I have written many times about the non-ending stream of tax return prepares who disregard the law and end up being caught. I’ve done so in posts such as
Tax Fraud Is Not Sacred,
More Tax Return Preparation Gone Bad,
Another Tax Return Preparation Enterprise Gone Bad,
Are They Turning Up the Heat on Tax Return Preparers?,
Surely There Is More to This Tax Fraud Indictment,
Need a Tax Return Preparer? Don’t Use a Current IRS Employee,
Is This How Tax Return Preparation Fraud Can Proliferate?,
When Tax Return Preparers Go Bad, Their Customers Can Pay the Price,
Tax Return Preparer Fails to Evade the IRS,
Fraudulent Tax Return Preparation for Clients and the Preparer,
Prison for Tax Return Preparer Who Does Almost Everything Wrong,
Tax Return Preparation Indictment: From 44 To Three,
When Fraudulent Tax Return Filing Is Part of A Bigger Fraudulent Scheme,
Preparers Preparing Fraudulent Returns Need Prepare Not Only for Fines and Prison But Also Injunctions,
Sins of the Tax Return Preparer Father Passed on to the Tax Return Preparer Son,
Tax Return Preparer Fraud Extends Beyond Tax Returns,
When A Tax Return Preparer’s Bad Behavior Extends Beyond Fraud,
More Thoughts About Avoiding Tax Return Preparers Gone Bad,
Another Tax Return Preparer Fraudulent Loan Application Indictment,
Yet Another Way Tax Return Preparers Can Harm Their Clients (and Employees),
When Unscrupulous Tax Return Preparers Make It Easy for theblo IRS and DOJ to Find Them,
Tax Return Preparers Putting Red Flags on Clients’ Returns,
When Language Describing the Impact of Tax Fraud Matters,
Injunctions Against Fraudulent Tax Return Preparers Help, But Taxpayers Still Need to Be Vigilant,
Will the Re-Introduced Legislation Permitting Tax Return Preparer Regulation Be Enacted, and If So, Would It Make a Difference?,
Can Fraudulent Tax Return Preparation Become An Addiction?,
Tax Return Preparers Who Fail to File Their Own Returns Beg For IRS Attention,
Using a Tax Return Preparer? Take Steps to Verify What Is Filed on Your Behalf,
When Dishonest Tax Return Preparers Are Married,
There Was Nothing Magical About This Tax Return Preparation Business,
Don’t Get Burned By a Tax Return Preparer,
Tax Fraud School: When It’s Not Enough to Be a Fraudulent Tax Return Preparer,
It’s Not Just Tax Return Preparers Assisting in the Preparation of Fraudulent Tax Returns,
Overused Fraudulent Tax Return Preparation Ploys,
It’s Not Just Law Enforcement That Confronts Misbehaving Tax Return Preparers,
When An Injunction Doesn’t Stop a Tax Return Preparer from Filing False Returns,
Filing a Fraudulent Tax Return Is Bad, Filing More Than 3,000 Is Outrageously Bad,
When It Comes to Fraudulent Tax Returns, It's Not Always the Preparers,
A Procedural Twist on Dealing with Fraudulent Tax Return Preparers,
Can Tax Return Preparers Learn from the Misdeeds of Other Preparers?,
Should Tax Return Preparers Use Their Full Legal Names?,
Is There Ever a Free Lunch, Even in the Tax Return Preparation Business?,
Is the Tax Return Preparer or the Client Responsible For Unjustified Deductions?,
When Preparing False Tax Returns Seems to Lack a Financial Motive,
Was This Convicted Tax Return Preparer Courageous or Foolish?, and
One-Stop Shopping for Tax Return Preparation and Unrelated Merchandise?
Only in a some instances have I mentioned the sentences handed down by judges on tax return preparers who plead guilty to, or are convicted of, tax fraud. In most of those instances the sentences were peripheral to the issues I addressed. In only a few instances did I comment on the adequacy of the sentence. That includes one commentary in which I discussed how plea bargaining can reduce what otherwise might be a tougher sentence, and in another I considered how injunctions should be added to the usual sentences of fines, restitution, prison, or some combination of those penalties.
Recently, the IRS issued a news release describing the sentencing of a tax return preparer who pleaded guilty to five counts and aiding and assisting in the preparation and presentation of false and fraudulent tax returns. Over a period of three years (“between 2021 and 2023,” which I interpret as three years and not the one year (2002) that is between 2001 and 2003), the preparer prepared and filed approximately 463 fraudulent returns, causing a tax loss to the U.S. Treasury of $1,575,250. One of the preparer’s schemes was to fabricate Schedules C (Profit or Loss from Business), showing “significant net losses” for taxpayers who had not operated a business. The preparer also put inflated itemized deductions on clients’ returns, particularly for the medical expense deduction.
The preparer was ordered to pay $1,954,673.30 in restitution, which appears to be the amount of taxes not paid by the clients increased by interest and penalties. The preparer was also sentenced to 18 months in prison, to be followed by two years of supervised release. 18 months is roughly 540 days. That’s roughly 1.17 of a day (or 30 hours) for each fraudulent return. It’s one day for each $2,917 in federal taxes unpaid by clients.
Is 30 hours in prison for a fraudulent return sufficient? I suppose it depends on the magnitude of the fraud. So the better question is whether one day in prison is sufficient for a monetary crime of $2,917. For purposes of comparison, consider someone who embezzles $1,575,250. In New York, as summarized in this explanation, embezzlement of more than $1,000,000 is a Class B felony, which carries a prison sentence of 5 to 25 years. A quick look suggests that in other states the sentences are at least as long, perhaps higher. So 18 months is quite the bargain.
A better question is whether 18 months is enough time to persuade this preparer to give up trying to make money through fraudulent means and to seek income in some other, legal manner. It depends on what happens during those 18 months in prison. Are attempts at reformation serious and effective? Only time will tell in the case of this particular preparer.
# posted by James Edward Maule @ 3:42 PM
