Some of our favorite recent tax fraud cases.
Houston: Preparer Diane Caldwell Larry has pleaded guilty to falsifying client returns. During her plea hearing, she admitted that while operating Paradise South Tax Services she prepared 33 materially false client returns for tax years 2007 through 2010. Those returns generated excessive refunds and cost the IRS some $168,792.
Larry acknowledged that she included in these client returns fake “side business” losses and false and excessive itemized deductions and credits to generate larger refunds. When some of these returns were audited, Larry also made up false documents to legitimize some of the deductions and credits. Specifically, she admitted that she knowingly and willfully included a false $84,215 business loss deduction for a non-existent side business, as well as false deductions for uniforms’ upkeep, toll bridge fees, job-related tools and employee business expenses totaling $10,644 on a client’s 2009 return. This return alone cost the U.S. Treasury approximately $18,382.
The plea agreement requires Larry to make full restitution to the IRS for all of the fraudulent refunds. Sentencing is October 20; she faces up to three years in prison and a $250,000 fine.
Detroit: Preparer Matthew Bender has been sentenced to four years in prison and one year of supervised release after being convicted of obstructing the IRS and of nine counts of aiding and assisting in the preparation of false federal income tax returns. He has also been convicted of failing to make a required appearance in court following his first trial.
According to court documents and evidence at trial, between 2006 and 2011 Bender prepared more than 3,000 returns and earned more than $500,000 in fees. He failed, however, to report his own income from tax prep to the IRS, either by filing false returns for himself or by failing to file his own returns at all. Evidence also showed that Bender inflated refunds for his clients by placing false deductions on their returns.
After the initial indictment prior to his first trial, Bender was ordered to appear in court on July 2, 2013, concerning his failure to comply with his conditions of release. He failed to appear in court on that date and was arrested in August 2013 after returning to Michigan from Ohio and Texas.
Scottsdale, Ariz.: Gregory S. Ott, owner and president of Xpress Pay Inc., a payroll service company, has been arrested for tax evasion.
According to authorities, most of Xpress Pay’s clients were small-business owners who had a professional employer organization arrangement with the payroll company. Xpress Pay collected payroll taxes from its clients for the quarterly tax periods ending March 31, 2008, through March 31, 2010. These payroll taxes were deposited into Xpress Pay’s business account and although the company had sufficient funds on hand, Ott allegedly failed to make all of Xpress Pay’s federal tax deposits for the quarterly tax periods mentioned above.
Ott allegedly failed to pay $1,051,907.76 for 2008, $1,499,865.24 for 2009 and $568,279.06 for 2010, for a total of $3,120.052.06.
According to the indictment, he willfully attempted to evade and defeat the payment of tax due to the federal government and allegedly hid company assets from the IRS. From 2008 through approximately March 2010, Ott transferred or had transferred for him some $1,486,350 from Xpress Pay’s business account to bank accounts he owned and controlled. During the years 2008 through 2010, he also took or directed employees to take $160,320 directly from Xpress Pay’s business account to make mortgage payments on houses he owned.
On July 7, Ott pleaded not guilty to all pending counts. Trial begins August 19.