Magic. The power of influencing the course of events by using mysterious forces. Someone on stage with a wand that can apparently pull a rabbit of its hat…or an accountant that can make numbers disappear on a tax return. Both use deception to manipulate people. Rafael Alvarez became known as ‘The Magician’ by his customers for his supposed ability to make their tax burden disappear. But there was no magic to what Alvarez was doing. Magic and fraud share the ability to create illusions that are convincing, but ultimately false. Alvarez was falsifying tens of thousands of tax returns and, in the process, depriving the Internal Revenue Service of $145 million in tax revenue – a scheme that became one of the largest tax frauds in the history of the United States Department of Justice.
From 2010 to 2020, Alvarez had prepared approximately 90,000 federal income tax returns for his customers. During this period, Alvarez oversaw a sweeping fraudulent scheme, whereby he and his employees submitted false information to the IRS which included bogus itemized tax deductions, made-up capital losses, phony business expenses, and fraudulent tax credits – all in order to get his clients higher refunds. It’s magic.
To execute his scheme Alvarez had recruited employees who did not have legal status in the country. In one instance, Alvarez recruited an undocumented employee from a supermarket and instructed that person to impersonate a tax preparer at his company so that they could fraudulently use the preparer’s tax identification number and file false returns.
On December 17, 2024, Alvarez was found guilty of income tax fraud. As part of the guilty plea, Alvarez agreed to pay the IRS $145 million in restitution and forfeit over $11.84 million in fraudulent proceeds he received from his scheme.
Shout out to the Internal Revenue Service in this case.
Today’s Fraud of The Day is based on article “Tax Preparer Known as ‘the Magician’ Bilked I.R.S. Out of $145 Million” published by The New York Times on December 17, 2024.
A tax preparer in the Bronx spent decades operating a business where he filed returns for thousands of clients, often getting them big refunds. Customers called him “the magician” because it seemed he could make their tax burdens disappear.
But federal prosecutors said that many of the thousands of returns he had filed were part of a “sweeping fraudulent scheme” that used bogus information to bilk the I.R.S. out of $145 million. It was one of the largest frauds committed by a tax preparer that the Department of Justice had encountered in its history, prosecutors said.
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