Scrap Metal Company Owner Tries to “Steel” from the IRS

Joseph Lee Scott Deardorff, of Kansas City, MO, owner and operator of Totally Recovery and Recycling, LLC, was indicted in October, 2016 on charges of willfully and intentionally evading taxes and hiding assets from the IRS.

From 2010 to 2012, Deardorff had almost $500,000 in taxable income but failed to file accurate returns.

In order to conceal his true income from the IRS, Deardorff cashed checks he received from the sale of scrap metal at various places such as gas stations and check cashiers.  The amount of the checks he cashed from 2010-2012 totaled $1.9 million. When he sold the scrap metal, he requested to be paid in checks for amounts under $1,500, making it easier to cash the checks.

Deardorff used the cash to purchase multiple properties, both for business and investment purposes, multiple Corvettes, and equipped his tow trucks with high end GPS units, high-end speakers, DVD and CD players.

In addition, Deardorff paid all of his employees in cash and filed to file any W-2 for any of his employees from 2010-2012.

Former IRS Revenue Officer Tries to Outsmart His Old Employer

A former revenue officer for the IRS, Henti Lucian Baird of Greensboro, NC, pleaded guilty in October, 2016 to one count of tax evasion and one count of corruptly endeavoring to impede the due administration of the internal revenue laws.

Baird worked for the IRS for 12 years prior to starting his own company, HL Baird Tax Consultants.  It operated from 1984 to 2014, and Baird advertised himself as a specialist in handing IRS problems.  During that time, he created over 10 nominee bank accounts in the names of his children to evade paying his own federal income taxes.  Baird would transfer hundreds of thousands of dollars into these nominee accounts, filing a false Chapter 13 bankruptcy petition, submitting a false Form 433-A, and then transferring the funds out of the nominee accounts to avoid impending IRS levies. Baird used the funds to pay the mortgage on his 4,300 sq. ft. home, his timeshare in Florida and payments on his BMW.

In addition, Baird used his stepson’s identification without his knowledge to obtain Preparer Tax Identification Number (PTIN), which used to prepare over 900 tax returns for his clients as well as his own.

Baird will be sentenced in January, 2017 and faces a total of 8 years in prison and has agreed to pay full restitution to the IRS, which currently totals over $477,000 and will continue to accrue interest and penalties until paid in full.

Washington State Accountant Sentenced for Tax Fraud

Roger Stadtmuller of Spokane, WA received a 15-month prison sentence and ordered to pay $400,000 in restitution to the IRS on charges of tax fraud. Stadtmueller filed false tax returns for his two businesses and under reported his income by $1.8 million.  His attorney requested that he be given home detention but the judge denied the request, stating that “Allowing Stadtmuller to spend time in his multi-million dollar home wouldn’t be a just punishment.”

Wisconsin Woman Scammed by Fake IRS Agent

A woman from Appleton, WI was taken for over $5,000 by a man in a uniform posing as a law enforcement agent, who threatened to arrest her if she didn’t pay what he claimed were back taxes.

Prior to the man showing up at her door, the victim received repeated phone calls from someone claiming they were from the IRS and that she owed them money.  When the fake agent knocked on the woman’s door, he produced paperwork that looked like a warrant for her arrest.

Fearing she would be taken to jail, she followed the man’s instructions and purchased and activated over $5,000 in iTunes gift cards and turned them over to the scammer.

Lien vs. Levy

A lien is not a levy.  There is a common misconception between the two.  A lien, or Notice of Federal Tax Lien, secures the governments interest in your property when an individual fails to pay their tax obligations.  While, a levy is when the property is seized or taken to pay the liability.  If you have an outstanding lien and do not come to an agreement with the IRS, they can levy, seize and sell your property or any property that you have an interest in.

There is a lien on my house

A common misconception is that a Federal Tax Lien is on your house.  Taxpayers often call our office and state that “the IRS has filed a lien on their house.”  This is partially true, but is under inclusive.  The lien is not only on your house, but it’s on all real property that you have an interest in (current or future interest), as well as all other property that you have an interest in.  This can include but is not limited to: bank accounts, investment accounts, retirement accounts, automobiles, equipment, ownership of business entities, personal belongings, etc.  Thus said, the Federal Tax Lien is on everything that you currently own, or have a future interest in.

If you were to sell any of those properties, the proceeds are supposed to flow to the IRS in order to pass the property with clear title.  However, lien searches are rarely done with the exception of real property transfers, so the few occasions that the IRS can take the money in a sale or transfer proceeding, are when a taxpayer sells a piece of real property.

If you have a Federal Tax Lien filed against you and you are thinking of selling or transferring property of any kind you must be weary that the IRS could step in and take the proceeds of the sale up to the amount of the Federal Tax Liens.

Purchasers of property should also be cognizant of Federal Tax Liens against the seller as you may be purchasing property without clear title.  In some instances the IRS has stepped in and attempted to seize the property after conveyance.

Owner of The Sherwood Fund is the Opposite of Robin Hood

David Williams of Studio City, CA was sentenced in October, 2016 to 15 years in prison on charges of tax evasion and wire fraud.

Williams, a licensed securities dealer and investment advisor, was the president of Morgan Peabody, a brokerage and investment firm.  In the midst of his May 2015 jury trial, Williams pleaded guilty to three counts of wire fraud and two counts of tax evasion.  As part of his plea agreement, Williams admitted to directing Morgan Peabody representatives to sell securities in a fake fund he created called the Sherwood Securities Investment Fund LLC, which they were told was a real estate investment fund, which offered a 9% annual return on investments.

Of the $3.75 million that investors put into his “fund”, Williams used a majority of the money to pay for personal expenses, including expensive vacations and a $50,000/month lease on his $6 million personal residence.

Williams admitted to failing to file tax returns for 2007 and 2008, and failed to report $2.3 million of income he scammed from investors.

In addition to his prison term, Williams is also ordered to pay restitution to his victims in the amount of $5.125 million, $777,881 to the IRS and $258,940 to the California Franchise Tax Board.

IRS Lists Tax Practitioners (CPA’s, EA’s, Attorney’s) Who Have Been Disciplined

If you are searching for representation before the IRS you should certainly do your homework to find the correct practitioner.  It makes sense – everyone researches through Yelp or Google reviews which restaurants are the best, so why not do some research on the representative?

The IRS now offers a convenient way to check the disciplinary history of representatives.  The agency’s Office of Professional Responsibility (OPR) now elicits a lookup chart in an Excel spreadsheet that shows censures of practitioners for Circular 230 misconduct, as well as suspensions and disbarments.

Circular 230 outlines requirements, duties, restrictions, and disciplinary causes of action for professionals who want to practice before the IRS.

Before this release individuals had to wade through announcements of discipline published in the Internal Revenue Bulletin on IRS.gov.

The document attached above contains 25 years of more than 3,000 misdeeds – censures, suspensions, disbarments, and assorted practice restrictions, such as permanent injunctions and denials of limited practice to unenrolled tax return preparers due to misconduct.

 

Celebrity Federal Tax Lien: NeNe Leakes

The “Real Housewives of Atlanta” cast member NeNe Leakes, whose real name is Linnethia Monique Leakes, recently had a Federal Tax Lien filed against her in the amount of $824,366.01 in unpaid taxes for the 2014 tax year.

 

As the Federal Tax Lien is of public record, this gives us the opportunity to review some facts about tax lien.

Date of Assessment.

According to the FTL above, the Date of Assessment was November 23, 2015.  This means on that date she either filed her 2014 tax return, or was assessed an additional amount upon further examination of her tax return by the IRS.  The Date of Assessment is the date which starts the Collection Statute for IRS collection – the IRS has 10 years from the later date of when the return was filed or there was a later assessment on the given return, to collect on that liability.

Late Filing Penalty.

NeNe may have filed her return late, given the Date of Assessment, which means that she may be subject to penalties for late filing.  The IRS has listed 8 facts about Penalties which may apply in NeNe’s case:

  1. Two penalties may apply.  If you file your federal tax return late and owe tax with the return, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.
  2. Penalty for late filing.  The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.
    Minimum late filing penalty.  If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.
  3. Penalty for late payment.  The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.
  4. Combined penalty per month.  If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for those two penalties that month is 5 percent.
  5. File even if you can’t pay.  In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return and pay as much as you can. Use IRS Direct Pay to pay your tax directly from your checking or savings account. You should try other options to pay, such as getting a loan or paying by debit or credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up an installment agreement with the IRS using the Online Payment Agreement tool on IRS.gov.
  6. Late payment penalty may not apply.  If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.
  7. No penalty if reasonable cause.  You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time. There is also penalty relief available for repayment of excess advance payments of the premium tax credit for 2014.

Unpaid Balance of Assessment. 

The FTL for NeNe indicates that there is an unpaid balance of $824,366.01.  This does not necessarily mean this was the amount due on her tax return; this is simply the balance between tax owed and what she had paid when the return was filed.  Thus said, her current balance could now be far in excess of the unpaid balance of assessment.  Referencing the notes above, she could also have failure to file penalties and failure to pay penalties which can accrue to 25% each.

Celebrity Federal Tax Lien: TY DOLLA $IGN

The Internal Revenue Service recently filed a Federal Tax Lien against Tyrone William Griffin, Jr. known professionally as Ty Dolla $ign, an American rapper, singer, songwriter and record producer from Los Angeles, California.

The IRS filed the Federal Tax Lien for 3 separate years:

  • 2011 – $16,617.05;
  • 2013 – $54,626.91; and
  • 2014 – $109,725.39.

The IRS, claiming he owes roughly $180,969.35 will certainly pursue its claim against Ty Dolla $ign if he does not soon reach an agreement with the IRS.