Car Wash Executives Plead Guilty to Tax Evasion Scheme
RICHMOND, Va. - Thomas Ellis, 63, and Brenda Ellis, 59, of Richmond, Virginia, have pled guilty to conspiring to defraud the Internal Revenue Service of more than $133,000 in tax revenue from 2003 through 2007. Neil H. MacBride, United States Attorney for the Eastern District of Virginia, announced the pleas after they were entered in U.S. District Court today. Both defendants will face up to five years in prison and a fine of $250,000 when they are sentenced by the Honorable Henry E. Hudson on July 30, 2010.
Thomas and Brenda Ellis were the owners of Buzz Thru Car Washes, an automated car wash service that provided washing, waxing, vacuuming and other vendor services after a customer deposited payment, generally in the form of paper currency or coins, into a machine. The Ellises reported the income and expenses of Buzz Thru each year on their Federal individual income tax returns, Forms 1040, Schedule C, entitled “Profit or Loss From Business.”
The gross receipts for Buzz Through were determined by taking all of the currency out of the machines at the close of the day, and transporting the funds to an office located in the defendants’ home. They kept a daily tally of gross receipts on a sheet of paper. On a monthly basis they totaled these amounts and summarized them on a master spread sheet.
From 2003 to 2008 Thomas Ellis brought the daily car wash cash receipts to the home office where Brenda Ellis would then account for them cash in two sets of records and ledgers. On one set, she recorded the true amount of cash received by the two car washes. These amounts were summarized monthly and recorded on ledgers clipped by magnets to the back of a desk in the Ellis’ home office. On another set, however, she recorded a lesser amount of cash received. This set was kept in a separate area of the office.
When the defendants went to the bank, they deposited only the lesser amount of cash recorded in the second set of records. They kept the rest of the cash in a safe at the house or used the funds to maintain their lifestyle.
When the defendants met with their accountant to prepare their income tax returns, they only reported the second set of records, thus understating their income on their income tax returns. Between 2003 and 2007, the defendants understated $386,397 in income from their car wash businesses on their Schedule C, resulting in the non-payment of $133,163 in income tax due to the United States.
The case was investigated by the Criminal Investigation Division of the Internal Revenue Service. Assistant United States Attorney David T. Maguire is prosecuting the case for the United States.A copy of this press release may be found on the website of the United States Attorney's Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.
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