IRS Steps up Prosecutions for Identity Theft

WASHINGTON, D.C. (MARCH 3, 2015)

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The Internal Revenue Service is continuing its enforcement push against refund fraud and identity theft, and today announced the Top Ten Identity Theft Prosecutions for Fiscal Year 2014.

The IRS said its ongoing efforts to bring identity thieves to justice remains a significant priority as part of the agency’s comprehensive identity theft strategy focusing on preventing, detecting and resolving identity theft cases as soon as possible.

“Identity theft is a crime that carries significant consequences, and these cases send a warning to criminals,” said IRS-Criminal Investigation chief Richard Weber in a statement. “Our top 10 cases represent the seriousness of these crimes and the magnitude of the consequences that will be faced by those who victimize honest taxpayers and steal from hard-working Americans.”

In fiscal year 2014, the IRS initiated 1,063 identity theft related investigations. Criminal Investigation enforcement efforts resulted in 748 sentencings as compared to 438 in FY 2013, an increase of 75 percent. The incarceration rate rose 7.1 percent to 87.7 percent. The courts also imposed more jail time in 2014, with the average months of those being sentenced rising to 43 months as compared to 38 months in FY 2013. The longest sentence was 27 years.

During FY 2014, Criminal Investigation dedicated significant time and resources to bringing down identity thieves attempting to defraud the federal government.

The nationwide Law Enforcement Assistance Program provides for the disclosure of federal tax return information associated with the accounts of known and suspected victims of identity theft with the express written consent of those victims. There are now more than 755 state/local law enforcement agencies from 47 states participating. Since the start of the program, more than 6,776 requests were received from state and local law enforcement agencies.

The Identity Theft Clearinghouse continues to develop and refer identity theft refund fraud schemes to CI Field Offices for investigation. Since its inception in FY 2012, it has received over 7,600 individual identity theft leads. These leads involved approximately 1.47 million returns with over $6.8 billion in refunds claimed.

CI continues to be the lead agency that investigates identity theft and is actively involved in more than 78 multi-regional task forces or working groups including state, local and federal law enforcement agencies solely focusing on identity theft.  CI has one of the highest conviction rates in all of federal law enforcement—at 93.4 percent—and is the only federal law enforcement agency with jurisdiction over federal tax crimes.  CI is routinely called upon to be the lead financial investigative agency on a wide variety of financial crimes including international tax evasion, identity theft and transnational organized crime.

The summary of the following 10 identity theft cases is based on public information available in court records:

Top Ten Identity Theft Cases

1. Couple Sentenced for False Tax Refund Conspiracy – On April 24, 2014, in Charlotte, North Carolina, Senita Birt Dill and Ronald Jeremy Knowles, were sentenced to 324 and 70 months in prison, respectively. Both were also ordered to pay $3,978,211 in restitution to the IRS. Dill and Knowles pleaded guilty to false claims of conspiracy and access device fraud. Dill also pleaded guilty to aggravated identity theft. Dill and Knowles used fraudulently obtained personal identification information (including names, dates of birth and social security numbers) to file false tax returns claiming tax refunds. Dill and Knowles used neighboring addresses to fill out the fraudulent tax returns and checked the homes’ mailboxes frequently to retrieve the fraudulent refund checks upon delivery. The defendants also used addresses in Greenville and Greer, S.C., which belonged to Knowles’ businesses. Dill and Knowles filed over 1,000 false tax returns using the fraudulently obtained personal identification information.

2. Georgia Man Sentenced for Tax Fraud and Identity Theft – On Aug. 25, 2014, in Atlanta, Georgia, Mauricio Warner was sentenced to 240 months, three years of supervised release, ordered to pay $5,041,869 in restitution and forfeiture of bank accounts that contained $4,185,455. Warner was convicted on wire fraud, aggravated identity theft, filing false claims, and money laundering. Warner filed over 5,000 false tax returns using the names and social security numbers of unsuspecting victims that were told they could submit an application for an “Obama stimulus payment” or “Free Government Money” by providing their names and social security numbers. In addition to word-of-mouth marketing, Warner used toll-free telephone numbers to collect victims’ personal identifying information.

3.  Dallas Men Sentenced for Role in Massive Stolen Identity Refund Fraud Scheme – On May 15, 2014, in Dallas Texas, Ogiesoba City Osula was sentenced to 210 months in prison and ordered to pay $15.9 million in restitution. Osula was convicted on conspiracy to commit wire fraud, mail fraud and bank fraud; presenting fraudulent claims upon the U.S.; access device fraud and aiding and abetting; and aggravated identity theft and aiding and abetting. Previously sentenced were co-defendants: George Ojonugwa, sentenced to 174 months and ordered to pay $15,979,187 in restitution; Eseos Igiebor, sentenced to 96 months and ordered to pay $9,660,658 in restitution; Ebenezer Legbedion, sentenced to 40 months and ordered to pay more than $1 million in restitution; and Evelyn Nyaboke Haley sentenced to 60 months and ordered to pay approximately $5.7 million in restitution.  The defendants conspired to defraud the United States by using stolen identity information and false information to create and electronically file false tax returns to claim refunds. On Nov. 8, 2011, police in a Cincinnati suburb questioned Osula and Ojonugwa, who were in a parked car.  When the vehicle was searched, police found more than $300,000 in cash and money orders and numerous debit cards.  During that incident, while Osula was in a police car and waiting to be questioned, he ate a debit card.

4. Floridian Sentenced in Identity Theft Tax Fraud and Social Security Schemes – On Sept. 17, 2014, in Miami, Florida, Kevin Cimeus, was sentenced to 156 months in prison and three years of supervised release. Cimeus was convicted of conspiracy to steal government property or money, theft of government money or property, access device theft, and aggravated identity theft.  Federal agents found over 2,400 social security numbers and names of real people stored on thumb drives, laptop computers, iPad, and Cimeus’ email account at Cimeus’ residence. Cimeus recruited Miami Dade College students to allow him to use their bank accounts to receive fraudulently obtained tax refunds. Cimeus also used his own bank accounts to receive fraudulently obtained tax refunds. Cimeus filed at least one thousand tax returns from two IP addresses. He also used the two IP addresses to access the Social Security Administration’s web site and create online profiles for social security recipients in order to re-route the victims’ social security payments to other accounts.

5. Ohio Man Sentenced for Participation in $3.5 Million Identity Theft Scam – On Aug. 21, 2014, in Columbus, Ohio, Roma L. Sims was sentenced to 100 months in prison, three years of supervised release, and ordered to pay $3,517,534 in restitution to the IRS. Sims pleaded guilty to aggravated identity theft, wire fraud and conspiring to commit identity theft in a scheme to defraud the IRS. Sims advertised through various means in order to collect personal identification information from low-income or unemployed single parents with children. After tricking the innocent individuals who responded into providing their personal identification information, Sims prepared and filed false income tax returns in their names. Sims also obtained additional personal identification information by conspiring with Robert Earthman, who had access to the Kentucky child support enforcement database, which contained personal identification information of single parents with children who were recipients of child support. In total, Sims was responsible for the preparation and filing of approximately 977 income tax returns for the 2010 – 2012 tax years. Samantha C. Towns was sentenced to three years of probation and ordered to pay $1,312,513 in restitution to the IRS. Robert S. Earthman was sentenced to 24 months in prison, three years of supervised release and was ordered to pay $1,312,513 in restitution to the IRS.

6. New York Tax Preparer Sentenced for Filing False Tax Returns and Aggravated Identity Theft – On April 24, 2014, Mahamadou Daffe, a tax preparer in Queens, N.Y., was sentenced to 102 months in prison and three years of supervised release. Daffe was found guilty of conspiracy to steal government funds, theft of government funds, conspiracy to file false claims, wire fraud, and aggravated identity theft in connection with the preparation and filing of nearly 1,000 false income tax returns submitted online using stolen identities.

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IRS Whacks Robert De Niro with $6.4 Million Tax Lien

NEW YORK (FEBRUARY 27, 2015)

The Internal Revenue Service reportedly sent a tax lien for $6,410,449.20 to Academy Award-winning actor Robert De Niro for his 2013 taxes, but it has now been paid after the notice went to the wrong address.

De Niro’s spokesman Stan Rosenfied told the Web site The Smoking Gun that the notices were sent to an old address and once the actor found out about his overdue taxes, the full amount was hand-delivered to the IRS on Thursday morning.

The lien was dated February 3 and was uncovered by researchers at a new Web site called FamousTaxLiens.com.

De Niro won Academy Awards for playing the young Vito Corleone in “The Godfather Part II” in 1974 and boxer Jake LaMotta in “Raging Bull” in 1980. Of special interest to accountants, De Niro also played a bounty hunter in the 1988 movie “Midnight Run,” who is hired to bring to justice an accountant played by Charles Grodin who embezzled $15 million from the mob.

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Tax Refunds Hit $125 Bn

FEBRUARY 26, 2015
BY JEFF STIMPSON

The IRS has issued nearly 40 million tax refunds worth almost $125 billion for this season as of February 20. The average refund is $3,120.

Altogether, the IRS has processed almost 50 million returns, or about a third of the total individual federal income tax returns the agency expects to receive this year. Almost 83% of those returns resulted in refunds.

More than 92% of refunds have been direct deposited into taxpayer accounts.

The “Where’s My Refund?” link on IRS.gov has so far generated more than 100 million hits, Commissioner John Koskinenrecently told the Tax Section of the New York Bar Association, adding that despite cuts to the IRS budget, the filing season seems off to a smooth start.

Taxpayers visited the online tools and resources on IRS.gov almost 160 million times so far this year, the service added.

Around this time last year, the IRS had processed almost all of 49.6 million returns received and had issued about the same number of refunds as this season. The average refund last year at this time was $3,116.

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IRS Won’t Penalize Those Who Received Wrong Tax Info from Health Insurance Marketplaces

WASHINGTON, D.C. (FEBRUARY 25, 2015)

The Internal Revenue Service will not try to collect additional taxes from those taxpayers who have already filed their taxes after receiving incorrect information from the federal health insurance marketplace, Healthcare.gov.

Last week, the Centers for Medicare and Medicaid Services announced that approximately 800,000 taxpayers who received coverage via Healthcare.gov and qualified for premium tax credits had received the wrong information on a Form 1095-A, “Health Insurance Marketplace Statement,” sent to them in the mail (see800,000 Taxpayers Received Wrong Tax Info from Health Insurance Marketplace). They were asked to wait to file their taxes until March when a corrected form will be sent to them.

In a statement Tuesday, an unidentified Treasury Department spokesperson said that those who have already filed their tax returns will not be subject to additional taxes once the correct information is available and they do not need to file an amended tax return.

“Treasury estimates that approximately 50,000 tax filers (or less than 0.05% of total tax filers) already have filed their taxes using these incorrect form 1095As,” said he statement. “We have concluded that these individuals do not need to file amended returns. The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms.”

The incorrect information that appeared on the 1095-A specified the premium amount for the “second lowest cost Silver plan” in the taxpayer’s area. The amount is supposed to represent the benchmark plan used to determine the amount of the premium tax credit the taxpayer is eligible to receive. That information was calculated incorrectly for many taxpayers, although CMS stressed that it won’t be an issue for the majority of people who received health coverage through Healthcare.gov.

Still, some taxpayers and their tax preparers may want to file amended tax returns anyway. “Nonetheless, some individuals may choose to file amended returns,” said the Treasury spokesperson. “A tax filer is likely to benefit from amending if the 2015 monthly premium for his or her second lowest cost Silver plan (or ‘benchmark’ plan) is less than the 2014 premium. For example, if a filer’s original form lists a benchmark premium of $100 and her updated form lists a premium of $200, it may be in her interest to refile. Individuals may want to consult with their tax preparers to determine if they would benefit from filing amended returns. As CMS announced last week, affected individuals who have not yet filed their taxes should wait to file until they receive their corrected forms.”

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The Secret Tax Lives of the Rich and Famous

NEW YORK (FEBRUARY 23, 2015)
BY BEN STEVERMAN

BLOOMBERG BUSINESS

(Bloomberg Business) From Willie Nelson to Wesley Snipes, celebrities have a long history of tax trouble. In just the last year, comedian Chris Tucker, supermodel Gisele Bundchen, the lead singer of Creed and at least one of the Real Housewives have had reported run-ins with the IRS. What’s going on?

Singers, actors, and professional athletes get ensnared in complicated money situations that confuse even advisers with CPAs and law degrees. Here’s why: the costs of doing show business.

Just as Uber drivers can deduct the cost of gas from their taxes, celebrities can deduct their necessary expenses. But there’s a fine line between show-business expenses and the perks of a celebrity lifestyle.

Hiring a stylist or personal assistant might be deductible—as long as their pay is well-documented—but an expensive car or a poolside massage probably aren’t.

Dave Lopez, a Philadelphia-based CPA financial planner, works with hip hop artists for whom it’s crucial to network with other producers and musicians around the country. That can mean that hotel or airfare is deductible, but not drinking in the back of the city’s priciest club. Anyway, it can be impossible to get entertainers to keep track of their expenses. “Everybody’s doing everything in cash,” Lopez said. “The record-keeping is not that great.” Stars’ income can be as fickle as their fans

The IRS charges a penalty if taxpayers don’t pay enough in estimated taxes throughout the year. But many entertainers have no way to estimate how much they’ll make by Dec. 31. In the film business, “you can have one job a year. You can have four jobs a year. You can have three years without a job,” said CPA financial planner Mitchell Freedman.

And a lot of their income arrives in strange ways, which makes it tempting to cheat the IRS. Professional athletes get paid for autograph signings, reality TV stars for appearing at clubs. Those checks can’t just be cashed; they must be reported on tax returns.

They’re Big in Japan, Milwaukee and Everywhere Else
When you’re an actor shooting on location or a tennis player going from tournament to tournament, you can end up owing taxes to dozens of jurisdictions. States, the IRS and foreign countries all want a piece of you.

The complications multiply on concert tours, said Victor Wlodinguer of Citrin Cooperman. Backup musicians and roadies need the right W-2s and worker’s compensation insurance for each jurisdiction. Managers must keep track of not just expenses and income but where they occur. States like California and New York will otherwise demand concert promoters withhold a big chunk of revenue for taxes, Wlodinguer says. Foreign artists visiting the U.S. get the same treatment from the IRS.

Sudden Wealth Syndrome
Some stars are good with money. But it’s hard to expect financial savvy from people known primarily for their jokes, their three-pointers or their ability to cry on cue. “They’re on set for 12 to 14 hours a day,” Jeff Fishman of Los Angeles-based JSF Financial said of his clients. “They don’t have time to focus on the financial world.”

When they hit it big, many don’t know what to do with all the money. So they start spending it, quickly.

“There’s a temptation to be the kid in the candy store,” Fishman says, even though much of that new money may belong to the IRS.

Making planning harder: Unless you’re the next Betty White, the income won’t last forever.  “This year you’re hot—you’re at every awards show—and then we don’t hear from you ever again,” Lopez says.
When you get famous enough, everyone knows you’re rich. That brings out friends and family from deep in your past, begging for a loan, a job, or an investment in their soon-to- fail business. If you give your cousin money, you’ll need to fill out a W-2, a 1099, or a gift tax return. He or she may be family, but the IRS demands the correct form.

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