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Tax professional acquitted in federal tax fraud trial

On Behalf of | May 24, 2018 | Criminal Defense, Fraud, White Collar Crimes |

An Ohio tax preparer feels vindicated (and relieved) after a jury acquitted him on 21 counts of tax fraud.  He was facing the prospect of not merely losing his professional license but spending the rest of his life in prison.

Although the case had a happy ending, it was a years-long ordeal for the accused. The case reveals the powers of the government and the extreme lengths the IRS will go to in prosecuting alleged tax crimes.

IRS suspicious of tax credits on multiple returns

Sergio Gardea, a tax preparer for a tax and accounting firm, was initially charged with 30 counts of tax fraud. The case involved 30 tax returns which improperly claimed the Child Tax Credit. All of the dependents claimed under the credit were living outside of the United States, which triggered red flags at the IRS. To qualify for the credit, dependents must live in the U.S. all or most of the year.

Gardea maintained that he did not knowingly claim the credit for ineligible persons. He testified that he prepared the returns in good faith based on the information provided to him. At one point in the investigation, the IRS had sent in an undercover agent to see if their suspect would suggest or go along with bogus tax credits. Gardea prepared that return without claiming the Child Tax Credit, telling the client (agent) that he didn’t qualify.

The government’s cased hinged on 3,600 returns over a four-year period that claimed $8 million worth of Child Tax Credit and/or Additional Child Tax Credits. Prosecutors failed to prove a tax evasion conspiracy or criminal intent by Gardea. In the end, all that was proved was that the majority of his individual taxpayer clients have dependents (quite normal) and that his clientele includes many families with connections in Mexico and Central America.

A victory for tax professionals everywhere

The investigation and prosecution lasted five years. After a two-week trial, the federal jury acquitted Gardea on all 21 remaining counts. The prosecutor had dropped nine other counts at the conclusion of the trial. Mr. Gardea expressed gratitude that justice was (eventually) served, thanking the judge for his fairness and the jury for keeping an open mind.

If the IRS is asking questions or you have any inkling that you or your business are under investigation for tax fraud, find a criminal defense lawyer who handles white collar crimes and practices in federal court. Early intervention by legal counsel will either defuse a government probe or find out where you stand in order to mount a defense.

 

 

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