Here’s something you do not see very often—individuals who claim income as household help in order to commit tax fraud. The dodge earned a North Carolina tax preparer a lot of trouble and more than ten years in prison.
Keesha Frye, a 43-year old Durham resident, owned KEF Professional Tax Services, a tax-preparation business. In providing her services, Ms. Frye and her employees routinely embellished the returns of her clients to include income earned from household help. Abbreviated on a return as “HSH,” this refers to employment or monies earned through providing in-home services, like house cleaning.
The income boost gave the lower-income clients of Ms. Frye just enough added earnings to qualify for the Earned Income Tax Credit (EITC). The EITC is intended to serve as a tax-break for parents with minimal earnings. While this type of criminal tax fraud may seem small potatoes, Department of Justice documents reveal that Ms. Frye created a tax loss of $1.7 million.
Adding to that, Ms. Frye created false income tax returns on her own behalf. Although Ms. Frye claimed childcare expenses for her child attending a Durham daycare center, the owner of the business had no record of her child and did not recall meeting Ms. Frye.
Tripped up by an undercover investigation
Ms. Frye was tripped up by an undercover IRS criminal tax investigation. In 2014, an agent visited KEF Professional Tax Returns. While being recorded on audio, an employee of KEF prepared a false tax return. A later search of the premises offered evidence against Ms. Frye including “cheat sheets” to support the tax fraud.
It is possible that Ms. Frye learned from earlier experience. A tax preparer used by Ms. Frye was convicted of tax fraud in 2012. When interviewed by federal agents working on the case against her tax preparer, Ms. Frye claimed no knowledge of the education expenses and business losses that were registered on her 2006 tax return.
Though small time, Ms. Frye’s fraudulent tax returns earned her more than a decade of prison time, plus probation and almost $2 million in restitution to the IRS. In a plea agreement, an employee nabbed in the scam is serving two years in prison, plus probation and $83,083 in restitution.
Ms. Frye serves as a cautionary tale for income earners at all levels—be knowledgeable about who is preparing your income tax returns. In this case, Ms. Frye and company prepared fraudulent returns and then told her clients they needed to create a fake paper trail to support their tax return.
When you use a new accounting firm, check references and ensure the business follows best practices, including the expertise to protect your finances and your credibility with the IRS. Ask about their service in the event of an IRS audit. If you are drawn into a tax controversy of any kind, speak with an experienced criminal tax defense attorney as soon as possible.
Skilled Cleveland tax attorneys protect your rights
In Cleveland, Chicago, and internationally, Robert J. Fedor, Esq., LLC provides experienced, confidential legal strategies and solutions for persons or entities notified of an IRS civil tax audit or other tax challenge. Contact us or call 800-579-0997 today.