Criminal tax prosecutions run the gamut

By Sally P. Schreiber, J.D.

Despite the loss of 6% of its special agents since the previous fiscal year and its lowest staffing levels since the 1970s, the IRS Criminal Investigation division was able to successfully prosecute many high-profile cases in FY 2015 the division announced in its 2015 Annual Report. The division initiated 3,853 investigations between Oct. 1, 2014, and Sept. 30, 2015, and reported a 93.2% conviction rate in FY 2015. 

The Criminal Investigation division reported that its priorities were identity theft fraud, abusive return preparer and questionable refund fraud, international tax fraud, political/public corruption, its Organized Crime Drug Enforcement Task Force, its Bank Secrecy Act and Suspicious Activity Report Review teams, asset forfeitures, the voluntary disclosure program, and counterterrorism and the sovereign citizens movement.

The report noted the division’s involvement in the investigation of officials and associates of FIFA, the international body governing soccer, which started as a tax-evasion case, and in the conviction of Ross Ulbricht, the creator of the Silk Road dark net website.

Among the more interesting tax-related prosecutions was one against a couple who evaded taxes on their profitable business for many years before filing frivolous returns on which they claimed zero income. They asserted that they were permanent residents of the Kingdom of Heaven. Another case involved the owner of a pizza chain who engaged in a systemic scheme to underreport gross sales and payroll for nearly 60 restaurants.

In the refund fraud identity theft area, one case involved a couple whose scheme used names and Social Security numbers stolen from more than 7,000 people to file false refund claims. Another involved four preparers in Georgia who together filed more than 1,100 fraudulent tax returns, including five from identities stolen by one of the fraudsters from her place of employment.

Another egregious refund fraud case resulted in one of the perpetrators being sentenced to 204 months in prison and being ordered to pay more than $500,000 in restitution. The fraudsters stole personal identifying information to file hundreds of fraudulent returns using online tax preparation software and had refunds issued on prepaid debit cards.

In another Georgia case that began in 2014, the final person prosecuted for involvement in a stolen identity/tax refund fraud scheme involving 14 other people was sentenced to 94 months in prison and ordered to pay restitution of $84,940.

Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

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