IRS, Prosecutors Crack Down on Tax Evasion, Tax Fraud

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Questionable Refund Program. “We will announce plans in the very near future to institute notification procedures as well as significant processing improvements to minimize the number of taxpayers whose refunds are frozen unnecessarily,” Everson said.

Senators of both parties had requested the review following congressional testimony by the National Taxpayer Advocate, Nina Olson, New York Times reports.

The IRS said that members of Congress and the National Taxpayer Advocate had raised legitimate issues regarding the length of delay and lack of notification for refund claims. “Claiming fraudulent refunds ultimately undermines the integrity of the tax system, but I believe that appropriate notification should be given when refunds have been frozen,” Everson said. “Honest taxpayers expecting a refund deserve to be treated fairly.”


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The typical fraudulent refund claim involves false income and withholding, the IRS announcement said. A significant portion includes false Earned Income Tax Credit claims of up to $4,400 per return.

The crackdown on tax refund fraud comes even as several high-profile tax fraud cases are being adjudicated. Among the most familiar are the case of Survivor winner Richard Hatch and former Governor of Illinois, George Ryan. Even tax preparers and accountants are falling afoul of the tax laws. In New York, accountants David E. Cohen and Jeffrey Rosner, are facing a variety of criminal charges, including larceny.

Richard Hatch, the first winner of the reality television show “Survivor” faces another challenge -- prison -- after being found guilty Wednesday of failing to pay taxes on $1 million of winnings in 2000 and approximately $355,000 he earned from other sources. Hatch was handcuffed and taken into custody after U.S. District Judge Ernest Torres said he was a potential flight risk, reports. Hatch, 44, of Newport, faces up to 13 years in prison and a fine of $600,000. Sentencing was scheduled for April 28.

Prosecutor Andrew Reich said in a Providence, Rhode Island courtroom that Hatch misled his accountant by filing a tax return that excluded payment on his winnings after signing a statement that he knew it was prepared only for information purposes. Jodi Rodrigues Wallis, an accountant and family friend, testified that Hatch had asked her to prepare the return “so that he could see the impact the winnings would have on his finances,” Reuters reports.

Former Governor George Ryan of Illinois, on trial for corruption, has been charged with tax evasion, along with racketeering, mail fraud and other offenses, according to the Associated Press. Ryan amended his federal return in 2002 to include $63,000 of additional income from his campaign fund, but neglected to report $23,000 of campaign funds paid to his son-in-law, Michael Fairman, in 1996 from his campaign fund. Ryan amended his 1997 and 1998 returns, but did not show that he paid Fairman an additional $50,000 from his campaign funds during those years. Ryan’s accountant, Arnold Lederman, recalled a conversation with Ryan’s attorney in 1997, when the attorney said “George feels that campaign funds are his money and he can do whatever he wants with them,” the Chicago Sun-Times reports.

Skimming cash from receipts at his restaurant was Neil Stein’s way of avoiding paying taxes, according to Stein’s accountant, Andrew P. Goldner, was convicted, in U.S. District Court along with his client of preparing a false 2001 federal tax return. Stein pleaded guilty to filing false returns for 1999, 2000 and 2001 and will serve a prison term as well as pay taxes, interest and penalties of $400,000, but Goldner, who was found guilty of participating in the swindle for only one year, received two years’ probation and three months’ house arrest.

Prosecutors in New York describe the office of David E. Cohen and Jeffrey Rosner, two Manhattan accountants, as a tax-return factory, according to a report in the New York Times. Cohen and Rosner, whose slogan was “My Tax Problems Disappear Like Magic”, have been charged with 21 counts, including grand larceny, for filing false returns for themselves and their clients for years. “Clients waited hours in the waiting room, then spent 15 or 20 minutes filling out forms that often used the same boilerplate numbers, like contributions to charity and unreimbursed business expenses, on every tax return, regardless of income.”

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