On Wednesday, an indictment was unsealed in Central Islip, New York, revealing charges against seven individuals for orchestrating what is considered the nation's largest COVID-19 tax credit fraud scheme. The defendants are accused of attempting to defraud the United States of over $600 million by filing more than 8,000 falsified tax returns. These returns improperly claimed employment tax credits related to the COVID-19 pandemic.
The indictment details that from November 2021 to June 2023, the alleged conspirators, all current or former New York residents, exploited the Employee Retention Credit (ERC) and paid sick and family leave credit (SFLC), both authorized by Congress to support businesses during the pandemic. The accused individuals operated out of Credit Reset, a so-called credit repair business owned by defendant Keith Williams, and acted as tax preparers to file fraudulent claims on behalf of themselves and their clients.
The defendants reportedly profited by receiving tax refund checks from the U.S. Treasury and charging clients fees based on the refunds obtained. They also allegedly recruited others into the scheme, offering them a cut of the fraudulent proceeds. Despite the defendants seeking over $600 million, the IRS disbursed approximately $45 million to them and their clients.
In an attempt to evade detection, the defendants are said to have omitted their names as paid preparers on the tax returns and used Virtual Private Networks (VPNs) to hide their IP addresses. For clients without a legitimate business, the scheme involved selling shell companies to facilitate the filing of false returns. When the IRS and Social Security Administration (SSA) detected irregularities and requested additional information, the defendants allegedly provided false responses.
Some defendants are also charged with submitting fraudulent Paycheck Protection Program (PPP) loan applications. The indictment includes 45 counts relating to the conspiracy, including charges for wire fraud and aiding in the preparation of false tax returns. If convicted, the defendants could face significant prison time, with maximum penalties ranging from three to thirty years for various charges.
The case is being investigated by the IRS-Criminal Investigation (IRS-CI) and the U.S. Postal Inspection Service (USPIS), and is prosecuted by attorneys from the Tax Division and the Eastern District of New York. Acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department's Tax Division, along with other officials, announced the charges.
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