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California man faces fraud, witness tampering charges in tax case

A few prior blog posts have warned taxpayers to protect their identities and to beware of unscrupulous return preparers promising unrealistic refunds this tax season. But a story from Southern California involves a tax preparer facing charges far afield from anything we have discussed up to this point.

The man faces a number of fraud charges stemming from his return preparation business, which served wealthy clients. He allegedly instructed his clients to pay him the taxes they owed to the Internal Revenue Service. He assured them that he would then turn around and pay the money to the government. But most of that money never made its way to the IRS. According to the criminal complaint, he often prepared fraudulent returns that only reported slightly more than 10 percent of his clients' income. He kept the taxed owed on the unreported 90 percent for himself, amassing $11 million.

The story does not end there, however. Some of his former clients were called as witnesses against the man in the fraud case. To preclude them from testifying, the government alleges that he hired an assassin for $100,000 to silence two former clients. His driver stands accused of being the go-between man and has been charged in the witness tampering conspiracy.

While the details of the allegations against this man are far from ordinary, this story provides an easily applicable message: Be sure to find a trustworthy tax preparer. Taxpayers are liable for mistakes on their returns, even if someone else does the paperwork. People whose preparers create false or fraudulent returns could find themselves subject to an IRS audit and required to pay overdue taxes, penalties and interest.

Source: The San Diego Union-Tribune, "Calif. tax preparer accused of ordering hit on 2," Elliot Spagat, Mar. 5, 2012.

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