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Posted on: February 27, 2020

Nassau County Accounting Firm Accused of Submitting False NYS Tax Returns

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MINEOLA, N.Y. – Nassau County District Attorney Madeline Singas announced that a Nassau County accounting firm was arraigned today on a felony complaint for allegedly submitting false New York State Tax Returns on behalf of 267 clients.

Kenneth Erdheim, CPA, PC, was arraigned today before Judge Gary Carlton and charged with Criminal Tax Fraud on the Second Degree (a C felony). The defendant corporation is due back in court on March 5. If convicted of the top count, the corporation will have to pay $32,667 in fines.

“The tax returns of more than 250 clients were allegedly mishandled by this company, costing the government nearly $130,000 in revenue,” DA Singas said. “Due to this company’s alleged misdeeds, their clients now must repay that money to New York State even though they were unaware of the mistakes on the returns. We encourage everyone to research multiple tax preparers and to check their qualifications before filing returns this tax season.”

“Tax preparers who betray the trust of their clients and deprive New York State of tax revenue will be held accountable,” said New York State Commissioner of Taxation and Finance Michael Schmidt. “We will continue to work with all levels of law enforcement to ensure a level playing field for New Yorkers.”

DA Singas said that starting in 2018, the New York State Department of Tax and Finance’s Buffalo office suspected fraud in many of the personal income tax returns for the 2016 tax year submitted by Kenneth Erdheim, CPA, PC.

Following an investigation, the Department of Tax and Finance discovered the IRS code 414(h) was allegedly listed on the returns for 267 of Erdheim’s clients, even though they were not entitled to the deduction because they are not government employees. As a result, the Department of Tax and Finance received $129,638 less in tax monies from the taxpayers than was owed under NYS Tax Law. IRS code 414(h) applies to state or local employees who have government-sponsored retirement plans.

The Department of Tax and Finance handed over the case to the NCDA for prosecution in May of 2018.

Kenneth Erdheim and his company did not benefit financially from the alleged fraud and his clients were not aware it was taking place. However, his clients are still liable for the $129,638 and will be individually billed by the NYS Tax Department for the overpayments they are not entitled to. The defendant will be responsible for paying back any accrued interest.

Senior Assistant District Attorneys Heidi Bausk and Lauren Littman of DA Singas’ Financial Crimes Bureau are prosecuting this case. Richard Kestenbaum, Esq. represents the defendant corporation.

For tips on how to select a tax preparer click here.

The charges are merely accusations and the defendant is presumed innocent until and unless found guilty.                   


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