Tax Division

Federal Court Permanently Shuts Down New York Tax Preparer A federal court in the Eastern District of New York issued a permanent injunction yesterday against a Brooklyn, New York, tax return preparer. Melinda Jacob, individually and on behalf of her business Melinda Jacob Tax Services LLC, consented to the injunction, which permanently bars her and her business from preparing federal tax returns for others. On Feb. 5, Jacob pleaded guilty to aiding and assisting in the preparation of a false tax return. As part of her guilty plea, Jacob also agreed to be permanently barred from preparing or filing tax returns for others. Read more: https://lnkd.in/gW9wGNBN

Indianapolis CPA Pleads Guilty to Participating in Illegal Tax Shelter Defendant Helped Clients in Mississippi and Elsewhere File Returns Claiming False Business Deductions An Indiana CPA pleaded guilty yesterday to assisting in the preparation of false tax returns on behalf of clients who participated in an illegal tax shelter. According to court documents and statements made in court, between 2013 and 2022, Jason L. Crace prepared income tax returns for clients that claimed millions of dollars in false deductions for so-called “royalty payments.” However, as Crace knew, these “royalty payments” were merely circular flows of money designed to give the appearance of genuine business expenses. In reality, tax shelter participants sent their money to bank accounts controlled by scheme promoters, who then sent the money right back to different bank accounts that the participants controlled. In this way, tax shelter participants retained control of the money they transferred, while falsely deducting the transfers as business expenses on their tax returns. Participants’ decision regarding how much (and even whether) to pay “royalties” was driven purely by the amount of income they wanted to shelter from the IRS on their tax returns. Read more: https://lnkd.in/gW_e_ut6

Connecticut Fisherman Pleads Guilty to Tax Evasion Defendant Evaded Taxes on $1.4 Million in Fishing Income Between 2011 and 2021 A Connecticut man pleaded guilty today to evading taxes on income he earned as a commercial fisherman. According to court documents and statements made in court, Brian Kobus, of Durham, Connecticut, worked as a commercial fisherman and deckhand for fishing companies in Massachusetts. After each fishing trip, the companies paid him by check. Despite receiving over $1.4 million in fishing income between 2011 through 2013, and 2017 through 2021, Kobus did not file federal income tax returns or pay the taxes that he owed. To conceal the source and disposition of his income from the IRS, Kobus regularly cashed his paychecks from the fishing companies and used the cash to fund his lifestyle. In total, he caused a tax loss to the IRS of approximately $377,839.90. Read more: https://lnkd.in/gzhdXUMg

Former Alaska City Treasurer Sentenced for Wire Fraud, Money Laundering and Tax Evasion An Alaska man was sentenced yesterday to 30 months in prison for embezzling more than $1 million from the City of Houston, Alaska, and from a Wasilla-based equipment company, and then evading taxes on the embezzled profits. According to court documents and statements made in court, from 2015 through 2018, Jess Adams was the Treasurer for the City of Houston, where he was entrusted with bookkeeping responsibilities and had administrative access to the city’s accounting records and software. Adams used this access to direct electronic transfers from the city’s bank account to a personal account in his name, which he maintained to hide the embezzled funds. Adams created fictitious entries in the city’s accounting records to disguise these payments as legitimate business expenses. Read more: https://lnkd.in/gCY6pNp4

Georgia Precious Metals Dealer Sentenced for Tax Fraud Defendant Did Not Report Commissions from Sale of Precious Metals and Concealed Income from IRS Saleem Hakim was sentenced today to four years in prison following his conviction in January on charges of tax evasion and failing to file tax returns. According to court documents and evidence introduced at trial, during at least the years 2009 through 2013, Hakim was in the business of brokering the sale of precious metals to clients. Hakim earned more than $2.8 million in commissions for converting cash to precious metals for his clients during those years which enabled him to fund a lavish lifestyle that included purchases of high-end watches, jewelry, designer accessories and furs. Despite earning substantial income during 2009 through 2013, he did not file income tax returns for those years. Hakim last filed an income tax return for tax year 1999. Read more: https://lnkd.in/g65Yrh5Z

Virginia Businesswoman Sentenced for Employment Tax Crimes A Virginia woman was sentenced today to 15 months in prison for not paying employment taxes to the IRS. According to court documents and statements made in court, Gail Jones, of Dumfries, Virginia, was a co-owner and served as director, president and vice president of parcel delivery service S&G Property Management Inc. (S&G). Between 2013 and 2018, Jones caused income, Social Security and Medicare taxes to be withheld from S&G’s employees. However, Jones did not pay those withholdings to the IRS as she was required to do. To thwart potential IRS levies and other collection activities, Jones opened new bank accounts using other individuals’ social security numbers, new Employer Identification Numbers and variations of her business’ name. Between December 2016 and December 2018, she withdrew over $450,000 in cash from business bank accounts in lieu of paying the taxes owed. In total, Jones caused a tax loss to the IRS of approximately $950,000. Read more: https://lnkd.in/ggHaaRvQ

Texas Business Owner Sentenced for Evading Income Tax A Texas man was sentenced today to 37 months in prison, three years of supervised release and to pay $529,551 in restitution to the United States for evading taxes on income he earned from his business. According to court documents, John L. Petrone owned and operated a business that sold an herbal extract known as “kratom,” along with other related products. Petrone did not file individual income tax returns for 2014 through 2019, nor did he pay income taxes for those years, despite earning hundreds of thousands of dollars from his business. During that time period, Petrone attempted to evade his income taxes by opting not to withhold federal taxes from his paychecks, operating the business under different names, dealing in cash, using business bank accounts to pay for personal expenses and lying to the IRS during an audit. In addition, Petrone did not pay his business’s employment taxes. Read more: https://lnkd.in/gtck92wN

Florida Fisherman Pleads Guilty to Tax Evasion Defendant Evaded Paying More than $400,000 in Taxes on Income Earned while Working as a Commercial Fisherman for Companies Operating Out of Massachusetts A Florida man pleaded guilty yesterday to evading taxes on income he earned from commercial fishing in Massachusetts. According to court documents and statements made in court, Christopher Garraty, of New Port Richey, and formerly of Newport and East Greenwich, Rhode Island, worked as a commercial fisherman and deckhand for fishing companies operating out of New Bedford, Massachusetts. Despite earning substantial income working as a fisherman, Garraty did not file until 2012 any federal income tax returns for tax years 2002 through 2011. When he filed the delinquent returns, he reported that he owed a total of approximately $234,497 in taxes for those nine years. But even after reporting that he owed taxes, Garraty did not make any payments to the IRS. In addition, Garraty did not file returns for 2015 through 2018 despite earning approximately $600,000 in fishing income across those years and owing approximately $179,382 in taxes. Read more: https://lnkd.in/gNzTJaar

Southern California Man Pleads Guilty to Preparing False Tax Returns A Southern California man pleaded guilty yesterday to preparing and filing false tax returns for his clients. According to court documents and statements made in court, starting in 2013, Salvador Gonzalez, of Corona, operated Grace’s Lighthouse Resource Center Inc., a return-preparation business. Since then, Gonzalez has prepared or assisted in the preparation of more than 11,000 tax returns that requested refunds from the IRS totaling more than $38 million. Consistently, Gonzalez directed his clients to create a phony corporation and to title their homes, cars and other assets in the name of the corporation. Gonzalez then referred those clients to an associate to prepare these sham corporation’s tax returns. The associate would provide the clients with a blank spreadsheet and request that they input their business expenses into that spreadsheet. At Gonzalez’s direction, the clients would include personal expenses, such as their mortgage payments, car payments and utility bills, and then provide the spreadsheet to the associate. The associate would, in turn, use the spreadsheet to prepare the business tax returns, which inevitably would show a loss. Read more: https://lnkd.in/gGNDPtf7

Florida Tax Preparer Sentenced for False Return Conspiracy A Florida tax return preparer was sentenced today to 30 months in prison, two years of supervised release and to pay $970,970 in restitution for conspiring to defraud the United States by preparing and filing false tax returns for clients. According to court documents and statements made in court, from 2017 through 2020, John Borgela ran Empire Tax Services (Empire) with his co-conspirator Phedson Dore and filed hundreds of false returns each year. Borgela typically inflated tax withholdings and reported fictitious itemized deductions to generate refunds for clients to which they were not entitled. To conceal his participation in the fraud, Borgela did not list on the returns his name as the person who prepared them or include Empire’s electronic filing number (EFIN). Instead, he used his employees’ names and the EFINs of other return preparation businesses. Read more: https://lnkd.in/gDJSwyRB