According to a Department of Justice press release, four family members from Texas and Mississippi have been indicted for allegedly conspiring to defraud the United States by filing tax returns that sought more than $8.5 million in fraudulent refunds. The indictment, returned by a federal grand jury in Fort Worth, Texas, and unsealed recently, charges each defendant with conspiracy to defraud the government as well as aiding and assisting in the preparation of false tax returns. This case highlights the serious legal consequences that taxpayers may face when they submit knowingly false information to the IRS. If you have filed a false return or failed to report income truthfully, it is imperative to consult with a qualified tax defense attorney as soon as possible to determine your level of risk and steps that can mitigate any future civil or criminal tax repercussions.
Defendants Allegedly Used Fictitious Trusts and Fake Documents to Seek Illegitimate Refunds
Court records reveal that the alleged conspiracy began in 2016 and involved the coordinated efforts of four family members: David Hunt, of Arlington, Texas; his twin sons, Brandon and Baylon Hunt, also of Arlington; and their half-brother, Corey Burt, of Mississippi. Prosecutors allege that the defendants created a number of purported trusts that were not engaged in any legitimate business activity. In the names of these entities, they then filed false federal income tax returns that collectively sought over $8.5 million in refunds from the IRS. These refund claims were based on fabricated information, including false income and withholding amounts, that had no basis in fact.
In addition to filing returns for the sham trusts, Brandon Hunt allegedly filed a separate false return in his own name. The indictment states that the group ultimately received more than $1 million in fraudulent refunds from the IRS before their conduct was detected. Authorities further allege that Brandon and Baylon Hunt submitted falsified financial instruments and altered money orders to the IRS in support of their fraudulent filings. The money obtained through these schemes was allegedly used to purchase real estate, luxury goods, and cryptocurrency, and was moved between the family members to disguise the source and ownership of the funds.
Each of the four defendants was charged with conspiracy to defraud the United States, a felony offense that carries a statutory maximum penalty of five years in federal prison. They were also charged with multiple counts of aiding and assisting in the preparation of false tax returns, with each count carrying a maximum sentence of three years. If convicted, the defendants also face additional consequences including supervised release, restitution to the IRS for the amount of lost tax revenue, and monetary penalties.
The Government’s Ongoing Crackdown on Abusive Trust Schemes
While there are many legitimate uses for trusts in tax and estate planning, the IRS and Department of Justice have issued numerous warnings about so-called abusive trust arrangements. These typically involve the creation of entities that have no real economic substance and exist solely for the purpose of fraudulently understating taxable income or hiding assets. In some cases, taxpayers are encouraged to file returns in the names of such trusts in an attempt to secure refunds based on fabricated withholding, credits, or payments never actually made.
The IRS considers these schemes to be highly abusive and has made enforcement in this area a top priority. In addition to auditing returns filed under the names of suspect trusts, the IRS frequently pursues civil penalties against both the taxpayers and any promoters who marketed the structure. Where the conduct appears to involve willful misrepresentations or forged documents, cases are often referred to IRS Criminal Investigation for tax crime prosecution.
In this case, the alleged use of fake financial instruments and altered money orders suggests a level of alleged intentional misconduct that goes beyond poor recordkeeping or tax misunderstanding. Filing a return with the IRS is a legal act that carries with it both civil and criminal consequences when false statements are made knowingly. When patterns of fraudulent conduct emerge, such as repeated filings with similar false entries, or multiple returns filed on behalf of related parties, prosecutors are more likely to bring conspiracy charges and pursue significant criminal tax penalties.
Taking Prompt Action Can Prevent a Criminal Tax Referral
For taxpayers who have used trusts in the past and are unsure whether those structures were set up or operated correctly, the safest course of action is to seek professional advice before the IRS comes calling. Filing a return that claims a refund to which you are not entitled, even if you believe it to be legitimate at the time, can expose you to serious penalties if the IRS determines the claim was false.
If you received a refund based on trust activity that was not supported by actual transactions, or if a preparer or promoter convinced you to submit forms or returns that you now cannot substantiate, your window for correcting those filings voluntarily may be closing. The IRS offers pathways to rectify intentionally fraudulent filings via amended returns submitted though an IRS voluntary disclosure program, but these are generally only available before an audit or criminal tax investigation begins.
The earlier a taxpayer takes steps to come back into compliance, the more options they will have to resolve the matter civilly. Once an indictment is issued, like in the case of the Hunts and Burt, the focus shifts from voluntary repayment to criminal tax punishment. The defendants in this case now face the possibility of years behind bars, significant restitution, and the long-term consequences of a criminal tax conviction.
Consult a Civil and Criminal Tax Defense Attorney Before It’s Too Late
If you have used a likely abusive trust arrangement in your tax filings or submitted any documents to the IRS that may contain inaccurate or unverifiable information, it is critical to meet with a seasoned tax attorney without delay. A qualified tax defense lawyer can help you evaluate your exposure, assess the accuracy of any filings, and take corrective steps before the government initiates an investigation.
