A Houston woman who prepared tax returns without signing them was sentenced to 14 months in federal prison for padding clients’ returns with fake deductions and credits, and the IRS lost $244,824 to the scheme, the U.S. Attorney’s Office for the Southern District of Texas said. Jamie Nevid Wallace, who owned Donahue Tax Service, worked as a “ghost preparer,” so her clients appeared to file their own returns.
Wallace pleaded guilty on March 27 to aiding or assisting in the preparation of false tax returns. Her 14 months in prison will be followed by one year of supervised release, and she agreed to pay the $244,824 back to the IRS as restitution. She remains on bond and will surrender voluntarily to a Bureau of Prisons facility that has not yet been chosen.
The question for anyone who has paid a preparer is whether that person signed the return. The IRS says paid preparers must sign and include their Preparer Tax Identification Number, known as a PTIN, on every return they prepare. Wallace was required to use one, the release says, and did not.
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How did the scheme work from 2017 to 2023?
Prosecutors say the scheme ran from 2017 to 2023. Instead of putting a PTIN on the returns, Wallace created tax software accounts for her clients, which let the returns go out looking self-prepared. She charged fees for the work.
The returns carried invented Schedule A deductions, the form for itemized deductions, and invented Schedule C business losses and education credits. Those entries produced refunds the clients were not entitled to. The release does not say how many returns or clients were involved.
What did one 2021 return show?
The release gives one example. A 2021 return Wallace prepared claimed $68,453 in false Schedule A deductions and $36,852 in false Schedule C losses for a business that did not exist. It also claimed an education credit for expenses supposedly paid to a local university. Together, those entries caused an $18,075 tax loss on that single return.
Wallace admitted responsibility for $244,824 in losses to the IRS across the scheme. The release says she tried to conceal her involvement, and that a 2003 federal fraud conviction, in the court’s view, should have warned her away from more criminal conduct.
Who built the case against Wallace?
IRS Criminal Investigation investigated, and Assistant U.S. Attorney Brad Gray prosecuted the case before U.S. District Judge Alfred H. Bennett. The release was published Oct. 30 and updated Nov. 2. It lists the case under the Justice Department’s National Fraud Enforcement Division, which the release says supports the Task Force to Eliminate Fraud chaired by Vice President J.D. Vance.
Why does a missing signature fall on the client?
The IRS has said that ghost preparers try to be invisible. On a paper return, they may print it and have the taxpayer sign and mail it. On an e-filed return, they prepare it but refuse to sign digitally as the paid preparer. The agency calls not signing a red flag.
The IRS also says taxpayers are ultimately legally responsible for everything on their return, no matter who prepared it. That means a fake deduction put there by a preparer can come back to the person whose name and Social Security number are on the filing, in the form of a notice, a smaller refund or a bill.
The agency’s list of warning signs includes promises of a big refund, fees based on a percentage of the refund, and a preparer who wants the refund deposited into the preparer’s own account. Its 2021 warning adds preparers who demand cash and give no receipt. People who suspect misconduct can report a preparer to the IRS on Form 14157, and Form 14157-A applies when a return was filed or changed without the taxpayer’s consent.
What should a client look for before signing a return?
The IRS tells taxpayers never to sign a blank or incomplete return, and to read the finished return and ask about anything unclear before it goes out. For a direct deposit refund, it says to check the routing and account numbers on the return, since a dishonest preparer may insert their own bank information.
The agency also runs a Directory of Federal Tax Return Preparers meant to help people find a professional who meets its standards. For enrolled agents it points to verification on IRS.gov, and for CPAs and attorneys it points to state boards and bar associations. A preparer who will not sign, or who will not give a PTIN when asked, is the signal the IRS says to heed. Signing and listing a PTIN are the two steps the Houston release says Wallace skipped, and both are visible to a client who looks at the finished return before it is filed. Clients who never saw a preparer’s name anywhere on their paperwork, or who were told to enter figures into software themselves, have a reason to pull out last year’s return and read it line by line.
Got an IRS letter about a return a preparer handled?
The IRS says taxpayers are ultimately responsible for what is on their return, so a preparer’s invented deduction can come back to the client as a notice, a smaller refund or a bill. Answering an IRS letter in writing, on time and with the right enclosures, is the step that follows.
50 Letters to SSA, IRS, Banks & Insurers gives you fifty fill-in letters, and each one comes with when to send it, where, the deadline and what to enclose. The IRS section covers letters including CP2000, a missing refund, penalty relief and the Taxpayer Advocate. The letters help you reply in writing; they do not prepare or fix a return.
Get the fill-in letters for answering an IRS notice, with deadlines and enclosures →
This article was produced with AI assistance and edited for accuracy against the sources linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
