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LI accounting firm submitted false NY tax returns for 267 clients, Nassau DA says

Nassau County District Attorney Madeline Singas at a

Nassau County District Attorney Madeline Singas at a conference at Hofsta University on Dec. 5, 2017. Credit: Howard Schnapp

A Woodmere accounting firm was arraigned on a tax fraud charge Thursday after prosecutors said the company submitted false tax returns for 267 clients and denied the state nearly $130,000 in revenue, officials said.

Kenneth Erdheim CPA PC was arraigned before Nassau County District Court Judge Gary Carlton and charged with second-degree criminal tax fraud, according a news release issued by Nassau District Attorney Madeline Singas.

“The tax returns of more than 250 clients were allegedly mishandled by this company, costing the government nearly $130,000 in revenue,” Singas said in the release. “Due to this company’s alleged misdeeds, their clients now must repay that money to New York State even though they were unaware of the mistakes on the returns. We encourage everyone to research multiple tax preparers and to check their qualifications before filing returns this tax season.”

If convicted of the top count, the corporation will have to pay $32,667 in fines, the news release said.

The firm is due back in court on March 5.

“I’m sure there will be a resolution of the case in due course,” said Richard Kestenbaum, Erdheim’s attorney, who also said he entered a not guilty plea during the court proceeding.

Investigators said they discovered an IRS code, which grants government employees a deduction, on the returns for 267 of Erdheim’s clients for the 2016 tax year, even though the customers were not government employees. The code, IRS code 414(h), applies to state or local employees who have government-sponsored retirement plans, officials said.

As a result, the state Department of Tax and Finance received $129,638 less in tax money from the taxpayers than was owed under state tax law, officials said.

“Tax preparers who betray the trust of their clients and deprive New York State of tax revenue will be held accountable,” state Commissioner of Taxation and Finance Michael Schmidt said in the release.

Although prosecutors said Erdheim did not benefit from the alleged fraud financially, its clients must pay back the funds. 

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