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Tax Fraud Blotter: Just business

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The first two pages; a Rainy day; in all modesty; and other highlights of recent tax cases.

Freeport, Texas: Tax preparer Krystal Wright has been sentenced to two years in prison to be followed by a year of supervised release for aiding and assisting in the preparation and filing of false income tax returns.

Wright, who pleaded guilty earlier this year, was the sole owner and only tax preparer at the tax prep firm WW2F. Most of her clients did not have a business nor did they discuss any business income or expenses with her. From 2017 through 2020, she prepared and filed some 83 federal income tax returns that contained false and fraudulent items, including qualified solar electric property costs, gifts by cash or check, business expenses, wages, salaries, tips and supplies. After Wright completed a return, she did not review the completed documents with clients and only provided them with the refund amount and first two pages of the return.

The filings resulted in a total tax harm of $525,404. Wright was also ordered to pay that amount in restitution.

Terrell, Texas: Tax preparer Toronto Henderson, 49, has pleaded guilty to conspiracy to aid, assist, counsel or advise in tax fraud and has been sentenced to two years in prison.  

Henderson owned two tax prep businesses and recruited tax preparers to prepare and file income tax returns for clients. Henderson or others at his instruction personally trained the preparers and instructed them to create, among other things, fraudulent Schedule Cs; preparers used taxpayer information unrelated to the operation of any business or created fictitious and false information with respect to operation of a business to allow the claiming of undeserved losses.

The tax loss totaled $373,230, which Henderson was also ordered to pay in restitution.

Columbus, Ohio: Tax preparer Ali Kasimu Alston, 48, has pleaded guilty to aiding in the preparation of false and fraudulent returns.

From at least 2015 through at least 2022, Alston owned and operated the prep business in Columbus Overtime Ventures LLC, d.b.a. Raining Cash Tax Service. He admitted to systematically falsifying client tax returns to maximize federal refunds, filing Schedule Cs with fake businesses to maximize tax credits. He also tried to bribe one of his former employees with $4,000 to provide false information to law enforcement that was investigating the tax prep business.

Aiding in the preparation of a false and fraudulent return carries up to three years in prison. Alston will also pay more than $1.2 million in restitution to the IRS.

Beaumont, Texas: Tax preparer Michelle Denise Johnston, 42, has been sentenced to 15 months in prison and ordered to pay $196,177 in restitution for federal tax violations.

Johnston worked at Allen and Johnston Tax Service, which she formed with Yolanda Allen Morris in 2011; each had worked as Jackson Hewitt office managers at Wal-Mart locations and had decided to open their own tax prep business. The company existed until Allen and Johnston split in February 2021.

Johnston requested refunds on clients’ federal returns that were not based on the clients’ actual income, expenses, deductions and qualifying credits. She inflated refunds based on fabricated income, expenses, deductions and credits reported by Johnston without clients’ knowledge.

The IRS deposited the refunds with a third-party vendor; Johnston then caused the third party to pay the clients a modest tax refund that she’d originally made known to them. Before the vendor paid, however, Johnston deducted what was essentially a second tax prep fee from the refunds, the amount generally being the difference between the filed, larger refund and the modest refund made known to the client.

Johnston also signed an income tax return and falsely stated the amount of gross receipts and fraudulently stated taxpayers’ total expenses on returns, knowing the information was false.

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Fairmont, West Virginia: Tax preparer Jack Lee Oliver, 56, of Rivesville, West Virginia, has been convicted on 26 counts of filing false returns.

Oliver owns an insurance sales and tax prep business known as Insurance Depot. He prepared returns for clients claiming business losses for non-existent businesses without the clients’ knowledge and prepared returns for clients who did have businesses, falsely inflating expenses to cause a business loss, again without the knowledge of the clients.

On his own returns, Oliver claimed the foster son of one of his clients, resulting in thousands in undeserved refundable credits.

The expected federal tax loss exceeds $500,000. Oliver faces up to three years in prison for each count. 

Lenexa, Kansas: Tax preparer Hophine Bwosinde has pleaded guilty to preparing and filing false income tax returns for clients.

Bwosinde operated the tax prep business Ambroseli Professional Services and from 2018 through 2022 prepared and filed false returns by either inflating legitimate business expenses or claiming losses related to fake businesses. He also falsely reported negative income on clients’ returns, generating undeserved refunds.

Bwosinde caused a total tax loss of more than $1.5 million.

Sentencing is Feb. 18. Bwosinde faces a maximum of three years in prison as well as a period of supervised release, restitution and monetary penalties. 

Miami: A federal court has issued an order holding Gerald Vito, James Eleby and Kwame Thomas in contempt for violating a permanent injunction that prohibited Vito and Eleby from preparing, filing or assisting in the preparation or filing of federal returns for others.

According to the complaint filed against them in March 2021, the pair prepared returns that significantly understated clients’ tax liabilities by claiming deductions for fabricated or inflated charitable deductions, medical expenses and employee business expenses. The complaint further alleged that the defendants significantly understated clients’ tax liabilities by reporting false or inflated business losses. In December 2021, the court issued a permanent injunction barring Vito and Eleby from preparing returns for others.

Following a hearing in September, the court found that the two violated the injunction by continuing to prepare returns for others. The court further found that Thomas, who was not a defendant in the original complaint, worked with Eleby to prepare returns in violation of the injunction.

The court held Vito, Eleby and Thomas in civil contempt and ordered that they disgorge, in the aggregate, $988,789.56 in fees they earned while violating the injunction. Vito and Eleby were further ordered to disclose to the government the names of all taxpayers for whom they prepared returns after Dec. 27, 2021, notify those taxpayers of the injunction, vacate the premises at which they prepare returns and file an affidavit of compliance with these terms.

San Antonio: Resident Rachel Olivia Markum has been sentenced to 15 months in prison for tax evasion.

Markum and her husband, Robert Franklin Markum Jr., prepared and signed a false joint 1040 for 2016 attesting that the couple’s sole income was gross receipts or sales from the business Camping and Fishing Outlet as $3,530,473. She was aware that the true gross receipts exceeded $4 million.

Rachel Markum pleaded guilty on May 28 to one count of tax evasion and aiding and abetting. Robert Markum pleaded guilty on April 1 to one count of tax evasion, and on Aug. 28 was sentenced to 27 months in prison. The couple was also ordered to pay $359,108 in restitution.

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Estate planning for the Tax Cuts and Jobs Act expiration

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The political calculus involved with the details of estate planning next year and beyond may be distracting financial advisors and clients from a larger, simpler conversation, one expert says.

On the off chance that the federal estate-tax exemption levels of $13.99 million for individuals (and double for couples) revert to half those amounts when Tax Cuts and Jobs Act provisions expire in 2026, only 0.2% of households would face potential duties upon transfer of assets, according to Ben Rizzuto, a wealth strategist with Janus Henderson Investors‘ Specialist Consulting Group. He predicted that most financial advisors and high net worth clients, such as those he works with and others across the industry, will see no changes. 

With few other revenue-raising provisions available to President Donald Trump and Republican lawmakers, they’re not likely to shield all estates from payments to Uncle Sam — as much as they might like to play undertaker to the “Death of the Death Tax,” Rizzuto said, using the label for estate taxes adopted by critics favoring bills like the “Death Tax Repeal Act.” Lawmakers’ decisions on future exemptions from the taxes (and when they make those decisions) remain out of advisors’ control. Meanwhile, they must remind clients that estate planning is much more than having a will and avoiding taxes, Rizzuto said.

“For financial advisors and clients, I would expect for many of them not to have to worry about federal estate taxes next year,” he said in an interview. “Even though they may not have to worry about it, there are still a lot of good conversations to be had.”

READ MORE: Tax Cuts and Jobs Act expiration: A guide for financial advisors

The 1%

Trust tools that reduce the value of the assets that will transfer to spouses or other beneficiaries upon a client’s death, combined with the available statistics about the shrinking share of estates subject to taxes, could bring some peace of mind to clients. The 2017 tax law itself pushed down estate tax liability as a percentage of gross domestic product to a quarter of its 2001 level, according to an analysis by the “Budget Model” of the University of Pennsylvania’s Wharton School. Just two years after the law’s passage, the number of taxable estates had plummeted to 1,275 — or 1% of the number at the beginning of the century.

At the same time, advisors could raise any number of questions with clients about their estates that involve varying degrees of expertise and collaboration with outside professionals. And many surveys have found that clients are expecting them to do so. For example, at least 70% out of a group of 10,000 adults contacted in January by WeAreTalker (formerly OnePoll) on behalf of online legal information service Trust & Will said advisors should offer estate planning. In addition, 40% of the group said they would switch to an advisor who provided that service.

“We’re seeing a fundamental shift in client expectations,” Trust & Will CEO Cody Barbo said in a statement. “The findings are clear. Advisors who fail to integrate estate planning into their practice aren’t just missing an opportunity; they are facing a threat to their client base as wealth transfers to younger generations over the next two decades.”

READ MORE: Ethical wills can be a crucial tool for estate planning

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Get back to the planning basics

In that context, advisors and their clients should steer clear of trying to make sense of a complicated, ever-changing flow of news from Capitol Hill as Trump and the GOP pursue major tax legislation with a year-end deadline, Rizzuto said. If clients truly could be on the hook for estate taxes, a grantor retained annuity trust, a spousal lifetime access trust or gifting strategies may eliminate the possibility. One method involved with the latter could set them up in the future to receive stock that is “highly appreciated with lower basis,” Rizzuto noted, citing the example of equities that have gained a lot of value that a client could give to their parents.

“Why not gift them upstream?” Rizzuto said. “My father holds it. I tell him, ‘Dad, you have to do these things: Live for another 12 months, make sure you don’t sell, make sure that you update your will or your instructions to gift it back to me when you die.’ That’s another idea that we’ve been talking about with advisors.”

From another perspective, these possible paths forward may beckon to clients this year, if they are tuning into Beltway news about the progress of the tax legislation, he said. To bypass the risk of client perceptions that their advisor isn’t doing any tax planning at all, Washington’s complex maneuvering around the future rules is, “if nothing else,” a “great opportunity for advisors to bring this up at a very high level,” Rizzuto said.

“Advisors will really need to go back to basics and have some foundational conversations with clients,” he said, suggesting their goals with taxes as one key point of discussion. “‘What is it that we actually control within your financial and tax plan?’ When it comes right down to it, it’s really just incomes and deductions.”

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Developing future leaders in accounting: the new imperative in an AI and automation driven era

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As technology continues to automate routine tasks, the role of finance professionals is evolving, demanding deeper capabilities in critical thinking, communication and business acumen. 

Many of PrimeGlobal’s North American firms are focused on cultivating these skills in their future leaders. Carla McCall, managing partner at AAFCPAs, Randy Nail, CEO of HoganTaylor, and Grassi managing partner Louis Grassi shared their views with PrimeGlobal CEO Steve Heathcote on the need for future leaders to balance technological proficiency with human-centered skills to thrive.

AI is transforming the sector by streamlining workflows, automating data analysis and reducing manual processes. However, rather than replacing accountants, AI is reshaping their roles, enabling them to focus on higher-value tasks. In the words of Louis Grassi, AI can be seen as a strategic partner, freeing accountants from routine tasks, enabling deeper engagement with clients, more thoughtful analysis, and ultimately better decision-making. 

Nail emphasized the importance of embracing AI, warning that those who fail to adapt risk being replaced by professionals who leverage the technology more effectively. HoganTaylor’s “innovation sprint” generated over 100 ideas for AI integration, underscoring why a proactive approach to adopting new technologies is so necessary and valuable.

McCall advocates for an educational shift that equips professionals with the skills to interpret AI-generated insights. She stressed that accounting curricula of the future must evolve to incorporate advanced technology training, ensuring future accountants are well-versed in AI tools and data analytics. Moreover, simulation-based learning is becoming increasingly crucial as traditional methods of education become obsolete in the face of automation.

Talent development and leadership growth

As AI reshapes the profession, firms must rethink how they develop and nurture their future leaders. To attract and retain top talent, firms need to prioritize personalized development plans that align with individual career goals. 

HoganTaylor’s approach to talent development integrates technical expertise with leadership and communication training. These initiatives ensure professionals are not only proficient in accounting principles but also equipped to lead teams and navigate complex client interactions.

Nail underscored the growing importance of writing and presentation skills, as AI will handle routine tasks, leaving professionals to focus on higher-level analytical and decision-making responsibilities.

Soft skills are the success skills

While technical proficiency remains vital, future leaders must also cultivate critical thinking, communication and adaptability — skills McCall refers to as the “success skills.” McCall highlights the necessity of business acumen and analytical communication, essential for interpreting data, advising clients and making strategic decisions. 

Recognizing teamwork and collaboration remain crucial in the hybrid work environment, McCall explained in detail how AAFCPA fosters collaboration through structured remote engagement strategies such as “intentional office time,” alcove sessions and stand-up meetings. Similarly, HoganTaylor supports remote teams by offering training for career advisors to ensure effective mentorship and engagement in a dispersed workforce.

McCall emphasized why global experience can be valuable in leadership development. Exposure to diverse markets and accounting practices enhances professionals’ adaptability and broadens their perspectives, preparing them for leadership roles in an increasingly interconnected world.

Grassi reminded us that an often-overlooked leadership skill is curiosity. In his view the most effective leaders of tomorrow will be inherently curious — not just about emerging technologies but about clients, market shifts and global trends. Encouraging curiosity and continuous learning within our firms will distinguish the true industry leaders from those simply reacting to change.

A balanced future

What’s clear from speaking to our leaders is PrimeGlobal’s role in fostering trust, community and knowledge sharing. McCall recommended member-driven panels to discuss AI implementation and automation strategies and share best practice. Nail, on the other hand, valued PrimeGlobal’s focus on addressing critical industry issues and encouraged continuous evolution to meet professionals’ changing needs.

The future of leadership in the accountancy profession hinges on a balanced approach, leveraging AI to enhance efficiency while cultivating essential human skills that technology cannot replicate, which Grassi highlights skills including leadership and building client trust.

As McCall and Nail advocate, the next generation of accountants must be agile thinkers, skilled communicators and strategic decision-makers. Firms that invest in these competencies will not only stay competitive but will also shape the future of the industry by developing well-rounded leaders prepared for the challenges ahead.

By investing in both AI capabilities and essential human skills, firms can not only future proof their leadership but also shape a resilient and forward-thinking profession ready to meet the challenges of the future.

As Grassi concluded, while technical skills provide the foundation, leadership in accounting increasingly demands emotional intelligence, empathy and adaptability. AI will change how we perform our work, but human connection, trust and nuanced judgment are irreplaceable. Investing in these human-centric skills today is critical for firms aiming to build resilient leaders of tomorrow. To remain relevant and thrive, professionals must prioritize developing strong success skills that will define the leaders of tomorrow.

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Accounting

On the move: KPMG adds three asset management, PE leaders

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Wipfli appoints new chief growth officer; Illinois CPA Society installs latest board of directors; and more news from across the profession.

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