Owner of Harvard Tax Service Sentenced to Two Years in Prison for Assisting in the Preparation of False Tax Returns and Failure to File an Individual Tax Return

March 29, 2012

Baltimore, Maryland - U.S. District Judge Benson E. Legg sentenced Felix Jacob, age 80, of Baltimore, Maryland, today to two years in prison, followed by one year of supervised release, for assisting in the preparation of false tax returns and failure to file an individual tax return. Judge Legg also ordered Jacob to pay restitution to the IRS of $216,366.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; and Acting Special Agent in Charge Eric C. Hylton of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.

According to Jacob’s plea agreement, from 1992 to the present, Jacob has operated the Harvard Tax Service (HTS), which assisted individuals in filing tax documents. From 2005 through 2008, Jacob was a certified public accountant. Jacob is also a graduate of Harvard Law School and was a licensed attorney in Maryland until he was disbarred on March 29, 1985, after his conviction for filing a false tax return. Jacob did not disclose his disbarment to taxpayers seeking his assistance with their tax returns.

Jacob admitted that in the course of running his tax business, he recommended to taxpayers that they create partnerships, then had the taxpayers file U.S. Return of Partnership Income forms with the IRS, even though Jacob knew that many of the partnerships had no assets and no business activity. Jacob prepared those forms, as well as individual income tax returns, using numbers which were not supported by questionnaires regarding their income which Jacob had the taxpayers complete.

For example, when Jacob prepared the partnership income forms he listed his home address as the address of the taxpayers’ partnerships and created fictitious deductions. These fictitious deductions and corresponding losses on the partnership tax forms reduced the taxes paid by Jacob’s clients. Jacob often informed individuals of the amount of money they had avoided paying, so the taxpayer would be more willing to hire Jacob to prepare their future tax returns.

Jacob did not charge an hourly fee for the preparation of tax returns, but rather, charged a flat rate, often in excess of $10,000 per year, for assisting individuals with their taxes. In order to allay any concerns taxpayers might express about the figures Jacob used on their tax returns, Jacob guaranteed that if they were ever audited, he would represent them in their disputes with the IRS for free.

For calendar years 2006 and 2007, Jacob prepared at least 19 individual tax returns and 12 partnership returns using deductions which he knew were fraudulent. Those false filings resulted in a tax loss to the government of more than $600,000.

In addition, Jacob admitted that he did not file any individual income tax returns for himself for calendar years 2005 to at least 2010. During tax years 2005, 2006 and 2007, Jacob had gross income of $991,537.34, $1,160,365.81, and $787,729. The total loss to the U.S. caused by his failure to file tax returns for those years was $216,366.

United States Attorney Rod J. Rosenstein commended IRS-Criminal Investigation for its work in the investigation. Mr. Rosenstein thanked Assistant United States Attorney Harry M. Gruber, who prosecuted the case.

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