Court documents and trial evidence revealed that Watson deliberately prepared and electronically filed tax returns with the IRS for his clients, containing falsified income and deduction details. These inaccuracies often included exaggerated or completely fictitious business and unreimbursed employee expenses. Such deceptive practices led to reduced tax liabilities and subsequently resulted in substantial, unjustified refunds.
Witnesses testified that Watson’s fees for tax preparation were contingent on the refund amount, typically ranging between $500 to $1,500. This fee structure further highlights the profit-driven motives behind his unethical practices.
In addition to his prison sentence, U.S. District Judge Theodore D. Chuang ordered Watson to serve a year of supervised release and pay approximately $268,634 in restitution to the United States. This case underscores the severe consequences of fraudulent tax preparation and serves as a warning to other tax professionals.
The case was diligently investigated by the IRS Criminal Investigation team. Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, along with U.S. Attorney Erek L. Barron for the District of Maryland, announced the sentence. Trial Attorney Matthew L. Cofer of the Tax Division and Assistant U.S. Attorney Leah B. Grossi for the District of Maryland led the prosecution.
For small business owners, this case is a crucial reminder of the importance of engaging with ethical and compliant tax professionals. The ramifications of fraudulent tax practices not only affect individual taxpayers but can also have broader implications for the integrity of the tax system and the financial well-being of businesses.
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