Following a five-day bench trial presided over by Senior U.S. District Judge Terry R Means, John Anthony Castro was convicted on every single count of assisting in the preparation of fraudulent tax returns. He was immediately taken into custody after the verdict, signaling the severity of his crimes and the court’s commitment to holding him accountable.
“While the vast majority of tax preparers are honest and dedicated to providing ethical services to their clients, individuals like Mr. Castro exploit their clients for personal gain driven by greed,” stated Jenifer L. Piovesan, Special Agent in Charge of IRS Criminal Investigation, Newark Field Office. “John Anthony Castro is now a convicted felon who is staring down a substantial prison sentence for his elaborate scheme.”
The Rise and Fall of a Self-Proclaimed Tax Expert: John Anthony Castro’s Deceptive Practices
John Anthony Castro, despite graduating from law school, had repeatedly failed the bar exam. Nevertheless, he presented himself as an “international tax expert” and a “federal practitioner,” and even falsely claimed to be an alumnus of West Point to bolster his credibility. This fabricated expertise was central to his strategy to attract clients from across the globe.
Marketing aggressively, John Anthony Castro specifically targeted clients internationally, promoting himself as a specialist in intricate tax issues, including those relevant to Australian expatriates. Between 2017 and 2019, his firm processed over 1,900 tax returns for individuals worldwide, demonstrating the scale of his operation and the breadth of his reach.
Castro’s business model was built on the enticing promise of significantly larger tax refunds than clients could obtain elsewhere. He asserted to possess unique insights into overlooked deductions, suggesting a risk-free arrangement where his fee would be covered by splitting the extra refund amount with the client. Crucially, John Anthony Castro withheld tax returns from clients before filing, only disclosing the anticipated refund amount, a tactic that masked his fraudulent activities.
Fabricated Deductions and Unauthorized Filings: How John Anthony Castro Defrauded His Clients
Evidence presented in court revealed a pattern of deceit and manipulation. John Anthony Castro frequently filed tax returns on behalf of clients without their consent or even knowledge. In numerous instances, he claimed deductions that were entirely baseless and unsupported by facts. For example, in one case, for a client with an income of approximately $103,000, Castro fraudulently claimed over $90,000 in deductions for unreimbursed employee expenses, a blatant exaggeration and misrepresentation.
John Anthony Castro’s fraudulent deductions were based on extreme and legally unsound theories. These included:
- Classifying any expense related to illness prevention as an “impairment related work expense.”
- Deducting commuting expenses to and from work, which are generally not deductible for most taxpayers.
- Claiming the full value of mortgage payments and utilities based solely on the taxpayer having a Schedule C business, regardless of actual business use.
- Deducting dry-cleaning costs for work clothes, which have specific and limited deductibility rules.
- Deducting the entire cell phone bill even when employers provided work phones, ignoring the personal use element.
In one particularly egregious example, John Anthony Castro deducted over $26,000 in expenses supposedly related to a fledgling cupcake business that had generated a mere $250 in revenue, highlighting the absurdity and lack of legitimate basis for his deductions.
Undercover IRS Operation Exposes John Anthony Castro’s Tax Fraud Scheme
The fraudulent scheme began to unravel when an undercover IRS Criminal Investigation agent contacted John Anthony Castro in February 2018, seeking tax preparation services. While Castro’s office quoted a $5,000 retainer for in-person meetings, communication proceeded via email.
On February 13, 2018, the undercover agent provided a W2 and Form 1098-T, indicating wages of $142,217. Subsequently, an employee of John Anthony Castro contacted the agent to discuss potential deductions, emphasizing that Castro himself would make the final decisions on what deductions to include. The agent explicitly stated having no unreimbursed employee expenses, charitable contributions, or other deductible items.
Despite this, on March 12, 2018, John Anthony Castro presented the undercover agent with a tax analysis projecting a refund of $6,007 if using his services, compared to a mere $373 refund if using another preparer. Castro proposed to take half of the inflated refund as his fee, amounting to $3,008. The analysis vaguely mentioned $29,339 in deductions without specifying their nature.
Two days later, John Anthony Castro filed the agent’s tax return, fraudulently claiming $29,339 in deductions. This included $2,400 in employee expenses and $28,600 in “other expenses,” none of which had ever been discussed or authorized by the undercover agent. This meticulously planned operation successfully exposed Castro’s deceptive practices.
Victims Suffer Financial Hardship and Retaliation from John Anthony Castro
The trial revealed that John Anthony Castro employed this deceptive pattern across his client base. Victimized taxpayers, upon discovering the fraud, requested copies of their tax returns. Castro often refused to cooperate, delaying the provision of returns for months and evading direct communication.
Furthermore, John Anthony Castro displayed vindictive behavior when questioned or challenged. He resorted to berating clients in emails, threatening legal action, and retaliatory amended tax returns filed without client consent or knowledge. These amended returns often removed all previously claimed deductions, resulting in victim-taxpayers owing substantial sums to the IRS, amplifying their financial distress.
In a dramatic turn during the trial, John Anthony Castro testified in his own defense. Under rigorous cross-examination, he conceded that his tax positions were “extreme,” “outlandish,” and “not supported by the law.” He also admitted to prior instances of falsification and vindictive actions, effectively undermining his own defense.
Many of John Anthony Castro’s victim-taxpayers now face IRS audits and have had to file amended returns, incurring significant financial hardship as a direct consequence of his fraudulent schemes.
Justice Served: John Anthony Castro Faces Lengthy Federal Prison Sentence
John Anthony Castro now faces a maximum sentence of up to 99 years in federal prison, with each of the 33 counts carrying a potential penalty of three years. The sentencing will be a significant moment for the victims and a strong message against tax fraud.
The successful investigation was conducted by IRS Criminal Investigation, and the prosecution was handled by Assistant U.S. Attorneys P.J. Meitl and Nancy Larson. The conviction of John Anthony Castro serves as a stark reminder of the severe consequences of tax fraud and the IRS’s relentless pursuit of those who attempt to defraud the system and exploit taxpayers. This case underscores the importance of vigilance when choosing a tax preparer and the devastating impact of fraudulent tax schemes on unsuspecting individuals.
Conclusion: Tax Fraud Doesn’t Pay – Accountability for John Anthony Castro
The conviction of John Anthony Castro marks a decisive victory in the fight against tax fraud. His elaborate scheme, designed to exploit clients and defraud the U.S. tax system, has been brought to an end. As he awaits sentencing, the case serves as a powerful deterrent to others contemplating similar fraudulent activities. For the victims, while the financial repercussions may linger, the conviction offers a measure of justice and closure, knowing that John Anthony Castro has been held accountable for his crimes. This case emphasizes the critical need for taxpayers to exercise due diligence and seek reputable, ethical tax professionals to avoid falling prey to fraudulent schemes like that perpetrated by John Anthony Castro.
