An Indianapolis-based accountant was sentenced to three years in prison for preparing false tax returns for clients who participated in an illegal tax shelter.
According to the U.S. Department of Justice, Jason Crace, CPA, was sentenced on July 21 after pleading guilty a year ago in federal court for his role in the tax shelter scheme.
Authorities said that between 2013 and 2022, Crace prepared income tax returns for clients in Mississippi and elsewhere who claimed millions of dollars in false deductions for so-called “royalty payments.” Crace admitted he knew the royalty payments were merely circular flows of money designed to give the appearance of genuine business expenses, according to the DOJ.
“Typically, a client would send money to bank accounts controlled by scheme promoters who then sent the money—minus a fee—back to a different bank account controlled by the client,” the DOJ said. “In this way, tax shelter participants retained control of the money they transferred while falsely deducting the transfers as business expenses on their tax returns.”
One of the scheme’s promoters, Stephen Mellinger III, previously pleaded guilty and was sentenced to eight years in prison for his role promoting the scheme.
In total, Crace’s preparation of false tax returns claiming the fraudulent royalty deductions caused a loss to the IRS of more than $2.5 million.
In addition to his prison sentence, the court sentenced Crace to serve one year of supervised release and to pay restitution of $2,532,936.
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