'Bad guy' tax preparers keep courts busy
May 21, 2009. Even with government agencies that include the Secret
Service and the Tax Division of the Justice Department working with
the Internal Revenue Service to identify offenders, there is no
shortage in the number of tax preparers accused of engaging in
fraud. Individual CPAs and owners of tax preparation firms are
currently facing criminal and civil charges for cashing clients'
refund checks, stealing their identities, enrolling them in tax
shelters, and making bogus credit claims on their behalf, as well as
for familiar abusive tactics, inflating business expenses and using
fictitious deductions on returns.
A Chappaqua, New York accountant is one "bad guy" whose story has
recently come to light. Randal Kase, a certified public accountant,
faces up to 30 years in prison after admitting he stole clients' tax
return checks worth more than $300,000, the Lower Hudson Valley News
reports. Kase was arrested by Secret Service agents and pleaded
guilty in U.S. District Court in White Plains to one count of mail
fraud and one count of forgery. He is accused of stealing refunds
from clients from June 2002 through November 2008.
Kase arranged for the clients' tax-refund checks to be sent to
his home rather than to the victims. In one case, for several years,
Kase told a victim, a Westchester doctor, that he "broke even,"
according to a criminal complaint filed by Secret Service. The
doctor was actually paid $165,000 by the Internal Revenue Service in
25 checks, which were diverted by Kase and deposited into bank
accounts in the name of Kase or his wife, federal investigators
said.
The fraud was uncovered when another victim called the IRS to
complain that a $25,000 refund check had not been received.
In another case, Daniel Prewett and his wife and three employees
have been permanently barred from preparing tax returns for others
by a federal court in Tampa, Florida. Prewett has been accused of
helping customers set up fictitious domestic businesses to disguise
fraudulent business deductions for personal expenses and assets. One
of Prewett's clients, a dentist, used the defendants' scheme to
claim fraudulent deductions for the cost and operational expenses of
his $781,000 47-foot yacht, which he used solely for his personal
pleasure, the Justice Department's complaint alleges. The
defendants' schemes cost the U.S. Treasury more than $130 million
dollars, according to the complaint.
Prewitt is currently in jail serving an 18-year sentence on
federal charges related to cocaine distribution and money
laundering.
Return preparer fraud and fuel credit scams are on this year's
IRS list of the Dirty Dozen Tax Scams, and Ophelia Kelley, of
Vidalia, Georgia, the owner of two tax return preparation services,
Kelley Tax Service and City and Country Girl Tax Service has been
accused of having been involved in both. The Justice Department
announced on May 5th that Kelley has been permanently barred from
preparing federal income tax returns for others by a federal court
in Augusta, Georgia for allegedly claiming bogus fuel tax credits
for customers, truck drivers, who were not entitled to the credit.
The fuel credit is available only to taxpayers who operate farm
equipment or off-highway business vehicles.
The complaint alleged that Kelley fraudulently claimed absurdly
large credits for the truck drivers by falsely reporting purchases
of huge quantities of fuel, often more than the customer could have
bought using all his annual income.
Kelley is also alleged to have fabricated false deductions for
such things as medical expenses and charitable gifts. Kelley failed
to sign at least 100 tax returns she prepared for customers.
AccountingWEB.com May-21-2009
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