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Tax Fraud Blotter: Rampant self-dealing

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Makin’ a list; caught again; back to school; and other highlights of recent tax cases.

Washington, D.C.: Recent IRS Office of Professional Responsibility disciplinary sanctions include censure, suspension or disbarment from practice before the IRS. Individuals disciplined include (all dates this year):

  • California (all CPAs): Vincente Alvarez, Chatsworth, and Michael D. Robinson, San Francisco, indefinite from April 29; Grigor Demirchyan, Granada Hills, and Todd W. Beutel, Thousand Oaks, indefinite from May 8; and Tiffany C. Detinne, Carmichael, and Bernard Turk, West Hills, indefinite from May 28.
  • Florida: CPA Paul S. Mills, Key West, indefinite from May 8.
  • Massachusetts: Attorney Paul S. Hughes, Wellesley, indefinite from April 29.
  • Michigan: Attorney Brian P. McMahon, Ionia, indefinite from April 3.
  • Missouri: CPA Justin L. Strauser, Sullivan, indefinite from May 28.
  • New Jersey: Attorney James R. Lisa, Jersey City, indefinite from May 8. 
  • Pennsylvania: CPA Daniel J. Carney, Shawnee on Delaware, indefinite from April 2.
  • Tennessee: CPA Richard T. Brown Jr., Brownsville, indefinite from May 8.
  • Texas: CPA David D. Renken, New Braunfels, indefinite from April 2; Attorney Pejman Maadani, Houston, indefinite from May 8.
  • Virginia: CPA Carol A. Jones, Ruckersville, indefinite from May 15.

Reinstated to practice before the IRS effective in April were CPA Robert S. Damiano, of Bridgewater, New Jersey, and attorney Charles E. Hammond III, of Katy, Texas.

San Francisco: Resident Dwayne Lorenzo Richardson has been found guilty of tax evasion.

Richardson evaded his personal income taxes for 2017 to 2019 by claiming to owe only some $28,496 in tax when he’d made more than $1.2 million as a software engineering manager. He declared more than $1.1 million in medical expenses, overstating those expenses by more than $945,000.

Richardson received tax refunds totaling over $165,000 for the three charged tax years, then lied to an IRS agent in two audit interviews, stating that the $1.1 million of medical expenses were related to an appendectomy. Richardson paid no more than a few hundred dollars for treatment related to the appendectomy, which took place in 2010.

As he explained to one of his representatives in the tax audit, Richardson deducted nonexistent medical expenses from his taxes for multiple years because he had not been “caught” the first time he did it.

Brick, New Jersey: Business owner Gerard Artz has pleaded guilty to failing to collect and pay over employee taxes.

Artz owned and operated a construction company in Brick and New York City. Beginning around 2016, his company withheld employment taxes from employees’ paychecks and did not remit those employment taxes to the IRS. From 2016 to 2020, Artz and his company failed to collect and pay over $937,943 in employment taxes.

He faces up to five years in prison and a $250,000 fine; Artz has agreed to pay $937,943 in restitution. Sentencing is Feb. 5.

Encino, California: Tax preparer Bijan Kohanzad, 63, of Calabasas, California, has been sentenced to three months in jail and ordered to pay a $40,000 fine for helping a client file a return that underreported income, according to published reports.

From mid-2015 and to May 2017, Kohanzad, who pleaded guilty earlier this year, reportedly helped and counseled a client to reduce taxable income by falsely increasing business expenses.

The two years’ federal tax loss that Kohanzad caused reportedly totaled some $401,436.

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New York: Martin Handler, of Brooklyn, has been sentenced to 58 months in prison for defrauding the federal Head Start program, for stealing more than $1 million from his federally funded childcare company, and for tax evasion.

Between 2017 and August 2021, Handler secretly “owned” and exercised control over the nonprofit Project Social Care Head Start Inc. The U.S. Department of Health and Human Services, which administers the Head Start program, annually granted Project Social Care millions of dollars to be used exclusively on the program and from which earning a profit is prohibited. Handler conspired to submit multiple fictitious documents to HHS that fraudulently asserted Project Social Care had an independent board and had in place controls to guard against fraud, waste and abuse. In fact, it had neither an independent board nor sufficient controls in place, and Handler steered Head Start funding to his own for-profit companies through what authorities called rampant undisclosed self-dealing.

Between April 2019 and January 2023, as majority owner of New York City Early Learning Co., a for-profit that also received Head Start grants, Handler misapplied and misappropriated corporate treasury funds to, among other things, repay personal loans and finance the leasing of luxury vehicles for the benefit of two members of Early Learning’s Head Start board.

In 2021 and 2022, Handler falsely reported to the IRS $2 million in charitable contributions, evading taxes of at least $740,000.

Handler was also sentenced to three years of supervised release, ordered to pay a $200,000 fine and to forfeit $1,156,068.10, and to pay $1,156,068.10 in restitution to HHS and $740,000 in restitution to the IRS.

Miami: A U.S. district court has issued a permanent injunction against tax preparers and brothers George and Luis Brito and their businesses.

The injunction bars George Brito from preparing federal income tax returns, working for or having any ownership stake in any prep business, assisting others in preparing returns or setting up business as a preparer and transferring or assigning customer lists to any other person or entity. The court similarly enjoined Luis Brito from preparing income tax returns for individuals. The Britos consented to the injunction.

The complaint alleged that George and Luis Brito owned or controlled Brito and Brito Accounting USA Inc. and prepared returns for clients 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.

The order requires Luis Brito to inform his clients that he has been permanently enjoined from preparing returns except for certain types of business forms, including those reporting payroll, unemployment and corporate income taxes. The IRS can make unscheduled and random visits to Luis Brito’s business; he must also complete at least 24 hours of tax prep education by Dec. 31.

Union, New Jersey: Tax preparer Emmanuel Amenyo, 59, admitted assisting in the preparation of fraudulent returns, resulting in improperly large refunds.

From 2018 through 2021, Amenyo ran a tax prep business in which he prepared and submitted individual federal returns for clients. He filed numerous false returns and subscribed to false returns with respect to his own taxes.

These returns falsely claimed charitable contributions, itemized deductions, child and dependent care expenses, and other qualified expenses to which Amenyo and his clients were not entitled, causing a tax loss of $250,466.

Amenyo faces up to three years in prison and a $250,000 fine. Sentencing is April 1.

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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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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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