U.S. Attorney And IRS Announce Message To Potential Tax Cheats That Tax Crimes Result In Criminal Prosecution And Lengthy Prison Sentences And Fines And Issue A Fraud Notice To Taxpayers
HARRISBURG - With the deadline for filing income tax returns rapidly approaching, the U.S. Attorney’s Office for the Middle District of Pennsylvania, and the Philadelphia Field Office, IRS Criminal Investigation, jointly announced a warning to those who are thinking about breaking the law by committing tax crimes including a listing of recent tax fraud prosecutions and sentences.
“During this time of the year, IRS will receive millions of tax returns from honest taxpayers who file their returns on time and pay taxes they owe,” said U.S. Attorney Peter Smith. “Today’s warning is not for them; it is for tax cheats who break tax laws and abuse our tax system. If you belong in this category, pay close attention. My office will hold accountable anyone who participates in a tax fraud scheme that puts an added tax burden on honest taxpayers and drains our public finances.”
“Tax fraud exists in many forms, from unscrupulous tax preparers filing false and fraudulent returns, to identity thieves, and to those that go complex lengths to hide their income and evade paying the taxes they owe” said Special Agent in Charge Akeia Conner. “IRS-Criminal Investigation pursues tax cheats year-round. As the filing deadline quickly approaches, those who are contemplating engaging in tax fraud should know that they will be pursued.”
FILING FALSE TAX RETURNS AND EVASION
Over the last year, the U.S. Attorney’s Office has prosecuted and convicted individuals for filing false federal tax returns. Defendants have received substantial sentences for tax charges, ranging from several years in prison to home confinement. For example, the following individuals were sentenced for their roles in submitting false returns to the IRS:
Mitchell Orewiler, of Adams County was sentenced to 15 months in prison in July 2015. Orewiler pleaded guilty to filing false claims with the Internal Revenue Service in relation to his 2006, 2007 and 2008 Federal income tax returns. Orewiler was also ordered to pay $324,000 in restitution.
Felicia Burks, of Williamsport, PA was sentenced to 27 months in prison for filing 52 false income tax returns with the Internal Revenue Service in an attempt to obtain in excess of $150,000 in refunds. Burks was also ordered to pay $88,812 in restitution.
Paul Biko, of Harrisburg, pleaded guilty on January 14, 2016 to federal tax fraud in relation to his three Harrisburg businesses: Clearview of Harrisburg, Clearview Landscaping and Clearview Builders. As owner, Biko controlled the financial affairs of the three companies including all business bank accounts. For the fourth quarter of 2008, Biko’s companies withheld employment taxes from employees but failed to pay to the IRS the federal income taxes and Federal Insurance Contributions Act (FICA) taxes due to the United States. The government’s estimate of the loss is approximately $674,969.
Theodore Martin and his wife, Arminda Martin, of Ravenna, Ohio (formerly resided in York County), pleaded guilty on January 27, 2016 to tax evasion charges regarding their three cemetery businesses, including Suburban Memorial Gardens in Dover, Pennsylvania, and Grandview Memorial Park and Fairview Memorial Park in Ohio. The Martins failed to report to the IRS all the income they received from the operations of the cemeteries located in Ohio.
Felix Ramon Diaz, of Harrisburg, pleaded guilty on March 29, 2016 to forty-five counts of aiding and assisting the preparation of false tax documents. Diaz was a tax preparer who owned Felix Tax Service. From 2010 through 2013, Diaz filed forty five tax returns with false and fraudulent income, deductions, and addresses in an effort to maximize income tax refunds. Diaz’s conduct resulted in approximately $100,000 in taxes due and owed the Internal Revenue Service.
Sherry Garner, of Red Lion, pleaded guilty on February 19, 2016 to embezzlement from a credit union and with evading federal income taxes. Garner, the former Chief Executive Officer-Manager of the HD York Federal Credit Union in York, Pennsylvania embezzled $252,106 from the credit union between 2010 and 2013 and failed to report $70,983 in stolen income on her federal income tax return for 2011, thereby evading $19,069 in federal income taxes.
STOLEN IDENTITY REFUND FRAUD
In addition to prosecuting tax evaders and fraudulent tax return preparers, the IRS and the U.S. Attorney’s Office are conducting a continuing major effort to investigate and prosecute individuals who steal the identities of taxpayers and file fraudulent tax return. Rafael Sanchez, of Hazleton, the owner and operator of a check cashing, tax preparation and money transfer business in Hazleton was sentenced to 94 months in September 2015. Sanchez used the identities of unknowing third parties to file fraudulent federal income tax returns. He pleaded guilty to conspiracy to submit false claims and aggravated identity theft. Other similar fraud schemes are currently pending in court, or under investigation.
Federal penalties for each count of conviction of tax crimes range from a maximum of one year in prison and a $100,000 fine for failure to file a tax return, false withholding exemptions, and delivering or disclosing false tax documents, to a maximum of 10 years in prison and a $250,000 fine for conspiracy to defraud with respect to false refund claims. Other penalties include a mandatory term of two years in prison and a $250,000 fine for aggravated identity theft charges, three years in prison and a $250,000 fine for obstructing or impeding an investigation and filing or preparing a false tax return, and a maximum of five years in prison and a $250,000 fine for tax evasion, failure to pay taxes, conspiracy to commit a tax offense or conspiracy to defraud.
TAX SCAM WARNING
The U.S. Attorney’s Office and the IRS remind tax payers to exercise caution during tax season to protect themselves against tax schemes ranging from identity theft to return preparer fraud. Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and to prosecute the criminals behind them.
The IRS has issued its annual “Dirty Dozen” which lists common tax scams that taxpayers may encounter, particularly during filing season. Taxpayers are urged look out for, and to avoid, the following common schemes:
• Identity Theft
• Phone Scams
• Return Preparer Fraud
• Offshore Tax Avoidance
• Inflated Refund Claims
• Fake Charities
• Falsely Padding Deductions on Returns
• Excessive Claims for Business Credits
• Falsifying Income To Claim Credits
• Abusive Tax Shelters
• Frivolous Tax Arguments
Education is the best way to avoid these common schemes. To learn more about the Dirty Dozen scams and for help with recognizing and avoiding abusive tax schemes, the IRS offers educational material at www.irs.gov. Suspected tax fraud can be reported to the IRS using Form 3949-A found on the IRS.gov website.
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