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Seventh Circuit Affirms 51-Month Sentence for Return Preparer; Rejects Plea to Consider Caregiver Responsibilities. (Parker Tax Publishing June 5, 2014)

While noting that the taxpayer's teenage children and nephew would suffer emotionally from her incarceration, the court still affirmed a 51-month prison sentence for a return preparer that filed false returns. U.S. v. Williams-Ogletree, 2014 PTC 226 (7th Cir. 5/12/14).

In 2005, Leslie Williams-Ogletree ran Chicago-based LKJ Tax Services, a tax preparation service. Leslie applied for and obtained an Electronic Filers Identification Number (EFIN) from the IRS, which allowed her to file tax returns electronically in other people's names and to obtain electronic refunds. In late 2005, Leslie conspired with Robtrel White and Larryl White to submit false income tax returns to the IRS. Robtrel and Larryl would obtain and provide Leslie with various birth dates and social security numbers for individuals unlikely to file income tax returns, and then Leslie would file the false returns with LKJ's EFIN, using that personal information. The co-conspirators also generated false Form W-2 wage and tax statement data to support the false refund claims.

Between February and October 2006, Leslie used LKJ's EFIN to file 200 fraudulent income tax returns for the tax year 2005 in the names of individuals supplied by Robtrel, Larryl, and others. These tax returns sought refunds in the amount of $834,548 and the actual tax loss to the IRS was $652,730. The proceeds from the fraudulent tax returns were obtained in the form of tax refund anticipation loan (RAL) checks, which Leslie printed at LKJ's offices, pursuant to an agreement with Bank One. Robtrel then deposited many of these checks into his own bank accounts. Leslie also received direct payment from Bank One of a portion of the refund, which represented her purported tax preparation fee. In total, she received $62,203 in tax preparation fees for the 200 fraudulent returns.

When the government eventually detected the scheme, it indicted Leslie, Robtrel, and Larryl, charging them with conspiracy and filing false claims with the IRS. Robtrel and Larryl pleaded guilty, but Leslie pleaded not guilty and proceeded to trial. At trial, the government presented testimony from numerous witnesses, including an IRS agent who testified that a review of tax returns filed in 2006 with the EFIN issued to Leslie's tax preparation business, LKJ, revealed that 200 returns were fraudulent. The jury also heard from five individuals in whose name Leslie had filed tax returns. These individuals testified that they had not worked in 2006; did not live at the addresses listed on the tax returns; had not hired Leslie to file tax returns on their behalf; had never met Leslie; and had not received the tax refunds. Some of the individuals admitted to selling their personal information to Robtrel and/or Larryl, while others claimed that their personal information had been stolen.

Leslie was found her guilty and sentenced to 51 months in prison. She appealed, challenging the substantive reasonableness of her sentence. Leslie's main argument was that the district court failed to give proper weight to her extraordinary familial circumstances, namely her role, before her incarceration, as the primary caregiver to her two teenage sons and her teenage nephew.

The Seventh Circuit affirmed the sentence. The court noted that Leslie's children and nephew would suffer emotionally from her incarceration but said there was nothing in this case outside the normal realm of hardship all children suffer when a caregiving parent is incarcerated. To the extent there was a hardship, the court said, the district court took that into account, allowing Leslie to delay the start of her sentence to allow her to make arrangements for the children. Under these circumstances, the court concluded, there was no abuse of discretion in sentencing her to 51 months' imprisonment.

For a discussion of the penalties for filing false returns, see Parker Tax ¶277,110. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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