If You’re Already in Prison… Why Not?

While serving time in a Tennessee penitentiary, inmate Larry Steven Covington, Jr. pled guilty to charges of conspiring to defraud the United States.

A second inmate, James Glenn Collins pleaded guilty to a similar scam in 2014, and it is said that he taught Covington how to work the scheme.

Records show that Collins obtained a roster of inmates that included personal identifying information and used it to file hundreds of tax returns claiming refunds.  Most of these inmates had been unemployed for years and some had never worked a legal job in their adult life.

The two requested to have the refunds put on a debit-style card called Green Dot cards, which can be bought at retailers and are also used throughout the prison system to pay for contraband, transfer money or conduct transactions (mostly illegal) with people on the outside.  All they need is a contraband cellphone to use the Green Dot card.

Although the IRS rejected over $1.8 million in claimed refunds, it paid out $163,778 to Covington and $150,465 to Collins.  Both men had help from people outside the prison including Covington’s mother.

Collins was still in prison and given an additional 84 months to serve. Covington is on probation and scheduled to be sentenced in October.

The Old IRS Phone Scam Has a New Twist

The IRS has issued a warning about a new telephone scam. In previous warnings, the IRS has said that they will not call over the phone but send notices through the mail.  The scammers have caught on to this warning and now when they call, they tell the victim that they were sent two certified letters but they were returned as undeliverable.  The callers then threaten the victim with arrest if payment is not made immediately through a prepaid debit card.  The scammer also tells the victim that the purchase of the card is linked to the Electronic Federal Tax Payment System (EFTPS), which it is not.

The EFTPS is a free government system for paying taxes electronically, it does not require a purchase of a prepaid debit card. Callers are also “advised” not to contact their tax professional or the IRS.

If you receive a call from someone claiming to be from the IRS and demanding immediate payment, hang up immediately and call the IRS directly at (800) 829-1040.

Owner of Sneakerz Inc. Tries to be Sneaky with the IRS

James Coleman, owner of Sneakerz, Inc, who operated a sports bar in Albuquerque, NM was sentenced to 18 months in prison, three years of supervised release and ordered to pay $1,045,939 in restitution to the IRS. Coleman was charged in 2014 with a 4-count indictment for tax evasion and filing false tax returns.

For the tax years 2008-2009, Coleman underreported his income on his federal corporate returns, thereby evading $332,640 in taxes and did not file individual returns for those years claiming he received no business or dividend income.

Helpful Tips to Know About Gambling Winnings and Losses

Taxpayers must report all gambling winnings as income. They must be able to itemize deductions to claim any gambling losses on their tax return.  See below for information provided directly from the IRS:

Taxpayers who gamble may find these tax tips helpful:

  1. Gambling income. Income from gambling includes winnings from the lottery, horseracing and casinos. It also includes cash and non-cash prizes. Taxpayers must report the fair market value of non-cash prizes like cars and trips to the IRS.
  2. Payer tax form. The payer may issue a Form W-2G, Certain Gambling Winnings, to winning taxpayers based on the type of gambling, the amount they win and other factors. The payer also sends a copy of the form to the IRS. Taxpayers should also get a Form W-2G if the payer withholds income tax from their winnings.
  3. How to report winnings. Taxpayers must report all gambling winnings as income. They normally should report all gambling winnings for the year on their tax return as “Other Income.” This is true even if the taxpayer doesn’t get a Form W-2G.
  4. How to deduct losses. Taxpayers are able to deduct gambling losses on Schedule A, Itemized Deductions, but keep in mind, they can’t deduct gambling losses that are more than their winnings.
  5. Keep gambling receipts. Keep records of gambling wins and losses. This means gambling receipts, statements and tickets or by using a gambling log or diary.

See Publication 525, Taxable and Nontaxable Income, for rules on gambling and Publication 529, Miscellaneous Deductions, for more information on losses. Publication 529 also lists specific types of gambling records a taxpayer may want to keep. Download and view IRS publications on IRS.gov/forms at any time.

Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional IRS Resources:

Tax Topic 419, Gambling Income and Expenses
Interactive Tax Assistant, How Do I Claim My Gambling Winnings and/or Losses?
IRS Tax Map, Gambling Winnings and Losses

Florida Man Finds a Window to Evade Paying Taxes

Thomas Daly, of Fort Lauderdale, FL, pled guilty on June 1, 2017 to tax evasion. According to court records, Daly admitted that from 2002-2015 (with the exception of 2007), he avoided paying taxes on $1.5 million in income by not filing taxes. In 2009, the IRS sent Daly a notice of intent to levy his wages for failure to pay taxes.  At that time, Daly worked for a company selling hurricane-resistant windows.

In an effort to impede the IRS’s levy, Daly established his own business, South Florida Home Marketing Inc. (SFHM), and opened a bank account in the name of the company.  He then changed his employment status from employee to independent contractor, thereby allowing his employer to pay SFHM directly and attempts to levy his wages were prevented.

From August 2009 through April 2017, Daly used the funds from the account of SFHM to pay for personal expenses, including: rent, international travel, his girlfriend’s cosmetic surgery and a boat. He would classify these expenses as business expenses on the memo lines of the checks.  Daly admitted that his actions caused the IRS a loss of more than $351,000.

At his sentencing on Aug. 18th, Daly faces a maximum sentence of 5 years in prison, supervised release and restitution and monetary penalties.

Your IRS Questions Answered Here…

Question: I just received a letter form the IRS informing me they want to audit my 2015 income tax return. I really didn’t need this right now. What should I do?

 

Answer: First, take a deep breath knowing there is expert help available to you. As part of the IRS’s audit process they’ll ask you dozens of very innocent sounding questions, however many of these can be invasive as well as intrusive.  The answers to which can “seal” your fate with the IRS auditor. But there is a “right way” to answers these questions. The IRS’s mission is to determine the accuracy of your tax return and they will leave no stone unturned to accomplish this.  We have found that many taxpayers who decide to handle an IRS audit themselves wind up with a substantial bill owing the IRS thousands of dollars. Auditors are trained to obtain information from you that in a lot of cases is not required under the law. They get away with this because most people fear them and don’t know their rights.

Our clients generally NEVER meet or speak with the IRS. We handle everything for you so you don’t have to take time away from your job or business to deal with all of the IRS’s paperwork. Simply forward your audit letter to us and we’ll handle the rest.   Don’t let them walk all over you. We know the law.  We know your rights. We can help!

Illinois Woman Gets Jail Time for Filing False Tax Returns

Shameka Carr, formerly of Poplar Grove, Il, was sentenced to 87 months in prison, three years supervised release and ordered to pay $365,764 in restitution to the IRS.  From 2012 to 2014, Carr used stolen IDs requesting refunds in the form of prepaid debit cards and refund checks be mailed to addresses she controlled. In court, Carr admitted to the intended loss to the IRS in the amount of $1,026,284.

Prominent Philadelphia Attorney Can Add IRS Indictment to His Wikipedia Page

Husband and wife attorneys, Edward “Ted” Millstein and Susan Halpern from Rittenhouse, PA, were indicted on charges of willfully attempting to evade taxes.

Prosecutors state that Millstein concealed their assets, lied to IRS agents about their income, and put money and property in the names of others to avoid paying taxes.

It’s not the first time the couple has been in trouble for failing to pay taxes.  Both Millstein and Halper were charged for failing to pay taxes in 2010 in the amount of $143,473.35 and in 2011 in the amount of $153,560.69.

The IRS filed liens against the couple; in 2013, a lien was filed by the feds in the amount of $151,459 and the State of PA filed a state tax lien in the amount of $28,715.

If convicted on all charges, Millstein could face a prison sentence of up to seven years, three years’ probation and $450,000 in fines.  The max sentence for Halpern would be two years in jail, one year probation and $200,000 in fines.

Minnesota Man Tries to Convince the IRS “I’m Not Dead Yet”

It took a U.S. Senator, Amy Klobuchar from Minnesota to finally reverse the false declaration that Adam Ronning, 33, was deceased after he tried for 29 years.

The error started when Ronning was 4 years old, and his mother received a letter stating that she could no longer receive child support because somehow the IRS declared her son was deceased.  The IRS blamed the error on a computer glitch but never rectified the situation.

Ronning states, “They’ve never been able to prove that I’m dead.  It’s always me proving that I’m still here.”

After Ronning filed his 2009 tax returns, the IRS gave him only half of his refund because they showed him as deceased.  Ronning continued to file his taxes every year but never received the refund due him and spent hours on the phone with the IRS, on hold, trying to speak to supervisors only to be told it was a problem with the Social Security office.

After finally receiving a letter from the Department of Treasury, Ronning is hoping to receive an estimated amount of $20,000 that the IRS owes him in tax refunds.

A “60 Minutes” investigation found that approximately 9,000 Americans erroneously declared dead each year.

Businessman Who Stole Money from NFL Players Gets Sacked by the IRS

A businessman from High Point, NC, Michael Rowan, who provided financial services to professional athletes, including NFL players was sentenced to 65 months in prison for filing a false 2011 tax return and wire fraud.

Rowan would contact prospective NFL players in college offering them financial and wealth management services.  Upon being drafted by the NFL, Rowan would offer his services for an annual fee of $15,000 to $50,000 and have them sign agreements that allowed him access to their bank accounts.

Instead of only making transactions that his clients authorized, Rowan transferred more than $2.9 million into his own personal accounts without the player’s knowledge.  From 2009 to 2013, Rowan failed to report the embezzled funds on his federal tax returns.  This caused a net loss of more than $479,000 to the IRS.

In addition to jail time, Rowan will have one year supervised release and ordered to pay restitution to his victims in the amount of $2,960,295 and $479,352 to the IRS.