Electronic tax

Tax Fraud Blotter: The Best, the Brightest and the Guiltiest

Disorder in the yard; fines that don’t stick; prohibited logo; and other highlights of recent tax cases.

Olathe, Kansas: Dawna Kellogg, of Williamsburg, Kansas, pleaded guilty to wire fraud and filing a false statement related to a scheme to embezzle money from a local district court.

Kellogg, while employed in the accounting department at Johnson County District Court, stole at least $776,691.50 from her employer between January 2010 and June 2017.

She managed the accounting department, collected funds from each county system, recorded funds collected, processed daily reports, and deposited funds collected in the court bank account. She stole money the court received, such as bail payments, and spent or deposited the embezzled proceeds into her personal accounts.

Kellogg concealed the stolen money primarily by manipulating an unclaimed property account and creating false records in the court’s accounting system.

Kellogg pleaded guilty to one count of wire fraud and one count of underwriting a false statement. The total loss resulting from the scheme was $1,135,988.13. Sentencing is August 16.

Glastonbury, Connecticut: Attorney Deron D. Freeman was found guilty of tax evasion offenses.

Freeman, who owned and operated law firms in Hartford, Connecticut, practiced mainly in personal injury law and criminal law. Between 2006 and 2010, he fell way behind on his federal tax payments and failed to pay his outstanding tax balance despite multiple overdue tax notices and the imposition of payments and interest by the IRS.

In 2010, the IRS initiated a collection action against Freeman for the 2007, 2008, and 2009 tax years.

In 2011, shortly after Freeman entered into a payment plan with the IRS, he began using a bank account in the name of a third party to hold hundreds of thousands of dollars in an effort to protect funds from the scrutiny of the IRS. In June 2012, Freeman made sufficient tax payments for the IRS to remove a lien against him for the 2008 tax year. Shortly thereafter, he transferred over $248,000 from the third-party account to his personal money market account.

Freeman subsequently filed false returns for 2011, 2012 and 2013, failing to pay taxes on some $950,000 of income during those years, and also failed to pay significant taxes due for the tax years. 2014 and 2015.

Freeman has spent heavily on cars and watercraft, and between 2012 and 2016 spent around $1.5 million building a new home.

He was found guilty of three counts of fabricating and underwriting a false tax return and four counts of failing to pay income tax. He faces up to 13 years in prison.

Shreveport, Louisiana: Tax preparer Latasha Thomas, 44, of Crowley, Texas, was sentenced to 18 months in prison, followed by a year on probation, for making and subscribing to a false statement.

Thomas owned and operated Tax Related and ASAP Tax Service, in Shreveport. She was employed as an IRS revenue officer for two years before opening her prep businesses; she also owned the Kidz World Learning Center and the Best & Brightest Preschool Center in Shreveport.

Its main activity was to prepare and electronically transmit personal income tax returns. The IRS investigation found that Thomas aided and abetted in preparing fake 1040s for her clients by creating fake W-2s to increase her clients’ reported incomes and that she also falsified her personal returns.

Thomas received fees for filing individual client returns on corporate accounts on behalf of Tax Related, ASAP Tax and another company owned by Thomas, Diamond Elite Corp. These accounts were opened and mainly managed by Thomas. She received but did not report $168,297 in fees in 2016 and $139,736 in fees in 2017. She did not file a business return or include her business income on her personal returns for the one or other of the taxation years.

Thomas personally prepared her own 1040s for 2016 and 2017. She misrepresented both returns and the total income was wrong: she only claimed $45,677 for the two years combined when in fact her income totaled $308,033.

Thomas has agreed to be permanently prohibited from preparing, assisting, advising, or advising in the preparation or filing of federal returns for anyone other than himself. He is also prohibited from maintaining an association with a tax preparation company, from instructing, teaching or training any person in the preparation of federal income tax returns.

She was also ordered to pay $143,611 in restitution.

Erie, Pennsylvania: Independent tax preparer Erika A. Grandberry, 47, was sentenced to three months in jail and ordered to pay $66,789 in restitution following her conviction for violating federal tax laws.

Grandberry repeatedly reported false and fraudulent income and expenses for non-existent businesses on personal income tax returns from 2015 to 2017.

Plover, Wisconsin: Tax preparer James Canfield, 72, pleaded guilty to assisting in the preparation of false federal returns.

Canfield owned and operated Advanced Accounting Concepts and prepared returns for others for compensation. Between 2013 and 2018, Canfield electronically prepared and filed federal returns for clients who had overstated business expenses and unwarranted deductions for business use of clients’ homes. Despite being told by clients that they used their home primarily as a personal residence, Canfield allocated 100% of their home for business purposes and then took home expenses as deductible business expenses.

Canfield has already been fined twice by the IRS for preparing returns with improper business expenses and claiming personal living expenses as business deductions.

Sentencing is set for September 14. Canfield faces a maximum of three years in prison and a $250,000 fine. He will also be permanently prohibited from preparing and filing federal returns for others.

New York: Tax preparer Richard Barker, of Queens, was sentenced to 18 months in prison for conspiracy to defraud the United States.

Barker owned and operated a tax preparation business under the names Tax Depot Inc. and KPS Kampant, Parkinson, Sinclair & Co. Inc. From around 2012 to 2019, he conspired with others to submit false returns federal on behalf of clients. These statements included 1099-OIDs that incorrectly reported that financial institutions, creditors, and other entities had withheld and paid taxes to the IRS on behalf of customers, when in fact none of those taxes had been withheld or paid; the IRS paid customers undeserved refunds.

Barker also filed false claims for himself based on the same 1099-OID scheme and recruited at least one other person to do the same.

Barker, who caused a tax loss to the IRS of more than $460,000, was also ordered to serve two years of probation and pay some $464,252 in restitution to the IRS.

Roanoke, Virginia: Lisa Tucker Dillard, 60, a former owner of a tax preparation company who defrauded at least eight small businesses, was sentenced to two years in prison for wire fraud and ordered to pay $190,294 in restitution.

She owned and operated a bookkeeping and tax accounting business where she claimed to provide small business accounting services, including federal tax preparation, for a monthly fee. Beginning in 2017, Dillard launched a scheme to scam local small business owners, many of whom spoke limited English.

Dillard informed her victims that they owed a federal tax debt but that she had established an installment agreement with the IRS for payment. She then asked her victims to pay those payments directly to her, saying she would then forward the money to the IRS.

Dillard applied a fake IRS logo to the receipts she presented to her victims to make it appear that the money had been turned over to the IRS and applied to the victims’ alleged tax debts. In fact, she did not file any taxes or pay any money to the IRS on behalf of any victim and was never authorized by the IRS as a filer.