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IRS cases: penalties stiff for tax fraud
Tax evasion is a risky crime. It is a felony punishable by five years imprisonment and a $250,000 fine. Taxpayers hearing claims from preparers offering larger refunds than other preparers are encouraged to check it out with a trusted tax professional or the Internal Revenue Service (IRS) before getting involved.

Those convicted of tax evasion may face prison time, home confinement, electronic monitoring or a combination.


The following case summaries are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted:


Roosevelt Kyle of San Diego, Calif., was sentenced Dec. 8, 2003, to 12 months in custody. A jury convicted Kyle for failing to file his personal income tax returns for the years 1995 through 1998. Evidence at trial showed Kyle earned more than $300,000 and prepared more than 3,000 tax returns but failed to file his own personal income tax returns. According to evidence presented in court, Kyle promoted tax-avoidance seminars, at which he advised clients they could permanently stop paying income taxes.


Kyle also promoted the book "Vultures in Eagles Clothing," which claims the income-tax laws are not applicable to U.S. citizens. This book was written by Lynne Meredith, who is under criminal indictment in the Central District of California for various tax crimes.


Leonard Hunter of Detroit, Mich., an accountant and tax preparer who owned and operated Len Hunter Tax Service, pleaded guilty, Dec. 1, 2003, to conspiring to defraud the IRS by filing false tax returns. Hunter's employee, Paul Yeskey, pleaded guilty, Nov. 24, 2003, to conspiring to defraud the IRS by filing false tax returns. During 1995 through mid-1998, Hunter and Yeskey focused on taxpayers that were unemployed, self-employed or minimally employed, who had dependents and had not filed a tax return for several years. Working with these taxpayers, Hunter and Yeskey would prepare false and fictitious tax returns, which showed a tax refund was due.


Hunter would file the returns, listing his accounting service as the return address. When the refund checks were received, Hunter would assist the taxpayers in cashing these checks, sometimes receiving half of the value of the false refund check as payment for his services. The indictment indicated more than 79 returns were identified as part of the scheme, causing more than $130,000 in fraudulent refunds.


Frank Lesters Bowden of Greenville, N.C., was sentenced Sept. 15, 2003, to 84 months in prison, three years of supervised release and a $500 special assessment for conspiracy and federal tax violations. His codefendant, Vickie Jones Peele, was sentenced May 28, 2003, and received a sentence of 18 months in prison, three years of supervised release and a $500 special assessment.


Bowden and Peele were each convicted of conspiracy to defraud the U.S. Treasury/IRS and four counts of making false, fictitious and fraudulent claims to the IRS for tax refunds. Evidence presented in court showed that Bowden and Peele prepared and filed IRS 1041 forms, which are used to report trust income, using the names of several taxpayers. The evidence further showed that none of the taxpayers for whom the forms were prepared and filed operated any trust accounts and that all of the figures on the 1041 forms were fabricated. Bowden offered his services for $100 in cash as a preparation and processing fee, and sometimes charged an additional 10 percent of the refund for check cashing.


Nancy L. Wallace of Cincinnati, Ohio, was sentenced April 15, 2003, to three years and four months in prison, followed by three years of supervised release and ordered to pay restitution to the IRS and her clients in the amount of $935,867. Wallace pleaded guilty Dec. 2, 2002, to one count of conspiracy and one count of aiding and assisting in preparing and presenting a false income tax return. Wallace admitted she helped her clients to evade more than $300,000 and her actions cost the IRS almost $950,000 in lost taxes.


The defendant also admitted she misappropriated and diverted her clients' funds for her personal use and failed to repay all of the funds. Wallace agreed, as part of the plea, to fully cooperate with IRS in determining her own tax liability and to prepare accurate income tax returns for herself and any related entity for the years 1992 to 2001 and file within a reasonable time.

How to report problems
Those who suspect tax fraud or know of an abusive return preparer should report the activity to the nearest IRS office. This information can be communicated by phone or in writing to the local IRS office. Contact the IRS by phone at 800-829-0433.