Taxable Talk

There was quite a bit of tax fraud at week’s end. Indeed, I had to liberally weed out the stories so the ones below are the cream of the crop, so to speak.

First, we have another alleged Bozo tax preparer. Julius Nyamweya Kiage says he’s a certified public accountant. Mr. Kiage has had an accounting practice called J.K. Accounting & Co. PLLC in Brooklyn Park, Minnesota. Yet Mr. Kiage is not listed as a CPA in Minnesota, Iowa, or Wisconsin.

While the IRS is accusing Mr. Kiage of false advertising that’s not their biggest beef. Rather, the IRS noticed that the returns prepared by Mr. Kiage have “exaggerated or fraudulent claims related to education credits, individual retirement account deductions, education credits and charitable contributions.” Mr. Kiage has not been charged; the IRS at this point is investigating and has seized computer records and files from Mr. Kiage’s office. The IRS told a court (to obtain a subpoena) that Mr. Kiage prepared 1,843 returns over the last two years that resulted in refunds of $4.7 million. The investigation began as a result of a tip.

Robert P. Peebles of St. Helena, California had a problem that most of us would like to have. He was trustee of his 96-year old aunt’s $5 million trust. He allegedly decided to set up his own $4 million trust funded from his aunt’s trust, to be repaid with annual payments.

His attorney allegedly told him that he would have to report his trust to the IRS and Connecticut (his aunt was a Connecticut resident) on estate tax returns. So he fired his attorney.

He then hired two accountants to prepare the estate tax returns. But somehow he failed to tell the accountants about his trust (the IRS alleges it was deliberate; Mr. Peebles claims it was an oversight and the accountants didn’t ask about it).

The IRS accuses Mr. Peebles of lying to IRS investigators under oath, various tax laws, and mail fraud. He was arraigned in Connecticut and has been released on bail.

And yes, if you do transfer $4 million into your own trust from that of your late aunt you do need to report it on the estate tax returns.

Earlier this year officials at the nearby University of California, Irvine announced that about 1,100 student identities were stolen by Texas-based United Healthcare. Now several individuals have been indicted for filing phony tax returns using these students identities (and others).

The indictments were handed down by a federal grand jury in Sherman, Texas. Those indicted, Christopher Chiota of Dallas, Kennedy Mpezini of McKinney, Gilbert Gotoro of Irving, Tendeka Daniel Parirenyatwa of Richardson, Michael Thomas Jr., of Irving, and Kudzai Mangoma all face charges of fraud and identity theft. The indicted allegedly filed returns for 163 UCI students after starting a phony tax preparation business and setting up relationships with several banks.

The problem for the individuals who filed returns for the UCI students was that sooner or later some of the students would file their own returns. Once that happened the scheme was certain to be investigated. UCI police along with criminal investigators from the IRS, Department of Justice and Texas law authorities are still investigating and it’s likely that further charges are forthcoming.