Tax Fraud Blotter: Fakin’ it
Potluck; what a decade; nice work, Genius; and other highlights of recent tax cases.
St. Louis: Preparer Tiffany McAllister, 44, has pleaded guilty to three counts of tax fraud.
McAllister began operating a tax prep service in 2009 and continued the business through the 2019 tax year. During that time, she registered two companies with the state of Missouri and obtained employer identification numbers for them through the IRS even though she never transacted business nor employed anyone through either company. Nevertheless, from 2014 through 2016 McAllister prepared fraudulent returns claiming that she and some of her clients received wages and had taxes withheld with respect to the fictitious companies.
McAllister also prepared returns for clients that fraudulently claimed wages and withholdings from other fictitious businesses, self-employed business losses and educational expenses to increase the federal tax refunds her clients obtained.
IRS investigation revealed that McAllister received payment for assisting in the fraudulent preparation of 39 returns for the tax years 2014 through 2017.
She admitted that she created federal tax losses of $920,854.
Sentencing is June 30.
Pittsfield, Massachusetts: Resident Jacob Sweener has pleaded guilty to marijuana and tax offenses.
Sweener pleaded guilty to one count of conspiracy to distribute marijuana, one count of possession with intent to distribute marijuana and two counts of filing a false return.
He admitted that from 2013 to January 2017 he conspired with others to distribute marijuana; 41 pounds of marijuana and more than $69,000 in cash were seized during a search of his home in 2017. Sweener also filed false income tax returns for 2014 and 2015 by substantially underreporting his income by more than $300,000 and failing to pay more than $90,000 in federal income taxes.
Sentencing is June 21. Filing a false return can lead to up to three years in prison, three years of supervised release and a fine of $250,000. Conspiracy to distribute marijuana and possession with intent to distribute marijuana each provide for up to five years in prison, a lifetime of supervised release, a fine of $250,000 and forfeiture.
El Cajon, California: Business owner David Daughtrey has been sentenced to 18 months in custody on charges of bank fraud and tax evasion.
In July, he pleaded guilty to one count of conspiracy to commit bank fraud and tax fraud, and one count of filing a false tax return. His crimes spanned 2006 to 2016: For several years, he evaded income tax by underreporting his income and orchestrated a scheme to fraudulently obtain a mortgage for a $1.8 million residence using a third party. The federal tax loss in this case totaled $1,053,989.63.
Daughtrey directed another individual to submit a mortgage application to a national bank to purchase a $1.8 million, five-bedroom residence, and to falsely claim that the funds used as down payment belonged to, and the residence would be used by, the third party. In reality, Daughtrey provided the funds and the home was intended to be Daughtrey’s primary residence. He also later submitted a false hardship letter on behalf of the third party to modify the terms of the loan on the home.
Over several years, Daughtrey conspired to commit tax evasion by filing returns listing substantially less income than he earned. Daughtrey’s 2012 return, for example, omitted at least $498,612 in income. Daughtrey failed to report his total income in tax years 2013 to 2015 and did not file timely returns for subsequent years.
He agreed to pay $1,053,989.63 in restitution to the IRS, which includes the tax loss plus penalties and interest.
Dallas: A federal court has permanently enjoined preparer Keysha Briseño from preparing federal income tax returns for others.
The complaint alleged that Briseño continually and repeatedly included false business losses and fabricated business expenses on some of her clients’ returns. According to the complaint, she and her spouse allegedly own and operate a prep business known under the names Tax Genius, Tax Genie and K&J Tax Service. The complaint alleged that Briseño controls Tax Genius and has prepared more than 4,200 tax returns between 2017 through 2019, more than a quarter of which contained fabricated business losses. The complaint further alleged that after the IRS revoked her federal return preparer identification in 2012, Briseño continued to prepare returns using her sister’s preparer ID.
She consented to the injunction that permanently bars her from acting as a federal preparer either as herself or doing business as Tax Genius, Tax Genie or K&J Tax Service. The injunction further bars her from assisting or advising anyone in connection with any tax matter and from having an ownership interest or working for any other entity that prepares returns or represents clients before the IRS.
Atlantic Highlands, New Jersey: Construction exec Kathy Manna, formerly of Lavallette, New Jersey, has pleaded guilty to one count of making and subscribing a false return, admitting that she underreported income on her personal return.
Manna operated Manna Construction Group, which provided landscaping and construction services. She admitted that for tax years 2010 through and 2013 she underreported the gross receipts or sales of the company on her Schedule C.
The government alleges that the tax loss was $124,480.
The count of making and subscribing a false tax return carries a maximum of three years in prison and $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is July 28.
Oreland, Pennsylvania: Landscaping exec D. Adam Menko has admitted to evading more than $84,000 in taxes.
Menko, previously charged with one count of tax evasion, owned and operated D. Adam Menko Landscaping, a landscape and concrete construction business. During tax years 2013 through 2017, he failed to maintain complete and accurate business records to determine income and expenses. Instead, Menko used a check cashing agency to cash income receipt checks and paid his business expenses with cash. Though he knew he had earned income in tax years 2013 through 2017, Menko failed to file personal income tax returns for those years.
Menko, who evaded some $84,061 in federal taxes, could face five years and a $250,000 fine.
New Orleans: Preparer Danielle Franklin has been sentenced to four years of probation for assisting in the preparation of a fraudulent return.
Franklin prepared a return in 2014 for a client of Cutting Edge Income Tax, in Metairie, Louisiana, that included fraudulent business losses. Franklin also admitted to other relevant conduct, which included preparing at least 31 false 1040s for her clients from 2013 through 2016. These fraudulent tax filings caused a federal tax loss of $215,296.43.
In addition, Franklin’s 2013 through 2016 U.S. individual/joint returns reported inflated withholdings or false estimated tax payments, or both. These misstatements caused an additional tax loss of $14,277.
Franklin was also ordered to pay $229,573 in restitution to the IRS.
Scottsdale, Arizona: Kevin Scott Wynn has been sentenced to 46 months in prison and fined $7,500 after being found guilty in 2019 of tax evasion and failure to file returns. The sentence included an upward adjustment for obstruction of justice.
Wynn withdrew $1.5 million in cash from his business bank account in 13 transactions in 2020, and subsequently cut his ankle monitor and fled Arizona before a sentencing hearing. Police arrested him in Mexico City in August.
After prison, Wynn will be on supervised release for three years. He will also be required to pay more than $700,000 in federal back taxes.