Tax Fraud Blotter: Zappy ending
False losses claimed; kids’ IDs for sale; ‘lavish lifestyle’ becomes eight months in jail; and other highlights of recent tax cases.
Dallas: Preparer Vicki Walker, 52, has pleaded guilty to aiding and assisting in the preparation of a false return.
According to case documents, Walker, of DeSoto, Texas, did business under the name Vicki Walker Tax Services. She admitted that she filed a false return with the IRS for a client that contained false business loss and capital loss deductions.
In addition, Walker admitted that she prepared other false returns intending to cause a tax loss of approximately $1,173,757.
Sentencing is Aug. 2, when she faces a maximum of three years in prison as well as a term of supervised release, restitution and monetary penalties.
Everett, Wash.: John Yin, 66, who worked for a Canadian company that sells point-of-sale software, has been sentenced to 18 months in prison and three years of supervised release for his role in a scheme to sell “tax zapper” software.
Yin pleaded guilty in December to wire fraud and conspiracy to defraud the government, admitting that he promoted and sold a revenue-suppression software that allowed restaurants to underreport sales and illegally lower their tax bills.
The software, sometimes called a “zapper” program, resulted in a loss of more than $3.4 million.
Yin was a salesman for Profitek, a British Columbia company selling point-of-sale systems for hospitality and retail industries, according to court records. The company designed, or had designed, and marketed, sold and supported revenue-suppression software as an add-on to its Profitek point-of-sale software.
RSS modifies the point-of-sale database of a business to delete all or some of the cash transactions and then reconciles the books of the business. The result is business records that appear to be complete and accurate but are in fact fraudulent.
Yin sold the point-of-sale software and assisted in the widespread distribution of the Zapper software to dozens of customers over several years. Between 2010 and 2013, eight restaurants in the Seattle area used the software and underpaid state and federal taxes by amounts ranging from slightly more than $145,000 to more than $910,000.
When the restaurant owner who underpaid taxes by more than $900,000 was confronted about using zapper software, she admitted she used the unreported cash to pay some employees in cash. In addition, she did not withhold Social Security or Medicare taxes for these employees.
Yin has agreed to pay $3,445,589 restitution to the U.S. and the State of Washington. The restitution obligation is shared by the eight restaurants detailed in the case.
Floral Park, N.Y.: Preparer David Menzies, 51, has pleaded guilty to filing fraudulent returns.
According to case documents and information in court, from January 2010 through April 2015 Menzies filed fraudulent returns for hundreds of clients that claimed fake business income and expenses and false dependents, all to claim undeserved refunds. Menzies solicited and sometimes purchased the ID information of minors from their parents and claimed them as dependents on other clients’ returns.
Menzies charged clients $250 for the use of the phony dependents and often used the same children’s information in multiple years. He recruited associates to help file these fraudulent returns and told those co-conspirators to escort clients to check cashers to cash refund checks and collect Menzies’ fees. He also solicited others to apply to the IRS for preparer IDs, and filed the fraudulent returns using the PTINS that the IRS assigned to these individuals.
Menzies admitted that he caused a tax loss of more than $250,000 and that he failed to timely file his own 2009 through 2015 personal returns.
Sentencing is July 26, when Menzies faces a maximum of three years in prison, a period of supervised release, restitution and monetary penalties.
Olympia, Wash.: Former bar and restaurant owner Eric M. Galanti, 41, has been sentenced to eight months in prison and a year of supervised release and been ordered to pay $800,000 restitution for multiple misdemeanor counts of failing to file tax returns.
He failed to file his business and personal returns between 2006 and 2012, during which time he owned several restaurants in the Seattle area.
IRS investigators found that Galanti’s businesses were generating significant revenues but he failed to keep accurate records; bank records show that two of the restaurants had deposits of more than $7.7 million between 2006 and 2011.
While he failed to file and pay his taxes, Galanti enjoyed a lavish lifestyle, using forged tax documents to facilitate his purchase of a $400,000 yacht; taking expensive trips to Hawaii, Las Vegas and the Caribbean; and paying more than $10,000 for concert tickets.