Posts Tagged ‘BozoTaxPreparer’

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Two Cases of Tax Return Preparers Committing Identity Theft

Sunday, September 15th, 2013

From the Bozo tax preparation front come two stories of preparers committing identity theft and preparing false tax returns. First, from Durham, North Carolina comes the case of Leslie Brewster. She’ll get to spend 70 months (nearly six years) at ClubFed for her part in a tax fraud scheme that occurred in the Tar Heel State.

Ms. Brewster did want to have her clients pay the least amount of tax possible. She just left out a couple of words that I use, “the least amount of tax legally possible.” She bought names and social security numbers to use on returns, and falsified hundreds of returns to get larger returns. It was the usual suspects in these cases: phony dependents, fake businesses, and incorrect education credits. She pleaded guilty to three felonies; besides the jail time, she must make restitution of $92,910.

From Atlantic City, New Jersey comes the story of Nicolas Gomez-Rua. He’ll get to spend 36 months at ClubFed for his part in a very similar scheme (to that of Ms. Brewster). Over a three-year periodf he ran a tax preparation business in Ventnor City, New Jersey. He, toom, included phony dependents, child tax and other credits to get his clients larger refunds.

But there’s more. from the DOJ press release:

Gomez-Rua admitted that he maintained a file of Social Security cards and birth certificates for individuals born in Puerto Rico that was used to add fraudulent dependents on the 1040 forms that were filed with the IRS. Clients paid Gomez-Rua on average $300 to $500 for the use of fraudulent dependents. Gomez-Rua admitted that after preparing the fraudulent returns, he filed the false returns electronically and by U.S. Mail with the IRS.

Not only did he admit that he filed 729 returns containing such fraudulent items, he also purchased another’s identity to use when he applied for U.S. citizenship. That’s another crime: Unlawfully obtaining United States’ citizenship.

Mr. Gomez-Rua’s wages while at ClubFed will go towards the $170,211 in restitution he was ordered to pay.

A reminder to everyone: If it sounds too good to be true, it probably is.

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Once Again, Registration of a Tax Preparer Doesn’t Stop Him from Bad Behavior

Sunday, August 11th, 2013

With tonight’s season premier of Breaking Bad, it feels apropos to note a tax “professional” who is accused of bad behavior. The US Department of Justice filed suit against Michael Turner of San Diego.

Mr. Turner is alleged to have,

…failed to sign or affix a Preparer Tax Identification Number (PTIN) to many of the returns that he has prepared. In addition and according to the government, Turner takes bogus deductions on his customers’ returns in order to claim larger refunds for his customers. His customers then recommend Turner as a tax preparer to their friends, which helps Turner to expand his customer base and further increase his own profits. Specifically, the government alleges that Turner claims inflated or fabricated deductions on the Schedule A of his customers’ Form 1040 tax returns, claiming that his customers have large non-cash charitable contributions and unreimbursed employee expenses. The complaint also alleges that when Turner’s customers are audited, Turner has provided false documents to those customers in an attempt to assist them in substantiating charitable contributions and employee expenses that they did not incur. According to the complaint, however, Turner has instructed his customers not to identify him as their tax return preparer in communications with the Internal Revenue Service (IRS).

That’s a multitude of bad behavior if proven. Of course, Mr. Turner doesn’t have a license, right? Well, no. California requires all paid tax preparers to have a license. Preparers who are unenrolled (not EAs, CPAs, or attorneys) must obtain a license from the California Tax Education Council (CTEC). And Mr. Turner has a license from CTEC.

This shows two points: First, that having a license cannot stop bad behavior. And second, the government has methods today of stopping tax preparers who are breaking bad. As the DOJ noted in their press release, “In the past decade the Justice Department Tax Division has obtained injunctions against hundreds of tax preparers.” I suspect this point just might make it into the arguments in the Loving appeal.

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Posted in IRS, Tax Preparation | 1 Comment »

I’m Shocked to Find Another Enrolled Preparer Committed Tax Fraud

Sunday, July 14th, 2013

Not really.

The IRS would like the public and Congress to believe that if every preparer were regulated by the IRS that preparer tax fraud would magically vanish. The reality is that as long as money is involved in an industry–and there’s always money involved with tax preparation–some preparers will be tempted to commit tax crimes. The fact that they are an attorney, CPA, EA, or RTRP won’t change the reality that money always tempts criminal activity.

Take William Zweifel. Mr. Zweifel was doubly an enrolled preparer: He was both an attorney and a CPA. That didn’t stop him from preparing false tax returns. He’s heading to ClubFed for 37 months and is voluntarily giving up his law and CPA licenses. (Had he not given them up voluntarily, he would likely have been disbarred.)

What did Mr. Zweifel do? From the DOJ release:

The method he used to create a false income tax refund was to offset a taxpayer’s income with an alleged loss from either a partnership in which the taxpayer had no partnership interest or from an S corporation which reported no loss for the taxpayer to claim. Zweifel stipulated in the plea agreement that the tax losses to the United States from the false claims on the two income tax returns listed in the criminal information were approximately $61,000 and approximately $42,000, respectively. Zweifel further admitted that for purposes of determining relevant conduct under the U.S. Sentencing Guidelines, the tax loss to the United States in this case is approximately $2.2 million.

Of course, most tax professionals (both enrolled and unenrolled) are ethical and would never consider behavior like Mr. Zweifel’s. Yet money is always a temptation; the IRS is burying its head in the sand if they think that by taking an open book exam an unethical tax preparer will magically become ethical. Indeed, that would make the situation worse: An unethical preparer would have an IRS stamp of approval.

The reality is that 100 years from now there will be tax professionals who commit crime. They’ll dream up schemes that, in their view, couldn’t be caught…and they’ll be caught.

The IRS has methods today to stop unethical preparers. The IRS can impose fines, seek injunctions to prohibit a preparer from practicing, and in especially egregious cases (such as Mr. Zweifel’s), seek criminal charges. The IRS’s policy reminds me of Captain Louis Renault:

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Licensing Stops All Tax Preparer Fraud…Well, No

Sunday, June 30th, 2013

As I mentioned, National Taxpayer Advocate Nina Olson believes that if the IRS licensed all tax preparers, tax preparer fraud would evaporate. Unfortunately, that’s definitely not the case.

This past week, the US Department of Justice indicted Teresa Marty, Rebecca Bandera-Marty, and Pamela Harris of conspiring to defraud the IRS. The defendants are alleged to have filed at least 250 false individual returns claiming more than $60 million in tax refunds. From the DOJ press release:

Marty and her daughter-in-law Bandera-Marty were licensed tax preparers, and Harris was AFS’s office manager. The defendants recruited clients by claiming that they could eliminate their debts and legally receive sizable tax refunds. They billed and collected excessive fees for this service, sometimes as high as $6,000. The defendants prepared the false tax returns claiming large refunds based on fictitious Forms 1099-OID. The fraudulent returns falsely reported that a client’s total outstanding debt (mortgage, credit limit s on credit cards, student loans, auto loans, etc.) was actually interest income that the client had received from the lender that had been withheld by the IRS, and therefore, the client was entitled to a refund. [emphasis added]

There’s nothing new about this kind of fraud, and the idea that by licensing tax professionals no tax professional would commit fraud is laughable. Wherever there is money, there’s temptation to obtain it in the wrong ways. Indeed, Teresa Marty had been previously permanently barred from preparing tax returns.

Ms. Marty, Ms. Bandera-Marty, and Ms. Harris are looking at terms at ClubFed if found guilty of the charges they face.

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Posted in Tax Fraud | 1 Comment »

Bozo Tax Tip #3: Use a Bozo Accountant!

Tuesday, April 9th, 2013

Here’s another Bozo Tax Tip that keeps coming around. The problem is, the Bozos don’t change their stripes. In any case, here are some signs your accountant might be a Bozo:

– He’s never met a deduction that doesn’t fit everyone. There’s no reason why a renter can’t take a mortgage interest deduction, right? And everyone’s entitled to $20,000 of employee business expenses…even if their salary is just $40,000 a year. Ask the proprietors of Western Tax Service about that.

– He believes that the income tax is voluntary. After all, we live in a democracy, so we don’t have to pay taxes, right?

– Besides preparing tax returns, he sells courses on why the Income Tax is Unconstitutional or how by filing the magical $2,295 papers he sells you will be able to avoid the income tax.

– He wants you to sign over that tax refund to him. After all, he’ll make sure you get your share of it after he takes out his 50% of the refund.

– He believes every return needs at least three dependents, no matter whether you have any children or not.

If your tax professional exhibits any of these behaviors, it’s time to get a new tax professional.

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Posted in Tax Preparation | 1 Comment »

Bozo Tax Tip #10: Report Income That You Didn’t Earn

Sunday, March 31st, 2013

It’s time for our annual rundown of Bozo Tax Tips, strategies that you really, really, really shouldn’t try. But somewhere, somehow, someone will try these. Don’t say I didn’t warn you!

The story you are about to read is true. Only the names have been changed to protect the stupid. This is not an April Fools joke.

This past week I spoke with a new client, call him Tom. Tom had been using a tax preparer named Jim. Last year (2012), wasn’t a good year; Tom’s business lost money. Yet Jim told Tom that he should report positive income so that, “[Tom] can collect social security in the future.”

Tom signed the tax return with the wrong income. Unlike a story that Joe Kristan reported last week, this has nothing to do with the Earned Income Credit; Tom didn’t qualify for that. (I don’t mean to diminish the issues with the Earned Income Credit: They’re very real. Credits like that do lead to fraud.) Tom paid a couple of thousand dollars in tax that he shouldn’t have. We’ll be amending Tom’s returns so in the end all will be well with him.

A tax return is supposed to report your income–accurately. If you make $50,000, that’s what should be on the return. If you lose $5,000, that’s what should be on the return. As an IRS auditor told me years ago, “One of the goals of an audit is for the taxpayer’s return to be reported accurately: no more, no less.”

There is plenty of Bozo behavior in this story. First, Jim (the tax preparer) should go back to basics. Yes, Jim is a licensed tax professional so he supposedly has taken continuing education courses. He might want to stay awake for them this time.

Second, you need to always review your tax return. The income and deductions reported on your tax return should match what you actually earned and spent. If you have questions about anything on your return, ask. Your tax professional should be happy to answer any questions you have.

Finally, if a tax professional tells you to add extra income to your return either add income so that you can qualify for social security or the Earned Income Credit, run, not walk, the other way.

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Posted in Tax Preparation | 1 Comment »

Excellent Fraud?

Sunday, December 23rd, 2012

Two Georgia tax preparers may have prepared their last returns. Larry Heath and Andy Heath are brothers. Both own and operate tax preparation businesses in northern Georgia. Both have prepared lots of returns, and they likely have very satisfied customers. Of course, when at least 86% of all returns obtain refunds, and over 94% of the returns analyzed by the IRS require adjustments, perhaps there’s an issue.

The Department of Justice alleges that there are lots of issues with the Heaths’ businesses, Heath’s Income Tax II and Excellent Tax Service. Among the items listed in the government complaint, the DOJ alleges that the Heaths, “…concoct bogus losses, expenses, education credits, business expenses and charitable contributions.” The DOJ is asking for an injunction against the brothers, stopping them from preparing any returns. The DOJ also wants to force the Heaths to notify all of their clients about the alleged tax fraud.

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Posted in Tax Fraud, Tax Preparation | Comments Closed

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.

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Posted in Scams | 1 Comment »

Bozo Tax Tip #2: Use a Bozo Accountant

Thursday, April 12th, 2012

Here’s another Bozo Tax Tip that keeps coming around. The problem is, the Bozos don’t change their stripes. In any case, here are some signs your accountant might be a Bozo:

– He’s never met a deduction that doesn’t fit everyone. There’s no reason why a renter can’t take a mortgage interest deduction, right? And everyone’s entitled to $20,000 of employee business expenses…even if their salary is just $40,000 a year. Ask the proprietors of Western Tax Service about that.

– He believes that the income tax is voluntary. After all, we live in a democracy, so we don’t have to pay taxes, right?

– Besides preparing tax returns, he sells courses on why the Income Tax is Unconstitutional or how by filing the magical $2295 papers he sells you will be able to avoid the income tax.

– He wants you to sign over that tax refund to him. After all, he’ll make sure you get your share of it after he takes out his 50% of the refund.

– He believes every return needs at least three dependents, no matter whether you have any children or not.

Come Monday will be our last Bozo Tax Tip of the Year. It’s a brand new tip for this tax season, too, and it’s actually the first Bozo Tax Tip that in some bizarre way actually works (well, for a while).

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There’s Good and Bad Creativity

Monday, August 22nd, 2011

There’s being aggressive, and there’s being stupid. A. Blair Stover was the latter. As the 8th Circuit Court of Appeals noted,

[The IRS]…found that even the most conservative estimate of the tax loss to the government caused by Stover’s schemes was $100 million, and potentially as high as $800 million. Agent Janice Mallon testified that a “reasonable estimation” of the government’s tax loss was $300 million. Apart from those costs, most of Stover’s clients had to pay other professionals to “undo” the structures Stover promoted, organized, and sold. Many had to pay penalties to the government.

Joe Kristan has more.

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Posted in Scams | Comments Closed

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