A tax preparer in the Bronx spent decades operating a business where he filed returns for thousands of clients, often getting them big refunds. Customers called him “the magician” because it seemed he could make their tax burdens disappear.
But federal prosecutors said that many of the thousands of returns he had filed were part of a “sweeping fraudulent scheme” that used bogus information to bilk the I.R.S. out of $145 million.
It was one of the largest frauds committed by a tax preparer that the Department of Justice had encountered in its history, prosecutors said.
The man, Rafael Alvarez, 61, of Cortlandt Manor, N.Y., appeared before a judge in U.S. District Court in Manhattan on Tuesday and pleaded guilty to one count of conspiracy to defraud and steal government funds and one count of assisting in the preparation of a false and fraudulent U.S. individual income tax return.
As part of his plea deal, Mr. Alvarez, who for about 10 years was the chief executive of a company called ATAX on the edge of the Marble Hill neighborhood, admitted to leading the scheme and attempting to obstruct the federal authorities’ investigation. He also agreed to pay the I.R.S. $145 million in restitution and forfeit $11.84 million in fraudulent proceeds that he had received.
Mr. Alvarez faces a maximum sentence of eight years in prison for the two counts and will be sentenced on April 11. His lawyer, Michael Bachrach, declined to comment.
“There was no magic to what Alvarez was doing — he was committing a serious federal crime by falsifying tens of thousands of tax returns and, in the process, depriving the I.R.S. of $145 million in tax revenue,” said Edward Y. Kim, an acting U.S. attorney with the Southern District of New York.
It remains unclear whether those whose returns were falsified by Mr. Alvarez were being considered participants in the scheme or whether any of the clients were cooperating with the authorities.
Mr. Alvarez, who had been preparing tax returns since at least 1990 at several ATAX locations, regularly falsified figures by submitting fictitious deductions, business expenses, capital losses and tax credits to get clients higher refunds, court documents show.
As their tax liabilities vanished on paper, Mr. Alvarez’s company generated millions in profits. From 2016 to 2019 alone, ATAX took in at least $15 million in gross revenue, and Mr. Alvarez, as the sole owner, received a large portion of the net revenue, the indictment said.
Mr. Alvarez, and a gaggle of employees who understood what he was doing, forged everything from medical expenses to charitable contributions to rental income, residential energy credits and more, according to the indictment.
Prosecutors said that Mr. Alvarez had recruited employees who did not have legal status in the country and intimidated them into participating.
In one instance, he recruited an undocumented employee from a supermarket and instructed that person to impersonate a tax preparer at ATAX so that they could use the preparer’s tax identification number and file false returns, the indictment said.
When a group of employees finally confronted Mr. Alvarez about the fraudulent returns, he threatened them and created a company policy that prevented anyone from correcting his fraudulent entries, according to prosecutors.
“Mr. Alvarez was so consistent at falsifying ATAX customer tax returns that he became known to ATAX’s customers as ‘the Magician,’” the release said.
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