Taxable Talk

Two brothers operated two businesses: a fruit market and a car wash. Two sets of books and skimming lead to a likely term at ClubFed. Halfway across the country we also have a story of an alleged Bozo tax preparer.

Let’s start in Harrison, Michigan. Timothy and William Walraven owned and operated the Country Garden Fruit Market and Walraven’s Car Wash. They also had other business interests in Clare County, Michigan. The Walravens operated their business similar to the way the mob ran Las Vegas: They skimmed cash from the businesses and stored it in their homes. That’s not a problem if you declare the cash on your tax returns (well, it’s not a tax problem but banks and safety deposit boxes are far better places to store cash) but the Walravens kept two sets of books; they evaded reporting about $580,000 in income to the IRS.

All went well for apparently 15 years. Somehow, the IRS discovered the scheme, executed search warrants at the Walravens’ homes, found $1.3 million in cash, and charged the brothers with tax evasion. They each pleaded guilty to one count of tax evasion and one count of conspiracy to defraud the IRS; they’ll be sentenced in April and will likely spend some time at ClubFed.

Meanwhile, Ernest Barreda of Tucson has been indicted on 12 counts of tax fraud. Mr. Barreda allegedly followed the Western Tax Service method of preparing tax returns; he allegedly told undercover IRS agents that they could take deductions and credits that they weren’t qualified for. He also allegedly partook in what the Walravens did. The IRS accuses Mr. Barreda of not reporting $250,000 of the gross receipts of his tax practice between 2001 and 2004. Mr. Barreda is looking at a term at ClubFed if he’s found guilty.

If you’re tempted to try either of these methods of tax evasion I suggest that instead you try the legal methods of lowering your taxes. There’s still plenty of time to contribute to an IRA (or a SEP IRA). Your tax professional may be able to identify legal deductions you qualify for. The Bozo methods in the above stories just lead to ClubFed.

Two tax fraud stories on Tuesday, making it a twofer for Bozos. And trust me, don’t try either of these yourself.

First, we head to Miami. Pablo Gehr allegedly wanted to help his fellow church parishioners. He allegedly volunteered to prepare their tax returns. That’s a good deed. But what he supposedly did©—adding phony deductions and credits to their returns—is anything but a good deed. And shock of shocks, somehow most of those refunds allegedly made it into Mr. Gehr’s personal bank account. The government alleges he did this 24 times; thus, he was charged with 24 counts of tax fraud. The parishioners themselves were unwitting victims.

Next, we head again to Portland, Oregon. Maurilio Castillo Vega wanted to help his construction business. “What if I pay my employees in cash and set up some phony companies so I don’t owe as much in income tax?” We’re not talking peanuts here; Mr. Vega defrauded Oregon out of $8 million. He pleaded guilty to racketeering last year after being charged with that, tax evasion, theft, and several other counts. He’ll spend five years in state prison for this scam. No word if he’ll have to make restitution (but it won’t be a surprise if he does).

These two givers allegedly gained…but the benefits lasted just a short time. Had they looked at long-term tax planning they might have reaped some tax savings and wouldn’t be either heading to prison or to trial.

It’s only Monday. And I already have several tales of woe from the tax evasion front.

First, there’s one less Bozo preparer out in the world. Tommy Jordan is the former owner of Tax Tyme in Montgomery, Alabama. Mr. Jordan definitely helped his clients get refunds—to the tune of $3 million—but his methods weren’t of the legal variety. The government wasn’t pleased, and Mr. Jordan tonight stands tried and convicted of 26 counts of aiding and assisting in the preparation of false tax returns. He’ll probably be spending quite a few years at ClubFed.

Heading next to Portland, Oregon we find that Jeffrey Carrithers pleaded guilty to one count of income tax evasion. Mr. Carrithers felt that one social security number wasn’t enough; he used two. That’s a problem, especially when you do that to hide income. Add in using bank accounts in others’ names, not reporting income on a Form 1099, lying to IRS agents, and, more importantly, doing this repeatedly and you’re bound to get in trouble. Mr. Carrithers cost the government $93,714.47 in lost taxes. He’ll be sentenced on March 31st; based on federal sentencing guidelines Mr. Carrithers is likely looking at spending a year at ClubFed.

Stephen Talmage of Anderson, South Carolina didn’t believe in the income tax. Well, most Americans don’t like it. Mr. Talmage took it a step further. In 1992 he stopped filing and paying income tax. When the IRS told Mr. Talmage that he had to file and pay he gave them typical tax protester frivolous arguments. When the IRS then was about to levy his wages he quit his job. In the end, though, Mr. Talmage was arrested and he pleaded guilty last year to income tax evasion. Today he was sentenced to two years at ClubFed. And he also has to pay his back taxes (now $250,000) plus penalties and interest.

Finally, Frank Frazier, Sr. is CEO of Nashville Jet Charters. His company properly collected $141,739 in federal excise taxes. He just didn’t remit those taxes to the IRS. That’s a problem, and Mr. Frazier pleaded guilty today to failing to turn over those funds he collected. It appears that including penalties and interest the total due is at least $180,000 and may be as high as $430,000. Mr. Frazier received 60 days at ClubFed and must make restitution.

As usual, it’s a whole lot easier to just pay your taxes in the first place then it is to evade them. Somehow, though, that never enters the mind of the tax evader.

Lots on the tax evasion front from the last few days. And we have two early entrants into the 2009 Tax Offender of the Year contest.

Larry McClure is one of two owners of Morgan-McClure Motorsports. Morgan-McClure owns a NASCAR team that ran from 1982 through 2007. Mr. McClure was indicted back in October for mail fraud, wire fraud, and tax evasion. Reports are that he will plead guilty this week to filing false tax returns and making false statements to IRS investigators. Mr. McClure may be spending ten years at ClubFed. This all stems from apparently not reporting $325,000 for using cars in the ARCA Re/Max Series.

Anthony Bruno is a disbarred attorney in the Chicagoland area. He either took a wrongful deduction or engaged in deliberate tax fraud. The latter is what he’s been charged with; the former is what his attorney, Jeffrey Steinback, told the Chicago Sun-Times is what really happened. He’s accused of falsely stating a $101,000 loss on his 2006 corporate tax return.

Digna Garrett used to run a nursing temp agency. Her business was quite a bit more profitable than she showed on her tax returns. It helps when you leave off $1.1 million in revenue. However, it can also lead to 18 months at ClubFed. She used the money for trips to Las Vegas and the Philippines instead of paying the IRS.

Finally, two stories from the Bozo taxpayers wing. First, Michael Sabo was a realtor in Las Vegas. He owed just under $100,000 to the IRS. The IRS put three liens on his home in suburban Henderson. So what did Mr. Sabo do? He went to the Clark County Recorder’s office, told the clerk he was an IRS agent, and had the liens removed. That didn’t work out so well as Mr. Sabo was charged with impersonating an officer or employee of the United States and with tax evasion. He pleaded guilty last year and was sentenced last week to a year and a day at ClubFed.

Last June Tony and Micaela Dutson pleaded not guilty to “running an $8 million tax fraud scam.” A new indictment was released last week that alleges that the Dutsons “tried to obstruct the IRS by filing baseless liens against four IRS workers.” Additionally, the Dutsons allegedly filed a lawsuit that the government characterizes as “frivolous” against one of the IRS investigators and allegedly lied about making payments in the millions to the individuals investigating them. The original indictment claimed that they were allegedly marketing an illegal tax avoidance program. They were barred back in 2006 from selling the program.

Well, last year’s Tax Offender of the Year attempted to arrest his judge. That wasn’t much of a success. Today we had stories about impersonating an IRS employee and allegedly filing false liens against IRS employees. The Dutsons were already on notice that their activities were being scrutinized. If they committed these acts (at this point in time it’s only an allegation) they are definitely in the running for the 2009 Tax Offender of the Year crown.