Business rehearsal; without exception ; installment plan; and other highlights of recent tax cases.
Plover, Wisconsin: Tax preparer James Canfield, 74, was sentenced to eight months in prison for helping prepare false federal returns.
Canfield owned and operated Advanced Accounting Concepts. Between 2013 and 2018, he electronically prepared and submitted federal returns for clients with overstated and, in some cases, fabricated business expenses, resulting in unwarranted deductions for the business use of clients’ homes. Although clients told him they primarily used their home as a personal residence, Canfield often allocated 100% of their home for business purposes and then considered ordinary household expenses to be deductible business expenses.
The judge noted that while Canfield did not directly benefit financially from fraudulent refunds or tax reductions paid by customers, he engaged in preparing the misrepresentations to generate repeat business from customers. and expand its customer base through referrals.
Canfield had previously been fined twice by the Internal Revenue Service for preparing returns with improper business expenses and claiming personal living expenses as business deductions. After the second time Canfield was fined, in 2012, IRS agents met with him and explained in detail how the deductions he was submitting were illegal under the regulations. He continued to prepare returns using the same false deductions for the next six years.
Canfield, who pleaded guilty earlier this year, will also be permanently banned from preparing or filing statements for third parties.
Statesboro, Georgia: Former Councilman William Britt, now of Bluffton, South Carolina, was sentenced to 33 months in prison for tax evasion on income from bars he co-owned.
Under the program, each facility was nominally owned by an individual; in reality, a group of business partners, including Britt, owned the bars in varying ownership percentages. Britt and the other real owners took money from the establishments and disbursed it among themselves according to their ownership percentages without reporting that income to the IRS.
Britt personally ensured that some of the nominal owners of the bars made false statements and provided false information to an accountant who prepared statements related to some of these businesses. Britt misrepresented the companies’ true ownership, underreported their revenues and omitted cash distributions to owners.
As part of her guilty plea, Britt admitted to underreporting her income in her 2014 individual return.
He was also ordered to serve three years of probation and paid $352,404.54 in restitution to the United States.
Shelbyville, Kentucky: Office manager Kimberly F. Jones was sentenced to 30 months in prison and ordered to pay $260,034 in restitution for misrepresenting her employer and including false information in her statements.
Jones was employed at Guardian Retention Systems, where as office manager she handled accounts payable and receivable, petty cash, payroll and taxes. She also had electronic access to bank accounts to pay bills.
She took several steps to misappropriate funds from her employer, using company credit cards in her name and the names of other employees to make unauthorized personal purchases; direct unauthorized transfers from the Company’s bank account; and divert customer revenue received through the company’s electronic payment account. Jones also set up a company called KAB Enterprises to issue false invoices to Guardian; she used the company’s credit cards and bank account to pay KAB’s fraudulent bills.
Jones also failed to report his embezzled funds as income on his returns from 2016 to 2018.
College town, Missouri: Company owner Jonathan Michaelson was sentenced to five years probation and ordered to pay more than $700,000 in restitution for withholding employee paychecks but failing to return the money.
Michaelson of software company Blue 2.0 LLC withheld $767,367 in income, Social Security, and Medicare taxes from employees’ paychecks from 2014 through 2017, but did not remit it. money to the IRS.
Michaelson, who pleaded guilty earlier this year, will have to pay $1,000 a month, or 10% of his monthly income, until the theft is paid for.
Chino Hills, CA: Former licensed stockbroker Robert Louis Cirillo was sentenced to 78 months in prison for committing several crimes, including filing a false statement and carrying out a securities fraud targeting low-income victims to obtain over $3.2 million.
From 2014 to 2021, Cirillo tricked over 100 victims into telling them he would invest their money in short-term construction loans that would pay returns of 15% to 30% for up to 90 days. In fact, he never invested the money and instead used it for his own personal expenses, including credit card payments, a trip to Las Vegas and two automobiles.
Cirillo targeted members of the Hispanic community, many of whom had limited means, for his fraud. A victim invested his savings of $20,000. Cirillo admitted to threatening his victims once they began to realize he had defrauded them.
In a separate scheme in 2021, Cirillo also participated in a “grandparent scam” in which a senior citizen was tricked into believing her grandson had been arrested for possession of illegal narcotics. Cirillo’s conspirators convinced the 82-year-old victim to send $400,000 for his grandson’s “bail” to a bank account that Cirillo had opened and controlled.
Cirillo filed false tax returns for 2015 to 2017 by failing to report more than $3 million in income. For example, in his 2017 federal tax return, he reported total income of $30,985, which did not include more than $1.9 million from his investment plan.
The investment fraud resulted in a total loss of $3,237,262; his plot to defraud the senior resulted in a total loss of $400,000; and the total tax loss was $675,898.
Cirillo, who had previously pleaded guilty, was also ordered to pay $3,948,835 in restitution.
Liverpool, New York: Glen Zinszer was sentenced to 51 months in prison for wire fraud and making false statements.
Zinszer began operating the company Brazzlebox in 2012, which he represented to investors would be like Facebook to businesses. From April 2013 until around summer 2016, he made false claims to investors about how Brazzlebox was doing to get them to invest more money and stay invested. He used a substantial portion of the invested money to fund his lifestyle, including paying mortgages on his homes and buying concert tickets and jewelry.
He also filed returns underreporting his income in the 2013 to 2016 tax years.
He was also ordered to serve three years of probation after his release from prison and to pay $3,049,933 in restitution to his victims (including the government), as well as forfeit $2,763,811.
Houston: David Felt, who evaded paying his income taxes, was sentenced to 18 months in prison and ordered to pay $250,000 in restitution to the IRS.
Felt, who pleaded guilty in May, admitted that he deliberately evaded payment of income taxes he owed for 1986 and 1987 and 1994 to 1998. He further admitted to having received more than $4 million of income between 2004 and 2014, none of which was paid to the taxes due.
He falsely stated that he had no significant assets or income and that he did not own any business and admitted that he had acted as a disbursement agent for a debtor in a bankruptcy case. He testified in 2017 that he would not pay insiders of the debtor’s estate while the debtor was paying creditors. He admitted to filing accounting reports for the debtor in 2019 containing payments to insiders, including himself, from the debtor’s estate.