News

Edgewood Tax Preparer Indicted for Filing False Tax Returns Resulting in Millions of Dollars of Losses


Slogan was “Money, Money, Money”

FOR IMMEDIATE RELEASE
April 14, 2010

Baltimore, Maryland - A federal grand jury has indicted Arnold Wood, age 57, of Edgwood, Maryland, for preparing false individual tax returns on behalf of his clients and himself.

The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge C. André Martin of the Internal Revenue Service - Criminal Investigation.

“Filing a tax return is one of the most significant financial decisions an average American taxpayer makes each year,” stated C. André Martin, Internal Revenue Service-Criminal Investigation Special Agent in Charge, Washington D.C. Field Office. “Taxpayers should be very selective in choosing a tax return preparer. We want to make sure taxpayers do not pay good money for bad advice.”

According to the 36 count indictment, Wood operated a tax return business known as Arnold’s Tax Service (ATS) from his home, which was initially located in Baltimore and later in Edgewood. From 2006 to 2009, Wood is alleged to have routinely prepared federal individual tax returns for his clients in which he fabricated or inflated deductions and credits to increase the refund due to his clients or decrease their tax liability. For example, Wood substantially overstated the amounts of charitable contributions made by many of his clients and used the same round figures (e.g., $4,000, $5,000, $9,000 or $10,000) on large numbers of returns in the same year. Wood also claimed that many of his clients had incurred expenses for which they were entitled to deductions or credits, when the clients in fact either had no such expenses or the expenses were much lower than reported by Wood. In other cases, Wood allegedly claimed that clients had suffered substantial losses from operating a farm, when in fact the clients neither owned, nor had operated, a farm.

The indictment further alleges that Wood advertised ATS with flyers and business cards promising that his services would enable his clients to “keep your money where it belongs,” or to “keep more for yourself!!!” His business cards included pictures of multiple $100 bills and the slogan “Money Money Money.” As a result of this advertising and the substantial refunds that were falsely generated, the number of tax returns Wood prepared for his clients increased from approximately 240 for the tax year 2005, to over 500 in the tax years 2007 and 2008. Wood either was paid a fee by his clients or retained a portion of the electronic refund he received on behalf of the client, or sometimes both.

According to the indictment, almost all of the tax returns filed by Wood resulted in refunds. In contrast, the national average is that 75-77% of filed returns result in refunds. The average amount of refunds received by Wood’s clients in each of the tax years 2005-2008 was over $3,000 each. The amount of the refunds received by Wood’s clients totaled $748,295 for tax year 2005; $1.527 million for tax year 2006; $1.815 million for tax year 2007; and $1.763 million for tax year 2008. The indictment alleges that the majority of these refund amounts were not owed to Wood’s clients, many of whom actually owed additional taxes when the fabricated items were corrected. Wood rarely discussed the completed tax returns with his clients after he filed them and in some cases, failed to even provide his clients with a copy of their filed return.

Finally, the indictment alleges that Wood substantially under-reported his income in his personal tax returns filed for 2007 and 2008, and falsely reported a business expense for 2007.

Wood faces a maximum sentence of three years in prison on each of 34 counts for preparing false tax returns for his clients; and three years in prison on each of two counts for making false statements on his personal income tax returns. Wood is expected to have an initial appearance in U.S. District Court in Baltimore on Thursday, April 15, 2010.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

United States Attorney Rod J. Rosenstein thanked Assistant United States Attorney Jefferson M. Gray, who is prosecuting the case.

 

 

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