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The Associated Press April 9, 2010, 10:31AM ET

26 in NY, NJ accused of filing 35K bad tax returns

A record number of tax preparers were charged Thursday with filing 35,000 suspected fraudulent returns that cost the government tens of millions of dollars in tax revenue, a prosecutor announced as he warned against cheating on taxes.

U.S. Attorney Preet Bharara said "Operation Brass Tax" was designed to be large to add punch to his message for people to pay their taxes. The filing deadline is April 15.

The 26 tax preparers in Manhattan, the Bronx and New Jersey were charged with submitting tax returns with more than $95 million in deductions, most of which were believed to be fraudulent. The Internal Revenue Service had agents pose as customers as part of the crackdown.

Bharara said some of the tax preparers made millions through the fraud, sometimes by submitting returns in the names of dead people or by charging customers to create fake dependents for them.

"It is our belief that this is the largest collective law enforcement action against tax preparers that's ever been undertaken," Bharara said, adding that the prosecution was part of his office's beefed-up effort to combat financial fraud during an economic downturn.

The tax preparers enticed customers to let them prepare their taxes by gaining a reputation for delivering tax refund rates as high as 95 percent to 98 percent, he said.

He called them a "pretty resourceful bunch. They were industrious and in some cases they were fairly brazen."

Patricia Haynes, special agent-in-charge of the Internal Revenue Service's New York office, said the prosecution was important in a nation that has between 900,000 and 2 million paid tax preparers.

"It's a nationwide problem," she said. "Some of these same schemes and methods are utilized across the country."

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