Some of our favorite recent tax fraud cases.
Whittier, Calif.: Preparer Calvin Tyrone Ridgill, 60, has pleaded guilty to one count of aiding and assisting in the preparation of a false tax return in connection with a scheme to defraud the IRS.
According to the plea agreement, during the years 2010, 2011 and 2012, Ridgill prepared federal income tax returns for clients that claimed false or inflated refunds based on false deductions such as losses from the sale of business property, Schedule E partnership losses, mortgage interest deductions or mortgage points, resulting in the understatement of the tax liability owed to the IRS.
The tax losses exceeded $400,000. The single count to which Ridgill pleaded guilty relates to the 2011 return that included a false Schedule E partnership loss of $56,788.
As part of the plea agreement, Ridgill agreed to a binding civil injunction barring him for life from aiding or assisting in the preparation of federal income tax returns for anyone other than himself and his legal spouse, and barring him from representing individuals before the IRS.
He faces a maximum of three years in federal prison and a fine of $250,000 when sentenced on July 13. He may be further ordered to pay restitution of approximately $357,477.
Las Vegas: The U.S. government has asked a federal court to bar preparer Harvey L. Cage, d/b/a CSN Tax Services, from preparing federal returns that contain or involve foreign earned income, and from promoting to others the exclusion of foreign earned income.
The complaint alleges that Cage inappropriately attempts to exclude foreign earned income from the calculation of clients’ federal tax liabilities. According to the complaint, from 2009 through 2012 he prepared more than 3,200 returns, of which about a quarter contained the foreign earned income exclusion.
According to the suit, Cage ignored the published list of waiver-eligible countries in filing for clients’ exclusion of foreign earned income and allegedly claimed exclusion for ineligible clients.
The complaint further alleges that Cage’s activities cost more than $12,000 per examined return and that additional taxes due from his clients, excluding interest and penalties, exceeds $3.7 million and grows as additional examinations are completed. After many of his customers had been audited, Cage also allegedly failed to provide his PTIN on returns he prepared.
Detroit: The federal government has filed a complaint seeking to permanently bar mother and daughter Denise Pope and Janise Jones and the prep businesses they operate from preparing federal tax returns for others.
The civil injunction complaint alleges that the pair prepared federal income tax returns for customers that understate tax liabilities. Pope, a.k.a. Denise Miller, operates CDP Tax Services Inc., CDP Accounting Service PC, dba CDP Tax and Uneek Business Solutions.
The suit alleges that the understatements and inflated refunds are the result of improper EITCs, education credits, charitable deductions, unreimbursed employee business expense deductions, and Schedule C expenses and income that the defendants claim for clients without supporting documentation. The complaint further alleges that the IRS interviewed several of the defendants’ clients, who stated that the deductions, credits and business expenses and income were not based on information they provided to Pope and Jones.
According to the complaint, the IRS estimates that the defendants prepared more than 3,000 returns since 2011 and that IRS examination of just 87 of those returns revealed more than $460,000 in lost taxes.
Cordova, Tenn.: Preparer Tara L. Mitchell, 42, has been sentenced to 18 months in prison for conspiring to defraud the IRS by filing false and fictitious income tax returns.
According to court documents, Mitchell owned and operated a tax prep business in Memphis, Tenn., in 2009, and prepared federal returns that contained a combination of false, misleading and inaccurate statements to inflate refunds. A number of the returns prepared by Mitchell contained two credits to increase the refund: the EITC and the First-Time Homebuyers Credit. In several instances, returns prepared by Mitchell included the homebuyers’ credit when the taxpayer had not purchased a home during the required period.
Other false items contained in Mitchell’s returns included Schedule C income and loss statements, the listing of taxpayers’ dependents, claims of head of household status and wage information. Mitchell, who did not have an EFIN, also paid to use the number of another preparer.
She pled guilty on Oct. 8 to conspiring to defraud the U.S. by receiving money for filing false income tax returns.
Co-defendant Derrick M. Evans, 43, of Marion, Ark., who was sentenced in January, recruited taxpayers for Mitchell and on two occasions provided ID information used by Mitchell to prepare false returns.
Once the return was completed and filed by Mitchell, a check for a RAL was printed. Evans then transported the taxpayer to Memphis to sign the check and Mitchell paid that individual a portion of the proceeds in cash and deposited the remainder of the refund in a bank account she controlled.
Mitchell prepared approximately 13 false returns for the 2009 tax year. The IRS has determined that tax losses attributable to those returns totals nearly $113,227, which Mitchell was ordered to repay as restitution to the IRS.
In addition to the prison sentence, Mitchell must serve three years of supervised release and has been barred from participating in the business of preparing returns while she serves her sentence.
New York: Preparer Alabi Gbangbala of Staten Island has been indicted on 31 counts of aiding and assisting in the preparation of false federal income tax returns and three counts of filing false personal federal income tax returns.
According to the allegations, Gbangbala operated the tax prep business Broadfield and for tax years 2008 and 2009 allegedly prepared false returns for clients by, among other methods, failing to report accurate exemptions, falsifying business receipts and losses on Schedules C, and inflating or fabricating charitable contributions and unreimbursed employee expenses.
Gbangbala also filed false individual income tax returns on behalf of himself for tax years 2008 through 2010, in which he failed to disclose his total income for each calendar year.
If convicted, Gbangbala faces a maximum of three years in prison and a fine of $250,000 on each count.
North Richland Hills, Texas: Preparer Michael Lloyd Moody has been sentenced to three years in prison and ordered to pay restitution to the IRS after admitting to causing false income tax returns to be filed with the IRS.
Moody was indicted in March 2013 on 16 counts of aiding and assisting in the preparation and presentation of false and fraudulent individual income tax returns. He pleaded guilty in December 2013 to two of those counts. He was on pretrial release until October 2013 when the court found he had violated its terms and conditions and remanded him into custody.
According to the factual resume filed in the case, from 2009 through 2010 Moody prepared 1040s, along with supporting schedules, at his residence. After meeting his clients, Moody delivered the completed returns to Universal Tax in Irving, Texas, to be e-filed.
Moody admits, according to the factual resume, that he inserted false or inflated deductions and credits to produce fraudulent refunds. For example, on approximately March 1, 2010, he prepared and caused to be filed a return knowingly including $37,044 as a business loss and $2,349 as an education credit due the taxpayer. In reality, this client did not own a Schedule C business and did not incur education expenses for the credit. The inflated refund cost the government $7,906.
