Indianapolis CPA sentenced to federal prison for defrauding IRS of at least $2.5M

(Adobe Stock)

An Indianapolis certified public accountant was sentenced Monday to three years in federal prison for assisting in the preparation of false tax returns on behalf of clients who participated in an illegal tax shelter.

Jason L. Crace entered a guilty plea in July 2024 in the U.S. District Court for the Southern District of Mississippi, according to the U.S. Department of Justice.

Crace operated several businesses in Indianapolis and Fishers at various times from 2008 to 2023, including Crace CPA LLC, Cobblestone Trustee Services LLC and Crace + Beam CPAs LLC.

According to court documents and statements made in court, between 2013 and 2022, Crace prepared income tax returns for clients that claimed millions of dollars in false deductions for so-called “royalty payments.”

The “royalty payments” were merely circular flows of money designed to give the appearance of genuine business expenses.

In reality, tax shelter participants sent their money to bank accounts controlled by scheme promoters, who then sent the money right back to different bank accounts that the participants controlled.

That way, tax shelter participants retained control of the money they transferred, while falsely deducting the transfers as business expenses on their tax returns. Participants’ decision regarding how much to pay “royalties” was driven purely by the amount of income they wanted to shelter from the Internal Revenue Service on their tax returns.

In total, Crace’s preparation of false tax returns claiming fraudulent “royalty” deductions caused a loss to the IRS of at least $2,532,936, according to a DOJ news release.

One of the scheme’s promoters, Stephen T. Mellinger III, previously pleaded guilty and was sentenced to eight years in prison for his role.

In addition to his prison sentence, the court sentenced Crace to serve one year of supervised release and to pay restitution of $2,532,936.