Lamar “Cory” Thompson, formerly of Chicago, received a 30 month prison sentence for mail fraud. The scheme centered around fraudulently filing for and receiving federal income tax refunds.
Between June 2010 and January 2014, Mr. Thompson obtained the social security numbers of several individuals in the Chicagoland Area, persuading them to get fingerprinted under the ruse that they’d be preparing returns at his firm. He then used those numbers and fingerprints to illegally set up several Preparer Identification Numbers and Federal Employer Identification Numbers.
Those numbers were then used to file fraudulent returns and claim the refunds. He also used the Social Security numbers to open bank accounts where the refunds were deposited.
Over the time in question, he tried to collect $1.5M in fraudulent refunds. In addition to the jail term he was ordered to repay over $900K in restitution.
In yet another case, Erica Earley of Robbins and Richton Park, received 14 months in the slammer for willfully filing fraudulent returns on behalf of her clients.
To falsely increase the refunds for her clients, Mz. Earley, who was a full time postal worker moonlighting as a preparer, falsely inflated her client’s income to maximize the Earned Income Credit and other education related credits. She charged as much as $1,000 to complete these simple, yet fraudulent returns.
Mz. Earley concealed this fraud by completing the returns as a “Ghost Preparer”. In other words, instead of signing the returns, she marked them as “Self-Prepared”, which is also illegal. She then directed all of the refunds to be sent to her checking account, which was subsequently closed by the bank for fraudulent activity. Later, she asked her clients to get prepaid debit cards in their names so that she could bypass the scrutiny of a normal banking relationship and still profit from the scheme.
In addition to the prison sentence, Mz. Earley was also ordered to serve a full year on supervised release and to pay over $500K in restitution.
Let me leave you with this.
This is just a couple of local cases that the Department of Justice and IRS have adjudicated in the past few months. There are more. A lot more.
Many make the mistake of saying that electronic filing is the culprit behind the majority of these cases. Some say that the speed at which returns are filed and refunds are processed is the problem.
But nothing could be further from the truth. If anything, the opposite is true. Electronic filing brings scrutiny of its own.
All of this fraud was going on long before the Service began allowing electronic filled returns. Under-reporting income so that a client can receive the Earned Income Tax Credit is the oldest trick in any fraudster’s book. Further screwing around with the numbers to max out the refundable credits has been done since way before I ever got my license.
We used to call these people Neighborhood Magicians. You’d sit down with them to do your return and they’d ask how much money you made last year. You’d say that you didn’t know.
And they’d respond by saying, “Okay. How much money would you like to make.” I’m writing about these cases to caution everyone.
Whether or not your return gets audited has everything to do with who prepares it in the first place. Choose your preparer wisely.
When you electronically file a return, the IRS takes the numbers on the return and matches them against the forms they have under your social security number for that year. If enough of the numbers don’t match, they initiate an audit.
If they audit two or three returns completed by the same preparer and find that the fraudster “Aided in the perpetuation of a Fraud” on all of them, they’ll simply send out audit letters to all of the returns completed by that preparer.
This is true whether the preparer actually signs the returns, or sends them out as a Ghost Preparer. Computers have electronic signatures. It isn’t difficult for the Service to take down the actual offender by simply tracking down the computer that sent in the returns. At that point, all of the clients filed by that machine will get audited as well.
The Service finds a bad preparer and shuts them down by sending out audit notices to all of their clients. And if the preparer’s crimes are egregious enough, the Service will also pursue criminal charges.
Be smart enough to not have this happen to you. If your preparer cuts corners, doesn’t ask for evidence, or pushes positions that can’t be substantiated, then the next person being audited might be you. That’s just how the system works.
If you find yourself in this position, don’t hesitate to give us a call.
We’re all going to get through this. Let’s get through it together.
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