Tax Fraud Blotter: An EFIN mess
No kidding; Time’s up; jailbird; and other highlights of recent tax cases.
Philadelphia: Preparer Nvahbulai Quisiah has been found guilty of conspiracy to defraud the U.S., preparing false client returns, wire fraud and identity theft.
Quisiah owned and operated the tax prep business First Premier Tax Service and from 2010 through 2017 falsified clients’ returns by claiming false dependents, itemized deductions and business losses to inflate refunds. Authorities said he used minors’ identities as phony dependents.
Sentencing is June 10, when Quisiah faces 20 years in prison for each wire fraud count, a maximum of five years for conspiracy, three years for aiding and assisting in preparing the returns and a minimum of two years for aggravated ID theft. He also faces supervised release, restitution and monetary penalties.
Phoenix: Preparer Susana Gonzalez has pleaded guilty to one count of aiding or assisting in the preparation of false and fraudulent income tax returns.
On May 9, 2016, Gonzalez, operating GTS Tax Service, prepared and e-filed a false 2015 federal income tax return for a client. The return included Schedule A deductions that she knew were false or inflated.
Columbus, Georgia: A federal court has permanently barred preparers Stacy and Heather Lee from preparing returns for others and from owning, operating or franchising a prep business.
Stacy Lee operated two prep stores: Fast Track Tax Service in Talbotton, Georgia, and TimeLee Tax Service in Columbus. Her daughter Heather Lee allegedly prepared returns at the two stores as well. From 2013 to 2018, Stacy Lee prepared 3,728 returns and Heather Lee prepared 1,116 tax returns, the complaint alleges. The government further claimed that the Lees prepared false federal income tax returns, understated federal income tax liabilities, and improperly claimed credits to inflate refunds for clients.
In particular, according to the complaint, the defendants fabricated deductions for charitable contributions, unreimbursed employee business expenses and medical expenses; and reported profits and losses for fictitious businesses. They also claimed false education credits, energy credits and childcare credits.
The court also ordered the two to close their prep stores.
New York: Brooklyn-based preparer Emerson Gamory has been sentenced to 15 months in prison for preparing false returns for his clients and himself.
Gamory, who pleaded guilty last summer, owned and operated Emerson Gamory Income Tax Services and from 2013 through 2017 falsified client returns by fraudulently claiming deductions for gifts to charity, unreimbursed employee expenses and education expenses. Gamory also prepared false returns for Gamory Tax that underreported its gross receipts and returns for himself that underreported net profits.
He caused a tax loss totaling more than $550,000 to the U.S.
Gamory was also ordered to serve a year of supervised release and to pay $574,565 in restitution to the U.S.
White Plains, New York: Preparer Michael Magnaldi, 54, formerly of Pelham, New York, and currently living in St. Augustine, Florida, has pleaded guilty to one count of aiding and assisting in the filing of false returns for tax years 2014 to 2017 and one count of subscribing to a false return for tax year 2016.
Magnaldi has years of audit experience in the New York City Department of Finance and since at least 2014 owned and operated MGM Tax Solutions, a tax prep business in the Bronx. For the 2014 through 2017 tax years, he prepared for clients 37 false 1040s containing, among other false information, false Schedule D capital losses, false IRA contribution deductions and false education credits. He unsuccessfully tried to conceal his role in preparing these fraudulent returns by not listing his or any name as the preparer. In response to IRS correspondence audits, Magnaldi caused additional false forms to be sent to the IRS to substantiate the claims.
The tax loss for the 37 false returns totaled $232,767.
Magnaldi also falsely understated his own and his business income on 2016 returns, the same year that he bought a home worth roughly $705,000. He falsely understated income on MGM’s 1120S, which understated flow-through income on his 1040. The tax loss for Magnaldi’s understatement of flow-through income is $243,417.
Each count carries a maximum of three years in prison. Magnaldi has agreed to pay restitution to the IRS of at least $476,184 plus interest and penalties. Sentencing is May 8.
St. Louis: Babatunde Olusegun Taiwo has been sentenced to four years in prison for his role in a tax fraud.
He conspired in a scheme to file false returns in the names of individuals whose personal ID information they stole. Through a data breach at a payroll company, Taiwo and others accessed the information of hundreds of individuals, including school district employees in Alabama and Mississippi. They then used the information to file false federal returns. They sought to conceal their fraud by filing the returns under stolen EFINs and directed that the claimed refunds be mailed to their residences in St. Louis.
In total, Taiwo and his conspirators filed more than 2,000 fraudulent returns that claimed more than $12 million in refunds, of which the IRS paid out $889,712.
Taiwo was also ordered to serve three years of supervised release and to pay $889,712 in restitution to the U.S.
Hoboken, New Jersey: Accountant Louis Picardo, 64, has been sentenced to a year and a day in prison for evading more than $914,000 in taxes on income he earned from his practice and various rental properties.
Picardo served as the tax collector in Hoboken between 1973 and 2008 and was a partner in Cannarozzi & Picardo, an accounting firm. He also was a member of multiple entities (the “Picardo Entities”) that managed both commercial and residential properties in Hudson County. Picardo failed to report to the IRS some $3,725,853 in taxable income for tax years 2012 to 2015, resulting in a tax loss of some $914,908.
Picardo was also sentenced to two years of supervised release and ordered to pay $914,908 in restitution to the IRS.
Phoenix: Kevin Jeffory Rocheteau has been sentenced to 30 months in prison and been ordered to pay $11,255 in restitution for filing false claims.
Beginning in 2016, Rocheteau, who previously pleaded guilty to false claims, used video calls from a local jail to recruit Kathie Bonenberger to file false claims with the IRS. On the two occasions when the scheme succeeded, Bonenberger, acting at Rocheteau’s direction, also received refund checks related to these returns and deposited them into bank accounts. Bonenberger, at Rocheteau’s direction, filed 35 false returns and claimed $165,000 in refunds.
Rocheteau directed several techniques to falsely inflate refunds, including claiming wages from fake or out-of-business employers, claiming wages on behalf of a person who never worked for a particular employer, and arranging to send the returns to multiple IRS service centers to conceal the scheme.
Modesto, California: Preparer Chris Donell Smith, 56, of Stockton, California, has pleaded guilty to aiding and assisting in the preparation of false returns.
Smith owned and operated the prep business New Covenant Tax & Accounting and between 2012 and 2015, prepared income tax returns that reported false items and dollar amounts for his clients without their knowledge or consent. He falsified charitable contributions, unreimbursed employee expenses and capital losses and wage income on some of his clients’ returns. For some of these clients, he prepared a correct return that he gave to the client, but then e-filed a fraudulent return claiming a higher refund. He directed that the payment of the refund be split, with the amount the client expected going into the client’s account and the additional higher amount going into an account controlled by Smith.
He defrauded the IRS of some $63,000.
Sentencing is May 11. Smith faces a maximum of three years in prison and a $100,000 fine.