Return Preparer Charged in $100 Million Fraud Scheme, DOJ Says

Bronx Tax Preparer Charged With Filing Tens Of Thousands Of False Tax Returns Causing Over $100 Million In Fraudulent Tax Loss

Rafael Alvarez Is Alleged to Have Perpetrated One of the Largest Ever Tax Frauds by a Return Preparer

Monday, April 15, 2024

Damian Williams, the United States Attorney for the Southern District of New York; Thomas Fattorusso, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”); James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”); and Trevor R. Nelson, the Deputy Inspector General for Investigations for the Treasury Inspector General for Tax Administration (“TIGTA”), announced today the unsealing of an Indictment charging RAFAEL ALVAREZ, a/k/a “the Magician,” with conspiracy to defraud the United States, aiding and abetting the filing of false federal tax returns, attempting to interfere with the administration of the internal revenue laws, making false statements, and aggravated identity theft. These charges arise from ALVAREZ's alleged orchestration of a wide-ranging scheme to file tens of thousands of federal individual income tax returns that included false information designed to fraudulently reduce the individuals' tax burden and to make false statements to the IRS. ALVAREZ was arrested today and will be presented in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.

U.S. Attorney Damian Williams said: “Rafael Alvarez was allegedly so prolific in falsifying his customers' tax returns that he came to be known as 'the Magician' for his ability to make customers' tax burden disappear. But, Alvarez's sleight of hand was criminal tax fraud, a serious federal tax crime he was allegedly committing for over a decade, depriving the IRS of more than $100 million in tax revenue. Today's charges, on Tax Day, should serve as an important reminder to tax professionals that when they try to cheat the public fisc they will face grave consequences.”

IRS-CI Special Agent in Charge Thomas Fattorusso said: “While Alvarez may have been known as the 'magician,' he can't say abracadabra and make these charges disappear. This one person is charged with creating a criminal enterprise that defrauded the government of more than $100 million. The evidence points to Alvarez's alleged scheme to file tens of thousands of fraudulent tax returns, while his company, ATAX, grossed over $15 million in revenue in just three years. Today's arrest was no magical illusion, and Alvarez now faces the reality of his actions.”

FBI Assistant Director in Charge James Smith said: “Rafael Alvarez, the CEO, owner, and manager of ATAX New York, allegedly orchestrated one of the largest ever tax fraud schemes by submitting false federal tax returns that ultimately cost the IRS over $100 million in revenue while simultaneously generating $15 million for his own company. Alvarez's alleged 10-year fraudulent operation is not a magic act, but rather a deliberate slight against the integrity of our country's tax system. Today, Alvarez must pay the price for his actions — the FBI does not tolerate those who steal from the government for personal economic fortune.”

TIGTA Deputy Inspector General Trevor R. Nelson said: “The Treasury Inspector General for Tax Administration aggressively investigates tax preparers who attempt to corrupt our Nation's tax system. Our mission at TIGTA is to protect the integrity of our Nation's system of tax administration. We are committed to working with our law enforcement partners to ensure those who endeavor to corrupt Federal tax administration are prosecuted to the fullest extent of the law.”

As alleged in the Indictment unsealed in Manhattan federal court and court filings:[¹]

From at least in or about 2010, up to and including in or about 2020, RAFAEL ALVAREZ was the CEO, owner, and manager of ATAX New York, LLC, also doing business as ATAX New York -Marble Hill, ATAX Marble Hill, ATAX Marble Hill NY, and ATAX Corporation (together, “ATAX”). ATAX was a high-volume tax preparation company located in the Bronx, which prepared approximately 90,000 federal income tax returns for its customers during this period. ALVAREZ both prepared tax returns for ATAX customers and recruited, supervised, and directed other ATAX personnel who in turn prepared tax returns for customers. During this period, ALVAREZ oversaw a sweeping fraudulent scheme, whereby he and his employees submitted false information to the IRS in ATAX customers' tax returns. This false information, which included, among other things, bogus itemized tax deductions, made-up capital losses, phony business expenses, and fraudulent tax credits, served to fraudulently reduce the customers' tax liability and increase the customers' tax refunds from the IRS. In total, ALVAREZ oversaw ATAX's fraudulent submission of tax returns on behalf of customers that deprived the IRS of substantially more than $100 million in tax revenue. ALVAREZ was so consistent at falsifying ATAX customer tax returns that he became known to ATAX's customers as “the Magician.” Additionally, as part of ALVAREZ's unlawful operation of ATAX, he and an ATAX employee made false statements to an IRS Revenue Agent. ALVAREZ's operation of ATAX helped the company generate at least approximately $15 million in gross revenues over the period of in or about 2016 to in or about 2019.

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RAFAEL ALVAREZ, 60, of Cortlandt Manor, New York, is charged with one count of conspiracy to defraud the United States and making false statements, each of which carries a maximum sentence of five years in prison. He is also charged with four counts of aiding and assisting preparation of false and fraudulent U.S. individual income tax returns and attempting to interfere with the administration of the internal revenue laws, each of which carries a maximum sentence of three years in prison. He is further charged with aggravated identity theft, which carries a mandatory minimum sentence of two years in prison.

The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Williams praised the investigative work of the IRS-CI, FBI, and TIGTA.

This case is being handled by the Office's Illicit Finance and Money Laundering Unit. Assistant U.S. Attorneys David R. Felton and Samuel Raymond are in charge of the prosecution.

The allegations in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.