Tax Preparer Known as ‘The Magician’ Admits Guilt in $145 Million IRS Fraud Scheme
An official stated that this case represents “one of the largest tax frauds ever executed” by a preparer.
A tax preparer from New York, known by the alias The Magician, has admitted to deceiving the Internal Revenue Service (IRS) with fraudulent returns submitted on his clients’ behalf for numerous years, as reported by the U.S. Department of Justice (DOJ).
The accusations originate from Alvarez’s role in orchestrating a decade-spanning, $145 million tax fraud operation that involved submitting tens of thousands of federal individual income tax returns containing misleading information aimed at fraudulently decreasing the tax obligations of individuals.
On Tuesday, Alvarez entered a guilty plea and as part of this agreement, committed to paying $145 million in restitution to the IRS. Additionally, he forfeited over $11.84 million accrued from his illicit activities.
The charges relate to Alvarez’s conduct from approximately 2010 to 2020, while he served as the CEO and owner of Bronx-based ATAX New York, LLC, a “high-volume tax preparation firm.”
Alvarez and his staff filed falsified information regarding clients on their tax submissions, such as fraudulent business expenses, fabricated capital losses, and incorrect itemized tax deductions. This allowed them to minimize the tax liability for ATAX clients and boost the IRS refunds for those clients.
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In total, ATAX prepared approximately 90,000 federal income tax returns.
According to the DOJ, “Alvarez’s skill in falsifying tax returns for ATAX clients earned him the nickname ‘the Magician’ among many of his customers.”
The conspiracy to defraud charge carries a maximum potential sentence of five years, while the charge for false returns can result in up to three years in jail. Sentencing is scheduled for April 11.
Acting U.S. Attorney Edward Y. Kim remarked, “Today’s guilty plea in what stands as one of the largest frauds committed by a return preparer ought to send a strong message to tax professionals that our Office will pursue tax offenses vigorously.”
Fraud Cases
In November, a tax preparer from Somerville, Massachusetts, was convicted of creating false tax returns. Yves Isidor, the defendant, prepared more than 1,200 tax returns from 2012 to 2020, including fabricated claims for non-existent medical and dental expenses and charitable contributions.
As a result, the clients received refunds that were unearned. During the trial, six taxpayers testified that they were unaware Isidor had included fraudulent claims on their tax returns.
“Clients expect honesty, professionalism, and integrity when hiring someone to handle their tax returns. Most importantly, they expect accurate information to be submitted to the IRS,” stated Acting United States Attorney Joshua S. Levy.
“Yves Isidor deceived his clients, who were oblivious to the incorrect items he added to their tax filings until approached by investigators. Tax fraud is far from a victimless crime; we all bear the consequences when individuals like Yves Isidor exploit the tax system.”
This defendant filed 83 federal returns over a span of approximately three years, falsely reporting elements such as business expenses, tips, and salaries. The majority of the clients neither owned businesses nor had discussed any business expenses with the preparer.
Even if clients are misled into filing returns with fraudulent information presented by the preparer, they are still “legally accountable for what is included in their return,” stated the agency. The IRS recommends utilizing trustworthy professionals when filing tax returns.
