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Tax Fraud Blotter: ‘Ship em out

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Brace yourself; more Ultimate crimes; good enough; and other highlights of recent tax cases.

Providence, Rhode Island: Mortgage broker Joseph Giuttari has admitted to stealing from investors, to filing fraudulent applications for Economic Injury Disaster Loans, and to failing to report an income of more than $540,000.

Giuttari, owner and operator of Hybrid Capital Group, The Fens Co. and Realty Funding Advisors, among others, pleaded guilty to wire fraud, theft of government property and filing a false return. He allegedly misrepresented to investors the amount a borrower was interested in obtaining; misrepresented that documents were in place to secure the investment funds; inflated how much borrowers owed; used borrowers’ names without their authorization to obtain funds from investors; and created fraudulent promissory notes and real estate documents bearing forged signatures of borrowers. He also admitted that he appeased certain earlier investors and lenders by paying them back using money from new investors.

The government claims the loss is between $3.5 million and $9.5 million.

Giuttari admitted that he also fraudulently applied for and acquired more than $160,000 in EIDLs for Hybrid Capital and Fens, claiming on the applications that his companies were not engaged in lending or investments.

He also admitted to falsely stating on his 2019 federal personal income tax return that his total income was $22,176, when in fact it was at least $541,000.

Sentencing is Jan. 30.

Oakland, New Jersey: Business owner Walter Hass, 62, of Hewitt, New Jersey, has admitted to a $3.5 million payroll tax evasion.

Hass owned and operated a shipping/logistics company and since 2014 has operated the company under three different names. From 2014 to 2022, he failed to pay over to the IRS at least $3.5 million in payroll taxes. Instead, he used company money to fund his personal lifestyle, including the purchase of luxury vehicles, high-end watches and jewelry, designer clothing items and accessories, tickets to sporting events, home renovations, vacations, water sports vehicles and extravagant meals.

The charge is punishable by up to five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greater. Sentencing is April 22.

Fresno, California: Former resident Pilar Rose has pleaded guilty to tax evasion and obstructing an IRS audit.

From 2012 through 2015, Rose prepared false financial statements for her husband’s orthodontics practice that significantly underreported profits. Rose evaded more than $870,000 that she and her husband owed in federal taxes.

In June 2015, Rose had sought a $1.5 million home mortgage refinance loan on the couple’s mansion. She submitted copies of her and her husband’s federal returns that showed significantly greater income than was reported on the actual returns they filed with the IRS. The bank declined the loan after discovering the discrepancies.

A month later, Rose applied to a second bank for a home mortgage refinance loan and represented that their bank accounts had a combined balance of more than $250,000 when they had less than $3,000. She also submitted copies of her and her husband’s federal returns and a P&L that significantly exaggerated the profitability of her husband’s orthodontics practice. The second bank approved the loan.

In early 2016, Rose obstructed an IRS audit of her and her husband’s taxes. She altered hundreds of checks for the couple’s non-deductible personal expenses such as their mortgage, utilities, landscaping, pool cleaning, cars, credit cards and children’s college tuition, to make it appear as though the checks were for deductible business expenses. She also created false financial statements for her husband’s orthodontics practice to match the altered checks.

In 2017, Rose purchased a new BMW for some $90,000, financing $65,000 through a loan from a third bank. On that loan application, she represented that she was an attorney who made more than $600,000 per year. She was not an attorney, and she used the Social Security number of her husband’s former dental school classmate because she knew that using her real Social Security number would reveal a low credit score. The loan was approved.

Sentencing is March 17. She faces up to five years in prison and $100,000 fine for the tax evasion charge and an additional three years and a $5,000 fine for the obstruction charge. Rose agreed to forfeit her interest in more than $2.5 million of proceeds from the sale of her and her husband’s mansion and BMW that authorities previously seized.

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Strongsville, Ohio: Dr. Suman Jana has pleaded guilty to corruptly endeavoring to obstruct the due administration of internal revenue laws.

Jana was a client of fraudulent tax shelter promoter Michael Meyer and his sub-promoter Rao Garuda, who used Meyer’s scheme called the “Ultimate Tax Plan” to fraudulently claim $764,350 in charitable contribution deductions for 2012 through 2015.

Meyer and his co-conspirators marketed the scheme as a way for high-income clients to reduce their taxes by claiming they had donated valuable property to charities Meyer controlled while retaining complete control and use over their “donated” assets. Jana used the funds he claimed to have donated to charity to, among other things, purchase several cars for himself and his wife.

In 2017, after claiming five years’ worth of charitable contribution deductions, Jana bought back the company he had “donated” to Meyer’s charity for $10,000, reclaiming his purported donation and exiting the plan.

In April 2018, the Justice Department filed a civil complaint for a permanent injunction against Meyer and the following month served a civil subpoena on Jana requesting that he produce records in connection with the Ultimate Tax Plan. Meyer and Garuda instructed Jana to pretend that the buyback did not occur. Meyer prepared backdated transaction documents, written acknowledgements and promissory notes for Jana to sign and submit in response to the civil subpoena, the false documents making it look as if Jana signed the promissory notes at the time that he and his wife paid personal expenses out of the purported charity. Jana signed the documents.

Sentencing is March 7. Jana faces a maximum of three years in prison, as well as a period of supervised release, restitution and monetary penalties.

Athens, Georgia: Tax preparer Jessica Crawford has admitted to filing more than $3 million in fraudulent returns on behalf of clients.

FBI agents investigating a multistate unemployment benefit scheme conducted during the COVID-19 pandemic discovered text messages between individuals involved in the scheme and Crawford, a preparer with Crawford Tax Services. Crawford filed for pandemic unemployment assistance benefits on behalf of those individuals, who had created fake businesses or submitted false information to fraudulently obtain benefits. Crawford received a percentage of the benefits.

In April 2022, an undercover IRS agent met Crawford to have taxes prepared and Crawford asked if the agent did anything on the side. At first the agent responded no. When Crawford said that expenses could be deducted if he did, the agent replied that he mowed an aunt’s lawn sometimes and Crawford said that was “good enough,” authorities said.

Despite the agent providing no income or expense amounts, Crawford created a Schedule C business for landscaping on the agent’s federal income tax return based solely on that interaction. Crawford prepared a 1040, including a fictitious Schedule C loss of $19,373, and claimed the Earned Income Tax Credit, the Child Tax Credit and qualified business income deduction that were affected by the fraudulent Schedule C loss. As a result, the agent’s return claimed a fraudulent federal refund of $12,359.

The IRS reviewed 1,261 returns filed by Crawford in 2020 and 2021 and determined that Crawford fraudulently filed returns for clients that resulted in losses to the IRS exceeding $3 million from falsely claimed 7202 credits for sick leave and family leave, tax credits and dependent care credits.

Crawford faces a maximum of 30 years in prison to be followed by five years of supervised release and a $1 million fine. Sentencing is March 19.

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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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