Dutch treat; for the record; last Resort; and other highlights of recent tax cases.

New York: Frank Butselaar, a native of Naarden, Netherlands, has pleaded guilty to one count of aiding or assisting in the filing of a false or fraudulent return.

Butselaar advised the creation of offshore structures for ultra-high-net-worth individuals and did so while a shareholder in the Amsterdam office of a major U.S.-based international law firm. When the clients were becoming or had become U.S. tax residents, Butselaar and his co-conspirators, who were partners at the firm, sought to conceal the clients’ offshore income through nominee owners, generally a family member who lived outside the U.S. The clients, with the knowledge of Butselaar and his co-conspirators, unknowingly continued to operate their offshore entities as their own and believed they had access to and could direct the money they were accumulating offshore.

The amount of unreported income for two of the client taxpayers exceeded $70 million. Butselaar was also repeatedly warned that the income being collected offshore for his clients was reportable.

He faces up to three years in prison. Sentencing is Feb. 13.

St. Louis: Tax preparer Robert Droege, 59, has been sentenced to 46 months in prison for filing false returns that caused an estimated tax loss of $2.5 million.

Droege pleaded guilty in June to four counts of aiding in the preparation of a fraudulent return, admitting to preparing at least 34 false returns in his home office, Bob’s Tax Service.

He prepared returns that contained false or fraudulent information including medical expenses, charitable contributions, personal property rental expenses, non-business bad debt and other deductions.

White Plains, Maryland: Part-time tax preparer Anthony Judd has pleaded guilty to preparing and filing a false return for a client.

Since at least 2013, Judd, who was also a full-time special police officer at the National Archives and Records Administration, prepared and filed more than 40 false returns for individual clients that reduced the clients’ taxes and inflated refunds. These returns reported losses for businesses that the clients did not have and deductions for expenses, such as transportation and job-related expenses, that the clients did not actually incur.

Judd prepared and filed each return as a ghost preparer and caused a tax loss to the IRS of some $484,525.

Sentencing is April 16. He faces a maximum of three years in prison as well as a period of supervised release, restitution and monetary penalties.

Naples, Florida: Tax preparer Heidi Torres-Moncaleano, 45, has been sentenced to a year and a day in prison for aiding in the preparation of false and fraudulent income tax returns.

From 2018 through 2021, Torres-Moncaleano, through her business Torres Tax Services, submitted fraudulent returns and Schedules C to the IRS, inflating clients’ losses to generate larger refunds. The federal tax loss exceeded $847,000.

Torres-Moncaleano, who pleaded guilty in April, was also sentenced to a year of supervised release with the condition that she pay $429,888 in restitution to the IRS.

New York: Ilya Kahn, a national of the U.S., Israel and Russia, has pleaded guilty to conspiracy to violate the Export Control Reform Act for his role in a scheme to secure and illegally export dual-use semiconductors and other sensitive technology to Joint Stock Company Research and Development Center Elvees and other entities in Russia. Kahn also pleaded guilty to attempted tax evasion for failing to pay taxes on his income from the scheme.

Kahn owns Senesys Incorporated and Sensor Design Association, which operated in California and Brooklyn, New York. Kahn operated these businesses as fronts for a years-long conspiracy to acquire and export sensitive and sophisticated dual-use electronics from the U.S. to Elvees, one of the leading Russian developers of microchips and which was sanctioned by the U.S. in 2022.

Many of these items required an export license for national security and anti-terrorism reasons, which Kahn did not obtain. He also arranged for Elvees to continue to fabricate and import semiconductors after Russia’s February 2022 invasion of Ukraine, using a network of front companies and bank accounts.

Kahn’s export activity for the benefit of Elvees dates to at least 2012, and accounts under his control received more than $50 million from Elvees and related entities between 2012 and 2022. Of that money, Kahn channeled nearly $5 million for his personal use, which he did not report to the IRS and on which he did not pay income taxes.

Kahn agreed to forfeit $4,923,548.94 and to pay an additional $1,892,816.00 in restitution to the IRS. He also faces up to 20 years in prison.

Newark, New Jersey: Insurance broker Joseph Schwartz of Suffern, New York, has admitted his role in a $38 million employment tax fraud scheme involving nursing homes.

He pleaded guilty to two counts of an indictment charging him with willfully failing to pay over employment taxes withheld from employees of his company and willfully failing to file a Form 5500 for a 401(k).

Schwartz, operator of Skyline Management Group, with headquarters in New Jersey, failed to pay employment taxes relating to health care and rehabilitation facilities that Skyline operated in 11 states. From October 2017 through May 2018, Schwartz caused taxes to be withheld from employees’ pay but failed to then pay over more than $38 million in employment taxes to the IRS. He also failed to file the 5500.

The employment tax fraud count carries up to five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greater. The failure to file a Form 5500 carries a maximum of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is April 10.

Cape Coral, Florida: William Skaggs Jr. and Billie Adkison have pleaded guilty to conspiracy to commit tax fraud.

Skaggs owned and operated Nastar Roofing; Adkison was the main office administrator for Nastar, and her duties included managing the company’s payroll. Between 2013 and 2023, Nastar paid its employees predominantly in cash to avoid paying taxes the pair knew were owed to the federal government. Typically, one or more Nastar employees, including Skaggs and Adkison, withdrew significant amounts of cash on Thursdays and Fridays to make Nastar’s payroll at the end of the work week.

Between 2013 and 2023, Nastar employees withdrew more than $21 million from the company’s bank accounts to pay employees in cash. The company did not withhold taxes from the cash payments, nor did it pay its own share of FICA taxes.

Skaggs and Adkison have agreed to make full restitution to the United States for the employment taxes, including an upfront partial restitution payment of $1 million before their sentencing. Each faces up to five years in prison.

Ocala, Florida: Tax preparer Steven Cabrera has been sentenced to three years in prison for assisting in preparing false tax documents, submitting false tax documents and willfully failing to file returns.

From 2017 to 2019, Cabrera, who pleaded guilty in August, engaged in widespread tax fraud, adding unauthorized and fraudulent deductions and credits to clients’ returns without their knowledge and then embezzling the additional tax return money.

He also defrauded clients directly by telling them to make out checks to “IRS” and pledging that he would send the funds to the IRS himself. Instead, he deposited those checks into an account he controlled for a fictitious business, “International Resort Services.”

Cabrera caused total losses of nearly $1 million.

A group of Republican lawmakers have sent a letter to the incoming administration asking that it end the IRS Direct File service, ideally via a day one executive order. 

The IRS piloted the program—developed as part of the Inflation Reduction Act of 2021—this past tax season, available in 12 states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. Around 140,000 taxpayers used the service, and the response, according to surveys of users, was very positive, with over 90% rating their experience either “excellent” or “above average.” The IRS said it aims to double the reach of the program next filing season. 

Republicans have long been critical of the program, saying it was not officially authorized and that its overall implementation has been highly wasteful. The letter divides the total amount budgeted by the total number of taxpayers who took part and concluded that the cost was $814 per return. Beyond procedural issues and cost, Republicans have also raised concerns about the fact that Direct File makes the IRS a tax assessor, collector, preparer, and enforcer in one, which they believe represents a clear conflict of interest as well as an invitation for government overreach. The letter sent to the income administration went over these points again, saying the government can find better use of its resources. 

“This is not an efficient use of government resources, especially when the private sector offers better tax preparation services at no cost to the federal government and taxpayers already have the option to file their taxes for free using the pre-existing public-private partnership between the IRS and many tax preparation and filing software companies—Free File. The IRS can, and should, spend a fraction of the resources it spent on creating a government run program on promoting existing free options. The results of such efforts would be better for all taxpayers,” said the letter. 

In contrast, Democratic lawmakers in October urged the IRS to make the Direct File program more accessible, specifically by relaxing some of the identification requirements. The service, said the Democrats, operates at a significant disadvantage compared to commercial tax prep services due to its stringent identity verification requirements in the form of the ID.me service, which is used by both the federal government and several state governments. ID.me credentials are assessed against the National Institute of Standards and Technology’s Identity Assurance Level 2 standard. The letter noted that private tax preparation companies are not assessed against IAL standards but basically operate at a Level 1 basis, as users simply assert their identity.

“Requiring them to use ID.me is creating yet another needless barrier to exactly these taxpayers who need Direct File most to claim tax benefits, as it has been with other government benefits,” said the Democrats’ letter.  

OK, I admit it. I tend to procrastinate. I also tend to lose track of what the date is, or sometimes what year it is (just kidding on the last one). Nevertheless, I’ve been accumulating stuff for a gift guide column for a while, and it’s time to start actually writing about at least a few of them. One or all of these would be appropriate for staff, coworkers and clients, or to surprise yourself with on the gift-opening holiday (Oh! How did you know? It’s just what I wanted!)

I do a lot of reading. Physical books are my favorite, but so many books these days are available in Kindle or other electronic formats. I’ve been using a tablet for the past several years to do much of my reading, especially if I’m traveling. The tablet I’ve been using is a fairly decent one, but it’s several years old. It’s been replaced by a new TCL Tab 10 Nxtpaper. While the Nxtpaper is a very workable tablet, it’s also excellent when you want to relax with a book. The 10.4-inch screen has a resolution of 2,000 by 1,200 pixels and a brightness of 600 nits, similar to some laptops. The screen has a finish that cuts down on glare and reflection, though it’s a little hard to read outdoors in the sun. It offers several settings that change the appearance of color pages, which is great when you are reading a color book or magazine. The tablet offers 5G cellular connectivity, but right now Verizon is the only carrier supported.  What I like about the tablet is that it offers a really good reading experience. At the moment, it’s priced at $240 from Verizon, so if you (or the intended user) have service from another carrier, this might not be the best choice. I don’t use my tablets on cellular service (most of the airlines I fly offer internet connectivity, as do the hotel rooms) so the 5G connectivity feature is not a deal breaker for me, though it might be for you or the person you have in mind.

Another great gift item is a USB monitor to use as a second display for a laptop. With more people using a laptop for their main PC, being tied to a single screen can diminish productivity. My main productivity PC has a 35-inch main display and a 27-inch secondary display, so I used to feel really constrained when I’ve had to use my laptop. I’ve been using a second monitor for several years and I find it a must to get much work done when I’m at a conference. But monitor technology, like everything else, has progressed over the years, so I replaced my old USB monitor with a ViewSonic TD1656-2K. The TD1656-2K isn’t the least expensive solution, coming in at about $350, but the features make it worthwhile. It has a 16-inch 2560 x 1600 display and a touch screen. The screen offers auto-pivot, so if you want to use it in portrait mode rather than landscape, just turn the monitor and the display will flip. The cover does dual duty as a stand, and weighs 2.8 pounds with the stand, about the same as an extra laptop. The sound is actually pretty good from the two 2.5-watt speakers, and there are two USB-C ports at the left and right bottom of the display. Both of these ports support 65-watt pass-through if your laptop offers power delivery. Best of all, the 16-inch screen is larger than the one on my laptop.

Or how about a mini home theater?  Many of us, or our clients or children, don’t have room for a home theater. And gifting a large screen TV is usually not an option. Video projectors are a great way to get many of the benefits of an enhanced video experience without having to dedicate a large amount of room and wall space to a big screen TV. Or maybe you have a staff member who has to travel and make presentations. The $400 Nebula Capsule Air is one of the smallest projectors you can buy, about the size of a can of soda. It’s not tremendously bright (as is common for projectors this small and inexpensive). With a light output of 150 lumens, you’ll need to use it in a darkened room. It has Google TV built in, and an optional $140 Power Bank Tripod gives you an extra two hours of runtime, added to the two-hour run time of the Capsule Air itself.

If you have a teenager, staff member, or have a client who is into technology or the Maker movement, how about a 3D printer? A great printer for a beginner is the Bambu Lab A1 mini. The $200 price is pretty easy to handle, and at $349, you can get the Combo, which includes the printer and an accessory that provides four-color printed objects. The A1 mini is pretty much assembled out of the box. You just have to cut some zip ties and attach a few pieces. It shouldn’t take more than about 15 minutes until it’s up and running. The internet has thousands of models to print. 

Finally, if you are willing to go really overboard and have someone on your gift list who is an audiophile, a gift of a pair of in-ear monitors offers a really superior audio experience. In-ear monitors are like super bud earphones. They have a wider range than most earbuds and truer sound reproduction. When you watch a performer and notice they have ear buds while performing, they are wearing in-ear monitors. They are pretty expensive. The one I’m recommending is the $500 Sennheiser IE 600 model, but it’s far from the most expensive model available. In-ear-monitors, especially for performers, can run into the thousands.

That’s it for this time. I’ll dig further into the review pile in later blogs. Oh, and if you want to get in touch with me, you can DM me on Facebook.