The owner of a tax preparation service was recently sentenced to 24 months in federal prison for felony tax fraud involving inflated refunds, according to a Department of Justice press release. Nichole Johnson, 37, of Jacksonville, Florida, pleaded guilty last summer to aiding and assisting false tax returns (26 U.S. Code § 7206(2)), a felony offense commonly referred to as tax preparer fraud. By preparing and filing over 1,900 falsified returns, Johnson defrauded the Internal Revenue Service out of “more than $1.3 million in [the form of] undeserved refunds,” which were issued as a direct consequence of the information she provided.
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Appearing before U.S. District Judge Marcia Morales Howard in Florida district court in December, Johnson was sentenced to two years in prison “for aiding and assisting in the filing of a false tax return,” according to the DOJ. Johnson, previously the owner of a Jacksonville tax preparation business called Financial Asset Tax Service, knowingly falsified various items on numerous returns she filed and prepared over the four-year tax period from 2014 to 2017. By preparing and filing approximately 1,900 falsified returns during this time, Johnson obtained roughly $1.3 million in improper tax refunds on behalf of clients, making the average refund per falsified return approximately $684.
Johnson utilized several methods to commit tax fraud. One method, for instance, was to inflate itemized deductions, which – when used properly – enable certain taxpayers to substantially reduce their taxable income, in some cases providing an advantage over the standard deduction. By completing and filing Schedule A, Form 1040 (Itemized Deductions), which should be attached to the taxpayer’s income tax return, a taxpayer can deduct medical expenses, dental expenses, home mortgage interest, and other expenses. If a taxpayer or tax preparer exaggerates (or outright fabricates) these expenses, he or she may be prosecuted for tax fraud, as this case demonstrates.
In addition to falsifying deductions, Johnson also “fraudulently claimed the General Business Credit… for taxpayers who were not entitled to [it],” according to the DOJ. The General Business Credit (GBC), which you can read more about here or here, enables eligible taxpayers to combine separate tax credits (such as the New Markets Credit), carrying the total amount forward a certain number of years.
(Note: The GBC is just one of numerous business tax credits offered by the IRS. If you own a small business or online business, our corporate tax attorneys can help you determine whether you might qualify for the GBC or related business tax credits. To claim the GBC, taxpayers file Form 3800 (General Business Credit), which should be attached to the taxpayer’s Form 1040.)
Per 26 U.S. Code § 7206(2), the maximum sentence for aiding and assisting false returns is 36 months in prison (per count), one year longer than the sentence Johnson received. The statute also sets forth criminal fines of up to $100,000 – or, for corporations, up to five times that amount. According to the Department of Justice, Johnson was ordered to pay restitution equal to the amount of the tax loss caused by her crimes: approximately $1.3 million.
Our tax office provides assistance with criminal tax exposure for CPAs and other tax professionals, delivering aggressive and effective legal support. Serving Northern and Southern California, our seasoned tax fraud defense attorneys defend accountants, bookkeepers, tax preparers, and others against felony and misdemeanor charges involving conspiracy, false or fraudulent statements, aiding and abetting tax fraud, and other forms of return preparer fraud.
With over 20 years of tax experience, including unique dual experience as a practicing tax attorney and accountant, founder David W. Klasing is highly skilled in obtaining favorable resolutions in high-stakes, high-pressure cases. We may be able to mitigate penalties, or even help you avoid prosecution by making a voluntary disclosure or taking other corrective actions. If you are seeking a counsel who can point to an extensive record of positive results, look to the Tax Law Office of David W. Klasing to supply the advocacy you need. Our IRS tax fraud defense lawyers are prepared to advise you, protect your rights, and fight aggressively on your behalf. Contact our law offices online right away to arrange a reduced rate consultation or call the Tax Law Office of David W. Klasing at (800) 681-1295.
Note: As long as a taxpayer that has willfully committed tax crimes self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax prosecution, the taxpayer can be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously receive a break on the civil penalties that would otherwise apply. It is imperative that you hire an experienced and reputable tax defense attorney to take you through the voluntary disclosure process. As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results. See our Testimonials to see what our clients have to say about us!
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