Archive for the ‘Scams’ Category

As Relieable as You Might Have Thought

Sunday, October 9th, 2016

That is not a typographical error in the headline. Yes, I meant to type, “Relieable.” Why? Because of a story of a Tampa, Florida tax professional who was as relieable, err, reliable as the headline.

Donna Demps was found guilty of wire fraud and aggravated identity theft. Here’s what the DOJ press release states:

According to testimony and evidence presented at trial, Demps formed the Florida corporation “D&D Honest Relieable [sic] Tax Services LLC.” She then used the corporation to open bank accounts into which she electronically transferred tax refunds obtained by stealing the identities of real people, many of whom were veterans, disabled, elderly, or otherwise unable to care for themselves. Demps never registered her tax preparation service with the Internal Revenue Service since she would have had to reveal that she was an eight-time convicted felon. Through her bank accounts, Demps stole more than $120,000 over a one-year period.

So we have someone opening up a corporation ending in “LLC” (limited liability companies are not corporations), with a misspelling of ‘reliable,’ and then stealing identities. There’s not much to add here, except that Ms. Demps will likely be spending quite a bit of time at ClubFed.

A New Scam: Mailed “IRS” Notices

Tuesday, September 20th, 2016

Something else to be wary of: Imitation IRS notices. Today I saw an “IRS” notice that looked almost real. The notice had the normal headers, and the terminology was just about right. The notice was supposedly from the Austin Service Center, but instead of responding to the Service Center the address for responding was a post office box in Austin. The real key was the request for money. All IRS notices (when a payment is due) ask for the check to be made payable to “United States Treasury.” The phony notice asked for the check to be made payable to “I.R.S.”

For taxpayers, a quick tip: If you have any doubts about the veracity of an IRS notice, call the IRS or your tax professional. If you see that the notice asks you to write a check payable to “I.R.S.” it’s phony.

For tax professionals, make sure you look at clients’ IRS notices. The scammers are trying something new, so we have to be wary. Given that two-thirds of legitimate IRS notices are wrong in whole or in part, we should already be asking our clients to forward to us any IRS notices they receive.

The one good news about this scheme is that it should be easier for IRS Criminal Investigation, TIGTA, and/or the US Postal Inspectors to catch the culprits. Renting a post office box leaves a paper record, so hopefully these fraudsters soon find their way to ClubFed.

Individual F: Has Kermit Washington Fouled Out?

Wednesday, May 25th, 2016

Yesterday I wrote about the guilty plea of former San Diego Charger Ron Mix; today, the other shoe dropped. “Individual F,” as former NBA basketball player Kermit Washington was called in the Mix indictment, was arrested on charges of corrupt interference with the internal revenue laws, wire fraud, obstruction of justice, and aggravated identity theft.

The Department of Justice press release details the charges:

It is alleged that Washington referred professional athletes to Ron Mix, a former professional football player and an attorney licensed in the state of California, whose practice focused on the filing of workers’ compensation claims on behalf of former professional athletes. In exchange for the referrals, Mix made payments to PCA and claimed those amounts as charitable deductions on his personal tax returns. Upon receipt of these payments, Washington diverted the funds for his own personal benefit. Washington filed false individual income tax returns for 2010 through 2013, failing to report the funds he diverted from PCA and false Forms 990-EZ on behalf of PCA. Washington also falsified PCA’s corporate minutes to obstruct the investigation and used the identity of another individual to perpetrate this scheme.

It is further alleged that Washington conspired with others to defraud eBay and PayPal, customers and donors of PCA by allowing the co-conspirators to use PCA’s name, tax-exempt status and IRS Employee Identification Number (EIN) with eBay and PayPal so the co-conspirators could avoid substantial listing and registration fees incurred in operating online, for-profit businesses. Moreover, customers who made purchases falsely believed that 100 percent of the proceeds from the co-conspirators’ online eBay sales benefited PCA. In exchange for allowing the co-conspirators to use PCA’s tax-exempt status, Washington received payments from the co-conspirators.

According to the indictment, Mr. Washington diverted about $500,000 of donations to a charity he founded and used them for his personal benefit. That money also allegedly didn’t make it onto his personal tax return. There are also allegations of fraud against eBay and PayPal, and identity theft. This alleged identity theft was not for purposes of obtaining a tax refund; rather, he used the name of someone without their knowledge as the “Secretary” of his charity on the Form 990-EZ filed for his charity.

Of course, these are just allegations but one thing is certain: Mr. Washington is looking at a lengthy term at ClubFed if he’s found guilty of the charges.

Mix Sacked: From Hall of Fame to ClubFed?

Tuesday, May 24th, 2016

Ron Mix is in the NFL Hall of Fame for his play as an offensive lineman for the San Diego Chargers. He was nicknamed the “Intellectual Assassin” for the combination of his physical play and his law degree. Mr. Mix’s law practice focused on civil litigation with an emphasis on workers compensation claims for professional athletes.

Mr. Mix paid a referral fee to a non-attorney for clients. That’s prohibited. From the Kansas City Star:

Instead of paying the person directly, Mix donated about $155,000 over three years to a charity operated by that person (identified as “Individual F” in the indictment), prosecutors said. Then Mix claimed those payments on his tax returns as charitable deductions…

Individual F operated The Sixth Man Foundation, which did business as the charity Project Contact Africa, according to the documents.

According to court documents, Individual F falsely told Mix that the donations would be spent on “alleviating suffering in Africa.”

However, Individual F used the bulk of the donations “for his own personal enjoyment and to fund his lifestyle,” according to the plea agreement.

Had the payments gone to a real charity (rather than Individual F), everything might have been copacetic. (This still could have been against ethics rules for attorneys, but the charitable deductions Mr. Mix made would have been legitimate.) Mr. Mix could have used the IRS’s online search tool to verify that the Sixth Man Foundation was a legitimate charity, eligible to receive tax-deductible contributions.

Mr. Mix has already made restitution. Given that and his cooperation, I expect his sentence will be light. Still, had he followed a former president (“Trust but Verify [the charity]”) it’s likely this would not have happened.

DOJ Press Release

UPDATE: It is clear from reading the indictment of “Individual F” (Kermit Washington) that Project Contact Africa was a real charity. The Department of Justice is alleging that very few of the donations that were meant for PCA actually made it to Africa. (See this post for more.)

A Pseudo New Nominee for Tax Offender of the Year

Thursday, August 13th, 2015

Well, he probably can’t win my coveted award of Tax Offender of the Year as the alleged crimes have nothing to do with tax. However, the alleged perpetrator is a tax attorney, so there is at least some relation to tax. Robert Howell of Cary, North Carolina is accused of attempted murder, kidnapping, and first degree burglary in Isle of Palms, South Carolina. Mr. Howell is alleged to have followed his ex-girlfriend to South Carolina where he is alleged to have committed the crimes. He’s also accused of assaulting and threatening her the day before this incident in her home in Cary, North Carolina.

While the charges are pending he’s been suspended from the North Carolina Bar.

Meanwhile, Mr. Howell is locked in a custody battle with his estranged wife. And Cary police plan on serving Mr. Howell with additional charges.

Hat Tip: Tax Professor Blog

Criminal Charges Dropped Against Roni Deutch

Saturday, August 8th, 2015

Back in 2009, the law firm of Roni Deutch was a huge deal. She was the “Tax Lady,” and her face and advertisements were plastered all over television. Then she was sued by the state of California. And then came the criminal indictments–perhaps the largest criminal indictment in California history.

Fast forward five years, and it’s all over. California has dropped the criminal indictments, and instead of paying $34 million she’ll be paying $2.5 million in the civil suit (per her lawyer). She will also pay $10,000 in fines and must perform 350 hours of community service. Ms. Deutch, who dropped her law license, can even reapply for that.

The Scamsters Haven’t Stopped

Thursday, May 1st, 2014

One of my clients called me first thing this morning (we’ll call him Joe from Richmond, Virginia; all names and cities have been changed to protect the innocent and guilty). Joe said he got a phone call from David. David identified himself as working for the IRS in Seattle. David accused Joe of not paying his taxes from 2008 – 2011; that Joe had not responded to a threat of a lawsuit that was mailed to him in December 2013; that unless Joe acted that lawsuit would be filed by the IRS. David told Joe Joe’s address and the first five digits of Joe’s social security number to “verify” his story.

Joe hung up the phone on David.

The phone call Joe received was almost certainly a variation of this scam:

TIGTA Warns of “Largest Ever” Phone Fraud Scam Targeting Taxpayers

WASHINGTON — The Treasury Inspector General for Taxpayer Administration (TIGTA) today issued a warning to taxpayers to beware of phone calls from individuals claiming to represent the Internal Revenue Service (IRS) in an effort to defraud them.

“This is the largest scam of its kind that we have ever seen,” said J. Russell George, the Treasury Inspector General for Tax Administration. George noted that TIGTA has received reports of over 20,000 contacts and has become aware of thousands of victims who have collectively paid over $1 million as a result of the scam, in which individuals make unsolicited calls to taxpayers fraudulently claiming to be IRS officials.

“The increasing number of people receiving these unsolicited calls from individuals who fraudulently claim to represent the IRS is alarming,” he said. “At all times, and particularly during the tax filing season, we want to make sure that innocent taxpayers are alert to this scam so they are not harmed by these criminals,” George said, adding, “Do not become a victim.”

Inspector General George urged taxpayers to heed warnings about the sophisticated phone scam targeting taxpayers, noting that the scam has hit taxpayers in nearly every State in the country. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.

The truth is the IRS usually first contacts people by mail – not by phone – about unpaid taxes. And the IRS won’t ask for payment using a pre-paid debit card or wire transfer. The IRS also won’t ask for a credit card number over the phone.

“If someone unexpectedly calls claiming to be from the IRS and uses threatening language if you don’t pay immediately, that is a sign that it really isn’t the IRS calling,” he said.

The callers who commit this fraud often:

  • Use common names and fake IRS badge numbers.
  • Know the last four digits of the victim’s Social Security Number.
  • Make caller ID information appear as if the IRS is calling.
  • Send bogus IRS e-mails to support their scam.
  • Call a second time claiming to be the police or department of motor vehicles, and the caller ID again supports their claim.

If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:

  • If you owe Federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.
  • If you don’t owe taxes, call and report the incident to TIGTA at 800-366-4484.
  • You can also file a complaint with the Federal Trade Commission at Add “IRS Telephone Scam” to the comments in your complaint.

TIGTA and the IRS encourage taxpayers to be alert for phone and e-mail scams that use the IRS name. The IRS will never request personal or financial information by e-mail, texting or any social media. You should forward scam e-mails to Don’t open any attachments or click on any links in those e-mails.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes winner) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

Given that Joe has paid his taxes without fail every year, that the IRS would send multiple notices about unpaid taxes, and the fact that the IRS doesn’t file lawsuits (the US Department of Justice acts as the legal arm for the IRS when the IRS initiates legal action), the chance that David was telling the truth is about the same as it snowing in Las Vegas in August.

Joe did the right things. He reported this to TIGTA (see above on how to do that), and he has saved (for now) the follow-up phone message where David whined at Joe for hanging up the phone on him and that action “wasn’t professional.” Joe also sent in an Identity Theft Affidavit to the IRS because it appears others do have his confidential personal information. (He’ll also be adding fraud alerts to his credit reports.)

Almost always, the IRS initiates contact through the US mail. If you owe significant money, IRS Collections will sometimes knock on your door and leave a business card. If you file an appeal with the IRS, that conversation may come by phone (but you would first get a letter from IRS Appeals).

If you get a phone call like Joe did, it probably is a scam. If you owe taxes, call the IRS back (800-829-1040); they can tell you if your account has been assigned to collections and whom to contact. If you don’t owe the IRS money, call TIGTA.

I’m hopeful that David and his ilk see the inside of ClubFed for a long, long time.

Accountant Who Solicited Hit Man Pleads Guilty

Sunday, August 12th, 2012

Back in March I reported on Steven Martinez. Mr. Martinez is a tax preparer who faced charges of stealing $11 million from clients. He decided that the best strategy to fight this charge wasn’t hiring a good attorney, nor was it trying to disprove the charges; rather, he decided to hire a hit man to kill four witnesses. (One reason he didn’t try to disprove the charges is that they were true; Mr. Martinez has admitted he took the $11 million and used it to buy a home in Mexico and other personal expenses.)

The hit man to be told the FBI, and Mr. Martinez was arrested. He pleaded guilty on Friday to soliciting a violent crime, interstate commerce in murder for hire, witness tampering, mail fraud, and eight other felonies. Sentencing is set for November 30th and the 51 year-old Martinez faces 100 years at ClubFed.

Hatch Finds a Job! (But Buyer Beware: Firm Linked to Roni Deutch & Another Accused Attorney)

Thursday, April 26th, 2012

Congratulations to Richard Hatch, winner of the first Survivor and my favorite tax-challenged celebrity. Courtesy of Kelly Erb we find out that Mr. Hatch now has a job.

Yes, it appears to be another penny on the dollars firm. If some of you actually could read the disclaimer on the advertisement, I congratulate you! My eyesight just isn’t that good.

But this firm is different: They are just a referral service, and by doing a search on them I discovered that they have been advertising for people to buy their leads. I also found that they own with beautiful spokeswoman Tonya.

Unfortunately, MMAC Group may have some issues. When I looked up who owned the domain “” using whosis, I found the reference was to one Gregory Flahive. That name sounded familiar, and when I looked it up in Google I discovered that Mr. Flahive is one of three Sacramento area attorneys accused of taking thousands of dollars upfront from homeowners trying for loan modifications; that would be illegal if proven under California law. He faces 19 felony charges.

Yet another name associated with MMAC is Brandon Funk (see the link to the referral service). Mr. Funk’s name, too, rang a bell; he’s the former Client Intake Director for Roni Deutch’s firm. For those who aren’t aware, Ms. Deutch was accused of taking large up-front payments with promises of reducing individuals’ tax debts but provided little or no help in actually reducing their taxes.

Is this business legal? Probably; they’re not promising anything. Would I use Richard Hatch to help me recommend a good tax professional? Please….

The Dirty Dozen

Thursday, February 16th, 2012

It’s time for the Dirty Dozen. No, not the movie; rather, the IRS’ annual listing of the worst tax scams.

On top of the IRS’ list is identity theft. It is a major problem, and the IRS is trying to stop it. The IRS does have a special unit dealing with identity theft.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page at

Second on the IRS list is phishing. The IRS never sends unsolicited emails to taxpayers. As the IRS notes,

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to

You can find the rest of the list here. Remember, if it sounds too good to be true it probably is.