Software touch; $3.5 million scam; big woof; and other highlights of recent tax cases.
Killeen, Texas: Former tax preparer Shermin Marshall has been sentenced to 42 months in prison for aiding and assisting in the preparation and filing of a false tax return and aggravated ID theft.
According to court documents, Marshall devised a scheme to file false federal income tax returns on behalf of his clients, falsifying items on the returns to increase refunds. Marshall also directed clients’ refunds to be deposited into financial accounts that he controlled and, without clients’ knowledge, stole a portion of those refunds. He also opened financial accounts in clients’ names without their permission.
He was also ordered to serve three years of supervised release and to pay $397,367 in restitution to the IRS.
Sterling, Virginia: Former software company vice president Kristie Lynn McDonald has been sentenced to 15 months in prison for conspiring to defraud the government by failing to pay over employment taxes to the IRS.
According to court documents, from January 2011 to 2013 McDonald conspired with the company’s CEO, Robert Lewis, to defraud the U.S. by failing to pay over to the IRS more than $1.8 million in payroll taxes withheld from employee paychecks.
As part of their scheme, McDonald and Lewis circumvented the company’s normal payroll and accounting procedures by paying some employees with manual paychecks. The employees still received the correct pay after withholdings, but by bypassing the accounting system the conspirators hid that the withholdings were not being paid over to the IRS. The scheme also concealed the company’s failing financial condition from its board.
They also caused the company to file false quarterly employment tax returns with the IRS that underreported the amount of tax due.
During this same period, McDonald and Lewis failed to remit the full amount of employee retirement contributions to the company’s retirement plan. Through their actions, the company failed to transfer nearly $225,000 in voluntary employee retirement withholdings. McDonald and Lewis used the misappropriated money to pay the operating expenses of the company, which included their own six-figure salaries and salary raises for other employees.
McDonald and Lewis pleaded guilty in March. McDonald was also ordered to serve three years of supervised release and to pay $1,812,706 in restitution.
Oklahoma City: Gregory Damien Lorson, of Naples, Fla., has pleaded guilty to federal tax fraud for not paying to the IRS the payroll taxes withheld from wages of employees for five years.
According to authorities, Lorson was president and CEO of Teemco, an environmental sales and consulting company in Oklahoma City, from 2010 until the business closed in mid-2015. During those years Teemco deducted and withheld federal income taxes, Social Security taxes and Medicare taxes from wages of employees. According to authorities, instead of forwarding the withheld payroll taxes to the IRS, Lorson used the monies to fund Teemco’s extensive advertising campaign and to pay other creditors and expenses.
Lorson admitted that he directed Teemco employees not to forward the withheld payroll taxes to the IRS and that he failed to file with the IRS quarterly returns for Teemco from 2010 to 2015.
As part of his plea agreement, Lorson agreed to pay $3,003,220.47 in restitution to the IRS for withheld payroll taxes and other federal taxes. He also agreed to pay $542,162.53 in restitution to the Oklahoma Tax Commission for Teemco employees’ state taxes that were withheld but never paid to state tax authorities.
Lorson faces up to five years in federal prison, plus a fine of $250,000 and three years of supervised release.
North Providence, R.I.: Dentist Lawrence P. Stephenson, 72, of Lincoln, R.I., has pleaded guilty to tax evasion, admitting that he diverted and failed to report as much as $1.2 million dollars in payments made to his business.
Stephenson admitted that as early as 2011 he began diverting a portion of his practice’s business receipts by depositing numerous checks from insurance carriers and patients into a personal bank account. An IRS investigation revealed that Stephenson failed to report approximately $1.2 million dollars paid to his dental practice and deposited elsewhere, thus failing to pay taxes due the IRS.
Over the years Stephenson made significant withdrawals from the personal account, including approximately $530,000 in 2013 and 2014. The funds were transferred to other banks and investment accounts he owned. Some of the funds he withdrew were used to pay personal expenses. In 2013 alone, Stephenson admitted, he underreported his income to the IRS by more than $320,000.
Sentencing is October 12.
Atlanta: Preparers Joseph Racine, 37, and Arnouse Merlien, 40, both of Boynton Beach, Fla., have pleaded guilty to conspiracy to violate the federal income tax laws by purposely misrepresenting to the IRS that their clients were qualified to receive certain tax credits and deductions on federal returns.
Racine owns JSR Westend Tax Services in Atlanta and JSR Tax Services in Greenacres, Fla. According to authorities, in December 2016 IRS investigators identified Westend as potentially filing fraudulent returns for tax years 2013 through 2015. Investigation revealed that Racine was filing fraudulent returns involving multiple credits and deductions, including the fuel tax credit, refundable education credit and unreimbursed employee business expenses. Racine requested refunds on 99 percent of the returns.
In March 2017, investigators determined that JSR Tax Services in Florida, where Merlien primarily worked, was filing federal returns displaying the same patterns of fraud as those prepared at Westend in Atlanta. Investigation revealed that Racine and Merlien engaged in this scheme to increase the amount of money they could charge clients for preparing returns.
The fraud resulted in losses to the U.S. government of more than $3.5 million. Sentencings are Sept. 6.
Fayetteville, Arkansas: Darrell Rosen, 59, has been sentenced to 63 months in prison to be followed by three years of supervised release, and been ordered to pay $1,851,990.05 in restitution for one count of money laundering and one count of filing a false income tax return.
According to court records, from 2010 to 2014 Rosen solicited individuals in Arkansas, Texas and elsewhere to invest in a business centered on training dogs. Rosen represented that he had contracts with governmental entities as well as some private companies that would allow him to train and then sell dogs to the government for a profit.
He made false promises that he would invest the money in the dog-training business when, in fact, he used much of the money on his personal expenses. Rosen caused his 2013 federal return to be filed with false information by both failing to report income he received from investors and for claiming undeserved Schedule A deductions.
Rosen pleaded guilty in January.
Pinole, California: Starsheka Mixon, 35, has been sentenced to three years and a month in prison for a stolen ID refund fraud.
According to court documents, between January 2011 and June 2013 Mixon and co‑defendant Denna Chambers, 35, of Fairfield, California, conspired with others to fraudulently obtain refunds by filing false federal returns in the names of others. The returns included false statements about the taxpayers’ income, dependents, and occupations to obtain undeserved refunds and credits including the Earned Income Tax Credits and the Additional Child Tax Credit. Some of the fraudulent returns used the name and personal information of individuals without their knowledge or consent.
The fraudulently obtained refunds were typically placed on prepaid debit cards controlled by Chambers, Mixon or their associates.
Chambers and Mixon admitted that some 174 false federal income tax returns were filed seeking more than $880,000 in refunds, of which the IRS paid out some $477,348.
Mixon was also ordered to serve two years of supervised release. Chambers will be sentenced on Sept. 13.