HOUSTON It s no surprise the weeks before the April 15 filing deadline are the busiest for tax preparation offices.
But busy is an understatement at My Neighborhood Tax Service in the 2100 block of North Main St. on Houston s north side.
Drive by any morning or afternoon, and you d likely see a line out the door a line so long, you might think they were giving something away.
That s what they re making it look like, Hey here s a stack of cash it s yours, said client Kenny Howell.
What kind of cash? Word on the street was it was stimulus money from the Obama administration to help the homeless and disabled up to $1,600 worth.
Boom, it sounds good, so you re going to jump on it, said Howell, who stays at a long-term shelter for the homeless.
And when Kenny Howell and other homeless went in, they said the process was quick and easy: Show your ID and Social Security card, wait about 10 minutes, and just sign here, sign here, sign here, according to Rick Gardner.
But Gardner, who is also homeless, said what you signed was an electronic keypad like the type you find at retail stores to electronically sign a credit card receipt. What you still didn t see was any paperwork.
That s what struck me as odd, because you could at least tell me what I m signing, Gardner said.
Turns out, it was no stimulus package at all. The documents they were finally handed were an income tax return.
And that was a big problem. Why?
It s all a bunch of lies, said Howell.
Lies, because the homeless clients 11 News interviewed said they didn t make any income. Yet on their tax returns, My Neighborhood Tax Service listed them earning wages as housekeepers and janitors.
11 News: Did you do janitorial work last year?
Gardner: I ve never had a janitorial service in my life.
And some of the homeless noticed something else going on.
11 News: Did they ever ask for documentation?
Howell : None, none at all.
Sound hard to believe? The 11 News Defenders sent in a homeless lady outfitted with undercover recording gear. And right from the top, she makes it clear to her tax preparer that I haven t worked in two years.
But that didn t seem to matter, when My Neighborhood Tax Service came back a few minutes later.
Tax office: Your return is $1,266.
Homeless client: How can that be?
Tax office: Um, uh, for housekeeping.
Homeless client: This isn t going to get me in trouble or anything?
Tax office: Nuh uh (no), because it was cash, you know, you could have done housekeeping at your friends, family.
That s right, making up bogus income to get a real tax refund. And that s not at all that was phony.My Neighborhood Tax Service also claimed an education tax credit for its homeless clients, meaning they paid tuition to go to school.
But there was another problem.
I haven t been a student since I was in high school, Gardner said.
No kind of schooling, no GED, nothing, added Howell.
In the end, the bogus claims added up to one thing a tax refund around $1,600 for each homeless client, of which My Neighborhood Tax Service took a gouging $440 in fees from each return.
They are stealing from the government, said Certified Public Accountant Ted Feher, a longtime member of the Houston CPA Society.
I mean they made it up, it s clear they made it up, said Feher, adding that it spells one thing tax fraud.
I don t think there s language strong enough to express how bad that is, Feher chuckled.
And the CPA noticed something else---rather suspicious similarities in the tax returns 11 News obtained. The wages listed were all around $6,000. They also listed business incomes all around $300, and the refunds were nearly identical around $1,690.
All just a coincidence?
No, no, no, this was calculated, it can t be that coincidental, said Feher.
You have almost the perfect crime, said CPA Bob Martin.
Martin said the numbers claimed on those tax returns reveal someone knew what they were doing.
When you get around $5,000 or $6,000, you get the best advantage, or the highest advantage of all the credits, Martin said. They managed to find the sweet spot where they would get the most refund.
But that sweet spot seemed to be a sore spot when 11 News tried to talk to My Neighborhood Tax Service about it. We were told to turn off our cameras and leave.
We later caught up with an employee, who identified himself as Edward Diaz.
11 News: How do you explain these tax returns here? These people say they haven t worked, and they re down as housekeepers and janitors.
Diaz: OK, that s why we try and investigate out here sir.
11 News: You re going to do an investigation?
11 News: You had no idea this was going on?
Diaz: No sir.
11 News: And you expect us to believe that?
11 News: And you expect our viewers to believe that?
Afterward,a law firm representing My Neighborhood Tax Office sent 11 News a letter blaming a single employee for the erroneous tax returns, and saying it immediately fired that worker. Attorney Juan Vasquez, Jr. also said his client has reported the issue to the IRS and is working to correct the problem, which includes sending a letter to clients offering to file amended returns free of charge. Additionally, Vasquez said that each company employee undergoes three weeks of training prior to filing any tax return, and at no time during the training did management instruct its workers to perform inappropriate actions.
But 11 News talked to the terminated worker in question, who told a different story.
That was the way management told us to do it, Rios said.
She said she was simply following marching orders from the top.
I just did what I was told to do and they showed me how to do it their way, she said.
Rios said it was big business, estimating more than 1,000 tax returns were filed at the North Main Street office where she worked.
In the end, it s not just the government getting used.
Exploitation big time, said homeless advocate Cliff Macklin. Exploiting individuals who really are in dire need.
Macklin said the phony tax returns create a contradiction for those homeless people who already get government disability checks.
You re too disabled to work, but you ve got a federal document stating that you ve worked for that year, Macklin said.
Macklin said if, or when, Uncle Sam spots it, the federal government may cut off disability benefits.
You re screwed, Macklin said.
An IRS spokesperson would not comment on the 11 News Defenders investigation. The agency sent us the following statement:
Strict privacy laws protect every individual andbusiness entity from unauthorized disclosures of details of their relationship with the IRS. To that end,the IRS can neither confirm nor deny investigations in progress, completed in the past nor contemplated.Unless there is public record, such as court records or documents filed in the public domain, we cannot discusstax matters publicly.