Nottingham Tax Preparer Pleads Guilty to Preparing False Tax Returns Resulting in a Loss of over $1 Million
Baltimore, Maryland - Nathan Leroy Hockaday, age 51, of Baltimore, Maryland, pleaded guilty today to five counts of aiding in the preparation of false tax returns.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.
According to Hockaday’s plea agreement, from 2006 to December 31, 2009 Hockaday operated a tax return preparation business out of his home located on South Wickham Road in Baltimore. From 2005 through 2008 Hockaday prepared and electronically filed approximately 2,025 tax returns for his clients using an income tax preparation software program. Hockaday, however, did not sign his clients’ returns as the paid preparer as required by IRS regulations, and did not include any personal information on returns to identify himself as the preparer.
Hockaday routinely reduced his clients’ taxable income by reporting false or inflated business losses and/or losses from the operation of Subchapter “S” Corporations on their returns. Some of the business entities on the tax returns were completely fictitious, while others had not incurred the net operating losses that were reported.
The false business and corporation losses significantly lowered each client’s tax liability, resulting in substantially larger refunds than the clients were entitled to receive. Of the 2,025 tax returns filed by Hockady, 1,387 tax returns included business and/or corporation losses that resulted in an estimated tax loss to the government of between $1 million and $2.5 million.
Approximately 50 of Hockaday’s clients were audited by the IRS in late 2008 and early 2009. The audits revealed the fraudulent scheme, and a significant amount of additional tax due was assessed for each of these clients. After these audits, in early 2009 while preparing his clients’ 2008 tax returns, Hockaday began telling clients that he was no longer able to get them as large of a refund because changes had been made to the tax laws or the IRS was cracking down. Thus, the corporation and business losses that Hockaday reported for the tax year 2008 were still overstated, but lower than in prior years.
Hockaday faces a maximum sentence of three years in prison and a $250,000 fine on each count. U.S. District Judge Catherine C. Blake has scheduled sentencing for March 4, 2011 at 9:15 a.m.
United States Attorney Rod J. Rosenstein commended the IRS for its work in the investigation and thanked Assistant United States Attorney Tonya Kelly Kowitz, who is prosecuting the case.