NJ Man Admits Tax Fraud, Cost IRS Over $550K

NJ Man Admits Tax Fraud, Cost IRS Over $550K.

A Somerset man who ran a local tax preparation business pleaded guilty Thursday to knowingly filing false federal tax returns on behalf of his clients, deceit that federal prosecutors say racked up more than $550,000 in losses for the IRS.

Vito A. Pascarella, whose company offered tax services to individual filers in New Jersey and beyond, admitted in court that he intentionally submitted returns filled with bogus information.

According to prosecutors, Pascarella inflated wages, fabricated self-employment activity, and made up income and expenses tied to non-existent businesses, all in an effort to pad his clients’ refunds.

A Pattern of Deception

The fraud wasn’t a one-time incident. Over several tax seasons, Pascarella engaged in a systematic scheme, manipulating tax documents in ways that made his clients appear entitled to refunds or credits they hadn’t earned.

In many cases, he claimed that clients were small business owners when, in reality, they had no such operations.

Court filings suggest Pascarella’s operation wasn’t limited to a handful of clients. The cumulative damage to the IRS is estimated at more than $550,000.

Sentencing Scheduled for September

Pascarella is due back in court on September 15 for sentencing. He faces a maximum of three years in federal prison, along with financial penalties, mandatory restitution, and a period of supervised release following any prison term.

The final sentence will be determined by a federal judge, who is required to consider federal sentencing guidelines but has some discretion based on the facts of the case.

In a joint statement, Acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department’s Tax Division and U.S. Attorney Alina Habba for the District of New Jersey confirmed the plea deal and underscored the seriousness of the offense. 

Tax Fraud by the Numbers 

• Tax fraud costs the U.S. government billions annually. According to IRS estimates, the "tax gap" - the difference between taxes owed and taxes paid, was over $540 billion in recent years.

• Tax preparer fraud is a known risk. The IRS warns taxpayers every year about dishonest preparers who falsify information to boost refunds or earn kickbacks.

• Criminal penalties for tax fraud are serious. Convictions can lead to up to 5 years in prison, steep fines, restitution, and long-term damage to personal and professional reputations.

• IRS Criminal Investigation investigates a wide range of financial crimes, including tax fraud, identity theft, and money laundering. In 2023, the agency initiated over 1,200 tax crime cases.

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