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Tax Fraud Blotter: Dirty laundry

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Startup shut down; healthy, wealthy and crooked; won’t ever stand the strain; and other highlights of recent tax cases.

Greenville, Mississippi: Tax preparer Slexcia Neal has been sentenced to 18 months in prison on each count of conviction after pleading guilty to three counts of filing fraudulent federal returns.

Neal owned a tax prep business in Cleveland and Merigold, Mississippi, where taxpayers sought her help preparing and filing documents with the IRS. When Neal submitted a number of these documents, they contained false information that lowered taxpayers’ income and ultimately increased federal refunds.

She was also ordered to serve a year of supervised probation and to pay more than $1.96 million in restitution to the IRS. Neal was also barred for life from preparing tax documents for others.

Bedford, New Hampshire: Exec Andrew Park, 49, has been sentenced to 30 months in prison for willfully failing to pay more than $14 million in payroll taxes and not filing personal returns.

Park, who pleaded guilty last year, was co-founder and CEO of a startup tech company and responsible for filing the company’s quarterly employment returns and collecting and paying over Social Security, Medicare and income taxes withheld from the employees’ wages to the IRS, as well as the matching Social Security and Medicare taxes the company owed.

From the company’s founding in 2014 through the third quarter of 2021, he withheld federal taxes from the wages of the company’s employees but did not pay them over as required by law. He also did not pay over the portion of the employment taxes that the company owed.

Park failed to do so even though a payroll service company he’d hired notified him that the taxes were due; in more than one instance, he was also notified by an employee that the amount paid to Social Security listed on a W-2 did not match what was reported by the Social Security Administration.

From 2013 through 2020, Park also did not file individual returns despite paying himself a salary of some $250,000 each year.

Park caused a tax loss to the IRS exceeding $14 million.

He was also ordered to serve three years of supervised release and to pay $639,821.78 in restitution to the U.S. and a fine of $15,000.

Owings Mills, Maryland: James Wilson has been convicted of conspiracy to commit insurance fraud, money laundering, filing false returns and ID theft.

Wilson conspired to defraud insurance companies by obtaining more than 30 life insurance policies for applicants by misrepresenting their health, wealth and existing coverage. The total death benefits from these policies exceeded $20 million. He also conspired to defraud individual investors to obtain funds that he then used to pay premiums on fraudulently obtained policies.

Wilson filed false individual income tax returns for 2018 and 2019, which concealed some $7.7 million in fraud proceeds.

Sentencing is May 1. He faces up to 20 years in prison for each count of conspiracy, wire fraud, mail fraud and money laundering, and a maximum of three years in prison for each count of filing a false return. Wilson also faces up to two years in prison for each count of aggravated ID theft. 

Lafayette, New York: David Gedamoske has pleaded guilty to evading taxes on more than $1 million in wages between 2016 and 2021.

Gedamoske worked as a journeyman lineman for various electrical companies and received wages reported on a W-2. When he started working at these companies, Gedamoske completed a W-4 and claimed either “99 Allowances” or that he was exempt from income tax. Despite owing a significant amount of tax, he then failed to file a federal return between 2016 and 2021, evading more than $200,000 in federal taxes.

Sentencing is June 11. Gedamoske faces up to five years in prison, up to three years of supervised release and a maximum $100,000 fine. He will also have to pay restitution to the IRS.

Hands-in-jail-Blotter

Appleton, Wisconsin: KBWB Operations LLC, d.b.a. Atrium Health and Senior Living, and former CEO and managing member Kevin Breslin, of Hoboken, New Jersey, have both pleaded guilty to one count of health care fraud and one count of tax conspiracy.

Breslin is one of six owners of KBWB-Atrium, which had corporate headquarters in Little Falls, New Jersey, and a corporate office in Appleton. From approximately January 2015 to about September 2018, KBWB-Atrium operated and owned 23 skilled nursing facilities in Wisconsin; Breslin was responsible for overseeing all of KBWB-Atrium’s operations.

The primary source of income for the KBWB-Atrium Wisconsin was federal funds from the Centers for Medicare and Medicaid Services, or CMS. The fraud involved diverting CMS funds, and the defendants allegedly prioritized distributions and guaranteed payments to KBWB-Atrium’s owners regardless of the company’s financial situation. As a part of the conspiracy alleged, Breslin, on behalf of KBWB-Atrium, directed that income taxes and employment taxes withheld from employees’ paychecks not be paid over to the IRS.

Sentencing is May 7. Breslin faces up to 10 years in prison for the health care fraud count and five years for the conspiracy to commit an offense against the United States, along with a period of supervised release. Both defendants face restitution and other monetary penalties.

Fairmont, West Virginia: Tax preparer Jack Lee Oliver, 56, of Rivesville, West Virginia, has been sentenced to three years in prison for defrauding the IRS of $708,538.

Oliver, who was found guilty in October, owns the insurance sales and tax prep Insurance Depot. Oliver prepared returns for clients claiming losses for non-existent businesses and prepared returns for clients who did have businesses but, without the knowledge of the clients, he falsely inflated expenses to cause a loss. In both instances, his actions caused the clients to receive undeserved refunds.

Oliver also claimed the foster son of one of his clients on his returns, resulting in thousands of dollars in undeserved refundable credits.

Oliver will serve a year of supervised release following his prison sentence. He was also ordered to cooperate with the IRS to pay back taxes.

Miami: Two Ukrainian nationals who were extradited from the Kingdom of Thailand to the United States in September have been sentenced on charges related to labor-staffing companies they operated in Florida.

Oleg Oliynyk and Oleksandr Yurchyk were each sentenced to 15 years in prison for conspiracy to defraud the U.S. and conspiracy to commit money laundering.

They and others owned and operated a series of labor-staffing companies in South Florida from at least April 2008 to August 2021. Through these companies, Oliynyk, Yurchyk and co-defendants Oleksandr Morgunov, Mykhaylo Chugay and Volodymyr Ogorodnychuk facilitated the employment of non-resident aliens who were not authorized to work in the U.S. and helped evade assessment and collection of more than $25 million in federal income and employment taxes.

Oliynyk and Yurchyk were each also ordered to serve three years of supervised release, to pay $10,863,233.05 in restitution to the U.S. and to forfeit $11 million.

Holly Springs, Mississippi: Tax preparer Lakisha Pearson, 48, has been sentenced to 52 months in jail for mail fraud in connection with falsely claiming Employee Retention Credits. 

Pearson, who owns Unity Tax Express, pleaded guilty to using the internet to file false tax credit claims for numerous persons, totaling nearly $47 million and taking kickbacks from those persons. The IRS sent $15,942,586.77 in ERC credits to the claimants who thought they were given a government grant and were unaware that Pearson had filed returns for them. 

Pearson was also ordered to pay the above amount in restitution.

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Tax bill set to bring forward Medicaid work requirements to 2026

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House Republican leaders are planning to accelerate new Medicaid work requirements to December 2026 in a deal with ultra-conservatives on the giant tax bill, according to a lawmaker familiar with the discussions.

The revised version of President Donald Trump’s economic package — slated to be released publicly Wednesday — calls to move up work requirements to December 2026 from 2029, the lawmaker said, who requested anonymity to discuss private talks.

Work requirements have been a sticking point in reaching agreement on Trump’s tax bill, as Speaker Mike Johnson attempts to navigate a narrow and fractious majority.

The December 2026 deadline could also become an issue in the midterm elections, just one month earlier with Democrats eager to criticize Republicans for restricting health benefits for low-income households.

The lawmaker said there will be a waiver process for states unable to quickly comply with the deadline. The person also said that changes to the federal match for Medicaid enrollees won’t be in the bill and talks continue on changes to Medicaid provider taxes.

The debate over Medicaid has pinned lawmakers from high-tax states against hardliners. But the new Medicaid work requirement date could alienate several moderates concerned about cuts to the health care program for low-income people and those with disabilities.

Johnson can only lose a handful of votes and still pass the bill, which is the centerpiece of Trump’s legislative agenda.

The new date is also likely to provoke a backlash in the Senate.

It will be very difficult for states to implement the work requirements in a year and a half, said Matt Salo, a consultant who advises health care companies and formerly worked for the National Association of Medicaid Directors.

Squeezing the process of creating work requirements in every state into a compressed time frame is “almost a guarantee it won’t work” and will result in people who qualify for health coverage getting kicked out of the program, Salo said.

“Trying to speed run this into a much tighter time frame to hit an arbitrary budget target is not a recipe for success,” Salo said.

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Mike Johnson says deal reached on raising SALT cap to $40K

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House Speaker Mike Johnson said Republicans have reached an agreement to increase the state and local tax deduction to $40,000, suggesting a resolution to one of the final issues holding up President Donald Trump’s economic bill. 

“That is the agreement we came to,” Johnson told CNN Wednesday, in response to a question about raising the deduction cap to $40,000 from $10,000 for a decade.

“I think the SALT caucus, as they call themselves, it’s not everything they wanted, but I think they know what a huge improvement that is for their constituents and it gives them a lot to go home and talk about,” Johnson said.

The $40,000 SALT limit will phase out for annual incomes greater than $500,000, according to a person familiar with the matter. The income phaseout threshold would grow 1% a year over a decade, they said.

The cap is the same for both individual taxpayers and married couples filing jointly, the person added.

Several lawmakers — New York’s Mike Lawler, Nick LaLota, Andrew Garbarino and Elise Stefanik; New Jersey’s Tom Kean, and Young Kim of California — have threatened to reject any tax package that does not raise the SALT cap sufficiently.

It’s not clear that all those lawmakers have signed off on the deal.

Some SALT advocates have pushed for income limits as high as $750,000 and a 2% annual phaseout increase, according to another person familiar with the negotiations, who requested anonymity to discuss private talks.

Lawler told NPR in an interview Wednesday morning that lawmakers are still working through some “finer points,” but that he’s hopeful to reach a deal later in the day.

The current write-off is capped at $10,000, a limit imposed in Trump’s first-term tax cut bill. Previously, there was no limit on the SALT deduction and the deduction would again be uncapped if Trump’s first-term tax law is allowed to expire at the end of this year.

Johnson’s plan expands upon the $30,000 cap for individuals and couples included in the initial version of the tax bill released last week. That draft called for phasing down the deduction for those earning $400,000 or more. That plan was quickly rejected by several lawmakers from high-tax districts who called the plan insultingly low.

SALT has been among the thorniest issues for House leaders who are navigating the political realities of pushing an expensive tax bill through with their narrow and fractious majority. Trump has grown frustrated over the SALT demands and urged lawmakers on Tuesday to not let their parochial interests sink the bill.

Still, the agreement is also already causing a backlash from conservatives who are pushing for more spending cuts to offset the tax reductions in Trump’s economic package.

Representative Andy Harris, who chairs the conservative House Freedom Caucus, told Newsmax he thinks Republicans are “actually further away from the deal, because that SALT cap increase, I think, upset a lot of conservatives again.” 

The House Rules Committee debated Trump’s bill for hours early Wednesday, beginning at 1 a.m. Washington time, in order to meet Johnson’s self-imposed Thursday deadline to pass the legislation out of the House. Republicans are expected to soon release a revised version of the legislation that will address SALT and other unresolved issues.

Republicans are also sparring over spending reductions in the bill, including weighing cuts to Medicaid health coverage and food assistance for low-income households.

House Republicans leaders are planning to accelerate new Medicaid work requirements to December 2026 from 2029 in a deal with ultra-conservatives to cut additional health spending.

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ISACA offers AI audit credential

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IT auditors who know a lot about artificial intelligence can now show it through a new certification, as the ISACA — the organization behind credentials like CISA and CISM — now offers an AAIA or “Advanced in AI Audit” credential. The certification demonstrates that an IT audit professional can navigate the complexities of AI and has the skills to respond to risks, identify opportunities and ensure compliance while safeguarding organizational integrity. Overall, it validates expertise in conducting AI-focused audits, addressing AI integration challenges, and enhancing audit processes through AI-driven insights.

The credential requires knowledge of a wide range of AI-related audit skills, proven through an exam scheduled through ISACA. Only those with an active CISA from ISACA, CIA from the IIA, and CPA from the AICPA are eligible to pursue the AAIA, which covers the key domains of AI governance and risk, AI operations, AI auditing tools and techniques.

Chiefly, professionals must demonstrate “AI operations” skills that concern balancing sustainability, operational readiness and the risk profile with the benefits and innovation AI promises to support enterprise-wide adoption of this powerful technology. This includes AI-specific data management, AI solution lifecycle management, AI-specific change management, supervision of AI solutions (especially agents), testing techniques for AI solutions, AI-specific threats and vulnerabilities, and AI-specific incidence response management. 

The next largest area of focus is “AI governance and risk,” which is mainly concerned with advising stakeholders on implementing AI solutions through appropriate and effective policy, risk controls, data governance and ethical standards. This encompasses general knowledge of AI and its business impacts, AI governance and program management, AI risk management, data and data governance programs, and how AI fits into standards frameworks and professional ethics. 

After that is “AI auditing tools and techniques,” which focuses on optimizing audit outcomes for innovation and highlights the professional’s knowledge of audit techniques tailored to AI systems and the use of AI-enabled tools to streamline audit efficiency and provide faster, quality insights. This includes audit planning and design, testing and sampling methodologies, evidence collection techniques, data quality and analytics, outputs and reports, all specific to AI. 

There are a number of task-based secondary classifications, such as “utilize AI solutions to enhance audit processes, including planning, execution and reporting” and “evaluate algorithms and models to ensure AI solutions are aligned to business objectives, policies and procedures.”

“ISACA is proud to have served the global audit community for more than 55 years through our audit and assurance standards, frameworks and certifications, and we are continuing to help the community evolve and thrive with the certifications and training they need in this new era of audits involving AI,” said Shannon Donahue, ISACA chief content and publishing officer. “Through AAIA, auditors can demonstrate their expertise and trusted advisory skills in navigating AI-driven challenges while upholding the highest industry standards.”

As AI becomes increasingly integrated into the world economy, a number of standard-setting and certification bodies have responded to rising concerns about the impact the technology can have on business and the economy as a whole. The National Institute of Standards and Technology released its AI Risk Management framework at the beginning of 2023. The following year, the International Organization for Standardization released ISO 42001, which specifies requirements for establishing, implementing, maintaining and continually improving an AI management system within an organization. ISACA says this is the first advanced AI audit certification in the world, developed in response to rising concerns about the black box nature of many AI models which, in turn, has driven calls for more oversight by audit and assurance professionals over the technology’s internal structures. 

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