Samuel Joseph DeAngelo headed Western Tax Service. It attracted tax clients quickly as it averaged $2,500 refunds for each customer.
It’s techniques were certainly interesting, and come from the Richard Hatch School of Tax Preparers:
– Making up false deductions for employee business expenses;
– Making up false charitable deductions (typically 10% of AGI);
– Phony depreciation deductions;
– Phony tax payment deductions; etc.
The IRS audited a taxpayer who used Western Tax Service and discovered the fraud. Most of the tax clients had no idea that Western was doing anything wrong. The IRS expanded their review of returns prepared by Western (Western prepared about 8,000 returns in 2001). Yes, Western charged large fees but they got large refunds; what could be the problem? (Hint: If it sounds too good to be true…)
The axe fell in 2004. Now, the story reaches its conclusion. Last Friday DeAngelo pled guilty to defrauding the IRS and helping people file false tax returns. He also pled guilty to using others to engage in currency transactions to avoid the $10,000 reporting requirement: he sent employees to the bank to make multiple $9,990 deposits (don’t try this at home!). DeAngelo faces a maximum of 24 years in jail.
I had a couple Western refugees come in to my office for help. They were rudely surprised that you do have to pay tax on your income….
Press Release: US Dept. of Justice
News Story: Orange County Register
