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Tax Preparer Fined Over $1.6M, Sentenced to 3 Years for Aiding and Abetting False Returns

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    The owner of a Florida tax return preparation business has been fined more than $1.6 million and sentenced to federal prison for “aiding and abetting the filing of false federal income tax returns,” according to the United States Department of Justice (DOJ), which issued a press release late last year. Tax preparer Leslie Muniz, who pleaded guilty in August of 2019, either personally filed or caused to be filed “hundreds of fraudulent tax returns,” fabricating business losses and falsifying other pieces of information in order to illegally obtain larger IRS refunds for her clients. Tax schemes involving inflated refunds are common among return preparers who engage in fraud, with some prior examples featured here and here on our tax law blog. In fact, the IRS recently singled out “promises of inflated tax refunds” for inclusion in the 2019 IRS Dirty Dozen, the complete list of which is available here.

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    Florida Tax Preparer Gets Maximum Sentence for Aiding, Assisting False Tax Returns

    According to the Department of Justice, Muniz, who owned and operated the tax preparation company Royalty Tax Services from 2012 to 2016, caused the IRS to receive hundreds of falsified tax returns during this period. Many of the returns claimed “false itemized deductions and fake Schedule C businesses and business losses,” the press release stated.

    When legitimate, claiming losses enables small businesses to obtain tax refunds (subject to some limits on “excess” business losses, which are explained by the IRS here). When those losses or businesses are fake, however, the taxpayer crosses a line from tax planning into tax fraud. If your tax preparer claims that you own a fake business or had fictitious business expenses – or if, in this scenario, you are tax preparer – the government will catch on eventually, likely triggering a tax audit and/or criminal tax investigation into possible tax fraud.

    The IRS Criminal Investigation (IRS-CI) division – which, like numerous others, investigated Muniz’s case successfully – has made return preparer fraud a priority in recent years. In fact, tax preparer fraud appeared alongside inflated refund scams on the 2019 Dirty Dozen. Indeed, these issues are often linked, with the IRS noting that “dishonest preparers… perpetuate refund fraud” (amongst “other scams,” notably identity theft). To learn more about what IRS-CI does, read about how IRS-CI generates leads, how the IRS prosecutes suspected tax crimes, or the warning signs of a criminal referral from an IRS audit.

    IRS-CI looks for certain indicators of fraud when investigating potential tax crimes. In Muniz’s case, two particular details would likely have been red flags for investigators:

    1. According to the press release, “Muniz… used tax preparation numbers assigned to her employees to file the fraudulent tax returns,” an action apparently taken “to avoid having the returns traced to her.”
    2. When employees raised concerns about the aforementioned numbers (or otherwise “questioned Muniz about her tax practices”), they were terminated.

    Muniz, who pleaded guilty late last summer, appeared in November before U.S. District Judge Paul G. Byron, who sentenced the former tax preparer to 36 months in prison. This sentence is notable in that it is the statutory maximum for aiding and abetting a false return, otherwise known as aiding or assisting a false return, under 26 U.S. Code § 7206(2). The court also required Muniz to pay IRS restitution exceeding $1.6 million, equivalent to the tax loss caused by her criminal activity.

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    This case sends an important message, not only to tax preparers but those who hire them: remain firmly within the bounds of tax law, or risk facing civil and criminal penalties. As IRS Tampa Field Office spokesperson Ryan Thompson warned taxpayers, “Ultimately, the taxpayer is responsible for the accuracy of the return and will be required to pay back any received but undue refund.” (For proof, look to a similar case in Arizona, which our tax defense lawyers recently wrote about.)  It is also important that taxpayer’s have exposure for tax evasion and other various criminal tax charges along with conspiracy charges if they took an active part in committing the tax fraud with the tax preparer.   Every return contains a jurat that reads:

    “Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.”

    Note: Both husband and wife have exposure for tax crimes on a married filing joint return.

    Whether or not you are a tax professional, you are required to comply with the law. Get tax help you can trust from a reputable IRS tax attorney with decades of experience serving businesses and individuals. Whether you have tax compliance questions, are searching for a tax preparation service, or need assistance with a serious issue such as an IRS audit or criminal charge, the Tax Law Office of David W. Klasing delivers 24/7 support. Call our main office in Irvine at (800) 681-1295, or contact us online today to schedule a reduced-rate consultation.

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    In addition to our staffed main offices in Irvine,  the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los AngelesSan BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan JoseSan FranciscoOakland, Carlsbad and Sacramento.


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    Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company?  Absolutely not!  See our policies that address this issue here.

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