Whistleblower Lawyer Blog
With tax season approaching, the IRS has alerted the public to “tax preparer fraud” by issuing issued a “fact sheet” (at https://www.irs.gov/newsroom/article/0,,id=202123,00.html). The IRS also has attached information about reporting abusive tax schemes through the IRS Whistleblower Program, which provides rewards to whistleblowers.
Interestingly, the IRS has included descriptions of some of the tax fraud and tax evasion schemes that have caused courts to issue “more than 290 permanent injunctions against abusive tax scheme promoters and abusive return preparers since 2001.”
The summary by the IRS is reprinted below:
Houston Tax Preparer Sentenced to Prison
On Sept. 26, 2008, in Houston, Tex., Rosalind D. Jones was sentenced to 21 months in prison and ordered to pay $175,206 in restitution to the IRS for filing false income tax returns. In January 2008, Jones pleaded guilty by admitting that she prepared false tax returns in order to create or to increase income tax refunds for her clients. On the count to which she pleaded guilty, Jones admitted that the false items she placed on the tax return in question claimed a false income tax refund of $4,195. Without the false items, the taxpayer was entitled to a tax refund of only $26.
Tax Return Preparer Sentenced to Five Years in Prison for Filing False Claims for Tax Refunds and Identity Theft
On Aug. 25, 2008, in Pensacola, Fla., Deborah R. Adams, operator of Archer Tax and Accounting Services, was sentenced to 60 months in prison, to be followed by three years of supervised release, and ordered to pay $62,802 in restitution to the IRS. Adams pleaded guilty in May 2008 to 31 counts of preparing and filing false federal income tax returns and 13 counts of identity theft. According to court documents, she filed 31 false federal income tax returns during tax years 2003 through 2005. Adams also prepared false returns with the personal identity information and Social Security numbers stolen from former clients and had the false refunds also deposited to bank accounts she controlled. Adams filed fraudulent claims for tax refunds totaling $102,000.
New Jersey Man Who Prepared Hundreds of Fraudulent Tax Returns Sentenced to Six Years
On May 14, 2008, in Newark, N.J., Romanus Okorie was sentenced to 72 months in prison for filing fraudulent tax returns on behalf of numerous New Jersey residents resulting in a loss to the government in excess of $2.5 million. He was also ordered to pay a $100,000 fine and was prohibited from working as a tax preparer for three years following his release from prison. On Jan. 22, 2008, a jury had convicted Okorie of 10 counts of willfully preparing materially false tax returns. Evidence presented at trial showed that more than 100 clients were audited, and the total tax loss based on the audited returns exceeded $1 million. The government presented further evidence that in 2003 Okorie prepared approximately 250, and in 2004 close to 300, tax returns, all but one generating a refund. The government estimated that the actual tax loss for the returns prepared by Okorie – more than 600 – exceeded $4 million.
North Carolina Professional Tax Return Preparer Sentenced to 70 Months
On Feb. 28, 2008, in Charlotte, N.C., Lloyd Anthony Bastfield, a professional tax return preparer for approximately 18 years, was sentenced to 70 months in prison and ordered to pay $6 million in restitution. Bastfield pleaded guilty in April 2007 to conspiring to defraud the United States by filing false tax returns claiming nearly $6 million in false claims for refunds for individuals between 2001 and 2005, and evading over $171,000 in personal income taxes owed by him for the years 2000 through 2004. According to a Bill of Information, Bastfield admitted that between 2001 and 2005, he prepared and electronically filed more than 10,000 fraudulent income tax returns for individual clients which claimed false and fictitious education income tax credits.
Phony Tax Return Preparer Posed as CPA and Prepared Fraudulent Returns
On Oct. 2, 2007, in Atlanta, Ga., Larry Vonzell Black was sentenced to 15 months in prison, to be followed by three years of supervised release. Black pleaded guilty to charges of filing false claims with the IRS on July 16, 2007. According to information presented in court, he falsely told members of the public, friends and acquaintances that he was a certified public accountant trained to prepare tax returns. He advertised his tax preparation services at a booth set up in a check-cashing store in metropolitan Atlanta. Under the guise of preparing legitimate tax returns, he obtained personal information, including Social Security numbers and W-2 forms, from taxpayers. He then submitted false claims by forging a signature on each taxpayer’s tax return, directing the payment of refunds to himself and distributing only a small portion of the fraudulent refunds to his victims. In all, Black submitted false claims for over $46,000.
Western Tax Service Return Preparers Sentenced for Filing False Tax Returns
On Oct. 15, 2007, in Santa Ana, Calif., Kelly Agbonmoba David, aka David Kelly, was sentenced to 46 months in prison. David’s co-defendant, Anthony Todd Stefani, was sentenced to 27 months in prison. Both men had been found guilty on charges of conspiracy to defraud the United States and of aiding and assisting in the filing of false tax returns with the IRS. According to the indictment, David was hired in 1999 to assist in the preparation of income tax returns for DeAngelo Tax Service and, later, Western Tax Service. Co-defendant Stefani was employed by Western Tax Service to prepare income tax returns in 2001. The indictment further states that the tax preparers were trained in how to make false, misleading and inaccurate statements on clients’ tax returns, usually without the knowledge of their clients. The preparers at DeAngelo and Western Tax Services prepared and filed over 11,000 income tax returns for years 1998 through 2001. Other individuals sentenced for their role in the conspiracy were Samuel DeAngelo, sentenced on Sept. 24, 2007, to 51 months in prison; Douglas Shields, sentenced on Aug. 6, 2007, to 15 months in prison; Jeffrey Russell Wright, sentenced on Sept.17, 2007, to six months in prison followed by six months home detention; and Erin Cordes, sentenced on Sept. 24, 2007, to one year of probation which includes six months of home detention.
San Jose Tax Preparer Sentenced for Preparing False Tax Returns, Banned for Life from Working as a Tax Consultant
On Nov. 1, 2007, in San Jose, Calif., Jonathan Wendy was sentenced to 12 months and one day in prison to be followed by one year of supervised release. In addition, the judge imposed two special supervised release conditions that Wendy agreed to in the plea agreement – a lifetime ban on working as a tax consultant, and filing complete and accurate federal tax returns for tax years 1998 through 2005. Wendy pleaded guilty on Nov. 1, 2006, to one count of aiding or inducing another to file a false tax return. According to his plea agreement, Wendy, who was a tax preparer for over 20 years, admitted that on July 27, 1999, he prepared a federal income tax return for the 1998 tax year which falsely listed taxable income as $94,347, when he knew the correct amount was approximately $104,929. Wendy also admitted that he intentionally reduced the tax liability by creating numerous false or grossly inflated deductions on the return. In addition to the specific count to which he pleaded guilty, Wendy admitted preparing 17 other individual tax returns and falsely listing the taxable amount claimed on each return. As a result of his conduct, the amount of tax owing to the government by those taxpayers was more than $70,000.
U.S. Court Permanently Bars Washington State Woman’s Bogus “Decoding” Tax Scheme
On Aug. 22, 2008, a federal court permanently barred a Tacoma, Wash., woman from selling a tax scam. The court found that Sharon Kukhahn’s “IMF Decoder” scheme falsely purported to “decode” IRS computer transcripts of customers’ taxpayer accounts to show that the customers were not liable for federal income tax. Kukhahn operates businesses named IMF Decoder; Paralegal Research Advocates; and Advocates for Justice, Liberty and Freedom.
Federal Court Bars Oregon Family and Associate from Promoting Tax Fraud Scheme
On April 11, 2008, an Oregon federal court permanently barred John Fitzgerald of Portland and his three daughters – Marilyn Dial, Martha Farr Sharp and Karen Gray – from marketing a tax fraud scheme involving sham nonprofit corporations that customers used to evade federal taxes. The civil injunction order also barred Noreen McCausland, a family associate, from promoting the scheme. Judge Michael W. Mosman of the U.S. District Court for the District of Oregon found that the defendants, through their business American Family Enterprise, Inc., operated “a one stop shop” for setting up sham nonprofit corporations in Oregon. The defendants falsely told customers they could put their income, assets and businesses into the sham corporations and would not have to file income tax returns or pay taxes.
Texas Man Barred from Promoting Home-Based Business Tax Scheme
On Feb. 8, 2008, a federal court barred Thell G. Prueitt of Kingsland, Tex., from promoting a home-based business tax scheme, falsely advising customers they could claim tax deductions for non-deductible personal expenses, and other fraudulent deductions. The court also found that he promoted an ATM and pay phone tax scam, falsely advising customers that they could claim tax credits and deductions based on artificially inflated purchase prices.
California Preparer Promised Customers She Would Represent Them at IRS Audits
On Oct. 2, 2008, a federal court permanently barred Bonnie Arnel, of Newman, Calif., from preparing federal income tax returns. According to the complaint, Arnel told customers she could “find the deductions the IRS [did] not want [her customers] to know about.” Arnel also allegedly promised customers that, as part of her tax preparation services, she would represent them at IRS audits, when she had no intention of doing so and in fact never did.
Imprisoned Tax Defiers Barred from Preparing Tax Returns and Selling Tax Fraud Materials
On Oct.17, 2008, a federal court in Las Vegas permanently barred notorious tax defiers Irwin Schiff and his former associate, Cynthia Neun, from promoting Schiff’s fraudulent “zero tax” plan. The pair was convicted on tax charges in October 2005 and is currently incarcerated. The permanent injunction ensures that Schiff and Neun cannot promote tax-fraud schemes from within prison or when they are released from prison.