Court Acquits CPA of Preparing False Tax Returns Claiming AMT Credits

(Parker Tax Publishing March 2026)

A district court held that a CPA, who had a tax return preparation business, was not guilty of 55 counts of aiding and assisting in the preparation of false tax returns and one count of attempting to interfere with the administration of internal revenue laws. The court concluded that absent evidence that the CPA knew his 2018 calculations of his clients' alternative minimum tax were wrong when he prepared their returns, no rational jury could find him guilty beyond a reasonable doubt. U.S. v. Demba, 2026 PTC 34 (D. N.J. 2026).

Background

Christoper Demba is a CPA with his own tax preparation business. In May of 2018, Demba received a letter from the IRS stating that it was investigating his possible involvement in tax avoidance transactions in his tax return preparation practices. IRS agent Thomas Mazur asked Demba for information relating to the alternative minimum tax (AMT) credits taken by Demba's clients and Demba sent him a letter explaining his AMT credit calculations. Demba stated that he believed he could use all the AMT an individual had paid as an AMT credit in future years. He noted that during prior IRS audits of his clients, the IRS did not question his AMT credit calculation or methodology. He further explained that in 2018, the way in which the AMT was calculated changed and there was also confusion on how to calculate the amount of AMT an individual had paid in prior years because of issues he was having with his tax software.

Under Code Sec. 53, the AMT credit is equal to the excess, if any, of: (1) the tentative minimum tax for the tax year, over (2) the regular tax liability for the tax year. If an individual pays AMT in one year, however, that individual may be able to use some of that paid AMT as a credit to offset tax liability in a future year (the AMT credit). Agent Mazur testified that the AMT is one of the more difficult areas of tax law and he even had to enter into a stipulation on the law after he testified incorrectly on the subject.

The AMT may consist of two separate items: (1) deferral items, and (2) exemption items. Only the amount of AMT paid that relates to the deferral items can be carried forward and used as an AMT credit in a subsequent year. There are two forms the IRS uses to calculate the AMT and the AMT Credit: Form 6251, the Alternative Minimum Tax form, and Form 8801, the Credit for Prior Year Minimum Tax. Form 8801 is a form that taxpayers use to determine if they paid AMT in a prior year and whether they qualify for the AMT credit in the current year. Line 19 on Form 8801 has an instruction that states: "Enter the amount from your [prior year] Form 8801, Line 26." Line 26 simply states "Credit carryforward to [subsequent year]."

In January of 2025, Demba was indicted in a New Jersey district court on 55 counts of violating Code Sec. 7206(2) (aiding and assisting in the preparation of false tax returns) and one count of violating Code Sec. 7212(a) (attempt to interfere with the administration of the internal revenue laws). According to the indictment, Demba submitted false tax returns to the IRS on behalf of his clients between 2018 and 2022. The government said that Demba falsely claimed the AMT credit for his clients so that they would owe less in taxes.

In order to obtain a conviction under Code Sec. 7206(2), the government must establish: (1) that the defendant aided, assisted, procured, counseled, advised or caused the preparation and presentation of a return; (2) that the return was fraudulent or false as to a material matter; and (3) that the act of the defendant was willful.

In October of 2025, Demba's jury trial began. The crux of the government's case stemmed from Demba's failure to follow the Line 19 instructions on Form 8801. Instead of providing the amount from Line 26 of the prior year, Demba would provide a different number, which resulted in his clients either paying less in taxes or receiving a refund. This discrepancy occurred for a handful of Demba's clients.

The jury subsequently informed the court that it could not come to a unanimous decision and the judge declared a mistrial. Demba had previously moved for acquittal under Rule 29(a) of the Federal Rules of Criminal Procedure and filed a motion for acquittal which the government opposed. After the mistrial, the court considered Demba's Rule 29(a) motion.

Analysis

The court held that the government failed to present evidence sufficient to sustain a conviction and granted Demba's motion. The court found that the government's entire case rested on Demba's failure to follow the Line 19 instruction and input a number that did not match Line 26 from the prior year. There was no doubt, the court said, that Demba did not follow this instruction, which according to the government was enough for a rational jury to infer that Demba voluntarily and intentionally violated a known legal duty. However, citing the Supreme Court's decision in Cheek v. U.S., 498 U.S. 192 (1991), the court said the government had to show more: it needed to negate Demba's "good-faith belief that he was not violating any of the provisions of the tax laws." In Cheek, the Court found that the element of willfulness requires the government to prove that the preparer voluntarily and intentionally violated a known legal duty. At Demba's trial, the court noted, there was no evidence to contradict Demba's asserted belief that he could add up all the AMT an individual previously paid and apply that as an AMT Credit.

Further, the court observed, there was no evidence that Demba was notified, much less counseled or advised that his method was incorrect. On the contrary, the court noted that several of his clients were audited, and the IRS did not question Demba's AMT credit calculation or methodology. The court found no evidence to suggest that Demba conspired with any of his clients to get them higher tax return refunds or that he charged his clients higher fees in exchange for getting them a larger tax return refund.

For a discussion of criminal penalties for false and fraudulent returns, see Parker Tax ¶277,110. For a discussion of the AMT calculation, see Parker Tax ¶12,110.

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