Tax Preparer Who Was Generous on Deductions Gets 5 Years’ Probation

Clemencia Carandang was a wheelchair-bound hospital bookkeeper who set up a sideline business a few years ago as an income tax preparer working out of her home in Carson. It wasn’t a big business--100 or so clients, perhaps, but most of them liked her work, particularly the healthy refunds, and they kept coming back.

There were only two problems.

One was that Carandang had no formal training in income tax work or a state license to do it.

The second was that, according to state investigators, many of the returns she prepared listed outrageously high itemized deductions.

Deductions Made Up

That, said Sam Williams, a special agent for the Franchise Tax Board who investigated Carandang, was because she made up the deductions.

To gain the huge tax refunds, Carandang routinely wrote in thousands of dollars of charitable contributions or interest expenses that her clients never claimed, Williams said.

The people who initially scan tax returns for the state Franchise Tax Board began to notice something funny early last year. Then their computers verified the pattern. A broader investigation subsequently found that Carandang had prepared 500 income tax returns claiming about $800,000 in fraudulent refunds.

The state took the evidence to the Los Angeles County district attorney’s office, which filed 18 felony counts.

On Friday, two months after pleading guilty to four counts in a compromise with prosecutors, Carandang was sentenced in Compton Superior Court to five years’ probation, ordered to pay a $20,000 fine and another $10,000 to the state for the cost of its investigation. Judge Arthur Jean also ordered her to do 500 hours of community service work.

The 46-year-old divorced woman who lives with her daughter could have received up to 12 years in state prison. However, Deputy Dist. Atty. Reva Goetz said that because Carandang is a paraplegic--the result of a 1971 auto accident--”community service time for her was much a deterrent as jail.”

Investigator Williams said Carandang is one of a number of preparers he has recently investigated for filing large numbers of fraudulent returns.

He said she specialized in clients who had recently immigrated from the Philippines and charged extremely high fees for tax preparation work--an average of $500 and in one case more than $5,000 in exchange for the promise of huge refunds.

“She is a shrewd lady,” he said.

On one return cited by Williams, which he said typified Carandang’s work, she claimed interest expenses of $9,541 and charitable contributions of $2,985 for a client whose adjusted gross income was only $27,920 and who had not asked Carandang to claim any deductions for him under either of those two categories.

Carandang’s attorney, Bruce Hochman, characterized her as a woman who was victimized by a lack of professional caution. Her mistake, he said, was taking her clients’ word rather than carefully cross-examining their claims of deductions.

Many of her clients “participated in the expansion of their deductions,” Hochman said.

But Williams, who said he interviewed more than 50 of Carandang’s clients, said he was convinced that they did not aid her.

“These were not sophisticated people,” he said. “To those who questioned her about how she could arrange such large refunds, she’d say, ‘I’m a tax expert.” ’

Carandang was the second local tax preparer sentenced in recent months. Last September a Rowland Heights tax preparer, Fred H. Cowherd III, was sentenced to 90 days in county jail after he pleaded guilty to five counts of filing false state income tax returns.

State investigators said Cowherd overstated clients’ deductions to charge a percentage of the inflated refund for his fee, cheating the state out of $25,000.

Williams said most of the fraudulent refunds sought by Carandang were requested in returns that were filed in 1987 but sought to amend returns paid in previous years.