PENNSYLVANIA ANNOUNCES 2017 TAX AMNESTY DETAILS

Pennsylvania has announced the details of its new tax amnesty program. It will run from April 21 to June 19, 2017. Significant penalty and interest relief is available to all who participate.

 

The Amnesty Period

The Amnesty Period will run from April 21 through June 19, 2017.

 

The Amnesty Details 

Any tax administered by Pennsylvania that is delinquent as of December 31, 2015, is eligible for tax amnesty. Under the program, one-half of all interest and 100 percent of all penalties on eligible taxes that are delinquent as of December 31, 2015, will be waived for taxpayers who file tax amnesty returns and pay delinquent taxes and one-half the interest that is due within the amnesty period.

 

How to Participate

Delinquent taxpayers known to the Department should expect to receive notices inviting them to participate in the program by filing an online Amnesty Return and making payment. Taxpayers not receiving notices will be required to register and complete an online Amnesty Return which will include a line item summarizing tax owed for each newly-reported or amended period. In both cases, all missing or amended tax returns must be filed electronically (e.g., sales tax and employer withholding) or on paper no later than June 19, 2017. While returns due after December 31, 2015, are not eligible for amnesty, they must be filed and all taxes paid by June 19, 2017, in order to participate in the program.

 

Ineligible Taxpayers

A taxpayer under criminal investigation or the subject of a criminal complaint or pending criminal action for an alleged violation of any law imposing an eligible tax may not participate; nor may a taxpayer with a signed voluntary disclosure agreement for any period covered by the amnesty program or a taxpayer that participated in Pennsylvania’s 2010 amnesty program. A taxpayer who participates in the program is not eligible to participate in any future amnesty program.

 

No Early Birds—No Late Comers

Payments and delinquent tax returns must not be received electronically or postmarked prior to April 21, 2017, and pre-payment of half the interest prior to April 21 will not meet program requirements. Additional details will be provided prior to the start of the program. No extensions will be granted; all returns and payments must be in by June 19, 2017.

 

The Stick

If within two years after the end of the program a taxpayer that is granted amnesty becomes delinquent for certain periods in payment of any taxes that are due or in the filing of any required returns, the Department may assess and collect all penalties and interest waived through the amnesty program.

Finally, the Department may audit or investigate tax delinquencies reported or paid during the Amnesty Period, and when the program concludes a five percent non-participation penalty will be imposed on all eligible tax, penalty, and interest unpaid during the Amnesty Period.

IRS Revenue Officer Bites the Hand that Feeds Him

An IRS Revenue Office from Edison, NJ, James C. Brewer, pled guilty to 12 counts of filing or preparing false tax returns, 12 counts of wire fraud and one count of mail fraud in connection with a multi-year scheme to falsify his tax returns and the returns of others to inflate the amount of refunds.

Brewer failed to report income he received from an unauthorized tax preparation business, underreported the gross receipts earned from an Internet retail business and claimed false dependents on returns filed during a three-year period.  Brewer also claimed a tax credit for first time homebuyers which was  a fraudulent deduction. He also listed false dependents and deductions on tax returns he prepared for others, without their knowledge, in order to receive inflated refunds they were not entitled to. Brewer would then divert a portion of the client’s returns to himself, again without the client’s knowledge.

Brewer faces a maximum of 20 years in prison for each wire and mail fraud count, 3 years in prison for each tax fraud count.  Brewer has also agreed to pay restitution in the amount of $70,000 to the IRS, plus penalties, interest and fines.

IRS Insight: How Criminal Investigations Are Initiated

Criminal Investigations by the Internal Revenue Service are serious matters which require diligent deliberation and counsel.  This investigation could be sourced out to the US Attorney’s Office for prosecution at any time.  As you will see below, these investigations can be recommended by any number of means and taxpayers are often unaware that they are being investigated.  It is not uncommon for these investigations to take a year or two before they reach a prosecutors desk.  If for any reason you believe that you are being investigated criminally, contact our office for a free consultation.

Below the IRS has shed some insight as to how they initiate their criminal investigations:

Sources of Criminal Investigations for IRS Special Agents

Criminal Investigations can be initiated from information obtained from within the IRS when a revenue agent (auditor) or revenue officer (collection) detects possible fraud.  Information is also routinely received from the public as well as from ongoing investigations underway by other law enforcement agencies or by United States Attorneys offices across the country.

Preliminary Analysis and Investigation Approvals

Special agents analyze information to determine if criminal tax fraud or some other financial crime may have occurred.  Relevant information is evaluated. This preliminary process is called a “primary investigation.”  The special agent’s front line supervisor reviews the preliminary information and makes the determination to approve or decline the further development of the information.  If the supervisor approves, approval is obtained from the head of the office, the special agent in charge, to initiate a “subject criminal investigation.”  At this point, at least two layers of CI management have reviewed the ‘primary investigation’ material and determined there is sufficient evidence to initiate a subject criminal investigation.

Conducting a Criminal Investigation

Once an investigation is opened, the special agent obtains the facts and evidence needed to establish the elements of criminal activity.  Various investigative techniques are used to obtain evidence, including interviews of third party witnesses, conducting surveillance, executing search warrants, subpoenaing bank records, and reviewing financial data.

The special agent works closely with IRS Chief Counsel Criminal Tax Attorneys during the course of the criminal investigation.  This process ensures all legal aspects of the investigation and prosecution recommendation are correctly addressed.

Prosecution Recommendations by the Special Agent

After all the evidence is gathered and analyzed, the special agent and his or her supervisor either make the determination that evidence does not substantiate criminal activity, in which case the investigation is ‘discontinued,’ or the evidence is sufficient to support the recommendation of prosecution, in which case the agent proceeds with the preparation of a written report detailing the findings of violation of the law and recommending prosecution.  This report is called a ‘special agent report’ and it is reviewed by numerous officials, including:

1.  The agent’s front line supervisor, called the supervisory special agent
2.  A criminal investigation quality review team, Centralized Case Review;
3.  CI assistant special agent in charge
4.  CI special agent in charge.

If CI determines the investigation should be criminally prosecuted, a prosecution recommendation is forwarded to:

1.  The Department of Justice, Tax Division, (if it is a tax investigation) or
2.  The United States Attorney for all other investigations.

Each level of review may determine that evidence does not substantiate criminal charges and the investigation should not be prosecuted.

Prosecution 

If the Department of Justice or the United States Attorney accepts the investigation for prosecution, the IRS special agent will be asked by the prosecutors to assist in preparation for trial.  However, once a special agent report is referred to for prosecution, the investigation is managed by the prosecutors.

Conviction

The ultimate goal of an IRS Criminal Investigation prosecution recommendation is to obtain a conviction – either by a guilty verdict or plea. Approximately 3,000 criminal prosecutions per year provide a deterrent effect and signals to our compliant taxpayers that fraud will not be tolerated.

Owner of Toms River Accounting Business Convicted for Swindling Clients Out of Tax Refunds

A Toms River, NJ, woman was sentenced today to 37 months in prison for filing false tax returns and using her accounting business to cheat her clients out of their tax refunds, U.S. Attorney Paul J. Fishman announced.

Doreen Gentile, 62, previously pleaded guilty before U.S. District Judge Joseph H. Rodriguez to Count 2 and Count 27 of an indictment, charging her with mail fraud and filing a false income tax return. Judge Rodriguez imposed the sentence today in Camden federal court.

According to documents filed in this case and statements made in court:

Gentile owned and operated her accounting business, Doreen A. Gentile & Associates, LLC (DAG & Associates), out of her home in Toms River. Gentile admitted that as part of her scheme, she would show her clients a tax return that indicated that they had no tax or refund due, owed a minimal amount of tax, or were due a refund that was far less than the amount to which they were entitled. Gentile then prepared a second set of tax returns, signed without her clients’ permission, that she submitted to the IRS or the State of New Jersey for the full tax refund.

Based on the second set of returns, the IRS or the State of New Jersey issued tax refund checks care of DAG & Associates and mailed them to the DAG & Associates post office box in Toms River. Gentile then deposited the tax refund checks into the DAG & Associates bank account without her clients’ permission. Afterwards, Gentile used the funds to pay for personal expenses.

Gentile also admitted that from 2006 through 2009, she failed to report to the IRS all of her income generated from DAG & Associates, including funds she stole as part of her refund scheme, resulting in tax losses of approximately $188,811.

In addition to the prison term, Gentile must serve three years of supervised release and pay restitution of $1,863,013.

U.S. Attorney Fishman credited special agents of IRS–Criminal Investigation, under the direction of Special Agent in Charge Jonathan D. Larsen, and special agents of the Social Security Administration, Office of Inspector General, under the direction of Special Agent in Charge Edward J. Ryan, the for investigation leading to today’s sentencing.

The government is represented by Senior Litigation Counsel Jason M. Richardson of the U.S. Attorney’s Office Criminal Division in Camden.

IRS Criminal Investigation (CI): At-a-Glance

The mission of the IRS Criminal Investigation (CI) unit is to investigate potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.

Below is an overview, published by the Internal Revenue Service, of the Criminal Investigation Unit:

IRS Criminal Investigation (CI) is comprised of nearly 3,500 employees worldwide, approximately 2,500 of whom are special agents whose investigative jurisdiction includes tax, money laundering and Bank Secrecy Act laws. While other federal agencies also have investigative jurisdiction for money laundering and some bank secrecy act violations, IRS is the only federal agency that can investigate potential criminal violations of the Internal Revenue Code.

Compliance with the tax laws in the United States relies heavily on self-assessments of what tax is owed. This is called voluntary compliance. When individuals and corporations make deliberate decisions to not comply with the law, they face the possibility of a civil audit or criminal investigation which could result in prosecution and possible jail time. Publicity of these convictions provides a deterrent effect that enhances voluntary compliance.

As financial investigators, CI special agents fill a unique niche in the federal law enforcement community. Today’s sophisticated schemes to defraud the government demand the analytical ability of financial investigators to wade through complex paper and computerized financial records. Due to the increased use of automation for financial records, CI special agents are trained to recover computer evidence. Along with their financial investigative skills, special agents use specialized forensic technology to recover financial data that may have been encrypted, password protected, or hidden by other electronic means.

Criminal Investigation’s conviction rate is one of the highest in federal law enforcement. Not only do the courts hand down substantial prison sentences, but those convicted must also pay fines, civil taxes and penalties.

 

Essex County Tax Preparer Pleads Guilty to Preparing Fraudulent Tax Returns

An employee of an Irvington, N.J. based tax preparation business pleaded guilty today to preparing fraudulent tax returns.

Darlene Covington, 32, entered her plea in Newark federal court before U. S. District Judge Katharine S. Hayden. Covington pleaded guilty to a one count superseding information that charges her with aiding and assisting in the preparation of false tax returns. Sentencing is scheduled for October 25, 2016. “IRS-Criminal Investigation stands ready to investigate anyone who would put a taxpayer at risk for a quick profit,” stated Jonathan D. Larsen, Special Agent in Charge, IRS-Criminal Investigation, Newark Field Office. “Ms. Covington’s plea today shows that protecting taxpayer money is a matter IRS-Criminal Investigation takes extremely seriously.”

According to court documents and statements made in court: Covington was employed as a tax preparer at a tax preparation business, KCJ Financial Corp., located in Irvington, N.J. In her role as a tax preparer, Covington obtained personal identification information, such as names and social security numbers, for 24 people. Covington used this personal identification information without the knowledge, consent or permission of these individuals to prepare fraudulent tax returns. Covington prepared these fraudulent tax returns so that an uncharged co-conspirator would receive the refunds. Covington then used the filed false income tax returns to secure Refund Anticipation Loans from various banks. Covington received a fee of $235 for each Refund Anticipation Loan. The fraudulent tax returns resulted in a tax loss to the government of approximately $106,732.The count of aiding and assisting in the preparation of false tax returns carries a statutory maximum prison sentence of three years and a statutory maximum fine equal to the greatest of: (1) $250,000; (2) twice the gross amount of any pecuniary gain derived from the offense; or (3) twice the gross amount of any pecuniary loss sustained by any victims of the offense.

The investigation was conducted by IRS-Criminal Investigation, Newark Field Office, under the direction of Special Agent in Charge Jonathan D. Larsen and the U.S. Attorney’s Office, under the direction of U.S. Attorney Paul J. Fishman. The Government is represented by Assistant U.S. Attorney Sharon Ashe.

The IRS Gets Under the Skin of Prominent Dermatologist

After five days of deliberations, jurors handed down a guilty verdict on 58 counts to Joel Sabean dermatologist of Portland, OR, on federal tax evasion charges and unlawfully distributing a controlled substance.

 

Sabean was accused of sending more than $2.3 million to a female family member in Florida and then writing off the payments as medical expenses on his taxes, thereby eliminating over $900,000 in taxes due. He also wrote dozens of prescriptions for her in violation of federal drug laws.

 

During the trial, prosecutors said that Sabean sent the money in an attempt to encourage a “relationship” with this woman, although he had never visited her despite telling his bookkeepers that she was gravely ill.  The woman in question, who has not been identified, is now in custody as well.  She is accused of an elaborate scheme to defraud Sabean by claiming she had serious illnesses including: kidney transplants, bone infections and a heart surgery.  When taking the stand, she admitted in court to having, “A problem with lying my whole life.”

 

Sabean’s attorneys argued that he suffered from mental illness and that made him susceptible to fraud.

 

The jury did not agree, and Sabean now faces a maximum sentence of 20 years in prison and $600,000 in fines.  His sentencing hearing is scheduled for March 21, 2017.

Tobacco Store Owner has to Cough up Big Bucks for Tax Fraud

Business owner Hisham Jaber, of Pekin, IL pleaded guilty to filing fraudulent corporate income tax returns and sales tax returns with the State of Illinois.

Jaber was the owner of two retail tobacco stores, Smoker’s Paradise One and Two and was charged with underreporting more than $8 million in sales between 2008 and 2013.  The amount of the fraud resulted in an underpayment to the state of $640,000.

Jaber was sentenced to three years in prison and ordered to pay restitution of the amount owing to the state of $640,000.

Emeritus Professor of Business Administration Needs An Education on Paying Taxes

A professor at the University of Rochester, Dan Horsky pleaded guilty to conspiracy and had to pay a record $100 million penalty to the IRS for failing to disclose off-shore accounts.

Horsky amassed approximately $200 million by investing in start-up companies and held the funds in accounts in a bank in Zurich.  He didn’t disclose the funds to the IRS, or pay the required taxes on them.

Owners of offshore accounts are required to file a Foreign Bank Account Report (FBAR) with the government.  Failure to file an FBAR can result in a penalty of up to 50% of the offshore account balance. Horsky’s penalty is the largest FBAR penalty to date.

Horsky faces a possible prison sentence and additional monetary fines.  His sentencing hearing is scheduled for this month.

Tax Audit Horror Story!

Joan Barthel, a freelance writer living in Manhattan, was subjected to an IRS audit because her husband claimed a deduction due to their summer home in CT burned down.

Two IRS agents came to the audit and claimed that the Barthels’ calculations were incorrect and that they owed the IRS $14,000.  Part of the deduction the agents questioned was the loss of a very large collection of books.  According to Barthel, “I’m a writer, and the house was filled with books.  They wanted the name and author of every book I lost in the fire.  I was in tears.   They came in assuming I was a criminal and had deliberately tried to cheat the United States government.  It was ‘guilty until proven innocent.’ As a layperson, you’re up against this monolithic organization represented by two guys who are yelling at you.  You’re at a disadvantage to say the least.”

The Barthels hired a lawyer who representing them in tax court where they settled with the IRS for $4,000.  But the case dragged on for so long they had accrued $2,000 in interest.