Criminal Defense Lawyers

My Accountant Filed a False Tax Return – Am I Going to Jail?

Here’s the uncomfortable truth no one wants to tell you: when you signed that tax return, you swore under penalties of perjury that everything on it was true. It doesn’t matter that you didn’t prepare it. It doesn’t matter that you didn’t understand the numbers. It doesn’t matter that your accountant told you it was fine. Your signature is your confession that you believe every line is accurate. And if those lines turn out to be false, you’re the one who swore to them.

Welcome to Spodek Law Group. Our goal is to give you the real picture of what happens when the IRS discovers your tax preparer filed false returns on your behalf – and what that means for your criminal exposure. Todd Spodek has represented clients who were completely blindsided when they discovered their trusted accountant had been inflating deductions, fabricating expenses, or claiming credits they weren’t entitled to. Some of those clients were victims. Some became defendants. The difference came down to a few critical questions about what they knew and when they knew it.

This isn’t a situation where you can simply blame your accountant and walk away. The IRS will come after you for the money. The question is whether they’ll also come after you for a crime. If you’ve just discovered that your tax preparer filed false returns in your name, stop reading and call us at 212-300-5196. What you do in the next few days could determine whether this is a financial problem or a prison sentence.

The Signature You Can’t Take Back

Heres what most people dont realize about tax returns. That signature at the bottom isnt just a formality. Its a legal declaration made under penalties of perjury – the same oath you take in a courtroom.

When you sign your tax return, your certifying that “under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.”

Read that carefully. Your declaring that YOU examined the return. That YOU believe its true. Not that your accountant examined it. Not that your accountant believes its true. You.

This is why the IRS comes after taxpayers even when the preparer committed fraud. From the governments perspective, you signed a document swearing everything was accurate. You didnt have to sign it. You could have reviewed it more carefully. You could have asked questions. You chose to sign.

That signature transforms you from a potential victim into a potential defendant.

The IRS Manual is clear: “No matter who prepares your tax return, you, the taxpayer, are ultimately responsible for all of the information on your tax return.” Ultimately responsible. Not your preparer. You.

This is especialy dangerous if you signed blank forms or authorized your preparer to file without reviewing the final return. Both of those actions make the “I didnt know” defense almost impossible to sustain.

Criminal vs Civil – You Could Face Both

When the IRS discovers false information on your return, two seperate tracks can open against you. These tracks run in parallel. One dosent stop the other. And the outcomes can compound in ways that financially destroy you even if you avoid prison.

The first is civil. This is about money. The IRS will assess the additional taxes you should have paid, plus interest from when they were due. They’ll add penalties – typically 20% for accuracy-related issues, or 75% if they determine fraud was involved. You will owe every dollar of this, regardless of what happens to your preparer.

The interest calculation is particuarly brutal. It compounds daily from the original due date of the return. If your preparer filed false returns for multiple years – which is common in these schemes – the interest alone can exceed the original tax owed. Weve seen clients who owed $30,000 in taxes end up owing $75,000 after penalties and interest were added. That number keeps growing until you pay in full.

Heres the irony that destroys people: even if your preparer goes to prison for filing false returns, you still owe the full amount. Their conviction dosent cancel your tax debt. You were the victim of their crime, but your still responsible for the taxes. The preparer might face years in federal prison, and you still have to write a check to the IRS.

You might think you can sue your preparer to recover these amounts. Technicaly you can. But think about this: your preparer just went to federal prison. There assets have probably been seized. There professional licenses are revoked. Any lawsuit against them will produce a judgment you cant collect. You win on paper and lose in reality.

The second track is criminal. This is about prison. Tax evasion under 26 USC 7201 carries up to five years in federal prison. Filing a false return under 26 USC 7206 carries up to three years. These sentences can run consecutively if multiple years are involved.

For criminal prosecution, the government must prove willfulness – that you voluntarily and intentionally violated a known legal duty. This is were the question of what you knew becomes critical. If you genuinly had no idea the returns were false and acted in good faith reliance on your preparer, criminal prosecution becomes much harder. But if you knew, or should have known, or deliberately avoided knowing – that reliance defense evaporates.

The Reliance Defense – Your Only Real Protection

If your facing criminal exposure becuase of your preparers actions, the reliance defense is probably your most important protection.

The legal principle is straightforward: a taxpayer who honestly and in good faith seeks the advice of a tax professional, and honestly and in good faith follows that advice, cannot be convicted of a crime requiring willful intent. The reasoning is that if you genuinly believed your preparer was giving you accurate advice, you lacked the willfulness needed for a criminal conviction.

But the reliance defense has strict requirements. All three must be met:

First, you must have given full disclosure. You had to tell your preparer everything relevant to your tax situation. If you withheld income sources, hid transactions, or failed to mention assets – the defense fails. You cant claim reliance on advice that was based on incomplete information you chose to withhold.

Second, you must have actually relied on the advice. This means you followed what the preparer told you becuase you trusted there expertise. If you knew the return was wrong but signed anyway becuase you wanted the bigger refund, thats not reliance – thats complicity.

Third, your reliance must have been reasonable. This is were things get complicated. Was it reasonable to believe you could deduct $50,000 in business expenses when you only had $60,000 in income? Was it reasonable to accept a refund three times larger then last year without asking why? A jury will evaluate wheather a reasonable person would have questioned what was on that return.

Heres something important: courts have held that good faith reliance dosent have to be objectively reasonable – just genuinly believed. But prosecutors will absolutly argue that your reliance wasnt genuine if the numbers were obviously too good to be true.

Todd Spodek has successfully defended clients using reliance arguments. But the defense requires documentation. Did you provide your preparer with accurate records? Did you ask questions? Did you have any communications expressing concern? All of this matters.

When “I Didn’t Know” Becomes “You Should Have Known”

Heres were innocent victims become criminal defendants: the concept of willful blindness.

Willful blindness – sometimes called deliberate ignorance – is when you suspected something was wrong but chose not to investigate. You didnt want to know the truth, so you avoided asking questions. Courts treat this as equivalent to actual knowledge.

Think about what that means. If your tax preparer was giving you refunds that seemed unusualy large, and you never asked how – a prosecutor can argue you were willfully blind. You knew something seemed off. You chose not to look closely. That choice can satisfy the willfulness element of a criminal charge.

Prosecutors look for specific red flags:

Did you give your preparer false information? If you understated income or inflated expenses, your a participant in the fraud, not a victim.

Did you ask them to “be aggressive” or “minimize taxes”? Those phrases, in emails or text messages, become evidence that you wanted false deductions – even if you didnt specify which ones.

Did you question anything and then accept there explanation? If you expressed concern and they talked you out of it, that might help you. But if you asked and then decided you didnt want to know more, thats willful blindness.

Did the same “error” appear year after year? One wrong deduction might be your preparers mistake. The same wrong deduction for five years becomes your pattern. How did you not notice your returns looked exactly the same every year with the same large deductions?

Did your refund seem too good to be true? When your colleague with a similar job got $2,000 back and you got $15,000, did you ask why? If you cashed those checks without question, prosecutors will argue you didnt want to know the answer.

What the IRS Is Really Looking For

When the IRS investigates preparer fraud, there not just building a case against the preparer. There looking at every client to determine who was complicit.

The investigation typicaly starts when the IRS identifies a pattern of false returns from the same preparer. Maybe it was an audit that uncovered fabricated deductions. Maybe it was a whistleblower. Maybe the preparer got sloppy and the pattern became obvious. Once the IRS identifies a fraudulent preparer, they pull every return that person filed.

Then they start interviewing clients.

This is were people destroy themselves. The IRS contacts you and says there investigating your tax preparer. You think your a victim, so you talk freely. You explain that you wanted a bigger refund. You mention that your preparer promised you more back then other preparers could get. You admit you didnt really understand the deductions.

Every one of those statements is evidence. Wanting a bigger refund suggests motive. Being promised more then other preparers suggests you knew something unusual was happening. Not understanding the deductions suggests you signed without reviewing – which undercuts your ability to claim you believed the return was accurate.

The interview process is designed to feel casual. Agents will tell you there investigating the preparer, not you. They’ll say you can help them catch the bad guy. They might even sympathize with you as a victim. But every word is being recorded. Every answer is being analyzed. And everything you say can shift you from witness to target.

Heres what investigators are specificaly trying to determine: Did you provide accurate information to your preparer? Did you ask questions about unusualy high refunds? Did you sign returns without reviewing them? Did you communicate with your preparer about “maximizing” deductions? The answers to these questions determine wheather your a victim who gets a bill or a defendant who gets indicted.

At Spodek Law Group, we see this constantly. Clients come to us after there already talked to IRS investigators. By then, theyve given statements that make the reliance defense almost impossible to sustain. They thought they were helping the investigation. They were actually building the case against themselves.

What Happens When You Report Your Preparer

Many people think that reporting there preparer for fraud will protect them from prosecution. This is dangerously wrong.

When you file Form 14157-A – the Tax Return Preparer Fraud or Misconduct Affidavit – you are doing two things. Your reporting the preparer. And your putting yourself on the IRS’s radar as someone who filed false returns.

The IRS may open two investigations. One into the preparer. One into you.

Your affidavit becomes evidence. Everything you write in that form can be used to evaluate your own criminal exposure. If you claim you had no idea the returns were false, investigators will test that claim. They’ll look at the returns. They’ll examine the deductions. They’ll ask wheather a reasonable person could have believed those numbers were accurate.

This dosent mean you shouldnt report preparer fraud. But you should absolutly consult with a criminal tax attorney before filing that affidavit. You need to understand what your admitting, what your claiming, and how investigators will evaluate your statements.

Filing as a victim dosent make you innocent. It makes you known.

Real Cases of Preparer Fraud

To understand how this plays out, look at some actual cases.

Rafael Alvarez, known as “The Magician,” operated a tax preparation business in the Bronx that filed tens of thousands of false returns over a decade. The scheme caused $145 million in tax losses. Alvarez promised clients inflated refunds through bogus itemized deductions, made-up capital losses, phony business expenses, and fraudulent credits.

The nickname says everything about the mindset. Alvarez marketed himself as someone who could get results other preparers couldnt. His clients came to him becuase he promised bigger refunds. That promise became evidence of there knowledge when the scheme collapsed.

Alvarez went to prison for four years. But his clients faced there own consequences. Thousands of returns had to be reviewed. Clients who couldnt demonstrate they were truly innocent of any knowledge faced civil penalties. Some faced criminal investigation. Many discovered that the refunds they recieved had to be paid back with interest – plus the fraud penalty of 75%.

John Anthony Castro was a tax preparer who promised clients significantly higher refunds then other preparers could get – and then split the additional refund amount with them. This arrangement made every participating client a co-conspirator. They knew they were getting more then they deserved. They knew they were sharing the extra money with the preparer. That knowledge eliminated any reliance defense.

Castro was convicted on all 33 counts. His clients who participated in the split arrangement faced there own exposure.

The lesson is clear: if your preparer promised results that seemed too good to be true, and especialy if you benefited financialy from an unusual arrangement, your in dangerous territory.

What to Do Right Now

If you suspect your tax preparer filed false returns on your behalf, heres what you should do.

First, do not contact the IRS without an attorney. Anything you say can and will be used to evaluate your criminal exposure. The initial conversation with investigators might feel cooperative, but your giving them evidence.

Second, gather your records. Find the returns you signed. Collect the documents you provided to the preparer. Locate any communications – emails, texts, notes – about your returns. These records will be essential for evaluating your reliance defense.

Third, contact a criminal tax attorney immediatly. Not a CPA. Not a regular tax preparer. Someone who specializes in IRS criminal investigations. The stakes are too high for anyone else.

Fourth, do not file amended returns without legal advice. Amending returns can be seen as an admission that the originals were false. It can also create a paper trail that prosecutors use against you. Whether to amend – and how to amend – is a strategic decision that should be made with counsel.

Fifth, understand that the money is separate from the crime. Even if your clearly a victim with zero criminal exposure, you almost certainly owe the IRS whatever taxes should have been paid. Preparer fraud dosent make the taxes go away. You may be able to reduce penalties, but the underlying tax obligation is still yours.

There is also a timeline issue that catches people off guard. The IRS has three years from the filing date to audit most returns. But if there was a substantial understatement of income – more then 25% – that extends to six years. And if fraud is involved, there is no statute of limitations at all. The IRS can come after you for fraudulent returns from a decade ago. Just becuase years have passed dosent mean your safe.

Spodek Law Group is located in the Woolworth Building at 233 Broadway in Manhattan. We handle federal criminal tax investigations nationwide. If your tax preparer has put you in this situation, call us at 212-300-5196. The consultation is free. The mistake of talking to the IRS first isnt.

Todd Spodek has represented clients in exactly this situation – people who trusted there tax preparer and now face criminal exposure for returns they didnt understand. Some of those clients avoided prosecution entirely becuase they got representation early. Others faced years of fighting charges they might have avoided if they hadnt talked to investigators first. The difference in outcomes comes down to one thing: when they got a lawyer.

Remember: the IRS has a 90% conviction rate in criminal cases. Your only protection is the reliance defense – and that defense only works if you build it before you start making statements to investigators. Once youve talked, you cant untalk. Once youve given them evidence, you cant take it back. Call a lawyer. Then decide what to say.