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Tax Fraud Blotter: No risk

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Everything must go; have con, will travel; gold rush; and other highlights of recent tax cases.

Deltona, Florida: Business owner David Albert Fletcher has pleaded guilty to evading payment of more than $1.7 million he owed for tax years 2004 through 2014.

Fletcher owned and operated several furniture liquidation businesses and for 2004 through 2013 did not timely file his federal income tax returns or pay taxes. After an audit, the IRS assessed $1.7 million in taxes, interest and penalties.

To evade collection, Fletcher concealed his income and assets from the IRS, including by using nominees to hide his purchases of luxury vehicles. He also filed returns that understated his income, and when interviewed by an IRS special agent lied about how much he earned.

Fletcher faces up to five years in prison.

Chatham, New Jersey: John Goggins, former senior vice president and general counsel for a large public corporation, has been sentenced to eight months in prison for willfully failing to file federal income tax returns.

Goggins, who previously pleaded guilty to a four-count information charging him with willfully failing to file federal income tax returns for 2018 through 2021, earned total gross income in those years of $54 million from wages, restricted stock awards, the exercise of annual nonqualified stock options, interest, dividends and gains from stock sales.

Goggins was also sentenced to a year of supervised release and was ordered to pay $3.11 million in restitution to the IRS (which has already been paid) and was fined $40,000.

Indianapolis: A U.S. district court has permanently enjoined tax preparer Juan Santiago and his company from preparing federal returns for others and from owning or operating tax prep businesses in the future.

Santiago failed to respond to the civil complaint filed against him, so the court entered the permanent injunction by default.

Santiago resides in Lakeland, Florida, but travels to Indianapolis for tax season to operate Madison Solutions LLC. The complaint alleges that he and Madison Solutions used a variety of schemes to improperly reduce clients’ tax liabilities or to obtain undeserved refunds, including by repeatedly placing false or incorrect items, deductions, exemptions or statuses on clients’ returns without their knowledge.

For example, the complaint alleges that Santiago routinely elected head of household status and Child Tax Credits for clients when they were otherwise not qualified for such status or credits. The complaint also alleges that Santiago reported fictitious businesses on returns and fabricated business expenses and income to fraudulently reduce taxable income.

Wilmington, Delaware: Business owner Robert Higgins, of West Chester, Pennsylvania, has been convicted on charges of mail, wire and tax fraud.

He owned and operated First State Depository, a precious metals depository that held more than $100 million in customer assets, primarily in the form of gold and silver bars and coins. Higgins diverted customer assets to pay debts and finance his personal life, including two timeshares in Hawaii and luxury vacations. First State’s records indicated that at least $58 million worth of customer assets had been misappropriated; industry sources generally agree that this is the largest theft from a precious metals depository in U.S. history.

Higgins faces up to 20 years on the wire and mail fraud charges and five years on each tax fraud charge.

Hands-in-jail-Blotter

Ft. Worth, Texas: John Anthony Castro, 40, owner of the virtual tax prep business Castro & Co. who falsely inflated dozens of client returns, has been sentenced to more than 15 years (188 months) in prison for tax fraud.

Castro — who had graduated law school but repeatedly failed the bar exam — held himself out as an “international tax expert” and “federal practitioner” and falsely claimed to be a graduate of West Point.

He successfully marketed to clients around the world, claiming to be an expert on certain tax issues related to Australian expats, among other things. Between 2017 and 2019, he filed more than 1,900 returns on behalf of individuals worldwide. Castro promised his clients a significantly higher refund than they would receive from other preparers, claiming he knew how to identify and claim deductions that others did not. He added that there was no risk, as he split the additional refund amount with clients for his fee.

He did not share the return with clients before filing but instead informed them of the amount of the anticipated refund. On many occasions, Castro filed returns on behalf of clients without their permission or knowledge.

In other instances, he claimed deductions that had no basis in fact. Castro claimed deductions based on extreme and unsupported legal theories, including saying that deductions for any expense related to preventing an illness qualified as an “impairment related work expense;” expenses related to commuting to and from work; and the full value of one’s mortgage and utilities as long as the taxpayer had some Schedule C business to claim, among others.

When the victim-taxpayers learned what Castro had done, many demanded copies of their returns. Castro refused to engage in conversation and even delayed providing returns for months; he often acted in a highly vindictive manner when questioned or challenged by clients or others, berating individuals in emails, threatening legal actions or by filing amended returns, without clients’ permission or knowledge, that removed all deductions. Many of the victims have since been audited or filed amended returns.

Castro was also ordered to pay $277,243 in restitution.

Thornton, Colorado: Tax preparer Lance McCuistion, 56, has been sentenced to 52 months in prison after pleading guilty to preparing false returns for clients.

In July 2014, McCuistion pleaded guilty to preparing false returns in a prior investigation and was sentenced to probation. As a result of that offense, McCuistion was unable to obtain a PTIN. From around April 2018 through April 2022, McCuistion used PTINs in the names of three associates to prepare returns for clients.

These returns claimed items for which McCuistion knew the taxpayers were not eligible, with the aim of increasing refunds or reducing taxes.

Independence, Missouri: Business owner Richard Dean Schiele Jr., 51, has pleaded guilty to filing a false claim as part of a scheme to fraudulently receive nearly $1.4 million in federal COVID-19 relief money.

Schiele admitted he filed nine employer’s quarterly returns with the IRS on April 22, 2023, for a company he formed the same month called Schiele Family Own Distribution. The returns made a total of $1,392,716 in claims for pandemic-era credits against the company’s ostensible employment taxes. Schiele later admitted that the company had no employees in 2020 through 2022.

The IRS issued checks totaling $478,890 to Schiele; the Treasury recovered $348,764.91 from Schiele’s bank account.

He must pay $130,125 in restitution to the IRS.

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IRS employee union requests emergency relief

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The National Treasury Employees Union, which represents workers at the Internal Revenue Service among 37 federal agencies and offices, has asked a federal judge for emergency relief to preserve the union rights of federal employees while NTEU’s legal challenge to President Trump’s executive order stripping unions of collective bargaining rights can be heard in court.

Trump signed an executive order last Thursday removing the requirements from employees at agencies including the Treasury Department that he deemed to have national security missions. On Monday, the NTEU filed a lawsuit to stop the move arguing that Trump’s rationale for protecting national security was just a way to end union protections for federal workers. The administration also wants to prevent the unions from collecting dues automatically withheld from employee paychecks.

NTEU’s request for a preliminary injunction was filed Friday with U.S. District Judge Paul Friedman.

 “NTEU seeks emergency relief to protect itself and the workers it represents from this unlawful attempt to eliminate collective bargaining for some two-thirds of the federal workforce,” the request stated.

The NTEU contended that the Trump administration’s executive order claims that allowing workers to join a union was a threat to national security were absurd.

“We all know this has nothing to do with national security and that the true goal here is to make it easier to fire federal employees across government,” said NTEU national president Doreen Greenwald in a statement Friday. “Just five days after declaring the administration would no longer honor our contract with Health and Human Services, thousands of brilliant civil servants who work tirelessly to improve public health were let go for spurious reasons and little recourse to fight back.”

The union pointed out that Congress declared 47 years ago that collective bargaining in the federal sector was in the public’s interest by giving employees a voice in the workplace and allowing labor and management to work together. It acknowledged there is a narrow exemption in the law for groups of employees whose work directly impacts national security, but argued that Trump’s executive order is blatant retaliation against federal sector unions and ignores the laws passed by Congress creating the agencies.

In agencies where a reduction-in-force has been announced, NTEU’s contracts provide time for employees to respond to a RIF notice and explore alternatives to mitigate the impact of the layoffs.

Earlier this week, after two court rulings in California and Maryland, the IRS’s acting commissioner, Melanie Krause, announced the IRS would be bringing back approximately 7,000 probationary employees who had been fired and then put on paid administrative leave.

A bipartisan bill has been introduced in Congress to preserve collective bargaining rights for federal employees. The Protect America’s Workforce Act (H.R. 2550), sponsored by Rep. Jared Golden, D-Maine, and Brian Fitzpatrick, R-Pennsylvania, would overturn Trump’s executive order stripping collective bargaining rights from hundreds of thousands of federal workers at multiple agencies.  Separately, eight House Republicans and every House and Senate Democrat have sent letters to the White House condemning the executive order.

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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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