Five tax preparers sentenced in federal case involving fabricated business expenses, fraudulent refunds and millions of dollars in tax losses.
TEXAS – October 15, 2026 (STL.News) A Texas tax return preparer was sentenced to 14 months in federal prison for participating in a fraudulent tax-preparation scheme that cost the federal government millions of dollars, according to the U.S. Department of Justice.
Sivagami Chidambaram was sentenced October 7, 2026, for her role in a conspiracy involving a tax preparation business owner and several employees who submitted federal income tax returns containing fabricated business expenses.
The Justice Department announced the sentencing on October 14, confirming that Chidambaram was the fifth defendant sentenced in connection with the operation. Four defendants received federal prison sentences, while a fifth was sentenced to home confinement.
Federal prosecutors said the scheme involved deliberately reporting expenses that taxpayers were not legally entitled to deduct. The false entries reduced reported tax liabilities and generated refunds clients were not entitled to.
Chidambaram admitted that her conduct caused the United States a tax loss exceeding $250,000 but less than $550,000.
The case shows how fraudulent tax preparation practices can extend beyond individual returns into coordinated criminal operations involving business owners, employees, and numerous taxpayer accounts.
Five Defendants Sentenced in Texas Tax Fraud Case
The investigation resulted in sentences for five individuals who participated in different aspects of the fraudulent return preparation operation.
Mathews Chacko, the tax preparation business owner, received the longest sentence after pleading guilty to conspiracy to defraud the Internal Revenue Service.
The judge sentenced Chacko to 50 months in federal prison on July 8, 2026. He admitted responsibility for tax losses exceeding $3.5 million but less than $9.5 million.
Three other individuals received the following sentences:
- Anish Pillai: 26 months in federal prison after pleading guilty to aiding and assisting the filing of a false tax return.
- Subhala Suresh: 18 months in federal prison after pleading guilty to aiding and assisting the filing of a false tax return.
- Sivagami Chidambaram: 14 months in federal prison for her role in the conspiracy.
- Mou Kundu: 18 months of home confinement after pleading guilty to aiding and assisting the filing of a false tax return.
The July sentencing announcement also disclosed additional financial losses associated with two of the defendants.
Pillai admitted causing approximately $1.5 million to $3.5 million in tax losses, while Suresh admitted causing approximately $250,000 to $550,000 in losses.
These figures represent losses attributed to individual defendants and should not simply be added together to calculate the total loss from the conspiracy. The defendants participated in the same operation, and the publicly disclosed loss ranges do not establish whether their attributed amounts overlap.
The Justice Department described the overall cost to the federal government as millions of dollars.
How the Fraudulent Tax Return Scheme Operated
Federal prosecutors said the broader operation ran from about January 2019 through October 2022.
Chidambaram participated for a shorter period, beginning around February 2020 and continuing through October 2022.
The defendants worked within a tax preparation operation that prepared federal income tax returns for clients.
Rather than accurately reporting taxpayers’ financial information, the preparers included business expenses that were false or otherwise not legitimately claimable.
Business expense deductions can reduce taxable income when they meet applicable federal tax requirements. However, taxpayers generally must have qualifying business activities and legitimate expenses to claim such deductions.
Federal investigators determined that the defendants used fabricated expenses to reduce reported taxes and produce refunds that were not legally justified.
The scheme was particularly significant because the defendants incorporated the fraudulent information into returns prepared for other taxpayers.
In some cases, clients were unaware that their returns contained false information. In other instances, prosecutors said, preparers knowingly communicated with clients about inaccurate entries.
The Justice Department’s July announcement said Chacko and his associates sometimes inserted fraudulent business expenses without telling their customers.
When clients questioned the entries, the preparers sometimes supplied false explanations intended to justify the deductions.
In other cases, prosecutors said the preparers emailed clients about submitting false information to the IRS.
Those details demonstrate that the fraudulent filings were not limited to accidental errors or misunderstandings of complicated tax rules.
The defendants’ guilty pleas established criminal responsibility for the offenses they admitted to.
Work-From-Home Expenses Used to Inflate Refunds
One of the investigation’s more revealing aspects involved the use of supposed work-from-home expenses.
According to the Justice Department, Chidambaram sometimes questioned clients about expenses associated with working from home, despite knowing that the claimed expenses were not allowable on their particular returns.
The resulting entries reduced taxable income and helped produce larger refunds.
Federal prosecutors also identified instances in which Chidambaram entered false business expenses before speaking with the affected clients.
In other situations, she included fraudulent items to satisfy customers who demanded larger refunds.
These practices show how refund expectations can drive fraudulent tax preparation.
A taxpayer who receives a refund substantially larger than expected may view the result favorably without recognizing that the return contains deductions that cannot be legally supported.
However, a larger refund does not necessarily mean a preparer identified legitimate tax savings.
The distinction between lawful tax planning and fraudulent return preparation depends on whether the reported information is accurate and permitted under federal tax law.
Importantly, working from home does not automatically qualify an individual for a federal home-office deduction.
Eligibility depends on the taxpayer’s circumstances, the nature of the work, and the applicable tax rules.
For example, ordinary employees generally cannot deduct unreimbursed home-office expenses on their federal individual income tax returns for tax year 2026, while qualifying self-employed individuals may be eligible for certain deductions.
The central issue in the Texas prosecution was not that taxpayers worked from home. Instead, the preparers knowingly reported expenses that could not legitimately be claimed.
Business Owner Received Longest Prison Sentence
Chacko’s 50-month sentence is the longest prison term announced in the case.
His guilty plea to conspiracy to defraud the IRS reflected his participation in the broader fraudulent tax preparation operation.
The admitted tax loss attributed to Chacko exceeded $3.5 million and was below $9.5 million.
That range is considerably larger than the amounts individually attributed to Chidambaram and Suresh.
The July 8 sentencing announcement also identified Chacko’s involvement in a scheme that inserted false business expenses into client returns, sometimes without the clients’ knowledge.
The Justice Department reported that the defendants occasionally provided misleading explanations when customers questioned those entries.
A business owner’s involvement matters because tax preparation firms occupy a position of trust.
Customers often rely on professional preparers to determine which deductions, credits, and expenses they can legally report.
While taxpayers remain responsible for the accuracy of their returns, preparers who knowingly submit fraudulent information can face criminal prosecution.
The Texas case demonstrates that federal enforcement can extend beyond the person who signs or submits a return to others involved in preparing or facilitating false filings.
Why Fraudulent Deductions Create Taxpayer Risks
The consequences of preparing fraudulent returns can extend beyond the criminal sentences imposed on preparers.
A taxpayer whose return includes improper deductions may face additional taxes, interest, and potential penalties if the IRS later determines the filing was inaccurate.
The precise consequences depend on the taxpayer’s circumstances, including whether the taxpayer knew about the false information.
An individual who unknowingly relied on a dishonest preparer may be in a different position from someone who knowingly supplied false information or encouraged the submission of fraudulent deductions.
Nevertheless, the IRS generally holds taxpayers responsible for reviewing their returns before signing and filing them.
That responsibility makes it important for customers to understand the income, deductions and credits appearing on their federal tax documents.
A preparer who promises an unusually large refund without reviewing supporting records should raise concerns.
Similarly, taxpayers should be cautious when a preparer reports business losses or expenses for activities the taxpayer does not operate or expenses the taxpayer did not incur.
The Texas investigation illustrates why these warning signs matter.
Some of the fraudulent deductions were reportedly inserted without clients’ knowledge, meaning the returns could have appeared legitimate to taxpayers who trusted the preparation business.
Other entries were added in response to demands for higher refunds, creating a different situation in which the desire for a larger payment contributed to the improper filing.
IRS Criminal Investigation Led Federal Probe
IRS Criminal Investigation conducted the investigation that resulted in the five defendants’ guilty pleas and sentences.
IRS Criminal Investigation is the federal law enforcement division responsible for investigating potential criminal violations of tax laws and certain related financial crimes.
Its work differs from routine civil tax examinations.
While civil examinations generally focus on determining whether taxpayers have accurately reported their tax obligations, criminal investigations examine conduct that may warrant prosecution.
In this case, federal prosecutors pursued criminal charges for deliberately preparing and filing false returns.
Acting Assistant Deputy Chief Marissa R. Brodney and Trial Attorney Michael L. Jones of the Justice Department’s Criminal Division Tax Section prosecuted the case.
Assistant Attorney General Colin McDonald of the National Fraud Enforcement Division and U.S. Attorney Justin Simmons of the Western District of Texas announced Chidambaram’s sentencing.
The investigation resulted in separate sentences reflecting the defendants’ admitted offenses and individual involvement in the operation.
The Justice Department’s announcements did not provide a single final restitution total for all five defendants.
Federal Prosecutors Emphasize Tax System Integrity
The July 8 announcement included statements from senior federal prosecutors emphasizing the importance of maintaining public confidence in the federal tax system.
Assistant Attorney General Colin M. McDonald said criminal tax violations undermine public trust and described the National Fraud Enforcement Division’s efforts to investigate and prosecute those offenses.
U.S. Attorney Justin R. Simmons also emphasized that tax fraud imposes costs on the public rather than merely affecting a government agency.
The financial impact of fraudulent refunds ultimately concerns money collected and administered through the federal tax system.
When false deductions generate refunds taxpayers are not entitled to, the government incurs financial losses.
Federal authorities treat deliberate schemes involving fabricated expenses differently from legitimate disagreements about tax treatment or unintentional filing mistakes.
The Texas prosecution involved guilty pleas, admitted fraudulent conduct, and completed criminal sentences.
It therefore represents an established criminal case, not an investigation involving defendants who have merely been accused of wrongdoing.
Case Comes Amid Broader Federal Tax Fraud Enforcement
The Justice Department released the October 14 announcement as part of a broader national effort targeting tax fraud.
Federal authorities announced the creation of the National Fraud Enforcement Division on April 7, 2026.
The division focuses on investigating and prosecuting fraud involving federal funds and programs, including criminal tax violations.
On October 14, the Justice Department also publicized a nationwide tax enforcement initiative involving federal prosecutors, the IRS, and IRS Criminal Investigation.
The initiative included cases involving false returns, improper refund claims, and other forms of tax-related fraud.
The Texas sentencing was among the cases highlighted during that period.
Although the defendants’ conduct occurred primarily between 2019 and 2022, the final sentencing announcement came during the expanded enforcement effort in October 2026.
The timing shows that criminal tax investigations can continue for years after the underlying returns are filed.
Investigators must identify the relevant financial transactions, determine the nature of the false information, and develop evidence strong enough to support criminal charges.
Federal prosecutors must then resolve the cases through guilty pleas or trials before courts impose sentences.
The Texas case has now reached sentencing for all five defendants identified in the Justice Department’s announcements.
How Taxpayers Can Protect Themselves
The case offers several practical lessons for individuals and businesses that hire professional tax preparers.
Taxpayers should review their completed returns before authorizing submission to the IRS.
Particular attention should be given to business income, expenses, losses, deductions, and credits.
Individuals who do not operate businesses should question why a preparer has reported business-related expenses on their returns.
Taxpayers should also retain supporting documentation for legitimate deductions and ask for explanations when unfamiliar items appear.
A professional preparer should be able to explain the legal basis for deductions and identify the records supporting them.
The IRS also advises taxpayers to use preparers who have a valid Preparer Tax Identification Number when required and to avoid individuals who refuse to sign returns they prepare for compensation.
Taxpayers should be cautious about preparers who base their fees on a percentage of the expected refund or guarantee unusually large refunds before reviewing financial information.
Those practices do not automatically establish fraud, but they can be warning signs.
Customers should also obtain copies of their completed returns and verify that refund information, including bank account details, is accurate.
Anyone who discovers potentially false information on a previously filed return should consider obtaining qualified tax advice about the appropriate corrective steps.
The Texas prosecution shows why careful review matters even when someone presents themselves as a tax professional.
Five Sentences Conclude Major Texas Tax Fraud Prosecution
The sentencing of Sivagami Chidambaram closes the publicly announced sentencing proceedings involving the five defendants.
The operation resulted in four federal prison sentences and one sentence of home confinement.
Chacko received the longest prison term at 50 months, followed by Pillai at 26 months, Suresh at 18 months, and Chidambaram at 14 months.
Kundu received 18 months of home confinement.
Federal prosecutors established that the defendants helped file returns containing false information that improperly reduced tax liabilities and generated refunds.
The financial losses attributed to the participants ranged from hundreds of thousands of dollars to several million dollars.
Beyond the individual sentences, the case underscores paid tax preparers’ legal obligations and the financial risks created when fraudulent deductions are inserted into federal tax returns.
For taxpayers, the central lesson is that an unexpectedly large refund should be supported by accurate financial information and legitimate deductions.
For tax preparation businesses, the prosecution shows that knowingly preparing or filing false returns can lead to federal criminal convictions and substantial prison sentences.
The Justice Department’s October 14 announcement marks the latest development in a case that began with fraudulent filings years earlier and ultimately resulted in criminal sentences for five participants.
