Michigan Man Pleads Guilty in $7 Million Tax Fraud Scheme
A Detroit man has pleaded guilty to making a false claim as part of a tax fraud scheme that prosecutors say sought more than $7 million in improper refunds from the Internal Revenue Service.
The Justice Department announced the guilty plea September 2, 2026, saying Rodney Underwood admitted to conduct involving more than 200 tax returns prepared for clients in the Detroit area. The government said the returns contained false dividend income and withholding amounts that were used to generate refunds clients were not entitled to receive.
According to the Justice Department, Underwood used a practice prosecutors described as “ghost preparing” returns. The paid preparer section was left blank, making the filings appear to have been prepared by the taxpayers themselves.
More Than $7 Million in False Refund Claims
Court documents cited by prosecutors say the false returns collectively claimed more than $7 million in refunds. The government estimates that the scheme caused an actual loss of approximately $6.2 million.
Prosecutors also said Underwood failed to report fees he received from the scheme as income on his own individual tax returns. The alleged conduct therefore involved both false claims made through client returns and personal tax-reporting issues connected with the proceeds.
Guilty Plea and Sentencing
Underwood pleaded guilty to making a false claim. He is scheduled to be sentenced January 6, 2027. The charge carries a maximum penalty of five years in federal prison, although any eventual sentence will depend on the federal sentencing guidelines and other statutory factors considered by the court.
A guilty plea is different from an allegation in an indictment because it represents the defendant’s admission to the charged offense. The sentencing phase will determine the punishment after the court reviews the relevant circumstances.
IRS Criminal Investigation
The case was investigated by IRS Criminal Investigation, the federal agency responsible for investigating potential criminal violations of the tax laws. Trial attorneys Shawn Noud and Alexis Hughes of the National Fraud Enforcement Division’s Tax Section are prosecuting the case.
Tax refund fraud can affect public finances directly because fraudulent claims seek government payments that are not legally owed. Federal prosecutors have increasingly emphasized enforcement against schemes that manipulate tax filings or federal benefit programs.
Broader Federal Fraud Enforcement
The prosecution comes as the Justice Department expands its focus on financial fraud. The department has established a National Fraud Enforcement Division and has said it is targeting schemes that divert federal money through false claims, deceptive filings and other forms of fraud.
For taxpayers, the case also demonstrates why the accuracy of tax returns matters even when a preparer or third party handles the filing. False information submitted to the IRS can create criminal exposure for people who knowingly participate in a fraudulent scheme.
The court is expected to address Underwood’s sentence in January. Until then, the plea establishes his criminal responsibility for the offense to which he admitted, while the precise punishment remains a matter for the federal court. Related federal fraud case.
