Consumer Fraud

Multimillion dollar tax refund fraud includes former IRS employee among those charged

money Multimillion dollar tax refund fraud includes former IRS employee among those chargedA former Internal Revenue Service (IRS) employee is among those charged with filing false claims in a multimillion dollar tax refund fraud conspiracy. Others charged include an employee of the U.S. Food & Drug Administration (FDA) and a former New York City Corrections officer. The U.S. Department of Justice (DOJ) and IRS announced the indictments Jan. 16.

The DOJ says Rodney Chestnut, a retired New York City Department of Corrections officer; Clive Henry, a former IRS employee whose job it was to prepare tax returns; and Nafeesah Hines, a former FDA employee, have been indicted on 20 counts of filing false claims for millions of dollars in fraudulent tax refunds. Each defendant is charged with one count of conspiracy to defraud the United States, 11 counts of assisting preparation of false returns and four counts of filing false tax returns. Additionally, Hines and chestnut are also charged with one count each of filing false tax returns.

According to the indictment, the co-conspirators undertook a scheme to file false IRS form 1099-OID (Original Issue Discount) claiming false tax withholdings. The form was attached to tax returns that also claimed false refunds of taxes that had never been paid to the IRS. The tax fraud scheme brought in more than $3.4 million from 2008 to 2012.

More information about income tax fraud can be found on the Tax Division section of the Justice Department website. A person who has knowledge of tax fraud may report it to the IRS Office of the Whistleblower.

While the Federal False Claims Act explicitly excludes tax fraud, there is an IRS Whistleblower law, separate from the Federal False Claims Act, which provides for up to triple damages and whistleblower awards of 15 to 30 percent of the amount recovered. The Whistleblower Protection Act of 1989 is a federal law that protects federal whistleblowers who work for the government and report agency misconduct.

In simple terms, if the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects. To file under this section of the law, the tax, penalties, interest, and additions in dispute must total a sum in excess of $2,000,000, and a few other provisions must be met. If the case involves an individual who is not paying taxes, his or her annual gross income must be more than $200,000.

For more information about whistleblower claims, visit BeasleyAllen.com.

Source: U.S. Department of Justice