Teaneck tax preparer arrested for $124 million IRS fraud

A New Jersey tax preparer was arrested Monday for fraudulently seeking more than $124 million from the IRS by filing over 1,000 false tax forms claiming COVID-19-related employment tax credits.

Leon Haynes, 49, of Teaneck, New Jersey, is charged by complaint with eight counts of aiding and assisting the filing of false tax returns and one count of mail fraud.

He made his initial appearance 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,” said U.S. Attorney Philip R. Sellinger. “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.”

“Today’s arrest demonstrates IRS Criminal Investigation and our law enforcement partners commitment to holding accountable those who exploited the pandemic for personal gain,” Tammy Tomlins, Special Agent in Charge of the Newark Field Office, said. “We are committed to rooting out pandemic-related fraud and holding accountable anyone seeking to profit from the public health emergency.”

“This arrest demonstrates our commitment to pursue those who attempt to defraud pandemic-related assistance programs through SSN misuse,” Gail S. Ennis, Inspector General for the Social Security Administration, said.

Sellinger said his office will continue to prosecute fraudsters who exploited the pandemic for personal gain, but progressive Democrat Lisa McCormick said Congress gave then-President Donald Trump a $6 trillion slush fund that was designed to benefit the re-election of corrupt politicians more than it could help the country recover from the coronavirus outbreak.

“The CARES Act is 880 pages of outrage and corruption, that gave Republican President Donald Trump a $6 trillion slush fund without adequate oversight or guidance to prevent abuses,” said McCormick, shortly after the laws were enacted. “Instead of stabilizing the economy, it enriches the rich and insults the 99 percent of Americans who follow the rules. This is worse than the TARP bailouts under Bush.”

“These programs were supposed to aid businesses and employees during a crisis but they were misused for personal and selfish gain because these politicians wrote sloppy laws packed with special interest favors and weak protection for taxpayers,” said McCormick.

“As many of us suffered through the pandemic, Leon Haynes found a way to line his pockets at our expense,” Christopher Nielsen, Postal Inspector in Charge of the Philadelphia Division, said. “He allegedly filed over $100 million worth of fraudulent tax returns, stealing money from programs designed to support suffering businesses. Working with our colleagues at the IRS Criminal Investigative Division and the United States Attorney’s Office, we have begun the process of holding him accountable for his frauds.”

According to Sellinger and Acting Deputy Assistant Attorney General Stuart M. Goldberg, Congress authorized an employee retention tax credit (ERC) that a small business could use to reduce the employment tax it owed to the IRS in response to economic impact of the COVID-19 pandemic.

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 government order related to COVID-19 (for example, an order limiting commerce, group meetings or travel) or a significant decline in profits.

The credit was an amount equal to a set percentage of the wages that the business paid to its employees during the relevant time period, subject to a maximum amount.

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.

From November 2020 to May 2023, Haynes, acting as a tax preparer, repeatedly exploited these programs by preparing and submitting 1,387 false forms to the IRS claiming COVID-related tax credits on behalf of himself and clients.

Haynes falsely told his clients that the government was giving out COVID-relief money for businesses and that they were eligible for the money simply because they had a business.

Without consulting with his clients, Haynes then submitted forms to the IRS on behalf of their businesses that grossly overstated the number of employees and amount of paid wages. Haynes submitted similarly false forms for three of his own companies.

Based on these and other misrepresentations, Haynes fraudulently sought $124.8 million in tax refunds on behalf of his companies and numerous other businesses in his clients’ names.

Based on Haynes’ false claims about his own companies, the U.S. Treasury mailed him multiple tax refund checks totaling more than $1 million. The U.S. Treasury also disbursed at least $31.6 million in tax refunds to Haynes’ clients based on the false tax forms that Haynes submitted. Haynes charged each client up to a 15 percent fee based on the tax refunds the client received from the U.S. Treasury.

At Haynes’ request, many clients paid him those fees in cash.

Each count of aiding and assisting in the preparation of false returns carries a maximum penalty of three 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.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.