A Texas man, Lamar “Cory” Thompson, formerly of Chicago, has been sentenced to 30 months in prison for mail fraud related to a scheme to fraudulently obtain tax refunds from the IRS.
Thompson had the help of others in his scheme—only they didn’t all know it. According to court documents, from approximately June 2010 through January 2014, Thompson obtained the Social Security numbers of individuals in the Chicago area and persuaded them to get fingerprinted under the false pretense that they would be working for and with him as tax return preparers. He then used this personal information without their knowledge to unlawfully obtain EINs, EFINs, and PTINs from the IRS for the purpose of filing fraudulent tax returns.
Identifiers
An Employer Identification Number, or EIN, is a federal tax identification number used to identify a business entity—think of it as a Social Security number for businesses. You must include a name and taxpayer identification number, such as a Social Security number, ITIN or EIN of the principal officer, general partner, grantor, owner, or trustor, on the application. That “responsible party” controls or manages the entity. Unless the applicant is a government entity, the responsible party must be an individual, not an entity.
An Electronic Filing Identification Number, or EFIN, is assigned by the IRS. Tax preparers use an EFIN to electronically file tax returns. To obtain an EFIN, you must complete an application and passes a suitability check. Typically, the firm owns the EFIN and uses either its EIN or the sole proprietor’s Social Security number, if it doesn’t have an EIN, to apply for an EFIN.
A Preparer Tax Identification Number, or PTIN, is assigned to a tax professional who prepares or helps prepare any federal tax return or claim for a refund and receives compensation. PTINs are preparer-specific—you’re not allowed to share—and expire each year in December. Failure to have a current PTIN could result in section 6695 penalties, injunction, and potential disciplinary action by the IRS Office of Professional Responsibility.
The Scheme
Thompson used this information to prepare and file false tax returns with the IRS, seeking refunds in the names of other individuals. In furtherance of this scheme, Thompson opened bank accounts in the names of others and used these accounts to deposit and withdraw the fraudulently-obtained tax refunds. According to court documents, in some cases, Thompson provided money and gifts to third parties in exchange for the use of the bank accounts opened in their names.
In total, Thompson attempted to obtain approximately $1,549,342 in fraudulent tax refunds from the IRS.
Earlier this year, Thompson entered into a plea agreement, where sentencing would range between 18-51 months. The 30 months falls within that range.
In addition to his prison sentence, U.S. District Judge Manish S. Shah for the Northern District of Illinois ordered Thompson to serve three years of supervised release and to pay restitution to the United States in the amount of $908,727.
Protect Yourself
It’s a good reminder that those who are looking to take advantage of honest tax professionals—including those who are looking to enter the profession. While the specific details of how Thompson recruited individuals are under wraps, here are some general guidelines to avoid job scams:
- Never give out personal information like your Social Security number over email or phone.
- Don’t agree to a background check unless you have met the employer in person and confirmed their identity.
- Legitimate jobs won’t require you to make upfront payments or write funds to them.
- Don’t accept a check that comes with “extra” money—legitimate payroll will never involve a check for deposit for more than the amount owed to you with the expectation that you’ll return funds.
- Payroll checks shouldn’t not come with an immediate timeline—be wary if a potential employer asked you to cash a check or money order quickly.
Before you accept a job, do your homework. Click over to the employer’s website and search online to verify that the employer appears legitimate—reading reviews is a plus. If possible, meet the potential employer in person at their office or in a public space, before accepting employment.
To report a scam, file a complaint online with the Federal Trade Commission.