United States Attorney And IRS, Special Agent In Charge, Urge Taxpayers To Beware Of Fraudulent Tax Return Preparers And Tax Scheme Promoters

Remind Taxpayers To Pay Federal Income Taxes On Time And In Full

LOUISVILLE, Ky.  – United States Attorney John E. Kuhn, Jr., joined by Tracey D. Montaño, Special Agent in Charge, IRS Criminal Investigation, urged the public today, to avoid dishonest tax-return preparers and their fraudulent schemes, and urged taxpayers to pay federal income taxes on time and in full, during a press conference today, at the U.S. Attorney’s Office in Louisville. 

“Recently, my Office has successfully prosecuted a number of tax preparers who unlawfully falsified returns,” stated U.S. Attorney Kuhn.  “As the filing deadline approaches, it is imperative the public guard against the many dishonest and fraudulent schemes of some return preparers as well as ensure their own returns are accurate and honest.”

“The U.S. Tax system is based on a principle of voluntary compliance and is the cost we pay for government services we use on a daily basis. It is important for the honest taxpayer to have confidence that when they pay their taxes, their neighbors and co-workers are doing the same,” stated Tracey D. Montaño, Special Agent in Charge.  “IRS-Criminal Investigation will continue to partner with the U.S. Attorney’s Office to ensure that those committing schemes to defraud the government and the taxpaying public are caught and prosecuted for their crimes.  Those Americans who file accurate, honest and timely returns can be assured that the government will hold accountable those who don't."      

During the press conference, U.S. Attorney Kuhn noted several recent successful prosecutions by his Office, with investigative assistance by the IRS Criminal Investigation division, for return preparer fraud and individual income tax fraud.

Last month, Tiffany Elliott pleaded guilty to preparing fraudulent tax returns through her business, Tax Time, Inc., by creating false deductions including investment expenses, business losses, charitable deductions, and work expenses.  The loss to the United States Treasury was $255,938, exclusive of penalties and interest. Tara L. Mitchell and Mechelle Blankenship, of Logan County, Kentucky, were charged with falsely claiming education credits for taxpayers who were not entitled to them. And in a Civil Complaint by the Department of Justice Tax Division against NJ Mobile Tax Service, owner and preparer Napoleon Jackson was permanently barred from tax preparation. Jackson allegedly promised customers he could increase their chances of a higher tax return. Jackson allegedly falsified charitable donations, education credits, claims of dependents, and deductions for homes not owned by taxpayers. Preparers who charge clients a percentage of their tax refund intentionally prepare false returns to increase their clients’ refund, and thus their own fees. 

As in past years, the IRS has designated return preparer fraud as one of 2016’s “Dirty Dozen” tax scams to avoid during return filing season. U.S. Attorney Kuhn and S.A.C Montaño urged taxpayers to remain diligent to ensure their returns are accurate even if they are prepared by a professional, noting that taxpayers are ultimately responsible for the content of their own returns.

Further, across the nation and in the Western District of Kentucky, individuals are prosecuted for stealing social security numbers, then filing completely fictitious returns to obtain fraudulent refunds.  Recently Erica Spencer, of Louisville, was sentenced to 48 months in prison, and ordered to pay $94,000 in restitution for using identities to file fraudulent federal income tax returns and receive fraudulent federal income tax refunds in their names. Also, prosecuted in the Western District of Kentucky, Fernando Herrera, who was sentenced to 48 months in prison for a scheme that included obtaining identification documents from Mexican nationals, applying for false taxpayer identification numbers, filing fictitious returns, and obtaining fraudulent refunds totaling more than $730,000. 

The IRS website has information about how to guard against identity theft: Identity Protection: Prevention, Detection and Victim Assistance  information on reporting tax fraud How Do You Report Suspected Tax Fraud Activity?, and how to Report Phishing and Online Scams.

U.S. Attorney Kuhn further reminded tax payers of their obligation to file accurate federal income taxes on time and to pay in full. “Unfortunately, we all too often see taxpayers themselves filing false returns.  We sometimes have cases where taxpayers fail to report income, or falsely pad deductions with false entries such as business expenses, charitable contributions, educational expenses, or dependent care credits.  This is against the law, and we prosecute these cases,” concluded U.S. Attorney Kuhn. Last month, a Madisonville, Kentucky business owner was sentenced to 30 months in prison and ordered to pay $649,506.15 in restitution for filing false tax returns. Gholam A. Sattar-Shamsabadi failed to report the proceeds of his admitted insurance fraud as taxable income during a six year period.        

IRS, SAC Montaño emphasized the investigative work done by the IRS Criminal Investigation office, alongside the U.S. Attorney’s Office, to find dishonest preparers and shut them down. Further, Montaño warned the public of phone scams and so called phishing scams. The IRS has seen a surge of phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation and license revocation, among other things. Also, taxpayers need to be on guard against fake emails or websites looking to steal personal information. According to Montaño, the IRS will never send taxpayers an email about a bill or refund out of the blue. Montaño warned the public to not click on one claiming to be from the IRS and to be wary of strange emails and websites that may be nothing more than scams to steal personal information.

During this last week before the tax filing deadline, those in need of assistance may contact the IRS Customer Service Phone Numbers -  Individuals: 800-829-1040 or Businesses:800-829-4933

U.S. taxpayers filed approximately 150 million returns in 2014.  According to statistics available from the Treasury Inspector General for Tax Administration, the Internal Revenue Service (IRS) identified more than 2.1 million of those returns that claimed fraudulent refunds totaling more than $15.7 billion.