A California tax preparer who controlled two bank accounts with the same initials as the Internal Revenue Service and the states Franchise Tax Board has pleaded guilty to fraud and tax evasion.
David Canales, 53, pleaded guilty Monday to one count of mail fraud and one count of tax evasion in connection with a scheme to defraud his clients out of more than $1 million.
According to the plea agreement, between 2001 and 2008, Canales operated a tax preparation and bookkeeping business in Chula Vista. He admitted that he controlled two bank accounts with the fictitious business names, International Recovery Systems/IRS and Freight Transport Brokers/FTB (see Tax Preparer Set up Fake IRS Bank Account). He further admitted that he falsely represented to his clients that they owed substantial amounts of tax to the IRS and California Franchise Tax Board and directed his clients to write checks to IRS and FTB.
In his plea agreement, Canales admitted that instead of forwarding these checks and the tax returns to the IRS and FTB, he deposited the checks in his own IRS and FTB bank accounts and either did not submit the clients returns to the relevant taxing authority or submitted different returns showing little or no tax due and owing.
Canales admitted that he caused losses in excess of $1 million and willfully evaded payment of income taxes on $457,653 in income he earned for tax years 2003-2007.
Paid preparers are a critical component in our system of tax administration, said Treasury Inspector General for Tax Administration J. Russell George in a statement. When preparers violate the law, they harm their victims and severely damage the credibility and reputation of the tax preparation community.
Canales faces up to 20 years in prison, a $250,000 fine and three years of supervised release. A sentencing hearing is scheduled for May 24.
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