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The U.S. Department of Justice (DOJ) announced the sentencing of Chicago and Minneapolis return preparer Lessie Beatrice Lindsey, 37, who in June 2019 pleaded guilty to tax fraud. By “routinely” filing tax returns that contained false information, Lindsey caused the Internal Revenue Service to issue nearly $1 million in improper refunds for the tax period from 2012 to 2015. The amount Lindsey claimed, the DOJ noted, was even larger than the amount actually issued, exceeding $1.1 million.
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Court records indicate that Lindsey, a tax preparer who was active in both Chicago and Minneapolis, caused the IRS to improperly issue refunds totaling $995,966 by filing 192 false tax returns on behalf of her clients, beginning in 2013 and continuing until 2016. That amounts, on average, to a refund of approximately $5,187 per falsified return. According to the DOJ, Lindsey “falsified information on the federal income tax returns… including employment, income, and tax credits, in order to increase the clients’ tax refunds,” echoing a familiar pattern that we have observed on other occasions.
The IRS has also taken notice of this pattern, adding both “promises of inflated tax refunds” and “tax return preparer fraud” to its 2019 “Dirty Dozen” list of that year’s top tax scams. In particular, the IRS warns, it is “common” for “unscrupulous tax preparers” to improperly claim business tax credits, notably the Fuel Tax Credit and Research Credit. The American Opportunity Tax Credit (AOTC), Earned Income Tax Credit (EITC), and Child Tax Credit (CTC) are also frequent targets. For example, “[The] IRS estimates that between 21% to 26% of EITC claims are paid in error,” according to its website. Lindsey’s case is part of that statistic, with the EITC listed as one of the tax credits she attempted to falsely claim on behalf of her clients.
Appearing before Senior Judge David S. Doty in Minneapolis district court, Lindsey was sentenced to one year plus one day in federal prison. The DOJ’s press release did not specify whether Lindsey was ordered to pay restitution and/or criminal fines, though such outcomes are common in cases where taxpayers are convicted of or plead guilty to fraud. In many cases, the offender is ordered to pay restitution roughly equivalent to the tax loss caused by his or her crime(s), though this amount can be greatly increased by civil fraud penalties or other civil tax penalties.
Tax preparers, attorneys, and accountants can face serious penalties for engaging in fraud, including civil fraud penalties, IRS restitution, prison time, supervised release, and the potential suspension or revocation of professional licenses and certifications. If you are facing a tax audit, an IRS criminal investigation, or have been contacted regarding a client or former client, it is imperative to retain effective counsel as soon as possible.
At the Tax Law Office of David W. Klasing, we possess more than 20 years of combined experience representing individuals and business entities, including CPAs and return preparers, in criminal tax matters. Providing aggressive legal representation for tax professionals throughout Northern and Southern California, our tax defense lawyers are available 24 hours a day, seven days a week, to offer assistance with criminal tax exposure for CPAs and other tax professionals. Contact us online right away to arrange a reduced-rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295 for immediate assistance.
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