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Tax Fraud Blotter: Public mistrust

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The price of flame; a guy at the IRS; package deal; and other highlights of recent tax cases.

Nome, Alaska: Businesswoman Tina H. Yi, of Anchorage, Alaska, has pleaded guilty to evading taxes on income from her business.

Yi was the sole owner and operator of SJ Investment, a hotel, bar and liquor store. Yi created the business around April 2007 and operated it until around October 2017, when the property was destroyed in a fire.

From around 2014 to 2018, Yi maintained two sets of financial records relating to the business income and expenses, one accurate and one that understated business income. Yi provided the false records to her accountant to prepare returns, and her 2014 through 2018 returns were false.

Yi caused a total tax loss to the IRS of more than $550,000.

Sentencing is Oct. 11. Yi faces up to five years in prison as well as a period of supervised release, restitution and monetary penalties. 

Houston: Tax preparer Christopher J. Guevara has admitted to aiding or assisting in the preparation of a false 2017 income tax return.

From at least 2018 to 2020, Guevara owned and operated Chris Tax Service and admitted to placing false Schedule A deductions, residential energy credits and Schedule C businesses on returns he prepared, resulting in inflated and undeserved refunds. Guevara admitted to placing $26,857 in false business losses that were listed on the 2017 Schedule C. The tax loss to the U.S. on that return was some $13,390. 

Guevara took responsibility for $123,458 in losses to the IRS and has agreed to pay that amount in restitution. 

Sentencing is Oct. 31. Guevara faces up to three years in prison and a possible $250,000 fine. 

Plainview, Illinois: Former Illinois State Senator William Samuel McCann Jr. has been sentenced to 42 months in prison to be followed by two years of supervised release, and ordered to pay $683,816.61 in restitution for fraudulent use of campaign funds, money laundering and tax evasion.

McCann engaged in a five-year scheme, converting more than $600,000 in campaign funds to his personal use. A state senator from various districts from 2011 to 2019, he formed the Conservative Party of Illinois and, in 2018, launched an unsuccessful bid for governor. He previously lived in Carlinville, Illinois, and owned and operated two construction-related businesses. He also organized multiple political committees and from April 2011 to November 2018 received more than $5 million in donations.

McCann used campaign funds to purchase personal vehicles, pay personal debts, make mortgage payments and pay himself. On his joint return for 2018, McCann failed to report income from rental payments to himself for the RV trailer and motorhome and used $10,000 from a campaign account for a down payment on a motorhome.

McCann pleaded guilty to all nine counts of the indictment, which charged him with seven counts of wire fraud, one count of money laundering and one of tax evasion. The penalty for each count of wire fraud and the count of money laundering is up to 20 years in prison. For tax evasion, the statutory penalty is up to five years.

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Roanoke, Virginia: Brian Hoeppner, owner of a payroll processing and tax prep business, has been sentenced to three years in prison for wire fraud and for filing a false return.

Hoeppner, who previously pleaded guilty, owned and operated Blue Ridge Bookkeeping and had several clients. One hired him to handle her company’s payroll, file the company’s employment tax returns and submit all related paperwork and payments to the IRS.

From at least September 2012 through December 2019, Hoeppner billed this client for her company’s employment taxes. Rather than pay these taxes to the IRS, he spent the money on personal expenses and her company’s employment taxes went unpaid. When the IRS sent notices to this client, Hoeppner lied that “he had a guy at the IRS” who was sorting things out.

After several years of notices, this client demanded that she accompany Hoeppner to a meeting he had set up with the IRS. Just before the meeting, Hoeppner admitted to her that he had been stealing her company’s payments, in all more than $125,000. As of December 2019, this client was still responsible for paying more than $240,500 in taxes, penalties, interest and costs; she almost shuttered her business to come into compliance with the IRS.

Hoeppner was also ordered to pay $58,361 in restitution to this client and $218,445.32 in restitution to the IRS.

Investigation also uncovered that from 2009 through 2013 Hoeppner stole employment taxes from at least one other client. In addition to accruing a debt to the IRS of more than $10,000, the owners discovered that Hoeppner stole a $14,112 federal refund check that the IRS had issued to the company.

On his false personal income tax returns, Hoeppner also failed to report his embezzlement income and overreported withholdings he had paid to the IRS.

Houston, Alaska: Former tax preparer and former municipal treasurer Jess Adams has been sentenced to 30 months in prison for embezzling more than $1 million from the City of Houston, Alaska, and from a Wasilla, Alaska, equipment company and then evading taxes on the embezzled profits.

From 2015 through 2018, Adams was the treasurer for Houston. He used this access to direct electronic transfers from the city’s bank account to a personal account that he maintained to hide embezzled money, creating fictitious entries in the city’s accounting records to disguise these payments as legitimate business expenses.

In October 2018, Houston placed Adams on administrative leave; he resigned his position the next month.

A year later, Adams was employed as a bookkeeper by an equipment company. Again, he directed electronic transfers from the company’s account to personal accounts that he’d opened to hide the embezzled money and used fictitious entries in the company’s accounting software to make the transfers look legitimate. He then laundered the money.

A former seasonal tax preparer for a national tax advisory company, Adams filed false individual income tax returns for 2016 through 2021. These returns did not disclose the embezzled income.

He was also ordered to serve three years of supervised release and pay more than $1.5 million in restitution to the United States, as well as additional restitution to the City of Houston and to the equipment company.

Guilford, Connecticut: Businesswoman Michelle Ann Gilson has pleaded guilty to failure to pay payroll taxes.

Gilson co-owned and co-operated B&M Package Solutions and formerly owned and operated Epic Empirez, both package-delivery companies. Gilson was responsible for company books, payroll and invoices, and for collecting and paying over certain federal taxes from her employees and for her companies paying their share of FICA taxes.

Investigation revealed that beginning in 2017 Gilson failed to report employees’ federal income and FICA taxes and failed to pay over withheld amounts.

Gilson pleaded guilty to one count of willful failure to pay over withholding taxes for multiple quarters during 2017 through 2022. She has agreed to pay some $1,407,831 in restitution to the IRS.

Sentencing is Oct. 9. Gilson faces up to five years in prison. 

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Grant Thornton adds two international firms

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Grant Thornton Advisors is adding Grant Thornton Switzerland/Lichtenstein and Grant Thornton in the Channel Islands to the multinational platform it launched earlier this year. Both transactions are expected to close later this year.

In January, Grant Thornton Advisors combined with Grant Thornton Ireland to create an integrated international firm. In April, it announced agreements with GT firms in Luxembourg, the United Arab Emirates and the Cayman Islands, as well as GT Netherlands in May.

Grant Thornton building

The firm is backed by private equity firm New Mountain Capital, which acquired its majority stake in March 2024 after selling a majority stake in Top 100 Firm Citrin Cooperman. As a result of the PE investment, Grant Thornton took on an alternative practice structure, splitting its non-attest services into Grant Thornton Advisors and its audit and assurance services into Grant Thornton LLP.

By adding firms in Switzerland, Liechtenstein and the Channel Islands, Grant Thornton is expanding its geographic footprint and increasing its total headcount to 13,5000 professionals across nearly 60 offices over the Americas, Europe and Middle East. 

“We are very pleased to have our colleagues in the Channel Islands, Switzerland and Liechtenstein join our differentiated and expanding platform,” Jim Peko, CEO of Grant Thornton Advisors, said in a statement. “We’re building the world’s most talented team — delivering seamless offerings through an expanded footprint. The result: an unparalleled client experience and unmatched quality.”

Adam Budworth, managing partner of Grant Thornton Channel Islands, said in a statement: “This is an exciting opportunity to support our growth in the Channel Islands with access to new service offerings, technologies and investment capital. Joining the platform will only enhance the reputation of the Channel Islands on a bigger stage, while at the same time creating unique opportunities for our people.”

“I am delighted about this positive development and am convinced that it is the right step for our firm in the current turbulent market environment,” Erich Bucher, CEO of Grant Thornton Switzerland/Liechtenstein, said in a statement. “It opens up completely new perspectives for us and will enable us to push ahead with our growth strategy much more quickly.”

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What’s new in the Senate version of Trump’s tax bill

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Senate Republicans plan to modify President Donald Trump’s massive fiscal package to lower maximum deductions for state and local taxes and limit the impact of a “revenge” tax on foreign investors.

Senate GOP leaders also plan to cut deeper into Medicaid health insurance for the poor and disabled than House Republicans did in their version of the legislation to help pay for Trump’s tax cuts.

Republicans on the Senate Finance Committee released their version of the legislation, which also would make permanent some business tax breaks that would only run through 2029 in the version the House passed last month by a single vote. 

Here are some of the key differences between the Senate and House tax bills. 

‘Revenge’ tax

The House bill’s Section 899 “revenge” tax has alarmed Wall Street analysts who warn it would create another disincentive for foreign investors already rattled by Trump’s erratic trade policies and the nation’s deteriorating fiscal accounts. 

Senate Republicans responded by delaying and watering down the levy, which would increase tax rates for individuals and companies from countries whose tax policies the government deems “discriminatory.” 

The Senate version would postpone that new tax until 2027 for calendar-year filers and raise it by 5 percentage points a year until it hits a 15% cap. The House version of the tax would take effect sooner and rise to 20% over four years on individuals and firms from targeted countries.

State and local tax deduction

Senate Republicans want to significantly scale back the House bill’s $40,000 limit on state and local tax deductions, a move House Republicans from high-tax states such as New York, New Jersey and California are fighting.

The Senate’s version of the tax bill calls for a $10,000 SALT cap, which leaders acknowledge is merely a placeholder figure as they try to hash out a compromise. There are no Senate Republicans from those high-tax states, and they’ve made no bones about the fact that it’s not a priority for them. 

Car loans

Senators want to restrict to new cars a House-passed provision allowing car buyers to deduct up to $10,000 a year in interest on their auto loans through 2028 for vehicles built in the U.S. Ohio Republican Sen. Bernie Moreno, a former car dealer, pushed for the language.

Moreno had also sought to make the tax break permanent, but the draft keeps it a temporary benefit.

Electric vehicles

The Senate bill would eliminate a popular $7,500 credit for the purchase of electric vehicles 180 days after the bill becomes law, as opposed to expiring at the end of the year for most vehicles in the House version. That could be a difference of a few days, or longer, depending on the timing of the bill. 

Child tax credit

Both the House and Senate bills seek to boost the child tax credit but they do so in different ways. The Senate legislation would increase the maximum per-child credit from $2,000 to $2,200, making it permanent and adjust it for inflation in later years. 

The House bill would boost the tax break to $2,500, but it would decrease after 2028.

Tipped workers

The Senate bill contains new limits on Trump’s campaign promises to exempt tips and overtime from taxation. It caps the amount of tipped wages that can be exempt at $25,000 per individual and overtime at $12,500 per individual and $25,000 per couple. The breaks phase out above $150,000 in income for individuals and $300,000 for couples, and, like the House bill, they expire after 2028.

Seniors

The Senate bill expands a maximum $4,000 bonus standard deduction for seniors to $6,000 in an effort to better offset all Social Security taxes paid, a promise by Trump.

Medicaid cuts

The Senate bill makes more aggressive cuts to the Medicaid program for low-income and disabled people than the reductions in the House bill, favoring states like Texas and Florida that did not expand Medicaid under the Affordable Care Act. 

The Senate bill also would require parents with children 15 and older to work or do community service for 80 hours per month to qualify for health insurance through Medicaid. The House plan exempted all people with dependents from the work requirements. 

University endowment tax

The Senate bill significantly pares back the House’s plans to increase taxes on investment income generated by private university endowments. While the House proposed a levy as high as 21% on institutions with the largest endowments, the Senate version would cap the tax hike at 8%. 

The bill does not include a tax on private foundations found in the House bill.

Permanent business tax breaks

The panel also plans to permanently extend three business-friendly tax breaks that end after 2029 in the House version. Those provisions include the research and development deduction, the ability to use depreciation and amortization as the basis for interest expensing and 100% bonus depreciation of certain property, including most machinery and factories. 

Gun tax breaks

The Senate version would eliminate taxes and other regulations on many guns and silencers subject to the National Firearms Act of 1934 in a win for gun-rights advocates.

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Harvard wins reprieve, SALT stalls: Tax bill winners and losers

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U.S. businesses and wealthy universities scored major wins in the Senate Republicans’ version of President Donald Trump’s tax bill, while low-income Americans and clean energy providers are poised to be hit the hardest.

The Senate bill has already sparked backlash from various GOP factions and several provisions threaten the fragile coalition that squeaked the legislation through the House by a single vote last month. 

The legislation could still be altered before it heads to the Senate floor, where Trump can afford to lose no more than three Republicans. 

Here’s who’s winning and losing at this stage in the tax fight.

Winners

Manufacturers, banks

The Senate would make permanent three business tax deductions that the House bill would sunset after 2029. The tax breaks include the ability to use depreciation and amortization as the basis for interest expensing, the research and development write-off and a 100% bonus depreciation of certain property, including most machinery and factories. Banks could see a surge in lending as companies have more cash freed up to invest in projects.

Wealthy U.S. colleges

Private universities that have endowments of at least $2 million per pupil would pay an excise tax of 8%, a significant decrease from the devastating 21% rate that was included in the House proposal. That’s still up from the current tax of 1.4% but it’s a more survivable outcome for universities like Harvard, Yale, Princeton and MIT. 

Chipmakers

The Senate bill calls for increasing an investment credit for semiconductor manufacturers to 30%. That’s up from the previous credit of 25%, giving chipmakers more incentive to spend on new facilities. Major beneficiaries of the tax credit have included Intel Corp., Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Micron Technology Inc.  

An employee gives utensils to customers at a restaurant in New York

Tipped workers

The Senate bill makes good on one of Trump’s campaign promises of no taxes on tips and overtime — to a point. Senators would cap the amount of tipped wages that can be exempt at $25,000 per individual and overtime at $12,500 per individual and $25,000 per couple. Those deductions start to phase out $150,000 in income per person.

Foreign investors

Senators plan to delay and scale back a duty on investors in foreign countries with tax regimes that the U.S. deems unfair. The provision, informally called a revenge tax because it targets countries that impose digital services levies, would be delayed until 2027 for calendar-year filers. It then raises the levy by 5 percentage points each year until it hits a 15% cap. 

Health insurers

The Senate abandoned an endeavor to cut costs in the Medicare Advantage program. The move will allow lawmakers to avoid backlash from trimming the popular health insurance program that is largely relied upon by retired Americans. It’s also good news for managed care companies which benefit from the program: Humana Inc. and UnitedHealth Group Inc.

Losers

Residents of high-tax states

Senators decided to put a placeholder state and local deduction cap of $10,000 in the draft bill, a drastic decrease from the $40,000 in the House-passed bill. The decision has already roiled House lawmakers from New York, New Jersey and California. Trump earlier told senators that he was open to lowering the SALT cap, according to a person familiar with the matter. 

Clean energy

Senators went along with House efforts to quickly phase out a Biden-era tax credit for wind and solar. The bill also would eventually end investment and production tax credits for other types of power, including hydropower and geothermal.

Electric vehicle makers

Electric vehicle makers, including Tesla Inc and General Motors Co., will be hurt by the end of a consumer tax credit of as much as $7,500 for the purchase of electric cars. Tax credits for commercial and used electric vehicles will also be eliminated.

Low-income Americans

Federal funding for Medicaid would be cut in the Senate bill, shrinking the program that provides health-care to over 70 million Americans, including the financially vulnerable and those with disabilities. The cuts are more aggressive than the proposals in the House version of the bill, as part of lawmakers’ efforts to find ways to pay for the package. 

Pass-through businesses

Owners or closely-held businesses, including partnerships and limited liability companies, had a widely-used deduction scaled back in the Senate version of the bill. The House draft called to increase a write-off for business income to 23% from the current 20%. The Senate plan just calls to preserve the 20% rate in the tax code. Advocates for the break say a bigger deduction is necessary to create parity between privately held businesses, which pay a top rate of 37%, and the 21% corporate rate.

Deficit hawks

The bill raises the debt ceiling by $5 trillion, an increase from $4 trillion in the House version. 

SNAP recipients

After mulling a scaleback of cuts to federal food aid for the poor, the Senate version makes cuts to the Supplemental Nutrition Assistance Program as a way to help pay for the expensive spending package. The changes require state governments to cover more of the cost of federal food stamps received by their residents.

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