San Angelo Tax Preparers Found Guilty of Tax Fraud

San Angelo Tax Preparers Found Guilty of $18 Million Tax Fraud

A federal jury returned a guilty verdict against three San Angelo tax preparers whose fraudulent tax returns cost the IRS roughly $18 million, announced U.S. Attorney for the Northern District of Texas Chad E. Meacham.

Hugo Cesar Granados, the 60-year-old manager of Columbia Tax Service, his adult daughter, Blanca L. Granados, his adult son, Hugo Alberto Granados, and his employee, Saul Garcia-Soto, were indicted in May 2021. Mr. Garcia-Soto pleaded guilty to assisting in the preparation and presentation of false documents on July 12, 2022. The remaining defendants elected to proceed to trial and were convicted Friday evening of conspiracy to defraud the United States and multiple counts of aiding in the preparation and presentation of false documents.

Following the reading of the verdict, all three were immediately remanded into the custody of the U.S. Marshals Service.

“Columbia Tax Service doctored clients’ tax returns to inflate clients’ refunds and line the Granados’s pockets. Such blatant fraud is an affront to all conscientious taxpayers,” said U.S. Attorney Chad Meacham. “As is their right, the Granadoses opted for a trial by jury. We are proud to have obtained a guilty verdict. I’m thankful to the IRS Criminal Investigation agents who ran this case to ground and to the members of the jury, who gave three days of their lives to bring these defendants to justice.”

“When Hugo Cesar Granados, along with his daughter and son, used their family tax return preparation business, Columbia Tax Service, to file false tax returns and make a fast buck, they underestimated the special agents of IRS Criminal Investigation,” said IRS-Criminal Investigation Special Agent in Charge Christopher J. Altemus, Jr., Dallas Field Office. “Let these guilty verdicts be a reminder to others seeking to enrich themselves illegally – IRS CI special agents will find you; they will uncover your fraudulent schemes and hold you accountable.”

At trial, prosecutors introduced evidence that the elder Mr. Granados and his co-conspirators falsified their clients’ individual income tax returns (Forms 1040) in order to inflate the clients’ tax refunds.

They routinely fabricated clients’ Schedule A, itemized deductions, and Schedule C, sole proprietorship profit and loss statements, claiming the taxpayer owned a business when no such business existed, claiming unreimbursed employee expenses such as travel and per diem, and claiming business expenses related to maintenance, utilities, supplies, insurance, and professional services that were never incurred or grossly inflated.

Testimony adduced at trial showed that Columbia Tax Service claimed more than $900,000 in income in 2015 and more than $1.3 million in income in 2016.

Mr. Garcia-Soto testified, saying that in 2016, Columbia Tax employees met with Hugo C. Granados because taxpayers were not receiving their refunds from the IRS. When questioned, the elder Mr. Granados asked the employees if they thought the company was doing something illegal. Mr. Garcia-Soto said that he, Blanca Granados, and Hugo A. Granados all replied that they thought Columbia Tax was doing something illegal. In response, Hugo C. Granados just smiled and turned back to his computer.

In a Skype chat introduced at trial, Blanca Granados wrote to a co-worker: “Fraud is ridiculous here yo . . . I swear.”

Ten taxpayer clients also testified. Two women admitted that they did not operate daycare centers as stated in their returns, but rather cared for family members for free, while a man admitted that his wife did not operate a retail business that generated $19,00 in expenses as stated on the couple’s return.

Prosecutors also introduced into evidence the company’s “tax preparation manual,” a handbook that outlined exactly how to commit fraud.

In discussing preparation of Schedule C of the tax return, the manual stated: “This is where your training and knowledge of income and deductions will make a big difference in the amount of refund the taxpayer will be obtaining.

A determination has to be made if the return needs additional income to generate the maximum earned income and other credits or if the return has a substantial amount of income (Adjusted Gross Income) and needs to come down to maximize the earned income and other credits.” In other words, the manual advised tax preparers to manipulate income to maximize refunds rather than referring to the law to determine whether an activity was a business for income tax purposes and whether expenses properly qualified as a business deduction.

Jurors ultimately concluded that the conspirators submitted numerous fraudulent tax returns. Analysts put the estimated tax loss at roughly $18 million for tax years 2013-2017.

Hugo Cesar Granados now faces up to 14 years in federal prison; Blanca Granados faces up to 14 years; Hugo Alberto Granados faces up to 17 years. Their sentencing date has not yet been set.

Saul Garcia-Soto faces up to three years and is slated to be sentenced in October.

The Internal Revenue Service – Criminal Investigations conducted the investigation. The San Angelo Division of the Northern District of Texas, including Assistant U.S. Attorneys Jeffrey Haag, Ann Haag, Amy Burch, and Paulina Jacobo, prosecuted the case.

SOURCE: USDOJ.Today