FORT WORTH, TX – John Anthony Castro, 40, the operator of a virtual tax preparation service named Castro & Company, has been found guilty on 33 counts of tax fraud. This announcement comes from U.S. Attorney for the Northern District of Texas, Leigha Simonton, following a five-day bench trial.
In January, John Castro was formally indicted, and his trial before Senior U.S. District Judge Terry R Means concluded with a guilty verdict on all 33 charges of aiding in the preparation of fraudulent tax returns. Immediately after the verdict, Castro was taken into custody.
“The majority of tax preparers operate with integrity, offering honest services to their clients. However, individuals like Mr. Castro prey on their clients, driven by pure greed,” stated Jenifer L. Piovesan, Special Agent in Charge of IRS Criminal Investigation, Newark Field Office. “John Castro now stands as a convicted felon facing a significant prison term.”
Evidence presented during the trial revealed that John 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.” Adding to the deception, he falsely claimed to be an alumnus of West Point.
Castro successfully marketed his services globally, asserting expertise in niche tax areas, including those affecting Australian expatriates. Between 2017 and 2019, he processed over 1,900 tax returns for clients worldwide.
His sales pitch centered on the promise of substantially larger refunds compared to other tax preparers. John Castro claimed to possess unique knowledge of deductions that others overlooked. He proposed a risk-free arrangement where his fee would be covered by splitting the extra refund amount with the client. Crucially, he withheld the completed tax returns from clients before filing, only informing them of the anticipated refund amount.
Testimonies and documents showcased a disturbing pattern of behavior. In numerous instances, John Castro filed tax returns on behalf of clients without their consent or awareness. In other cases, he included deductions that were completely unfounded. For example, in one instance, for a client earning approximately $103,000, Castro fraudulently claimed over $90,000 in deductions related to unreimbursed employee expenses.
John Castro’s fraudulent deductions were based on extreme and legally baseless theories. These included claiming deductions for:
- Expenses related to illness prevention as “impairment related work expenses.”
- Costs associated with commuting to and from work.
- The total value of mortgages and utilities, provided the taxpayer had any form of Schedule C business.
- Dry-cleaning expenses for work attire.
- The entire cell phone bill, even when employers provided work phones.
In one striking example, John Castro deducted over $26,000 in expenses supposedly related to a fledgling cupcake business that had generated a mere $250 in revenue.
The trial included testimony from an undercover IRS – CI agent who contacted John Castro in February 2018. While the agent requested an in-person meeting, Castro’s office quoted a $5,000 retainer for such meetings, leading to communication via email instead.
On February 13, 2018, the agent provided a W2 and a Form 1098-T, indicating wages of $142,217. Around two weeks later, a Castro & Company employee contacted the agent to discuss potential deductions, emphasizing that John Castro held the final decision on all deductions claimed. The agent explicitly stated having no unreimbursed employee expenses, charitable contributions, or other deductible items.
On March 12, 2018, John Castro delivered his tax analysis to the undercover agent. He projected a $373 refund if another preparer was used, but a significantly inflated $6,007 refund if using Castro’s services. Castro proposed taking half of the increased refund, amounting to $3,008 for himself. The analysis mentioned $29,339 in deductions but lacked specifics.
Two days later, John Castro filed the agent’s return, incorporating $29,339 in fabricated deductions, including $2,400 in employee expenses and $28,600 in other expenses never discussed with the agent or his staff.
Evidence presented at trial confirmed that John Castro employed this fraudulent pattern across numerous clients. Upon discovering Castro’s actions, many victimized taxpayers requested copies of their tax returns. Castro often refused communication and delayed providing returns for months. When questioned or challenged, John Castro frequently reacted vindictively, resorting to berating emails, legal threats, or unilaterally filing amended tax returns that removed all deductions, leaving victims owing substantial sums to the IRS.
During the trial, John Castro testified in his defense. Under cross-examination, he conceded that his tax positions were extreme, baseless, and legally unsustainable. He also admitted to a history of prior misrepresentations and retaliatory actions.
Many of John Castro’s victims have faced IRS audits and have had to file amended returns, resulting in significant financial distress.
John Castro now faces a maximum sentence of 99 years in federal prison, with each of the 33 counts carrying a potential three-year sentence.
IRS Criminal Investigation spearheaded the investigation. Assistant U.S. Attorneys P.J. Meitl and Nancy Larson are the prosecutors in this case.
