Frank A. Rubino, ESQ.

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Alleged tax fraud led to $4.7 million in mistaken returns

A Florida woman has been charged with filing a false claim and with assisting another in the filing of other false claims. The tax fraud scheme led to claims requesting more than $120 million in tax refunds that were not owed. The Internal Revenue Service is reported to have paid up to $4.7 million in fraudulent refunds before discovering the improper conduct. The IRS and the Justice Department are pursuing further investigation into the actions of the parties involved.

The defendant in this case is alleged to have filed a fraudulent Form 1099-OID (Original Issue Discount), seeking a $662,906 refund for herself. In addition, she is accused of recruiting other clients to make similar fraudulent claims. The recruiting was done on behalf of a co-conspirator, as well as for PMDD Services and Forever Grace. These entities would prepare the false tax returns and get the client to give them a portion of the refund received. The defendant would receive 1.5 percent for her role as recruiter.

The fraudulent returns would characterize large debt obligations, including mortgage and credit card debt, as income withheld by a lender. The OID forms reported this false income as taxes that were withheld, and therefore owed back to the debtor in the form of a refund. This resulted in huge refund claims that were not actually owed to the taxpayer.

The charges facing the Florida woman could lead to up to 15 years in prison and extensive fines. Each individual taxpayer involved in the plan may also face action by the IRS. The Tax Division of the IRS is continuing its enforcement work in connection with this scheme.

Source: LoanSafe.org, "Florida and Arkansas Residents Charged in Multi-Million Dollar Tax Refund Fraud Scheme," Moe Bedard, 1 June 2011

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Coral Gables Office

Frank A. Rubino, Esq.
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