More expenses than wages; fake medical, education deductions; stealing from the elderly and veterans; and other highlights of recent tax cases.
Morgantown, W. Va.: CPA Gregory N. Cason, 45, has been found guilty of tax fraud.
Cason prepared tax returns for AKA Enterprises Inc., a business entity operating several business in Morgantown, including a bar and restaurant facility. Cason knowingly underreported income, failed to report expenses paid in cash, and failed to report periodic cash payments to employees.
A federal jury found Cason guilty of two counts of aiding and assisting in the preparation and filing of a false tax form. He was acquitted of one count of conspiracy to defraud the Internal Revenue Service and to aid and assist in the preparation and filing of false tax forms.
He faces up to three years in prison and a fine of up to $250,000 on each count.
Rockingham, N.C.: Preparer Herbert Lee Martin has been sentenced to 11 years in prison for conspiring to defraud the IRS and assisting in the preparation of fraudulent returns.
According to documents filed with the court, from at least January 2012 through April 2016, Martin owned and operated the tax prep business Herb’s Helping Hands, where he prepared and filed federal income tax returns that fraudulently claimed refunds for clients. Martin also taught others how to prepare false returns and supervised preparation of these returns.
He and his co-conspirators reported fictitious or inflated income and dependency exemptions to fake or inflate Earned Income Tax Credits, false business income and losses, and false deductions. On occasion Martin and his co-conspirators purchased, and sometimes stole, personal ID information of individuals, including minor children, and listed these individuals as false dependents on returns to inflate fraudulent refunds for clients. Martin also sometimes directed some of the clients’ refunds into his own bank account or a bank account he controlled.
He was also ordered to serve three years of supervised release and to pay $10,605,420 restitution to the IRS.
Earlier this month, Martin’s niece, Jessica Shanice Taylor, was sentenced to 24 months in prison for aggravated ID theft, which she committed as part of Martin’s scheme. She also was ordered to pay $36,569 restitution to the IRS.
New Orleans: A federal court has permanently barred preparer Tiga Bryant from preparing federal tax returns for others.
In its complaint, the government alleged that Bryant, sometimes doing business as Denson’s Fast Tax Services, fraudulently reduced clients’ tax liabilities by improperly claiming bogus deductions and fuel tax credits.
Bryant agreed to the civil injunction order entered against her, which requires her to turn over to the U.S. a list of all persons for whom she prepared federal returns since 2014. The court also authorized the federal government to monitor Bryant’s compliance with the terms of the injunction.
The government’s complaint alleged that Bryant claimed false employee business expense deductions that improperly reduced her client’s taxable income. In more than one example, the complaint alleged that Bryant claimed a client incurred employee business expenses totaling slightly less than half the wages the client earned in that particular year.
According to the complaint, Bryant even claimed that one of her clients had incurred employee business expenses totaling more than the wages the employee earned in that year.
In each of these instances, the clients did not actually incur the expenses Bryant reported on the return, according to the complaint, which added that Bryant also claimed bogus fuel tax credits. For example, Bryant reported on one of her client’s returns that the client used 2,500 gallons of gasoline for off-highway business use when the customer only used her vehicle for driving between home, work, school, and child responsibilities.
The IRS audited 197 returns prepared by Bryant and determined that Bryant claimed credits and/or deductions her customers were not entitled to take on 189 of these returns and understated their tax liabilities by more than $800,000.
Pocatello, Idaho: Preparer Jonathan Peirsol, 42, has been sentenced to a year and one day in prison for filing false returns.
According to court documents, from approximately 2009 through 2012 Peirsol prepared false individual income tax returns under the name JJ Accounting Inc. and falsified returns without clients’ knowledge or consent by adding items such as medical and education expenses.
For some of the returns, Peirsol also diverted, without his clients’ knowledge, portions of the refunds sent by the IRS, arranging for these to be deposited into a bank account he controlled. Peirsol also failed to report on his personal tax returns the fees he earned from his prep business.
Peirsol was also ordered to serve a year of supervised release and to pay $62,441 restitution to the IRS. Peirsol, who also owns and operates J&J Chemical Inc. in Blackfoot, Idaho, pleaded guilty in March to aiding and assisting in the preparation of a false return.
Champaign, Ill.: Preparer Mark Stites, 63, has pleaded guilty in connection with stealing thousands of dollars from an elderly woman for whom he prepared taxes, according to published reports.
News outlets said Stites admitted that between June 2007 and February 2013, while acting as power of attorney for the woman, he withdrew more than $500,000 from two bank accounts belonging to her and used it fraudulently.
The woman, a resident of the Champaign County Nursing Home, died a year ago, reports added.
Stites could face eight years in jail, reports said, adding that he was an accountant and preparer who operated Associated Professional Services. A friend of the woman's family, he was granted power of attorney for her in 2007, reports said, adding that the matter came to the attention of authorities in early 2013 when Stites sought advice from a lawyer at a local legal aid agency regarding the woman being denied Medicaid. Stites reportedly admitted to the attorney that he had removed $100,000 of the woman’s money from her certificates of deposit and put them in his account to pay her bills.
When told that the woman should still have had money left after her monthly expenses, Stites admitted he used some of her money to pay his own bills, reports said. Investigators then reportedly found that Stites had withdrawn more than $513,000 of the woman’s money and wrote checks to himself and his business.
Whitman, Mass.: Former police sergeant Glenn P. Pearson, 61, has pleaded guilty to wire fraud, preparing false income tax returns for clients of his prep business, obstructing the internal revenue laws and misappropriating funds from the accounts of disabled veterans while he was a fiduciary appointed by the U.S. Department of Veterans Affairs.
According to court documents, from 2007 to 2012 Pearson was appointed a VA fiduciary for eight disabled veterans of the U.S. armed forces. Pearson used his position to misappropriate and embezzle more than $250,000 in VA-issued benefit money from the accounts of several veterans.
Beginning in 2012, Pearson also operated the prep business FTS Tax Services, through which he prepared false returns for clients for a fee. From 2012 through 2015, he prepared numerous returns that included false credits and fictitious deductions to get his clients bigger refunds than they were entitled to receive.
When Pearson’s clients were audited by the IRS, Pearson took steps to obstruct the IRS — including making false statements to the agency and preparing false documents for his clients to submit to the IRS during the audits.
Pearson admitted to causing a tax loss of more than $1.5 million.
Sentencing is Sept. 19, when Pearson faces a maximum of 20 years in prison for wire fraud, five years for misappropriation of funds by a fiduciary, three years for preparing false tax returns, and three years for attempting to interfere with the administration of internal revenue laws. As part of the plea agreement, Pearson will make restitution to the veterans, the VA and the IRS. He also faces supervised release and monetary penalties.
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