return preparer fraud

IR-2009-69

July 30, 2009

Internal Revenue Service : Fraud prosecution : First-time homebuyer credit .


IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud


IR-2009-69, July 29, 2009

WASHINGTON --The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.

On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client's federal tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.

To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.

"We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction," said Eileen Mayer, Chief, IRS Criminal Investigation. "The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund."

Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.



First-Time Homebuyer Credit

The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a primary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer's spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser's tax return until after the taxpayer closes and has purchased the home.

Different rules apply for homes bought in 2008.

Full details and instructions are available on the official IRS Web site, IRS.gov .


.O. Price III Plea Agreement

July 30, 2009

Internal Revenue Service : Fraud prosecution : First-time homebuyer credit : Plea agreement .


UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION


UNITED STATES OF AMERICA v. JAMES OTTO PRICE, III

CASE NO. 3:09-cr-132-J-25HTS


PLEA AGREEMENT


Pursuant to Fed. R. Crim. P. 11(c), the United States of America, by A. Brian Albritton, United States Attorney for the Middle District of Florida, and the defendant, James Otto Price, III, and the attorney for the defendant, Donald Mairs, mutually agree as follows:



A. Particularized Terms



1. Count(s) Pleading To

The defendant shall enter a plea of guilty to Count One of the Indictment, which charges the defendant with knowingly and willfully aiding and assisting in the preparation and filing of a Federal income tax return knowing it to be false or fraudulent in some material way, in violation of 26 U.S.C. § 7206(2).



2. Maximum Penalties

Count One is punishable by up to three (3) years' imprisonment, a fine of up to $250,000, or both a fine and imprisonment, a term of supervised release of up to one (1) year, and a special assessment of $100. In addition, if the defendant were to violate any of the terms of supervised release upon release from imprisonment, the defendant could be sentenced to an additional term of imprisonment of up to one (1) year and could face an additional period of supervised release. With respect to certain offenses, the Court shall order the defendant to make restitution to any victim of the offense(s), and with respect to other offenses, the Court may order the defendant to make restitution to any victim of the offense(s), or to the community, as set forth below. Additionally, the defendant may be assessed the costs of prosecution.



3. Counts Dismissed

At the time of sentencing, the remaining counts against the defendant, Counts Two through Thirty-Five of the Indictment, will be dismissed pursuant to Fed. R. Crim. P. 11(c)(1)(A).



4. Elements of the Offense(s)

The defendant acknowledges understanding the nature and elements of the offense(s) with which defendant has been charged and to which defendant is pleading guilty. The elements of Count One are:
First : That the Defendant aided or assisted in the preparation and filing of an income tax return which was false in a material way, as charged in the Indictment; and

Second : That the Defendant did so knowingly and willfully.



5. No Further Charges

If the Court accepts this plea agreement, the United States Attorney's Office for the Middle District of Florida agrees not to charge the defendant with committing any other federal criminal offenses known to the United States Attorney's Office at the time of the execution of this agreement, related to the conduct giving rise to this plea agreement.



6. Joirt Stipulation - Loss Amount

The United States and the defendant stipulate and agree that, for purposes of determining the defendant's offense level under USSG §2T4.1. the tax loss attributable to the defendant is more than $200.000 but not more than S400.000. which equates to a base offense level of 18. The parties understand and agree that this stipulation is not binding on the Court, and if not accepted by the Court the parties will not be allowed to withdraw from the plea agreement, and the defendant will not be allowed to withdraw from the plea of guilty. The defendant further understands and agrees that this stipulation and agreement is for criminal sentencing purposes only, and is in exchange for the United States' agreements contained in this plea agreement. including the United States' agreement not to pursue federal charges for relevant conduct against the defendant. The stipulated amount is not binding on the Internal Revenue Service for purposes of determining any restitution amounts or the defendant's civil tax liability. Such liability may be greater than the tax loss amount specified above, and may include interest and penalties .



7. Acceptance of Responsibility - Three Levels

At the time of sentencing, and in the event that no adverse information is received suggesting such a recommendation to be unwarranted, the United States will recommend to the Court that the defendant receive a two-level downward adjustment for acceptance of responsibility, pursuant to USSG §3E1.1(a). The defendant understands that this recommendation or request is not binding on the Court, and if not accepted by the Court, the defendant will not be allowed to withdraw from the plea.

Further, at the time of sentencing, if the defendant's offense level prior to operation of USSG §3E1.1(a) is level 16 or greater, and if the defendant complies with the provisions of USSG §3E1.1(b), the United States agrees to move, pursuant to USSG §3E1.1(b) for a downward adjustment of one additional level. The defendant understands that the determination as to whether the defendant has qualified for a downward adjustment of a third level for acceptance of responsibility rests solely with the United States Attorney for the Middle District of Florida, and the defendant agrees that the defendant cannot and will not challenge that determination, whether by appeal, collateral attack, or otherwise.



8. Cooperation - Substantial Assistance to be Considered

Defendant agrees to cooperate fully with the United States in the investigation and prosecution of other persons, and to testify, subject to a prosecution for perjury or making a false statement, fully and truthfully before any federal court proceeding or feceral grand jury in connection with the charges in this case and other matters, such cooperation to further include a full and complete disclosure of all relevant information, including production of any and all books, papers, documents, and other objects in defendant's possession or control, and to be reasonably available for interviews which the United States may require. If the cooperation is completed prior to sentencing, the government agrees to consider whether such cooperation qualifies as "substantial assistance" in accordance with the policy of the United States Attorney for the Middle District of Florida, warranting the filing of a motion at the time of sentencing recommending (1) a downward departure from the applicable guideline range pursuant to USSG §5K1.1, or (2) the imposition of a sentence below a statutory minimum, if any, pursuant to 18 U.S.C. § 3553(e), or (3) both. If the cooperation is completed subsequent to sentencing, the government agrees to consider whether such cooperation qualifies as "substantial assistance" in accordance with the policy of the United States Attorney for the Middle District of Florida, warranting the filing of a motion for a reduction of sentence pursuant to Fed. R. Crim. P. 35(b). In any case, the defendant understands that the determination as to whether "substantial assistance" has been provided or what type of motion related thereto will be filed, if any, rests solely with the United States Attorney for the Middle District of Florida, and the defendant agrees that defendant cannot and will not challenge that determination, whether by appeal, collateral attack, or otherwise.



9. Use of Information - Section 1B1.8

Pursuant to USSG §1B1.8(a), the United States agrees that no self-incriminating information which the defendant may provide during the course of defendant's cooperation and pursuant to this agreement shall be used in determining the applicable sentencing guideline range, subject to the restrictions and limitations set forth in USSG §1B1.8(b).



10. Cooperation - Responsibilities of the Parties

a. The government will make known to the Court and other relevant authorities the nature and extent of defendant's cooperation and any other mitigating circumstances indicative of the defendant's rehabilitative intent by assuming the fundamental civic duty of reporting crime. However, the defendant understands that the government can make no representation that the Court will impose a lesser sentence solely on account of, or in consideration of, such cooperation.

b. It is understood that should the defendant knowingly provide incomplete or untruthful testimony, statements, or information pursuant to this agreement, or should the defendant falsely implicate or incriminate any person, or should the defendant fail to voluntarily and unreservedly disclose and provide full. complete, truthful, and honest knowledge, information, and cooperation regarding any of the matters noted herein, the following conditions shall apply:

(1) The defendant may be prosecuted for any perjury or false declarations, if any, committed while testifying pursuant to this agreement, or for obstruction of justice.

(2) The United States may prosecute the defendant for the charges which are to be dismissed pursuant to this agreement, if any, and may either seek reinstatement of or refile such charges and prosecute the defendant thereon in the event such charges have been dismissed pursuant to this agreement. With regard to such charges, if any, which have been dismissed, the defendant, being fully aware of the nature of all such charges now pending in the instant case, and being further aware of defendant's rights, as to all felony charges pending in such cases (those offenses punishable by imprisonment for a term of over one year), to not be held to answer to said felony charges unless on a presentment or indictment of a grand jury, and further being aware that all such felony charges in the instant case have heretofore properly been returned by the indictment of a grand jury, does hereby agree to reinstatement of such charges by recision of any order dismissing them or, alternatively, does hereby waive, in open court, prosecution by indictment and consents that the United States may proceed by information instead of by indictment with regard to any felony charges which may be dismissed in the instant case, pursuant to this plea agreement, and the defendant further agrees to waive the statute of limitations and any speedy trial claims on such charges.

(3) The United States may prosecute the defendant for any offenses set forth herein, if any, the prosecution of which in accordance with this agreement, the United States agrees to forego, and the defendant agrees to waive the statute of [imitations and any speedy trial claims as to any such offenses.

(4) The government may use against the defendant the defendant's own admissions and statements and the information and books, papers, documents, and objects that the defendant has furnished in the course of the defendant's cooperation with the government.

(5) The defendant will not be permitted to withdraw the guilty pleas to those counts to which defendant hereby agrees to plead in the instant case but, in that event, defendant will be entitled to the sentencing limitations, if any, set forth in this plea agreement, with regard to those counts to which the defendant has pled: or in the alternative, at the option of the United States, the United States may move the Court to declare this entire plea agreement null and void.



11. Cooperation with Internal Revenue Service

The defendant agrees to fully cooperate with the Internal Revenue Service in the determination and payment of the defendant's civil tax liability for all years for which the defendant has not filed a tax return, or for which the defendant has filed an incorrect tax return. Such cooperation shall include, but is not limited to: (1) providing the Internal Revenue Service with all relevant books, records, and documents in the defendant's possession, under the defendant's control, or otherwise available to the defendant for all such years; (2) filing complete and correct income tax returns for all such years; and (3) paying, or making arrangements acceptable to the Internal Revenue Service to pay over time, the defendant's civil tax liability for all such years. The defendant understands and agrees that the defendant's tax liability for purposes of this paragraph (i.e., the defendant's civil tax liability) may include interest and penalties. The defendant agrees not to file any claim for refund of taxes, interest, or penalties for amounts attributable to any tax returns filed incident to this plea agreement. The defendant agrees to provide the defendant's Probation Officer with such verification as the Probation Officer may deem necessary that the defendant's income tax obligations (under this paragraph and otherwise) are being met.



B. Standard Terms and Conditions



1. Restitution, Special Assessment, and Fine

The defendant understands and agrees that the Court, in addition to or in lieu of any other penalty, shall order the defendant to make restitution to any victim of the offense(s), pursuant to 18 U.S.C. § 3663A, for all offenses described in 18 U.S.C. § 3663A(c)(1) (limited to offenses committed on or after April 24, 1996); and the Court may order the defendant to make restitution to any victim of the offense(s), pursuant to 18 U.S.C. § 3663 (limited to offenses committed on or after November 1, 1987) or § 3579, including restitution as to all counts charged, whether or not the defendant enters a plea of guilty to such counts, and whether or not such counts are dismissed pursuant to this agreement. On each count to which a plea of guilty is entered, the Court shall impose a special assessment, to be payable to the Clerk's Office, United States District Court, and due on date of sentencing. The defendant understands that this agreement imposes no limitation as to fine.



2. Supervised Release

The defendant understands that the offense(s) to which the defendant is pleading provide(s) for imposition of a term of supervised release upon release from imprisonment, and that, if the defendant should violate the conditions of release, the defendant would be subject to a further term of imprisonment.



3. Sentencing Information

The United States reserves its right and obligation to report to the Court and the United States Probation Office all information concerning the background, character, and conduct of the defendant, to provide relevant factual information, including the totality of the defendant's criminal activities, if any, not limited to the count(s) to which defendant pleads, to respond to comments made by the defendant or defendant's counsel, and to correct any misstatements or inaccuracies. The United States further reserves its right to make any recommendations it deems appropriate regarding the disposition of this case, subject to any limitations set forth herein, if any.

Pursuant to 18 U.S.C. § 3664(d)(3) and Fed. R. Crim. P. 32(d)(2)(A)(ii), the defendant agrees to complete and submit, upon execution of this plea agreement, an affidavit reflecting the defendant's financial condition. The defendant further agrees. and by the execution of this plea agreement, authorizes the United States Attorney's Office to provide to, and obtain from, the United States Probation Office or any victim named in an order of restitution, or any other source, the financial affidavit, any of the defendant's federal, state, and local tax returns, bank records and any other financial information concerning the defendant, for the purpose of making any recommendations to the Court and for collecting any assessments, fines, restitution, or forfeiture ordered by the Court.



4. Sentencing Recommendations

It is understood by the parties that the Court is neither a party to nor bound by this agreement. The Court may accept or reject the agreement, or defer a decision until it has had an opportunity to consider the presentence report prepared by the United States Probation Office. The defendant understands and acknowledges that, although the parties are permitted to make recommendations and present arguments to the Court, the sentence will be determined solely by the Court, with the assistance of the United States Probation Office. Defendant further understands and acknowledges that any discussions between defendant or defendant's attorney and the attorney or other agents for the government regarding any recommendations by the government are not binding on the Court and that, should any recommendations be rejected, defendant will not be permitted to withdraw defendant's plea pursuant to this plea agreement. The government expressly reserves the right to support and defend any decision that the Court may make with regard to the defendant's sentence, whether or not such decision is consistent with the government's recommendations contained herein.



5. Defendant's Waiver of Right to Appeal and Right to Collaterally Challenge the Sentence

The defendant agrees that this Court has jurisdiction and authority to impose any sentence up to the statutory maximum and expressly waives the right to appeal defendant's sentence or to challenge it collaterally on any ground, including the ground that the Court erred in determining the applicable guidelines range pursuant to the United States Sentencing Guidelines, except (a) the ground that the sentence exceeds the defendant's applicable guidelines range as determined by the Court pursuant to the United States Sentencing Guidelines; (b) the ground that the sentence exceeds the statutory maximum penalty; or (c) the ground that the sentence violates the Eighth Amendment to the Constitution; provided, however, that if the government exercises its right to appeal the sentence imposed, as authorized by Title 18 United States Code, Section 3742(b), then the defendant is released from his waiver and may appeal the sentence as authorized by Title 18, United States Code, Section 3742(a).



6. Middle District of Florida Agreement

It is further understood that this agreement is limited to the Office of the United States Attorney for the Middle District of Florida and cannot bind other federal, state, or local prosecuting authorities, although this office will bring defendant's cooperation, if any, to the attention of other prosecuting officers or others, if requested.



7. Filing of Agreement

This agreement shall be presented to the Court, in open court or in camera , in whole or in part, upon a showing of good cause, and filed in this cause, at the time of defendant's entry of a plea of guilty pursuant hereto.



8. Voluntariness

The defendant acknowledges that defendant is entering into this agreement and is pleading guilty freely and voluntarily without reliance upon any discussions between the attorney for the government and the defendant and defendant's attorney and without promise of benefit of any kind (other than the concessions contained herein), and without threats, force, intimidation, or coercion of any kind. The defendant further acknowledges defendant's understanding of the nature of the offense or offenses to which defendant is pleading guilty and the elements thereof, including the penalties provided by law. and defendant's complete satisfaction with the representation and advice received from defendant's undersigned counsel (if any). The defendant also understands that defendant has the right to plead not guilty or to persist in that plea if it has already been made, and that defendant has the right to be tried by a jury with the assistance of counsel, the right to confront and cross-examine the witnesses against defendant, the right against compulsory self-incrimination, and the right to compulsory process for the attendance of witnesses to testify in defendant's defense; but, by pleading guilty, defendant waives or gives up those rights and there will be no trial. The defendant further understands that if defendant pleads guilty, the Court may ask defendant questions about the offense or offenses to which defendant pleaded, and if defendant answers those questions under oath, on the record, and in the presence of counsel (if any), defendant's answers may later be used against defendant in a prosecution for perjury or false statement. The defendant also understands that defendant will be adjudicated guilty of the offenses to which defendant has pleaded and, if any of such offenses are felonies, may thereby be deprived of certain rights, such as the right to vote, to hold public office, to serve on a jury, or to have possession of firearms.



9. Factual Basis

Defendant is pleading guilty because defendant is in fact guilty. The defendant certifies that defendant does hereby admit that the facts set forth in the attached "Factual Basis," which is incorporated herein by reference, are true, and were this case to go to trial, the United States would be able to prove those specific facts and others beyond a reasonable doubt.



10. Entire Agreement

This plea agreement constitutes the entire agreement between the government and the defendant with respect to the aforementioned guilty plea and no other promises, agreements, or representations exist or have been made to the defendant or defendant's attorney with regard to such guilty plea.



11. Certification

The defendant and defendant's counsel certify that this plea agreement has been read in its entirety by (or has been read to) the defendant and that defendant fully understands its terms.

DATED this 22 day of July, 2009.
A. BRIAN ALBRITTON

United States Attorney

______________________________

JAMES OTTO PRICE, III

Defendant
By: ______________________________

NICHOLAS A. PILGRIM

Assistant United States Attorney

______________________________

DONALD MAIRS

Attorney for Defendant
______________________________

MAC D. HEAVENER, III

Assistant United States Attorney

Deputy Chief, Jacksonville Division


UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION


UNITED STATES OF AMERICA v. JAMES OTTO PRICE, III

CASE NO. 3:09-cr-132-J-25HTS


PERSONALIZATION OF ELEMENTS


1. Do you admit that on or about February 23, 2009, in Duval County, in the Middle District of Florida, you aided or assisted in the preparation and filing of an income tax return which was false in a material way. as charged in Count One of the Indictment?

2. Do you admit that you did so knowingly and willfully?


UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION


UNITED STATES OF AMERICA v. JAMES OTTO PRICE, III

CASE NO. 3:09-cr-132-J-25HTS


FACTUAL BASIS 1


James Otto Price, III, has prepared numerous fraudulent tax returns. The first fifteen tax returns described in Counts One through Fifteen of the Indictment involve tax year 2008. In these tax returns prepared by Price, Price falsely claimed that the taxpayers were eligible to receive the First-Time Home Buyer Credit made available by Congress pursuant to the Housing and Economic Recovery Act of 2008. (The First-Time Home Buyer Credit can be claimed by using a Form 5405, which is filed with the 2008 or 2009 federal tax return presented or filed by. or on behalf of. a taxpayer. The credit operates like an interest-free loan for the 2008 filing year because it must be repaid over a 15-year period. To qualify for the credit, a buyer must purchase a home within a relevant time period, i.e., April 2008 through December 2009.)

A number of the taxpayers who Price claimed were eligible for the home buyer credit were not even aware that Price had claimed a First-Time Home Buyer Credit on their returns. Other clients were erroneously advised by Price that if they merely contemplated buying a house in the upcoming months, they were eligible for the credit. Price knew when he prepared the fifteen tax returns claiming the First-Time Home Buyer Credit in 2008 that the taxpayers whose returns he prepared had not purchased a home to qualify for the credit. Price also knew that his false representations were material to the IRS' determination of whether the taxpayer would receive the home buyer credit.

For example, with respect to Count One of the Indictment, on or about February 23. 2009. Price met with a client, Charde Hampton, to prepare her tax return. Although Ms. Hampton advised Price that she did not have a house and was not planning on purchasing a house, Price told Ms. Hampton that she qualified for the First-Time Home Buyer Credit by virtue of the fact that she had two jobs. Price then claimed the credit on the tax return that he prepared for Ms. Hampton, and he inputted the address of a home unknown to Ms. Hampton as the house that allegedly qualified for the credit. Price also falsely claimed that the qualifying home had been purchased by Ms. Hampton on January 5, 2009, when, as he well knew, Ms. Hampton had not purchased a home, much less a home on January 5, 2009, to qualify for the home buyer tax credit.

Price's other fraudulent 2008 tax year returns conform to the same pattern. In other words, in addition to fraudulently claiming the First-Time Home Buyer Credit for the 2008 tax returns for his clients whom he knew had not purchased a qualifying home. Price made up a date upon which the taxpayer(s) allegedly purchased the house qualifying for the tax credit. Price knew that the dates that he inputted on the tax returns as the dates for when the qualifying house was purchased were false when he filed the tax returns for his clients. As a result of the fraudulent returns, Price was able to pay himself fees of approximately $1,000 per fraudulent tax return by electronically debiting this amount from the $7,500 home buyer credit and tax refund proceeds wrongly received by his clients.

The remaining twenty tax returns prepared by Price charged in the Indictment involve tax years 2004 and 2005. In these returns. Price intentionally overstated or made up charitable contribution deductions and unreimbursed employee expenses on the Schedule A and/or Form 2106-EZ for the taxpayers. Price also intentionally made up false businesses and business expenses on the Schedule C forms incorporated with the tax returns in order to increase the amount of the tax refund that his clients would receive. Price profited from preparing these false returns by getting his clients to return to him as clients and to refer new business to him. It should be noted that many of the taxpayers did not even know that Price had claimed on their tax return that they owned a for-profit business until they were subsequently contacted by the IRS for an audit. Price knew that the fictitious figures he inputted onto the tax returns of his clients would have the effect of increasing the tax refund paid out to his clients beyond the amount that the taxpayers would have received from the IRS in the absence of Price's false representations. Price prepared the thirty-five tax returns identified in the Indictment in Duval County, in the Middle District of Florida, on or about the dates specified in the Indictment for each tax return. The tax loss attributable to Price as a result of the thirty-five fraudulent tax returns that he prepared is $216,454.00.

1 The factual basis is prepared by the United States and does not include all of the facts relevant to the defendant's involvement in the crime to which the defendant is pleading guilty.
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There was obviousl willful misconduct in the case reported.

However there are many other return preparer criminal investigatopms that can be defended. In many case wqhazt is "negligence" is perceived by the IRS to be willful fraud.

contact us at ab@irstaxattorney.com to help resolve thsee issues. The IRS loves to go after tax return preparers.