turner Tax Services, a tax preparation business, since 1997, and prepared tax returns for a fee of between $100 to $200. During the tax years 2002 and 2003, Turner knowingly inflated his clients’ itemized deductions to obtain a larger refund for his clients and thereby promote his business. Turner inflated his clients’ itemized deductions for personal property taxes, gifts to charity, and unreimbursed employee expenses.
Turner also admitted that, on or about April 15, 2003, he prepared and electronically filed a joint U.S. Individual Income Tax Return, Form 1040, on behalf of a married couple. He falsely reported that the taxpayers had total itemized deductions of $44,709, deductions for personal property taxes of $2,473, gifts to charity of $5,003, and unreimbursed employee expenses of $8,197. Turner knew that these deductions were inflated, and he received no documentation from the taxpayers to support these itemized deductions claimed. Turner inflated these deductions without discussing the deductions with his clients.
San Ysidro Tax Preparer Pleads Guilty to Preparing False
2005 and 2006 Tax Returns
SAN DIEGO – On April 2, 2009 United States Attorney Karen P. Hewitt announced that Pablo Amesquita, a self-employed tax preparer doing business as “Tax & Weddings,” located in San Ysidro, California, pled guilty in federal court in San Diego to two felony counts of aiding and assisting in the preparation and presentation of false tax returns for tax years 2005 and 2006. Amesquita entered his guilty plea before United States Magistrate Judge Jan M. Adler, subject to final acceptance of the plea by United States District Court Judge Michael M. Anello, at the time of sentencing.
According to the filed plea agreement, Amesquita admitted to preparing tax returns for his clients for the 2005 and 2006 tax years, in which he knowing and willfully falsified and exaggerated itemized deductions claimed on the returns in an attempt to defeat a total of approximately $65,096 and $80,227 in additional taxes due and owing to the United States in 2005 and 2006, respectively.
Riverside Woman Sentenced to 48 Months in Federal Prison For
Filing False Claims with the IRS
RIVERSIDE, California – On April 6, 2009, Peaches Mercer Turner, the final defendant in a scheme to file false claims with the Internal Revenue Service, was sentenced to spend 48 months in federal prison at a hearing in United States District Court in Riverside.
Turner was sentenced by United States District Judge Stephen G. Larson and was ordered to pay restitution to the IRS totaling $37,706. At a sentencing hearing held earlier this year, Turner’s co-conspirator, Alejandro Berdin, who pleaded guilty to one count of conspiring to file false claims with the IRS, was sentenced to spend 37 months in prison followed by three years of supervised release. Additionally, Berdin was ordered to pay restitution to the IRS in the amount of $5,122.
According to court papers, in 2006 and 2007, Turner and Berdin conspired to defraud the Internal Revenue Service by filing false tax returns claiming Telephone Excise Tax Refunds and the Earned Income Tax Credit, based upon false statements contained on the returns. In total, Turner and her co-conspirators filed returns claiming approximately $536,812 in refunds with the IRS.
To accomplish the scheme, Turner admitted in her plea agreement that she paid cash to some individuals to obtain their names and social security numbers as well as the names and social security numbers for their dependents, for use in the scheme. In some instances, Turner obtained the personally identifying information without the individual to whom it belonged knowing that she had done so. Turner used the personally identifying information she obtained to file false claims for refunds with the IRS. Turner specifically admitted that she filed one tax return with the IRS claiming a refund of the Telephone Excise Tax of over $60,000.
Turner’s plea details that, in order to conceal the conspiracy from detection, she instructed others that, if they were contacted by investigators, they should tell the investigators that Turner did not prepare their tax returns when, in fact, she did. Additionally, Turner admitted to directing others to remove and destroy evidence of the conspiracy, including the computer with which she prepared the false tax returns, from her home.
Potential Red Flags to Watch for When Selecting a Return Preparer
Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the amount of the refund.
Use a reputable tax professional who signs your tax return and provides you with a copy for your records.
Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
Review your return before you sign it and ask questions on entries you don’t understand.
No matter who prepares your tax return, you, the taxpayer, are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form.
Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
Where to Check for Disbarred, Suspended, Resigned, and Censured attorneys, certified public accountants, enrolled agents, and enrolled actuaries who practice before the Internal Revenue Service since 1998?
If you’d like to check to see if the tax professional you are about to hire has been involved in a disciplinary action or has been suspended, go the Office of Professional Responsibility via the link below:
Or, you can access www.irs.gov and type in the search field “OPR List”
Where Do You Report Suspected Tax Fraud Activity?
If you suspect tax fraud or know of an abusive return preparer, report this activity using IRS Form 3949-A, Information Referral. You can download Form 3949-A from the Web site at IRS.gov or call 1-800-829-3676 to order 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.