|  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.
A
copy of the Accusation and related documents is available via the Division
of Criminal Justice Web Page @ www.njdcj.org.
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