From The Stupid Preparer Files: Oh I Mean Stupid Attorney Files

Stacie says: “I don’t know about the suspsension period mentioned below.  The IRS reports that attorney Michael McCall was suspended for 24 months from practice before the IRS for writing a bogus tax opinion.  Frankly, if this guy wrote a bad opinion on purpose, I think it should be a permanent suspension.  But that’s just me.”

WASHINGTON — The Internal Revenue Service has accepted an offer of consent to suspension from bond attorney Michael W. McCall. Under the terms of the settlement agreement, McCall will be suspended from practice before the IRS for at least 24 months for writing a false tax opinion. Thereafter, he may petition for reinstatement.

“Practitioners have a duty to their clients, the system, and the municipal finance bond community to ensure that the tax advice they are giving their clients complies with the law and is complete and accurate,” IRS Office of Professional Responsibility (OPR) Director Karen L. Hawkins said.

McCall was engaged by a state of Washington county municipal sewer district to act as co-bond counsel and special tax counsel to write an opinion as to the tax-exempt status of the district bonds issued in October 2000 and to perform due diligence with respect to certain transactional matters relating to the bond issuance. The district issued the bonds for its utility local improvement district for a proposed commercial development. The bonds were issued in violation of state law as the utility local improvement district was located outside of the sewer district boundaries.  The bonds defaulted and have been determined to be invalid.

The OPR alleged that McCall’s opinion on the tax-exempt status of the district bonds was false under Circular 230, Section 10.51(j), and that McCall’s opinion on certain transactional matters was also false under Section 10.51(j).  In addition, the OPR alleged that McCall failed to perform due diligence under Circular 230, section 10.22, with respect to transactional matters related to the bond issuance, including an undisclosed payment to him from bond proceeds received by the developer.

Following an OPR investigation, McCall admitted to violations of Circular 230 for giving false opinions, knowingly, recklessly, or through gross incompetence (Treasury Department Circular 230, Section 10.51(j) (2000)), and for failing to exercise due diligence (Treasury Department Circular 230, Section 10.22 (2000)).
 
The settlement agreement included a disclosure authorization that allowed the IRS to issue this release.

IRS Patrol: An Installment of the IRS’s Own Stupid Preparer Files With Elements of the DUH Factor Too

Looks like the IRS has caught on to The Stupid Preparer Files.  This is the second news release by the IRS about stupid preparers in a couple of months.   If you are a loyal reader of  More Tax Tips you know that I like to keep readers up to date on IRS tax tips and news releases, so I am – shall we say – on top of these releases.  I can’t recall seeing this particular topic – not in the last few years anyway.  

One other point of interest you will notice as your read about this Stupid Preparer is this story also has elements of the DUH factor too. 

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IRS Wins 48-Month Suspension of a Lawyer for Failing to File His Own Tax Return and Late Filing

WASHINGTON — Massachusetts Tax Attorney Kevin Kilduff was barred from practicing before the Internal Revenue Service for 48 months for failing to file one federal tax return and for filing another five returns late.

“Professionals who demonstrate a lack of respect for our tax system by failing to meet their own tax filing obligations should not expect to retain the privilege to practice before the IRS,” said Karen L. Hawkins, Director of the IRS Office of Professional Responsibility (OPR).

The OPR had originally sought the 48-month suspension, alleging Kilduff’s conduct was willful and disreputable. OPR enforces standards of conduct under Treasury Circular 230, which governs enrolled agents, attorneys and certified public accountants. Kilduff formerly worked for the IRS Office of Chief Counsel.

The Administrative Law Judge (ALJ) subsequently set the penalty at a 24-month suspension. Kilduff appealed the ALJ decision to the Secretary of the Treasury’s Appellate Authority, which in fact ultimately imposed the harsher 48-month suspension.

Kilduff’s suspension is for a minimum of 48 months. OPR has sole discretion regarding his reinstatement to practice before the IRS. At the very least, Kilduff must file all federal returns and pay all taxes he is responsible for, or enter an acceptable installment agreement or offer in compromise.

The complete decisions of the ALJ and the Appellate Authority are available on the OPR page on this web site.

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So not filing your own tax return is not a good idea. – DUH

From The Stupid Preparer Files – Woman Claims Connecticut Residents are Not Subject to Federal Income Tax

By Stacie Clifford Kitts, CPA

I do enjoy reading about how stupid some tax preparers can be. It’s like a tax preparation train wreck. You know the kind you want to slow down to see. Moreover, the messier the scene, the harder it is to look away.

Nevertheless, regardless of how many stories I read, I am still amazed at tax preparers who are willing to go to jail over some income tax. Honestly, the blatant stupidity is genuinely mind numbing.

A favorite concerns a Connecticut woman, Sunita Buddhu who took over her father’s tax practice following his incarceration. Yes, I said it, his incarceration. Daddy went to jail for -get this – producing counterfeit checks from his place of business. The same business where he also prepared tax returns.

Now what do you suppose she told her father’s tax clients? Ummmm – I am sorry that my dad’s in jail – but no worries, I can still prepare your tax return, no need to worry about that fake check thingy.

Outstanding!

Apparently, whatever she said worked because she continued preparing returns. But more baffling even than her clients who agreed to let her continue to work on their returns, is why she agreed to step in. Now let’s see, dad is in jail for fraud, ya think there might be a problem with his tax practice? Ya think- just maybe?

Well yes Sunita, there did appear to be a problem. Following her father’s incarceration, the IRS started a tax preparer investigation and proceeded to audit over 600 returns she and her father had prepared.

Oh, but now the story really gets good. As a result of the investigation, Ms. Buddhu decided it would be a good idea to file amended returns for her clients moving false and obviously disallowed Schedule C deductions to Schedule A. Huh, okay if the deductions are bogus, which apparently they were, hello – they are still bogus regardless of the schedule they’re on. Duh.

But wait, there’s more.

Undaunted, her behavior gets even more bizarre when she informs her clients that the IRS does not have the authority to conduct examinations of Connecticut resident’s tax returns. Okay, talk about frivolous arguments. What is so special about Connecticut?

But wait, there’s more.

She also told her clients that because they were residences living and working in the United States, they were only required to pay social security taxes, but were not subject to income tax. Yep that’s right, according to the Buddhu’s only non-resident aliens are subject to income tax.

But wait, there’s more. Oh, I do love this one.

She actually prepared letters that she mailed to the IRS stating her frivolous tax arguments 1) the IRS did not have jurisdiction over Connecticut residents and 2) U.S. residents living and working in the U.S. were not required to pay income tax.

Holy Cow!

Unfortunately, not only will this crazy out of control tax preparer suffer from this train wreck but so will her clients. They are now responsible for paying the additional taxes and associated penalties and interest that resulted from the audits of their returns. And at least one client had to barrow against their house to pay the debt to the IRS.

From The Stupid Preparer Files – A Man Pretending To Be a Former IRS Employee Claims To Have A Special Relationship With The IRS

By Stacie Clifford Kitts, CPA

Apparently, Gerard Mirabella of Spring Hill, Florida prepared returns for his clients claiming false deductions for medical expenses, charitable contributions, non-existent businesses and other items according to a recent Department of Justice news release.

But that’s not all.

Mr. Mirabella was much more creative than just making up fake deductions for his clients. Yes sir-ee. It appears that he was able to convince his clients to go along with his um, works of fiction, by claiming that he was a former IRS employee whose returns were “cleared” by the IRS.

That’s right, as a former employee he apparently claimed to have a special “in” with our friends the Internal Revenue Service. This imaginary special treatment alludes to a unique prescreening of his work by the IRS giving his clients a license to claim certain fraudulent deductions.

A complaint requesting a permanent injunction against Mr. Mirabella also states that he told at least one client that he [Mr. Mirabella] had worked extra hard on the client’s return and that in addition to his normal $3,000 fee, he would like to receive a “tip” for his services.

Wow-wee, that sure is original. I will give him that.

I certainly wasn’t shocked to find out that a Florida Judge has permanently barred Mr. Mirabella from preparing any more tax returns. Thank goodness.

From The Stupid Preparer Files – Rerun of Former IRS Secretary Files Fraudulent Returns for Taxpayers

By Stacie Clifford Kitts, CPA

Here is another one for the “Stupid Preparer” files.

What do you really know about your tax return preparer?

If you hired Debra Windham of Chicago a former secretary with the IRS Criminal Investigative Division, your tax return might have been involved in a tax fraud scheme that resulted in a loss to the government of approximately $850,000. The government has filed suit seeking a permanent injunction against Ms. Wildham.

According to the complaint, Ms. Windham allegedly prepared tax returns for clients claiming bogus deductions and then applied for refund anticipation loans in her client’s name without their consent. In addition, as part of her scheme, she allegedly prepared two sets of returns, one she presented to her client and another return claiming the fraudulent deductions that she filed with the IRS. Ms. Windham then pocketed the additional refunds claimed on the returns.

Highlights From The Stupid Preparer Files


By Stacie Clifford Kitts, CPA

Here is my latest addition of the stupid preparer files. Again – mind boggling. This preparer tried to scam something as stupid and easy to track as buying a house. The thing that is most disturbing about this case, is the fact that this guy thought he could get away with it.

Today the Internal Revenue Service announced that it has successfully prosecuted James Otto Price III for falsely claiming the first-time home-buyers credit on a clients federal income tax return. Mr. Price faces up to three years in jail and a $250,000 fine.

The IRS warns potential fraudsters to beware as they have implemented technology that automatically searches for and identifies potential fraudulent claims. The IRS currently has 24 open criminal investigations and has issued seven search warrants related to the fraudulent use of the credit.

“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”

Taxpayers are reminded that even if they utilize a paid preparer, the taxpayer is still responsible for the accuracy of the return.

The IRS says:

“The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a primary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home. Different rules apply for homes bought in 2008.”

Going to Jail for Falsely Claiming First-Time Home-Buyers Credit


By Stacie Clifford Kitts, CPA

Here is my latest addition of the stupid preparer files. Again – mind boggling. This preparer tried to scam something as stupid and easy to track as buying a house. The thing that is most disturbing about this case, is the fact that this guy thought he could get away with it.

Today the Internal Revenue Service announced that it has successfully prosecuted James Otto Price III for falsely claiming the first-time home-buyers credit on a clients federal income tax return. Mr. Price faces up to three years in jail and a $250,000 fine.

The IRS warns potential fraudsters to beware as they have implemented technology that automatically searches for and identifies potential fraudulent claims. The IRS currently has 24 open criminal investigations and has issued seven search warrants related to the fraudulent use of the credit.

“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”

Taxpayers are reminded that even if they utilize a paid preparer, the taxpayer is still responsible for the accuracy of the return.

The IRS says:

“The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a primary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home. Different rules apply for homes bought in 2008.”

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