BOSTON — The former personnel director for the town of Agawam, who pleaded guilty last January to defrauding the federal government, was sentenced on Sept. 5 to two months in prison, which will be followed by 12 months of supervised release, with the first six months to be served in home confinement, according to a press release issued by the U.S. attorney’s office in Boston.
She was also ordered to pay $261,102 in restitution to the Internal Revenue Service, according to a press release. Colleen Gruska, 66, was facing up to three years in prison after agreeing to plea deal.
The charges were filed in October 2021, after federal agents showed up at Agawam’s Town Hall and served Gruska with a subpoena to search her financial records. That search warrant led to Gruska, who resides in Feeding Hills, being formally charged in February with four counts of filing false tax returns as a federally registered tax preparer, according to court records.
Gruska no longer works for Agawam. Asked to comment last February, Agawam Mayor Christopher Johnson said the charges had nothing to do with the work she did for the town.
According to the charging documents filed by Assistant U.S. Attorney Michael Mazur, federal agents seized 106 tax returns Gruska had filed between 2011 and 2020. After examining the returns, investigators found that 34 of the returns prepared by Gruska “reflected a pattern of fabricated or overstated Schedule C losses, which resulted in a substantially reduced tax liability for each taxpayer,” including herself, according to the charging documents.
Schedule C tax forms are used by sole proprietorships to report income or losses on the 1040 individual tax return. The government’s statement of facts said Gruska started a small tax preparation business in 2011 that mainly served family members and friends.
The 34 flagged Schedule C forms showed losses that were either “dramatically overstated or were for businesses that did not exist,” according to the statement of facts.
Gruska also prepared the returns for her legitimate tax preparation business and a house and yard cleaning business she falsely claimed she operated, court documents said. In 2017, for the tax prep business, she reported $27,469 in losses, and $44,720 in expenses for the cleaning business, according to court records. However, the government found that actual losses were $350 for the tax business and none for cleaning business.
When she filed tax returns for her businesses the next three years, she continued to overstate the expenses of both when the actual figures were $350 and $0, respectively. In 2018, she reported losses for the tax service and cleaning businesses, respectively, of $28,195 and $50,380. In 2019, she reported $19,205 and $43,463. In 2020, she reported $20,062 and $50,437.
In those filings, she certified she had written documentation in support of the losses when she knew there was no documentation, according to the statement of facts. The prosecutor’s statement says all filings for the cleaning business between 2011 and 2020 were plainly false, because it didn’t exist.
Prosecutors said Gruska used the same fraudulent scheme for two legitimate businesses owned by one individual, and for four individuals for businesses that did not exist.
Between 2011 and 2020, she filed returns for the owner of a legitimate snowplowing and roofing business. The business owner did not inspect the returns before they were filed, prosecutors said. Gruska reported expenses for the snowplowing business at $797,884 and expenses for the roofing business of $208,313 per year, when the actual figures were $153,925 and $3,381, respectively.
She also filed returns between 2011 and 2020 for an individual who ran a soccer coaching business. According to the statement of facts, Gruska knew the individual volunteered as an unpaid coach, but reported Schedule C expenses on her return of $233,561. The individual allowed Gruska to use her personal identification number.
Between 2016 and 2020, Gruska also reported expenses of $49,596 for a snowplow business that didn’t exist, for an individual who allowed her to use his personal identification number to file his return.
And between 2016 and 2018, two individuals allowed Gruska to file a joint return, using their personal identification numbers, that listed $29,600 in expenses for a snowplowing business that didn’t exist.
As a result of the fraudulent activities, the government received $261,102 less in tax payments than it should have, which Gruska must pay back now.
Mazur had recommended Gruska be incarcerated for 18 months, serve 12 months of supervised probation, and pay a fine, which could be as much as $250,000, in addition to the restitution.
