Accounting
Tax Fraud Blotter: Crooks R Us
The shadow knows; body of evidence; make a Note of it; and other highlights of recent tax cases.
Newark, New Jersey: Thomas Nicholas Salzano, a.k.a. Nicholas Salzano, of Secaucus, New Jersey, the shadow CEO of National Realty Investment Advisors, has been sentenced to 12 years in prison for orchestrating a $658 million Ponzi scheme and conspiring to evade millions in taxes.
Salzano previously pleaded guilty to securities fraud, conspiracy to commit wire fraud and conspiracy to defraud the U.S., admitting that he made numerous misrepresentations to investors while he secretly ran National Realty. From February 2018 through January 2022, Salzano and others defrauded investors and potential investors of NRIA Partners Portfolio Fund I, a real estate fund operated by National Realty, of $650 million.
Salzano and his conspirators executed their scheme through an aggressive multiyear, nationwide marketing campaign that involved thousands of emails to investors, advertisements, and meetings and presentations to investors. Salzano led and directed the marketing campaign that was intended to mislead investors into believing that NRIA generated significant profits. It in fact generated little to no profits and operated as a Ponzi scheme.
Salzano stole millions of dollars of investor money to support his lavish lifestyle, including expensive dinners, extravagant birthday parties, and payments to family and associates who did not work at NRIA. He also orchestrated a separate, related conspiracy to avoid paying taxes on his stolen funds.
He was also sentenced to three years of supervised release and agreed to a forfeiture money judgment of $8.52 million, full restitution of $507.4 million to the victims of his offenses and $6.46 million to the IRS.
Marina del Rey, California: Tax preparer Lidiya Gessese has been sentenced to 41 months in prison for preparing and filing false returns for her clients and for not reporting her income.
Gessese owned and operated Tax We R/Tax R Us and Insurance Services from 2013 through 2019 and charged clients $300 to $800. Gessese would then prepare returns that included claims to deductions and credits she knew her clients were not entitled to, including falsely claiming dependents, earned income credits, the American Opportunity Credit, Child Tax Credits, business deductions, education expenses or unreimbursed employee business expenses. The illegitimate claims led to some $1,135,554.64 issued by the IRS for 2010 through 2018.
She failed to report, or underreported, her own income for 2010 through 2018, some of which included improperly diverted funds from clients’ inflated or fraudulent refunds, causing a tax loss of $488,276.
Gessese, who pleaded guilty in April, was also ordered to pay $1,096,034.01 to the IRS and $53,526.95 to her other victims.
Fullerton, California: In Chun Jung of Anaheim, California, owner of an auto repair business, has pleaded guilty to filing false returns for 2015 to 2022, underreporting his income by at least $1,184,914.
He owned and operated JY JBMT INC., d.b.a. JY Auto Body, which was registered as a subchapter S corp. Jung was the 100% shareholder.
Jung accepted check payments from customers that he and his co-schemers then cashed at multiple area check cashing services; the cashed checks totaled some $1,157,462. Jung withheld the business receipts and income from his tax preparer and omitted them on his returns.
He will pay $300,145 in taxes due to the IRS and faces a $250,000 penalty and up to three years in prison. Sentencing is Jan. 31.
Tucson, Arizona: Tax preparer Nour Abubakr Nour, 34, has been sentenced to 30 months in prison.
Nour, who pleaded guilty a year ago, operated the tax prep business Skyman Tax and for tax years 2016 through 2018 prepared and filed at least 27 false individual federal income tax returns for clients.
These returns included falsely claimed business income that inflated refunds so that he could pay himself large prep fees. Nour’s clients had no knowledge that he was filing false tax returns under their names.
Nour was also ordered to pay $150,154 in restitution to the United States for the false tax refunds.
Farmington, Connecticut: Tax preparer Mark Legowski, 60, has been sentenced to eight months in prison, to be followed by a year of supervised release, for filing false returns.
From January 2015 through December 2017, Legowski was a self-employed accountant and tax preparer doing business as Legowski & Co. Inc. He prepared income tax returns for some 400 to 500 individual clients and some 50 to 60 businesses.
To reduce his personal income tax liability for 2015 through 2017, Legowski underreported his practice’s gross receipts by excluding some client payment checks. He then filed false personal income tax returns that failed to report more than $1.4 million in business income, which resulted in a loss to the IRS of $499,289.
Legowski, who
Wheeling, West Virginia: Dr. Nitesh Ratnakar, 48, has been convicted of failing to pay nearly $2.5 million in payroll taxes.
Ratnakar, who was found guilty of 41 counts of tax fraud, owned and operated a gastroenterology practice and a medical equipment manufacturer in Elkins, West Virginia. He withheld payroll taxes from employees’ paychecks and failed to make $2,419,560 in required payments to the IRS. Ratnakar also filed false tax returns in 2020, 2021 and 2022.
He faces up to five years in prison for each of the first 38 tax fraud counts and up to three years for the remaining counts.
Orlando, Florida: Two men have been sentenced for their involvement in the “Note Program,” a tax fraud.
Jasen Harvey, of Tampa, Florida, was sentenced to four years in prison and Christopher Johnson, of Orlando, was sentenced to 37 months for conspiring to defraud the U.S.
From 2015 to 2018, they promoted a scheme in which Harvey and others prepared returns for clients that claimed that large, nonexistent income tax withholdings had been paid to the IRS and sought large refunds based on those purported withholdings. The conspirators charged fees and required the clients to pay a share of the fraudulently obtained refunds to them.
Overall, the defendants claimed more than $3 million in fraudulent refunds on clients’ returns, of which the IRS paid about $1.5 million.
Both were also ordered to serve three years of supervised release. Johnson was also ordered to pay $864,117.42 in restitution to the United States; Harvey was ordered to pay $785,858.42 in restitution. Co-defendant Arthur Grimes will be sentenced on Jan. 13.
Ft. Lauderdale, Florida: Tax preparer Jean Volvick Moise, 39, has been sentenced to three years in prison for filing false income tax returns.
Moise prepared false returns for clients to inflate refunds. He prepared returns which included, among other things, false dependents, false 1099 withholdings, false educational credits and false Schedule C expenses, often for businesses which did not exist. Moise’s fee was larger than the typical one charged by a tax preparer.
Moise filed hundreds of false returns that caused the IRS to issue more than $574,000 in fraudulent refunds.
The Internal Revenue Service commemorated the 70th anniversary of the April 15 tax filing deadline on Tuesday, but this year the agency has also been suffering through
The IRS noted on Tuesday that the tax-filing deadline moved from March 15 to April 15 in 1955 to give taxpayers and the IRS more time to prepare and process complex tax returns. However, with the budget cuts and the efforts of the Elon Musk-led Department of Government Efficiency, the IRS has also paused its technology modernization efforts.
IRS chief information officer Rajiv Uppal is reportedly the latest high-level official to announce his resignation, according to
Acting chief counsel William Paul was reportedly
The high-profile departures come after the approximately 7,000 IRS probationary employees were put on paid administrative leave this year, with plans to cut up to 50% of the IRS workforce after tax season. The National Treasury Employees Union has been warning of the impact of the cutbacks.
“NTEU is incredibly proud of the IRS employees who persevered despite attacks on their jobs and their agency and helped deliver a smooth filing season for millions of taxpayers and business owners,” said the NTEU’s national president, Doreen Greenwald, in a statement. “But the success feels precarious as the administration plans a forthcoming firing spree that will cripple the agency’s ability to serve the American people, before, during and after the filing season.”
The NTEU noted that the Trump administration has already removed about 7,000 probationary IRS workers, and the Treasury has announced plans for a broader reduction in force that could impact thousands more IRS employees across the country.
“It is not speculation to say that a gutted IRS helps fewer taxpayers file their returns, slows their refunds, and allows tax cheats to thrive, because we saw all three of those things the last time Congress
The smaller the IRS workforce, the less tax revenue is collected, according to a
Inside the shaky state of the IRS
The Urban-Brookings Tax Policy Center held a webinar Tuesday to discuss how the large reductions in the IRS’s funding and staffing would affect taxpayers, as well as the successive buyout offers under the
“What we do know before we get into potential future layoffs is that 11,000 IRS employees out of about 100,000 had initially taken the buyout or been laid off in February, and now another 20,000 we’ve been told this morning are taking another buyout, so a total reduction so far of 30,000 employees out of 100,000,” said Tracy Gordon, vice president for tax policy, codirector and acting Robert C. Pozen Director at the Urban-Brookings Tax Policy Center, citing recent articles from
Barry Johnson, a former chief data and analytics officer at the IRS who is now a nonresident fellow at the tax policy center, discussed the advances that the IRS had been making in its technology efforts before the cutbacks. They included:
- Introducing interactive chatbots that used artificial intelligence to interpret taxpayer questions and link them to the appropriate content on its website;
- Expanding online account capabilities for individuals, businesses and tax professionals;
- Introducing the Direct File system for free online tax filing; and,
- Improving the IS’s enterprise case management system.
“One of the big goals we were working on was to make our data more interoperable and accessible to support modernization, while greatly improving the security of all of our data systems,” said Johnson. “We were making progress in releasing statistics in closer to real time and to automate some of our statistical processes. And we were laying the groundwork to support evidence-based policy-making and program evaluation at all levels of government — again, while ensuring the protection of individually identifiable tax data.”
Much of the extra funding for IRS enforcement, taxpayer service and IT modernization has already been cut by Congress or is in the process of being zeroed out, but the plans are unclear.
“There are many unknowns for personnel, for funding, which according to your charts, may actually be close to zero for modernization right now,” said Pete Sepp, president of the National Taxpayers Union. “The [Inflation Reduction Act] funds may have run out by about out for modernization, and we have zero in appropriations. How in the world is anything going to press forward in that environment? Maybe it can, but we want to see the plan.”
Technology can only go so far in helping taxpayers navigate the IRS.
“What we don’t see now is what’s going to be happening going forward,” said Nina Olson, executive director of the Center for Taxpayer Rights and a former National Taxpayer Advocate at the IRS. “How do they propose to improve taxpayer service? Are they going to use AI to eliminate calls? Everybody’s been trying to eliminate the calls since the phone system was set up, and all it does is increase. Maybe you can eliminate some of the repeat callers, the more that you do chatbots and things. But as I keep saying to people, the IRS isn’t like Amazon or your bank. It has enforcement powers that no bank has. And if you’ve ever tried to get a problem resolved with Amazon or any one of these online deliveries, good luck with that. The chat system doesn’t really work really well, and that’s what drives people to the phones. They want to hear from somebody that their issue has been resolved.”
The federal government’s financial condition worsened by $4.7 trillion in the past year, according to a new report released to coincide with Tax Day.
The annual
“Our country’s financial condition continues to spiral out of control, and taxpayers are left holding the bag,” said TIA CEO Sheila Weinberg in a statement Tuesday. “On a day when Americans are asked to be transparent and accurate with their finances, their government fails to do the same.”
Despite the enormous size of its commitments to Social Security and Medicare, the U.S. Treasury Department only reported $241 billion of them on the official balance sheet because, according to government documents, recipients aren’t legally entitled to benefits beyond the current month, allowing future payments to be reduced or eliminated by law.
The report’s release comes amid efforts by the Elon Musk-led Department of Government Efficiency to slash the size of the federal government, virtually eliminating entire agencies while threatening cutbacks in Social Security, Medicare and Medicaid offices and personnel to aid seniors.
The report warned that due to inaccurate and nontransparent budgeting practices, Congress and the American people lack the information needed to make informed decisions about taxes, spending, and long-term policy. Weinberg is advocating for full accrual budgeting and accounting, which would include the true cost and projected growth of government programs. “This kind of transparency would be the first step in regaining control of our nation’s finances,” she said.
The Financial State of the Union report gives the federal government an ‘F’ grade for its fiscal health and asks Congress to adopt honest accounting standards to provide long-term financial sustainability. Truth in Accounting is also encouraging citizens to
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