IRS TAX TIP 2006-70

Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued in about six to eight weeks from the date the IRS receives your return. If you file your return electronically, your refund should be issued in about half that time — even faster when you choose direct deposit.

You can check on the status of your refund seven days after you e-filed your return or four to six weeks after mailing your return. There are several ways to check the status of your refund.  To use these applications, you will your Social Security, your filing status and the amount of the refund.

• Where's My Refund: The fastest, easiest way to find out about your current year refund is access IRS.gov and click on the “Where’s My Refund” link available from the home page

• Refund Hotline:  Call the IRS Refund Hotline at 1-800-829–1954

• TeleTax:  Call IRS TeleTax System at 1-800-829-4477. TeleTax’s refund information is updated each weekend -- if you do not get a date for your refund, wait until the next week before calling back

In some circumstances, you may not receive your refund as quickly as you expected. Refund delays can be caused by a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or to include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.

For more information on how long it may take the IRS to process your federal tax refund, visit Frequently Asked Questions at IRS.gov.

IRS TAX TIP 2006-19

Want your refund faster? Have it deposited directly into your bank account. More taxpayers are choosing direct deposit as the way to receive their federal tax refunds. More than 52 million people had their tax refunds deposited directly into their bank accounts in 2005. It’s a secure and convenient way to get your money in your pocket faster.

• Security. The payment is secure — there is no check to get lost. Each year thousands of refund checks are returned by the US Post Office to the IRS as undeliverable mail.  Direct deposit eliminates undeliverable mail and is also the best way to guard against having a tax refund stolen.
• Convenience. There’s no special trip to the bank to deposit a check!

To request direct deposit, follow the instructions for “Refund” on your tax return.

Want an even faster refund? Try e-file! Taxpayers who file electronically get their refunds in about half the time as those who file paper returns.

A word of caution — some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted. Also, make sure you have the correct nine-digit routing number and your account number when selecting direct deposit.

For more information about direct deposit of your tax refund, check the instructions for your tax form. This and other helpful tips are available in IRS Publication 17, Your Federal Income Tax. To get a copy, visit the Forms and Publications section of the IRS Web site, IRS.gov, or call 1-800-TAX-FORM (1-800-829-3676).

IR-2006-24, Feb. 6, 2006

WASHINGTON — The Internal Revenue Service today announced new steps to improve the Questionable Refund Program (QRP) and reduce the number of taxpayers subject to frozen refunds.

IRS Commissioner Mark W. Everson said the changes include notifying taxpayers when a tax refund has been frozen. Other new procedures will result in a more timely release of frozen tax refunds for those cases that do not warrant further review.

“The actions we’re announcing constitute significant improvements to an important program,” Everson said. “Going forward, we’re going to both improve our screening procedures and notify all taxpayers whose refunds are held. As Senate Finance Chairman Grassley stated when asking us to look at reforms for QRP, the IRS needs to respect the ‘necessary balance between taxpayer rights and enforcement of the law.’ We believe this approach strikes the right balance.”

Highlights of the changes:

• Improvements to screening procedures. The IRS will improve and refine the accuracy of filters in the program to reduce the initial number of valid refund claims held.

• Notification to taxpayers. The IRS will notify all taxpayers whose refunds are frozen.

• Earlier release of refunds. The IRS will expedite the review of returns, resulting in an earlier release of refunds.

Notification procedures will be implemented this filing season. Improvements to the screening and review processes will be implemented as soon as possible in the coming months.  The IRS will also continue to identify and implement other areas for improvement.

The IRS announced the review last month after members of Congress and the National Taxpayer Advocate raised questions regarding the length of delay and lack of notification for refund claims. The IRS developed the new procedures in consultation with the National Taxpayer Advocate.

The IRS established the Questionable Refund Program to deal with the serious problem of refund fraud, which has increased significantly in recent years. The IRS estimates that fraudulent refund claims now exceed a half-billion dollars a year. Congress has held a number of hearings urging the IRS to devote additional resources and improve its detection and prevention of fraudulent refunds, particularly those involving prisoners.

The following examples of questionable refund program fraud investigations are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Defendant Sentenced for Filing False Claims for Refunds

On September 20, 2006, in Columbia, SC, Angela Collier was sentenced to 12 months in prison to be followed by three years of supervised release.  Between January 2004 and March 2005, Collier prepared at least 87 false claims totaling over $298,000 in refunds by preparing tax returns for individuals using Turbo Tax.  Collier electronically filed the returns claiming the individuals had used large amounts of non-taxable gasoline/gasohol and kerosene even though she knew the taxpayers did not qualify for the credit.  Collier charged her customers between $100 and $1,000 to prepare the returns depending on the amount of refund she was obtaining for them.  Collier’s customers were unaware that she was making these claims and had not provided her with any information to substantiate them.

Kansas Man Receives 21 Month Sentence for Filing a False Tax Return

On September 20, 2006, in Wichita Falls, KS, Seth Bryant was sentenced to 21 months in prison for filing a false tax return. Bryant pleaded guilty in June to one count of filing a false claim admitting that he obtained a fraudulent W-2 form which falsely stated he worked at Koch-Glitsch in 2003. He presented the false information to A-OK Tax Service which electronically sent his tax return to the IRS. As a result, Bryant received a $5,160 refund check that he was not entitled to receive.

Woman Sentenced for Filing False Tax Returns

On September 12, 2006, in Memphis, TN, Edith Thompson was sentenced to 12 months and one day in prison to be followed by two years of supervised release.  Thompson pleaded guilty on May 2, 2006, to four counts of filing false claims against the United States. During her plea hearing she admitted to filing three fraudulent tax returns in her name for tax years 2001 through 2003, and one 2003 fraudulent tax return filed in the name of Valerie Little.  During the plea hearing, evidence was presented indicating the fraudulent items claimed on the returns pertained to false dependants, earned income tax credit, and a fictitious Schedule C business.  According to the indictment, Thompson’s scheme resulted in returns being filed with the Internal Revenue Service that claimed refunds totaling over $49,000.

Nigerian National Sentenced for Filing False Claims for Income Tax Refunds

On September 11, 2006, in Montgomery, AL, Robert O. Emojevwe, a Nigerian national, was sentenced to 15 months in prison to be followed by three years of supervised release, and ordered to pay a special assessment of $100 and $116,147 in restitution.  On March 16, 2005, Emojevwe was charged with filing 46 false claims for income tax refunds for the 1998, 1999, and 2000 tax years.  Emojevwe made false statements on the returns relating to the taxpayers’ income and deductions in order to make it appear that the taxpayers were eligible for the earned income tax credit, to which the taxpayers were not entitled.  On May 9, 2006, Emojevwe pleaded guilty to one of the indictment’s 46 counts.  However, under Emojevwe’s plea agreement with the government, all of the conduct charged in the indictment was taken into account in imposing sentence.

Mother, Daughter, and Son Used False Identities to Get Cars, Real Estate and Tax Refunds; Mother Sentenced to 8 Years in Prison

On September 1, 2006, in Tacoma, WA, Mildreada Ruiz Rapa and her daughter, Melanie Andrews, were sentenced for a wide range of identity theft related charges including fraudulent use of Social Security numbers, real estate fraud, false statements to HUD, and income tax fraud.  Rapa was sentenced to eight years in prison to be followed by three years of supervised release.  Andrews was sentenced to 15 months in prison to be followed by three years of supervised release.  In addition, Rapa was ordered to make restitution of about $550,000 and Andrews was ordered to pay restitution of $60,000.  In October 2005, Michael Andrews, Rapa's son, was sentenced to 18 months in prison and ordered to pay $243,224 in restitution after pleading guilty to related identity theft charges.  According to court records, automobile purchases and car loans were made in a series of fictitious identities each defendant had crafted over time.  The same false identities were then used by the defendants to purchase seven residential properties in the Vancouver and Portland areas.  The homes and corresponding bank loans ranged from $180,000 to $450,000, and totaled about $2 million.  In each instance, the defendants created entirely fictitious histories, accompanied by false asset and income information, including false IRS Form W-2s.  Rapa also ran an income tax preparation service.  She prepared and submitted IRS Forms 1040 in her own false identities and in the false identities of her children, for which she received fraudulent refunds.  On tax returns for her clients, Rapa altered their IRS Form W-2s to increase their income, without their knowledge, arranged for the inflated refunds to be paid to her own accounts, and then either kept the entire refund or kept the inflated amount and paid the remainder to her client.  Rapa received in excess of $60,000 in fraudulent IRS refunds.

Defendant Nets 36 Months in Prison for Preparing False Claims for Income Tax Refunds

On August 23, 2006, in Columbia, SC, Charles Edward Stubbs was sentenced to 36 months in prison for preparing false claims for income tax refunds.   Stubbs was also ordered to pay more than $101,000.00 in restitution.  Stubbs prepared 85 false tax refund claims between January 2002 and October 2003 totaling more than $271,000.00, using other individuals' identification information.  As part of the scheme, he created W-2 forms to falsely represent that the individuals were employed in North and South Carolina and due income tax refunds. 

Norwalk Man Sentenced to Prison for Tax Fraud

On August 10, 2006, in New Haven, CT, Stuart O. Dennison, was sentenced to 24 months of in prison, followed by three years of supervised release, and ordered to pay restitution in the amount of $96,839.76 to the Internal Revenue Service, for filing fraudulent income tax returns and fictitious W-2 wage and tax statements for the tax years 2002 and 2003. According to the court documents, Dennison filed five false tax returns and claimed tax refunds not due to him in 2002 and 2003.  Four of the five false tax returns were filed electronically. Dennison filed three of these false returns in his own name, and the remaining two were filed in the name of his mother and his girlfriend. Dennison fabricated and submitted false W-2 wage and tax statements for all five tax returns. The total amount falsely claimed by Dennison was $207,506.76. As a result of this fraudulent scheme, Dennison received $96,839.76 in illegitimate tax refunds that he spent on, among other things, two automobiles, limousine rides, and high-end home audio/video equipment.

Virginia Man Sentenced to 36 Months for Filing False Tax Returns and Bank Fraud

On July 17, 2006, in Norfolk, VA, Tony Wayne Adams was sentenced to 36 months in prison and ordered to pay more than $101,000 for filing false income tax claims and bank fraud. Adams pleaded guilty in April 2006, admitting that he filed false tax returns seeking refunds from 2001 to 2003. According to the Statement of Facts in the case, Adams created at least five sham businesses and lied about his income on a Form W-2 “Wage and Tax Statement” that he created. Adams was ordered to repay the government and to repay several automobile dealerships he defrauded for using false documents and lying about his income to buy several cars.

Colorado Woman’s False Refund Claims Uncovered by IRS Fraud Detection Center

On July 10, 2006, in Denver, CO, Sydessah Nyessah Lewis was sentenced to five months in prison, five months of home detention, and ordered to pay $16,714 in restitution to the Internal Revenue Service for filing a false tax refund claim. A federal grand jury earlier charged Lewis with seven counts of filing false tax refund claims using various aliases. She pleaded guilty to one count in April 2006 admitting that she requested a $3,430 tax refund using another person’s name. IRS personnel at the agency’s Fraud Detection Center in Utah discovered the scheme.

Former Prison Inmate Pleads in Tax Refund Scheme

On June 27, 2006, former prison inmate Daniel G. Johnson was sentenced to 33 months in prison for filing false claims to the IRS. Johnson admitted that while serving time in the Arizona Department of Corrections, he filed two false income tax returns seeking $209,815 in refunds. Johnson pleaded guilty on November 28, 2005. In the first instance Johnson admitted that in November 2000, he filed a false 1999 U.S. Individual Income Tax Return using false wages and withholdings to claim a $2,129 tax refund. He also claimed large gambling winnings on his April 2001 tax return and requested a $207,686 refund. 

California Man Sentenced to 18 Months in Prison for Forging Tax Refund Checks

On June 5, 2006, in Los Angeles, CA, Uriel Flores Ramos was sentenced to 18 months in prison and ordered to pay restitution of $350,446 for passing at least 135 U.S. Treasury checks with forged endorsements as part of an income tax refund scheme.   Ramos pleaded guilty to passing forged U.S. Treasury checks on March 20, 2006.  Ramos’s wife, Lea Enriquez Flores, pleaded guilty on March 13, 2006 to conspiring with Ramos to defraud the IRS.  Flores admitted that she and Ramos prepared false tax returns, including false forms W-2 and falsely claimed dependants for people and claimed tax refunds from the IRS.  On the returns that they prepared, Ramos and Flores used addresses of businesses and residences that they controlled or to which they had access in the city of Orange, California, as the addresses of the taxpayers.  Flores’ sentencing is pending.

Washington State Man Sentenced for Filing a False Claim with IRS

On May 25, 2006, in Spokane, WA, Gustavo A. Bauer was sentenced to 15 months in federal prison for filing a false claim with the IRS, followed by two years of supervised release and ordered to pay $17,500 in restitution. Bauer pleaded guilty in April 2006 to one count of filing a false claim with the IRS. According to the US Attorney, Bauer filed 16 false income tax refunds in 1999 using the names and social security numbers of other people. The returns used false W-2 forms and all of them claimed the Earned Income Credit (EIC). The returns claimed tax refunds of $98,165. Bauer was a fugitive until June 2005 when he was found and arrested on counterfeiting charges near Fresno, California.

Ohio Tax Preparer Sentenced for Preparing False Tax Returns

On May 15, 2006, in Cleveland, OH, Vanessa Carter was sentenced to 30 months in prison, followed by three years of supervised release for preparing and filing 20 false federal income tax refunds.  She was also ordered to pay $19,504 restitution to the IRS.  Carter prepared and electronically filed false tax returns in the names of 11 people.  The tax returns contained false, fictitious, and fraudulent claims for $75,295 in tax refunds.

Leader of Tax Refund Scheme Sentenced to 46 Months

On March 24, 2006, in West Palm Beach, FL, Cynthia Reynolds was sentenced to 46 months in prison to be followed by 3 years supervised release and ordered to pay $343,900 in restitution.  Reynolds is the last of five defendants to be sentenced in a tax refund and counterfeit check scheme.  According to the evidence, Reynolds would obtain the Social Security numbers and other identifying information from recruited individuals and would then prepare fraudulent Forms W-2 to support the false income information on returns, which resulted in refunds ranging from $3,000 to $5,000.  Reynolds and her co-defendants would encourage taxpayers to apply for refund anticipation loans, which would allow the taxpayer to receive a cash advance on the false refund claim.  During the course of the conspiracy, the defendants cause approximately 50 fraudulent income tax returns to be submitted to the IRS with false tax refund claims of approximately $200,000. 

Man Who Threatened to Blow up Federal Courthouse Sentenced  

On March 22, 2006, in Detroit, MI, Vassalo K. Russell was sentenced to 87 months in prison for threatening to use a weapon of mass destruction against U.S. government property, a false income tax refund scheme and a probation violation from a prior federal bank fraud conviction.  Russell’s income tax refund scheme involved forging W-2 forms in 2003. 

Prison Inmate Sentenced for Filing False Tax Refund Claims

On March 17, 2006, in Miami, FL, Paul Turturro was sentenced to 48 months of imprisonment, followed by three years of supervised release.  Turturro was also ordered to pay $68,215.75 in restitution to the IRS for claiming more than $138,242 in false federal income tax refunds.  While in prison, Turturro recruited fellow prisoners to file false tax returns claiming refunds.  Turturro’s wife, Grace, prepared false Forms W-2 and other documents and filed the returns at numerous IRS Service Centers around the country.  When the refund checks were mailed to Grace Turturro, she kept $1,000 as a fee, and then sent the balance of the money to friends or relatives of the inmates. 

Former Detention Officer Sentenced for Defrauding the IRS in Connection with Refund Claims

On March 2, 2006, in Miami, FL, Lawrence Vincent Bailey, a former detention officer with the Department of Juvenile Justice in Miami, Florida, was sentenced 12 months and one day of imprisonment, followed by three years of supervised release.  Bailey was also ordered to pay restitution to the IRS in the amount of $852,458.  On December 2, 2005, Bailey pleaded guilty to conspiring to defraud the government.  On September 29, 2005, Bailey and Derrick Wayne Smith were charged in a twenty-one count indictment with conspiracy and substantive counts of defrauding the government.  According to the indictment, Bailey and Smith, along with co-conspirators Ron J. Hill and Sheree R. Saunders, recruited taxpayers and prepared false income tax returns on the taxpayers' behalf.  In her capacity as manager of H&R Block, co-defendant Vanessa G. Faulk and her husband James N. Faulk, prepared false income tax returns on the taxpayers' behalf knowing that the returns contained false information.  Approximately 246 fraudulent income tax returns claiming approximately $1.2 in refund claims were submitted to the IRS, co-conspirators Vanessa Faulk, James Faulk, Ron Hill, and Sheree R. Saunders were prosecuted previously in a separate case. Derrick Wayne Smith is scheduled to be sentenced at a later date.

Tax Preparer Sentenced to Prison for Filing False Return

On February 15, 2006, in Houston, TX, Filiberto Valencia Hernandez, aka Gilbert Hernandez, a tax return preparer, was sentenced to two years in federal prison, without parole, followed by three years supervised release for knowingly making and presenting a false claim against the United States.  Indicted along with John Anthony Mitchell, in January 2004, Hernandez was convicted following his plea of guilty to the federal felony offense on October 31, 2005.  According to the terms of the plea agreement filed in the record of the case, Hernandez offered to prepare the 1999 U.S. Individual Income Tax return for a client and accepted a $50 fee for the service.   Without the client's knowledge or consent, Hernandez prepared a return that falsely claimed an earned income tax credit for two falsely listed dependents resulting in a refund amount of $5,084.  Moreover, the tax return reflected Hernandez's address rather than the client's address.  Hernandez arranged for Mitchell, an Electronic Return Originator (ERO), to electronically file the false return with the IRS.  Mitchell did so knowing the return claimed false dependents, a false earned income tax credit, and a false income tax refund for $5,084.  As a consequence of the false filing, the IRS issued a check payable to Hernandez's client in the amount of $5,084 through its rapid refund program to Mitchell, the ERO.  Mitchell delivered to Hernandez a check in the amount of $4,704, the amount of the refund less bank fees and return preparation fees.  Hernandez cashed the check.  Hernandez later gave his client $1,000 as his tax refund for 1999.  John Anthony Mitchell was previously sentenced to serve 12 months and a day in federal prison, without parole for his role in the scheme.  

Raleigh Woman Sentenced for Filing False Tax Returns

On February 9, 2006, in Raleigh, NC, Margaret Yvonne Crudup was sentenced to 15 month in prison for filing fraudulent tax returns.  Crudup pled guilty on June 13, 2005, to twenty two counts of making fraudulent claims on tax returns she prepared in her own name and in the names of others between tax years 2001 and 2003.  Crudup’s scheme was designed to obtain illegitimate tax refunds by making a variety of false claims on the returns she prepared, including false claims of dependents who either did not exist or were not actually dependents of the taxpayer on whose behalf the return was filed; fraudulent claims of inapplicable tax filing status; provision of false W 2 and employment information, and providing false information about Schedule C expenses for non existent businesses.  The total amount of fraudulently sought tax refunds is estimated at over $120,000.

Nashville CPA Sentenced in False Claims Case

On January 26, 2006, in Nashville, TN, James E. Webb, a Certified Public Accountant, was sentenced to 51 months in prison followed by 3 years of supervised release and ordered to pay restitution of $80,295.  Webb, who had an office in Nashville, paid individuals to find taxpayers who had not filed income tax returns for several years.  These paid individuals would then obtain personal information from the taxpayers, including dependant information, and provide that information to Webb.  Webb would then prepare a tax return styled in the name of the taxpayer reporting fabricated income amounts and adding false dependents on the returns generating an Earned Income Tax Credit.  Webb then forged the taxpayers' name on the return, signed the return as the preparer, and mailed the return to the IRS.  The refunds were to be mailed to a PO Box or a private mail box in Nashville, which Webb controlled.  The scheme resulted in approximately $404,749 in false claims, with $80,295 in refunds issued by the IRS.

Lomita CPA and Tax Preparer Sentenced to Three Years Imprisonment for Submitting False Tax Returns to the IRS

On January 23, 2006, in Los Angeles, CA, James Michael Jerra (aka James Michael Porter), a Lomita CPA and tax preparer, was sentenced to three years in prison following his November 2005 conviction of three counts of subscribing to false federal income tax returns for 2002. Jerra falsely claimed a refund of over $3 million from the IRS. Evidence showed that Jerra filed two false 2002 employment tax returns for Jandel Corporation with the IRS, which falsely claimed that Jandel Corporation paid wages and compensation of $9,986,724, and that from those payments, income taxes of $3,854,875 had been withheld for 2002. Evidence also showed that Jandel Corporation had not paid any wages or compensation in 2002, nor had it withheld any income taxes from payments made for wages or other compensation.  Jerra also filed a false 2002 personal federal income tax return with the IRS which falsely reported wages of $9,986,724 and withholding of $3,854,875. The scheme involved offsetting the reported wages with a false gambling loss of over $7 million. Jerra then falsely claimed a refund for 2002 of $3,089,460. Jerra had not received any wages, nor had any taxes been withheld from him in 2002. Evidence presented at trial showed that Jerra did not receive the refund.

Memphis Man Sentenced in Tax Fraud Scheme

On January 18, 2006, in Memphis, TN, Tommie Brown, Jr., was sentenced to 41 months in prison followed by two years supervised release for his part in a conspiracy to file false claims for federal tax refunds.  Lee and his brother Stephen Brown agreed to create and helped to create false W-2’s for individuals.  The W-2’s contained false wages and federal tax withholdings.  On some occasions, Tommie Brown prepared tax returns for the recruited individuals resulting in false claims of approximately $80,946.17 being submitted to the government.  Stephen Brown, was previously sentenced on April 1, 2005, to serve 37 months in prison for his role in the conspiracy.

Detroit Man Gets Prison for Helping Others Get Fraudulent Tax Refunds

On January 10, 2006, in Detroit, MI, Jabbolli Davist was sentenced to 40 months in prison, followed by two years of supervised release, fined $2,100 and ordered to pay restitution of over $187,000.  This sentence was imposed as the results of Davist's September 6, 2005 guilty plea to a March 17, 2003 indictment charging him with one count of conspiracy to defraud the IRS through false claims, 18 counts of aiding and abetting the filing of false claims with the IRS, and two counts of making false statements to IRS criminal investigators.  According to court records, during 1999 through 2002, Davist operated a "refund scheme" where he helped taxpayers obtain fraudulent tax refunds. He found these taxpayers by word of mouth though family or friends and sometimes offered a $200 to $500 referral fee to anyone who brought him a taxpayer.  Davist would meet with the taxpayer, get their identification information, instruct them on how to file, provide them with a fraudulent and fictitious W- 2 and drove the taxpayers to a local tax preparation service where they filed for their fraudulent refunds and requested a Refund Anticipation Loan (RAL).  Davist required the taxpayers to hand all the tax preparation papers over to him and told them the he would let them know when their refund was ready for pickup.  Once the RAL check was ready, Davist would notify the taxpayer, take them to get the RAL check and go with them to cash it keeping a significant portion of the tax refund for himself.  The amount of the fraudulent tax refunds totaled over $187,000.

Five Sentenced in False Refund Scheme

On January 5, 2006, in Tulsa, Oklahoma, John Leonard Swimmer was sentenced to 57 months in prison followed by five years supervised release for his role in a conspiracy to defraud the IRS by obtaining the payment of false claims.   In addition, Swimmer was ordered to pay $59,562.75 in restitution to the financial institutions that issued Refund-Anticipation Loans (RAL’s) based on the false returns.   Swimmer, one of six people charged in April 2005, pled guilty in August 2005.  Four of the other defendants in the case have been sentenced after pleading guilty to making false claims against the U. S. Government.  John Randall Shepardson was sentenced to 18 months in prison followed by three years supervised release and ordered to pay restitution of $6,312.10.  Jack Ray Hines was sentenced to 12 months and one day followed by three years supervised release.  Shawna Lynn Mendenhall received 5 years probation.  Holly Jones was sentenced to 24 months in prison followed by three years supervised release and ordered to pay $5,984.05 in restitution.  The other defendant, Tommy Alan Toothman is scheduled to be sentenced on March 21, 2006.

The defendants recruited individuals to file fraudulent federal income tax returns under their own names and social security numbers using W-2 forms that contained names of employers who either did not employ the employees listed on the forms and contained fabricated amounts of tax withhholdings or were legitimate employers of the recruited individuals but contained inflated amounts of tax withholdings. The defendants then caused the false Forms W-2 to be submitted to commercial tax return preparers to be used to prepare false federal income tax returns which were electronically filed with the IRS.  The recruited individuals were then instructed to apply for a RAL through the tax return preparer. This allowed the recruited individuals to receive cash advances from financial institutions within one to five days. The recruited individuals paid the defendants a portion of the refunds which ranged from $3,073 to $5,951. Testimony in court during Swimmer's sentencing revealed that 34 false 2001 returns that sought a total of $124,057 in refunds were filed.

Indianapolis Accountant Sentenced to Prison in Tax Refund Scheme

On January 5, 2005, in Indianapolis, IN, Robert Stout was sentenced to 37 months in prison, followed by three years supervised release, ordered to pay $61,177 in restitution and was barred from preparing income tax returns during his period of supervised release.  Stout, who was an accountant, prepared false W-2 earnings statements and prepared false tax returns for persons claiming they were entitled to earned income credits based on the false W-2’s. The refunds ranged from $1,500 to $6,000 per return. During the course of the scheme Stout prepared approximately 60 false returns claiming refunds totaling $256,000. Clifton Jett was also sentenced for his role in the scheme. Jett was sentenced to 18 months in prison to be followed by three years supervised release. Jett was one of the persons who submitted a false tax return as well as recruiting 16 other people to file false tax returns that were prepared by Stout. The proceeds of the tax refunds were shared among various members of the conspiracy.

Defendant Used Internet Auction Web Sites to Carry Out Scam

On December 19, 2005, in Seattle, WA, Evangelos Dimitrios Soukas was sentenced to 92 months in prison to be followed by three years supervised release. Soukas was sentenced for submitting fraudulent claims to the IRS, identity fraud and conspiracy to commit wire and mail fraud. According to court documents, Soukas admitted to using a variety of schemes from 1999 to 2004, in his attempts to defraud his victims of more than $1.1 million dollars. Soukas posted false and fraudulent advertisements for merchandise on various internet auction web sites, knowing he did not have the merchandise and having no intention of delivering it. Soukas advertised expensive electronic equipment such as laptop computers, camcorders and cell phones. But, after purchasers mailed Soukas checks or paid into a Paypal account, they never received the merchandise. Soukas also used at least 15 victims' names, Social Security Numbers and dates of birth to open bank accounts, to apply for lines of credit and loans on the internet, and to purchase merchandise. Using the false identities, Soukas also filed false income tax returns in his victims' names in an attempt to obtain tax refunds to which he was not entitled.

Two Defendants Sentenced for Stealing Elderly Patients’ Identities to Commit Tax Fraud

On December 19, 2005, in Atlanta, GA, Joseph Milligan and Rae Beavers were sentenced on charges of conspiring to file false claims against the United States and fraudulently using other persons’ social security numbers. Milligan was sentenced to two years in prison to be followed by three years supervised release. Beavers was sentenced to one year and one day in prison to be followed by three years supervised release. Both defendants were ordered to pay restitution in the amount of $47,344. According to the evidence, Milligan and Beavers both worked at Eye Consultants of Atlanta, P.C. and beginning around January 2002, they stole the names, social security numbers and dates of birth of elderly patients. The information was provided to a convicted co-conspirator, Terrence Edwards, who used the data to file fraudulent federal income tax returns over the Internet. Each fraudulent return claimed a refund was due and Edwards filed for a refund anticipation loan from Santa Barbara Bank and Trust.

In July 2002, Milligan began working for Greenville Radiology, P.A. and continued to compile additional lists of elderly patients’ names, social security numbers, and dates of birth. Edwards paid Milligan between $200 and $500 for each list of patient identity information. When filing the fraudulent tax returns, Edwards used Beavers’ internet accounts and directed the bank to deposit some refund anticipation loans into Beavers’ bank account. Beavers worked with Edwards to forge a signature on and negotiate an income tax refund check in the amount of $26,355.65. Through Milligan’s and Beavers’ participation in the conspiracy, Edwards filed approximately 70 returns that falsely claimed refunds in excess of $200,000.

District of Columbia Man Sentenced to Two Years in Prison for Filing False Claims on Tax Returns

On December 12, 2005, in Greenbelt, MD, Eugene Love was sentenced to two years in prison, followed by three years supervised release, for filing false claims on federal income tax returns.  Love was also ordered to pay $190,416 in restitution; $60,035 to IRS and $130,381 to HSBC Taxpayer Services, the entity that provided Refund Anticipation Loans based on the false application for refunds.  According to the guilty plea, from about December 2001 through March 2002, Love was an office manager at Instant Tax Service.  As the office manager Love was responsible for preparing and submitting tax returns on behalf on Instant Tax customers.  The returns were filed electronically using the Electronic Filer Identification Number, which was assigned to Love.  During this period, Love prepared 56 personal income tax returns using false W-2 information.  A Refund Anticipation Loan (RAL) was requested for each of these claims and issued in the client’s name.  Each of the 56 RALs issued as a result of this fraudulent scheme were cashed and funds paid to Love.

Defendant Sentenced for Operating a False W-2 Tax Form Scheme

On November 21, 2005, in Fort Worth, TX, Anthony R. Houston was sentenced to 12 months in prison and ordered to pay restitution of $92,879. Houston pleaded guilty in August 2005 to one count of aiding or assisting in the preparation of a false tax return. Houston admitted that he assisted in preparing a false tax return for an individual (T.H.) using a false W-2 form which listed K-Mart of Texas as her employer. The defendant falsely listed $17,680 in wages, and $2,254.50 in federal income tax withholding on the W-2 Form. K-Mart of Texas stated they did not employ T.H. When T.H. was interviewed by an agent of the Internal Revenue Service, Criminal Investigation, she stated that Houston prepared a false W-2 form for her in February 2003. According to T.H., Houston approached her at an apartment complex and told her of the W-2 scheme. T.H. agreed and gave Houston her full name and social security number which Houston used in preparing the false W-2. Houston told her to have the return prepared at Jackson Hewitt. T.H. agreed to give Houston $1500 -$2,000 when she received the money from the return.

Co-Defendant Wife Pleads Guilty to Tax Scam Conspiracy from Prison Facility

On November 18, 2005, in Miami, FL, Grace Turturro pleaded guilty to conspiring to make or present fraudulent claims for federal income tax refunds against the United States. As stated in court, Paul Turturro is a prisoner at Moorehaven Correctional Facility in the Middle District of Florida. While in prison, Paul Turturro recruited fellow prisoners to file false tax returns claiming refunds. The necessary information such as names, dates of birth, and social security numbers was sent by Paul Turturro to Grace Turturro, who lived in New Jersey. As further stated in court, Grace Turturro would prepare false W-2 forms and other documents and would then file the returns at numerous IRS Service Centers around the country. The returns purported to be for tax years 1999-2002. All of the returns listed the Turturro address in New Jersey. When the refund checks came back to Grace Turturro, she kept $1,000 as a fee, and then sent the balance of the money to designated friends or relatives of the inmates. Grace Turturro sent payments to various locations including Boca Raton, Ft. Pierce and Miami, Florida. During the course of the conspiracy, the defendants caused approximately 43 fraudulent income tax returns to be submitted to the IRS, for a total fraud loss of $138,242.42.

Pair Sentenced for Filing False Claims in Oklahoma

On October 25, 2005, in Oklahoma City, OK, Stacey Leon McNeill was sentenced to 60 months in prison, followed by three years supervised release, ordered to pay restitution of $241,822 to the IRS and to perform 104 hours of community service. On October 7, 2005, another defendant, Shari S. Strawther was sentenced to 46 months in prison, followed by three years supervised release, ordered to pay restitution of $91,008 to the IRS and to perform 208 hours of community service. On July 8, 2005, McNeill and Strawther pleaded guilty to one count each of making a false claim to the Internal Revenue Service that they knew was materially false.

Man Sentenced to 15 Years in Fraud Case

On October 17, 2005, in Norfolk, VA, Craig Lamont Brown was sentenced to serve 180 months in prison, followed by five years supervised release and ordered to pay $221,691 in restitution after his convictions on conspiracy, bank fraud, and making false against the United States. Between 2000 and 2004, Brown and his nine co-defendants were involved in a scheme in which the co-defendants would open accounts at local banks and credit unions, deposit worthless or stolen checks into those accounts, after which they would withdraw funds credited on those checks as quickly as possible before the banks or credit unions could detect the scheme. Brown also prepared tax returns for the co-defendants and others that falsely inflated their income, which allowed them to obtain fraudulent refunds which were also split with Brown. Seven of the nine co-defendants have been sentenced receiving prison terms ranging from 14 months to one day in prison.

Georgia Man Sentenced for Preparing False Tax Returns for Clients

On October 13, 2005, in Macon, GA, Joseph Jerome Perkins was sentenced to 96 months in prison, followed by three years supervised release and ordered to pay restitution of $5,009.86 and a fine of $10,000. Perkins prepared taxes from his residence in Montezuma, Georgia, for numerous clients in a three county area. He charged his clients an up front tax preparation fee, usually $50, and a portion of the refund. The majority of fraudulent tax return prepared by Perkins included the use of false filing status, fraudulent dependents, false wages, and fabricated Schedule C businesses, in order to qualify the taxpayer for an Earned Income Tax Credit. The tax loss for the 32-count indictment was approximately $95,431.

The following examples of Questionable Refund Program fraud investigations are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Twin Brothers Sentenced in Tax Refund Fraud Scheme

On September 30, 2005, in Minneapolis, MN, identical twin brothers were sentenced for operating a tax fraud scheme.  Allen Steven Mickle was sentenced to 70 months in prison.  His brother, Sylvester Mickle was sentenced to 41 months in prison.  Both defendants were ordered to pay restitution in the amount of $127,684.50.  The Mickles entered guilty pleas in February, 2005.  Each pleaded guilty to one count of conspiring to defraud the United States and four counts of aiding the filing of false claims.   The Mickles admitted in court that they recruited and paid participants to file false tax returns.  For each participant in the scheme, the Mickles created fraudulent W-2 forms with inflated income and withholding information and directed the recruits to file false federal and state income tax returns and to apply for “Refund Anticipation Loans” to obtain the refunds over night.  When successful, the recruits then picked up their refund checks and cashed them.  The Mickle brothers kept most of the federal refund and allowed the recruits to keep the entire state refund.   The Mickle brothers also admitted conducting part of the conspiracy together, in the same place at the same time. Court testimony revealed there were 57 recruits who applied for fraudulent refunds.

Indianapolis Man Sentenced in Tax Scheme

On September 27, 2005, in Indianapolis, IN, Nafees A. Khaiser was sentenced to 27 months in prison, followed by three years supervised release and ordered to pay $405,111 in restitution following his guilty plea to submitting false and fraudulent tax returns and wire fraud.  Khaiser submitted fraudulent tax returns to the IRS and the Indiana Department of Revenue over a period of three years, showing substantial refunds due to him. 

Tax Preparer Sentenced for Preparing Fraudulent Income Tax Returns

On September 7, 2005, in Atlanta, GA, Deborah Ann Hill was sentenced on charges of preparing false tax returns.  Hill was sentenced to 18 months in federal prison, followed by 2 years of supervised release, and ordered to pay $126,110.00 in restitution to the IRS.  Hill pleaded guilty to the charges on June 24, 2005.  According to the evidence, Hill filed false federal income tax returns for other individuals for the tax years from 2000 and 2001.  Those returns falsely claimed deductions under Schedule C for fictitious expenses associated with the operation of small businesses, and falsely claimed eligibility for fuel tax credits relating to the use of kerosene for purposes other than the operation of a motor vehicle. According to the evidence, Hill was preparing returns for acquaintances out of her residence. The false information was generated for the purpose of getting tax refund checks. Hill retained over $43,000 of those fraudulent refunds for her personal benefit.

Man Gets Jail Time on Tax Fraud Charge

On September 7, 2005, in Martinsburg, WV, Glenn M. Riner was sentenced to 15 months in prison, followed by two years' supervised release.  Riner pled guilty to filing a false claim against the government and one count of failing to appear for his arraignment.  Riner was previously indicted on five counts of filing false claims against the government by filing false tax returns.  The indictment revealed that Riner's false claims amounted to over $44,000. During the sentencing hearing it was noted that most of the refunds were stopped by the IRS.

Valley Man Sentenced To Prison For Filing A False Claim With The IRS

On September 6, 2005, in Los Angeles, CA, Salvador Wenseslao Aguilar, 34, was sentenced today to 14 months imprisonment and ordered to pay $86,041 in restitution.  Aguilar pleaded guilty in May to one count of filing a false claim with the IRS.  Aguilar admitted in court documents to causing over 70 fraudulent tax returns to be filed with the IRS, falsely claiming more than $200,000 but less than $350,000 from the United States government.  According to the plea agreement, Aguilar used false forms W-2, false employers and false dependants for the individuals in whose names and social security numbers Aguilar prepared 1997 through 2002 tax returns, which were filed with the IRS.

Defendant Receives 30 Months on Conspiracy Charge

On August 10, 2005 in Miami, FL, Roger C. Farrell, Jr. was sentenced to 30 months in prison, followed by three years of supervised release on a charge of conspiracy to make and present fraudulent claims against the United States.  Farrell was also ordered to pay restitution in the amount of $217,456 to Santa Barbara Bank & Trust in California, and $112,534 to the Internal Revenue Service, a total of $329,990.  The Information filed alleged that during 2002, Farrell participated in a conspiracy to file false federal income tax returns claiming fraudulent refund claims.  The scheme involved recruiting individuals to obtain their Social Security numbers and other identifying information and then filing federal income tax returns for those individuals, and using fraudulent Forms W-2 to support the false income information on the returns. The Information further alleged that the members of the conspiracy would profit by retaining a portion of the tax refunds that had been fraudulently obtained on behalf of the recruited individuals.

Former Data Transcriber Sentenced to 70 Months in Prison

On August 3, 2005, in Memphis, TN, Teresa Fleming was sentenced to 70 months in prison to be followed by two years supervised release.  Fleming was also ordered to pay restitution to the IRS totaling $423,309.13.  Fleming was sentenced for her role in two separate income tax refund fraud schemes.  Fleming pleaded guilty on February 28, 2005, to nine counts of wire fraud, two counts of theft of government property, seven counts of money laundering, one count of conspiracy, and one count of misuse of a Social Security number.  According to the indictment, Fleming was a former data transcriber at the Memphis Internal Revenue Service Center.  She and others conspired together to defraud the IRS of money and stole money of the IRS by diverting tax returns in the amount of $351,068.71 and by attempting to divert an additional $154,949 of tax refunds due to taxpayers by routing their tax refunds to bank accounts controlled by the defendants.  In a separate matter, Fleming pleaded guilty on April 27, 2005, to nine counts of filing false claims against the U.S. Government.  The false claims submitted to the IRS totaled $60,909.

West Palm Beach Man Found Guilty of Tax Charges

On July 26, 2005, in Miami, Fl, Reginald Knight was found guilty of conspiring to defraud the United States and of presenting a false claim to the Internal Revenue Service by filing a false Form 1040 claiming a refund.  The evidence at trial showed that in 2001 Knight filed a tax return claiming income of $323,956 and also claiming that $99,292 had been paid into the Internal Revenue Service as withholding taxes.  The return then claimed that Knight was due a tax refund of $55,900.  The IRS Criminal Investigation identified the fraudulent return before the tax refund was paid. 

Pacoima Woman Sentenced to Prison for 70 Months for Preparing False Income Tax Returns

On July 18, 2005, in Los Angeles, CA, Linda M. Hall was sentenced to 70 months in prison and was ordered to pay a $6,339,023 in restitution.  Hall pleaded guilty on March 22, 2005, to a five-count information that alleged she filed false income tax returns for individuals that claimed false partnership losses.  Hall admitted in her plea agreement that she prepared returns that listed false partnership losses which resulted in a loss of $6,121,919 to the IRS.  Hall admitted that she willfully assisted in procuring, counseling and advising the preparation of the fraudulent tax returns that were filed with the IRS. 

Former Tax Preparer Sentenced to Over 6 Years in Prison

On July 14, 2005, in Atlanta, GA, Ben Nyemah Badio, a former tax preparer, was sentenced to 6 years and 6 months in prison for operating a $1.5 million tax fraud scheme.  In addition to jail time, Badio was ordered to serve 5 years supervised release, ordered to pay over $400,000 in restitution to the IRS, and ordered to pay his interest in a 2002 Cadillac Escalade, which was the subject of a $55,000 money laundering violation, forfeited to the United States.  According to the evidence, Ben Badio electronically filed over 80 false tax returns in 2000 and 2001, and without the knowledge of his clients falsely claimed inflated refunds in their name. Badio filled out tax forms falsely claiming that each of these taxpayer-clients was entitled to thousands of dollars in a "Federal Fuel Tax Credit," based on purported purchases by the taxpayer of tens of thousands of gallons of diesel, kerosene, liquid petroleum gas, and other fuel.  Badio had the refunds sent to bank accounts by way of "refund anticipation" bank loans that Badio applied for in the names of the taxpayers.  In some cases Badio paid the client a purported refund, but it was just a fraction of what he had actually claimed and received in their name or sent the client no refund at all.  Also sentenced was Elroy Badio, Ben Badio’s brother, who assisted in the scheme and was found liable for false returns in excess of $200,000. Because of his cooperation in this investigation, Elroy Badio was sentenced to six months of home confinement to be followed by six months of probation, and ordered to pay over $20,000 in restitution.

Baton Rouge Woman Sentenced in False Claims Scheme

On June 3, 2005, in Baton Rouge, LA, Sherri Ali Benson was sentenced to 24 months in prison to be followed by three years supervised release. Benson was ordered to pay restitution in the amount of $52,217 for filing false claims. Upon release, Benson will be deported to her home town on San Fernando, Trinidad. According to the plea agreement, Benson presented claims to the IRS, knowing them to be false. In 2001 and 2002, Benson electronically filed false 1999, 2000, and 2001 federal income tax returns in the names of her father sister, and brother and she filed all of these returns reflecting false wages, tax withholdings and itemized deductions claiming the refunds to herself in the amount of $530,000.

Three Defendants in Fraudulent Tax Return Conspiracy Sentenced

On May 26, 2005, in Miami, FL, Vanessa G. Faulk, James N. Faulk, and Sheree R. Saunders were sentenced for their part in a conspiracy that took place from January 2001 through April 2002, to file false federal income tax returns that contained fraudulent refund claims.  Vanessa Faulk, a manager at H&R Block, was sentenced to 30 months in prison to be followed by three years supervised release. She was also ordered to pay restitution of $852,458.69 and a special assessment of $3,000, representing $100 for each of the 30 counts charged against her in the Indictment.  James Faulk was sentenced to four months home confinement to be followed by 60 months of supervised release and ordered to pay $852,458.69 in restitution.  Saunders was sentenced to 30 days incarceration, five months home confinement, to be followed by three years of supervised release.  Saunders was also ordered to pay restitution of $852,458.69.  Another defendant, Ron J. Hill, was sentenced in March 2005 to 30 days in prison to be followed by two years and eleven months of supervised release, and ordered by the court to pay restitution of $12,000.

Milwaukee Woman Sentenced to 41 Months in Prison for Tax Fraud

On May 13, 2005, in Milwaukee, WI, Babette E. Davis was sentenced to 41 months in prison and ordered to pay $61,745 in restitution to the Internal Revenue Service for her role in a scheme to obtain payment of false claims for income tax refunds. Between 1997 and 2001, thirty-two false claims were filed with the IRS totaling $136,635. Evidence at sentencing detailed that Davis and her friend, Toya M. Olds, recruited 25 neighbors, relatives or friends to participate in the scheme. The individuals were instructed to provide Davis with their W-2 forms, which were then altered to reflect inflated wage and withholding amounts. In addition to the W-2 forms, Davis informed participants that they needed the names, birth dates, social security numbers of two children to claim as dependents. If participants did not have legitimate dependents to claim, Davis provided them. All 32 false returns claimed at least one dependent. The inflated wage amount, along with the dependents, made participants eligible for the Earned Income Tax Credit, which typically increased the anticipated refund by $3,000. Toya M. Olds was sentenced in September 2004 for one year incarceration for her role in the scheme after pleading guilty to one count of filing a false claim to the Internal Revenue Service.

Louisiana Woman Sentenced on Two Counts of False Claims

On May 11, 2005, in New Orleans, LA, Yolanda Singleton was sentenced to 15 months in prison to be followed by three years of supervised probation and ordered to pay restitution in the amount of $73,725. According to the facts, Singleton submitted false claims to the U.S. Treasury. From January 2003 through April 2003, Singleton worked as a tax preparer for the New Century Tax Service and prepared nineteen personal income tax returns on behalf of nineteen separate individual taxpayers, including herself for the 2002 tax year. In each return, Singleton made false representations by listing individuals as dependents on IRS tax forms when she knew that the individuals were not dependents of the taxpayers. By claiming false dependents the taxpayers then qualified to receive the Earned Income Tax Credit (EITC), which inflated the taxpayers’ refunds. The false dependents were all inmates in the custody of the Louisiana Department of Corrections during 2002. In addition, Singleton prepared and filed eleven fictitious individual tax returns for tax year 2002 in the names of inmates who were in the custody of the Louisiana Department of Corrections during 2002. Singleton obtained the names and social security numbers of the eleven inmates and then prepared a 2002 IRS form 1040 on behalf of each inmate. Singleton used Schedule C to falsely claim business income by the inmates/alleged taxpayers and falsely represented that the inmates supported dependants to qualify the inmates for EITC.  

Gulfport Bail Bond Business Operator Sentenced to Prison for Federal Income Tax Refund Fraud Conspiracy

On May 11, 2005, in Dunn Lampton, MS, Rhoda Lynn Holmes was sentenced to 24 months in prison, followed by three years supervised release and ordered to pay $9,938 in restitution.   Holmes sentencing was based on a guilty plea to conspiracy to present false tax refund claims to the IRS.  Holmes exploited her access to identifying information of clients of her bonding company to obtain social security numbers to use in preparing false federal income tax returns purportedly filed on behalf of the taxpayers whose identifying information she obtained.  Holmes filed the tax returns electronically over the Internet and diverted the resulting tax refund and refund anticipation loans into various bank accounts controlled by Holmes and her co-defendants.  The tax refund claims listed in the indictment total $128,723.  Four other defendants charged in the indictment have pled guilty. 

Two Men Sentenced in False Claims Scheme

On March 16, 2005, in New Orleans, LA, Emanuel Roy Ashton and Donald Roy Stovall were sentenced for conspiring together to file fraudulent returns claiming refunds in excess of $266,136. Ashton was sentenced to a term of 51 months in prison to be followed by three years supervised release. Stovall was sentenced to a term of 30 months in prison to be followed by three years supervised release. Stovall is currently serving a 15 year state sentence for forgery, bank fraud, and issuing worthless checks. In the spring and summer of 2001, Ashton and Stovall, while serving as inmates at Dixon Correctional Institute in Jackson, Louisiana, conspired to cause 49 false claims for income tax refunds to be filed with the Internal Revenue Service.  The false tax returns fraudulently claimed the same amount of wages, withholdings, employer information, standard deduction, and home address.  The false tax returns were for the calendar year 2000.  Each return claimed a refund just more than $5,431. CI stopped all of the claims for refunds before they were issued.

Former Accountant and Employee of Accounting Firm Sentenced for Tax Fraud Conspiracy, Bank Fraud and Mail Fraud

On March 3, 2005 in Baltimore, MD, Charles G. Fagan was sentenced to 42 months in prison followed by three years supervised release and ordered to pay $349,249 in restitution.  On March 10, 2005, Ashok Thakur an employee of Fagan’s was sentenced to 18 months in prison followed by 2 years supervised release and fined $63,501 in connection with his guilty plea to conspiracy to defraud the government, bank fraud, and mail fraud.  Both men were sentenced in connection with their guilty pleas to crimes committed from 2000 to 2003 in connection with schemes to defraud the IRS as well as several clients of his accounting practice. 

Rockford Man Receives 30 Month Sentence

On February 25, 2005 in Chicago, IL, Michael Brisson was sentenced to 30 months in prison and ordered to pay $492,000 in restitution.  In November of last year Brisson plead guilty to bank fraud, making a false claim for a federal tax refund and failing to account for and pay over federal employment taxes.   Brisson admitted that he defrauded a bank by using loan money for the hotel for his personal account, admitted he failed to pay federal taxes that were withheld from the paychecks of the employees of the hotel, and admitted he filed two fraudulent tax refund requests.  In addition, Brisson admitted to using false balances to obtain a down payment on an additional business. 

Gail Black Sentenced for Tax Crimes

On February 10, 2005, in Toledo, OH, Gail L. Black was sentenced to 27 months, to be served concurrently with a five year state sentence she is currently serving, followed by three years supervised release for willfully and intentionally submitting false claims against the U.S. via the electronic filing of tax returns claiming false refunds.   Black admitted she created false W-2’s with false wage and withholding amounts to maximize an earned income tax credit for each of the 26 returns she filed.  The 26 tax returns falsely claimed tax refunds totaling $104,865. 

Defendants Conspired to Obtain Over $300,000 in False Tax Refunds

On December 16, 2004, in Mobile, AL, Janice Ford was sentenced to 30 months in prison and ordered to pay $37,207 in restitution to the U.S. Treasury.  Ford conspired with her sister, Tamera Mayo, to file false tax returns.  Mayo is scheduled to be sentenced in January 2005.  From December 2001 through 2002, Ford and Mayo were involved in a scheme to file false federal income tax returns with the IRS in order to obtain tax refund checks.  The sisters purchased or obtained personal information such as social security numbers or dependent names and prepared the tax returns.  The tax returns covered tax years 1998, 1999, 2000, and 2001, which totaled over $300,000 in actual or attempted tax refunds. 

Michigan Woman Sentenced for Tax Fraud

On December 14, 2004, in Detroit, MI, Althea Williams, a.k.a. Althea McKenzie, was sentenced to 24 months in prison followed by three years of supervised release as a result of her June 26, 2004, guilty plea to one count of conspiracy to commit mail fraud and one count of aiding and abetting in the filing of a false claim against the IRS.  According to the second superseding information and court records, from 1995 to 1998, Williams assisted individuals in obtaining lease vehicles or mortgage loans by providing false financial information including false forms W-2, verification of employment, and income histories.  Williams supplied false applications for over $200,000 in leases and loans.  The second superseding information also charged that, in 1995, Williams knowingly prepared numerous false and fictitious federal tax returns out of her office, which were filed with the IRS.  The false tax refunds claims totaled over $62,000.

Tax Defendant to Serve Prison Term for Conspiring to File False Tax Refund Claims

On November 30, 2004, in Houston, TX, Guyitri Ramsook was sentenced to 24 months in prison, without parole, to be followed by three years of supervised release for her part in a conspiracy to present false claims for income tax refunds.  Ramsook was also ordered to pay restitution in the amount of $811 to the Internal Revenue Service. According to court documents, between 1999 through 2001, Michael Maharaj, a former certified public accountant, practiced accounting with an emphasis on tax. Maharaj did business in Houston under the company names of Nation's Accounting and Tax Service, and Nation Tax and Accounting Service. Peter Kolo and Maharaj were business associates who shared the same office space beginning in 1997 through the end of 2001.  Maharaj prepared a false tax return for Ramsook for the tax year 2000 claiming a fraudulent tax refund of $16,110. Maharaj also prepared a false tax return for Ramsook in her mother's name for the tax year 2000, fraudulently claiming a refund of $141,929.  Ramsook signed her mother's name on the tax return. This refund was routed to Ramsook's credit union account. Ramsook withdrew approximately $35,000 to pay off a car loan on a 2000 Mercedes Benz ML 320 purchased in February 2001. The Internal Revenue Service (IRS) recovered all but $811 of this fraudulent tax return, hence the court's restitution order.  
Co-defendants Maharaj and Kolo have also been convicted of conspiracy to present false claims for income tax refunds after admitting their guilt. Maharaj was sentenced to 78 months imprisonment, without parole, followed by three years supervised release and ordered to pay a $125,000 fine and restitution in the amount of $225,238 to the IRS.  Kolo was scheduled to be sentenced on October 21, 2004, failed to appear for his sentencing and remains a fugitive.

Man Sentenced to 37 Months in Tax Refund Scheme

On October 18, 2004, in Fresno, Ca, Jose Luis Torres Ramos was sentenced in connection with an illegal tax refund scheme.  Ramos was sentenced to 37 months in custody, to be followed by a three-year term of supervised release, and an assessment of $100.  Ramos was also ordered to pay $123,766 in restitution and agreed to forfeit his residence.  Ramos admitted that as part of the conspiracy to defraud the IRS, he had false tax returns and false Forms W-2 prepared by co-defendant Arjelia Hernandez.  The Forms W-2 each included a false employer, fictitious earnings and fictitious tax withholdings resulting in the amount of tax refund fraudulently claimed on the tax return.  Ramos also admitted to opening or having access to numerous post office boxes which he used to receive the false refund checks, knowing that all of these refund checks were made out to fictitious workers who had not worked in the United States, who had no federal income tax withholdings, and who were not entitled to any tax refunds from the United States.  The case was part of a crackdown by the IRS on numerous tax refund schemes operating in the Central Valley.  To date, 25 people have entered guilty pleas in connection with the illegal tax refund scheme.

What is the telephone tax refund?

The telephone tax refund is a one-time payment available on your 2006 federal income tax return, designed to refund previously collected long-distance federal excise taxes. It is available to anyone who paid long-distance taxes on landline, cell phone or Voice over Internet Protocol (VoIP) service. 

Why is the government refunding these taxes?

Several recent federal court decisions have held that the tax does not apply to long-distance service as it is billed today. The IRS is following these decisions and refunding the portion of the tax charged on long-distance calls.  The IRS is also refunding taxes collected on telephone service under plans that do not differentiate between long distance and local calls.

The telephone tax continues to apply to local-only service, and the IRS is not refunding taxes charged on local-only service.

The IRS will refund to you the taxes on long-distance service billed to you for the period after Feb 28, 2003 and before Aug 1, 2006.  Taxpayers should request this refund next year when they file their 2006 tax returns.

How do I get the telephone tax refund?

In general, anyone who paid the long-distance telephone tax will get the refund on their 2006 federal income tax return. This includes individuals, businesses and nonprofit organizations. The 2006 return is usually filed during 2007.

The IRS is making it easier for taxpayers by offering a standard refund amount between $30 and $60, so they don’t need to gather old phone bills. Taxpayers who choose the standard amount will only need to fill out one line on their tax returns. The standard amount is based on actual telephone usage data and the amount applicable to a family or other household reflects the long-distance phone tax paid by similarly sized families or households. Using this amount is the easiest way for taxpayers to get their refunds and avoid gathering 41 months of old phone records.

Businesses and nonprofits must fill out the new Form 8913 and base their refund requests on the actual amount of tax they paid.  The IRS is considering an estimation method that businesses and nonprofits could use for figuring the tax paid and is asking for public suggestions on potential methodologies that are both accurate and relatively easy for taxpayers to use.  Comments should be e-mailed to Telephone.Tax@irs.gov and must be received by Sept. 15, 2006.

Who is eligible to request the telephone tax refund?

In general, any individual, business or nonprofit organization that paid long-distance tax for service billed after Feb 28, 2003 and before Aug 1, 2006 is eligible to request the refund.

What is the standard amount?

Individual taxpayers can take a standard amount from $30 to $60 based on the number of exemptions claimed on their tax return.  For those claiming:

• one exemption, the standard refund amount is: $30
• two exemptions, the standard refund amount is: $40
• three exemptions, the standard refund amount is: $50
• four exemptions or more, the standard refund amount is: $60

The instructions to the 2006 1040 tax forms will provide more information on how to determine the correct number of exemptions. (Because the term, “exemptions” does not appear on Form 1040EZ, people who fill out this form should follow the instructions carefully.)
 
The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects the long-distance phone tax paid by similarly sized families or households. Using this amount is the easiest way for taxpayers to get their refund and avoid gathering 41 months of old phone records.

What forms do I file to request the refund?

For many individual taxpayers who want to take the standard amount, there are no additional forms to file, and they only need to fill out one additional line on their regular income-tax return.

Individuals choosing the standard amount can simply fill in the amount on Form 1040, Form 1040A, Form 1040NR or Form 1040EZ. People who don't need to file a return can use a new, simple form (Form 1040EZ-T) to choose the standard amount.

Taking the standard amount is optional. It is also the easiest way to get refunds. A married couple filing a joint return with two dependent children, for example, will be eligible for the maximum standard amount of $60.

Individuals who decide not to use the standard amount must figure their refund using the actual amount of tax they paid. To choose this option, taxpayers can fill out Form 8913 and attach it to their regular income-tax returns (Forms 1040, 1040A, 1040NR or 1040EZ, or the new simple Form 1040EZ-T for people who don't need to file a regular income-tax return).  .

The standard amount is not available to businesses and nonprofits. Accordingly, they must fill out Form 8913 and base their refund requests on the actual amount of tax they paid. Businesses should attach this form to the income-tax returns they normally file -- Form 1120, Form 1120S, Form 1065 or Form 1041. Nonprofits, including churches, charities and other tax-exempt organizations, attach it to Form 990-T. The IRS is considering an estimation method businesses and nonprofits can use for figuring out the amounts to be included on Form 8913.

How did the government come up with the standard amounts?

Telephone industry and IRS data were used to determine the refundable standard amounts. Telephone industry data showed that long distance spending correlated directly with the number of persons in a household; therefore, a scaled refund structure was selected based on the number of exemptions claimed on the tax return.

Can I e-file to get this refund?

Yes. Virtually anyone who files an individual return qualifies for electronic filing, and the telephone tax refund is one of many tax benefits that can be reported on an e-filed return. Whether you file electronically or on paper, you can get your refund even faster by having it deposited directly into your checking or savings account.
 
I don’t have to file an income-tax return. How do I get the telephone tax refund?

For those  people who do not otherwise have to file a tax return, there is a new simple form (1040EZ-T) that  can be used to get this refund. If you choose the standard amount, all you need to do is fill out this simple form using the number of exemptions you are eligible to claim. For example, a married couple with two dependent children (for a total of four exemptions) will be eligible for the maximum standard amount of $60.

If you decide not to use the standard amount, you must figure your refund using the actual amount of tax paid. To choose this option, you must fill out an additional form (Form 8913) and attach it to Form 1040EZ-T.

Do internet long-distance plans qualify for the refund?

Yes. If you paid the federal excise tax on your long-distance internet plan, you can request the telephone tax refund.

Why do I only get a refund for the past few years?

Under the applicable statute of limitations in the Internal Revenue Code, the IRS is generally not permitted to refund taxes that were paid more than three years before the date on which the refund program was announced. Accordingly, the telephone tax refund is available for long-distance taxes billed after Feb. 28, 2003, and before Aug. 1, 2006.

How do I determine how much federal excise tax I have paid on my long-distance service?

Taxpayers who choose to base their refund requests on the actual amount of tax paid should review their phone bills since Feb. 28, 2003. Taxes paid on local-only service are not eligible for the refund. In general, federal excise taxes paid on other types of service qualify. Federal access charges and state or local taxes and charges are not eligible for the refund.

On the other hand, taxpayers who choose the standard amount need not   determine the amount of tax they paid. The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects the long-distance phone tax paid by similarly sized families or households. Using this amount is the easiest way for taxpayers to get their refund and avoid gathering 41 months of old phone records.

What if I don’t know whether I paid this long-distance tax and I don’t have my phone bills?

To get the telephone tax refund, you must have paid the tax.  If you don’t have your telephone bills, the only way to be sure if you paid the tax for long distance is to check with your service provider.

Who do I call?

Instructions for requesting this refund will be included with your tax forms and at irs.gov. Therefore, most people will not need to call the IRS.  If you decide to figure the actual amount and need to obtain copies of your phone bills, you should contact your phone service provider.   Telephone companies may charge for copies of past bills.

What do I have to do now?

In most cases, nothing. Taxpayers will request this refund on their 2006 return. Accordingly, the IRS will begin accepting refund requests in January 2007.

The only decision you have to make is whether to use the standard amount or the amount of tax you actually paid. To take the standard amount, you don’t need to do anything now. You can figure it when you fill out your 2006 return.

If you are considering using the actual expense method, you may want to start gathering your phone bills since Feb. 28, 2003. As with any other line item on your return, starting early and keeping good records always makes the tax-preparation process easier.

Will the IRS pay interest on the refunded telephone tax?

The standard amount includes interest. The IRS will issue guidance later this year relating to the payment of interest where the actual expense method is used.

How do I decide if it’s better for me to use the actual or take the standard amount?

You can use whichever method gives you the larger refund. The standard amount is based on actual telephone usage data and the amount applicable to a family or other household reflects the long-distance phone tax paid by similarly sized families or households. Using this amount is the easiest way for taxpayers to get their refund and avoid gathering 41 months of old phone records.

Do I have to itemize to claim this refund?

No. Because this is a refund of taxes previously paid, it does not matter whether you itemize or take the standard deduction.

Will I get a separate check?

No. The telephone tax refund will be treated as a one-time payment on your 2006 return. Accordingly, it will reduce the amount you owe on your return or increase the amount of your refund.
 
What is the total amount the government expects to refund?

Economists at the U.S. Department of the Treasury estimate the amount refunded to individuals will be about $10 billion.

IR-2006-137, Aug. 31, 2006

WASHINGTON — The Internal Revenue Service today announced the standard amounts that most long-distance customers can use to figure their telephone tax refund. These amounts, which range from $30 to $60, will enable millions of individual taxpayers to request the telephone tax refund without having to dig through old phone bills.

In general, anyone who paid the long-distance telephone tax will get the refund on their 2006 federal income tax return. This includes individuals, businesses and nonprofit organizations. The 2006 return is usually filed during 2007.

The standard amounts are based on the total number of exemptions claimed on the 2006 federal income tax return. The standard amounts are $30 for a person filing a return with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions. For example, a married couple filing a joint return with two dependent children (for a total of four exemptions) will be eligible for the maximum standard amount of $60.

“The easiest way for eligible taxpayers to get their money back is to use the standard amounts,” said IRS Commissioner Mark W. Everson. “These amounts save taxpayers from locating 41 months of old phone bills and analyzing these bills to determine the taxes paid. We believe the standard amounts are both reasonable and fair.”

To get the standard amount, eligible taxpayers only need to fill out one additional line on their regular 2006 return. The IRS is creating a special short form (Form 1040EZ-T) for those who don’t need to file a regular return.

The standard amounts are based on actual telephone usage data, and the standard amount applicable to a family or other household reflects the long-distance phone tax paid by similarly sized families or households. Those who paid the long-distance tax on service billed after Feb. 28, 2003 and before Aug. 1, 2006 are eligible for a refund.

Only individuals can use the standard amounts. Alternatively, individual taxpayers can choose to figure their refund using the actual amount of tax paid.

Details on requesting the telephone tax refund will be included in all 2006 tax return materials and on irs.gov.

Though businesses and nonprofits must base their telephone tax refund on the actual amount of tax paid, the IRS is looking for ways to make the refund process easier for these taxpayers. The IRS is considering an estimation method businesses and nonprofits may use for figuring the tax paid.

"Businesses and nonprofits generally have more varied usage patterns than individuals do," Everson said. "We've met with a number of business and nonprofit groups to understand their concerns, and we plan to continue to work with them to come up with a reasonable method for estimating telephone excise tax refund amounts."

Comments and suggestions for simplifying the refund process for businesses and nonprofits should be e-mailed to Telephone.Tax@irs.gov. The deadline for these comments is Sept. 15, 2006.

IR-2006-82, May 25, 2006

WASHINGTON — The Internal Revenue Service today announced that it will stop collecting the federal excise tax on long-distance telephone service.

The tax on telephone services was first imposed in 1898. The current rate is 3% of the charges billed for these services. The IRS announcement follows decisions in five federal appeals courts holding that the tax does not apply to long-distance service as it is billed today.

Taxpayers will be eligible to file for refunds of all excise tax they have paid on long-distance service billed to them after Feb. 28, 2003. Interest will be paid on these refunds.

Taxpayers will claim this refund on their 2006 tax returns. In order to minimize burden, the IRS expects to announce soon a simplified method that individuals may use.

“So taxpayers won’t have to spend time digging through old telephone bills, we’re designing a straightforward process that taxpayers may use when they file their tax returns next year,” said IRS Commissioner Mark W. Everson. “Claiming a refund will be simple and fair.”   

The IRS announcement does not affect the federal excise tax on local telephone service, which remains in effect. Likewise, various state and local taxes and fees paid by telephone customers are also unaffected.

More information can be found in IRS Notice 2006-50. It will also be published in Internal Revenue Bulletin 2006-25, dated June, 19, 2006.