Credit Where Credit Isn't Due

Congress created the Employee Retention Credit to help struggling businesses keep workers on payroll during the pandemic. Candies Goode-McCoy of Las Vegas treated it like an ATM. 

From approximately June 2022 through September 2023, Goode-McCoy conspired with others to file more than 1,200 tax returns for her own businesses and for others, claiming the Employee Retention Credit and the paid sick and family leave credit, and seeking refunds totaling more than $98 million. The IRS paid out roughly $33 million before the scheme was stopped. Goode-McCoy personally received over $1.3 million in fraudulent refunds and about $800,000 more from clients, spending the proceeds on luxury cars, vacations, and gambling. 

She pleaded guilty to one count of conspiracy to defraud the government with respect to claims and was sentenced to 54 months in prison, three years of supervised release, and more than $26 million in restitution to the IRS. 

Jason explains why refundable credits like the ERC draw intense IRS scrutiny, how high-volume claims create unmistakable data patterns, and what a business should do if it already claimed an ERC it can no longer defend, including the ERC Voluntary Disclosure Program, claim withdrawal, amended returns, audit defense, and penalty relief. 

This episode is for taxpayers, small business owners, tax preparers, bookkeepers, enrolled agents, CPAs, and anyone trying to understand where an aggressive credit claim crosses the line into criminal tax fraud. 

Key Takeaways:

• A refundable credit is the most heavily scrutinized money in the tax code. A refund that sounds too good to be true usually is. 
• The ERC was a legitimate program with specific eligibility rules: a government-ordered shutdown or a significant decline in gross receipts in qualifying periods. 
• High-volume claims with repeated credits create detectable patterns. The IRS shifted most of its exam staff to audit ERC claims. 
• Lifestyle that doesn't match reported income is a classic red flag investigators follow every time. 
• Tax preparers should build practices on eligibility analysis, documentation, and defensible positions, not refund size. 
• If you already claimed a credit you can't support, voluntary correction through the ERC Voluntary Disclosure Program or claim withdrawal is far better than waiting for the IRS to find it. 
• The goal is to keep the matter in the civil tax resolution lane, through amended returns, audit defense, and penalty relief, before it becomes a criminal case. 

Resources Mentioned: 

• DOJ sentencing release: Business Owner Sentenced to Over Four Years in Prison for $100M COVID-19 Tax Credit Scheme 
• DOJ District of Nevada release: Business Owner Sentenced to Over Four Years in Prison for $100M COVID-19 Tax Credit Scheme 
• DOJ guilty plea release: Nevada Woman Pleads Guilty to Fraudulently Seeking Nearly $100M in COVID-19 Employment Tax Credits 
• Related co-conspirator (IRS-CI): Nevada businesswoman pleads guilty to multimillion dollar scheme to fraudulently claim COVID-19 tax credits 
• The Law Office of Jason Carr, PLLC: https://carrtaxlaw.com 

Transcript

SPEAKER_00 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_01 0:28

The IRS handed her $33 million. She kept $1.3 million for herself, took $800,000 more from her clients, and spent both on luxury cars, vacations, and the casino floor in Las Vegas. Then the same agency that wrote the checks came to collect. Here's what she did. Congress created two pandemic era tax breaks, the Employer Retention Credit, or the ERC, and the Paid Sick and Family Leave Credit. Both were designed to help struggling businesses keep people on payroll during COVID. Real programs, real money, aimed at real businesses that were hurting. Good McCoy saw those programs as an ATM. She conspired with others to file more than 1,200 tax returns for her own businesses and for other people, all of them claiming these credits. The return sought refunds of more than $98 million. Let that number sink in. So where did the money go? Vacations, luxury cars, other luxury goods, and gambling at the casinos. So how does a scheme this big come apart? Start with the ERC itself. By the time Good McCoy got going, the IRS already knew the employee retention credit had become one of the most abused programs in the tax code. The credit is refundable, meaning you can get cash back even if you owe no tax, and a whole cottage industry of what the IRS called ERC mills had sprung up to chase it. The agency pulled a huge share of its exam staff to focus specifically on auditing these claims. Now picture the data. One preparer filing twelve hundred employee tax returns in roughly 15 months with refund claims approaching $100 million. That's not a needle in a haystack. That is a bonfire. When you file it that volume with those numbers, you don't blend in, you light yourself up. IRS Criminal Investigation and the Treasury Inspector General for Tax Administration work the case. As a special agent in charge put it, IRS investigators are the experts at following the money, and this was, in his words, one of the biggest COVID fraud cases the agency had seen. And the money trail here was loud. You claim ninety-eight million dollars in credits, you take home seven figures, and then you spend it on cars and casino chips. Lifestyle that doesn't match reported income is one of the oldest red flags in the book. Agents follow it every single time. The end result? Good McCoy pleaded guilty to one count of conspiracy to defraud the government with respect to claims. She was sentenced to 54 months in prison, three years of supervised release, in order to pay the IRS more than $26 million in restitution. And she wasn't alone. One of her co-conspirators, a Las Vegas real estate agent and tax preparer named Adanya Stiles, funneled clients to her and has also pleaded guilty. That's how these conspiracies unwind. One person flips, the referrals get traced, and the whole network comes down. Here's where I want you to imagine Candy's Good McCoy walking into my office in early 2022 before any of this happened. Because there was a legitimate version of the story. The ERC was real money and plenty of businesses generally qualified. The right move was never don't touch the credit. The right move was claim what you actually qualify and document it. First, eligibility. The ERC had real specific rules. A business generally had to show either a government-ordered shutdown or a significant decline in gross receipts during the qualifying periods. If you came to me, step one is a sober eligibility analysis. Did your business actually meet one of the tests? In which quarters and for how many employees? That analysis is the difference between a defensible refund and a criminal referral. Second, documentation. I tell every business owner the same thing about a lucrative audit prom credit like this one. You file it the way the careful operators did during COVID, through a real accountant or attorney with detailed records, fully expecting that you might be audited. Real planning has receipts. Real credits have eligibility rules. If you can't support it on paper, you don't claim it. Now a word to the tax preparers listening, because I teach a lot of you. Good McCoy is your cautionary tell. When you file extreme volume with cookie cutter credits, you're not building a practice, you're building the government's case for them. The IRS literally redeployed most of its exam staff to hunt ERC claims. Your defense as a preparer is intake quality, eligibility work papers, and a documented basis for every position. Refund size is not a business model. It's an exhibit. And here's the most important part, the part that's actually a service we provide. Let's say you already claimed the ERC and now you're not sure it holds up. Maybe a meal talked you into it. You're not out of options, but the window matters. The IRS ran a dedicated ERC voluntary disclosure program and a separate claim withdrawal process for exactly this situation, letting taxpayers pull back or pay back improper credits on far better terms than waiting to get caught. Beyond that, the general voluntary disclosure framework, omitted returns, audit defense, and penalty abatement all exist to fix this while it's still a civil problem. That's the whole philosophy of this show. You want the ERC problem solved while it's still an IRS problem. You do not want it becoming a DOJ problem. Good McCoy blew past every off-rent and drove straight into a 54-month sentence and a $26 million restitution order. So here's the top takeaway to remember from this case. Free government money is never actually free, and a refundable credit is the most scrutinized money in the tax code. If someone's promising you a refund that sounds too good to be true, it isn't a windfall. It's a first exhibit. If you claim the ERC and you're not certain it's defensible, the time to fix it is now, on your terms, through voluntary disclosure or a withdrawal, not later when criminal investigation is following your money. 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_00 7:01

If you enjoyed today's episode, share it with a friend or colleague who needs to hear it. Subscribe so you never miss a case. For show notes and more, visit cartaxlaw.com. This podcast is legal education and commentary, not legal advice. And listening does not create an attorney client relationship. Full disclaimer at Cartaxlaw.com.