The feds are trying to stop White Plains CPA Joseph Cervone from filing tax returns for clients, just in time for his release from prison in a $23.5 million tax scheme.
U.S. Attorney Geoffrey S. Berman sued Cervone and Peopleworks Inc. on June 10 in federal court to permanently ban them from the tax-return preparation business.
“In the absence of an injunction, the United States will be put at risk of providing tax refunds to taxpayers not entitled to such refunds,” assistant prosecutor Alexander J. Hogan stated in the complaint.
Cervone, 65, was licensed as a certified public accountant in 1978. He founded Peopleworks in 1993 and operated alone from a storefront in downtown White Plains, filing about 600 individual and business returns yearly.
The Internal Revenue Service had discovered $342,000 in deductions on his personal taxes for 2007 to 2009, for retirement plan contributions he could not substantiate. That prompted a more detailed audit of Peopleworks.
Cervone had created 66 partnerships through which clients claimed $23.5 million in tax credits for renewable electricity and coal production. The government distributed $17 million in credits.
But the partnerships were fake and no actual energy investments had been made. Cervone had also taken $500,000 in fees that he did not declare on his tax returns.
The energy and coal credit scheme ended in 2012, but Cervone, according to the civil complaint, kept claiming other unsubstantiated expenses for clients. In a sampling of tax returns from 2015 to 2017, the IRS found that nearly half were deficient, by an average of $17,457.
Cervone pleaded guilty in 2017 to obstructing the IRS and to subscribing to false tax returns. He was sentenced to 22 months in prison, and the government seized $16.5 million from companies he controlled.
Cervone is scheduled for release on July 19 from a Bureau Prisons residential re-entry center in the Bronx.
The government is asking the court to permanently bar Cervone and Peopleworks from preparing tax returns for others or from owning, managing, working for or profiting from any entity preparing tax returns.