A New York tax preparer known as The Magician has pleaded guilty to orchestrating a massive tax fraud scheme, defrauding the IRS with fake returns filed on behalf of clients over a period of several years, as reported by the U.S. Department of Justice (DOJ). Rafael Alvarez, 61, was charged with conspiracy to defraud the United States, stealing government funds, and assisting in the preparation of false tax returns. The scheme involved filing tens of thousands of federal individual income tax returns with false information to fraudulently reduce tax burdens, totaling $145 million.
Alvarez, who was the CEO of Bronx-based ATAX New York, LLC, a high-volume tax preparation company, and his employees falsified customer tax returns by including fake business expenses, non-existent capital losses, and false itemized tax deductions. This allowed them to decrease the tax liability for ATAX customers and increase IRS refunds for clients. In total, approximately 90,000 federal income tax returns were prepared by ATAX.
Alvarez, also known as ‘the Magician’ to ATAX customers, pleaded guilty to the charges and agreed to pay $145 million in restitution to the IRS. He also forfeited over $11.84 million obtained from his illegal actions. The sentencing for the case is scheduled for April 11, with potential maximum prison sentences of five years for conspiracy and up to three years for filing false tax returns.
Acting U.S. Attorney Edward Y. Kim emphasized the significance of this case as one of the largest tax frauds committed by a preparer, warning tax professionals that the DOJ will vigorously investigate and prosecute tax offenses. The IRS requires anyone preparing federal tax returns for payment to have a preparer tax identification number (PTIN), which must be renewed annually.
Several recent cases have targeted fraudulent tax preparers, including a preparer from Somerville, Massachusetts, convicted of filing false tax returns and another preparer sentenced to federal prison for filing fake income returns. The IRS has cautioned against unscrupulous preparers who engage in fraudulent schemes and advises taxpayers to use reputable professionals for filing accurate returns. Please rewrite this sentence.
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