Tax Fraud Blotter: Buddy, can you spare four years?
Strip-club credit; as is the mother; a rep for refunds; and other highlights of recent tax cases.
Hammond, Ind.: Preparer Arthur Lee Smith Jr., 60, of Chicago, has been sentenced to 46 months in prison followed by two years of supervised release and been ordered to pay $313,871 in restitution after pleading guilty to filing fraudulent federal returns.
According to case documents, Smith held himself out as a preparer, using the names “King Solomon” and “Buddy.” When preparing returns for clients, he sometimes fraudulently reported an overinflated salary and federal income tax withheld and other times fraudulently reported unearned wages, unpaid federal income tax withheld or false dependents, resulting in fraudulent refunds.
New York: Preparer Maria Munoz, 45, has pleaded guilty to aiding and assisting in the preparation of a fraudulent return.
According to documents and information provided to the court, Munoz owned and operated a Brooklyn prep business called Munoz Multiservices Corp., and from 2010 through 2012 prepared fraudulent income tax returns for clients. These returns included inflated or fictitious deductions for gifts to charity, unreimbursed employee expenses, personal property taxes and other expenses.
Munoz agreed that she caused a tax loss of $136,789.
Sentencing is April 26, when Munoz faces a maximum of three years in prison, a period of supervised release, restitution and monetary penalties.
Burnsville, Minn.: Joseph Arnold McGlynn Jr., 33, former owner, CEO and president of United Credit Consulting has pleaded guilty in connection with failing to account for and pay over employment taxes.
According to the plea agreement and court documents filed in court, while McGlynn ran UCC, a credit repair service company, he was responsible for ensuring that UCC’s employer’s quarterly federal returns were filed and that employment taxes were paid. Though he caused employment taxes to be withheld from the wages of employees, however, he failed to pay over the taxes to the IRS.
Instead, McGlynn used the money to fund a lavish lifestyle, including luxury vacations, rentals of luxury vehicles, visits to strip clubs and purchases of luxury items such as jewelry and handbags.
He failed to pay to the IRS at least $159,157 in employment taxes.
Cataula, Ga.: Preparer Melissa Lowe, 47, and her daughter Bianca Lowe, 29, have been sentenced for filing false returns with the IRS.
Melissa Lowe was sentenced to 24 months in prison to be followed by a year of supervised release and ordered to pay $440,000 restitution; Bianca Lowe was sentenced to nine months in prison followed by a year of supervised release and ordered to pay $78,687 restitution. Both are also prohibited from acting as tax preparation agents or seeking employment in any tax-related field.
Evidence showed that from 2011 to 2013 Melissa Lowe owned and operated Priority Tax Service, where Bianca Lowe was an occasional employee. Priority primarily filed federal and state income tax returns for individual taxpayers. The Lowes engaged in a sustained practice of filing fraudulent returns designed to inflate refunds.
While the scheme was perpetrated in several ways, the most common method used by the Lowes was filing a Schedule C with each return even when such a filing was unwarranted or unnecessary. The Lowes routinely filed a Schedule C showing that their client sustained large business losses.
In most cases, the businesses were either non-existent or their losses were drastically overstated. Most of the individual taxpayers were unaware of the fraudulent filings.
The IRS eventually realized that Priority was filing Schedule Cs in a volume drastically higher than the national average for such businesses. Total loss to the government was estimated at $440,000.
Liberty, Texas: Local resident Maria Lilia Riggs, 69, has pleaded guilty in connection with charges that she conspired to impede and obstruct the IRS in the collection of income taxes.
Authorities said that joint 1040s of Riggs and her spouse for tax years 2007 through 2014 showed federal income taxes owed of approximately $359,009 with little or no withholding or taxes paid or tendered. For tax years 1999 through 2006, the joint 1040s of Riggs and her spouse showed federal income taxes owed of some $164,514 also with little or no withholding or taxes paid or tendered.
Prosecutors maintained that beginning in 2006, when Riggs learned that federal tax levies were being served on her financial institution, she began to open other accounts at that institution and another financial institution in the names of relatives and corporations in which the personal earned income of Riggs and her spouse were deposited and withdrawn from to evade collection of taxes owed over the years. In 2013, when IRS officers attempted to collect past-due taxes from the couple, Riggs completed and signed a 433-A and failed to disclose her ownership of the various nominee accounts she was using to evade payment of taxes.
Riggs faces up to five years in federal prison, as well as restitution to the IRS of some $521,166.
Anderson, S.C.: Preparer Shirley Carson, 49, pleaded guilty to a 20-count indictment charging her with filing false federal income tax returns.
Authorities said Carson operated a small prep business out of her home and developed a reputation for obtaining significant refunds for lower-income clients. For tax years 2012 and 2013, Carson prepared at least 19 fraudulent returns.
In these returns, she generated large refunds by falsely stating that the clients had dependents who did not exist and medical or mortgage expense that had never been paid. Additionally, Carson filed a false return for herself on which she used counterfeit W-2s to make it appear that she had paid taxes through withholdings when she hadn’t, resulting in an undeserved refund.
Dallas: Preparer Arslen Ramin Ayeze was sentenced to a year and a day in prison and ordered to pay $65,000 restitution to the IRS after pleading guilty to one count of aiding and assisting in the preparation of a return.
According to the plea agreement and case papers, Ayeze did business under the name Universal Tax and in January 2010 prepared and e-filed a 2009 Form 1040 on behalf of “K.G.” that was fraudulent.
Ayeze falsely included a business loss deduction of $10,575 for a purported sole proprietorship operated by K.G., knowing that K.G. had not incurred the loss. The false deduction resulted in a tax loss to the U.S. of some $2,557.