Some of our favorite recent tax fraud cases.
Laguna Hills, Calif. Preparer Randall Craig Hutchens, 62, CEO and president of the prep business Accounting Services, Inc., has pleaded guilty to three counts of aiding and assisting in the preparation of false returns, done as part of a scheme involving reduced tax liabilities based on fraudulent shelters.
According to the plea agreement, from approximately May 2010 until October 2013 Hutchens sold fraudulent tax shelters to numerous clients through ASI, promoting these shelters to clients as legal ways to reduce taxes. The shelters required clients to purchase an equity interest in an LLC on the condition that the LLC could, typically within about two years, repurchase that interest for substantially less than the price paid for it (typically, $1).
None of the LLCs was legitimate. Hutchens then prepared returns for clients who bought the shelters, including in them false losses related to the LLCs.
He prepared and filed with the IRS at least 125 false federal returns, costing the federal government at least $1,622,512.
The three counts to which Hutchens pleaded guilty relate to fraudulent 2011 returns filed on behalf of clients that included either a false Schedule E, a false loss on a 4797 or a false Schedule C.
As part of the plea agreement, Hutchens 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.
Hutchens faces a maximum of nine years in federal prison and a fine of $750,000, in addition to possible payment of restitution. Sentencing is Sept. 28.
Tampa, Fla.: A U.S. court has barred preparer Octavio Cruz from preparing federal returns for others.
The civil injunction order, to which Cruz consented, also bars the business Cruz operated, Advantage Accounting Corp., from continuing to prepare returns.
In August 2014, the U.S. filed to enjoin Cruz and Advantage from preparing returns for others. According to the complaint, Cruz prepared returns that unlawfully understated income tax liabilities and inflated refunds by fabricating or exaggerating deductions and tax credits his customers were not eligible to take.
His practices included fabricating Schedule C losses for non-existent businesses and falsely claiming inapplicable childcare and residential energy credits. The suit alleges that Cruz also prepared returns that falsely claimed American Opportunity Credits for unqualified taxpayers.
The government alleged that loss to the U.S. Treasury may be in the millions of dollars.
The injunction requires Cruz to provide the government with a list of all customers for whom he has prepared federal returns or claims for refund since Jan. 1, 2012.
N. Las Vegas, Nev.: A federal court has barred preparer Sheila Bunting and her business from preparing federal returns that contain or involve foreign earned income and from promoting the exclusion of foreign earned income to others.
The civil injunction order, to which Bunting consented, also bars her business, 5 Star Tax LLC, from continuing to prepare returns that contain or involve foreign earned income and from promoting the exclusion of foreign earned income to others.
According to the complaint, Bunting inappropriately attempted to exclude foreign earned income from the calculation of clients’ federal taxes, which understated tax liabilities or inflated refunds.
According to the suit, Bunting disregarded the published list of waiver-eligible countries in filing the exclusion of foreign earned income on behalf of clients.
The injunction requires Bunting to provide a list of all persons for whom she prepared federal returns or claims for refund since Jan. 1, 2012, that reference foreign earned income.
Kansas City, Kan.: Preparer Ahferom Goitom, 35, has pleaded guilty to one count of preparing false returns.
Goitom admitted that while a preparer for Instant Tax Services he prepared tax returns for clients that included false deductions and credits, often without clients’ knowledge. He fabricated business expenses, inflated charitable deductions and exaggerated childcare expenses. In addition, he told an undercover IRS agent to find someone to claim as a dependent to inflate his refund.
Shiloh, Ill.: Preparer Shanta C. Doss, 35, has entered pleas of guilty to 15 counts of false claims against the U.S. through the preparation and submission of fraudulent federal returns.
From 2011 through 2013, Doss prepared and e-filed returns to the IRS for friends and from other referrals. Many of these returns were false in that the Schedule Cs inflated or entirely fabricated business income.
Doss also knew she was required to disclose to the IRS that she was a paid preparer and to identify herself on the 1040. Instead, she concealed her identity by failing to disclose herself as a paid preparer to evade detection because she was operating a tax refund fraud scheme.
She faces a maximum of up to 75 years in prison, three years of supervised release, a fine and mandatory restitution. Sentencing is Sept. 29.
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