COVID Tax Credit Scam Uncovered in North Carolina

A hundred dollar bill featuring Benjamin Franklin wearing a face mask

A North Carolina tax preparer just admitted helping drain nearly $14 million in COVID relief dollars from the people who actually needed them.

Story Snapshot

A Lumberton tax business owner pleaded guilty in a COVID tax credit fraud scheme tied to about $13.9 million in false refunds.
Seven other preparers connected to the same business also pleaded guilty, making this part of a larger $25 million pandemic fraud operation.
The scheme abused special sick and family leave tax credits that Congress passed to keep real workers and small businesses afloat during COVID.
The case highlights how complex tax rules and weak oversight let insiders quietly cash in while ordinary families fought to stay afloat.

Tax Business Owner Admits Role in Massive COVID Refund Scam

Federal prosecutors say 48-year-old Nejlai Mitchell, a Robeson County woman, owned and ran a tax return preparation business with offices in Lumberton and Hope Mills, North Carolina.^[3] According to court documents, she pleaded guilty to conspiring to prepare false tax returns and helping file those false returns for clients.^[3] These returns claimed special COVID-19 tax credits that the clients were not actually allowed to receive.^[2] Her case shows how one small business can move huge sums of taxpayer money when no one is watching closely.

From April 2022 through May 2023, Mitchell and seven employees filed fake returns that asked the Internal Revenue Service to pay out money based on the paid sick and family leave credit.^[2] Congress created this credit so real businesses could afford to keep sick workers home during the pandemic instead of forcing them to choose between health and a paycheck.^[2] Instead, the group turned that lifeline into a cash machine, helping clients claim credits they did not earn while charging fees for their “help.”

Nearly $14 Million Lost, With More Fraud Attempts Behind It

The Internal Revenue Service reports that, as a result of this conspiracy, it paid out about $13,890,697 in fraudulent tax refund claims linked to these fake COVID credits.^[2] Mitchell will be ordered to pay that same amount through a forfeiture money judgment, meaning she must give up assets equal to the fraud dollars.^[3] Local coverage notes that the broader scheme involved nearly $25 million in false pandemic relief claims tied to this network of eight preparers.^[4] Prosecutors say seven other tax preparers have already pleaded guilty for their roles.^[3]

Mitchell now faces up to eight years in federal prison and a fine of up to $500,000 when she is sentenced later this year.^[3] The other defendants face shorter but still serious prison terms for preparing and filing false tax returns.^[2] For readers who feel the system rarely punishes white-collar crime, this case may look like a rare moment of accountability. At the same time, the fact that the Internal Revenue Service already paid out close to $14 million before catching the fraud reinforces fears that federal agencies let billions slip away while regular taxpayers get audited for honest mistakes.

Pandemic Tax Credits Turned Into a Playground for Fraudsters

This North Carolina case fits a bigger pattern that has grown across the country since COVID.^[19] Tax preparers and other players have learned to target special pandemic credits like the paid sick and family leave credit and the employee retention credit because they can be worth large sums per return.^[19]^[20] A recent analysis of tax refund fraud explains how threat actors get personal data, file fake returns, bypass checks, and then quickly turn those refunds into cash or cryptocurrency.^[20] The same basic loopholes in identity checks and return review make it easier for insider preparers to game the system from within.

When you step back, the pattern fuels anger on both the right and the left. Many conservatives already see Washington as a bloated bureaucracy that wastes money and rewards insiders. Many liberals see a system where the well-connected find new ways to profit while ordinary workers fall farther behind. Pandemic tax credits were supposed to soften the blow for small businesses and families. Instead, cases like Mitchell’s show how fast politically connected programs can become hunting grounds for fraud, while the federal government struggles to track who really deserves help.

Trust Gap: Ordinary Taxpayers Scrutinized While Preparers Exploit Loopholes

The Internal Revenue Service itself warns taxpayers to be wary of preparers who promise huge refunds, charge fees based on refund size, or steer refunds into their own bank accounts.^[24] These warning signs match what many people now see on social media, where “Facebook tax pros” brag about getting clients giant checks by inventing fake businesses or credits.^[23] When those schemes collapse, the customers often owe the money back, plus penalties, while the preparer has already taken a cut and disappeared.^[22]^[23] The North Carolina case shows what happens when that same behavior scales up inside a formal business that looks legitimate from the outside.

Eight North Carolina tax preparers plead guilty in $25 million COVID tax credit fraud schemehttps://t.co/ESMR6NPDUU

— SandyL (@SBrewY) June 25, 2026

For citizens watching from both sides of the political aisle, the lesson is blunt. Huge federal relief programs, rushed out during crisis, created easy targets for fraud. Agencies like the Internal Revenue Service and the Department of Justice are catching some of the worst offenders, but only after tens of millions are gone.^[7]^[9]^[19] Ordinary people feel the rules pressing on them every April, yet see professionals twist those same rules into personal jackpots. That gap in treatment deepens the sense that the system protects insiders, not the public it claims to serve.