One for the Books

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It takes a conniving mind to make claims to the Internal Revenue Service for more than $63 million dollars in fraudulent income tax refunds, all processed by a single tax preparation business. (It also takes a lot of chutzpah.)But federal prosecutors allege that is exactly the scheme that one Arizona business owner embarked on, when she prepared 2,000 fraudulent tax returns on behalf of more than 100 clients, according to an article in The Arizona Republic.

The story details how the bilking bookkeeper filed inflated tax return documents related to home foreclosures and discounted bonds, and submitted them on behalf of her clients. (Fortunately, the government had paid out only around $1.4 million of the claims before it caught on to the fraudulent returns.) The business owner soon landed in federal court, answering to a grand jury that moved to indict her for filing 16 false tax refund claims with the intention of stealing millions of dollars from the government. In court, prosecutors rebuffed her defense attorney’s attempt to root the crimes in her own naiveté, noting the false claims she continued to submit even after she became aware of her erroneous filings. (Note to future fraudsters: the excuse that you did not know what you were doing works less well when you were already warned about your behavior.)

After pleading guilty to making false claims to the IRS she was sentenced to eight months in federal prison and is on the hook for $692,206 in restitution to the federal government, apart from the $714,217 worth of reimbursements already paid back by affected taxpayers. (However, paying the government back may become a problem for this accountant: According to the defendant, all of her subsequent employers have fired her after catching wind of her crimes.)

This type of fraud affects regular Americans in devastating ways. Not only did this tax preparer thrust her clients into probably the biggest financial mess of their lives, but taxpayer-funded dollars must also be used to untangle fraud at this scope and level. (For someone who reportedly ”gives too much of herself at times,” let’s hope she can learn to take her punishment.)

Source: Today’s ”Fraud of the Day” is based on ”Cave Creek bookkeeper sentenced in $1.4 million tax-refund fraud case,” written by Garrett Mitchell and published by The Arizona Republic on January 26, 2016.

A Cave Creek bookkeeper who pleaded guilty to making millions of dollars of false refund claims to the Internal Revenue Service was sentenced Tuesday to eight months in prison. Linda Mary Anderson, the owner of Coyote Accounting, a tax-return preparation business, was arrested in March 2014 after a grand jury charged her with filing 16 false claims seeking nearly $3.9 million in fraudulent tax refunds in 2009 and 2010, which the government initially said resulted in nearly $2.2 million in false refunds actually being paid.

According to court documents, Anderson, 57, prepared more than 2,000 fraudulent documents on behalf of more than 100 people, claiming more than $63 million worth of refunds.

According to the charges, Anderson largely relied on fake IRS forms 1099-A and 1099-OID to seek the inflated refunds. The first document is typically used for home foreclosures and repossessions, while the latter involves bonds or certificates of deposit issued at a discount.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.