California Tax Preparer Admits $25 Million Fraud on Taxes and COVID Aid

A tax preparer based in California entered a guilty plea on May 5, 2026, in federal court for including fabricated details on clients' federal income tax returns to generate large refunds and for submitting misleading applications for COVID-19 business relief loans to obtain funds he diverted for personal purposes, according to a U.S. Department of Justice press release.

The fraud affected the U.S. Treasury through tax losses exceeding $25 million, stemming from false refunds issued to the preparer's clients and improper disbursements from federal COVID-19 relief programs. These programs, administered by the Small Business Administration, provided loans to support businesses during the pandemic, but the preparer claimed funds without meeting eligibility criteria and used them outside authorized business needs, per the Justice Department release.

The guilty plea shifts the case from pretrial proceedings to sentencing, with a hearing scheduled in the coming months under federal guidelines for wire fraud and tax fraud statutes. Prior to the plea, the preparer faced charges without admission of guilt; now, conviction is established, triggering mandatory restitution calculations and potential prison time based on the $25 million loss amount.

Sentencing will require the court to order repayment of the full $25 million in losses, activating Treasury Department mechanisms to recover funds through asset forfeiture or garnishment. The plea also advances Justice Department tracking of pandemic fraud cases, prompting audits of similar tax preparation firms and accelerating reviews of outstanding COVID-19 loan applications still under investigation.

Federal prosecutors must now prepare a presentence report within 90 days, detailing the fraud's extent for the judge's consideration.

This case follows a series of Justice Department actions against COVID-19 relief fraud, with over 1,500 individuals charged nationwide since 2020 under the department's COVID-19 Fraud Enforcement Task Force established in May 2021. The original tax fraud statutes cited trace back to the Internal Revenue Code, enforced consistently across administrations to protect federal revenue streams.