E-file evasion; a.k.a. a CTR scam; fancy cars and a dead mom; and other highlights of recent tax cases.
Minneapolis: Tax preparer Sue Yang, 48, of Circle Pines, Minnesota, has pleaded guilty to federal tax violations.
Yang, who operated a tax preparation business, participated in IRS e-file and was assigned an EFIN. In 2010, the IRS conducted a periodic suitability review of Yang and found that he had failed to file a 2009 personal income tax return and that he owed substantial federal income taxes from tax years 2005 through 2008. The IRS warned Yang repeatedly about potential sanctions, including suspension of his EFIN or expulsion from the e-file program.
In August 2012, Yang was suspended from the e-file program. He then operated surreptitiously as an e-filing preparer, enlisting others to obtain EFINs that he used to e-file more than 26,000 returns for clients.
From 2018 through 2021, Yang received some $765,000 from working as a tax preparer but reported no income related to his prep business. The combined federal tax loss was some $214,297.
He pleaded guilty to one count of filing a false federal income tax return and one count of corruptly impeding and obstructing administration of internal revenue laws.
Houston: Tax preparer Fabrice Mahinga has admitted to willfully preparing a false joint 2017 individual income tax return.
He admitted that from 2016 to 2018 he operated Kennedy Tax Service and that he often claimed fake Schedule C items, education and fuel tax credits on the returns he prepared. In 2019, he helped prepare a return that should have resulted in a tax owed of $42. Mahinga added to the return a false Schedule C and false credits that resulted in a false claim for a federal income tax refund of $4,257.
Mahinga took responsibility for $270,612 of loss to the IRS. He has agreed to pay $182,212 in restitution. Sentencing is Feb. 17 when Mahinga will face up to three years in prison and a $250,000 fine.
Central Islip, New York: A federal jury has returned a guilty verdict on all five counts of an indictment charging Lorraine Pilitz, a.k.a. Lorraine Christie and Lorraine Storms, with illegally structuring financial transactions, corruptly obstructing the IRS and filing false returns.
Pilitz owned and operated several automobile-related businesses on Long Island. Between 2011 and 2013, she structured cash deposits to avoid required currency transaction reporting filings, depositing cash amounts just under $10,000 and hiding hundreds of thousands of dollars from the IRS.
She also diverted hundreds of thousands of dollars of business checks into her and her family's personal bank accounts, maintained "off-the-books" payrolls, failed to file personal and corporate returns and filed returns that severely underreported her income.
Lincoln, California: Vladimir Alex Avdeyuk has been sentenced to a year and a day in prison and ordered to pay $467,057 in restitution for tax evasion and corrupt endeavor to obstruct the administration of the internal revenue laws.
Avdeyuk operated a sole proprietorship in construction work, particularly repairs and reconstruction after fires. He repeatedly filed false returns and took numerous steps to obstruct an IRS audit. He filed 1040s for himself and his spouse that substantially underreported his business income for tax years 2012, 2013, 2015 and 2016; he should have owed at least $467,057 in additional tax for those years.
He also obstructed the federal audit of his returns for 2012 and 2013 by submitting multiple false documents to the IRS and lying to agents on multiple occasions. In a 2017 interview, he admitted that he had misidentified deposits, submitted a false promissory note, created a false gift letter and was actually the donor, created a false loan application and knowingly omitted business income.
About three years later, he filed another false return, a 1040 for 2016 that he backdated to April 18, 2016 (forgetting that the deadline for the return would have been April 2017, not 2016). On the C-EZ appended to that return, Avdeyuk reported that his business had gross receipts of $23,314, which he knew to be falsely low. If he had reported his true gross receipts and expenses, his additional tax due would have been $84,231.
Las Vegas: Tax preparer King Isaac Umoren, 41, has been sentenced to 13 years and three months in prison for filing false returns, aggravated ID theft, wire fraud, money laundering and impersonating an FBI agent.
Umoren owned and operated Universal Tax Services, a prep business that he used to engage in two schemes.
From 2012 through 2016, he prepared and filed federal returns for clients that included false deductions and fictitious businesses to inflate refunds. At times, Umoren used the names and PTINs of other UTS employees without their knowledge or consent and required clients to use a refund anticipation check program that he then used to secretly take fees out of the refunds without clients' knowledge.
In 2016, Umoren posed as an FBI agent, wearing a fake badge and tactical gear, and drove to a client's house with police lights attached to his vehicle to demand payment of a prep fee.
Also in 2016, he attempted to sell UTS. To induce potential buyers to purchase the company at an inflated price, he provided fraudulent documents as well as the stolen tax and personal ID information of some 12,000 taxpayers who were not UTS clients. Eventually, Umoren succeeded in inducing a victim to purchase UTS for some $3.8 million.
Umoren, who previously
McMinnville, Oregon: Investment advisor James Millegan has been convicted of tax evasion in connection with evading income taxes by hiding his money in multiple bank accounts and submitting false financial statements to the IRS.
Millegan owned and operated J.W. Millegan Inc., a small, commission-based investment advisory business that served clients in the Portland and Salem, Oregon, areas. From 1996 to 2016, the firm was his only significant source of income.
From July 2009 through September 2016, he evaded $2.5 million in income taxes, filing returns each year reflecting his true income, which sometimes exceeded $1 million, and the taxes he owed on that income, which typically ranged from $125,000 to $350,000. Despite these returns, Millegan often failed to pay the IRS.
Described as a prolific spender by personal assistants hired to pay his bills, he used the proceeds of his tax evasion to fund a lifestyle that included a $4.5 million home, a $1.3 million coastal home, Rolls Royce and Bentley automobiles, equestrian expenses like stabling and lessons, and an attempt to establish an equestrian competition center and resort in Oregon. Millegan also bought a classic 1938 Rolls Royce touring car, spent $800,000 restoring it and showed it at premier car shows in the U.S., Great Britain and Europe.
He concealed income from the IRS by transferring it to six bank accounts he controlled, including transferring $1.4 million to the bank account of his deceased mother's trust, which he used to pay his personal expenses. From July 2009 through September 2016, Millegan transferred $3.7 million to these accounts. He also submitted false financial statements to the IRS.
Sentencing is April 3. Tax evasion is punishable by up to five years in prison. He also awaits trial on other charges.
Gulf Breeze, Florida: Former attorney William Cater Elliott has been sentenced to a year in prison after pleading guilty to three counts of tax evasion for 2015, 2016 and 2017.
Elliot was sole proprietor of William C. Elliott Associates PA, a law firm.
He was also ordered to pay $211,073 in restitution and $116,896.25 in cost-of-prosecution fees. Elliott's imprisonment will be followed by three years of supervised release, with the first three months to be served on home confinement.
