Two Tennessee Women Plead Guilty to Tax Return Preparation Fraud
A Nashville, Tennessee, resident and a LaVergne, Tennessee, resident pleaded guilty in separate cases this week to assisting in the preparation of false tax returns, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney David Rivera for the Middle District of Tennessee.
According to documents filed with the court, Tracey Brown, 48, of Nashville, operated a tax return preparation business, Total Tax Services, from her residence. Brown admitted that from at least January 2006 through December 2010, she routinely filed false tax returns on behalf of her clients in order to increase their refunds, without her clients’ knowledge or permission. She further admitted that on these false returns she claimed a variety of false items, such as false medical expenses, charitable contributions and business losses, with an intended tax loss of approximately $443,605.
According to court documents, Michelle Theus, 42, of LaVergne, was a tax return preparer operating under the name Cole Tax Services in LaVergne. Theus admitted that from 2009 through 2012 she filed false tax returns on behalf of her clients for the 2008 through 2011 tax years. Unbeknownst to her clients, Theus routinely reported false items on the tax returns she prepared, such as false dependents and false education and childcare credits, in order to increase her clients’ refunds. Theus further admitted that often she would prepare and provide the client with an accurate return and then prepare and file a false tax return in the client’s name that claimed an inflated refund. In most cases, Theus directed the Internal Revenue Service (IRS) to split the fraudulently-inflated refunds into separate bank accounts, having the portion expected by the client deposited into the clients’ bank accounts and having the inflated portion of the refund deposited into one of her or her family members’ accounts. Theus took steps to conceal her wrongdoing from the IRS and her clients by not signing the tax returns she prepared, which gave the IRS the impression that the clients prepared the tax returns themselves and by listing her and her family members’ addresses on the tax returns to divert correspondence from the IRS away from the clients. Theus admitted that she prepared approximately 206 tax returns for her clients and that the intended tax loss for these returns is approximately $450,959.
In addition to preparing false tax returns for her clients, Theus admitted that she prepared and filed false 2009 and 2010 income tax returns for herself that substantially underreported the income she earned from her tax preparation business. Theus failed to report more than $95,000 in income for 2009 and 2010, which resulted in additional tax loss of $37,275.
Brown is scheduled to be sentenced on Dec. 21 and Theus is scheduled to be sentenced on Jan. 11, 2017. They each face a statutory maximum sentence of three years in prison, as well as a term of supervised release and monetary penalties.
Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Rivera commended special agents of IRS-Criminal Investigation, who conducted the investigations and Assistant U.S. Attorneys Tom Jaworski and S. Carran Daughtrey and Trial Attorneys Alexander Effendi and Nathan Brooks of the Tax Division, who are prosecuting these cases.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.