Chowan Watson, 55, of Rocky Mount, North Carolina, pleaded guilty in federal court in Raleigh on Thursday to one count of aiding and assisting in the preparation of a false tax return, in a scheme that prosecutors say cost the Internal Revenue Service approximately $3.9 million in tax losses.
Source: U.S. Department of Justice, Eastern District of North Carolina
Chief U.S. District Judge Richard E. Myers II accepted the plea, according to the U.S. Attorney's Office for the Eastern District of North Carolina. U.S. Attorney Ellis Boyle announced the plea, and court documents in the case can be found through the U.S. District Court for the Eastern District of North Carolina or on PACER under Case No. 5:26-CR-125-M.
How the scheme worked
Watson and Angela Dickens operated Empire Tax Service in Rocky Mount, a business later renamed K&J Tax Service. From 2017 to 2023, the two fraudulently filed hundreds of tax returns by inflating the amounts shown as “Other 1099 Withholding,” the Justice Department said. The inflated withholding figures pumped up the refunds claimed on those returns, and the operators took excessive fees out of the inflated refunds, prosecutors said. Total tax losses are approximately $3.9 million.
“Watson and Dickens didn't just bend the rules — they broke the door wide open,” U.S. Attorney Ellis Boyle said in the Justice Department's statement. “For years, they engineered a scheme that faked withholdings, pumped up refunds, and drained the U.S. Treasury of nearly four million dollars. They preyed on the trust of hardworking Eastern North Carolinian taxpayers and twisted a legitimate tax preparation service into a personal profit machine.”
IRS Criminal Investigation led the investigation. “Those who attempt to undermine the integrity of the American tax system should understand IRS Criminal Investigation follows the money to uncover fraudulent schemes,” said Donald “Trey” Eakins, Special Agent in Charge of IRS-CI's Charlotte Field Office, adding that IRS-CI and the U.S. Attorney's Office would continue to pursue anyone who seeks to defraud the tax system.
The second operator pleaded guilty first
Dickens, Watson's co-operator at Empire Tax Service and K&J Tax Service, previously pleaded guilty to one count of aiding and assisting in the preparation of false tax returns in the same approximately $3.9 million scheme, according to an IRS Criminal Investigation release dated August 4, 2026. Dickens also faces a maximum of 36 months in prison, is due to be sentenced in November 2026, and has agreed to pay restitution to the IRS.
Source: IRS Criminal Investigation
Why preparer fraud hits ordinary families hardest
Tax-preparation fraud of this kind works because clients hand a preparer their pay records and trust the numbers that come back. When withholding figures are invented, the refund looks like a windfall — but the return carries the client's signature, and the IRS can later claw back inflated refunds, with interest and penalties, from the taxpayer as well as the preparer. Federal prosecutors have made preparer fraud a stated priority: on April 7, 2026, the Justice Department announced a new National Fraud Enforcement Division to investigate and prosecute fraud against the public, work the department links to President Trump's Task Force to Eliminate Fraud, chaired by Vice President J.D. Vance.
Taxpayers are legally responsible for what is on a return filed in their name, even when a preparer fills it in. Review every line before signing, be wary of any preparer who promises an unusually large refund or takes fees as a percentage of the refund, and keep copies of your wage and withholding documents.
What happens next
Watson faces a maximum penalty of 36 months in federal prison and is due to be sentenced later this year. She has agreed to pay restitution to the IRS; the final restitution amount is set through the court process. Dickens is due to be sentenced in November 2026. Reporting on Watson's plea in the accounting trade press matches the Justice Department's account of the scheme, the $3.9 million loss figure and the 2017–2023 period.
Source: Accounting Today