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Tax Fraud Blotter: Incorrect positions

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On ice; the end of the beginning; Speed trap; and other highlights of recent tax cases.

Miami: A federal court has issued a permanent injunction against tax preparer Richard Louis that bars him from preparing federal income tax returns, working for or having any ownership stake in a tax prep business, assisting others (including family members) prepare returns or setting up business as a preparer and transferring or assigning customer lists to any other person or entity. 

In June, the court enjoined seven independent contractors who worked with Louis — Harold Bornelous, Romeo Davis, Teddy Davis, Joseph Garrett, Demetrius Knowles, Daniel Oku and Marlyne Wah — from preparing returns for others but allowed them to apply for reinstatement after two years if they successfully complete the IRS Annual Filing Season Program. The contractors agreed to the injunctions.

The complaint alleged that Louis and the seven contractors prepared returns that claimed various false or fabricated deductions and credits, including fabricated residential energy credits, false and exaggerated itemized deductions, and fictitious and inflated business expenses. According to the complaint, Louis marketed himself as Taxman and he with the seven contractors prepared thousands of returns for clients over the past 10 years.

The court also ordered Louis to disgorge $390,000 from the scam that he’d received from his prep business. He agreed to both the injunction and the disgorgement.

Moon Township, Pennsylvania: Business owner Albert Boyd Jr. has pleaded guilty to willfully filing a false return.

For each year from 2017 to 2022, Boyd failed to report income from his company, Boyd Roll-Off Services, on the business return, causing a total tax loss of at least $1,030,000.

Boyd ensured that much of the company’s income from the sale of scrap metal went unreported by causing cash proceeds not to be deposited in the business bank account and causing checks to be deposited into accounts other than the business bank account. Boyd then failed to provide his tax preparer with records relating to the undeposited cash and diverted checks.

Sentencing is Dec. 17. He faces up to three years in prison and a fine. 

Des Moines, Iowa: Businessman Mark Francis Davidson, 66, formerly of Adel, Iowa, has been sentenced to 18 months in prison for filing a false income tax return.

Davidson is the majority shareholder of Collegiate Concepts Inc., which rents dorm minifridges to colleges and college students. From 2015 to 2021, Davidson diverted more than $3.8 million from the corporation to himself and failed to report this income to the IRS. Davidson concealed these payments from the corporation’s accountant and tax preparer by providing check ledgers that falsely identified checks from the corporation to Davidson as legitimate business expenses.

After his imprisonment, Davidson will be on supervised release for a year. He was also ordered to pay $1,449,620 in restitution to the IRS and a fine of $20,000.

Frankfort, Illinois: Jeremiah Johnson, owner of three local childcare and transportation businesses, has been sentenced to a year and a day in prison for underreporting more than $1.47 million in income.

Johnson owned New Beginnings Academy, New Beginnings Child Development and Epic Transportation. From 2015 to 2020, he obtained more than $1.47 million of income from the operation of those businesses but failed to report the money on his individual returns, instead reporting lesser W-2 wages and some rental income.

During the same period, Johnson also failed to file corporate returns or pay any of the required employer and employee withholdings for federal income tax, Social Security tax and Medicare.

Johnson, who pleaded guilty earlier this year, was also fined $10,000 and ordered to pay $123,391 in restitution to the IRS.

Hands-in-jail-Blotter

Wilmington, North Carolina: Businessman George William Taylor Jr. has pleaded guilty to not paying more than $2 million in employment taxes and not filing employment tax returns.

Taylor owned and operated National Speed, a service business for high-speed automobiles. He was responsible for withholding Social Security, Medicare and income taxes from employees’ wages and paying those taxes to the IRS. From 2014 through 2021, Taylor withheld the taxes but did not pay those withholdings over to the IRS, nor did he file the necessary employment returns. During the same period, he also did not pay the employer’s share of those taxes to the IRS.

In total, Taylor caused a federal tax loss of $2,272,072.

Sentencing is Nov. 19. Taylor faces up to five years in prison, as well as a period of supervised release, restitution and monetary penalties. 

Cincinnati: A U.S. district court has issued a permanent injunction against tax preparer Emmanuel Antwi and his businesses.

Antwi and his businesses, Manny Travel Agency & Business Services Inc. and Manny Financial, Insurance & Accounting Firm LLC, consented to the injunction, which permanently bars them from preparing federal returns for others. The United States’ claim demanding that Antwi turn over ill-gotten gains he received in tax prep fees remains pending.

According to the civil complaint, since at least 2020 Antwi filed hundreds of returns each filing season with at least 95% of the returns claiming a refund. Allegedly, Antwi knowingly took unreasonable or incorrect positions on returns he prepared that resulted in understatements of the tax that his clients owed and overstatements of refunds.

In particular, the complaint alleges that Antwi prepared returns that claimed deductions for purported business losses or employee business expenses that he knew were false. The complaint also alleges that Antwi prepared returns where he knowingly reported the wrong filing status.

Antwi must send notice of the injunction to each person for whom he or his businesses prepared federal returns, amended returns or claims for refund after Jan. 1, 2019. He must also post a copy of the injunction both on websites that he and his businesses maintain and at physical locations where any business is conducted.

Newnan, Georgia: Business owner Barry Lee White, of Carrollton, Georgia, has been sentenced to 22 months in prison to be followed by three years of supervised release for willful failure to pay more than $2.4 million in payroll taxes.

Between 2012 and 2019, White owned and operated, at different times, two construction maintenance and electrical companies that were required to withhold from employees’ gross pay FICA taxes and as sole operator of the companies, White had the responsibility to collect, truthfully account for, and pay the IRS the payroll taxes.

From at least 2015 to 2018, White withheld more than $1.8 million in payroll taxes from his employees but failed to pay the taxes to the IRS and failed to pay more than $600,000 for the employer’s portion of the payroll taxes.

Convicted of the charges in May after pleading guilty, White was also ordered to pay $2,499,473.07 in restitution.

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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