Tax Fraud Blotter: How much is that ID in the window?
Frivolous natures; debt of a salesman; tooth and justice; and other highlights of recent tax cases.
Bolingbrook, Illinois: A federal court has permanently barred preparer Jackelin Brooks from preparing federal returns for others.
Brooks prepared returns that reported false income and expenses from Schedule C businesses and improperly claimed the American Opportunity Tax Credit and the Residential Energy Credit, resulting in undeserved refunds. The complaint alleges that the returns cost the U.S. tens of thousands of dollars. The injunction was entered against Brooks by default because she failed to defend against the government’s allegations.
New Orleans: Preparer Leroi Gorman Jackson has been permanently blocked from acting as a preparer of any Louisiana tax returns other than his own.
Jackson, owner of a chain of tax prep businesses known as Taxman Financial Services, was arrested in 2017 for submitting income tax returns on behalf of his clients that contained phony business losses and resulted in $20,000 in fraudulent refunds, and for withholding an estimated $21,891 in payroll taxes from his employees’ paychecks but failing to remit the withheld taxes to the state. He pleaded guilty in that case; he also pleaded guilty to a similar scheme in 2014.
Louisiana Department of Revenue litigators also brought a civil case against Jackson, seeking to bar him from working as a tax preparer in Louisiana.
Fort Lauderdale, Florida: Father and daughter Kenneth Roger Edmonson, 51, and Danielle Takeila Edmonson, 35, have been convicted for their involvement in filing of false returns seeking refunds.
From 2015 through 2018, they filed refund claims with the IRS totaling more than $100 million, including individual refund claims ranging from hundreds of thousands of dollars to as high as $80 million. The Treasury paid out approximately $3.4 million in refunds.
Danielle Edmonson also filed a fraudulent return seeking a refund for 2014, falsely indicating on handwritten forms that she had paid taxes of more than $300,000. The Treasury issued a refund for $239,700 in 2015; Edmonson bought a luxury car. She also filed fraudulent returns for each of tax years 2015, 2016 and 2017, seeking refunds totaling some $91 million. These returns contained forms falsely claiming that she had paid more than $145 million in taxes. The Treasury issued a refund to Kenneth Edmonson for $2,405,703.
In September 2017, he filed a fraudulent return seeking a refund of some $725,111. This return also contained false claims that he had paid a substantial amount of withholding taxes, and the Department of Treasury mailed him $734,266.27.
In January 2018, police searched the Edmonson residence and found letters addressed to both individuals warning them of the “frivolous nature” of their returns. Shortly afterward, Kenneth Edmonson went to his bank to attempt to withdraw the funds from the fraudulent refund check.
Danielle Edmonson faces a maximum of 65 years in prison; Kenneth Edmonson faces a maximum of 35 years in prison. Sentencing for both is Feb. 20.
Gaithersburg, Maryland: Preparer Maria Espinal, 53, of Montgomery Village, Maryland, has pleaded guilty to aiding and assisting in filing false returns and to aggravated ID theft.
Espinal owned and operated a prep business, and from 2011 through 2017 prepared and filed fraudulent federal and state returns on behalf of clients that claimed undeserved refunds. Espinal altered legitimate W-2s in the names of third parties and replaced the third party’s name with her client’s name.
Espinal also displayed a sign on her office wall that read in Spanish, “If you have lost your [identification] number or passport, we have these people,” and that listed the ID information for several individuals.
Espinal used the personal ID information for one of those individuals to obtain a fraudulent refund on behalf of another client. She also filed a return using another individual’s personal ID information to generate a fraudulent refund that Espinal deposited into her own bank account.
She faces two years in prison for aggravated ID theft and three years for aiding in the preparation of a false return. She also faces a period of supervised release, restitution and monetary penalties. Sentencing is April 2.
Hampton, Virginia: Salesman Gregory Overton Powell, 62, has been sentenced to 40 months in prison followed by three years of supervised release and been ordered to pay $1,405,954 in restitution to the IRS for evading federal income taxes for some 13 years.
Powell worked as a timeshare salesman between 2006 and 2016, when his average annual salary was approximately $300,000. He failed to file returns and made minimal, if any, payments towards his tax liabilities. For tax years 2006 through 2016 alone, Powell’s tax liabilities exceeded $1.4 million, including penalties and interest.
The IRS agreed to allow Powell to enter an installment agreement on two separate occasions provided he adjust his tax withholdings. In each instance, he agreed to do so but then falsely represented to his employer that he was exempt from tax, preventing any withholdings from his salary.
Powell took other steps to evade payment of his taxes: He provided a collection information statement to the IRS in which he failed to report his ownership of a 34-foot speedboat; directed his wife to purchase and hold title to real property as a nominee to obstruct collection efforts; and convinced an individual to take nominal title of a residence that Powell owned.
New York: Steven L. Henning, a CPA and former partner at a Manhattan accounting firm, has been sentenced to 51 months in prison for participating in two wire fraud schemes.
In the first, he falsely claimed to have entered into multimillion-dollar intellectual property deals and defrauded investors out of $2 million. In the second, he falsely claimed to have entered into client engagements and defrauded an employer out of more than $240,000.
Henning, who pleaded guilty last year was also ordered to serve three years of supervised release, pay $938,246 in restitution and forfeit $938,246.
Duluth, Minnesota: Former dental clinic owner Gary James Hedin, 41, has pleaded guilty in connection with failing to account for and pay over federal employment taxes.
Hedin, former owner of Downtown Dental Care, failed to file required returns and pay employment taxes withheld from the wages of his employees for tax years 2012 through 2017. He instead used the money to fund a lavish lifestyle.
Hedin admitted that he owes $158,958 in federal taxes. Sentencing is Feb. 20.
Raleigh, North Carolina: Preparer Garvey Imhotep has been sentenced to 45 months in prison for conspiring to defraud the United States.
From 2011 through 2014, Imhotep conspired to file false returns for clients of several prep businesses. Imhotep and his co-conspirators filed returns claiming false education expenses and other fraudulent items to inflate refunds. He also used PTINs assigned to others. The federal tax loss was more than $1.5 million.
He was also ordered to serve three years of supervised release and to pay $2,144,888 in restitution to the IRS.
Charlotte, North Carolina: Preparer Ramonda Byrd has pleaded guilty to aiding and assisting in filing a false return.
Byrd owned and operated the prep business Divine Financial Solutions and from 2012 through 2017 prepared false returns on behalf of her clients. She inflated federal refunds with fictitious business income and expenses as well as false medical expenses, charitable contributions and child and dependent care expenses. Her fee was then often deducted from the refund.
Byrd caused a tax loss to the U.S. of more than $270,000. She faces a maximum of three years in prison, as well as a period of supervised release, restitution and monetary penalties.