Slogan was “Money, Money, Money”
From the U.S. Attorney’s Office in Baltimore:
U.S. District Judge Benson E. Legg sentenced Arnold Wood, age 57, of Edgewood, Maryland, to two years in prison, followed by three years of supervised release, one year of which is to be served in home detention with electronic monitoring, for preparing false individual tax returns on behalf of his clients and himself. Judge Legg also ordered Wood to pay restitution of $45,000.
The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation, Washington, D.C. Field Office.
“Arnold Wood stole millions of dollars from the United States Treasury by making up false expenses to claim on his own tax return and tax returns that he prepared for clients,” said U.S. Attorney Rod J. Rosenstein.
“Filing a tax return is one of the biggest financial transactions an American taxpayer makes each year,” stated Rebecca Sparkman, Internal Revenue Service-Criminal Investigation Special Agent in Charge, Washington DC Field Office. “The IRS-Criminal Investigation works diligently to stop fraudulent tax schemes and recover any tax losses.”
According to Wood’s plea agreement, Wood operated a tax return business known as Arnold’s Tax Service (ATS) from his home, which was initially located in Baltimore and later in Edgewood. From 2006 to 2009, Wood routinely prepared federal individual tax returns for his clients in which he fabricated or inflated deductions and credits to increase the refund due to his clients or decrease their tax liability. For example, Wood substantially overstated the amounts of charitable contributions made by many of his clients and used the same round figures (e.g., $4,000, $5,000, $9,000 or $10,000) on large numbers of returns in the same year. Wood also claimed that many of his clients had incurred expenses for which they were entitled to deductions or credits, when the clients in fact either had no such expenses or the expenses were much lower than reported by Wood. In other cases, Wood claimed that clients had suffered substantial losses from operating a farm, when in fact the clients neither owned, nor had operated, a farm.
According to the plea agreement Wood advertised ATS with flyers and business cards promising that his services would enable his clients to “keep your money where it belongs,” or to “keep more for yourself!!!” His business cards included pictures of multiple $100 bills and the slogan “Money Money Money.” As a result of this advertising and the substantial refunds that were falsely generated, the number of tax returns Wood prepared for his clients increased from approximately 240 for the tax year 2005, to over 500 in the tax years 2007 and 2008. Wood either was paid a fee by his clients or retained a portion of the electronic refund he received on behalf of the client, or sometimes both.
According to the statement of facts, almost all of the tax returns filed by Wood resulted in refunds. In contrast, the national average is that 75% to 77% of filed returns result in refunds. The average amount of refunds received by Wood’s clients in each of the tax years 2005 to 2008 was over $3,000 each. The amount of the refunds received by Wood’s clients totaled $748,295 for tax year 2005; $1.527 million for tax year 2006; $1.815 million for tax year 2007; and $1.763 million for tax year 2008. According to the plea agreement, the majority of these refund amounts were not owed to Wood’s clients, many of whom actually owed additional taxes when the fabricated items were corrected. Wood rarely discussed the completed tax returns with his clients after he filed them and in some cases, failed to even provide his clients with a copy of their filed return.
The tax loss caused by Wood’s preparation of client tax returns is between $1 million and $2.5 million.
In the same way, Wood prepared his personal tax returns for tax years 2005 through 2008, fabricating or inflating deductions and credits, substantially overstating the amounts of charitable contributions he made and claiming substantial losses from operating a farm that he neither owned, nor operated. In addition, although Wood operated ATS from his home, his reported business expenses on those tax returns included office expenses, “repairs and maintenance,” and utilities.
Wood claimed $103,849 in itemized deductions on his 2008 tax return which exceeded his and his wife’s reported income by $44,901. Wood admitted that he also substantially under-reported his income on his personal tax returns filed for 2007 and 2008 by a total of at least $105,180.40. The tax loss incurred as a result of Wood’s fraudulent preparation of his personal tax returns is at least $45,000 in additional taxes owed to the IRS for tax years 2005-08.
United States Attorney Rod J. Rosenstein commended the IRS-CI for its work in this investigation and thanked Assistant United States Attorney Jefferson M. Gray, who prosecuted the case.
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