News and Press Releases

Preparer Overstated Deductions for 37 Clients, Illegally Lowering Tax Bills

December 19, 2007

EPHRAIM A. ROLLOLAZO, 56, of Maple Valley, Washington was sentenced today in U.S. District Court in Seattle to nine months of home confinement, three years of supervised release and 500 hours of community service for Aiding and Assisting in the Preparation or Presentation of Materially False Tax Returns. ROLLOLAZO pleaded guilty July 31, 2007. At sentencing U.S. District Judge Marsha Pechman told him, “When you cheat the government, you cheat veterans, you cheat children who need assistance,... you cheat citizens seeking good public schools, to benefit people you identify as being worthy.”

ROLLOLAZO operated Turbo Tax Systems, LLC with offices in Seattle and Kent, Washington. Between 2000 and 2004, ROLLOLAZO prepared 114 tax returns for 37 clients on which he overstated their itemized deductions. Because of these deductions, taxpayers underpaid their taxes by approximately $154,000. ROLLOLAZO has already paid $70,722 restitution to the United States.

According to a search warrant filed in the case, an undercover IRS agent went to the Turbo Tax Systems office in Kent in March of 2004, after the IRS observed irregularities in the tax returns coming from the business. For example, a review determined that in an unusually high percentage of the returns, the itemized deductions were more than half of the taxpayers’ income. Many of the returns had the exact same dollar amounts for deductions such as job search expenses, and all 252 returns reviewed claimed exactly $500 in non-cash or check charitable donations. The undercover agent provided information for the preparation of his tax return. The preparer claimed deductions the agent never authorized and the preparer left them on the return even when the agent told the preparer the figures were not accurate. Ultimately the return overstated the undercover’s tax refund by more than $1,300.

At sentencing the courtroom was filled with members of the Filipino community showing their support for ROLLOLAZO. Judge Pechman told them, “I want to make it very clear that this prosecution was not a mistake.” The judge stated that she was mystified as to how ROLLOLAZO could think his actions could benefit his Filipino community. “Leading your community into unlawful behavior,” she told him, “reinforces stereotypes that immigrants are only here to take and not to give. That’s a stereotype that simply isn’t true.”

IRS statistics indicate that in the last fiscal year, 123 tax preparers were sentenced for abusive practices. Of those, more than 80% were sentenced to some type of incarceration.

According to the IRS you should be as careful when choosing a tax preparer, as you would in choosing a doctor or a lawyer. While most preparers provide excellent service to their clients, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients. It is important to know that even if someone else prepares your return, you are ultimately responsible for all the information on the tax return.

You can learn more about protecting yourself from Abusive Return Preparers by clicking here.

The case was investigated by the Internal Revenue Service Criminal Investigations (IRS-CI) and was prosecuted by Assistant United States Attorney Jim Lord.

For additional information please contact IRS-CI Public Affairs Officer Dan Wardlaw, at (360) 696-7647 (ex. 3) or Emily Langlie, Public Affairs Officer for the United States Attorney’s Office at (206) 553-4110.

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