Federal prosecutors say eight North Carolina tax preparers did not just bend the rules, they broke them, using a Covid-era sick and family leave tax break to wring nearly $14 million in refunds from the IRS. Court records show the business owner and seven employees pleaded guilty this week to preparing false tax returns between April 2022 and May 2023 for clients who were never entitled to the credit. The case is one piece of a much larger federal push to claw back money lost to pandemic-relief fraud.
According to the U.S. Department of Justice, Nejlai Mitchell, who ran tax-preparation offices in Lumberton and Hope Mills, admitted that she and seven employees conspired to file false returns that claimed refunds tied to the paid sick and family leave credit. The DOJ says the IRS ultimately paid out about $13,890,697 in fraudulent refunds that flowed from the scheme. "Instead of honoring their legal and ethical duties as tax preparers, this group allegedly engineered a calculated scheme to enrich themselves by submitting false returns," Assistant Attorney General Colin M. McDonald said in the department's announcement.
The paid sick and family leave credit was created under the Families First Coronavirus Response Act to reimburse employers, and in some situations self-employed people, for wages paid when workers stayed home because of Covid-19. The IRS has warned that bad social-media advice and so-called "ghost preparers" have fueled thousands of questionable claims, and it has posted detailed FAQs that spell out how bogus Form 7202 filings and fake Schedule H entries can be used to pump up refunds. The agency says it will hold on to suspicious refunds until it can verify them and has issued instructions for taxpayers on what to do if the IRS comes calling, outlined in the IRS bulletin.
The defendants are identified as Nejlai Mitchell, Whitnee Leach, Tiffany Moody, Shaneen Ray, Eyoubo McBurney, Katrena Stanback, Jeannie Negron and Sylvia Swindell. Local coverage reports that several co-conspirators entered guilty pleas on staggered dates, with Negron and Swindell pleading in August 2025, McBurney and Stanback in September 2025, Moody and Ray in December 2025, Leach in May 2026, and Mitchell following in June 2026. That reporting also notes that the crew operated from offices in both Lumberton and Hope Mills, according to Charlotte Alerts News.
What They Face In Court
Mitchell and Leach each face as many as five years in prison on the conspiracy charge and up to three additional years for preparing and filing false returns. The remaining six defendants are looking at maximum sentences of three years apiece on their preparing-and-filing counts. The case was announced by U.S. Attorney W. Ellis Boyle and the Department of Justice's National Fraud Enforcement Division, with IRS Criminal Investigation leading the probe. Trial Attorney Caroline Pearson and Assistant U.S. Attorney Ethan Ontjes are handling the prosecution. Any punishment will be set by a federal judge who must weigh the U.S. Sentencing Guidelines along with other statutory factors, the DOJ said.
Why This Matters
Prosecutors and tax officials argue that scams targeting pandemic relief credits drain money that was supposed to keep legitimate employers and taxpayers afloat during Covid-19, not pad the profits of crooked preparers. Similar crackdowns have gone after other tax pros accused of juicing Covid-era claims, from large federal indictments to hefty plea deals, part of a nationwide wave of pandemic fraud cases covered by outlets such as Newsweek. Federal investigators say they plan to keep chasing preparers who twist pandemic tax rules for personal gain, and they urge taxpayers to vet their preparers carefully and keep thorough records in case the IRS comes knocking.
