Tracey Hernandez Sentenced to 25 Months for Tax Fraud, NC, 2023

Burlington, NC – Tracey Hernandez, 39, will spend the next two years and a month in a federal prison cell after pleading guilty to a brazen tax fraud scheme that bilked the government out of over $2.1 million. The sentence, delivered today in the Middle District of North Carolina, marks the culmination of a year-long investigation by IRS-Criminal Investigation (IRS-CI) that peeled back layers of deception and fabricated financial records.

Hernandez wasn’t some high-roller hiding assets in offshore accounts. She operated a low-tech, high-volume ghost tax preparation business. Meaning she filed returns *for* clients, but didn’t sign them as the preparer – a deliberate tactic to shield herself from scrutiny. The feds at IRS-CI flagged her operation in 2021 after noticing a statistically improbable number of returns with wildly inflated claims. It wasn’t a few extra deductions; it was a systemic pattern of fraud, raising immediate red flags.

The scale of the operation is staggering. Hernandez filed over 200 fraudulent returns, systematically fabricating expenses and credits to maximize refunds. Investigators found she routinely claimed bogus education expenses, conjured up fake tax credits, and wildly inflated business profits reported on Schedule C forms – the form used by sole proprietors to report business income and expenses. This wasn’t about legitimate tax avoidance; it was a calculated effort to steal from the U.S. Treasury.

While the original press release doesn’t detail how Hernandez profited, sources close to the investigation suggest she skimmed a percentage of the fraudulent refunds as payment for her “services.” This practice, common in these types of schemes, transforms the operation from simple tax fraud into a form of organized financial crime. The feds suspect she targeted vulnerable individuals who may not have fully understood the implications of the false claims being made on their behalf.

The sentencing isn’t just about punishment; it’s about restitution. In addition to the 25-month prison sentence and a year of supervised release, Hernandez has been ordered to pay back the full $2,106,281 she illegally obtained. This is no small feat. The government will likely pursue asset forfeiture and wage garnishment to recover the funds, a process that could take years. The feds are also likely to investigate the clients whose returns were filed fraudulently, potentially leading to additional charges.

Assistant U.S. Attorney Ashley Waid prosecuted the case, building a solid case based on the meticulous work of the IRS-CI agents. Sentencing guidelines for this type of fraud, considering the amount of money involved and the number of fraudulent returns, typically range from 24 to 30 months. Hernandez receiving 25 months indicates she likely cooperated with investigators to some degree, providing information that aided the investigation. However, cooperation wasn’t enough to avoid a significant prison term.

This case highlights a persistent vulnerability in the tax system: the ease with which unscrupulous preparers can exploit it. The IRS-CI continues to prioritize investigations into fraudulent tax preparation, focusing on identifying and prosecuting those who prey on taxpayers and steal from the government. The agency encourages anyone suspecting tax fraud to report it through their website or by calling the IRS hotline.

Beyond the financial implications, this case underscores the broader impact of tax fraud. Every dollar stolen through fraudulent refunds represents a dollar less available for vital public services – schools, infrastructure, healthcare, and national security. Hernandez’s actions weren’t victimless; they harmed all American taxpayers.

Source: U.S. Department of Justice

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