KC Tax Preparer Pleads Guilty to False Claim
KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a Kansas City, Mo., woman pleaded guilty in federal court today to presenting a false tax claim.
Chanita Cotton, 44, of Kansas City, pleaded guilty before U.S. Chief District Judge Fernando J. Gaitan to the charge contained in a Nov. 27, 2012, federal indictment.
By pleading guilty today, Cotton admitted that she prepared 23 false and fraudulent income tax returns that resulted in more than $90,000 in refunds. Cotton received a significant portion of those refunds.
Cotton prepared federal income tax returns for her friends, family, clients and others without providing any information on the returns that would identify her as the preparer. During the tax years 2007 through 2010, Cotton prepared returns for clients that included false income amounts in order to earn refunds through the Earned Income Tax Credit (EITC) for amounts higher than they were legally owed. The EITC is a refundable tax credit intended for workers earning a low to moderate income, which results in a tax refund for those whose credit exceeds the amount of taxes owed.
Cotton abused the EITC by including falsified household help income to inflate her clients’ income amounts and earn the maximum EITC. Household help income is earned by working in someone’s home, e.g. babysitting, house cleaning, nursing. Household employers do not need to provide their employees with Forms W-2 if the earned incomes fall below a certain threshold.
Under federal statutes, Cotton is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
This case is being prosecuted by Senior Litigation Counsel Gregg R. Coonrod. It was investigated by IRS-Criminal Investigation.