Tax Preparer Finds Out in the Worst Way Possible That ERC Wasn’t a Free Money Glitch
A federal grand jury in Newark, New Jersey, returned an indictment Wednesday charging tax preparer Leon Haynes of Teaneck, New Jersey with fraudulently seeking more than $150 million from the IRS by filing more than 1,600 false tax returns for himself and his clients that claimed COVID-19-related employment tax credits. He’s looking at 55 counts of aiding and assisting in the preparation of false tax returns, five counts of mail fraud, one count of aggravated identity theft and two counts of tax evasion.
He was arrested last July at which time U.S. Attorney Philip R. Sellinger said, “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. As described in the complaint, Haynes abused his position as a tax preparer to steal millions of dollars by submitting over 1,000 false applications for funds set aside to help legitimately struggling businesses. My office and our partners will continue to find and prosecute fraudsters who exploited the pandemic for personal gain.”
The employee retention tax credit was just one of several relief measures authorized by Congress in response to the COVID-19 pandemic and the effects lockdowns had on businesses. As the name implies, ERC was intended to ease tax burdens for employers who were able to keep people on staff rather than lay them off. Another credit packaged in the Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed for a paid sick and family leave credit employers could apply against employment taxes for wages paid to employees on sick leave because of COVID-19.
Said the Department of Justice in the news release:
As charged in the indictment, from November 2020 to May 2023, Haynes repeatedly exploited these programs that were intended to help small businesses impacted by the COVID-19 pandemic. Acting as a tax preparer, Haynes allegedly filed more than 1,600 false employment tax returns with the IRS claiming COVID-related tax credits on behalf of himself and his clients.
Haynes allegedly falsely told his clients that the government was giving out COVID-relief money for businesses and that they were eligible for it simply because they had a business. Haynes allegedly submitted forms to the IRS on behalf of his client’s businesses, often without consulting his clients, that grossly overstated the number of employees and the amount of wages paid to fraudulently claim these COVID-related tax credits. Haynes allegedly submitted similarly false forms for four of his own companies.
According to the indictment, based on these and other misrepresentations, Haynes fraudulently sought more than $150 million in tax refunds on behalf of his companies and numerous other businesses in his clients’ names.
Allegedly Haynes’ clients got at least $40 million in tax refunds from his filings, a portion of which he received as a fee and often in cash at his request. Aaaaaand…New Jersey Tax Preparer Charged in COVID-19 Employment Tax Credit Scheme
Haynes allegedly did not report on his or his businesses’ tax returns some of the income he received from clients as his share of the fraudulent obtained tax refunds. The IRS also allegedly directly mailed Haynes multiple tax refund checks totaling $1,428,592 based on false claims he submitted relating to his businesses.
If convicted, he could get a maximum penalty of 20 years in prison for each mail fraud charge, a maximum penalty of five years in prison for each tax evasion charge, three years in prison for aiding and assisting in the preparation of false return charge and two years in prison for the aggravated identity theft charge.
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