Archive for the ‘Tax Evasion’ Category

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Another Las Vegas Preparer Gets In Trouble Over the Foreign Earned Income Exclusion

Sunday, June 7th, 2015

The Foreign Earned Income Exclusion is pretty simple to understand. An individual who is either a bona fide resident of a foreign country or is outside of the United States for 330 days out of a 365-day period can exclude about $99,000 of earned income from income tax. Seems fairly straightforward, right?

There is a codicil to the Exclusion. “This period can be waived when the Secretary of the Treasury determines, after consultation with the Secretary of State, that individuals were required to leave a foreign country due to war, civil unrest or other conditions that preclude the normal conduct of business, among other things.” A list of such countries is published each year. I prepare a lot of tax returns with the Exclusion. I have yet to prepare any with the Exclusion based on the waiver.

Sheila Bunting of North Las Vegas looked at that waiver list as a way to make her clients happy. She apparently repeatedly used the waiver clause of the Exclusion to get her clients a lower tax bill. Unfortunately, her clients weren’t in those countries. The IRS wasn’t amused, and Ms. Bunting found herself facing a lawsuit from the Department of Justice. She consented to a permanent injunction last week.

The DOJ press release notes, “The injunction requires Bunting to provide a list of customers that identifies by name, social security number, address, e-mail address, telephone number and tax periods, all persons for whom she has prepared federal tax returns or claims for refund since Jan. 1, 2012, that reference foreign earned income.” If you used butning’s 5 Star Tax LLC and have the Foreign Earned Income Exclusion (Form 2555) on your tax return, you can expect to receive a “Dear Soon to be Audited Taxpayer” letter from the IRS.

This is the second Las Vegas preparer who recently has been in hot water over the Exclusion. Earlier this year Harvey Cage was sued by the Department of Justice for the same thing. I’d say it was something in the water but Las Vegas is in a desert.

Posted in Las Vegas, Tax Evasion | 1 Comment »

I’m Shocked, Shocked! That a Chicago Attorney may have Committed Tax Evasion Related to Corruption

Sunday, May 31st, 2015

There’s one thing about Illinois politics: Both Democrats and Republicans tend toward corruption. After all, which of the past few governors haven’t gone to prison?

The DOJ news release on the indictment of Daniel Soso makes for interesting reading. Sure, he’s accused of not paying approximately $779,615.86 in income tax (I’m not sure how approximate that is when there are pennies in the press release, but whatever). But it’s the preceding paragraph that makes for intrigue:

The indictment alleges that in 1996, the Illinois Attorney General entered into a written contract with several law firms who represented the State of Illinois in its lawsuit against certain tobacco companies to recover, among other things, money damages incurred by the State of Illinois as a result of the sale of tobacco products to residents of the State of Illinois. In addition, the contract provided that the law firms representing the State of Illinois, including Law Firm B, would share a “contingent fee” equal to ten percent of the total monetary recovery realized by the State of Illinois in its planned lawsuit. The indictment further alleges that Soso, Individual A (an individual formerly licensed to practice in Illinois) and Individual B (a partner of Law Firm B) entered into agreements to pay Soso and Individual A a portion of the attorney fees awarded in the tobacco lawsuit and concealed these agreements from the State of Illinois, the Illinois Attorney General and others.

The Chicago Sun-Times let’s us know who they think Individual A is.

[Edward] Vrdolyak isn’t identified by name in the Soso indictment and hasn’t been charged with any wrongdoing in the case. But the indictment cites an unnamed “Individual A.” Vrdolyak is Individual A, two sources with knowledge of the case told the Chicago Sun-Times.

Mr. Vrdolyak is a former Chicago Alderman who was convicted back in 2008 in a kickback scheme and received ten months at ClubFed.

Chicago is a beautiful city–one of my favorite places in the world–but you can have both its weather and its politics.

Posted in Illinois, Tax Evasion | 1 Comment »

Chipco President Gets 10 Months

Sunday, May 31st, 2015

Back in March I reported on the president of Chipco, John Kendall. Chipco closed a couple of years ago, and most of us in the poker world thought it had to do with the end of the poker boom. That was probably a contributing factor. Another factor was that Mr. Kendall withheld payroll taxes, but didn’t forward them on to the state of Maine. And he got caught.

Mr. Kendall was sentenced on Friday to 3 1/2 years in prison, with all but ten months suspended. Mr. Kendall will remain free on bail while he appeals his conviction.

Posted in Tax Evasion | Comments Closed

Fake Businesses, Phony Dependents: What Could Go Wrong?

Sunday, May 17th, 2015

I’ve seen reports of Bozo tax preparers inventing deductions and dependents. This is the first time I’ve heard of a tax preparer inventing a business from scratch on a tax return. The results were good…for a while.

Ramona Johnson was the manager of Tax Office One in Fort Worth, Texas; her daughter-in-law, Nekia Everson, was a tax preparer. From 2008 through 2011 the business earned in $1.9 million in fees, so it was producing a good amount of revenue. And they were probably getting good refunds for their clients. After all, they did the “normal” things for Bozo tax preparers; phony dependents and itemized deductions for personal expenses were the norm (so that taxpayers would qualify for the Earned Income Credit). But then:

On some returns, Johnson and Everson would completely fabricate a Schedule C business, including income and expense items. For some taxpayers, Johnson would create a false and fraudulent Schedule C reflecting the taxpayers had a profit from a nonexistent business. This false profit, together with claimed dependents (both fraudulent and actual), would be used to claim the taxpayer was entitled to an earned income tax credit.

Of course, while they had gross receipts of $1.9 million, somehow the gross receipts didn’t make it onto the personal tax returns. Ms. Johnson neglected to include tax preparation income on her 2009 and 2010 returns:

In addition, the government presented evidence that for calendar years 2009 and 2010, Johnson filed tax returns in which she reported total income of $2,850 and $16,906, respectively, when she well knew that the income amount was understated in that it did not include income she received for her work preparing tax returns.

Ms. Johnson and Ms. Everson will have plenty of time to think about whether preparing accurate tax returns would have been a better strategy. Ms. Johnson will be at ClubFed for 170 months (over 14 years); Ms. Everson will be there for 95 months (just under 8 years).

For taxpayers the usual rules apply: If it sounds too good to be true, it probably is.

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Posted in Tax Evasion, Tax Preparation | 1 Comment »

Honesty Is Usually a Good Policy

Sunday, May 3rd, 2015

Ronald Jerome Boyd is the Chief of the Los Angeles Port Police. The Port Police are responsible for policing Los Angeles Harbor (which is one of the busiest in the country). Mr. Boyd has been Chief since November 2004 (and has been head of emergency management at the port since January), but he’s now on paid administrative leave. That’s because he’s been indicted on 16 counts of corruption and tax charges.

Chief Boyd is alleged to have been involved in obtaining a port contract to a software company where he would share in 13.33% of the profits. Chief Boyd is alleged to have lied to FBI agents during the investigation. The contract was for a smartphone app called “Portwatch.” The problem is that Chief Boyd allegedly didn’t reveal that he was going to receive that kickback.

Adding to his woes are tax charges. Chief Boyd is alleged not to have filed tax returns from 2008 to 2011 for his security business and to have substantially underreported income on his personal tax returns from 2007 to 2011.

Chief Boyd will be surrendering to authorities this coming week.

Posted in California, Tax Evasion | 2 Comments »

No Discount for her Sentence

Sunday, April 26th, 2015

Michelle Morin of Laredo, Texas has prepared her last tax return. That was the minor part of her sentence. She also must serve 30 months at ClubFed. Why?

Well, Ms. Morin operated Discount Tax Service. Her clients were very happy with her methods, as they received tax credits and itemized deductions on their returns whether or not they qualified for them. While the tax loss to the federal government was more than $228,000, Ms. Morin did get a break in her plea deal that she has to make restitution on under 10% of the tax loss (just $20,146).

One thing that definitely led to the sentence was what happened with the fraudulent refunds. As noted in the DOJ press release,

As part of her plea, Morin admitted fraudulently claiming a false Schedule C loss in the amount of $83,184.00 for a non-existent online business on a on a taxpayer’s 2009 tax return. Morin also fraudulently reported $2,000 in residential energy credits that she knew the taxpayer was not entitled to claim. Subsequently, Morin improperly directed $2,000 of the false refund to her personal account.

Ms. Morin will report to ClubFed in the near future.

Posted in Tax Evasion | 1 Comment »

Bozo Tax Tip #9: 300 Million Witnesses Can’t Be Right!

Tuesday, March 31st, 2015

For tax bloggers like myself, Richard Hatch has been a godsend. His antics have been, well, remarkable. While he’s no longer at the top of my Bozo Tax Tips, his story is one that prospective tax offenders should learn. I keep thinking that I’ll be able to drop this Bozo tax tip one year. Yet every time I think that’s going to happen Richard Hatch makes the news again. One tip I can give any celebrity: Be careful about your taxes. The IRS loves going after Bozo tax celebrities. So here’s the story that refuses to die.

For a tax blogger, people like Richard Hatch are wonderful. Hatch, for those who don’t remember, was the winner of the first Survivor and won $1 million. About 300 million individuals worldwide saw Hatch take down the $1 million.

Hatch received a Form 1099-MISC for his winnings. In the United States, winnings from contests are taxable. Hatch claims that CBS and/or the producers of Survivor promised him that they would pay his taxes. (Both CBS and the producers of Survivor deny this charge.)

Here’s what I wrote back in January 2006 when Hatch was convicted:

Mr. Hatch has cemented a place in the Bozo Tax Criminals Hall of Fame (a website I’ll create one day). Let’s look at his stupid not so good actions.

1. Hatch goes to accountant #1, find out that he owes over $300,000 in taxes. He goes to accountant #2, and the tax bill is around $240,000. (At his level of income, some differences in taxes owed is normal.) He then asks accountant #2 what his return would be if he didn’t declare the $1 million in Survivor winnings. Accountant #2 makes Hatch sign a statement that he won’t file that return (it showed Hatch getting a $4300 refund). He filed that return.

2. The IRS amazingly discovers his tax evasion. (With perhaps 300 million witnesses, even the most inept attorney could prove he won $1 million.) He’s offered a plea bargain: pay your taxes, and we’ll let you off fairly easily on the jail time. He accepts the plea initially, then changes his mind.

3. The case goes to trial. Hatch claims that CBS should have withheld taxes. His attorney might want to ask any seasoned accountant about what you should do if taxes aren’t withheld but should have been. (Answer: you pay the taxes.)

4. Hatch’s attorney can’t find the OJ Simpson jury. (Hat tip: Roth Tax Updates)

5. Hatch is found guilty. Roth Tax Updates speculates that his sentence will be around 3 years in jail. Oh, he’ll also have to pay those taxes, and interest and penalties. The maximum possible sentence is 13 years in prison and a fine of $600,000.

Hatch is now serving his prison sentence of 51 months. He recently appealed his conviction, though chances of it being overturned seem slim.

2008 Update: And they were slim. Last February, Hatch’s appeal was denied. As you might expect, 300 million witnesses can’t be wrong.

2009 Update: Richard Hatch continues to look for that needle in the haystack. He’s filed another appeal, though to this non-lawyer it’s more likely that he’ll be released after serving his 51 months at ClubFed than getting a favorable ruling.

2010 Update: Mr. Hatch was released in mid-2009. He then violated the terms of his release and was sent back to ClubFed. Finally, in October, Mr. Hatch was released. He’ll be spending the next couple of years in his home state of Rhode Island.

2011 Update: As part of his sentence, Mr. Hatch was supposed to amend his tax returns and declare the $1 million of income. He neglected to do that. Judge William Smith didn’t neglect to give Mr. Hatch a piece of his mind this past March: He sentenced Mr. Hatch to nine more months at ClubFed. Following his release from ClubFed (in December), Mr. Hatch will have 26 months of supervised release.

2012 Non-Update: Mr. Hatch was released from prison in late December 2011. He has filed a writ of certiorari with the Supreme Court. The chance of the Supreme Court taking his case is about the same as a blizzard in August in Las Vegas. The writ was denied.

2013 Update: Mr. Hatch’s non-payment of taxes extends north of the border. Mr. Hatch owned a piece of property in Sydney, Nova Scotia. That property was sold in a tax sale after Mr. Hatch didn’t pay the property taxes on it for at least six years.

2014 Update: Mr. Hatch still thinks he did nothing wrong. Last year, on Oprah: Where Are They Now, Hatch told Oprah Winfrey, I never did anything deserving of prison time…I never attempted to evade taxes, which was what I was convicted of.” I’ll let the reader decide on the veracity of Mr. Hatch’s statement.

Judge Smith’s remarks from over two years ago have not yet sunk in to Mr. Hatch. “You can continue to proclaim your innocence…You don’t have the option of engaging in this type of game or negotiation with the court. It needs to be a severe punishment. That’s the only thing that will deter you in the future.”

2015 Non-Update: Mr. Hatch was silent on the tax front since his appearance on Oprah. It appears that this may be the last year I’ll have Mr. Hatch in my Bozo Tax Tips.

And to think I’d have had so little to write about if Mr. Hatch had just paid his $300,000 in tax in the first place.

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Posted in Tax Evasion | 1 Comment »

A Break in my Hiatus: Poker Chips and Tax Evasion

Sunday, March 22nd, 2015

When my friend Steve Evans posted a link to a story about Chipco’s president being arrested on tax evasion, that got my attention. Chipco was a Maine-based company that made high-quality poker chips. Many of the local casino here in Las Vegas have used Chipco chips. I have a particular fondness for them; one of my poker chip sets features these chips that I got to design back in 2002.

John Kendall was the president of Chipco (formally, Chipco International). They closed a couple of years ago. Those in the poker community thought that there closing was mostly due to the end of the poker boom. Another factor was Chipco’s method of paying employees: off the books.

Perhaps this could be my Bozo Tax Tip #11: Pay your employees off the books and don’t send withholding to the government. That’s exactly what Mr. Kendall did, and the money went exactly where you’d think it would go: his mortgage, country club dues, and legal fees for his personal bankruptcy. Maine Revenue Services investigated, and they weren’t happy. Add in underreporting of his own income on his 2009 tax return and you have the makings of six guilty verdicts. That’s what happened this past week in Portland, Maine. Mr. Kendall will be sentenced later this year.

A helpful hint to anyone wanting to emulate Mr. Kendall: Just pay employees in the normal way, on the books, and send the withholding where it belongs.

I now return to my regularly scheduled hiatus.

Posted in Tax Evasion | 2 Comments »

Harassing IRS Agents Isn’t a Bright Idea

Sunday, February 8th, 2015

Speaking of ways to get in trouble with the IRS, one is to harass an IRS agent. They don’t like it (and it’s a crime). Scott Bodley of Silver City, New Mexico apparently didn’t care.

Back in 2003 Mr. Bodley threatened to file liens on an IRS agent who was auditing his taxes. (Had he done so, those liens would have been quashed.) He quit his job in 2004 to stop an IRS levy. Then he filed false paperwork with employers so he wouldn’t have taxes withheld, claimed he was a sovereign citizen, and basically tried to avoid paying his taxes. His actions did work for a few years, but his luck ran out on Friday. That’s when he was convicted of 26 charges including harassing IRS agents, filing false tax returns, and tax evasion.

Mr. Bodley will be sentenced in May, and he’ll likely have some time at ClubFed to think about the reality that it’s always easier to just pay your taxes in the first place…but that somehow doesn’t enter the Bozo mind.

Posted in Tax Evasion | 1 Comment »

Former NFL Player Alleged to Have Fumbled His Sales Tax Returns

Sunday, February 8th, 2015

I’ve said repeatedly that if you want to get in trouble with the IRS, one of the easiest ways to do so is to collect payroll taxes but not remit them. Less frequently I’ve commented about state tax agencies and mentioned that they don’t like you collecting sales taxes and not remitting them. A former NFL player is accused of that and committing wage theft against his employees.

Sam Adams played in the NFL for 14 years with Seattle, Baltimore, Oakland, Buffalo, Cincinnati, and Denver. A defensive lineman, he has 44 sacks credited to him in his career and made the Pro Bowl three times. He and his CFO, Dana Sargent, now face 21 counts of theft and tax evasion. From the Affidavit of Probable Cause:

Adams and Sargent have not only made multiple attempts to evade tax liabilities resulting in a tax bill, as of January 21, 2015, of over $446,571.38, but have failed to pay employees their deserved wages, failed to pay the medical premiums promised to employees as part of their benefit packages, failed to remit the premiums withheld from employees’ paychecks for medical insurance and failed to pay into unemployment insurance for employees, resulting in liens by the Employee Security Department on each company. During the latter part of 2013 through January 2014, Adams’s and Sargent’s illegal actions have caused employees, through no fault of their own, to have countless insufficient fund checks that they were unable to cash which resulted in employees losing their housing, being unable to pay household bills, being unable to buy Christmas gifts and accruing thousands of dollars in unpaid medical bills for themselves and their families. Numerous wage complaints have been filed against Lincoln Plaza Athletic Club, LLC, West Seattle Athletic Club, LLC, Adams and Sargent. The Department of Labor has been involved in efforts to assist employees in getting their unpaid medical, dental and vision bills paid due to Adams and Sargent either failing to pay the premiums as promised in the employees’ compensation packages and/or deducting premiums from employees’ pay checks and failing to remit them to the insurance company.

There’s plenty more in the affidavit, including West Seattle Athletic Club closing and the next day a “new” business opening (West Seattle Club) opening. That club paid its first three sales tax returns and then decided not to. That’s a good way to get on a tax agency’s naughty list. Mr. Adams operates six athletic clubs in Oregon and Washington. After reading the indictment, I think it’s possible he won’t be operating any soon.

Posted in Sales Tax, Tax Evasion, Washington State | Comments Closed

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