Latest Legal News from the Criminal Courts of Los Angeles, California and the U.S.

August 06, 2009

SALINAS RETURN PREPARER PLEADS GUILTY TO TAX FRAUD

Failed to report $1,163,425 in taxable income on behalf of clients

SAN JOSE, Calif. – Lydia Hernandez pleaded guilty in federal court yesterday to tax evasion and aiding and assisting in the preparation of false tax returns, United States Attorney Joseph P. Russoniello and Special Agent in Charge, IRS Criminal Investigation, Scott O’Briant announced.

In pleading guilty, Hernandez admitted that she was in the business of preparing tax returns under the name of Lydia Hernandez Tax Services in Salinas, Calif. She prepared 39 income tax returns on behalf of 13 clients for the 2002 through 2005 tax years. She prepared false returns in order to reduce the taxable income for those clients and obtain a bigger refund for them than they were entitled to receive. For some of the clients with businesses, Hernandez filed false Schedule C’s, deducting items such as gifts, dry cleaning, cell phone expenses, gym fees and union dues, although she knew these were not deductible items for these clients. Hernandez also falsified the amount of deductions for state and local taxes and filed false depreciation and mileage deductions on behalf of her clients. The total tax loss from the false and inflated deductions did not exceed $256,000. Hernandez also admitted that, for the 2004 tax year, she under-reported her business income by $51,129 on her individual income tax return.

Hernandez, of Salinas, was indicted by a federal Grand Jury on Jan. 16, 2008. She was charged with three counts of tax evasion and 39 counts of willfully preparing false and fraudulent U.S. Individual Income Tax Returns. Under the plea agreement, Hernandez pled guilty to one count of tax evasion and one count of willfully preparing false and fraudulent tax returns.

The sentencing of Hernandez is scheduled for November 2 before Judge Ronald M. Whyte in San Jose. The maximum statutory penalty for each count of aiding and assisting in the preparation of a false tax return in violation of 26 U.S.C. § 7206(2) is three years imprisonment and a fine of $100,000. The maximum statutory penalty for tax evasion, in violation of 26 U.S.C. § 7201 is five years in prison and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Jeffrey Schenk and Eumi Choi are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Jeanne Carstensen and Susan Kreider. The prosecution is the result of an investigation by the Internal Revenue Service Criminal Investigation.

Further Information:

Case #: CR-08-00020

A copy of this press release may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can.

Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.

Judges’ calendars with schedules for upcoming court hearings can be viewed on the court’s website at www.cand.uscourts.gov.

All press inquiries to the U.S. Attorney’s Office should be directed to Jack Gillund at (415) 436-6599 or by email at Jack.Gillund@usdoj.gov.

This site does not contain all press releases or court filings and is not an official record of proceedings. Please contact the Clerk of Courts for the United States District Court for official copies of documents and public information.

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CALIFORNIA CRIMINAL DEFENSE LAWYER

JOSEPH SHEMARIA

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Latest Legal News from the Criminal Courts of Los Angeles, California and the U.S.