Fake Businesses, Real Prison: The Evansville Preparer Who Invented COVID Credits
The COVID sick-leave credits were real. The businesses behind them weren’t. Evansville preparer Tonda Avery pleaded guilty to five counts of aiding false tax returns — approximately 123 returns containing false Forms 7202, causing a total tax loss of $965,203. Her sentence is in. And one question outlives the plea: under the IRS’s own guidance, who is responsible for what was claimed on those returns?
Who is Tonda Avery, and what did she plead guilty to?
Tonda Avery, 55, of Evansville, Indiana, operated Diversity Tax Service (DTS) in Evansville, where she prepared federal income tax returns and employed other tax return preparers. She has pleaded guilty to five counts of Aiding and Assisting in the Preparation and Presentation of a False and Fraudulent Tax Return — and she has been sentenced. What the judge gave her is below, after the scheme itself, because the scheme is the story.
What was the scheme?
The tool was Form 7202. That form let eligible self-employed individuals claim refundable tax credits for periods when they were unable to work because of circumstances related to COVID-19 — real relief, written for real businesses. According to the Department of Justice, between 2020 and 2021 Avery prepared and filed approximately 123 tax returns containing false Forms 7202, causing a total tax loss of $965,203.
For clients who did not own legitimate businesses, she created fictitious businesses and prepared false Schedule C forms reporting nonexistent business income and expenses — then used those invented businesses to support the credit claims. For clients who did have legitimate businesses, she inflated the inputs instead: the number of days they supposedly could not work, and their net earnings from self-employment. Either way, clients claimed larger credits, and received larger refunds, than they were entitled to.
What did her filing numbers show?
The pattern sat in her own filing statistics. In 2020, approximately 33.82% of the returns Avery filed included a Form 7202, compared with approximately 0.90% of returns nationwide and 0.50% in Indiana. In 2021, the share of her returns carrying the form jumped to approximately 61.14% — against the same 0.90% nationwide and 0.40% in Indiana. Put plainly: six out of ten returns from one office claimed a niche pandemic credit that fewer than one in a hundred taxpayers claimed nationwide. Avery also instructed and encouraged the other preparers at DTS to prepare fraudulent returns, including returns containing false Forms 7202.
What did she charge for a fake return?
Fees at DTS were based on the number of forms and schedules in a return. When Avery added a fraudulent Schedule C and Form 7202 to a client’s return, she increased her fee by $800. The invented paperwork wasn’t a favor done for struggling clients — it was a product, priced per form.
What was her sentence?
Avery was sentenced to one year and one day in federal prison, followed by one year of supervised release. The court also ordered her to pay $1,318,455.43 in restitution. The case was investigated by IRS Criminal Investigation, and the sentence was imposed by U.S. District Judge Matthew P. Brookman.
The credits were claimed on her clients’ returns — so who is responsible?
Here is the part of the story that outlives the headline. The false credits were not claimed on Avery’s returns — they were claimed on her clients’ returns, under their names. The Department of Justice’s account says those clients claimed credits they were not entitled to and received refunds greater than they were entitled to receive. And the IRS’s own guidance for choosing a preparer is blunt: taxpayers are responsible for all the information on their income tax return — that’s true no matter who prepares the return. If your refund was built on a business you never owned or days you never missed, that claim is on your return — and under IRS guidance, you are responsible for all the information on your return, even when someone else prepared it. It is better to understand your position now than to be surprised later.
The bottom line: the credits were real — the businesses weren’t. Avery’s case is a reminder that a refund is only as good as the return underneath it, and that, under the IRS’s own guidance, taxpayers are responsible for all the information on their return — no matter who prepared it. If a preparer ever added a business, a form, or a credit you don’t recognize, get the return reviewed while the next move is still yours.
Alex Volkov, CPA is a New York-licensed CPA with over two decades in accounting, focused on resolving IRS tax problems — back taxes, liens, levies, garnishments, and audits — for individuals and businesses in all 50 states and around the world.
A credit on your return that you can’t explain?
If a preparer put a business, a schedule, or a pandemic credit on your return that doesn’t match your real life, find out where you stand now. The first case review is free — 15 minutes with a licensed CPA.
Source: U.S. Department of Justice, U.S. Attorney’s Office for the Southern District of Indiana, “Evansville Tax Preparer Lands in Federal Prison for $965,000 COVID 19 Tax Credit Fraud.” Read the DOJ press release. The case was investigated by IRS Criminal Investigation; the sentence was imposed by U.S. District Judge Matthew P. Brookman. Taxpayer-responsibility guidance: IRS Tax Tip 2018-02, “Ten Tips for Choosing a Tax Preparer” (irs.gov).