WRAL Investigates

Undercover video: Are Triangle tax preparers following the law?

Posted May 2, 2013 6:15 p.m. EDT
Updated May 3, 2013 11:35 a.m. EDT

— Six months after the WRAL Investigates team reported on a statewide tax fraud scheme involving suspected illegal immigrants, undercover video shot in April shows a Cary tax preparer agreeing to help a mother claim a tax credit for her children living in Mexico.

The tax fraud scheme is a $4 billion problem across the United States that involves suspected illegal immigrants getting billions of dollars in tax credits for children who don't live in America, or don’t even exist, according to the Treasury Inspector General for Tax Administration.

A Raleigh tax preparer, who asked not to be identified, said he lost numerous Latino clients this year after other local tax agencies agreed to help his clients get illegal refunds for children who don’t live in this country.

“They manipulate the system,” he said.

In previous years, the tax preparer took his clients’ word when they claimed dependents. However, under tougher IRS rules this year, he started asking for updated school or medical records to prove children lived here with the tax filers and not in another country.

“If you want to file with me, you need to give me the proof,” he said.

That demand cost his business. He says clients who counted on getting thousands of dollars in child tax credits left him for preparers willing to look the other way.

The WRAL Investigates team sent a Spanish-speaking staff member with a hidden camera to eight Triangle area tax agencies to pose as a mother who has children in Mexico. Seven of the agencies gave her accurate information and said her children must live with her to get the credit.

“If they are in another country, they will not give it to you,” one tax preparer said.

Not everyone followed the rules. At a tax office on Chatham Street in downtown Cary, the undercover WRAL staffer met with tax preparer Martin Cruz and told him that other agencies wouldn’t let her claim a credit for her children living in Mexico.

“I want to put them down, but when I went to others to do them, they told me it cannot be done,” the WRAL staffer.

“Of course, the children have to be with you. But if you provide help for them, there are some that put it (down),” Cruz said, before agreeing to help with her request. "Yes, you can put them down. I'll put it down and you just put that you do provide financial help on the paperwork, and that's it. No proof is needed. Then, if you are audited, you present the correspondence that you have."

The WRAL Investigates team contacted Cruz and asked about the erroneous information he gave the WRAL staffer. Cruz said he was busy at the time and must have been confused by the woman's questions about the tax credit. He admitted that dependents must live with tax filers to be claimed and that proof is needed.

Wake Forest certified public accountant Nancy Dawkins says the IRS needs to do more to combat child tax credit abuse.

“It does invite fraud,” she said. “If you're filing something with the IRS, you have to be able to prove it.”

Last year, investigators uncovered more than 1,000 tax returns linked to eight addresses in North Carolina, with refunds worth more than $5 million. Agents confiscated hundreds of refund checks, lists of Hispanic names, a box of Mexican birth certificates and tax returns sent to people linked to falsified documents.

Candida Figueroa and Cathy Cisneros pleaded guilty to the tax fraud scheme. The IRS was tipped off after the U.S. Postal Service noticed a flood of “suspicious mailings from the U.S. Treasury Department appearing to contain Treasury checks” hitting the same Charlotte mailboxes, according to court records.

This year, criminal complaints accused Eli Valle and Mardoqueo Mejia-Fajardo of providing false names to obtain post office boxes in Duplin County to receive more than $2 million in child tax refunds.

Legitimate tax preparers and filers say that when others cheat, they end up paying the price.

“It's very frustrating when you want to do the right thing and you're trying to do the right thing, and you feel like you're being punished or losing business to people that are cheating,” Dawkins said.