On April 23, 2019, in the Eastern District of California, special agents of the Treasury Inspector General for Tax Administration (TIGTA) arrested Internal Revenue Service (IRS) employee Deena Vang Lee for her role in a scheme to defraud the IRS and the United States. Lee was previously charged, on April 11, 2019, with multiple counts each of wire fraud, aggravated identity theft, making and subscribing a false and fraudulent tax return, and aiding and assisting in the preparation of a false and fraudulent return.

According to the 18-count indictment, at certain times relevant to the charges, Lee was employed at the IRS Fresno Service Center. From about February 2012 to about February 2016, Lee prepared and electronically filed fraudulent Federal income tax returns for friends, family members, and acquaintances. She charged many of her customers a tax preparation fee of between $100 and $400 for her services.

Lee allegedly included false information on forms that she prepared and submitted for her customers to claim the Child and Dependent Care Expenses tax credit. The IRS requires a form when a taxpayer claims a tax credit for expenses paid for the care of a qualifying individual. The form must include the care provider’s name, address, social security number, and amount paid to the provider. Lee fabricated the means of identification of multiple individuals and listed them (the “False Providers”) when preparing the forms. She also fabricated childcare expenses purportedly paid to the alleged providers, when in actuality, the False Providers did not provide childcare to the customers, nor did the customers pay the False Providers for childcare.

It is further alleged that Lee falsely inflated and/or fabricated expenses on forms she submitted for her customers to claim the American Opportunity tax credit. For those customers for whom Lee sought the credit, she typically falsely claimed the maximum adjusted qualified education expenses allowed per student. Lee also listed false dependents on her customers’ returns.

In certain cases, Lee’s actions resulted in the IRS’s either issuing excessive tax refunds via direct deposit into bank accounts controlled by the customers or Lee, or not collecting the correct amount of tax owed by the customers. Lee’s actions resulted in a tax loss to the IRS of more than $20,000.

In addition, Lee prepared and submitted, under penalties of perjury, fraudulent Federal income tax returns on her own behalf for Tax Years 2013 through 2015, which did not include income she received from customers for her tax preparation services.

If convicted, Lee could face a maximum statutory penalty of up to 20 years’ imprisonment and a $250,000 fine.

Source:  The facts in this case narrative come from the following publicly available documents: E.D. Cal. Indict. filed Apr. 11, 2019; E.D. Cal. Executed Arrest Warrant filed Apr. 23, 2019.