Federal Way Tax Preparer Sentenced to Prison for Scheme to Prepare False Income Tax Returns

          A 52-year-old Federal Way, Washington resident was sentenced today in U.S. District Court in Seattle to one year in prison, one year of supervised release, and $13,141 in restitution for 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.  PASTARS was convicted February 28, 2019,  following a four–day jury trial.  At the sentencing hearing, Chief U.S. District Judge Ricardo S. Martinez said PASTARS’ clients were primarily immigrants with little knowledge of the tax system and limited language skills.  “That population is most vulnerable,” the Chief Judge said “They were left to flounder by themselves when the IRS came knocking at their door.”

          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 had 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 case was investigated by Internal Revenue Service Criminal Investigation. 

          The case was prosecuted by Assistant United States Attorneys Seungjae Lee and Michael Dion.