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Justice News

Department of Justice
U.S. Attorney’s Office
Middle District of Pennsylvania

FOR IMMEDIATE RELEASE
Thursday, April 12, 2018

U.S. Attorney And IRS Warn Potential Tax Cheats To Timely File Accurate And Complete Tax Returns

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 Division, jointly announced a warning to those who are thinking about breaking the law by committing tax crimes including listing recent tax fraud prosecutions and sentences.

“Millions of individuals file their federal income tax returns in a timely and accurate manner but unfortunately, there are some who choose not to pay their fair share,” said United States Attorney David J. Freed.  “These individuals are taking advantage of the honest taxpayers who finance the government’s operations and subject themselves to criminal prosecution.”

“As the 2018 tax season draws to a close, everyone is reminded of their obligation to file tax returns that accurately reflect all of their income and expenses” said Guy Ficco, Special Agent in Charge of the Philadelphia Field Office.  "The Special Agents of IRS Criminal Investigation will continue to pursue the prosecution of those who willfully and intentionally violate their known legal duty of filing and paying their fair share of taxes."

Over the last year, the U.S. Attorney’s Office has prosecuted and convicted numerous individuals for filing false federal tax returns and committing tax evasion. Defendants have received substantial sentences for tax fraud, ranging from several years in prison to home confinement. Restitution is mandatory and often includes substantial interest and penalties.  For example, the following individuals were charged and/or sentenced for tax fraud recently:

FILING FALSE TAX RETURNS AND TAX EVASION

  • Donna Marie Wozniak, age 57, of New Freedom, Pennsylvania, pled guilty on August 14, 2017, to a two-count criminal information charging her with embezzlement in connection with healthcare and tax evasion. Wozniak was the business manager for Susquehanna Valley Surgery Center (SVSC), Harrisburg, Pennsylvania from 2000 through 2014.  As part of Wozniak’s job duties, she received invoices form vendors of SVSC that needed to be paid from SVSC’s general operating account. Upon receipt of these invoices, Wozniak would then review the invoices to decide when and how much each vendor would be paid. Wozniak obtained blank checks ostensibly for payment to vendors.  During a forensic audit of SVSC's financial records, it was discovered that Wozniak made a portion of the signed blank SVSC checks payable to herself and that these checks were cleared through SVSC's M&T Bank account. Wozniak cashed or deposited a total of $4.3 million utilizing multiple bank accounts she maintained. In order to conceal her theft, Wozniak created false invoices from legitimate SVSC vendors. Wozniak would then falsify entries into the QuickBooks accounting software maintained by SVSC, showing the checks and payments were being made to the vendors. Wozniak admitted to the theft of SVSC funds and was terminated from SVSC in November of 2014.  Wozniak failed to report the embezzled income on her Federal Income Tax Returns for a total tax loss of $1,312,000.  Wozniak was sentenced to 71 months’ imprisonment and ordered to pay $5,587,026.13 in restitution.
  • Richard J. Morgan, age 54, of Shavertown, Pennsylvania, pled guilty on July 7, 2017, for committing bank fraud and interfering with the administration of the Internal Revenue laws. Morgan owned and operated Wilkes-Barre Bookkeeping LLC, a Shavertown, Pennsylvania-based business that provided payroll services to its clients.  Local businesses contracted Morgan to pay employee payroll and salary expenses, to file IRS Form 941 Employer Quarterly Federal Tax Returns, and to remit employment tax liabilities to federal, state and local taxation authorities.  For three of his clients, Morgan failed to file the IRS Forms 941 and remit the employment taxes to the appropriate authorities, instead embezzling the funds for his own personal use.  Between March 2010 and October 2016, Morgan embezzled $376,224.85 from those clients, all while lying to them about his activities. Morgan also served as a Treasurer for a non-profit corporation and was tasked with selling its assets and winding up its operations when it closed in February 2010.  Instead, after paying the non-profit corporation’s outstanding liabilities, Morgan embezzled the remaining residual sales proceeds of $68,172. Morgan was sentenced on February 13, 2018, to 38 months’ imprisonment and was ordered to pay $494,618.85 in restitution to his victims and the IRS.
  • Nicholas A. Long, age 30, of Mechanicsburg, Pennsylvania, pled guilty on October 4, 2017, to an information charging him with the willful failure to pay federal payroll taxes owed by his business, Harrisburg Commercial Interiors, LLC during 2013. An Internal Revenue Service (IRS) investigation revealed that Long, through his solely owned commercial drywall business, Harrisburg Commercial Interior, LLC (HCI), willfully did not pay $216,304 in payroll taxes during 2013 and 2014. The IRS investigation began when several HCI employees contacted the IRS because they did not receive their 2013 income tax refunds. As the owner of HCI, Long exercised primary control over the financial affairs of the business, was solely responsible for issuance of all paychecks, and had sole signature authority on HCI's business bank account. Although he issued payroll checks totaling $730,788 in gross wages during 2013 and 2014, Long did not file the requisite Employer's Quarterly and Annual Federal Tax Returns, Forms and 940, with the IRS, nor pay over the $160,399 he withheld from his employees’ pay checks to the government. Long was sentenced on March 9, 2018, to one year and one day imprisonment and ordered to make full restitution in the amount of $216,304.   
  • Michael Powers, age 53, of New Cumberland, Pennsylvania, who owns and operates Powers Auto Repair in New Cumberland, pled guilty on September 11, 2017, to understating his true income by $238,381 on his 2010 income tax return. The tax owed on that unreported income amounted to $42,774.  Under the terms of his plea agreement, Powers will make restitution to the Internal Revenue Service (IRS) in that amount plus another $26,198 for unpaid taxes owed on unreported income of $208,979 for tax year 2012.  Thus, the total loss to the IRS as a result of Powers’ underreporting of income was $68,972. Powers was sentenced on March 12, 2018, to one year probation and home confinement and ordered to pay $68,972 in restitution.
  • Sopheak Kim, age 68, of Harrisburg, Pennsylvania, pled guilty on March 28, 2018, to willful failure to collect or pay employment tax and corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue Service.  Kim owned and operated Trojan Services, Inc., a Harrisburg-based company which contracted to provide labor to local companies. From 2010 through 2013, Kim failed to maintain business records relating to the operation of Trojan Services, Inc., to include records relating to employees, payroll and tax withholdings. The total tax loss alleged is approximately $250,110.  Kim is awaiting sentencing.
  • Atef Hussein, age 48, of Hagerstown, Maryland, pled guilty on October 30, 2017, to income tax evasion.  Hussein, former owner/operator of the Fairground Diner in Carlisle, Pennsylvania, understated income and taxes due, resulting in false income tax returns for tax years 2012 through 2015.  The tax loss for that period totaled $122,003. Hussein is scheduled to be sentenced on May 30, 2018.
  • Geraldo Ramos, age 44, of Harrisburg, Pennsylvania, pled guilty on November 13, 2017, to conspiracy to submit false claims and submitting false claims against the United States regarding income tax refunds. Between 2010 and 2014, Ramos acted as a tax return preparer and filed numerous false and fraudulent tax returns for family and friends claiming $58,659 in refunds they were not entitled to receive.  As a result, the IRS paid the conspirators $52,711, which was shared with Ramos.  The fraudulent tax returns included misrepresenting Schedule C income, listing fictitious dependents and manipulating filing status.  Ramos is scheduled to be sentenced on April 24, 2018.
  • Donald Royce, age 41, of Scranton, Pennsylvania, was indicted on May 16, 2017, for tax preparation fraud charges.  Royce was a tax preparer in Scranton who defrauded a number of local residents in 2014.  The indictment alleges that Royce prepared fraudulent tax returns for multiple taxpayers causing more than $250,000 in losses. Royce gave the taxpayers a client copy of their tax return, then made material fraudulent changes to the client copy, and submitted the false return to the Internal Revenue Service (IRS) for his financial benefit. The indictment further alleges that Royce took clients’ IRS payment checks and deposited them directly in to his own account without ever remitting the amount to the IRS, all without the taxpayers’ knowledge. Royce is awaiting trial.

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 continuing a major effort to investigate and prosecute individuals who steal the identities of taxpayers and file fraudulent tax returns.

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 would like to warn taxpayers of a quickly growing scam involving erroneous tax refunds being deposited into their bank accounts. Criminals steal client data from tax professionals and filing fraudulent tax returns, these criminals use the taxpayers' real bank accounts for the deposit.  Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.  In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.  In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.

The IRS urges taxpayers to follow established procedures for returning an erroneous refund to the agency. The IRS also encourages taxpayers to discuss the issue with their financial institutions because there may be a need to close bank accounts. Taxpayers receiving erroneous refunds also should contact their tax preparers immediately. Here are the official ways to return an erroneous refund to the IRS. If the erroneous refund was a direct deposit:

  1. Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
  2. Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.

If the erroneous refund was a paper check and hasn't been cashed:

  1. Write "Void" in the endorsement section on the back of the check.
  2. Submit the check immediately to the appropriate IRS location listed below.The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
  3. Don't staple, bend, or paper clip the check.
  4. Include a note stating, "Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check)."

The erroneous refund was a paper check and you have cashed it:

  • Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
  • If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS assistor that you need information to repay a cashed refund check.
  • Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
  • Include a brief explanation of the reason for returning the refund.
  • Repaying an erroneous refund in this manner may result in interest due the IRS.

For your paper refund check, here are the IRS mailing addresses to use based on the city (possibly abbreviated). These cities are located on the check’s bottom text line in front of the words TAX REFUND:

  • ANDOVER – IRS, 310 Lowell Street, Andover, MA 01810
  • ATLANTA – IRS, 4800 Buford Highway, Chamblee, GA 30341
  • AUSTIN – IRS, 3651 South Interregional Highway 35, Austin, TX 78741
  • BRKHAVN – IRS, 5000 Corporate Ct., Holtsville, NY 11742
  • CNCNATI – IRS, 201 West Rivercenter Blvd., Covington, KY 41011
  • FRESNO – IRS, 5045 East Butler Avenue, Fresno, CA 93727
  • KANS CY – IRS, 333 W. Pershing Road, Kansas City, MO 64108-4302
  • MEMPHIS – IRS, 5333 Getwell Road, Memphis, TN 38118
  • OGDEN – IRS, 1973 Rulon White Blvd., Ogden, UT 84201
  • PHILA – IRS, 2970 Market St., Philadelphia, PA 19104

Education is the best way to avoid these common schemes.  To learn more about other scams and for help with recognizing and avoiding abusive tax schemes, the IRS offers educational material at www.irs.gov.

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Updated April 12, 2018