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Tax Fraud Unveiled: The Case of Salvador Gonzalez and the $28 Million Scam
A Riverside County man has been sentenced to 72 months in federal prison for preparing and filing false tax returns for his clients, resulting in a tax loss to the IRS of at least $28 million, as announced by the Justice Department today. Salvador Gonzalez, residing in Corona, was sentenced on Monday by United States District Judge Jesus G. Bernal, who also mandated restitution payments totaling $403,908.
Gonzalez entered a guilty plea on June 17 to three counts of aiding and assisting in the preparation of false tax returns. Beginning in 2013, Gonzalez operated Grace’s Lighthouse Resource Center, Inc., a tax return-preparation business based in Corona. Throughout this period, Gonzalez consistently advised his clients to create fictitious corporations and to title their homes, vehicles, and other assets under the names of these corporations. He then referred these clients to an associate responsible for preparing the tax returns of these sham corporations. The associate would provide the clients with a blank spreadsheet, requesting that they input their business expenses.
Under Gonzalez’s instructions, clients included personal expenses such as mortgage payments, car payments, and utility bills in the spreadsheet provided to the associate. Consequently, the associate used this information to prepare business tax returns that inevitably displayed a loss. These fabricated losses were incorporated into the clients’ individual income tax returns, fraudulently reducing their taxable income.
Gonzalez further reduced his clients’ tax liabilities by fabricating deductions on their personal returns, including unreimbursed employee expenses, charitable contributions, and medical and dental expenses. As a result of these fraudulent practices, his clients paid less in taxes than they rightfully owed.
Before 2019, Gonzalez typically charged clients a flat fee of $500 per tax return. In 2019, he adjusted his fee structure to charge clients 1% of their gross income for his services. According to court documents, Gonzalez’s actions resulted in a tax loss to the IRS amounting to at least $28 million.
Consistent with the plea agreement, the U.S. Attorney’s Office – Tax Section filed a civil complaint in the U.S. District Court for the Central District of California against Gonzalez. The complaint seeks to permanently prohibit Gonzalez from preparing, assisting in, directing, or supervising the preparation or filing of federal tax returns, amended tax returns, or other related documents or forms for others. The civil complaint alleges that over several years, Gonzalez prepared tax returns that understated the federal income-tax liability of his customers through a scheme that harmed the United States, the IRS, his customers, and the public.
Tax Preparer Sentenced for $11.7M Fraud Scheme
Stacie says: Another tax preparer stealing from taxpayers. For every person who believes they are special and the rules don’t apply to them, there are thousands of honest people just trying to live their lives. It always makes me feel hopeful when justice is served on people like the Grandos family.
…A San Angelo tax preparer whose fraudulent tax returns cost the IRS millions of dollars was sentenced to 14 years in federal prison, announced U.S. Attorney for the Northern District of Texas Chad E. Meacham. His adult son and daughter were sentenced to 66 and 80 months, respectively.
Hugo Cesar Granados, manager of Columbia Tax Service, his daughter, Blanca L. Granados, and his son, Hugo Alberto Granados, were convicted at trial in August of conspiracy to defraud the United States and multiple counts of aiding in the preparation and presentation of false documents.
At trial, prosecutors introduced evidence that the elder Mr. Granados and his co-conspirators falsified their clients’ individual income tax returns in order to inflate the clients’ tax refunds.
They routinely fabricated clients’ Schedule A, itemized deductions, and Schedule C, sole proprietorship profit and loss statements, claiming the taxpayer owned a business when no such business existed, claiming unreimbursed employee expenses such as travel and per diem, and claiming business expenses related to maintenance, utilities, supplies, insurance, and professional services that were never incurred or grossly inflated.
Testimony adduced at trial showed that Columbia Tax Service claimed more than $900,000 in income in 2015 and more than $1.3 million in income in 2016.
An employee who plead guilty prior to trial, testified that in 2016, Columbia Tax employees met with Hugo C. Granados because taxpayers were not receiving their refunds from the IRS. When questioned, the elder Mr. Granados asked the employees if they thought the company was doing something illegal. Mr. Garcia-Soto said that he, Blanca Granados, and Hugo A. Granados all replied that they thought Columbia Tax was doing something illegal. In response, Hugo C. Granados just smiled and turned back to his computer.
In a Skype chat introduced at trial, Blanca Granados wrote to a co-worker: “Fraud is ridiculous here yo . . . I swear.”
Prosecutors also introduced into evidence the company’s “tax preparation manual,” a handbook that outlined exactly how to commit fraud.
In discussing preparation of Schedule C of the tax return, the manual stated: “This is where your training and knowledge of income and deductions will make a big difference in the amount of refund the taxpayer will be obtaining. A determination has to be made if the return needs additional income to generate the maximum earned income and other credits or if the return has a substantial amount of income (Adjusted Gross Income) and needs to come down to maximize the earned income and other credits.” In other words, the manual advised tax preparers to manipulate income to maximize refunds rather than referring to the law to determine whether an activity was a business for income tax purposes and whether expenses properly qualified as a business deduction.
At sentencing, experts put the estimated tax loss in excess of $11.7 million.
Stacie's Tax Stuff 