Taxable Talk

Another light week on the tax fraud front. But while it lacks depth, some of the cases are definitely amusing.

Three women in Maryland allegedly had a Bozo idea on how to make some money. Let’s get some inmates at the local prisons to give us their social security numbers, and then we’ll file phony returns on their behalf. What can go wrong?

Well, I can think of several felonies that the three committed. Unfortunately for our Bozo preparers the Postal Inspection Service, the IRS, and the FBI were not as amused by the scheme as I was. And since the Bozo preparers allegedly filed 101 claims totaling $365,599.41, the three are looking at lengthy terms at ClubFed if convicted on charges of mail fraud, conspiracy to defraud the US, and identity theft charges. You can read the press release on the indictment here.

Unfortunately, the three ladies in Maryland aren’t the only Bozos in the tax profession. Trumbauersville, Pennsylvania is a tiny town—less than 1,000 people reside in the borough. The town got some notoriety this week, though.

Eugene DiNatale, a councilman, runs an accounting business in nearby Rockledge. Mr. DinNatale and an associate, Chakawarn Sirirathasuk, found the old fashioned way to allegedly deprive the government of tax revenues. They allegedly collected employment taxes on behalf of their clients and kept the money rather than remitting it to the IRS. This is a scheme that almost never works, and one where the IRS and the Department of Justice go after every time it occurs. And the amount of the alleged money they kept wasn’t small: $4.9 million. Just for good measure the pair is also accused of overstating clients’ business expense deductions. Mr. DiNatale is looking at a very long term at ClubFed if convicted.

The final story comes from Saginaw, Michigan. Two brothers and a bank manager are accused of structuring transactions and tax evasion. The brothers filed tax returns from 2001 through 2005 showing incomes under $55,000 a year according to this news story but somehow managed to make “extravagant” purchases. And when their homes were raided in January 2006 the IRS found over $1.3 million. The bank manager is accused of aiding and abetting structuring. The brothers face multiple structuring and tax evasion charges. All are looking at relocating to ClubFed if found guilty.

My suggestion to everyone is if you think you’ve found a foolproof scheme to cheat Uncle Sam think again. Most schemes have been tried before and failed.

I really am an Enrolled Agent. In fact, hanging on the wall behind me is my Certificate of Enrollment (and my license is in my wallet).

Do you believe that anyone would impersonate a Certified Public Accountant? And would then choose to specialize in serving law enforcement?

Given that I’m writing about it, you should know the answer. From Arvada, Colorado (suburban Denver) comes the story of Denise Smith. Ms. Smith was indicted by a Jefferson County grand jury of 50 counts for allegedly impersonating an accountant. She’s also alleged to have incorrectly increased the deductions for her clients, cheating the IRS and Colorado out of tax revenue.

Her scheme unraveled when a client received an audit notice which apparently led to the investigation. Besides the obvious moral of the story (choose a reputable tax preparer) the Bozo moral is that if you’re going to impersonate an accountant, choose clients who don’t have the power to arrest you.

The Bozo side of my profession has had a busy week. Yeah, it’s tax season, but we have some pretty bad tax preparers highlighted here.

First, we go to Queens, New York. Tommasina (a/k/a Tammy) Paolino operated Titan Enterprises in the Ridgewood area of Queens. She’s been accused of first-degree grand larceny, first-degree identity theft, first-degree offering a false instrument for filing, first-degree falsifying business records, second-degree possession of a forged instrument and related tax charges. And that allegedly cost the State of New York $4 million in bogus refunds.

Next, we head to Kingsport, Tennessee. Donna Rees (aka Donna K. Blessing and Donna Blessing Bortz) operates B&B Tax Service. She apparently has had a good year, and the IRS thinks they know the reason. According to her indictment, Ms. Rees, “directed and encouraged persons for whom she had prepared tax returns to create false, fictitious and fraudulent documents and records to be used in civil audits.” When the IRS showed up at her office to ask her questions about 22 allegedly phony returns, she’s alleged to have cooked up phony documents on the spot. She’s alleged to have used fake business deductions and phony farming losses to get her clients bigger refunds. And that’s not Ms. Rees’ only troubles with the law; she’s already facing a federal bank fraud indictment.

So if your tax preparer volunteers to create phony deductions, just remember it’s an offer you can refuse. And if you know your tax preparer as “Tom” but he signs his name as “Dick” or “Harry,” you may want to inquire a bit….