The value of different color pens to tax fraudsters, and other highlights from our favorite recent tax fraud cases.
Detroit: The federal government is seeking to permanently bar Dieasha Davis and the prep service she allegedly owns, Tax Pioneer, from preparing federal returns for others.
According to the suit, Davis formerly managed and prepared returns for a Liberty Tax franchisee, and her fraudulent preparation of returns allegedly encompasses both her time at Liberty and, since 2013, at Tax Pioneer. The government’s complaint against Davis and Tax Pioneer alleges that the defendants improperly prepare returns that claim false or inflated income and expenses, bogus dependents, improper filing statuses and false itemized deductions, all to inflate clients’ refunds and refundable credits.
A few examples alleged in the complaint detail how Davis intentionally reduced clients’ income tax liabilities by reporting false information. In January 2016, Davis prepared a return for a client that reported more than $18,500 in losses from a non-existent “Property Management Real Estate” business, according to the complaint.
Davis also allegedly claimed a bogus expense deduction for the same client, reporting more than $9,800 of fictitious mortgage interest. Also in January 2016, she prepared a return for another client and added to this return $6,800 in fictitious wages in order to inflate a claim for the EITC, according to the complaint. The government alleges that Davis even concocted a W-2 to report these fraudulent wages.
The government also alleges that Davis encouraged clients audited by the IRS to submit false records. According to the complaint, a preparer at Tax Pioneer reported a fictitious child-care business on a client’s return for two years and reported false income and expenses to make the business appear legitimate. The government alleges that after the IRS red-flagged these returns, the client sought help from Tax Pioneer; Davis provided this client with blank worksheets, told the client to add false business expenses and income using different color pens and provide these bogus documents to the IRS, according to the complaint.
Lynn, Mass.: Preparer Claudia Carredano, 46, has been sentenced to 30 months in prison and three years of supervised release and been ordered to pay restitution of $320,760 and forfeiture in connection with a scheme to file fraudulent returns and pocket the excess refunds.
Carredano, who last March pleaded guilty to one count of wire fraud and one count of ID theft, co-owned the prep business Maya Multi Services. From 2008 to 2011, Carredano devised and executed a scheme to defraud the IRS by filing false returns on behalf of clients.
She filed dozens of false returns for her clients that included fraudulent dependents to increase the refund, generally without her clients’ knowledge. Carredano then directed the inflated portion of the refunds to her bank account and gave her clients versions of their returns that did not reflect the fraudulent dependents and sought smaller refunds than the returns she actually filed with the IRS.
Cleveland Heights, Ohio: Local resident Darryl E. Farmer, 45, has been sentenced to 70 months in prison and been ordered to pay $100,230 restitution.
Farmer held himself out as a neighborhood preparer who paid recruiters a “referral fee” to provide IDs of others. Farmer used this information to file false returns, including claiming credits for businesses that did not exist, according to court documents.
He also opened multiple personal and business bank accounts, which he controlled, in the names of these various persons to deposit the refunds from the returns, according to court documents.
Farmer falsely claimed more than $100,000 from the IRS between 2010 and 2012, according to court documents. He was found guilty last year of one count of conspiracy to defraud, nine counts of false tax claims, eight counts of aiding in the preparation of false tax returns, two counts of wire fraud and two counts of aggravated ID theft.
Orlando, Fla.: The federal government has filed suit to permanently bar the owners and operators of Q A Tax Service Inc., Unik Tax Refund, D&M Tax Solutions, LED Tax Services and UJM Tax Services from preparing returns for others and owning and operating a prep business.
The government also requests court orders requiring these owners and operators to disgorge the gross receipts they obtained from the preparation of federal returns that make, among other falsehoods, fake claims.
The government filed the first of these three suits against two of the owners and operators of Q A Tax Service, Vicky Barwick of Orlando, Fla., and Jasmine Morales of Winter Garden, Fla. According to that complaint, Q A has locations in Florida, Illinois, Indiana and North Carolina. The government filed the second suit in federal court in Fayetteville, N.C., against another owner and operator of Q A, Tanisha Salmon of Fayetteville.
The government filed the third suit in Florida against the owners and operators of the following prep businesses, each of which has locations in Florida: Unik Tax Refund LLC and Yves Demesmin of Mt. Dora; UJM Tax Services and Joseph Demesmin of Boca Raton; LED Tax Services and Elie Dorceus of Boynton Beach; and D&M Tax Solutions and Mario Cooper and Dia Fleming of Palm Coast.
The government alleges that Barwick, Morales, Salmon, Yves and Joseph Demesmin, Dorceus, Cooper and Fleming each used a prep model used by the former LBS Tax Services. Since 2014, the United States has sued nearly a dozen former LBS franchisees.
The government alleges in this case that the defendants used the LBS model to prepare and file false returns to inflate clients’ refunds and profit through exorbitant and often undisclosed fees. The complaints allege that the defendants engaged in fraudulent activity, including falsely claiming the EITC; fabricating businesses and related business income and expenses; fabricating deductions, particularly for unreimbursed employee business expenses; and charging deceptive and unconscionable fees.