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Palm Beach County Tax Return Preparer Pleads Guilty to Tax Violations Involving First-Time Home Buyer Tax Credit

FOR IMMEDIATE RELEASE
May 11, 2012

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and José A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), announced that Gregory J. Salgado, Jr., 39, of Royal Palm Beach, FL, pled guilty today before U.S. District Judge Kenneth A. Marra to one count of filing a false personal tax return with the Internal Revenue Service, in violation of Title 26, United States Code, Section 7206(1), and one count of preparing and filing a false tax return with the Internal Revenue Service for another taxpayer, in violation of Title 26, United States Code, Section 7206(2). Defendant Salgado agreed to pay restitution to the United States in the amount of $570,000.

Defendant Salgado remains on bond pending sentencing, which has been scheduled for July 27, 2012 at 2:30 p.m. At sentencing, Salgado faces up to 3 years’ imprisonment.

On January 23, 2012, an eight count indictment was unsealed charging that Salgado filed income tax returns for himself and his clients in which he fraudulently claimed the First-Time Home Buyer Credit (FTHBC) and other tax credits and deductions.

As stated in court documents, the Housing and Economic Recovery Act of 2008 established a refundable tax credit for first-time homebuyers equal to 10 percent of the purchase price, up to $7,500, for home purchases completed in 2008. The taxpayer was to repay the credit interest-free over 15 years. The FTHBC was increased to $8,000 for homes purchased in 2009 if the taxpayer retained the residence for more than 36 months, and no repayment of the credit was required for 2009 purchases.

According to court documents, Salgado filed a personal income tax return for the tax year 2008 in which he falsely claimed the FTHBC of $7,500 even though he knew that he was not entitled to the credit because he had not purchased a home in 2008.

In addition, court documents state that Salgado operated a tax return preparation business in Palm Beach County in 2009 where he prepared tax returns and electronically filed them for his clients, usually for a fee of $175 per return. Salgado filed tax returns for his clients for the tax year 2008 by entering fabricated information to support a false claim that the taxpayer was entitled to claim the FTHBC and other credits and deductions. Other credits and deductions falsely claimed by Salgado on his clients’ returns included the earned income tax credit, business expenses, home mortgage interest, gifts to charity, unreimbursed employee expenses and medical and dental expenses.

According to court documents filed in connection with today’s guilty plea, after numerous taxpayers received letters from the IRS requesting proof that the taxpayers had in fact purchased a home in 2008 to support the claim for a FTHBC, these taxpayers brought the IRS correspondence to Salgado, who promised to provide support to the IRS that would allow the taxpayers to keep the credit. On at least 21 occasions, Salgado then mailed to the IRS a fictitious Bank of America letter stating that the taxpayer was “approved” for a mortgage, in an attempt to convince the IRS that the taxpayer had purchased or was purchasing a home and was entitled to claim the credit. As Salgado knew, that letter was false and there was no home purchase and therefore no basis for those taxpayers to claim the credit.

As stated in court documents filed in connection with today’s guilty plea, on or about May 13, 2009, Salgado prepared and filed a tax return for a particular client on which he claimed the taxpayer was entitled to the $7,500.00 FTHBC, as well false deductions for fabricated expenses on Schedule C and a false claim for the Earned Income Tax Credit. These false claims resulted in the taxpayer receiving an inflated tax refund to which Salgado knew the taxpayer was not entitled.

According to court documents, between January 14, 2009 and May 13, 2009, Salgado submitted more than 75 tax returns that included false claims for the FTHBC. These claims resulted in a total tax loss to the United States of more than $570,000.00, but less than $1 million.

Mr. Ferrer commended the investigative efforts of the Internal Revenue Service, Criminal Investigation Division. This case is being prosecuted by Assistant U.S. Attorney Lauren Jorgensen.

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A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.

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