Faster than a speeding fraud; significant adjustments; register schmegister; smoked out; and other highlights of recent tax cases.
Metropolis, Illinois: Tax preparer Shawn Nowlin has been sentenced to a year in prison for assisting in the preparation of false federal returns.
Nowlin was an unauthorized preparer and operated under various names, including Snowlin Tax and Prep. From 2014 to 2018, he prepared some 291 federal returns and falsified wage and withholding amounts and other W-2 information, resulting in a loss to the United States of nearly $2 million dollars.
Slidell, Louisiana: Businessman Scott Pellissier has pleaded guilty to one count of failing to account for and pay federal income taxes and FICA taxes.
Pellissier was the sole owner of two auto-service companies. During the third quarter of 2016, he collected some $43,205.83 in federal income taxes and FICA taxes from employees of one of the companies but didn’t pay any of that money to the IRS. Pellissier also failed to account for and pay additional FICA and other taxes associated with the other company, resulting in a total loss of $550,000 to $1.5 million.
Sentencing is Aug. 19. Pellissier faces a maximum of five years, a fine and supervised release of up to three years.
Rock Springs, Wyoming: CPA Paul Edman has been sentenced to 120 days in prison to be followed by a year of supervised release after pleading guilty to aiding and assisting in the preparation of false federal returns.
In February 2017, investigators interviewed Edman about several of his clients, who are local restaurant owners believed to be suppressing cash sales. The government determined that Edman had counseled the restaurant owners in the preparation of a 1040 for 2014 knowing that the return was false.
Edman made significant adjustments to both personal and business expenses related to the family-owned restaurants to reduce their tax bill, which totaled nearly $645,000. He recommended ways, via email, in which they could deduct expenses in a fashion that would not stand out in an audit. Ultimately, Edman reduced his client’s tax bill $72,000 and then signed and e-filed the return.
Beaverton, Oregon: Contractor Francisco Mendez has pleaded guilty to conspiracy to commit tax evasion in a scheme to evade $100 million in payroll and income taxes.
Between January 2014 and February 2018, Mendez conspired to make cash payments to unlicensed construction work crews to dodge payroll and income taxes due on these wages. Otherwise legitimate construction companies would bid on residential real estate projects knowing they did not have enough employees to perform all the work; these companies would supplement their workforce with independent work crews, some of whom did not possess valid Construction Contractors Board licenses. Leaders of unlicensed crews would pay a fee to use another company’s CCB license.
Mendez registered a company, obtained a CCB license in his name and began accepting payments from unlicensed crews for the use of his license. The legitimate construction companies did not put these unlicensed work crews on their regular payroll and, instead, wrote checks payable to his company. Mendez cashed these payroll checks at check-cashing businesses and made under-the-table cash wage payments to the unlicensed crews. He further began accepting and cashing payroll checks from construction companies on behalf of other companies that held CCB licenses.
He faces a maximum of five years in prison, a $250,000 fine and three years of supervised release. Sentencing is Sept. 13.
St. Louis: Unregistered preparer Lakisha Smith has been sentenced to 32 months in prison and ordered to pay $10,416 in restitution to the IRS after
From 2013 to 2016, Smith prepared some 28 fraudulent returns for clients using the TaxAct commercial website. The returns reported false income and withholdings, and Smith typically received cash payments of up to $2,500 from the false refunds paid to the clients.
Smith was not registered with the IRS as a preparer.
Phoenix: Tax preparer Tschanavia Keyosha Jones, 41, has pleaded guilty to aiding and assisting in the preparation of false returns.
Between 2011 and 2015, Jones prepared and filed federal income tax returns for clients. Around 2011, she opened a tax prep business in California named Tax Maniacs and marketed herself as having years of experience as an IRS-registered preparer.
Around 2015, Jones moved from California to Arizona. She stopped operating Tax Maniacs before moving to Arizona but continued to file federal returns on behalf of clients.
Jones admitted that in April 2016, she prepared and filed a 1040 for a client that included educational expenses purportedly made by the client in 2015. These expenses were false. In addition, Jones included a Schedule C with the client’s returns that represented that the client owned a housekeeping business and had incurred expenses during the tax year. Jones knew this information was false.
Sentencing is Sept. 7.
Laurel, Maryland: Tax preparer Lovet Ako, who pleaded guilty in December, has been sentenced to 364 days, all suspended, and two years of probation for willfully filing a false return.
During tax year 2017, Ako owned and operated the tax prep business Money Back Taxes. He prepared and filed, for a fee, numerous returns for Maryland residents but he was not a lawfully registered preparer. On his personal return, Ako also failed to include any income from fees he earned for prep services.
Ako was also ordered to pay $35,551 in fines, interest and back taxes.
Pink Hill, North Carolina: Resident Phil Caprice Howard has been sentenced to 78 months in prison for conspiring to commit money laundering and filing a false 2014 return.
Howard, who pleaded guilty in October, arranged on at least 221 different occasions for cut-rag tobacco to be transported by trucks from Wilson, North Carolina, to an area on or near the Akwesasne Mohawk Nation Reservation as part of a conspiracy to smuggle the tobacco into Canada without paying Canadian federal excise duties and provincial taxes. (The Akwesasne Reservation straddles the U.S.-Canadian border on both banks of the St. Lawrence River.) Conspirators, many with ties to organized crime, then smuggled the tobacco over the St. Lawrence and on to the Kahnawake Mohawk Nation Reservation in Quebec. There the tobacco was manufactured into contraband cigarettes.
The conspiracy smuggled more than 6 million pounds of cut-rag tobacco into Canada, resulting in a tax loss to Canada of more than $600 million.
Howard received payment in the form of cash and cigarettes that were driven back to North Carolina, as well as in the form of wires, in all obtaining more than $2 million in criminal proceeds, which he laundered through a series of financial transactions. Howard failed to file Form 8300s for his receipt of cash. He also failed to report his criminal profits on his returns, including by filing false tax returns for tax years 2014 to 2018.
His tax crimes, which date back to tax year 2008, caused a tax loss to the U.S. of more than $1 million. Howard also provided false testimony to a federal grand jury investigating federal crop insurance fraud as part of an investigation by the Department of Agriculture and the IRS.
Howard will also serve three years of supervised release and pay some $1,062,192 in restitution to the United States. He was also ordered to forfeit $2,232,814 as proceeds of his money laundering.
