Taxable Talk

From San Antonio comes word of a company that allegedly took care of small businesses’ taxes in a way that’s, well, arresting. John Bean apparently owned a professional employer organization named “Synergy Personnel.” Most PEOs become the actual employer and, for a fee, they relieve a small business of the duties of personnel including the payment of taxes. Mr. Bean’s company allegedly had a unique and (if proven) very illegal method of dealing with those taxes: They didn’t. The FBI and IRS allege that Mr. Bean’s company kept the money for taxes and workers’ compensation insurance.

Mr. Bean’s company–or should I say companies? Not only is Synergy Personnel allegedly involved in this $110 million tax fraud, but there’s a list of 14 other companies that the FBI and IRS allege are involved. To date, two other individuals who were involved in these entities have pleaded guilty and are cooperating in the investigation.

Mr. Bean was arrested yesterday and is being held in lieu of $100,000 bail. He’s looking at a very lengthy term at ClubFed if found guilty of the charges.

This again brings up the point that employers who use outside payroll companies absolutely need to check to make sure the payroll deposits are being made (you can do this on EFTPS). It’s possible that employers in this case will be far luckier than others. In the usual PEO arrangement, the PEO becomes the employer of record. Assuming that’s the case, that could absolve the ’employers’ of tax liability.

I’ve found that the one set of books I keep is plenty. Why would I want (or need) a second set of records showing my income and expenses? Of course, I don’t have a Bozo mind, and I don’t think I need to duplicate my efforts. (One time where you should keep a second set of books is when you change computer software. You want to run both software to make sure they both come up with the same amount of income.)

From New York comes word of a group of grocery stores in New York, New Jersey, and Connecticut that used two sets of books. They weren’t changing computer systems, though. Instead, the first set of books showed their accurate income and expenses; the second set of books allegedly didn’t include all of the income. The owners allegedly skimmed cash and used it for their personal use according to this story. The tax returns allegedly used the books that didn’t show all the income. Unfortunately for those allegedly involved in the scheme, the IRS apparently discovered that two sets of books were being kept for all the wrong reasons. Nine individuals face various charges including tax evasion, conspiracy, and obstructing the IRS. Given that the alleged tax fraud involves $56 million, those charged are looking at lengthy stays at ClubFed if convicted.

For one of those indicted, Adam Arici, this isn’t his first indictment. Mr. Arici and his attorney were indicted last December for allegedly violating the US-Cuba trade embargo and for witness tampering.

Have I got a deal for you! Did you know that even if you have never submitted a tax return in the US that you can get a refund? Yes, thanks to the magical (and mythical) bank account sitting at the Department of the Treasury you can get a tax refund through Form 1099-OID!

The above statement is completely false, of course. There is no “bank account” (or any other account) sitting at the Department of the Treasury in your name. It doesn’t exist. If you try to obtain a tax refund in this manner, it’s frivolous and will get yourself in trouble.

Of course, where most don’t go some deliberately head. From Seattle comes a report on Ronald Brekke, of Orange County, California. Mr. Brekke “aided” nearly 1,000 individuals in three countries in attempting to obtain $763 million in tax refunds. Mr. Brekke’s scheme came to light in 2010 when two Canadians were arrested in Bellingham, Washington after trying to cash tax refund checks for over $350,000. Most of his clients were Canadians.

Mr. Brekke had public seminars on his methods. He helpfully (to the FBI and prosecutors) let individuals know that, according to this Department of Justice release, “…some of the filings would slip through resulting in a big payout for some of the filers.” Mr. Brekke had been earlier warned by the IRS and the FBI that was he was doing was illegal.

But that didn’t stop him. He continued to sell his scheme, and even after his conviction in March filed liens against the Court and and IRS employee. As the judge who sentenced him stated, he can either “[tilt] at windmills [and] squander his remaining time on earth” or understand that laws are, “rules that citizens of this country have made.” He’ll have 12 years to think about that at ClubFed. He’s also $291,064 poorer, as that was seized from his PayPal account and forfeited. Given his actions since March, I suspect I’ll be able to write about Mr. Brekke again in 13 years.

It’s one thing if someone makes an honest mistake in preparing his tax returns. It’s another thing if an attorney makes an honest mistake. It’s quite a different thing if the attorney makes dishonest mistakes and obstructs justice. I expect one Ohio attorney to have plenty of time to think over his actions.

From Columbus comes the story of Rick Matsa. Mr. Matsa is not only an attorney but also an architect, real estate broker, and a minister. As the Department of Justice press release notes:

Rick Matsa individually was convicted of one count of a corrupt endeavor to obstruct and impede the IRS, 15 counts of aiding and assisting in the preparation of false and fraudulent tax returns, that related to five different trusts; one count of willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR); one count of conspiracy to obstruct justice, commit perjury, and make false statements; two counts of witness tampering; one count of submitting a false statement; and one count of obstruction of justice.

Mr. Matsa created a phony trust, several nominee entities, phony foreign benificiaries, ignored reporting his foreign bank account that had more than $300,000 in it, but did manage to use the untaxed proceeds of his scheme to buy a 150-acrfe farm and a house.

Adding to his woes, he, “…conspired to obstruct the investigation by misleading and concealing evidence from the grand jury, making false statements to the grand jury, creating false documents, tampering with witnesses, and lying to federal investigators.”

Mr. Matsa faces up to 108 years at ClubFed, and I expect his sentence to be quite lengthy given the numerous severe charges he was convicted of.