Printed on: October 05, 2012

Ex-tax preparer faces 215-year prison term


POST REGISTER

A former Rigby tax preparer faces a potential prison sentence of 215 years and a fine of $10.5 million after pleading guilty Thursday to 41 counts of causing the filing of false tax returns.

Penny Jones, 62, entered the guilty plea before U.S. District Judge William Dimitrouleas in Fort Lauderdale, Fla. The plea was announced by the Justice Department and IRS in a news release.

Jones admitted guilt without entering a plea agreement with the government, the news release said.

Co-defendant John Michael Smith Jr. pleaded guilty in Florida on Thursday to one count of filing a false claim for a tax refund. Smith faces a maximum potential sentence of five years in prison, a $250,000 fine and must make restitution to the IRS.

Jones and Smith were among seven people indicted for their roles in a multimillion-dollar tax fraud scheme.

According to the Nov. 10, 2011, indictment, Jones and Smith were part of a scheme that was national in scope and caused the filing of false tax returns for at least 180 clients from 30 states.

The conspirators requested more than $120 million worth of fraudulent tax refunds, the news release said.

Clients of the scheme collectively filed more than 380 tax returns, the news release said, mostly from tax year 2008 but also for other tax years -- falsely reporting the amount of their personal debt obligations as both income and federal tax withholding.

They falsely reported that information on IRS Forms 1099-OID, which were filed by Jones based on information provided by the clients. OID stands for Original Issue Discount.

According to the website www.accountingtoday.com: "The forms are legitimately used by tax filers who must pay taxes on income they receive from the interest on certain investments, such as some types of bonds.

"Tax on certain bonds must be paid as income accrues. Such bondholders receive annual 1099-OID forms from the debt issuers. Bond holders then file these OID forms with the IRS, along with their income tax forms."

Jones operated her tax return preparation business under the names PMDD Services LLC and Forever Grace LLC.

Smith, a resident of Hidden Hills, Calif., and a former Cincinnati resident, admitted that he filed a false 2007 individual income tax return prepared by Jones, the news release said.

He sought a fraudulent tax refund of $208,312, which the IRS mistakenly paid. As part of his plea agreement, Smith agreed that he filed or caused the filing of more than $7 million worth of false 1099-OID claims, the news release said.

Previously, another PMDD Services client, Philip Butcher, formerly of Rogers, Ark., pleaded guilty to one count of filing a false claim for a refund, the news release said.

According to court documents in that case, Butcher filed two tax returns reporting his loans as OID income and tax withholding, claiming tax refunds of more than $1.45 million.