On May 20, the Department of Justice (DOJ) announced Kent Ellsworth, an Arizona resident, has pleaded guilty to two counts of aiding in the preparation of false tax returns. The charges stem from his alleged involvement in facilitating an “abusive-trust tax shelter” scheme aimed at underreporting income and tax liabilities. 

Operating under the banner of Ellsworth Stauffer P.C., a return preparation business, Ellsworth allegedly prepared and filed more than 500 false tax returns for approximately 60 clients nationwide between 2017 and 2023. The DOJ characterizes his actions as “promoting, selling, and implementing a fraudulent tax shelter,” which purportedly resulted in over $60 million in income being sheltered from the IRS, leading to an estimated tax loss of $17 million.

At the heart of the alleged scheme is the use of the “abusive-trust tax shelter.” Allegedly, Ellsworth directed clients, primarily successful business owners, to assign their income to trusts and a “private family foundation” to create the appearance that the income belonged to these entities rather than the individuals themselves. However, it is asserted that these trusts and foundations merely served as conduits for retaining control over the funds. Ellsworth received fees for his services from clients participating in the alleged tax shelter.

Ellsworth is set to be sentenced on August 14, facing a maximum penalty of six years in prison. The ultimate sentence will be determined by a federal district court judge, considering the U.S. Sentencing Guidelines and other statutory factors. Additionally, Ellsworth could face a maximum fine of $250,000, supervised release, and prosecution costs for each count.

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