Tax Return Preparers Beware - IRS Agents Posed as Clients.
Mr. Sergio Gardea has been an accountant and tax return preparer for close to 20 years. The IRS computers determined that a high percentage of the tax returns prepared by Mr. Gardea for his clients claimed the Child Care Tax Credit and/or the Additional Child Care Tax Credit.
The IRS decided to commence a criminal investigation against Mr. Gardea. The IRS caused an agent to visit Mr. Gardea's office in Akron, Ohio posing as a new client. The agent told Mr. Gardea that the children he sent money to lived in Mexico. The conversation was secretly recorded. Mr. Gardea told the agent that in order to claim the children as dependents he had to provide over 50% of their support. Mr. Gardea refused to prepare the form for the Child Care Tax Credit because the children did not live with the taxpayer in the United States.
Criminal Investigation Special Agents Visited Tax Preparer's Clients.
The Special Agents began visiting and calling clients of Mr. Gardea. Mr. Gardea's office prepares over 400 tax returns each year. The agents located approximately 15 taxpayers, who had their tax returns prepared at Mr. Gardea's offices, who were not United States citizens. These particular taxpayers admitted that they took the Child Care Tax Credit on their individual income tax returns but, the children that they claimed to support did not live with them in the United States. When questioned by the IRS special agents, each of the 15 taxpayers represented that they did not know that to properly claim the Child Care Tax Credit the children had to live with them in the United States.
The special agents also asked each of the 15 taxpayers if Mr. Gardea had explained the rules and requirements for the Child Care Tax Credit to them. Each of the 15 taxpayers said: "No".
The United States indicted Mr. Gardea on 30 separate counts of filing false income tax returns for the 15 individual taxpayers.
IRS Fought Mr. Gardea's Request for Discovery of the Prior Tax Returns of the Government's Witnesses.
Mr. Gardea retained David M. Garvin from Miami, Florida to represent him. The defense requested the attorneys representing the IRS to provide the prior tax returns of the 15 taxpayers that the United States intended to call as witnesses at trial. The lawyers for the United States refused. Mr. Gardea filed a motion with the Court requesting the Court to order the United States to produce the prior tax returns of their 15 taxpayer witnesses because Mr. Gardea had information that the vast majority of these witnesses had previously filed income tax returns claiming the Child Care Tax Credit prior to becoming clients of Mr. Gardea. Ultimately, the Court granted Mr. Gardea's motion.
Government called several agents to testify at the trial.
During the trial the Government called several agents as witnesses. One agent testified as an expert regarding the Child Care Tax Credit. He stated the requirements to properly claim the credit. Another agent testified as an expert on IRS records. She testified regarding 30 tax returns prepared by Mr. Gardea and filed on behalf of the government's 15 individual witnesses. The government also called the undercover agent who secretly recorded his conversation with Mr. Gardea while he pretended to be a new client. Finally, the government called the special agent who was the case agent on the file. He testified as a summary witness and with regard to his investigation.
Government called the individual taxpayers to testify against Mr. Gardea.
During the trial the Government called each of individual taxpayers it had subpoenaed. Prior to testifying, each of the witnesses met with the Government's lawyers to discuss their testimony. Virtually none of the witnesses spoke with Mr. Gardea or his lawyer concerning the testimony they would give at trial.
Government Witnesses Could Not Stand Up to Cross Examination.
Each day during the 2 week trial the IRS put its witnesses on the stand to testify. Each day Mr. Gardea was able to show through cross examination facts and inconsistencies that reduced any negative impact from the witness's testimony and, in many cases, resulted in the overall impact of the testimony being positive to Mr. Gardea's position that he was, in fact, innocent of all charges.
The Judge was Firm, Intelligent and Fair.
The case of Mr. Gardea was assigned to Federal District Court Judge John Adams. Judge Adams has a reputation of being firm, intelligent and fair. He lived up to his excellent reputation. Each motion and objection made immediately prior to and/or during the trial was met with a swift, firm, and well reasoned ruling. The Court insured that Mr. Gardea received a fair trial.
The Pressure of a Federal Criminal Tax Trial is Tremendous.
Throughout the investigation that lasted aproximately 2 years, Mr. Gardea was under the constant stress of knowing that his career would end if he did not prevail. Mr. Gardea conducted research almost daily to learn how to best defend himself. The amount of stress affected his sleep and his work. When the trial date arrived Mr. Gardea knew that he had done everything that he could have done to properly present his case. Nonetheless, the process of selecting 12 jurors that you do not know to decide your case and your fate increased the amount of stress Mr. Gardea was under. As the trial proceeded the stress level continued to go up because the jury's verdict was inching closer. While the jury deliberated the stress reached its highest point. Having the support of family members and close friends helped Mr. Gardea but, the stress was tremendous. When the jury annouced that it had reached its verdict Mr. Gardea said that he could literally feel his heart pounding. I appreciated his statement, I was sitting next to him and felt the same.
Listening to the Jury Verdict for Each of the 21 Counts Being Read Aloud was Surreal.
The forperson handed 21 pages representing the jury's 21 verdicts on the 21 counts that remained following the government dismissing 9 counts during the trial. The Court reviewed the forms and authorized the clerk to publish the verdicts by reading them aloud. The clerk read aloud: "In the case of United States v. Sergio Gardea, * * * as to count one we the jury find the defendant NOT GUILTY." This was followed by a similar announcement for each of the other counts. Each time there was tension followed by joy. I glanced over at Mr. Gardea sitting next to me. I believe I could see two years of stress and worry being removed from his mind. His family and friends were in the courtroom sitting behind him. The setting was surreal.
It was a Great Day for Justice and All Tax Return Preparers.
The jury and the Court insured that justice was served. But it was also a great day for all tax preparers. Mr. Gardea obeyed the mandates of Circular 230 and relied upon the answers his clients provided to his questions during the course of preparing their income tax returns. Five years later, the IRS brought a criminal trial largely based upon the assertions of the taxpayer clients as to what they were asked and what they said to their tax return preparer while their tax return was being prepared. If this type of evidence would have been sufficient to convict Mr. Gardea, virtually every tax return preparer would have been at risk. In this respect, Mr. Gardea's victory in court was a victory for all tax return preparers.