I’ll be back in my old stomping grounds of Orange County next Tuesday; I’ll be speaking to the Orange County Chapter of the California Society of Enrolled Agents on “Ethics in the Digital World.” I’ll be noting all the bad things that can happen and methods of avoiding trouble. Hopefully it will be a presentation that will keep Mr. Murphy away from you. You can register at the OCEA’s website.
Archive for the ‘Orange County’ Category
Last year I reported on the case of the misplaced tax refund. An Orange County, California women put in the wrong account number on her tax return. She used an account that she had closed years ago. However, Citibank reissued the account to one Stephen Reginald McDow. The woman wasn’t expecting a refund of $110. Rather, she was expecting $110,000. When the refund didn’t show up, she started investigating.
Mr. McDow had spent roughly 60% of the refund, and he told the unlucky woman what happened. When restitution never happened, she reported the theft to the local police. The Orange County District Attorney was going to prosecute the case. However, Mr. McDow pleaded guilty last week.
He got 60 days at the Orange County jail, 18 months of probation, and had to make restitution (which he has done).
As I mentioned when I first reported on this story, you can’t spend a tax refund that’s not yours. This has happened on a couple of occasions to my clients. I had one client receive a $1,500 check and another had over $10,000 incorrectly direct deposited into his account. Both returned the money and there were no other issues. If you instead elect to spend the money, you’re spending someone else’s money, be it the taxpayer who was expecting the refund or the tax agency that incorrectly sent it. That”s theft, and the local jail is likely no more comfortable than ClubFed.
Indeed, had Mr. McDow repaid this money when first contacted by the victim, all he’d be out is the money he should never have received. Instead, he gets 20 months to think this over.
I’m a resident of Orange County (well, if you read the next post I write…), and I missed the Real Housewife Tax Cheats in Orange County. Luckily, Joe Kristan caught it.
The Orange County Premium Fraud Task Force, a collaboration of investigators from OCDA, DOI, EDD, FTB and the Contractors State License Board investigated the couple for two years and discovered that between 2000 and 2008, they fraudulently submitted 42 claims for uninsured injured workers and underreported $29 million in payroll to SCIF in order to avoid paying Workers’ Compensation Insurance premiums.
Yes, proceeds from illegal income are taxable.
What happens when you get a tax refund direct deposited in your bank account? Well, you spend the money (or invest it, etc.). But what if that isn’t your refund? Well, that’s a problem.
Earlier this year I reported on individuals in Ohio who were notified that they would receive $200,000,000 refunds. The letters were in error, of course, and no refunds were issued. Had they been issued refunds they would need to return the checks. If the funds had been direct deposited, the individuals would be liable for interest on the money, too.
One “lucky” resident of nearby Laguna Beach received an unexpected $110,000 in his bank account. Reginald McDow is accused of having the $110,000 related to another individual’s tax refund deposited into his bank account and then not returning the money. The other individual put the wrong bank account number on her return (she had closed the account years ago, and Citibank allegedly reassigned the account to Mr. McDow), and Mr. McDow got his free money! According to the Orange County Register, Mr. McDow allegedly used the money to pay down his own debts.
The Orange County District Attorney is accusing Mr. McDow of theft. (Note that the alleged crime is a state charge, not a federal charge. Mr. McDow would be prosecuted in Orange County Superior Court.)
There are two morals to this story. First, if you receive a tax refund you are not expecting, you should check with the tax agency. I had a client recently receive a $1,500 refund. It turns out it was sent in error. My client had not cashed the check, and she is returning it to the IRS. If you receive a refund that’s not yours, you will need to return it to the tax agency. No, it’s not finders keepers.
Second, if you use direct deposit or electronic funds debit, make sure you check the banking information every year! If you make a mistake, your refund might not bounce and it could end up in an unscrupulous individual’s account. I’m unsure if the person who should have received the refund in this case is being made whole by the IRS or if she must pursue the alleged recipient of her funds. What I do know is that if she had verified and corrected her information before hitting “send” on her tax return, she would have the $110,000 and this would never have happened.
Chriss Street is Orange County’s Treasurer-Tax Collector. He’s the person responsible for collecting the property tax bills for Irvine, and the rest of Orange County. Mr. Street is up for re-election this June, and he’ll likely face a tough fight. On Friday, he was ordered to pay $7,068,765 for breaching his fiduciary duty in liquidating a trust.
Judge Richard M. Neiter of the US Bankruptcy Court said, “The overwhelming evidence at trial showed that the Defendant willfully engaged in self-dealing to advance his personal interest ahead of that of the Trust’s beneficiaries.” The Orange County Register reports that Mr. Street also used the trust to pay personal expenses including a dinner at Spago, Botox treatments, and paying a traffic ticket.
Mr. Street’s attorney refused to comment on the case until he could study the verdict.