Some of our favorite recent tax fraud cases.
Houston: Preparer Simon Makangula has been sentenced to 18 months in prison and ordered to pay $51,645 restitution to the IRS for willfully aiding and assisting in the preparation of a false income tax return for a client.
According to the plea agreement, Makangula admitted that the return contained two false dependents, a false refundable education credit, a false EITC and a false Schedule C loss.
He further admitted that the tax loss was some $9,731.
Phoenix: Preparer Margaret Nicole Hall, 40, has received a year and a day of imprisonment and been ordered to pay $92,937 restitution to the IRS after pleading guilty to one count of obstructing or impeding the administration of internal revenue laws and one count of aiding or assisting preparation or presentment of a fraudulent or false return.
According to her plea agreement, Hall, who owned and operated Taxes R Us, falsely represented during an IRS audit proceeding that the client in question received income from self-employment and also received tip income. She also knowingly provided fabricated lease documents and fabricated rental receipts as purported substantiation for items claimed in the false returns that she had prepared for her client.
Additionally, she prepared a federal income tax return that fraudulently stated purported wages, business income and tips.
New York: Unregistered Bronx preparer Raul Kelley, 48, has been arrested and charged in connection with tax fraud, filing a false personal income tax return and trying to steal tax refunds.
According to the complaint, investigation revealed that Kelley was hired to prepare a personal income tax return for two taxpayers and file it with New York State despite his not being registered with the state as a tax preparer. The complaint accuses Kelley of grossly inflating the taxpayers’ job expenses for 2012 from $1,500 to $97,120 against wages of $98,212. This resulted in a bogus return showing a refund of $4,432. The complaint further alleges that had expenses of only $1,500 been claimed, the return would have reported that the taxpayers owed the state $1,434.
If convicted, Kelley faces a maximum of 16 months to four years in jail.
Willis, Texas: Preparer Doyle J. Blevins Jr. has been indicted on 27 counts of preparing false returns.
According to the indictment, Blevins operated a tax prep business under the name Total Refund Tax Service and allegedly prepared dozens of materially false returns during calendar years 2008 through 2010.
The indictment also alleges that he included in these returns bogus “side business” losses to generate excessive refunds totaling approximately $285,000.
If convicted, he faces up to three years in federal prison and a possible $250,000 fine on each count.
Las Vegas: Husband and wife Wayne Reeves and Diane Vaoga have been permanently barred from preparing federal returns for others and from providing any advice related to federal taxes. They were also cited for willfully refusing to comply with previous court orders directing them to participate in discovery.
In its injunction order, the court found that Reeves orchestrated and promoted and that Vaoga assisted in an illegal tax scheme. According to the order, Reeves advised clients to set up sham trusts and direct wages into accounts for those trusts to improperly reduce tax liability. He also instructed clients to name him, Vaoga or another party as a signatory on trust accounts. Both Reeves and Vaoga acted as trustees and sent clients pre-signed blank checks to allow access to their money, collecting fees in the process.
They advised clients that these trusts brought numerous tax benefits, including that income from the trusts was non-taxable and did not need to be reported on returns; that clients could deduct personal expenses and count them as business expenses of the trusts; that clients worked for the trusts and thus were paid in tax-deductible management fees; that clients no longer needed to file federal returns; and that there were no problems with the IRS in making these arrangements.
The court found that Reeves engaged in this conduct knowing that such actions would improperly result in the understatement of clients’ tax liability.
Palestine, Texas: Preparer Jefferson Kincade, 37, has been charged with federal income tax violations, specifically 31 counts of preparing returns with false statements, six counts of theft of government money and six counts of aggravated ID theft.
According to information in court, Kincade prepared returns for individuals at EZ Tax, where he is alleged to have devised a scheme to prepare false returns, steal clients’ refunds and use clients’ and other individuals’ IDs to accomplish the theft.
The indictment alleges that Kincade’s goal was to increase the amount of refunds. All of these false statements and representations were about material matters, including such matters as filing status, dependents, wages, farm losses, business losses, withholding, education credits, distribution codes on retirement distributions and itemized deductions.
The indictment also alleges that Kincade was able to intercept the refunds for his own benefit by printing the refund checks, not giving them to his clients, and then cashing them with the assistance of two individuals not associated with EZ Tax.
If convicted, he faces up to three years in federal prison for each of the 31 counts of preparing false tax returns, up to 10 years for each of the six counts of theft of government money and up to two years for each of the six counts of aggravated ID theft.
