Michael Joseph Calalang Cabuhat had been living the good life. He had a nice house in the Hollywood Hills (of Los Angeles) and drove a Ferrari 360 Spider. Mr. Cabuhat owned a tax practice in Glendale (near Los Angeles) and called himself “celebritytaxguy.”
I will be the first to state that you can make a nice living from a tax practice. Mr. Cabuhat’s methods, though, were on the illegal side. He pleaded guilty to defrauding clients of more than $1.2 million, and will have 46 months at ClubFed to think that over. He also must make restitution of $1,496,416 and will be sending the government just over $426,000 from the sale of his home (and the car).
What did Mr. Cabuhat do? He had two methods of bilking clients but they all had a basis in preparing two returns for each client (and I’m not talking about state returns). In some cases Mr. Cabuhat prepared a return showing a small refund, and gave that return to the client. The small refund amount was duly deposited into the client’s account. However, the actual return filed with the IRS showed a larger refund, with that extra amount being deposited into a bank account controlled by Mr. Cabuhat.
His other method was to prepare a return showing an amount due; however, the return filed with the IRS showed a refund (with that refund being deposited into his account). He also had the clients make the tax payment to him, so that those funds, too, would be absconded.
And of course, Mr. Cabuhat didn’t report the $1.2 million he pocketed from the fraud on his own tax return. And, yes, Mr. Cabuhat had a license from the California Tax Education Council (all California tax professionals are required to have a license, either be an EA, CPA, attorney, or obtain the license from CTEC). As I’ve said before, having a license won’t stop tax preparers from committing crimes.
As for the crime itself, it was guaranteed to be discovered in the long run. Sooner or later a client would be audited or obtain a transcript of his return, and it wouldn’t match the return copy that the client had. Or even the IRS might wonder why 150 tax refunds were all deposited into the same bank account.
As noted in the press release from the Department of Justice,
…Judge Walter said Cabuhat’s scheme was “vicious” because it led to both financial and emotional harm to his victim-clients. Judge Walter noted that the stolen money was used simply to enhance Cabuhat’s lifestyle, allowing him to obtain a big house and a fancy car “all on the backs of these individuals who placed their trust” in Cabuhat.
Mr. Cabuhat will have nearly four years to think this all over.
Tags: BozoTaxPreparer
Celebrity Tax Guy only had a CTEC license so I doubt that he had many celebrity clients except maybe porn stars.