Accounting
Tax Fraud Blotter: Incorrect positions
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.
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.
The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all
- H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
- H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
- H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
- H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.
“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”
The bills were also included in a recent Senate
The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter.
- H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
- H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.
“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”
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