DETROIT, MI – September 5, 2026 (STL.News) Rodney Underwood of Detroit has pleaded guilty to a federal charge stemming from a tax fraud scheme in which prosecutors say more than 200 false tax returns were filed with the Internal Revenue Service, fraudulently claiming more than $7 million in refunds.
The U.S. Department of Justice announced Underwood’s guilty plea Wednesday, Sept. 2, saying the scheme caused an actual loss to the federal government of approximately $6.2 million. Underwood pleaded guilty to making a false claim and now faces a maximum statutory penalty of five years in federal prison.
His sentencing is scheduled for Jan. 6, 2027.
More Than 200 False Tax Returns Filed by Rodney Underwood
According to court documents and statements made in court, Underwood prepared and filed more than 200 nearly identical false federal income tax returns for clients in various parts of Detroit.
Federal prosecutors said the returns included false dividend income and false withholding amounts. Those figures generated tax refunds that Underwood’s clients were not entitled to receive.
The false returns collectively claimed more than $7 million in IRS refunds. The Justice Department said the government ultimately lost about $6.2 million as a result of the scheme.
The scale of the operation makes the case significant not only because of the amount of money involved but also because of the number of returns allegedly prepared using essentially the same method.
Underwood admitted his role by pleading guilty to making a false claim.
Prosecutors Say Underwood Was a Ghost Preparer
An important element of the case involves a practice federal authorities describe as “ghost preparation.”
Prosecutors said Underwood prepared tax returns for customers but left the section identifying the paid tax preparer blank. As a result, the returns appeared to the IRS as though the taxpayers had prepared and filed the documents themselves.
That concealed Underwood’s role as the preparer.
The IRS has repeatedly warned taxpayers about ghost preparers because legitimate paid tax return preparers generally must sign the returns they prepare and include identifying information.
In Underwood’s case, prosecutors said the practice spanned more than 200 false returns.
The returns contained fabricated dividend income and withholding information that generated refunds for taxpayers not legally entitled to the money, according to the Justice Department.
Underwood also failed to report the fees he collected through the scheme as income on his own individual federal income tax returns, prosecutors said.
DOJ Condemns Fraudulent Refund Schemes
Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division described fraudulent tax refunds as theft from Americans who comply with federal tax laws.
“Filing false returns isn’t a shortcut — it’s pure theft,” McDonald said in announcing the guilty plea.
Federal officials said the Justice Department intends to continue pursuing individuals who deliberately attempt to cheat the federal tax system through fraudulent refund claims.
The guilty plea represents an admission of criminal responsibility by Underwood and moves the federal prosecution into its sentencing phase.
Rodney Underwood Faces Up to Five Years
Underwood is scheduled to return to federal court for sentencing on Jan. 6, 2027.
The offense carries a maximum statutory sentence of five years in prison. However, that does not mean Underwood will necessarily receive the maximum sentence.
A federal district court judge will determine the sentence after reviewing the U.S. Sentencing Guidelines and other factors required under federal law.
Those guidelines can take into account numerous circumstances surrounding an offense, while the court ultimately sets the sentence under applicable federal law.
The approximately $6.2 million in actual government losses identified by prosecutors is therefore an important distinction from the more than $7 million in refunds that the fraudulent returns sought.
FOX 2 Detroit also reported that Underwood faces up to five years in federal prison and that the case involved more than 200 nearly identical tax returns.
IRS Criminal Investigation Handled the Case Against Rodney Underwood
IRS Criminal Investigation conducted the investigation, the criminal investigative arm of the Internal Revenue Service.
IRS Criminal Investigation investigates potential violations of federal tax laws as well as other financial crimes falling within its jurisdiction.
Tax refund fraud can be particularly costly because the schemes try to get the federal government to release money based on fabricated information in tax filings.
In the Underwood case, investigators and prosecutors determined that false dividend income and withholding amounts were being reported on returns to produce refunds that taxpayers otherwise would not have been entitled to receive.
The Justice Department said Trial Attorneys Shawn Noud and Alexis Hughes of the National Fraud Enforcement Division’s Tax Section are prosecuting the case.
Case Highlights Risks of Ghost Tax Preparers
The case also warns taxpayers who pay someone else to prepare their federal income tax returns.
A taxpayer should be cautious if a person paid to prepare a return refuses to identify himself or herself as the preparer.
A return that appears self-prepared when a taxpayer actually paid someone to prepare it can indicate that the preparer is trying to conceal involvement in the filing.
The Underwood prosecution shows why that distinction matters.
According to prosecutors, Underwood allegedly concealed his role on more than 200 returns while inserting false information that resulted in millions of dollars in improper refund claims.
For taxpayers, reviewing a completed return before submitting it remains important, regardless of who prepares it. Taxpayers should understand the income, deductions, credits, withholding, and refund amounts being reported under their names.
The Underwood case illustrates the potential consequences of systematically inserting fraudulent information into federal tax filings.
$7 Million Claimed and $6.2 Million Lost
Two numbers are particularly important in understanding the size of the case.
The false tax returns Underwood prepared claimed more than $7 million in fraudulent refunds, according to prosecutors.
The government’s actual loss was approximately $6.2 million.
The distinction means that not every dollar sought through the allegedly fraudulent filings necessarily resulted in money being paid by the government.
Nevertheless, an actual loss of approximately $6.2 million makes the scheme substantial.
The Justice Department’s announcement came amid continued federal enforcement against tax preparers and individuals accused of manipulating the tax system to obtain improper refunds.
Underwood’s guilty plea means the central question in his case is no longer whether he will be convicted on the charge to which he pleaded guilty. The next major development will be the punishment imposed by the federal court.
His sentencing hearing is currently scheduled for Jan. 6, 2027.
Until then, the court will consider the applicable sentencing guidelines and other statutory factors before determining the appropriate sentence.
Source: U.S. Department of Justice, Office of Public Affairs, Sept. 2, 2026.
