Local man pleads guilty to million dollar tax scheme

I-Team investigates the fraud
Posted at 10:24 PM, Mar 28, 2017
and last updated 2017-03-29 11:32:02-04

A tax fraud scheme busted in Milwaukee.  More than $1.2 million dollars, stolen. The I-Team investigated how the players fooled the federal government, and you won't believe what eventually tripped up the ringleader.

That Milwaukee man just pleaded guilty and is in federal custody in Kenosha County. This was a complicated tax filing scheme that paid out big cash.

Over the course of two years Javier Flores stole more than $1.2 million filing phony tax returns.  According to the criminal complaint numerous people were involved in the theft.  Investigators searched Flores' former address on Milwaukee's south side and seized tax software, blank tax forms, evidence of false identity documents and U.S. Treasury checks made out to different people.

Federal documents show Flores was paying people in Mexico up to $150 for their personal information.  Investigators say he then used the names to apply for individual taxpayer identification numbers, or ITIN's. The government requires that, or a social security number to file a tax return. Flores' manipulated the numbers on false returns for an average refund of $5,000 a person.

Agent Bret Kressin is an investigator with the IRS.  He told us, "they're getting identities any way they can to try to make a buck. It's a constant cat and mouse game with us."  SSA Kressin pointed out pulling off this crime takes a lot of work, but the pay off is big.  "Unfortunately you've seen refunds anywhere from $5,000 to $9,000 for a return, so they have an incentive to go to those lengths."

But the government is identifying more of the false returns before they're paid out.  "The goal is to knock down the success rate for the fraudsters when they're filing these to make it unprofitable for them."

In 2015 the IRS stopped almost $9 billion in identity theft returns and more than $6 billion in 2016.  And last year the number of reported stolen tax return victims dropped 46%. In the case of Javier Flores the feds caught up to him thanks to his expensive hobby.  A fellow gambler at Potawatomi noticed Flores gambling large amounts of money.  The criminal complaint shows Flores exchanging up to $50,000 for chips in one day.  Investigators say Flores told the other gambler about the tax fraud scheme.  That man then reported it to law enforcement.

Flores could spend up to 10 years in jail and face a $250,000 fine.  He will be sentenced in June.


New IRS safeguards. How does it affect taxpayers?

Choosing a tax professional

Identity Protection: Prevention, Detection and Victim Assistance

Know the warning signs of identity theft

Security Awareness for Taxpayers