Tax Fraud Blotter: S corp shenanigans
Preparer, politician, prisoner; fake losses and deductions; and other highlights of recent tax cases.
New York: Preparer Williesteina Jacobs has been sentenced to two years in prison for filing false returns.
According to court documents and evidence, Jacobs operated International Professional Business Services, a prep service in Queens. From 2007 through 2010, Jacobs filed false individual income tax returns with the IRS on behalf of her clients and claimed undeserved refunds.
These returns claimed false business losses and reported grossly inflated or fictitious deductions for, among other things, charitable donations.
Jacobs, who convicted last summer, was also ordered to serve a year of supervised release and to pay $31,188 restitution to the IRS.
Kansas City, Kan.: A federal court has permanently barred Everett Bias and Integrity Solutions Tax Consultants Inc. from preparing federal returns for others.
According to the government’s complaint, Bias and ISTC unlawfully prepared federal returns that lowered clients’ federal taxes by using S corporations. According to the government’s complaint, Bias and ITSC failed to report S corporation pass-through income as taxable income on the clients’ personal income tax returns, falsely lowered the income of clients’ S corps and then reported that falsely lowered income on the clients’ personal income tax returns.
The complaint also maintains that Bias and ITSC improperly double-deducted clients’ personal expenses, such as mortgage interest and real estate taxes, on clients’ corporate and personal returns, and concocted S corps to improperly deduct customers’ personal expenses as business expenses and lower pass through income or create a phony flow through loss.
The government similarly maintained that Bias and ISTC concocted businesses for clients claiming that they were sole proprietors and then fabricated the income and expenses of the fictitious business to show a loss. Finally, the government maintained that Bias and ISTC fabricated itemized deductions such as unreimbursed employee business expenses and medical/dental expenses on clients’ personal returns.
The court also ordered the defendants to contact all clients for whom they prepared federal returns since 2014 to inform them of the permanent injunction and to provide the federal government with a list of these clients.
Hapeville, Ga.: Tax preparer and local city council member Ruth Barr has been sentenced to 20 years in prison after being found guilty of theft, according to published reports.
Barr was sentenced to 20 years, to serve five, reports added.
Georgia investigated Barr after local media stories revealed a pattern of her preparing returns that led to audit and penalties by the IRS, or getting clients to lend her money, news outlets said.
Former clients have reportedly found themselves under widespread audits as investigators allege tax fraud.