Kratom ka-boom; what a sport; treed; and other highlights of recent tax cases.
New York: A federal court has issued a permanent injunction against Brooklyn tax preparer Melinda Jacob.
Jacob, individually and on behalf of her business Melinda Jacob Tax Services LLC, consented to the injunction that permanently bars her and her business from preparing federal returns for others. She
From 2019 through 2023, Jacob prepared more than 500 returns a year, including returns that falsely claimed credits, deductions or refunds for clients to improperly reduce tax liability or inflate refunds. The complaint alleges that Jacob falsely claimed residential energy credits and education credits and that she claimed false filing status and fictitious dependents on returns to inflate refunds.
Jacob must send notice of the injunction to each person for whom she prepared federal returns, amended returns or refund claims after Jan. 1, 2019.
Raymore, Missouri: Chelli Payne has been sentenced to six months in prison to be followed by six months of home confinement after keeping money that her company collected as payroll taxes instead of sending it to the Internal Revenue Service.
Payne, who pleaded guilty to one count of failing to account for or pay over employment taxes, worked at A Family Tree Enterprises, where she oversaw collecting and paying over employment taxes to the IRS. Family Tree, of Olathe, Kansas, provides day and residential services to individuals with intellectual or developmental disabilities.
In most quarters between early 2015 and 2019, Payne failed to pay over the withheld employment taxes, causing a tax loss to the IRS of $1,055,367.
She was also ordered to pay that amount in restitution.
Round Rock, Texas: Businessman John L. Petrone, who evaded federal taxes while buying jet skis, vacations and jewelry, has been sentenced to 37 months in prison.
Petrone did not file individual income tax returns from 2014 through 2019 and paid no income taxes for those years despite earning hundreds of thousands of dollars from his business that sold an herbal extract known as "kratom." Those businesses included K Botanicals, Round Rock Botanicals, Evil Monkey Tatoo and Unicorn Botanicals. Petrone switched between the businesses frequently, helping him to illegally avoid tax responsibilities.
He 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. He also did not pay his employment taxes of his business.
Petrone caused a tax loss to the IRS of more than $529,000, which he was ordered to pay in restitution. His sentence also includes three years of supervised release.
Houston: Resident Whitley Rachelle Carter has been sentenced to 30 months in prison to be followed by five years of supervised release for a scheme to cash stolen tax checks.
Around January 2022, authorities discovered that a couple in Houston had not received their expected $2,932,446.84 IRS refund check in the mail. Investigation revealed that Kuljinder Singh Hunjan and Carter used fake IDs with victims' personal information to open accounts at a local Regions Bank; Hunjan and Carter deposited the victims' refund check into the fraudulent bank account. Investigation also linked Carter to Hunjan and co-conspirator Benjamin Thomas through phone calls and CashApp transactions.
In April 2022, authorities arrested Thomas while he was driving a stolen Lamborghini, discovering two debit cards in his possession which were linked to fraudulently created accounts used to receive the proceeds of the nearly $3 million check. Thomas also had an ATM receipt showing a withdrawal of $800 from the Regions account that had received the check.
Hunjan and Thomas pleaded guilty last year; Hunjan was sentenced to 42 months in prison and Thomas to 90 months.
Carter, who pleaded guilty in October, was also ordered to pay $4,483,987.89 in restitution to two banks.
Pekin, Illinois: Timber buyer Kenin L. Edwards has been sentenced to 21 months in prison for making and subscribing a false return.
Edwards was employed in the logging business. His employment included contract work between landowners and sawmills, and he was paid a commission for the deals that he closed.
For 2014 through 2018, Edwards underreported income totaling $2,100,365, resulting in a total federal tax loss of $180,626. He also underreported income totaling $673,359 to the Illinois Department of Revenue, resulting in a total state tax loss of $22,004. Edwards has a remaining tax loss due to the IRS of $6,346 and has paid the tax loss to Illinois; interest and penalties due to both tax losses also have not been paid.
Edwards pleaded guilty in November to filing a false return. The court dismissed his remaining charges, and a ruling on restitution will be made later. He will also serve a year of supervised release and pay a $10,000 fine.
Charlotte, North Carolina: Business owner Peter Anthony Thomas, formerly of Charlotte and now a resident of Miami, has pleaded guilty to failing to account for and pay over federal trust fund taxes due for the quarter ending June 30, 2021.
Thomas owned the companies Club One CLT, Sports ONE, Sports ONE CLT and PT Media, which operated as sports-themed bar/restaurant/lounges in Charlotte. Thomas also owned several other bars, restaurants and lounges in Florida and Maryland, including Bar One Miami Beach and Bar One Baltimore. He controlled the Charlotte businesses' financial and business affairs and was responsible for filing 941s and paying over to the IRS the employment taxes for employees.
Between 2017 and 2022, Thomas caused the Charlotte businesses to collect more than $640,000 in trust fund taxes from the wages of their employees but did not pay over these taxes to the IRS. Between 2021 and 2023, he caused Bar One Miami Beach and Bar One Baltimore to collect more than $1.1 million in trust fund taxes from the wages of their employees but failed to pay over these taxes to the IRS.
In total, from 2017 to 2023 Thomas caused the Charlotte businesses to fail to pay over more than $2.5 million in employment taxes. Instead, Thomas used the money for travel, real estate and retail purchases and caused more than $2.9 million to be transferred between the Charlotte businesses.
Danbury, Connecticut: Business owner Bill G. Makros has pleaded guilty to tax evasion.
Makros owned and operated a tree service business known as Budget Tree and Stump Removal Service. From 2016 through 2020, he concealed income by receiving customer payments in checks made payable to "cash" or to him personally and by depositing the checks into bank accounts other than his business account. He also cashed check payments and did not deposit the cash into any accounts.
For 2016 through 2020, he failed to file his federal individual tax returns and failed to pay $140,694 in taxes on some $517,000 in profits.
During the pandemic, he applied for relief loans and submitted Schedule C forms that purported to be part of his returns for 2019 and 2020 even though he had not filed tax returns with the IRS for those years.
Sentencing is Sept. 27. Makros faces up to five years in prison.
Durham, Connecticut: Commercial fisherman Brian Kobus has pleaded guilty to evading income tax.
He worked as a fisherman and deckhand for fishing companies in Massachusetts. After each fishing trip, the companies paid him by check. Despite receiving more than $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.
He caused a tax loss to the IRS of some $377,839.90.
Sentencing is Oct. 16. Korbus faces up to five years in prison as well as a period of supervised release, restitution and monetary penalties.
