Taxable Talk

Having had to deal with a few refugees from Western Tax Service, I've seen the damage that a bozo tax preparer can do. But this story is, well, ridiculous.

From Oronogo, Missouri, comes the story of Carrie Shafer. Ms. Shafer owned her own tax service, TC's Taxes, from her home in Oronogo. She prepared 1,475 tax returns between 2002 and 2004. There was just one major problem here: Almost all of the returns were false or fraudulent.

Like Western Tax Service, Ms. Shafer never saw a deduction she wouldn't take for her customers, even if they didn't have that deduction. Medical, dental, charitable, and business expense deductions were just some of her favorites. And after she was told she was under investigation she continued to prepare returns that had false deductions, and provided false information at audits! That's either chutzpah or stupidity...or both.

Ms. Shafer pleaded guilty to 40 counts of tax fraud earlier this year. She received three years at Club Fed, and she has already been barred from preparing tax returns in the future. Her customers have already likely received "Dear Valued Taxpayer" letters from the IRS; they'll have to pay the true amounts owed with interest. Remember, if it sounds too good to be true, it probably is.

In February 2006, I wrote about the "end of the sage" for Western Tax Service. Western Tax Service, for those who don't remember, had inventive but illegal methods for getting refunds for its' clients: phony deductions for employee business expenses, false charitable deductions, fake deductions for tax payments, and other similar shenanigans. Back then, Samuel Joseph DeAngelo pleaded guilty to defrauding the IRS and aiding and assisting in the filing of false tax returns.

Mr. DeAngelo was finally sentenced on Monday. He received 51 months at ClubFed. Also sentenced on Monday was Erin Cordes, another tax preparer for Western; Cordes received one year of probation. Joe Shields will be sentenced in mid-October.

By the way, the total tax revenue lost to the US government in the Western Tax Service scam was $15,458,732. That's a lot of fraud.

I am rarely surprised when I write about tax crime. I remember reading on Fark about a 91 year old bank robber with the headline never too old to steal. Today's subject is a little younger, but still one of our senior citizens.

Well, let's head to North Platte, Nebraska. Thomas Miller is a retired dentist in North Platte. He also has some annuities and pensions (which isn't unusual). But his tax returns painted a somewhat different story.

According to this article, in 1998 he allegedly reported a tax loss of $1.6 million...but it should have been zero. In 1999, he reported a loss of $22,730 but he should have reported over $369,000 in pension and annuity income. He was indicted for this, and for reporting tax losses in 2001 and 2002 when the government believes that none should have been reported.

But it gets worse. Mr. Miller also faces charges of mail fraud, wire fraud, money laundering and swindling for allegedly taking $1.3 million in investor's money, putting it in accounts in Grenada, and then allegedly sending the money elsewhere overseas for his own use.

Mr. Miller pleaded guilty to two counts of tax fraud on September 4th. He still appears to be facing the other charges with a court date in October.

Bohdan Senyszyn worked for the IRS in Paterson, New Jersey. He audited mid to large-sized businesses. Mr. Senyszyn also holds a CPA license.

Then things went wrong. In 1992, Mr. Senyszyn agreed to help a New Jersey real estate developer hide income. Not content with one crime, Mr. Senyszyn then embezzled money from the real estate developer, evaded taxes on his own return (by failing to report the embezzled income), and committed bank fraud by obtaining a loan under false pretenses. He got the loan because his business had "income" of $175,000 based on "revenues" of $350,000. The real numbers were $0 and $0.

Mr. Senyszyn pleaded guilty this past week to tax evasion and bank fraud charges, and given the $762,000 loss to the treasury, he's looking at an extended stay at ClubFed.

Wesley Snipes lost his latest battle in federal court this past week. He had asked that his trial be moved from Ocala, Florida, to New York City. Snipes is accused of attempting to obtain a fraudulent $12 million tax refund.

The judge, though, was unmoved. Judge William Terrell Hodges wrote, "While the Ocala courthouse is not located in the immediate vicinity of a major airport, it is within one hour and a half driving distance from two international airports, (Tampa and Orlando), and is within a 45-minute driving distance from Gainesville Regional Airport, which has regular direct flights to and from Atlanta and Miami...As the government points out, these driving times are only slightly longer and, on some occasions may even be less, than the congested commute from New York airports to downtown Manhattan."

Snipes also asked for the move because he has a home in New York. But the judge pointed out that he has a home in Orlando, which is just to the south of Ocala. The judge also noted that Snipes "...is an affluent individual..." who can afford the travel costs.

And while the probable jury pool in central Florida wasn't listed as an argument in both sides' briefs, you can bet that Snipes felt that he would likely have a better chance in Manhattan than in Ocala, Florida. So the media circus will descend on bucolic Ocala in October when Wesley Snipes will face the government.

News Story: St. Petersburg Times

Tax fraud comes in many shapes and forms. This weekend has given me a plethora of examples.

We'll start in Dayton, Ohio. Martin Dorf found an interesting way to short the IRS: Report ten cents on the dollar. From 2001 through 2004 Mr. Dorf earned about $574,000 but he reported only $57,000. The IRS caught on to the scheme, and Mr. Dorf has pleaded guilty to one count of attempted tax evasion. Mr. Dorf has already made restitution, so he may avoid any time at ClubFed (he could get up to five years).

Billy Wayne Minor was a tax preparer in Brownsville, Tennessee. In 2006, he was charged with 15 counts of preparing false tax returns; he ended up pleading guilty to one count of aiding and assisting in the preparation of a false tax return. He got 18 months at ClubFed, a fine of $7,500, and he was permanently enjoined from preparing tax returns for others.

That wasn't the only bozo tax preparer brought to justice recently. Thomas Mercer of Romulus, Michigan pleaded guilty to 30 counts in federal court. Mr. Mercer prepared 23 tax returns full of bogus deductions for things like business losses, charitable donations, and tuition and fees. His clients agreed to share their refunds—refunds that ranged between $900 and $19,000 for a total of $330,000—with him. Mr. Mercer also coached his clients on what to say during meetings with the IRS and provided them with phony documents backing up the phony deductions. Mr. Mercer is looking at a significant stay at ClubFed.

Heading now to Florida, we find the end of the political career of Warren Newell. Mr. Newell pleaded guilty to federal tax evasion and corruption charges. He attempted to pocket $500,000 through three schemes, and then use money laundering, false income tax returns, and false financial disclosure forms to cover them up. Mr. Newell used to be a County Commissioner in Palm Beach County. He'll likely soon be visiting ClubFed.

Finally, we head down under to Sydney, Australia. Andrew McCall pleaded guilty to 32 counts of tax evasion, in a fraud scheme that cost Australia 530,257 Australian Dollars ($447,166 USD). Mr. McCall was sentenced to seven years imprisonment, and he must repay over 500,000 Australian Dollars. Mr.McCall used phony identities, false passports, and other false documents to deceive Australian authorities before he was caught.

As usual, for all of these individuals it would have been a lot easier to just pay the taxes and skip the fraud in the first place. But if they did that, I'd have a lot less to write about each week.

I hope you're enjoying the Labor Day weekend. These individuals didn't have a pleasant holiday.

From Shreveport, Louisiana comes the story of bozo tax preparer Betty Jean Thomas. Thomas had a not-so-good way of helping her clients: she invented phony business expenses. Even worse, those clients didn't have a business. The total cost to the government was $67,000. Ms. Thomas received a year and a day at ClubFed and must pay a $3,000 fine.

We previously told you the story of Athanasios Reglas. Mr. Reglas invented some phony companies to create phony deductions. He pleaded guilty last week, and was sentenced to three years at ClubFed followed by three years of supervised release. He previously forfeited $358,000 in cash that was found when he was arrested.

I also previously wrote about Reverend John Henry Walker. The Charlotte pastor was sentenced last week to five years and three months for tax evasion and stealing from his congregation. The pastor had pleaded guilty to charges of tax evasion, bank fraud, and lying to federal agents. He also must make restitution of $277,000. He used his purloined funds for erectile dysfunction medication, two cars (a Lexus and a Mercedes), and a new home. He evaded taxes on $750,000.

Finally, Joe Roth reported on the case of Lakeland, Florida dentist Nancy Montgomery-Ware. She decided to research the tax laws, and "determined" that, "The income tax is not allowable under the Constitution." That's what she said during closing arguments during her trial for tax evasion. According to the Lakeland Ledger, it only took one afternoon to find her guilty. She's looking at several years at ClubFed. Interestingly enough, her husband told her that she was crazy. It would have been much less costly for her to listen to her husband. But she didn't, and she'll have to pay the consequences.