Inside This Report

• More than 200 fraudulent tax returns claimed over $7 million in refunds.
• The scheme caused approximately $6.2 million in actual government losses.
• Rodney Underwood faces up to five years in federal prison.

By Samuel López | USA Herald

A Detroit man has admitted orchestrating a sweeping tax fraud scheme that used more than 200 nearly identical returns to claim over $7 million in fraudulent refunds from the Internal Revenue Service.

Rodney Underwood pleaded guilty to making a false claim in federal court, according to the Justice Department. His sentencing is scheduled for Jan. 6, 2027.

Underwood operated as a paid tax preparer for clients across multiple Detroit locations. But when he submitted their returns to the IRS, prosecutors said he deliberately left the paid-preparer section blank, making the filings appear as though the taxpayers had prepared them independently.

The practice is commonly known as ghost preparation. By concealing his involvement, Underwood avoided identifying himself as the person responsible for preparing the returns while making it more difficult for regulators to trace the fraudulent filings back to him.

Federal prosecutors said the returns followed a nearly identical pattern. Underwood reported fabricated dividend income and false tax-withholding amounts, creating refunds his clients were not legally entitled to receive.

Altogether, the returns sought more than $7 million from the federal government. The IRS issued enough of those refunds to produce an actual loss of approximately $6.2 million, according to court records and statements made during the proceedings.

Underwood also failed to report the fees he collected through the scheme as income on his own federal tax returns, prosecutors said.

“Filing false returns isn’t a shortcut — it’s pure theft,” Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division said in announcing the guilty plea.

McDonald added that fraudulent refund schemes take money from Americans who comply with the law and warned that federal authorities would pursue those who intentionally cheat the tax system.

The case highlights why ghost tax preparation carries substantial risks for taxpayers. A legitimate paid preparer is generally required to sign a return and include a Preparer Tax Identification Number. When someone refuses to identify themselves on a return they prepared for compensation, that omission can be a warning sign of misconduct.

Although clients may be unaware of every false entry placed on their returns, taxpayers remain responsible for reviewing the information submitted under their names. Fraudulent income or withholding figures can lead to audits, repayment demands, penalties, interest and, in serious cases, criminal scrutiny.

Underwood pleaded guilty to one count of making a false claim. The offense carries a statutory maximum sentence of five years in federal prison.

That maximum does not necessarily predict the sentence he will receive. The presiding federal judge will determine Underwood’s punishment after reviewing the advisory U.S. Sentencing Guidelines, the financial loss, his conduct, acceptance of responsibility and other statutory sentencing factors.

IRS Criminal Investigation is handling the investigation. Trial Attorneys Shawn Noud and Alexis Hughes of the National Fraud Enforcement Division’s Tax Section are prosecuting the case.

About the Author

Samuel López is a Senior Legal Analyst, investigative journalist and legal researcher with more than two decades of experience examining complex litigation, financial misconduct and regulatory enforcement. His background in legal analysis and case-document review allows him to translate sophisticated fraud prosecutions, evidentiary records and sentencing issues into clear, fact-driven reporting for the public.

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