Taxable Talk

I've said this before but it bears repeating—especially on Labor Day. If you want to get in trouble with the IRS either withhold payroll taxes and don't remit them to the IRS or pay your employees under the table (thus not being in compliance with trust fund taxes). Either method starts you quickly on the road to ClubFed.

Thomas Carbo of Wayne, Pennsylvania did the latter. He decided to improve his business' profitability by paying his employees under the table. He did temporarily save on his payroll tax expense...until he was caught. He ended up defrauding the government out of $168,000.

He was apparently caught as a result of a kickback scheme in nearby Norristown. His business appears to have been a Norristown vendor. The government subpoenaed his records but he didn't comply with the subpoena; he's accused of destroying the records instead. The government then investigated, looked at his bank records, and then discovered the tax fraud.

Mr. Carbo has pleaded guilty to one count of conspiracy to defraud and 17 counts of failing to collect and submit the payroll taxes. While he faces up to 90 years in prison and a fine of up to $4.5 million, federal sentencing guidelines suggest he'll receive a little over two years at ClubFed.

Earlier this year officials at the nearby University of California, Irvine announced that about 1,100 student identities were stolen by Texas-based United Healthcare. Now several individuals have been indicted for filing phony tax returns using these students identities (and others).

The indictments were handed down by a federal grand jury in Sherman, Texas. Those indicted, Christopher Chiota of Dallas, Kennedy Mpezini of McKinney, Gilbert Gotoro of Irving, Tendeka Daniel Parirenyatwa of Richardson, Michael Thomas Jr., of Irving, and Kudzai Mangoma all face charges of fraud and identity theft. The indicted allegedly filed returns for 163 UCI students after starting a phony tax preparation business and setting up relationships with several banks.

The problem for the individuals who filed returns for the UCI students was that sooner or later some of the students would file their own returns. Once that happened the scheme was certain to be investigated. UCI police along with criminal investigators from the IRS, Department of Justice and Texas law authorities are still investigating and it's likely that further charges are forthcoming.