Tax Fraud Blotter: Get that mortgage back!
EZ out; Totaled; to the cooler; and other highlights of recent tax cases.
Savannah, Georgia: A federal court has enjoined Andrea Nadel and her business, EZ Accounting & Tax Service, along with Estelle Nadel, from preparing federal returns for others.
According to the complaint, the Nadels and EZ prepared federal income tax returns that reported false Schedule A and Schedule C deductions to manipulate clients’ claims for the Earned Income Tax Credit and reduce their taxable income. The complaint alleges that the defendants prepared returns that falsely claimed deductions for gifts to charity, unreimbursed employee expenses, prep fees and taxes paid, and that their practice of claiming these false deductions has resulted in significant lost tax revenues. Andrea Nadel previously pleaded guilty to aiding and assisting the preparation of a false return.
The Nadels and EZ agreed to entry of the permanent injunctions without admitting any factual allegations in the complaint.
Las Vegas: Preparer Michael A. Sandoval has been sentenced to 40 months in prison for tax fraud.
Sandoval, who pleaded guilty last year, provided payroll and tax preparation services for individuals and companies through his business, Nevada Financial Solutions. When two of Sandoval’s clients provided Nevada Financial with $471,178 in payments to be forwarded to the IRS for their quarterly employment taxes, Sandoval did not pay the IRS but instead spent the funds for his personal benefit.
He also filed and caused the filing of false individual income tax returns for a substantial number of clients by reporting fraudulent deductions, including false Schedule C business losses, charitable contributions and state and local tax deductions. These deductions caused a tax loss of more than $2.8 million. On his own individual returns, Sandoval fraudulently understated his income for the years 2010 through 2017, causing an additional tax loss of $100,138.
Sandoval was also ordered to serve three years of supervised release and to pay restitution of $281,630 to a client and of $100,138 to the United States.
Succasunna, New Jersey: Anthony Curto Jr., 51, owner of a scrap metal business, has pleaded guilty to making and subscribing a false return in connection with underreporting his income and avoiding paying more than $175,000 in taxes.
Curto, who owned and operated Total Metal Transport, admitted that for tax years 2012 and 2013 he underreported and failed to report the gross receipts from Total Metal, which he operated on a cash-only basis.
The count of making and subscribing a false return carries a maximum of three years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is March 24.
Austell, Georgia: Preparer Thomas Holmes 41, has been sentenced to 37 months in prison and two years of supervised release and been ordered to pay $2,601,957 in restitution to the IRS for preparing and filing fraudulent returns.
Investigation revealed that Holmes, owner of TKO Tax Pros, prepared and filed thousands of federal income tax returns between 2011 and 2019, and on hundreds of the returns listed false information, including false Schedule C losses and false Schedule A deductions, causing taxpayers to claim millions in undeserved refunds. When the IRS issued those refunds, Holmes frequently kept a portion for himself and paid the balance to his clients.
During the investigation, the IRS revoked his e-filing privileges but Holmes, who pleaded guilty last year, continued to file fraudulent returns through the mail.
Las Vegas: Preparer Martha L. Williams, 42, has pleaded guilty to two counts of aiding and assisting in the preparation and filing of a false return.
Williams owns and operates MJW and Associated (formerly Across the Board Management), a tax prep business. Between 2009 and 2014, Williams prepared thousands of returns, and for more than 75 percent of her clients she prepared a false return that inflated the refund by including fictitious deductions related to businesses that did not exist. Williams used the IRS website to apply for EINs for fictitious businesses.
Williams caused at least $529,782 in tax loss.
Sentencing is May 13. Williams faces a maximum of three years in prison on each count and a $250,000 fine, or twice the gross gain or gross loss resulting from the offenses, whichever is greater.
Loveland, Colorado: Contractor Adam M. Hausman, 45, has been sentenced to 18 months in prison followed by a year of supervised release for obstructing and impeding the administration of the internal revenue laws.
Since 1999, he has filed only three U.S. income tax returns. For several years in which Hausman did not file returns, the IRS filed substitute returns for him, resulting in a tax due of $199,810. In 2010, the IRS initiated collection.
He began impeding the IRS through various methods, including the submission of statements where he failed to disclose all of his assets, filing a false 1040 that failed to report all of his income, failing to file personal returns for multiple years in which he received taxable income and failing to file corporate returns for his business. He also operated his business in cash.
Hausman, who pleaded guilty last year, was also ordered to pay $448,794 in restitution to the IRS.
Upland, California: Maria Huizinga, a.k.a. Maria Younghans, 62, has been sentenced to 37 months in prison for stealing more than $1.4 million from her employer.
From 2007 to 2019, Huizinga, who pleaded guilty last year to wire fraud and subscribing to a false income tax return, was the director of human resources for Taylor Freezers of California, a wholesale freezer distribution and service company. She was entrusted with access to the company’s finances and banking information, and admitted that she accessed Taylor’s payroll system and falsely claimed that she was owed additional pay for overtime, commission and unused vacation. She also admitted to falsely placing two family members on Taylor’s payroll.
Finally, Huizinga caused Taylor executives to authorize and sign manual checks purportedly to pay monies owed to company employees, which Huizinga then stole, altered to make payable to herself and deposited to her personal bank account. Huizinga admitted that she caused Taylor to make some $954,998 in unauthorized payments to herself and some $517,008 to her family members.
Huizinga was also ordered to pay $1,472,006 in restitution to Taylor.
Atlantic City, New Jersey: has been convicted of conspiring to defraud the U.S., filing false claims and obstructing the internal revenue laws.
Between 2015 and 2016, Crawford and his conspirators promoted and sold a “mortgage recovery” tax fraud in which they obtained for their clients fraudulent refunds from the IRS. Crawford promoted the scheme to individuals who were facing foreclosure or behind on their mortgage payments, telling them that they could extinguish their outstanding mortgage debts by filing federal forms.
Crawford and his conspirators caused clients to file forms that fraudulently claimed that a substantial amount of taxes had already been withheld. These claims caused the IRS to authorize undeserved refunds. More than $2.5 million in fraudulent refunds were sought from the IRS, which paid out more than $1.3 million. Crawford charged his clients a fee of roughly 25 percent of the refund.
Sentencing is March 20, when Crawford faces a maximum of five years in prison for the conspiracy charge, five years in prison for each false claim count and three years in prison for obstructing the internal revenue laws. He also faces a period of supervised release, restitution and monetary penalties.
Fort Atkinson, Wisconsin: Preparer David Zehnder, 55, has been sentenced to two years in prison for four felony counts of filing fraudulent Wisconsin income tax returns and one felony count of theft, news reports said.
Zehnder operated A-Z Productivity, a tax prep firm. He filed at least 83 false state income tax returns by overstating the itemized deduction credits on clients’ returns by $73,910. Zehnder also stole or attempted to steal $32,312 of clients’ refunds by diverting a portion into accounts he controlled.