Source: US FBI
Rafael Alvarez Perpetrated and Oversaw One of the Largest Ever Tax Frauds by a Return Preparer
Edward Y. Kim, the Acting United States Attorney for the Southern District of New York, announced today the guilty plea of RAFAEL ALVAREZ, a/k/a “the Magician,” to a two-count Superseding Information charging ALVAREZ with one count of conspiracy to defraud the U.S. and steal government funds and one count of aiding and assisting in the preparation of a false and fraudulent U.S. individual income tax return. The charges arise from ALVAREZ’s orchestration of a decade-long, $145 million tax fraud scheme to file tens of thousands of federal individual income tax returns that included false information designed to fraudulently reduce the individuals’ tax burden. As part of today’s guilty plea, Alvarez agreed to pay the Internal Revenue Service (“IRS”) $145 million in restitution and forfeit over $11.84 million in fraudulent proceeds he received from his criminal conduct. ALVAREZ pled guilty today before U.S. District Judge J. Paul Oetken.
Acting U.S. Attorney Edward Y. Kim said: “Rafael Alvarez became known as ‘the Magician’ by his customers for his supposed ability to make their tax burden disappear. But, as today’s guilty plea shows, there was no magic to what Alvarez was doing – he was committing a serious federal crime by falsifying tens of thousands of tax returns and, in the process, depriving the IRS of $145 million in tax revenue. Today’s guilty plea, in one of the largest ever tax frauds by a return preparer, should serve as an important reminder to tax professionals that this Office will vigorously investigate and prosecute tax offenses.”
As alleged in the Indictment and Superseding Information and statements made in public filings and court proceedings:
From at least in or about 2010, up to and including in or about 2020, ALVAREZ was the CEO, owner, and manager of ATAX New York, LLC, also doing business as ATAX New York-Marble Hill, ATAX Marble Hill, ATAX Marble Hill NY, and ATAX Corporation (together, “ATAX”). ATAX was a high-volume tax preparation company located in the Bronx, New York, which prepared approximately 90,000 federal income tax returns for its customers during this period. ALVAREZ both prepared tax returns for ATAX customers and recruited, supervised, and directed other ATAX personnel who in turn prepared tax returns for customers. During this period, ALVAREZ oversaw a sweeping fraudulent scheme, whereby he and his employees submitted false information to the IRS in ATAX customers’ tax returns. This false information, which included, among other things, bogus itemized tax deductions, made-up capital losses, phony business expenses, and fraudulent tax credits, served to fraudulently reduce the customers’ tax liability and increase the customers’ tax refunds from the IRS.
In total, ALVAREZ oversaw ATAX’s fraudulent submission of tax returns on behalf of customers that deprived the IRS of $145 million in tax revenue. ALVAREZ was so consistent at falsifying ATAX customer tax returns that he became known to ATAX’s customers as “the Magician.” Additionally, ALVAREZ agreed as part of his plea agreement that he was a leader of the scheme and attempted to obstruct or impede the administration of justice with respect to the investigation of the tax fraud scheme when he and an ATAX employee made false statements to an IRS Revenue Agent. ALVAREZ’s operation of ATAX helped the company generate approximately $12 million in fraudulent proceeds over the duration of the fraud.
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ALVAREZ, 61, of Cortland Manor, New York, pled guilty to one count of conspiracy to defraud the U.S. and steal government funds, which carries a maximum sentence of five years in prison, and one count of aiding and assisting in the preparation of a false and fraudulent U.S. individual income tax return, which carries a maximum sentence of three years in prison. ALVAREZ is scheduled to be sentenced by Judge Oetken on April 11, 2025.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Kim praised the outstanding investigative work of the IRS, Criminal Investigation, the Federal Bureau of Investigation, and the Treasury Inspector General for Tax Administration in this case.
This case is being handled by the Office’s Illicit Finance and Money Laundering Unit. Assistant U.S. Attorney David R. Felton is in charge of the prosecution.