John Anthony Castro, 40, owner of the virtual tax preparation business Castro & Company, was convicted Friday of 33 counts of tax fraud. The conviction was announced by U.S. Attorney for the Northern District of Texas, Leigha Simonton.
Castro, who falsely inflated dozens of client tax returns, was indicted in January. After a five-day bench trial before Senior U.S. District Judge Terry R. Means, he was convicted on all counts and immediately taken into custody.
"While most tax preparers are honest and provide honest tax services to their clients, some like Mr. Castro victimize their clients all in the name of greed," said Jenifer L. Piovesan, Special Agent in Charge of IRS Criminal Investigation's Newark Field Office. "Mr. Castro is now a convicted felon facing a lengthy prison sentence."
Evidence presented in court revealed that Castro, who had graduated law school but repeatedly failed the bar exam, marketed himself as an "international tax expert" and "federal practitioner." He falsely claimed to be a graduate of West Point and successfully attracted clients worldwide. Between 2017 and 2019, he filed over 1,900 tax returns for clients globally.
Castro promised clients significantly higher refunds than other preparers, claiming expertise in identifying and claiming unique deductions. He split the additional refund with clients as his fee but often filed returns without their permission or knowledge, claiming baseless deductions.
For example, he claimed over $90,000 in deductions for one client with an income of approximately $103,000. He used extreme and unsupported legal theories, including deductions for expenses related to preventing illness, commuting, full mortgage and utility values, dry-cleaning, and cell phone bills.
In February 2018, an undercover IRS agent contacted Castro. Despite the agent denying having any deductible expenses, Castro promised a $6,007 refund compared to $373 from other preparers. Castro filed a fraudulent return with $29,339 in deductions, including $2,400 in employee expenses and $28,600 in other expenses not discussed with the agent.
Castro's pattern involved similar fraudulent actions with other clients. When clients discovered the fraud, Castro delayed providing copies of their returns and acted vindictively, including filing amended returns without permission, causing clients to owe substantial amounts to the IRS.
During the trial, Castro admitted to his extreme and unsupported positions and prior falsifications. Many victims have faced audits and significant financial hardship.
Castro faces up to 99 years in federal prison, three years per count. The investigation was conducted by IRS Criminal Investigation. Assistant U.S. Attorneys P.J. Meitl and Nancy Larson are prosecuting the case.
