During and after the Covid-19 pandemic, the employee retention credit became a massive source of new business for many accountants and other tax professionals. But as has been widely reported for years, the IRS often pushed back on aggressive and downright bogus claims. There were also plenty of good faith interpretive questions, where taxpayers and their advisers believed they qualified for the credit but where the IRS said otherwise.
Some claims, however, were more than acceptable and have even turned into criminal tax cases. Can a tax audit lead to serious criminal charges? In some cases, yes. One case is a new federal indictment charging seven other people with a multistate conspiracy to defraud the United States of more than $600 million by filing more than 8,000 false tax returns claiming Covid-19 employment tax credits. The press release from the Ministry of Justice is here.
In reaction to the Covid-19 pandemic and its economic impact, Congress legalized a tax credit that incentivized corporations to keep their employees on their payroll, also known as the “employee retention credit” or Erc. congress too they legalize a credit that reimbursed corporations Salaries paid to painters from poor health or circle of relatives leave them unable to paint due to covid-19. This “paid in poor health and circle of relatives, they left credits” or Easy, it was equivalent to the salaries of the painting salaries their permission.
The indictment alleges that from November 2021 to June 2023, defendants Keith Williams, Jamari Lewis, Morais Dicks, Janine Davis, Tiffany Williams, James Hames Jr. and Ewendra Mathurin, all current or former New York residents, repeatedly exploited these programs that were intended to help businesses impacted by the Covid-19 pandemic. The scheme was allegedly headquartered at Credit Reset, a purported credit repair business that Keith Williams owned and operated. Acting as tax preparers, the defendants allegedly filed more than 8,000 false employment tax returns with the IRS claiming Covid-related tax credits on behalf of themselves and their clients.
Each of those supposedly fraudulent tax statements to the extent that SFLC claimed in excess of the amount of wages declared in the tax declaration, indexed the same salaries as those qualified in deficient health license wages and family license salaries qualified, or claimed the SFLC and the ERC for the same amount. wages, none of which was legal by law. The defendants allegedly benefited from this plan to receive Treasury Tax Refund checks from the US. And charge consumers a payment or a percentage of tax reimbursement that the visitor received.
The defendants would also have recruited other people in the program, who were paid receiving a percentage of American money checks obtained fraudulently. In total, the defendants requested more than six hundred million dollars, whose IRS paid around forty -five million dollars to the defendants and their customers.
The indictment claims that the defendants concealed their preparation of the false tax returns by not listing themselves as the paid preparer on the tax returns, and by using Virtual Private Networks to obscure their IP addresses while filing the false returns. For clients without a business, the indictment alleges, members of the conspiracy would sell shell companies to the clients in order to file false tax returns.
How was this ring discovered? The indictment says that after noticing discrepancies in the filings, the IRS and the Social Security Administration requested additional data related to tax returns ready through the defendants. In response, members of the conspiracy would pass false data to the IRS and SSA. The defendants are also alleged to have submitted false loan programs to the Paycheque Protection Program.
The defendants were charged with forty-five counts related to the program, adding conspiracy to defraud the United States, cordon fraud, and complicity in the preparation of false tax returns. Keith Williams, Lewis, Mathurin, Davis, Tiffany Williams and Dicks were also charged with cable fraud for the fraudulent PPP programs they submitted.
Make no mistake, these are serious charges. If convicted, the defendants face very serious prison time:
This is just an accusation, and the government will have to produce your record to discharge a conviction. But if all seven defendants are found guilty, the potential criminal sentence is long.
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