Taxable Talk

Back last July I wrote about Mr. Divorce, Demetrious Eugenios, who went through his own divorce and hid his assets from the IRS. His ex-wife found out, didn't like it, and told the government. He was convicted last July. Sentencing has been postponed on several occaisions.

Last Wednesday Eugenios found out his fate. According to this article in the Hollister (CA) Free Lance, Eugenios was sentenced to 30 months in prison, and must make restitution of $1.2 million.

Divorce just doesn't pay. And hiding a Porsche from your ex-wife and the IRS is worse.

ABC News is reporting that Irwin Schiff, convicted of numerous charges in Las Vegas and facing 43 years in prison and fines of over $3 million for telling clients that there is no such thing as an income tax, is mentally ill. That's according to court documents. Psychiatrists apparently believe that mental illness—suicidal depression, bipolar mental disorder, paranoia and delusions—made him tell people that you didn't have to pay income tax. Schiff is currently 77 years of age.

Of course, if the Court or the prosecution (the United States) looks at his website, they may get other ideas. For someone convicted to continue to say

"Since the income tax was repealed in 1954 when Congress adopted the 1954 Code, it is clear that for 50 years federal judges in conspiracy with U. S. Department of Injustice prosecutors have been illegally and criminally prosecuting people for crimes that do not exist in connection with a tax that nobody owes."

And you can see what his website says about himself here.

Mentally ill or not, it's likely we've heard the last from Mr. Schiff. He's likely to spend the rest of his days in either a psychiatric hospital or the geriatric wing of a federal institution.

Coverage When Schiff Was Convicted: Here (Roth Tax Updates)

Samuel Joseph DeAngelo headed Western Tax Service. It attracted tax clients quickly as it averaged $2,500 refunds for each customer.

It's techniques were certainly interesting, and come from the Richard Hatch School of Tax Preparers:

- Making up false deductions for employee business expenses;
- Making up false charitable deductions (typically 10% of AGI);
- Phony depreciation deductions;
- Phony tax payment deductions; etc.

The IRS audited a taxpayer who used Western Tax Service and discovered the fraud. Most of the tax clients had no idea that Western was doing anything wrong. The IRS expanded their review of returns prepared by Western (Western prepared about 8,000 returns in 2001). Yes, Western charged large fees but they got large refunds; what could be the problem? (Hint: If it sounds too good to be true...)

The axe fell in 2004. Now, the story reaches its conclusion. Last Friday DeAngelo pled guilty to defrauding the IRS and helping people file false tax returns. He also pled guilty to using others to engage in currency transactions to avoid the $10,000 reporting requirement: he sent employees to the bank to make multiple $9,990 deposits (don't try this at home!). DeAngelo faces a maximum of 24 years in jail.

I had a couple Western refugees come in to my office for help. They were rudely surprised that you do have to pay tax on your income....


Press Release: US Dept. of Justice
News Story: Orange County Register

The tax evaders have been busy.

First, a woman in Tullahoma, Tennessee successfully embezzled about $500,000. Only one problem: she forgot to pay her federal income tax on her ill-gotten gains. She pled guilty to four counts of tax evasion on the $129,000 she didn't pay to the IRS. (Story here.)

Next, a San Francisco contractor pled guilty to two counts of tax evasion for failing to report about $250,000 in income. He took under-the-table cash payments instead of reporting them to his business. He could face as much as five years in jail, but will probably get about a year and a significant fine. (Story here.)

Finally, Markell Boulis, a former Pittsburgh chiropractor, is already in jail for selling drugs. He's in a lot more trouble. This story, which appeared a little over a week ago, indicated that he's being investigated for insurance fraud. An owner of a medical supply firm is cooperating in the investigation and has accepted a plea bargain (story here). Now, Boulis has been indicted on tax evasion and fraud charges. According to the Pittsburgh Post-Gazette, the indictment charges that Boulis underreported his income in 2001 by over $500,000 and didn't report any of his 2002 income.

But it wouldn't take much for that to be true.

Danni Boatwright, the most recent Survivor champion, paid her taxes on the $1 million she won. "I paid them right away," she told AP Radio. "(CBS) recommends that you pay your taxes first off. Come on, you don't need anyone to tell you that. It's ridiculous. Poor Richard."

News Story: AP

Lawrence Block wrote a great book, Eight Million Ways to Die. A Milpitas, CA couple could write a sequel: Eight Million Ways to Lie (on Your Tax Return).

The couple sold an invention to the predecessor of Lucent Technologies for $8 million. No problems yet. Then they didn't report the income on their tax returns. Oops. Unlike Richard Hatch, the couple has accepted a plea agreement. They've paid the $2.8 million in back taxes, penalties, and interest, and will serve jail time. They're also paying a $350,000 fine. As an aside, I believe that this couple because they settled will find themselves much better off than Richard Hatch will when he is sentenced later this month.

The news story also noted that the couple was prohibited under their employment contract from such a sale. The husband was laid off.

News Story: San Francisco Chronicle