Fraud from the ground up; coding crook; and the nominees are; and other highlights of recent tax cases.
Jacksonville, Fla.: Preparer Elizabeth M. Jordan, 52, and her daughter, Dolores Youmans, 30, have pleaded guilty to aiding and assisting others with the filing of fraudulent returns.
According to the plea agreements, Jordan worked as a preparer for about 28 years and since 2011 was owner and operator of a business that offered prep services for clients. Jordan, Youmans and others prepared individual income tax returns and reported false information, including false deductions, false claims for education and other credits, and false claims of business expenses.
Jordan pleaded guilty to preparing and filing a fraudulent 2011 return in which she represented that the taxpayer owned a business with no income and $34,755 in expenses. She also represented on the return that the taxpayer had $4,000 in education expenses and was entitled to an education credit of $1,000. In fact, the taxpayer was a wage-earning employee of a corporation who had not operated a business in 2011 and had not incurred any education expenses that year.
After Jordan filed the return, the IRS issued a refund of $10,021 to the taxpayer. In the absence of the false statements and other improperly claimed deductions and credits, the taxpayer would have been entitled to a refund of $533.
Youmans pleaded guilty to preparing and filing a fraudulent 2012 return on which she represented that the taxpayer had a business with no income and $36,895 in expenses. She also represented on the return that the taxpayer had $4,000 in education expenses and was entitled to an education credit of $1,500. In fact, the taxpayer was a wage-earning employee of a corporation, had not operated a business in 2012 and did not incur any education expenses during that year. She further represented that the taxpayer had bought 5,255 gallons of gasoline and was entitled to a $962 fuel tax credit. Although the taxpayer was a truck driver, the employer had paid for all of the fuel and the taxpayer was not entitled to the credit.
After Youmans filed the return, the IRS issued a refund to the taxpayer of $16,469. The taxpayer would have been entitled to a refund of $5,182.
Jordan and Youmans each face a maximum of three years in federal prison. A sentencing date has not yet been set.
Glen Allen, Va.: Bookkeeper Edward Prestes, 48, has been sentenced to 20 months in prison for a fraud that caused a loss to the IRS of more than $3 million.
According to court documents, Prestes operated a conspiracy to evade paying income and employment taxes to the IRS for laborers working for various construction companies by paying such laborers more than $9.1 million “under the table.”
From 2011 through 2013, Prestes was an agent for Virginia American Contractors, Elson Contractors, Proactive Services, Positive Solutions and Service Contractors — nominee corporations that all used the same post office box mailing address. Each corporation had a separate bank account in which Prestes was an authorized signatory.
According to the court documents, after various construction companies made regular payments to the nominee corporations, Prestes would distribute the funds from the nominee corporations to the laborers, making these payments by both cash and check and withholding no income or employment taxes. He also issued no W-2s or 1099s to the laborers, nor did he file quarterly returns or yearly income tax returns for the nominee corporations.
At the end of each year, the construction companies issued 1099s to the nominee corporations and deducted the payments.
According to the court documents, from 2011 through 2013, the construction companies paid over $9.2 million to the nominee corporations. Prestes then paid the laborers approximately $2.8 million in cash and $6.3 million in checks. Prestes kept as a commission approximately 2 percent or 3 percent of the funds he received from the construction companies.
San Antonio: Consultant Rodney Lyle Roberts has been sentenced to 18 months in prison for preparing false returns.
According to court records, Roberts, who was found guilty in October, prepared false and fraudulent income tax returns by failing to report his income for tax years 2010, 2011, 2012 and 2013; he provided software consultant work under the name Rod Roberts.
Roberts said he received zero income, when in fact he had an income totaling more than $380,000 for the tax years in question.
Roberts was also ordered to pay $143,590 restitution to the IRS and to be on supervised release for a year after completing his prison term.
McClelland, Iowa: Businessman Michael Collins, 49, has pleaded guilty to tax evasion.
According to documents and information provided to the court, Collins was part-owner of a real estate development firm that earned significant income in 2006. He received some $289,000 in income that year but did not report it on his individual income tax return.
In 2008, the IRS contacted Collins regarding the unreported income and Collins filed an amended return reporting the income and reflecting a tax due of more than $100,000. He did not pay that tax liability, however.
Since 2006, Collins also operated an excavating and trucking company that generated more than $5.5 million in gross receipts. To evade payment of his outstanding tax liability, Collins registered the business as well as its bank accounts in the name of nominees, used nominee entities to conceal over $5 million in gross receipts from the business, filed fraudulent corporate tax returns that listed nominees as the owners of the business, and paid his personal expenses using the business’ unreported income.
He also filed documents with the IRS claiming to have no gross business receipts for the company and falsely told IRS employees that his only source of income was unemployment benefits.
He admitted to causing a tax loss of more than $250,000. Sentencing is May 11, when Collins faces a maximum of five years in prison. He also faces a period of supervised release, restitution and monetary penalties.
