A former tax preparer from the Chicago area, Erica Early, has pleaded guilty to filing fraudulent income tax returns on behalf of her clients. The case underlines the importance of small business owners maintaining strict oversight of their financial operations, particularly when employing third-party tax preparers.
From January 2014 through April 2019, Early operated a tax preparation business serving clients in Illinois, Wisconsin, and Indiana. The IRS’s investigation discovered that she inflated clients’ income on tax returns to maximize their Earned Income Tax Credit (EITC) and falsified education-related credits. Early typically charged her clients $1,000 to prepare basic tax returns.
Simultaneously employed by the U.S. Postal Service, Early did not restrict her fraudulent activities to her clients. She also falsified her personal tax returns, unlawfully claiming education credits that she knew she was ineligible to receive.
Early’s deceptive practices culminated in a significant tax loss for the IRS, totaling approximately $515,990. The case reminds small business owners of the financial and legal risks associated with entrusting sensitive financial tasks to external parties. Business owners must conduct thorough background checks and ensure the integrity of third-party tax preparers.
The Justice Department’s Tax Division, headed by Acting Deputy Assistant Attorney General Stuart M. Goldberg, announced the guilty plea. The division, along with IRS-Criminal Investigation, is investigating the case.
Early is scheduled for sentencing on October 4, 2023. She faces a potential maximum sentence of three years in prison, in addition to a period of supervised release, restitution, and monetary penalties. The final decision will be made by a federal district court judge who will consider the U.S. Sentencing Guidelines and other statutory factors.
Assistant Chief Matthew J. Kluge and Trial Attorney Boris Bourget of the Tax Division are prosecuting the case. The proceedings underscore the IRS and the Justice Department’s continued commitment to combating tax fraud and ensuring tax preparers maintain the highest standards of professional and ethical conduct.
Small Business Deals
For small business owners, this case serves as a cautionary tale. It’s crucial to ensure the legitimacy and trustworthiness of tax preparers and other third-party service providers with access to sensitive financial information. Furthermore, business owners should be cognizant of tax regulations and maintain transparency to avoid potential legal complications and financial loss.