Charlotte Tax Preparer Sentenced to Prison
Caused a Tax Loss to the IRS of more than $2.5 Million
A North Carolina man was sentenced yesterday to 41 months in prison for conspiring to defraud the United States by preparing and filing false tax returns.
According to court documents and statements made in court, Joseph Octave, 49, of Charlotte, was the leader of a multi-year, multimillion-dollar tax fraud scheme involving hundreds of fraudulent tax returns. Octave was the owner and operator of Kapital Financial Services, a tax preparation business with two offices in Charlotte. From 2014 through 2019, Octave used his tax business to orchestrate a criminal conspiracy in which he directed his employees to prepare and file fraudulent tax returns.
Octave instructed his employees to use several methods to falsify clients’ tax returns, including claiming false deductions, business losses, American Opportunity credits, education credits and earned income tax credits. Octave also trained his employees on how to create the fraudulent returns to avoid IRS detection and provided them with scripts and cheat sheets. To further conceal the fraud, Octave instructed his employees not to give clients copies of their own tax returns and not to share with the clients any details beyond the total refund amount.
According to filed documents and information presented in court, the falsified tax returns and false deductions resulted in reduced tax liabilities and inflated tax refunds for Octave’s clients. Furthermore, because the majority of the time the tax preparation fees were taken directly from the clients’ fraudulently inflated tax refunds, in many instances the clients were unaware of how much they were being charged. As a result of the tax scheme, Kapital Financial Services earned at least $700,000 in fees for preparing the fraudulent tax returns, and, as the owner, Octave received the largest share of this income. The conspiracy caused a total tax loss of more than $2.5 million.
In addition to the term of imprisonment, U.S. District Judge Max O. Cogburn Jr. ordered Octave to serve two years of supervised release and to pay approximately $2.5 million in restitution to the United States.
Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Dena J. King for the Western District of North Carolina and Special Agent in Charge Donald “Trey” Eakins of IRS-Criminal Investigation, Charlotte Field Office, made the announcement.
IRS-Criminal Investigation investigated the case.
Trial Attorney Brian Flanagan of the Tax Division and Assistant U.S. Attorney Caryn Finley of the Western District of North Carolina prosecuted the case.