Louisville Tax Preparer Sentenced For Filing False Federal Tax Returns And Diverting Client Funds Without Their Knowledge
LOUISVILLE, Ky. – Acting United States Attorney John E. Kuhn, Jr., and Christopher A. Henry, Special Agent in Charge, IRS-Criminal Investigation announced today that Elizabeth A. Lawless, 66, of Louisville, Kentucky, was sentenced this week by Senior District Judge Thomas B. Russell to 6 months in prison, followed by 3 years of supervised release, and ordered to pay restitution in the amount of $329,465 to the IRS.
On November 7, 2014, Lawless pleaded guilty to all counts of a 24-count indictment filed on October 1, 2013, charging her with wire fraud, and aiding and assisting in the preparation of false federal income tax returns.
Beginning in or around February 2010 and continuing through April 2012, Lawless prepared fraudulent tax returns for clients through her business, Lawless BK and Tax, by creating false education credits and fabricating itemized deductions for medical expenses, charitable contributions, and unreimbursed employee business expenses. Lawless did not notify her clients that she was falsifying deductions and credits and did not review her clients' tax returns with them, other than informing them of the amount they were to receive as a refund. As such, her clients were unaware that their returns were fraudulent. From February 2010 to April 2012, the fraudulent returns filed by Lawless, on behalf of her clients, resulted in tax loss of approximately $231,303.
Further, Lawless diverted substantial portions of her clients' fraudulent tax refunds to her own bank account. After the fraudulent tax returns were filed, Lawless provided copies of tax returns to her clients, advising them they were the returns that were filed with the Internal Revenue Service ("IRS"). In many cases, the returns Lawless provided to clients differed from the returns that were actually filed with the IRS, in that the filed returns contained additional fraudulent credits and deductions, resulting in larger refunds. Without her clients’ knowledge or consent, Lawless filed Forms 8888 along with the fraudulent returns so that a portion of the refunds would be deposited in her bank account, while deposits for the amounts indicated on the copies of the tax returns (Lawless provided to the clients) were deposited into the clients' accounts. From February 2010 to April 2012, Lawless diverted approximately $127,553 from her clients' fraudulent tax refunds to her own bank account.
This case was prosecuted by Assistant United States Attorney Amanda E. Gregory and was investigated by the Internal Revenue Service-Criminal Investigation.