|FOR IMMEDIATE RELEASE||
|July 7, 2004||
Division of Criminal Justice
Department of the Treasury
PASSAIC COUNTY TAX PREPARER PLEADS GUILTY TO $100,000 TAX FRAUD
of Criminal Justice & Division of Taxation Investigation Uncovers
TRENTON —Attorney General Peter C. Harvey announced that a joint-agency investigation targeting tax fraud has resulted in a Passaic County tax preparer pleading guilty to stealing more than $100,000 in illegal refunds by filing more than 1,000 suspect New Jersey income tax returns. The investigation by the Division of Taxation - Office of Criminal Investigation and the Division of Criminal Justice - Financial Crimes Bureau remains ongoing.
“This investigation and resulting guilty plea by the defendant uncovered a deliberate and blatant attempt to steal thousands of dollars from the state treasury by filing hundreds of fraudulent tax returns. This and similar prosecutions demonstrates the resolve and forward thinking by the Division of Criminal Justice and the Division of Taxation as they undertake concerted efforts to target tax cheats,” said Attorney General Harvey. “Make no mistake, we intend to recoup and return missing and due and owing tax dollars to our treasury and to New Jersey’s honest taxpayers.”
Vaughn L. McKoy, Director, Division of Criminal Justice and Robert K. Thompson, Director, Division of Taxation, said that Rosa M. Castro, 48, 16 Hillman St., Clifton, Passaic County, plead guilty before Passaic County Superior Court Judge Randolph Subryan to charges of theft by deception and filing and/or preparing false or fraudulent tax returns. As a result of the guilty plea, Castro faces up to five years in state prison, a fine of up to $150,000, and restitution to the State of New Jersey totaling more than $100,000 (to be determined by the Court). Castro is scheduled to be sentenced by Judge Subryan on Aug. 20.
"This case represents only the most visible of a number of initiatives the Division of Taxation has undertaken to combat tax refund and tax credit fraud. In addition to investigating and prosecuting preparers of fraudulent returns and the recipients of fraudulent refunds, the Division also employs a sophisticated system of internal controls to identify questionable refund applications and prevent the issuance of funds to which the applicants are not entitled,” said Director Thompson. "This is another example of outstanding cooperation between agencies to level the playing field for New Jersey's taxpayers, and to insure that the State's financial resources are protected from those seeking to personally profit by fraud at the expense of honest citizens."
According to Criminal Justice Director McKoy, Castro, a self-employed tax preparer, was charged on March 1 by state investigators from the Division of Criminal Justice - Financial Crimes Bureau and tax agents from the Division of Taxation’s Office of Criminal Investigations. The investigation targeted Castro’s alleged filing some 2,000 suspect, potentially fictitious and/or fraudulent New Jersey Gross Income Tax returns for the tax years 1999 through 2004.
The criminal Accusation charged that from Jan. 1, 2000 through Jan. 30, 2004, Castro filed and/or prepared fraudulent New Jersey State Gross Income Tax Returns for herself, family members, friends and others using actual and fictitious names and social security numbers. Specifically, the Accusation charged that Castro claimed certain earned income tax credit (EITC) refunds. Of the more than 1,000 returns identified by the Division of Taxation, 140 returns claimed EITC deductions that were determined to be fraudulent and linked to Castro as taxpayer, by home address, or as a co-endorsee on a refund check. The Accusation charged that Castro received more than $100,000 as a result of the fraud.
The investigation was initiated by the Division of Taxation based upon a review of suspect 2002 Castro-prepared tax returns claiming “net profits from business” as the sole source of income and/or certain exemptions and medical expense deductions which calculated a “zero” taxable income. On Jan. 23 and 27, 2004, undercover state investigators from the Division of Criminal Justice scheduled an appointment with Castro seeking to have her prepare 2003 tax returns. It was charged that Castro prepared false and fraudulent tax returns utilizing fictitious information on behalf of the undercover investigators.
In the category of “Earned Income Tax Credit” fraud, state investigators and tax audits reviewed 1,254 individual tax returns seeking $708,820 in Earned Income Tax Credit refunds. The review determined that 257 addresses were listed in the 1,254 tax returns and that each return contained much of the same financial information, including a taxable income of zero, a no line one income, only Schedule C or Schedule C-EZ income and same “head of household” filing status. Additionally, 80 tax returns listed Rosa M. Castro, 16 Hillman Street, as preparer and 127 tax returns used 16 Hillman Street as a residence or return address.
The ongoing investigation continues to review potential “refund” fraud. Thus far, the investigation has uncovered 724 individual tax returns seeking more than $85,000 in refunds for overstated medical expense deductions exceeding $6,068,945. Of the 724 returns reviewed, 248 separate tax returns reported exactly $9,000 in medical expenses or 29 percent of W-2 income, 274 separate returns reported exactly $9,500 in medical expenses or 30 percent of W-2 income, and 684 tax returns list Rosa M. Castro as preparer.
“With this guilty plea, the defendant has admitted to preparing illegal tax returns in order to steal money from legitimate taxpayers and the State of New Jersey,” said Director McKoy. “While this fly-by-night operation has been shut-down, it is important to remind all taxpayers, particularly those who are recent immigrants to the state or unfamiliar with New Jersey and federal tax laws, to obtain the services of legitimate, well-known and respected accountants and tax preparers - do not rely on the kitchen table preparer.”
Chief Sue Kane of the Division of Taxation - Office of Criminal Investigation and State Investigator Cheryl Smith of the Division of Criminal Justice - Financial Crimes Bureau coordinated the investigation. Supervising Deputy Attorney General Terrence Hull and Deputy Attorney Frank Brady of the Division of Criminal Justice - Financial Crimes Bureau along with Assistant Chief Bob Morris of the Division of Taxation’s Office of Criminal Investigation, conducted the investigation. Additional investigative support was provided by state investigators Lou Matirko, Noelle Holl and John Ho.
Director Thompson noted that anyone with information about unscrupulous tax preparers, or any type of tax fraud, are encouraged to contact the New Jersey Division of Taxation’s “Citizens Against Tax Cheats or CATCH” program. The hotline number is: (609) 292 6400. Information can also be mailed to the New Jersey Division of Taxation, 50 Barrack Street, P.O. Box 190, Trenton, NJ 08695 0190, Attention: Citizens Against Tax Cheats.
In announcing the guilty plea, Director McKoy noted that the Division of Criminal Justice has established a toll-free “Corruption TipLine” for the public to report corruption, financial crime and other illegal activities. The statewide “Corruption TipLine” is: 1-866-TIPS-4CJ. Any information received via the Division of Criminal Justice “Corruption TipLine” or the Division of Taxation “CATCH Hotline” will remain confidential.
copy of the Accusation and related documents is available via the Division
of Criminal Justice Web Page @ www.njdcj.org.