Tax Preparer Pleads Guilty to Assisting in the Filing of False Tax Returns and Filing False Personal Tax Returns Resulting in a Total Tax Loss of at Least $3.4 Million

April 20, 2011

Baltimore, Maryland - Sharolyn L. Yarbrough, age 34, of Baltimore, Maryland, who operated Sly’s Financial Services (SFS), pleaded guilty today to assisting in the preparation of false tax returns, and with filing a false tax return, resulting in a total tax loss for tax years 2006 through 2009 of over $2.5 million.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Rebecca A. Sparkman of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.

According to Yarbrough’s plea agreement, in 2003 she began preparing tax returns as a part-time employee at a nationwide tax preparation service. Two years later, without any other formal tax preparation or accounting training, Yarbrough started Sly’s Financial Services. From 2004 to the present, Yarbrough also had other part-time jobs and ventures, including running a bail bonds business and working as a notary and settlement agent for real estate transactions.

According to the plea agreement, from at least the spring of 2005, through the spring of 2010, Yarbrough routinely prepared false tax returns for her clients, fabricating and inflating deductions and credits to decrease their tax liability and to generate refunds for her clients. Yarbrough used several different techniques to fraudulently reduce the tax owed and to generate substantial refunds on her clients’ returns, including overstating the amounts of charitable contributions made by her clients, and claiming false or inflated business losses and/or business expenses, often for businesses that did not exist. As a result of the false statements that Yarbrough made on her clients’ returns, Yarbrough was able to secure tax refunds for her clients to which they were not entitled, and allowed many of them to avoid paying taxes that were owed. Almost all (99.5%) of the tax returns Yarbrough filed resulted in refunds for her clients. The estimated tax loss as a result of the scheme was over $3.4 million.

Yarbrough admits that she also filed false personal tax returns for the years 2006 through 2009, including fabricated and inflated deductions and credits, such as charitable contributions and business losses/expenses. In addition, Yarbrough seriously under-reported her income. As a result, Yarbrough owes taxes of at least $286,110.

Yarbrough faces a maximum penalty of three years in prison on each of the five counts to which she pleaded guilty. U.S. District Judge Benson Everett Legg, has scheduled sentencing for August 12, 2011 at 11:30 a.m.

United States Attorney Rod J. Rosenstein commended IRS-CI for its work in the investigation. Mr. Rosenstein thanked Assistant United States Attorney Sujit Raman, who is prosecuting the case.

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