ARIZONA NEWS

Arizona man pleads guilty in $60M false tax return scheme

May 21, 2024, 7:58 AM

Arizona man pleads guilty in false tax return scheme...

An Arizona man pleaded guilty on Friday, May 17, 2024, to two counts of helping people file false tax returns as part of a scheme where they used fake trust accounts to hide income and pay less in taxes. (Pexels File Photo)

(Pexels File Photo)

PHOENIX — An Arizona man pleaded guilty on Friday to two counts of helping people file false tax returns as part of a scheme where they used fake trust accounts to hide income and pay less in taxes.

From 2017 to 2023, Kent Ellsworth ran tax preparation business Ellsworth Stauffer P.C. During that time, he was involved in a scheme to cheat the IRS by promoting and selling a fake tax shelter, according to the U.S. Department of Justice.

He prepared over 500 false tax returns for about 60 clients across the country, helping them hide income from the IRS and avoid paying taxes.

The scheme fraudulently concealed over $60 million in income, leading to a tax loss of about $17 million from the IRS, prosecutors said.

The how’s and the why’s: A false tax return scheme unraveled

Ellsworth prepared fake tax returns to support the tax shelter scam. His clients, mostly successfully business owners, were told to transfer almost all of their income to fake trusts and a so-called “private family foundation” to make it appear as if they didn’t own the income.

However, the trusts and foundation were just bank accounts controlled by the clients, prosecutors said.

To carry out the scheme, Ellsworth learned how to use fraudulent methods to prepare tax returns.

He reported all income assigned to fake trusts as trust’s income and deducted expenses paid by the trust, including clients’ personal living cost. Ellsworth was paid fees for preparing these returns by clients involved in the tax shelter.

What’s next for Ellsworth in the false tax returns case?

His sentencing is scheduled for Aug. 14.

Ellsworth faces a maximum penalty of three years in prison for each count, as well as a maximum fine of $250,000 and the costs of prosecution for each count.

IRS Criminal Investigations is investigating the case.

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Arizona man pleads guilty in $60M false tax return scheme