Schedule C for Make-Believe

Kerwin Aldric Jordan was a California tax preparer who operated The Jordan Corporation and Jordan and Jordan A Financial Conquest. Prosecutors said he held himself out as a tax attorney and certified public accountant, even though he was neither. 

In this episode of Final Notice, Jason Carr breaks down how Jordan used non-existent businesses and fake business losses to reduce clients’ taxable income. The episode also covers the COVID relief loan side of the case, where prosecutors said Jordan received PPP and EIDL funds after falsely reporting that companies had employees when they had none. 

Jason explains why fake Schedule C losses create obvious audit and criminal exposure, how high-volume preparer patterns can create a data trail, and what taxpayers should do if they discover a preparer filed returns claiming businesses, losses, credits, or expenses that were not real. 

This episode is for taxpayers, small business owners, tax preparers, enrolled agents, CPAs, bookkeepers, and anyone who wants to understand where aggressive tax preparation crosses into criminal tax fraud. 

Key Takeaways:

• A real business loss needs a real business.
• A Schedule C is not a place to park fictional expenses. 
• Large preparer fees tied to large refunds should raise questions. 
• Taxpayers should understand the return before signing it. 
• Preparers should document intake, verify business activity, and refuse unsupported deductions. 
• Fake credentials are a serious warning sign. If someone claims to be a tax attorney or CPA, verify it. 
• If prior returns include false businesses, false deductions, or fake credits, review the exposure before contacting the IRS. 
• When facts involve false returns, COVID relief applications, or fake records, privilege matters. 

Suggested Timestamps: 

00:00: Cold open, 1,370 returns and $73 million in claimed losses 

00:30: Branded intro, Final Notice: Real Tax Cases. Exposed. 

00:45: Who Kerwin Aldric Jordan was 

01:45: The Jordan Corporation and “A Financial Conquest” 

02:30: Fake businesses and fake business losses 

03:45: The $2 million couple and the nearly $28,000 prep fee 

05:00: More than 1,370 returns and $25 million in alleged tax loss 

06:15: PPP loans, EIDL loans, and fake employees 

07:30: How preparer fraud patterns get detected 

09:00: What taxpayers should do before signing a return 

10:15: What tax professionals should learn from the case 

11:30: Cleanup options for bad returns 

12:30: Final lesson, if the business does not exist, the deduction does not either 

Resources Mentioned 

• DOJ case source: https://www.justice.gov/opa/pr/california-tax-preparer-pleads-guilty-filing-false-returns-and-fraudulently-obtaining-covid 
• The Law Office of Jason Carr, PLLC: https://carrtaxlaw.com 

Transcript

SPEAKER_01 0:06

You're listening to Final Notice. Real Tax Cases Exposed with Jason Carr. Each week we break down real Department of Justice tax fraud prosecutions and reveal what should have been done to avoid them. And now here's your host, Jason Carr.

SPEAKER_00 0:28

More than 1,370 tax returns, over $73 million in claim business losses, and the businesses, according to prosecutors, did not exist. Today's case is about Kerwin Aldrich Jordan, a 71-year-old tax preparer from Castag, California, formerly of Pebble Beach. He pled guilty to four counts of aiding in the preparation of false federal income tax returns and one count of wire fraud. Jordan was president of the Jordan Corporation, a tax preparation business, and he also owned and operated something called Jordan and Jordan A Financial Conquest. Financial conquest. That's quite a name. It sounds like a seminar at a hotel ballroom where the coffee is bad and the tax advice is worse. According to the Justice Department, Jordan held himself out as a tax attorney and certified public accountant. Prosecutors say he was neither. That detail matters. When someone claims credentials they do not have, that's not just resume padding. In tax, credentials tell the client who they are trusting, what rules apply, what duties exist, and whether privilege may protect sensitive communications. If the credentials are fake, the client is building their entire tax position on a false premise. Here is how prosecutors said the scheme worked. Jordan prepared federal tax returns for clients that fraudulently reduced their taxable income. The method was simple. He falsely reported the clients had one or more businesses even though he knew those businesses did not exist. Then he reported losses for those non-existent businesses and used those losses to reduce the client's taxable income. That is a magic trick here. Invent a business, invent expenses, create a loss, use the loss to wipe out real income. The Justice Department gave one example. Jordan reduced a married couple's two million dollar income with more than one million dollars in fraudulent expenses for nonexistent businesses. That eliminated additional taxes the couple would have owed and generated a refund of almost $25,000. The couple paid Jordan nearly $28,000 to prepare the return. Let that sit for a second. The refund was almost $25,000. The fee was nearly $28,000. That is not normal tax preparation pricing. That is a warning sign within an invoice attached. From twenty eighteen to twenty twenty three, Jordan filed more than thirteen hundred seventy federal tax returns for clients that reported more than seventy-three million dollars in total business losses. Prosecutors contend those returns caused more than $25 million in losses to the United States Treasury, and he did not stop with tax returns. Jordan also lied on PPP and Idle loan applications, which were COVID-19 business relief programs created to help businesses during the pandemic. Prosecutors said he applied for PPP loans for his companies and received $188,667, then applied for Idle loans for Jordan and Jordan, Euphrates Wealth Asset Management, and Lifestyles of the Rich in Faith Church, receiving $276,600. To get those loans, prosecutors said Jordan falsely reported that the companies had employees when they had none. Fake businesses on tax returns, fake employees on loan applications. Same theme, different form. So how does a case like this get caught? Investigative details are sparse, but the pattern tells you a lot. When a preparer files more than 1,370 returns over several years, and those returns collectively report more than $73 million in business losses, that creates a data trail. The IRS does not have to guess. It can look across returns and see repeated patterns, Schedule C losses, unusual expense ratios, similar categories, returns prepared by the same preparer, and clients whose actual economic lives do not match the businesses reported on those returns. That is especially true when the supposed businesses do not exist. If a W-2 employee suddenly has a business loss large enough to erase income, there should be a business behind it. Records, bank accounts, invoices, customers, mileage logs, contracts, something. A business loss is not just a number on a return. It is supposed to reflect reality. And the COVID loan side creates its own paper trail. PPP and IDL applications required information about businesses, employees, payroll, and economic need. If you tell one federal program that a company has employees and the tax records, payroll filings, bank records, and employment tax history say otherwise, that inconsistency becomes evidence. That is where tax fraud gets very practical. They are document cases. The records either support the story or they do not. So what should have happened instead? Start with the clients. If you are a taxpayer and your preparer says we can create a business loss to lower your tax, stop. Ask a basic question. What business? Not what line on the form, not what category of expenses, what actual business. A real Schedule C business has income or a real attempt to earn income. It has ordinary and necessary expenses. It has records. It has a profit motive. It has a story that makes sense outside the tax software. If you did not operate a business, you do not get to claim business losses. That sentence could have saved a lot of people a lot of pain. If a preparer is claiming large deductions or losses you do not understand, ask for an explanation in writing. Ask what records support the claim. Ask whether the preparer will sign the return as a paid preparer. Ask for a copy of everything filed. If the preparer gets defensive, that is information. For tax professionals listening, this is the indirect continuing education portion of the episode. Don't let refund size become your marketing plan. Build intake procedures. Use engagement letters. Document client provided information. Verify business activity before reporting business income or losses. If a client wants to claim expenses, make them produce records. If they cannot, do not put the numbers on the return. And never hold yourself out as something you're not. Do not call yourself a tax attorney if you are not a licensed attorney. Do not call yourself a CPA if you're not a CPA. Credentials matter because they tell the client what professional regime they are relying on. Now, for someone who has already filed bad returns through a preparer like this, the move is cleanup. You review the returns, you identify the false items, you quantify the exposure, you evaluate whether amended returns make sense. You prepare for an audit, you look at penalties, you deal with balances through installment agreements, offers and compromise, currently non-collectible status, or other civil resolution tools when appropriate. And if the facts are serious, you talk to a tax attorney first. That is not because every bad return is a criminal case. Most are not. It is because when fake businesses, fake losses, fake credits, or false loan applications are involved, you need to understand the exposure before you start sending explanations, emails, or documents all over the place. The goal is to keep the problem in the civil IRS lane whenever possible. Jordan's sentencing hearing is scheduled for October 5th, 2026, and he faces a maximum sentence of 32 years in prison. IRS criminal investigation investigated the case. The lesson here is simple. A tax return should describe what happened. It should not create a fictional business life because the software has a blank line and someone wants a refund. If a deduction depends on a business that does not exist, the issue is not tax planning, it is evidence. I'm Jason Carr, Tax Attorney. If you want to make sure you never end up on this podcast, you know where to find me. Cartaxlaw.com. Link is in the show notes. This has been Final Notice, Real Tax Cases Exposed.

SPEAKER_01 8:26

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