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“Free Money”

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Senior Director of Strategic Alliances
LexisNexis Risk Solutions - Government

Fraud of The Day advice for today: when your accountant says the U.S. government is giving money away for free, find another accountant. While extra money sounds like a nice concept, the reality is nothing in life is “free” especially from the government. Tax preparer Leon Haynes told his clients the government was giving money away. The government did deal out millions of dollars to Haynes clients. But that was because Haynes filed bogus tax returns applying the COVID-19 Employee Retention Credit, for which none of them qualified for.

The Employee Retention Credit (ERC) allows businesses to apply to their tax returns,’ a credit ranging between $5,000 to $21,000 for every employee wage paid during the time period of March 12, 2020, and January 1, 2022. It’s specific in its criteria, but fraudsters can always make it work for them.

From November 2020 to May 2023, Haynes prepared and submitted 1,387 false forms to the IRS claiming ERCs on behalf of himself and his clients. Haynes falsely told his clients that the government was giving out COVID-relief money for businesses and that they were eligible for the money simply because they had a business. “Free money.” Haynes then submitted forms to the IRS on behalf of their businesses that grossly overstated the number of employees and amount of paid wages. Haynes submitted similarly false forms for three of his own companies.

Based on these and other misrepresentations, Haynes fraudulently sought $124.8 million in tax refunds on behalf of his companies and numerous other businesses in his clients’ names. Based on Haynes’ false claims the U.S. Treasury mailed him multiple tax refund checks totaling more than $1 million and disbursed at least $31.6 million in tax refunds to Haynes’ clients. Haynes charged each client up to a 15 percent fee based on the tax refunds the client received from the U.S. Treasury.

Great job by the Internal Revenue Service.

Today’s Fraud of The Day is based on article “IRS Getting Serious About Prosecuting ERC Fraud” published by the Kiplinger Consumer News on August 11, 2023

The Department of Justice recently arrested a New Jersey tax preparer for allegedly seeking more than $124 million from the IRS. Employee retention credits have been in the news lately. The Department of Justice recently arrested a New Jersey tax preparer for allegedly seeking more than $124 million from the IRS. The multi-millions came from filings of over 1,000 false tax forms claiming the pandemic-related employee retention credit, also referred to as the ERTC or ERC. 

While our country was fighting the spread of the virus and its profound economic impact, Haynes allegedly scammed the system in a massive scheme to line his own pockets,” U.S. Attorney Philip R. Sellinger stated in a release about the arrest. 

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