Ann Quach ran a tax preparation business in Thousand Oaks, California, under the names AQ Financial and A2Z Tax Solutions. From 2011 to 2024, she prepared 1,734 false Form 1040 returns for her clients. Her method was distinctive: she fabricated entire businesses her clients never owned, placed them on Schedule C, and loaded them with fictitious losses to offset the clients’ real W-2 income. She then layered false medical and charitable deductions on top. The result was inflated refunds that kept clients coming back, year after year, while causing multi-million-dollar losses to the U.S. Treasury.

On August 6, 2026, U.S. District Judge Sherilyn Peace Garnett sentenced Quach to 27 months in federal prison and ordered her to pay $6,481,731 in restitution. Prosecutors noted this was not “a brief lapse in judgment” but a years-long scheme in which Quach exploited her tax expertise.

Jason explains how Section 7206(2) works (the federal statute targeting preparers who aid in filing false returns), why the IRS watches Schedule C more closely than any other individual form, how pattern analysis catches high-volume preparer fraud, and what the 1,734 affected clients should do now: amended returns, preparer misconduct affidavits, and why the signature on every Form 1040 is the taxpayer’s responsibility.

Key Takeaways

• Fabricating businesses on client returns is a federal felony under 26 U.S.C. § 7206(2), punishable by up to three years in prison per count.
• Section 7206(2) does not require proof that the client knew the return was false. The preparer’s conduct is independently criminal.
• Schedule C is the most commonly audited form on individual returns because it relies on self-reporting with no third-party verification.
• When a preparer is convicted, the IRS typically reviews the full client list. Affected clients owe back taxes, penalties, and interest on the fabricated deductions.
• Clients who did not know about the fabrication can argue reasonable cause to abate fraud penalties, but they still owe the underlying tax.
• Filing Form 14157 and Form 14157-A (Preparer Fraud or Misconduct Affidavit) tells the IRS you are cooperating and were a victim of preparer misconduct.
• Never sign a return you have not reviewed. Your signature under penalties of perjury is your responsibility, not your preparer’s.

Resources Mentioned

DOJ sentencing announcement (Aug. 6, 2026): https://www.justice.gov/usao-cdca/pr/ventura-county-tax-preparer-sentenced-more-2-years-federal-prison-filing-more-1700

26 U.S.C. § 7206 (Fraud and false statements, including subsection (2) on aiding and assisting)

26 U.S.C. § 7201 (Attempt to evade or defeat tax)

IRS Form 14157 (Complaint: Tax Return Preparer): https://www.irs.gov/forms-pubs/about-form-14157

IRS Form 14157-A (Tax Return Preparer Fraud or Misconduct Affidavit): https://www.irs.gov/forms-pubs/about-form-14157-a

IRS Form 1040-X (Amended U.S. Individual Income Tax Return): https://www.irs.gov/forms-pubs/about-form-1040x

The Law Office of Jason Carr, PLLC: https://carrtaxlaw.com

Disclaimer

This video is for informational and educational purposes only and does not constitute legal or tax advice. Viewing this video does not create an attorney-client relationship between you and The Law Office of Jason Carr, PLLC. The discussion is based on publicly available information and is not a complete analysis of any person’s legal rights, defenses, tax obligations, or case facts. Any commentary about what a taxpayer, business owner, or advisor “should have done” is general educational discussion only and may not apply to your situation. If you have a specific legal or tax question, consult a qualified attorney or tax professional licensed in your jurisdiction.

Comment Policy

Please do not post confidential, sensitive, or personally identifiable tax information in the comments. We do not provide individualized legal or tax advice in the comments or social media replies.

Steven T. Loo had every advantage: eight commercial properties across Washington and California, a stack of LLCs, and a net worth prosecutors pegged at around $43 million. What he didn't have was any intention of paying his taxes. For years, Loo directed his property managers to send building profits into two bank accounts held by shell companies that had been dormant since 1999, spent the money on himself and his family, and never reported it. He didn't even tell his tax preparer the income existed. Viewed across two decades, his returns claimed he owed nothing and sometimes claimed a refund.

A federal jury convicted Loo of six counts of tax evasion and six counts of filing false returns. In July 2026 he was sentenced to 20 months in prison, a $250,000 fine, and three years of supervised release, after prosecutors sought 51 months and called his motive simple greed.

In this episode, Jason Carr explains the affirmative-act rule that separates a civil audit from a felony under IRC § 7201, why filing a false return under § 7206(1) is its own crime, and how IRS Criminal Investigation used property-management records, bank records, and the preparer's own testimony to close the "honest mistake" door. He also walks through the fork in the road every taxpayer faces when a criminal investigator shows up, and the voluntary-disclosure and compliance path that could have kept this an IRS matter instead of a DOJ case.

Key Takeaways

• Owing tax is civil. Building a structure to hide income is what makes it criminal. Concealment is the line.
• Routing income through shell companies or inactive entities is a classic "affirmative act" of evasion under Spies v. United States.
• Hiding income from your own tax preparer destroys the "my accountant did it" defense and helps prove willfulness.
• IRS-CI builds these cases on paper: third-party property records, bank flows, and the gap between income earned and income reported.
• When a criminal investigator knocks, improvising an explanation creates new evidence. Get counsel and protect privilege.
• If prior years are wrong, voluntary disclosure and amended returns through counsel beat waiting to be caught, especially when you can afford to pay.

Resources Mentioned

• DOJ / U.S. Attorney's Office, W.D. Wash., "Seattle real estate investor sentenced to 20 months in prison for $4.7 million tax evasion scheme" (July 17, 2026): https://www.justice.gov/usao-wdwa/pr/seattle-real-estate-investor-sentenced-20-months-prison-47-million-tax-evasion-scheme
• UnitedStatesv.Loo, No. 2:24-cr-00072 (W.D. Wash.) — indictment returned April 24, 2024.5
• 26 U.S.C. § 7201 — Attempt to evade or defeat tax (felony evasion).
• 26 U.S.C. § 7206(1) — Fraud and false statements / filing a false return.
• Spiesv.UnitedStates, 317 U.S. 492 (1943) — felony evasion requires an affirmative act of concealment, not mere failure to file or pay: https://supreme.justia.com/cases/federal/us/317/492/
• Cheekv.UnitedStates, 498 U.S. 192 (1991) — willfulness and the limits of a good-faith defense: https://supreme.justia.com/cases/federal/us/498/192/
• The Law Office of Jason Carr, PLLC: https://carrtaxlaw.com

Disclaimer

This video is for informational and educational purposes only and does not constitute legal or tax advice. Viewing this video does not create an attorney-client relationship between you and The Law Office of Jason Carr, PLLC. The discussion is based on publicly available information and is not a complete analysis of any person’s legal rights, defenses, tax obligations, or case facts. Any commentary about what a taxpayer, business owner, or advisor “should have done” is general educational discussion only and may not apply to your situation. If you have a specific legal or tax question, consult a qualified attorney or tax professional licensed in your jurisdiction.

Comment Policy

Please do not post confidential, sensitive, or personally identifiable tax information in the comments. We do not provide individualized legal or tax advice in the comments or social media replies.