New Jersey Tax Preparer Arrested for Pandemic Fraud
A New Jersey man who owned a tax preparation business is under arrest, accused of filing over one thousand false tax claims to cash in on COVID-19 pandemic relief programs.
Prosecutors say Leon Haynes of Teaneck, N.J., tried to bilk the U.S. government out of $124 million by preparing and submitting 1,387 false forms to the Internal Revenue Service (IRS) claiming COVID-related small business tax credits for himself and his clients.
The alleged fraud occurred repeatedly between November 2020 and May 2023.
"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 for the District of New Jersey. “My office and our partners will continue to find and prosecute fraudsters who exploited the pandemic for personal gain."
Tax Credit Exploitation
During the pandemic, Congress authorized the employee retention tax credit (ERC), which allowed a small business to reduce its employment tax. It also authorized a credit against employment taxes to reimburse businesses for wages paid to employees on leave due to COVID-19.
To be eligible, a business had to be in operation in 2020 and have experienced a partial shutdown in its operations due to COVID-19.
According to court documents, Haynes repeatedly tried to exploit both of those programs, filing false forms on behalf of his three businesses and his clients, allegedly telling clients that the government was giving out relief money and they were eligible simply because they had a business.
Prosecutors say Haynes submitted forms that grossly overstated the number of employees and number of wages without telling his clients. He also submitted false forms for three of his own companies.
The U.S. Treasury mailed multiple tax refund checks totaling more than $1 million for Haynes’ own companies. Treasury also mailed more than $31 million in tax refunds for his clients. Haynes charged each client up to a 15 percent fee based on the tax refunds and allegedly asked for the money in cash.
Haynes faces eight counts of aiding and assisting the filing of false tax returns and one count of mail fraud.
U.S. Attorney Sellinger’s office received help on the case from IRS Criminal Investigation, the Social Security Administration Office of the Inspector General, and the U.S. Postal Service.
DOJ has charged more than 2,230 defendants so far with pandemic-related fraud, and has obtained over 550 convictions, but thousands of cases are still under investigation. DOJ formed a COVID-19 Fraud Task Force in 2021 and has been expanding the team by adding strike forces in various U.S. Attorney’s offices.