Federal Way Tax Preparer Convicted in Scheme to Prepare False Income Tax Returns
Defendant Falsified Deductions on more than a Thousand Tax Returns over Four Years
A 52-year-old Federal Way, Washington resident was convicted late yesterday of eight counts of aiding and assisting in preparing false income tax returns, announced U.S. Attorney Brian T. Moran. LINA PASTARS ran a tax preparation business out of her home and collected higher fees from customers by falsely inflating their deductions, so that her clients received a bigger refund. The jury deliberated about three hours following three days of testimony. Chief U.S. District Judge Ricardo S. Martinez scheduled sentencing for June 28, 2019.
According to testimony at trial and records filed in the case, the investigation of PASTARS began in 2015, when the IRS audited one of her clients whose 2012 tax return claimed more than $30,000 in unreimbursed business expenses. The clients claimed PASTARS has claimed the deductions without their knowledge. The IRS Scheme Development Center then began a review of returns prepared by PASTARS between 2012 and 2014 and discovered the returns had unreimbursed employee business expenses that far exceeded the average claims in the Puget Sound region. The statistical analysis revealed PASTARS claimed unreimbursed business expenses for clients that were three to four times the average claim.
On two different occasions in March and April 2015, undercover IRS Criminal Investigation (IRS-CI) agents went to PASTARS posing as clients for tax preparation. Both were very clear that they had no employee business expenses. They told PASTARS that all their expenses were reimbursed by their employers. Nevertheless, PASTARS claimed thousands of dollars in unreimbursed expenses so that the returns showed a refund. She increased the fee that she charged each undercover agent saying “If I do deduction I charge more.” Undercover audio and video of these exchanges were admitted into evidence and played for the jury.
As PASTARS deductions and promised refunds grew, so did her business. Most of her customers paid in cash – making her profit from the scheme difficult to trace. But based on those customers who paid by check or via an online payment system she went from 159 returns prepared in 2012 to 366 prepared in 2015. Over those same years her trackable income from tax prep increased ten-fold from $6,500 in 2012 to $65,470 in 2015. Those figures do not account for clients who paid in cash.
The statistical analysis of returns prepared by PASTARS between 2012 and 2015 reveal that she inflated the deductions for business expenses and charitable donations by as much as $4 million. Investigators will now calculate the tax loss for purposes of sentencing.
Aiding and assisting in preparation of false income tax returns is punishable by up to three years in prison and a $100,000 fine. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. The sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
The case was investigated by Internal Revenue Service Criminal Investigation.
The case was prosecuted by Assistant United States Attorneys Seungjae Lee and Michael Dion.