Disorder in the court; fines that didn’t stick; logo a no-go; and other highlights of recent tax cases.
Olathe, Kansas: Dawna Kellogg, of Williamsburg, Kansas, has pleaded guilty to wire fraud and filing a false return related to a scheme to embezzle money from a local district court.
Kellogg, while employed in the accounting department at the Johnson County District Court, stole at least $776,691.50 from her employer between January 2010 and June 2017.
She managed the accounting department, collected funds from each county system, recorded funds collected, processed daily reports and deposited the collected funds into the court’s bank account. She stole cash that the court received, such as bail bond payments, and either spent or deposited the embezzled proceeds into her personal accounts.
Kellogg concealed the stolen cash primarily by manipulating an unclaimed property account and creating false records in the court’s accounting system.
Kellogg pleaded guilty to one count of wire fraud and one count of subscribing to a false return. The total loss resulting from the scheme was $1,135,988.13. Sentencing is Aug. 16.
Glastonbury, Connecticut: Attorney Deron D. Freeman has been found guilty of tax fraud offenses.
Freeman, who has owned and operated law offices in Hartford, Connecticut, has practiced primarily in personal injury and criminal law. Between 2006 and 2010, he fell severely behind on his federal tax payments and failed to pay his overdue tax balance despite multiple notices of delinquent taxes and the imposition of payment and interest by the IRS.
In 2010, the IRS initiated a collection action against Freeman for the 2007, 2008 and 2009 tax years.
In 2011, soon after Freeman entered into a payment plan with the IRS, he began using a bank account in the name of a third party to hold hundreds of thousands of dollars in an attempt to protect the funds from IRS scrutiny. By June 2012, Freeman made sufficient tax payments so that the IRS removed a lien against him for the 2008 tax year. Shortly after, he transferred more than $248,000 from the third-party account to his personal money market account.
Freeman subsequently filed false returns for 2011, 2012 and 2013, failing to pay taxes on some $950,000 in income in those years, and also failed to pay significant taxes owed for the 2014 and 2015 tax years.
Freeman spent lavishly on cars and watercraft and, between 2012 and 2016, spent approximately $1.5 million constructing a new home.
He was found guilty of three counts of making and subscribing a false tax return and four counts of failure to pay income tax. He faces up to 13 years in prison.
Shreveport, Louisiana: Tax preparer Latasha Thomas, 44, of Crowley, Texas, has been sentenced to 18 months in prison, to be followed by a year of supervised release, for making and subscribing a false return.
Thomas owned and operated Tax Related and ASAP Tax Service, in Shreveport. She was employed as an IRS revenue officer for two years prior to opening her prep businesses; she also owned Kidz World Learning Center and Best & Brightest Preschool Center in Shreveport.
Her primary business was preparing and e-filing individual income tax returns. IRS investigation revealed that Thomas aided and assisted in the preparation of false 1040s for her clients by creating false W-2s to increase the reported income of her clients and that she also falsified her personal returns.
Thomas received fees for filing clients’ individual returns into business accounts in the name of Tax Related, ASAP Tax and another company owned by Thomas, Diamond Elite Corp. These accounts were opened and primarily maintained by Thomas. She received but did not report $168,297 in fees in 2016 and $139,736 in fees in 2017. She did not file a business return nor include her business income on her personal returns for either tax year.
Thomas personally prepared her own 1040s for 2016 and 2017. She made false statements in both returns and the total income was false: She claimed only $45,677 for the two years combined when in fact her income totaled $308,033.
Thomas agreed to be permanently enjoined from preparing, assisting, advising or counseling in the preparation of, or filing federal returns for anyone other than herself. She is also prohibited from maintaining any association with a tax prep business, instructing, teaching or otherwise training any person in the preparation of federal tax returns.
She was also ordered to pay $143,611 in restitution.
Erie, Pennsylvania: Freelance tax preparer Erika A. Grandberry, 47, has been sentenced to three months in jail and ordered to pay $66,789 in restitution on her conviction of violating federal tax laws.
Grandberry repeatedly reported false and fraudulent income and expenses for non-existent businesses on individual tax returns from 2015 to 2017.
Plover, Wisconsin: Tax preparer James Canfield, 72, has pleaded guilty to aiding in the preparation of false federal returns.
Canfield owned and operated Advanced Accounting Concepts and prepared returns for third parties in exchange for a fee. Between 2013 and 2018, Canfield prepared and e-filed federal returns for clients that had exaggerated business expenses and unjustified deductions for the business use of clients’ homes. Despite being told by clients that they primarily used their homes as their personal residence, Canfield attributed 100% of their home for business, then took home expenses as deductible business expenses.
Canfield previously has been fined on two separate occasions by the IRS for preparing returns with unjustified business expenses and claiming personal living expenses as business deductions.
Sentencing is Sept. 14. Canfield faces a maximum of three years in prison and a $250,000 fine. He will also be permanently prohibited from preparing and filing federal returns for others.
New York: Tax preparer Richard Barker, of Queens, has been sentenced to 18 months in prison for conspiring to defraud the United States.
Barker owned and operated a tax prep business under the names Tax Depot Inc. and KPS Kampant, Parkinson, Sinclair & Co. Inc. From about 2012 through 2019, he conspired with others to submit false federal returns on behalf of clients. These returns included 1099-OIDs that falsely reported that financial institutions, creditors and other entities had withheld and paid taxes to the IRS on behalf of the clients, when in reality no such taxes had been withheld or paid; the IRS paid the clients undeserved refunds.
Barker also filed false returns for himself based on the same 1099-OID scheme and recruited at least one other individual to do the same.
Barker, who caused a tax loss to the IRS of more than $460,000, was also ordered to serve two years of supervised release and to pay some $464,252 in restitution to the IRS.
Roanoke, Virginia: Lisa Tucker Dillard, 60, former owner of a tax prep business who defrauded at least eight small businesses, has been sentenced to two years in prison for wire fraud and ordered to pay $190,294 in restitution.
She owned and operated a bookkeeping and tax accounting business where she claimed to provide accounting services to small businesses, including the preparation of federal taxes, for a monthly fee. Beginning in 2017, Dillard began a scheme to defraud local small-business owners, many of whom spoke limited English.
Dillard advised her victims that they owed a federal tax liability but that she had established an installment agreement with the IRS for payment. She then instructed her victims to make those installments directly to her, claiming that she would then forward the money to the IRS.
Dillard applied a fake IRS logo to receipts that she presented to her victims to make it appear that the money had been remitted to the IRS and applied to the victims’ alleged tax liabilities. In fact, she filed no taxes and paid no money to the IRS on behalf of any victim and was never authorized by the IRS as a return filer.
