U.S. Attorney Philip R. Sellinger and Acting Deputy Assistant Attorney General Stuart M. Goldberg announced the arrest of a New Jersey tax preparer for fraudulently seeking more than $124 million from the COVID-19 Employment Tax Credit program.
According to the complaint, tax accountant Leon Haynes, from Teaneck, New Jersey, is charged with 8-counts of aiding and assisting in the filing of over 1,000 false tax returns, and 1-count of mail fraud. Haynes was scheduled to appear before U.S. Magistrate Judge Leda Dunn Wettre in Newark federal court.
“While our country was fighting the spread of the virus and its profound economic impact, Haynes allegedly scammed the system in a massive scheme to line his own pockets,” U.S. Attorney Philip R. Sellinger said. “As described in the complaint, Haynes abused his position as a tax preparer to steal millions of dollars by submitting over 1,000 false applications for funds set aside to help legitimately struggling businesses. My office and our partners will continue to find and prosecute fraudsters who exploited the pandemic for personal gain.”
Charged With 8 Counts of Attempted Tax Fraud
Tammy Tomlins, Special IRS Agent in Charge of the Newark Field Office, said. “Today’s arrest demonstrates IRS Criminal Investigation and our law enforcement partner’s commitment to holding accountable those who exploited the pandemic for personal gain. We are committed to rooting out pandemic-related fraud and holding accountable anyone seeking to profit from the public health emergency.”
Gail S. Ennis, Inspector General for the Social Security Administration also weighed in on arrest. “This arrest demonstrates our commitment to pursue those who attempt to defraud pandemic-related assistance programs through SSN misuse. These programs provided aid to businesses and employees during a crisis; we will continue to collaborate with other law enforcement agencies to investigate those who allegedly misused them for personal and selfish gain. I thank the IRS – Criminal Investigation, and the U.S. Postal Service for their investigative efforts and the U.S. Attorney’s Office for working this case.”
Over 1,000 False Tax Returns Filed
During the height of the worldwide pandemic, Congress responded by authorizing and devising an emergency plan to save small businesses across the nation from either going bankrupt or reducing their work force because of the mandated shutdowns, by giving those businesses in distress substantial tax credits (ERC), that could be used to reduce the employment tax a company owed to the IRS.
To qualify, the business had to have been in operation in 2020 and to have experienced at least a partial suspension of its operations because of a mandated federal order related to COVID-19. A business could also qualify if they had a significant decline in their profits due to the shutdown.
The credit was an amount equal to a set percentage of the wages the business owner paid to its employees during the relevant time period, subject to a maximum amount.
$124 Million from COVID Employment Tax Credit Program
Congress also authorized the IRS to give a credit against employment taxes to reimburse businesses for the wages paid to employees who were on sick or family leave and could not work because of COVID-19. This “paid sick and family leave credit” was equal to the wages the business paid the employees during the sick or family leave, also subject to a maximum amount.
Haynes, acting as a tax accountant falsified and submitted 1,387 tax returns to the IRS between November of 2020 to May of 2023, claiming COVID-related tax credit benefits on behalf of himself and his clients. Haynes additionally lied to his clients claiming that they were eligible for the tax credits, simply because they had a business. He then submitted (without consulting his clients), the fraudulent tax forms on their behalf to the IRS, and willfully overstated the number of employees and the amount of wages paid.
Haynes also submitted 3 fraudulent tax forms for 3 of his own companies. Those false tax forms along with other misrepresentations to the IRS, totaled $124.8 million dollars that Haynes was hoping to collect from the COVID tax relief fund.
According to the indictment, each of the 8-counts facing the 49-year-old tax accountant carries a maximum penalty of 3 years in prison and a $250,000 fine. The mail fraud charge carries a maximum penalty of 20 years in prison and a $250,000 fine or twice the gross gain to the defendant or gross loss to the victim, whichever is greatest.
