The 'Magician' Gets Federal Time For $145M Federal Tax Fraud Scheme

CORTLANDT MANOR, NY — A Westchester County man, who was a tax preparer in the Bronx, has been sentenced to prison after he admitted to filing thousands of false tax returns causing more than $100 million in fraudulent tax loss to the federal government.

Jay Clayton, the U.S. Attorney for the Southern District of New York, announced that 61-year-old Rafael Alvarez, a/k/a "the Magician," was sentenced on Thursday to four years in prison in connection with his orchestration of a decadelong, $145 million tax fraud scheme. As part of the scheme, he oversaw the filing of tens of thousands of federal individual income tax returns that included false information in order to fraudulently reduce his clients' tax burden.

Alvarez previously pleaded guilty in December to conspiracy to defraud the U.S. and steal government funds, and aiding and assisting in the preparation of a false and fraudulent U.S. individual income tax return.

In addition to the prison term, the Cortlandt Manor man was sentenced to three years of supervised release. He was also ordered to pay the IRS $145 million in restitution and forfeit over $11.84 million in fraudulent proceeds.

SEE ALSO:

• The 'Magician' Admits To $145M Federal Tax Fraud Scheme
• Tax Preparer Known As 'The Magician' Defrauds IRS Of Millions: Feds

"Rafael Alvarez was touted as 'the Magician' when, in reality, he was an elaborate fraudster, depriving the IRS of $145 million in tax revenue and penalizing many honest taxpayers," Clayton said. "All Americans bear the burden of tax fraud and want scamsters of this type brought to justice."

According to court documents, from 2010 to 2020, Alvarez was the CEO, owner, and manager of ATAX New York, LLC, also doing business as ATAX New York-Marble Hill, ATAX Marble Hill, ATAX Marble Hill NY, and ATAX Corporation (together, "ATAX"). ATAX was a high-volume tax preparation company located in the Bronx, which prepared an estimated 90,000 federal income tax returns for its customers during this period.

Alvarez both prepared tax returns for ATAX customers and recruited, supervised, and directed other ATAX employees who in turn prepared tax returns for customers. During this period, Alvarez and his employees submitted false information to the IRS in ATAX customers' tax returns. This false information, which included bogus itemized tax deductions, made-up capital losses, fake business expenses, and fraudulent tax credits, ended up fraudulently reducing the customers' tax liability and increasing the customers' tax refunds from the IRS.

Alvarez was so consistent at falsifying ATAX customer tax returns that he became known to ATAX's customers as "the Magician."

He also specifically recruited and personally trained impressionable, easily intimidated workers to be tax preparers. When certain ATAX employees questioned Alvarez about his fraudulent preparation of returns, he intimidated and threatened those employees to discourage them from reporting his fraud scheme to authorities.

In total, the scheme cost the IRS $145 million in tax revenue.

As part of his plea agreement, Alvarez agreed that he was a leader of the scheme and attempted to obstruct or impede the administration of justice when he and an employee made false statements to an IRS agent.

Alvarez's scheme helped ATAX generate around $12 million in fraudulent proceeds over the ten-year duration of the fraud.

Clayton praised the investigative work of the IRS, Criminal Investigation, the Federal Bureau of Investigation, and the Treasury Inspector General for Tax Administration in this case.

This case is being handled by the Office's Illicit Finance and Money Laundering Unit, with Assistant U.S. Attorney David R. Felton in charge of the prosecution.