Archive for the ‘Tax Evasion’ Category

If You Can’t Get the Refund, Why Not File Some Liens?

Sunday, April 20th, 2014

The answer to this is, perhaps it’s against the law. And it is. Let me start at the beginning.

Back in 2008, Francis Chandler filed his 2007 tax return. He claimed he had quite a bit of interest income and even more withholding…$6,222,850 of withholding. He claimed a refund of $3,969,012. He got it, too. There was a problem, though: He should not have gotten the refund; the claim was false. Two years later, Mr. Chandler was indicted and charged with making a false claim against the United States.

Now, you and I would seek legal advice about the case, but Mr. Chandler had a “better” idea. I’ll file a lien against two federal judges, the US Attorney, and an Assistant US Attorney. That wasn’t a bright idea; that’s a false retaliatory lien, and that’s a crime, too. Eventually, Mr. Chandler pleaded guilty to the false claim and filing the lien.

Mr. Chandler was sentenced on Tuesday to 37 months at ClubFed;
he must also make restitution of just over $3 million. A helpful hint to anyone who is thinking of emulating Mr. Chandler: Don’t!

While I Was Out…

Sunday, April 20th, 2014

I’ve recovered from Tax Day, my sleep is caught up, and it appears Las Vegas has moved smoothly towards summer (it reached 89 today). There has been a little bit of tax news during the past month:

Good News for Tax Professionals: The IRS announced that eServices has been updated and you can request a transcript for an individual where you have a Tax Information Authorization (Form 8821). I have not tested this new capability yet, but if this works we will no longer have to have a Power of Attorney in order to use eServices for transcripts.

That said, the IRS announcement (it came in late March) said that eServices was updated last fall. If it was, it wasn’t successfully updated; I tried to request a transcript for a client with an 8821 in December and couldn’t.

The IRS Scandal Continues to Percolate, with Bad News for Lois Lerner: Emails sent to and from the IRS and Lois Lerner have been made public, and these do not show Ms. Lerner in a good light. They show that Ms. Lerner was definitely involved in targeting conservative non-profits. They were obtained by Judicial Watch after filing a freedom of information act lawsuit against the IRS.

My favorite, though, is one where Cindy Thomas complains that Ms. Lerner and the White House through the Cincinnati “low-level” employees under the bus. I’ll let Ms. Thomas explain:

As you can imagine, employees and managers in EO Determinations are furious. I’ve been receiving comments about the use of your words from all parts of TEGE and from IRS employees outside of TEGE (as far away as Seattle, WA).

I wasn’t at the conference and obviously don’t know what was stated and what wasn’t. I realize that sometimes words are taken out of context. However, based on what is in print in the articles, it appears as though all the blame is being placed on Cincinnati. Joseph Grant and others who came to Cincinnati last year specially told the low-level workers in Cincinnati that no one would be “thrown under the bus.” Based on the articles, Cincinnati wasn’t publicly “thrown under the bus” instead was hit by a convoy of mack trucks.

Was it also communicated at that conference in Washington that the low-level workers in Cincinnati asked the Washington Office for assistance and the Washington Office took no action to provide guidance to the low-level workers?

One of the low-level workers in Cincinnati received a voice mail message this morning from the POA for one of his advocacy cases asking if the status would be changing per “Lois Lerner’s comments.” What would you like for us to tell the POA?

How am I supposed to keep the low-level workers motivated when the public believes they are nothing more than low-level and now will have no respect for how they are working cases? The attitude/morale of employees is the lowest it has ever been. We have employees leaving for the day and making comments to managers that “this low-level worker is leaving for the day.” Other employees are making sarcastic comments about not being thrown under the bus. And still other employees are upset about how their family and friends are going to react to these comments and how it portrays the quality of their work.

Another email shows that the IRS planned to meet with the Department of Justice over whether to prosecute conservative groups. I’ll leave it to the reader to decide whether or not there’s anything to see here.

Second Runner-Up for 2013 Tax Offender of the Year Gets 20 Years at ClubFed. Phillip Monroe Ballard decided to channel the spirit of 2012 Tax Offender of the Year Stephen Martinez: He decided to murder the judge of his tax evasion trial. Luckily for all concerned, an informer let authorities know of the plan. Mr. Ballard not only has a tax conviction but now a 20-year sentence for attempted murder-for-hire. Given he’s 72, he’ll likely spend the rest of his life at ClubFed.

“Just Pay the Five Dollars….”

Sunday, March 2nd, 2014

That’s one of my favorite lines from one of my favorite movies, North by Northwest. In that classic movie, Cary Grant’s character gets drunk and, well, I’ll be giving away some of the movie if I went on. In any case, his mother (in the movie) says the line, in perfect comedic tempo, “Just pay the five dollars.” Since the Oscars are being televised as I write this a movie reference seems apropos.

Similarly, most tax evaders (and tax deniers) would find their lives far, far easier if they just paid the tax in the first place. One Massachusetts dentist is accused of a long-running scheme that allegedly used many of the normal tricks to avoid paying taxes.

George Fenzell is the accused dentist. He allegedly began, in 1999, to not pay taxes; he allegedly used nominees to conceal receipts. He supposedly comingled funds with others and made some nominees own his business (which, according to the indictment, Mr. Fenzell does own).

Back in 2007 the Massachusetts Department of Revenue was investigating; the indictment alleges that this caused Mr. Fenzell to file his 2000 through 2005 tax returns. Those returns showed tax due of $129,000 which had grown to over $300,000 when you factor in interest and penalties. Meanwhile, the IRS couldn’t collect; the indictment alleges he continued to use cash and nominees to evade the IRS.

Mr. Fenzell is looking at a lengthy stay at ClubFed if found guilty.

Utopia Is Dead

Sunday, February 16th, 2014

A perfect place. That’s what comes to my mind when I hear the word “utopia.”

Vincent and Mary Giamo had a different idea; Utopia was their nightclub in Orchard Park, New York (near Buffalo). It was quite successful as they followed a formula that is illegal but helps with taxes: They kept two sets of books. One set was accurate, and showed they would owe $1.2 million in taxes to the IRS. The other set shockingly showed they didn’t owe that money. This scheme works quite well…until you’re caught.

And the Giamos were caught, tried, and convicted of tax evasion charges. Vincent received 12 months at ClubFed; his wife, Mary, received probation. They must also make restitution of another $671,840 to the IRS (they’ve already paid $550,000). They are also facing civil charges.

As usual, it’s a whole lot easier to just pay your taxes in the first place…but that though rarely occurs to the Bozo mind.

Really Big Tax Evasion Leads to Really Long Sentence at ClubFed

Sunday, February 9th, 2014

There’s tax evasion, big tax evasion, and then we have this story of really, really big tax evasion. And we also must highlight once again that tax protester arguments have as much chance of flying as the dodo bird.

I’ve actually written about this case before. Back in 2010 Bill Melot, a farmer in New Mexico, was convicted of tax evasion, agriculture program fraud, and several related offenses. His tax liability to the IRS was estimated at $18 million. When he was sentenced in 2011 he received five years at ClubFed followed by three years of supervised release. Mr. Melot appealed his conviction; the government appealed the sentence. The DOJ thought he should receive a far longer stay at ClubFed.

Last October the 10th Circuit Court of Appeals ruled on the appeals. Suffice to say it didn’t go well for Mr. Melot. Here’s a pertinent excerpt:

The Government’s evidence demonstrated overwhelmingly that Melot engaged in behavior consistent with an individual who had actual knowledge of his obligation to file returns and pay tax. Melot paid employees in cash, advising them they could avoid reporting the cash payments as income. He attempted to pay cash for inventory for his gas stations, in an effort to avoid creating a paper trail in his bank account. He used Social Security numbers he knew were false for numerous purposes. He transferred substantial assets into a foreign bank account but failed to file the necessary disclosure forms with the IRS. He frequently made domestic bank deposits in amounts slightly below $10,000, the amount at which he knew a bank must file a currency transaction report with the Internal Revenue Service. He transferred assets to corporations and trusts and used nominees to open bank accounts, but admitted he maintained control over the assets associated with these accounts and entities. He sent letters to the Internal Revenue Service denying he was a United States citizen or claiming to be either a non-resident alien or a citizen of the “republic of New Mexico.” Nonetheless, when he applied for a passport from the State Department and agricultural farm subsidies from the Department of Agriculture, Melot declared he was a United States citizen.

Both Mr. Melot and the DOJ didn’t like the sentence. Mr. Melot thought it was too long; the DOJ though it was too short. The sentencing judge had given Mr. Melot a two-level decrease (in the federal sentencing guidelines) for acceptance of responsibility. There was a problem with this according to the Court of Appeals:

…nor did [Melot] engage in any other conduct demonstrating an acceptance of responsibility for his offenses…To the contrary, the record clearly shows Melot continued to deny that he willfully engaged in criminal conduct and unambiguously shows Melot did not voluntarily pay restitution.

The Court of Appeals ordered a new sentencing hearing, with no downward adjustment in federal sentencing guidelines. It was not Mr. Melot’s day at the Court of Appeals.

The sentencing hearing occurred last week, and Mr. Melot’s five years at ClubFed lengthened to 14 years at ClubFed. The restitution hasn’t changed: $18,469,998 to the IRS and $226,526 to the Department of Agriculture.

Mr. Melot apparently believed that tax protester arguments (see the Tax Protester FAQ for a complete dismissal of each and every one of them) work. They don’t. Mr. Melot will have plenty of time to think that through.

Health Care Fraud Leads to Tax Charge

Sunday, December 15th, 2013

I’ve mentioned previously that if you fail to report illegal income on your tax return, you’re guilty of tax evasion. Yes, illegal income is just as taxable as legal income. This came into play with an ongoing investigation in Southern California.

It seems some medical practitioners came up with the idea of getting denizens of Skid Row into hospitals for unnecessary medical procedures. Dr. Ovid Mercene of La Mirada was one of the individuals involved in the practice. I’ll let the DOJ press release take it from here:

From 2008 and 2012, while Mercene worked at a Los Angeles-area hospital, he admitted patients, the vast majority of whom were homeless, who had been referred from a purported “care consortium.” The patients, many of whom did not require hospitalization, were admitted for the purpose of defrauding taxpayer-funded health programs such as Medicare, Mercene admitted in court today.

Mercene admitted the “patients” after watching them being transported by van from Skid Row to the hospital, where they were often kept on a special floor away from the hospital’s “regular” patients. These “patients” also were given smoking breaks while in the hospital, even though many of them supposedly suffered from respiratory diseases. After a short hospital stay where numerous unnecessary tests were typically performed, Mercene discharged the “patients” to skilled nursing facilities, even though they did not require such care.

Dr. Mercene received almost $700,000 in kickbacks. Somehow that income didn’t make it onto his tax returns. While I suspect the alleged health care fraud can be prosecuted under various statutes, the government had an easier charge (to prosecute) to make against Dr. Mercene: tax evasion. That’s what he pleaded guilty to last week. He’ll be sentenced next July.

Another Nominee for Tax Offender of the Year

Sunday, December 15th, 2013

It’s getting to be that time of the year: Nominations are due for the Tax Offender of the Year. Remember, to be considered for this award the offender must do more than just cheat on his taxes. It has to be special; it really needs to be a Bozo-like action or actions.

Via Joe Kristan comes a clear “winner” of a nominee: Phillip Ballard of Fort Worth, Texas was convicted of attempted murder for hire. Mr. Ballard, who is 72, is looking at 20 years at ClubFed. It’s why Mr. Ballard committed this crime that gets him his nomination:

While awaiting trial for tax evasion, Ballard approached a fellow inmate in September 2012, according to the criminal complaint.

Ballard said he believed U.S. District Judge John McBryde would sentence him to more than 20 years in prison; he wanted the judge killed so the case would be transferred to another judge.

And it only took the jury less than an hour to convict him.

Mr. Ballard’s tax preparation career ended in 2008; he followed the Irwin Schiff method of tax preparation (returns with all zeroes). At least one individual who followed Mr. Ballard’s advice is probably wishing he hadn’t. Richard Tilford was sentenced in 2012 to one year at ClubFed and had to make restitution of over $453,000 to the IRS. Mr. Tilford filed returns noting he had income but zeroed all that income out on his returns. As noted in the DOJ press release,

Each of the tax returns, according to the factual resume, was accompanied by a letter acknowledging that Tilford earned money during the relevant year, but denying that the earnings were income in the “constitutional sense.”

A hint for anyone who wants to try this at home: The only thing it will garner you is a nomination for Tax Offender of the Year. As for Mr. Ballard, he’s yet another worthy nominee for the 2013 Tax Offender of the Year award.

Nifty Scheme Lands Five at ClubFed

Sunday, November 24th, 2013

Last year I reported on the inventive scheme used by the owners of Nifty Fifty’s, a Philadelphia area restaurant chain. Back in 1986, the restaurant was founded. The chain is themed on the 1950s; the owners apparently longed for the 1850s when there wasn’t an income tax.

What did the five owners do? From the DOJ press release:

The restaurant owners paid employees a portion of their wages with unreported cash in order to evade payroll taxes; paid suppliers with unreported cash; and had false tax returns prepared that under-reported income and falsely inflated expenses and deductions. Just between the years 2006 and 2010, the defendants deliberately failed to properly account for $15.6 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes. In the course of their conspiracy, Mattei, McGlynn, Donnelly, and Welsh committed bank fraud by submitting to the bank bogus income tax returns in order to secure several business loans.

The five owners of Nifty Fifty’s pleaded guilty to the various charges and agreed to full restitution. The IRS has received over $4.5 million in restitution to date. The five owners all received time at ClubFed, ranging from 12 months and a day to 36 months.

Bubba Paris Sacked, Pleads Guilty to Not Filing a Tax Return

Thursday, October 31st, 2013

Former San Francisco 49er William H Paris, Jr. (aka Bubba Paris) is now a motivational speaker. He’ll have a new topic to talk about: Why You Should Pay Your Taxes.

Back in February Mr. Paris was indicted on three misdemeanor counts of failing to file a tax return. He was alleged to have earned between $41,700 and $83,800 annually from 2006 to 2008. He pleaded guilty on Wednesday to one count of not filing a tax return in a plea deal. Mr. Paris agreed to make restitution of $126,530; he’ll be sentenced next February. He faces up to one year at ClubFed and a possible fine of up to $100,000.

That’s the second former football player who has not had a good week. Former Philadelphia Eagle Freddie Mitchell was sentenced to 37 months at ClubFed earlier this week. Mr. Paris, though, is not facing as lengthy a sentence. At most he faces one year in prison; given that he has promised to make restitution it’s likely he’ll get probation.

A hint to celebrities: You’re a perfect target for IRS Criminal Investigations when you don’t file and pay your taxes. If you are convicted, it will be covered in the news. Consider that Bubba Paris didn’t report tax on $182,743 and is paying restitution of $126,530 (which include penalties and interest)–That’s a tax rate of 69%! He’ll also have to pay California, too. It’s a lot easier to just pay your taxes in the first place.

When They Can’t Get You for the Real Crime, There’s Always Tax Evasion

Thursday, October 17th, 2013

One of my clients a few days ago asked me jokingly–she’s been a client for years, so I know when she’s joking, “If I had a stream of illegal cash income, do I have to declare it on my tax return?” Of course you do–illegal income is just as taxable as legal income. From as far back as Al Capone to others more recently, such as Johnny Ray Taylor, the government has found that crooks who make illegal income tend to also not report that income; sometimes its easier to get the crook for tax evasion than the underlying offense.

Everyone’s heard of Al Capone, but who is Johnny Ray Taylor? Well, Mr. Taylor is a resident of nearby Henderson whose main source of income appears to have been pimping. Indeed, he’s apparently going to soon plead guilty state felony charges of pandering and living off of prostitution. Back in May, Mr. Taylor pled guilty to one count of tax evasion. On Wednesday he was sentenced to 25 months at ClubFed, must make restitution of $117,559 to the IRS (what he earned as a pimp), and will then have three years of supervised release. It is likely that Mr. Taylor will be able to serve his state charges concurrently with his time at ClubFed.

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