Taxable Talk

It was a busy week for bozo taxpayers. There's one less bozo tax preparer to harm my profession, while two under-the-table business owners found out that cash income is just as taxable as checks.

First, we'll head to Dartmouth, Massachusetts. Daniel McElroy owned Daily A. King, a temporary agency that had lots of advantages. Their rates were better than their competitors...but for all the wrong reasons. It seems that Mr. McElroy used two shell companies so that he didn't have to pay the full amount of payroll taxes to the government. He also underreported his payroll to his workers compensation carrier. All told, that's a lot of fraud, and Mr. McElroy was sentenced to nine years at ClubFed.

Let's now head to Camden, New Jersey where Neyembo Mikanda had a thriving tax preparation business, and with good reason. He falsified the tax returns for his clients, and for his own businesses. He was found guilty last week on all 26 counts, and will be sentenced later this year.

Finally, we head to beautiful La Jolla where Marjan Poustan ran a cosmetic surgery business with her husband. She pleaded guilty to attempted tax evasion. Her not so brilliant idea was to, in 2005, go from post office to post office and purchase money orders for just under $3,000 from cash receipts and use those to pay the bills for her business. Since legitimate business expenses are deductions, her scheme really appears to be one of the most bozo we've encountered. More likely, the brief story left out one detail—Ms. Poustan pocketed some of the money orders and was going to not report that income. In any case, she'll be sentenced in October.

A Lincoln Town Car is the top of the line for Lincoln.



It would be hard to confuse a Town Car with a Singer Sewing Machine:



Who could possibly confuse the two?

Well, Charles Edkins of Greenville, Michigan owned Baby Bliss, Inc. They made clothing for the popular American Girls dolls. Mr. Edkins pleaded guilty to four counts of tax evasion. He allegedly filed false tax returns in 1995 - 1997 and followed that up by not filing any federal tax returns from 1998 to 2003. Additionally, he didn't file corporate tax returns from 1995 - 2003. The indictment also alleged that he didn't file state tax returns from 1999 - 2003 after filing false state returns from 1996 - 1998.

And yes, Mr. Edkins allegedly wrote off personal expenses on his tax return. His Lincoln Town Car became five used Singer Sewing Machines (one for each tire, including the spare). The IRS wasn't as amused as I was.

On the positive side, Mr. Edkins did plead guilty and does plan on making restitution. He'll be sentenced later this year (he could receive up to five years and a $250,000 fine on each count).

You're on trial for tax evasion. Do you (a) hire a good defense attorney; (b) attempt to get evidence that exonerates you; or (c) file fake warrants and fraudulent liens, attempt to disrupt the court proceedings and attempt to "arrest" the judge?

Yes, Robert Beale, already awaiting to find out how long he'll be spending at ClubFed on tax evasion charges, did exactly that. As Joe Kristan reported, his insane scheme "missed it by that much."

Joe Kristan reports that tax evading psychic David Guardino has passed on. We wrote about him three times, most recently last February when he was sentenced. As Joe said, it's a sad way to go out.

Dr. Garland D. Miller was a successful physician in Zwolle, Louisiana. He even served as Sabine Parish's elected coroner. He went through an IRS audit in 1995 and then decided to take action.

Now, we don't have the results of the audit so we can only speculate as to what actually occurred. Suffice to say, it's unlikely it went well for Dr. Miller. So assume you went through a bad audit. Would you (a) Discuss with your accountant tax saving strategies, (b) Embezzle money from your employer, or (c) Purchase a publication from a foundation that argues that the income tax doesn't apply and then implement their strategies?

After the audit he purchased a publication from Save a Patriot Foundation that argued that you don't have to pay income tax. Interestingly enough, in 2006 a court ordered that a notice be put on their home page that states, "The District Court orders...That Defendants...are hereby permanently enjoined from directly or indirectly: ...Advising anyone that they are not required to file federal tax returns or pay federal taxes...." But I digress.

Dr. Miller then ceased filing tax returns. In 2000 he sold his office building to De Soto Regional Health System and became an employee. He was supposed to remit substantially all of his medical income to De Soto but didn't. There's a word for that—embezzlement.

After the local District Attorney investigated, the IRS joined in. Dr. Miller was convicted of tax evasion (it took the jury just two hours to reach a verdict). He'll be sentenced in October and will likely get to spend some time at ClubFed.

If someone ever hands you a publication that says you don't have to pay an income tax just laugh and note that it's good fiction. For if you take it as non-fiction you probably won't like the consequences.

Perhaps it was the holiday weekend, or perhaps it's the start of summer, but the tax evaders weren't that busy last week. Still, there are some amusing tales of evasion gone wrong.

First, we head to White Plains, New York. Yahezkel Elia and David Elyaho were accused of tax evasion. The IRS alleged that their business were far more profitable than they showed on their tax returns. And when the government found a logbook showing the 12,000 money orders that the two men used to conceal their true income the jury had no problem finding them guilty of tax evasion. Given that the evasion apparently involved millions of dollars the two men will likely soon be boarding at ClubFed.

Next, we journey to Mesa, Arizona. Last week John Stacey was indicted on tax evasion charges. The government alleges that he hid income and assets from his paving businesses by putting money into his mother's bank account, using phony social security numbers and employer identification numbers, and filing false bankruptcy financial disclosure statements. That's a trifecta of problems that could send Mr. Stacey to ClubFed if he's found guilty.

Finally, Michael Kyereme won't be scamming the City of Newark, New Jersey or Cisco Systems anymore. Mr. Kyereme pleaded guilty to mail fraud and tax evasion. Mr. Kyereme was a systems administrator for the City of Newark. When a Cisco part went bad he was supposed to use Cisco's online "SMARTNet" system to order a replacement part, and then have the bad part shipped back to Cisco. He may have done that a couple of times. More often, though, he just ordered "replacement" parts so that he could sell them to another individual and pocketed the money. He would ship other less expensive parts back to Cisco.

The indictment shows that the loss to Cisco is estimated at $4,179,667. That alone is enough to get Mr. Kyereme a stay at ClubFed. But there was an additional problem: tax evasion. Mr. Kyereme profited from his nefarious dealings but didn't report them on his tax returns. In 2006 his gains from this scheme totaled $1,242,483, or an additional $429,846 in tax.

Interestingly enough when Mr. Kyereme was taken into custody $3 million worth of Cisco equipment was found in his home and automobile. Mr. Kyereme remains out on bail until his sentencing later this Fall.

If you get a bright idea make sure it's a legal one, and make sure you pay your taxes. It's always a lot easier to pay them now then to find yourself paying them later...and possibly having to make a journey to ClubFed.

I'm not particularly familiar with the Australian Taxation Office and how they compare to the IRS. Yet I suspect that telling them, "Come and get me, you miserable bastards," is not the way to their hearts. But that's exactly what Australian actor Paul "Crocodile Dundee" Hogan said. The TaxProf Blog, AP, and Don't Mess with Taxes have more.

That's the question that Joe Francis, founder of Girls Gone Wild, must answer. Francis already faces tax charges; he's accused of hiding income through the use of foreign accounts and over $20 million of improper deductions on his corporate tax returns.

So what's another lawsuit? The Wynn Las Vegas Casino accuses Mr. Francis of not repaying $2 million of a $2.8 million loan. Mr. Francis is arguing that he has agreements so that he didn't have to repay the loan.

No trial date has been set.