Even with government agencies that include the Secret Service and the Tax Division of the Justice Department working with the Internal Revenue Service to identify offenders, there is no shortage in the number of tax preparers accused of engaging in fraud. Individual CPAs and owners of tax preparation firms are currently facing criminal and civil charges for cashing clients' refund checks, stealing their identities, enrolling them in tax shelters, and making bogus credit claims on their behalf, as well as for familiar abusive tactics, inflating business expenses and using fictitious deductions on returns.
A Chappaqua, New York accountant is one "bad guy" whose story has recently come to light. Randal Kase, a certified public accountant, faces up to 30 years in prison after admitting he stole clients' tax return checks worth more than $300,000, the Lower Hudson Valley News reports. Kase was arrested by Secret Service agents and pleaded guilty in U.S. District Court in White Plains to one count of mail fraud and one count of forgery. He is accused of stealing refunds from clients from June 2002 through November 2008.
Kase arranged for the clients' tax-refund checks to be sent to his home rather than to the victims. In one case, for several years, Kase told a victim, a Westchester doctor, that he "broke even," according to a criminal complaint filed by Secret Service. The doctor was actually paid $165,000 by the Internal Revenue Service in 25 checks, which were diverted by Kase and deposited into bank accounts in the name of Kase or his wife, federal investigators said.
The fraud was uncovered when another victim called the IRS to complain that a $25,000 refund check had not been received.
In another case, Daniel Prewett and his wife and three employees have been permanently barred from preparing tax returns for others by a federal court in Tampa, Florida. Prewett has been accused of helping customers set up fictitious domestic businesses to disguise fraudulent business deductions for personal expenses and assets. One of Prewett's clients, a dentist, used the defendants' scheme to claim fraudulent deductions for the cost and operational expenses of his $781,000 47-foot yacht, which he used solely for his personal pleasure, the Justice Department's complaint alleges. The defendants' schemes cost the U.S. Treasury more than $130 million dollars, according to the complaint.
Prewitt is currently in jail serving an 18-year sentence on federal charges related to cocaine distribution and money laundering.
Return preparer fraud and fuel credit scams are on this year's IRS list of the Dirty Dozen Tax Scams, and Ophelia Kelley, of Vidalia, Georgia, the owner of two tax return preparation services, Kelley Tax Service and City and Country Girl Tax Service has been accused of having been involved in both. The Justice Department announced on May 5th that Kelley has been permanently barred from preparing federal income tax returns for others by a federal court in Augusta, Georgia for allegedly claiming bogus fuel tax credits for customers, truck drivers, who were not entitled to the credit. The fuel credit is available only to taxpayers who operate farm equipment or off-highway business vehicles.
The complaint alleged that Kelley fraudulently claimed absurdly large credits for the truck drivers by falsely reporting purchases of huge quantities of fuel, often more than the customer could have bought using all his annual income.
Kelley is also alleged to have fabricated false deductions for such things as medical expenses and charitable gifts. Kelley failed to sign at least 100 tax returns she prepared for customers.