The gang's all here; not in good hands; lack of redemption; and other highlights of recent tax cases.
Jackson, Mississippi: Tax preparers Adam Earnest, James Klish, John Wells, Christopher Randell and Jonathan Barefoot have been sentenced for preparing and filing false returns.
Earnest was sentenced to 100 months in prison, Klish to 50 months, Wells to 15 months and Randell to 70 months. They will also serve three years of supervised release and pay restitution to the U.S. government. Barefoot awaits sentencing.
Cary, North Carolina: Businessman Arturo Barcenas Gonzalez has pleaded guilty to one count of tax evasion.
Barcenas owns and operates various businesses, including Barcenas Insurance Agency and the tax prep business Barcenas Financial Services. BIA is a retail insurance company that offers and sells traditional insurance policies, including automotive coverage. Investigation revealed that BIA operated a high-volume, cash-intensive business that registered and titled vehicles on behalf of undocumented aliens.
In 2018, Barcenas filed a false 2017 federal income tax return that concealed more than $300,000 in business receipts; he then stopped filing federal returns altogether. He continued to generate substantial business income; investigators identified business receipts exceeding $1 million a year between 2018 and 2022.
Barcenas engaged in various acts of evasion, including titling assets in the names of others, depositing business proceeds into personal accounts, and making extensive use of cash. Last May, the IRS searched his offices and recovered various income-establishing records that Barcenas had previously claimed that he didn't possess.
Estimated tax losses are more than $1 million for 2018 through 2022.
Barcenas faces up to five years in prison, a $250,000 fine and three years of supervised release, as well as payment of restitution to the IRS.
Kennedale, Texas: Tax preparer Anthony "Tony" Floyd, 51, has pleaded guilty to a $2.6 million tax fraud.
Floyd was charged in June with 10 counts of aiding in the preparation and presentation of false returns. Shortly after the jury was seated on the morning of his trial, he pleaded guilty to all charges.
Floyd filed some 400 returns that included false information to inflate refunds. He recruited clients outside box stores and through other clients, obtaining their personal information, such as income and deduction information, via text or cell phone conversations. Floyd rarely met clients in person.
The tax filings included falsified W-2s on behalf of individuals purportedly working in catering, lawn care, event planning, interior decor and other professions, and included non-existent charitable deductions, non-existent college attendance and fictitious relatives. Floyd also submitted the returns without reviewing them with the taxpayer, then diverted all or most of the refund to his own account.
The tax loss to the U.S. exceeded $2.6 million.
Floyd now faces up to 30 years in prison.
Milwaukee: Tax preparer Rodney C. Smith, 60, has been sentenced to 41 months in prison, to be followed by a year of supervised release for preparation of false returns through his business, Xpert Tax Services.
For four years, he prepared returns for clients with false representations about dependents, wages and income or losses from businesses to qualify clients for undeserved Earned Income Tax Credits.
The estimated tax loss was $3.3 million.
The IRS searched Smith's business in 2020 and he admitted he was knowingly violating federal tax laws. He still prepared false returns for clients the next year.
Smith, who pleaded guilty in this case in October and who was convicted in 2010 with conspiracy to defraud the U.S. by filing a false income tax return, was also ordered to pay $216,643 in restitution and a $400 special assessment.
Worcester, Massachusetts: Tax preparer Kwasi Kwarteng has been sentenced to a year and a day in prison to be followed by a year of supervised release for preparing false returns.
From at least 2014 through 2018, he operated under the name KK Tax Service despite not being registered with the IRS. He filed more than 1,195 returns in the names of clients, charging some $150 per return.
Kwarteng added false information to hundreds of the returns to claim deductions for fictitious medical expenses, personal property taxes, gifts to charity, IRA contributions and unreimbursed employee business expenses. The false returns resulted in some clients paying lower taxes than they owed and, in most cases, also in clients receiving inflated refunds.
He caused more than half a million dollars in losses to the IRS.
Kwarteng, who pleaded guilty in April 2023, was also ordered to pay $346,186 in restitution to the IRS and a special assessment of $1,300. He was placed under a permanent injunction barring him for life from preparing or assisting in the filing of federal returns for any other person or entity.
Jacksonville, Florida: Judy Grace Sellers has been found guilty of conspiracy to submit false returns and defraud the U.S. Treasury, substantive counts of aiding in the preparation of false returns, filing a false lien against the U.S. Attorney for the Northern District of Florida, and failure to appear.
Sellers operated commercialredemption.com, on which she promoted use of 1099-OIDs to commit tax fraud. Identified as a "sovereign citizen," she perpetuated the premise that the Treasury maintains secret accounts attributed to every U.S. citizen that can be drawn on by filing bogus documents with the Treasury and other government entities.
She also promoted 1099-OIDs to fraudulently report to the IRS debts — including mortgages, student loans, credit card debts and court judgments — as income, along with 100% withholdings of that "income" in informational returns to overcome internal IRS controls and induce the IRS to issue undeserved refunds.
Sellers personally created and submitted to the IRS 1099-OIDs that were fraudulent on their face. Her co-conspirators would then prepare and submit fraudulent returns seeking massive refunds, in one case more than half a million dollars on a single return.
The conspiracy resulted in the submission of at least 22 returns requesting fraudulent refunds totaling at least $3.4 million from the IRS.
In 2011, the U.S. Attorney's Office in the Northern District of Florida filed to enjoin Sellers from promoting her fraud on her website. In retaliation, Sellers filed a false lien against the then-U.S. attorney and a Department of Justice tax attorney who was leading the civil action.
Three years later, she was indicted on charges of tax fraud and for filing a false lien and arrested. In January 2015, Sellers was placed on house arrest with an ankle monitor, pending trial. In May 2015, Sellers was granted permission by her probation officer to leave her home to get her hair done in preparation for her pretrial hearing a few days later. The next day, Sellers cut off her monitor and absconded. She was not found until more than eight and a half years later in New Mexico.
Sellers had pleaded guilty to failing to appear for sentencing in her previous federal counterfeiting case in 2002. In that case, she was apprehended living under a false name in Mississippi.
She faces up to 23 years in prison. Sentencing is May 22.
