Congressmen concerned about misuse of .cpa domain

A group of four lawmakers has sent a letter to an internet governing body expressing concern about how the proposed .cpa domain extension might be exploited by fraudsters pretending to be CPAs.

The American Institute of CPAs has been working to secure a .cpa domain string, in partnership with the Australian accounting body CPA Australia, since 2014. The two groups have pending bids for what is technically known as a “generic Top-Level Domain string,” or gLTDs, before the Internet Corporation for Assigned Names and Numbers, also known as ICANN, the global nonprofit that oversees internet namespaces.

Rep. Steve Pearce, R-N.M., Michael Conaway, R-Texas, Steve King, R-Ind., and Ruben Kihuen, D-Nev., are asking ICANN to develop and promulgate verification regulations for gTLDs that are at the most risk of fraud and abuse, including “.cpa.” Conaway is a CPA who is a member of Congress’s CPA Caucus.

In a letter last month, the lawmakers pointed out that a 2013 communique by ICANN's Governmental Advisory Committee identified several domain extensions connected to regulated or professional sectors, including the accounting profession. “The GAC recognized that ‘these [gTLDs] are likely to invoke a level of implied trust from consumers, and carry higher levels of risk associated with consumer harm,’” they wrote. “Further, the communique highlighted that gTLDs such as ‘.cpa’ could be used to deceive consumers of CPA services in the United States and around the world if granted to those outside the global CPA community.”

“Ultimately,” the lawmakers added, “the communique recommended ICAAN ‘[e]stablish a working relationship with the relevant regulatory, or industry self-regulatory, bodies, including developing a strategy to mitigate as much as possible the risks of fraudulent, and other illegal, activities,’ and specifically cited ‘.cpa’ as requiring "Category 1" safeguards.”

“Unfortunately, to date, ICANN has not fully implemented this recommendation,” they noted. “While it has taken steps in the right direction, gTLDs, such as ‘.cpa,’ are still not regulated in a way to prevent fraud and abuse. For a gTLD that has a strong connection to a regulated industry, such as ‘.cpa,’ the protection of the public against fraud or other illegal activities should be of paramount concern to ICANN. Strong, reliable verification procedures are essential to protect the public interest. The importance of the public trust to the CPA profession around the world cannot be overstated, and the potential harm to the public of fraudulent or illegal use of a ".cpa" domain is immense.”

The lawmakers are encouraging ICANN to come up with verification procedures for websites that try to claim .cpa domain names. “ICANN cannot combat fraud by simply requiring applicants to make a representation, without any verification,” they wrote. “We recognize that although such verification is not a simple task, but it is an essential one.”

Source: Accounting Today

IRS, States, Industry Continue Progress to Protect Taxpayers from Identity Theft

From Neikirk, Mahoney & Smith, the Internal Revenue Service, state tax administrators and leaders of the tax industry announced today continued progress to expand and strengthen protections against identity theft refund fraud for the 2016 tax season.

The public-private sector partnership announced success in identifying and testing more than 20 new data elements on tax return submissions that will be shared with the IRS and the states to help detect and prevent identity-theft related filings. In addition, the software industry is putting in place enhanced identity requirements and validation procedures for their customers to protect accounts from identity thieves.

“This unprecedented partnership continues to put strong new safeguards in place for the 2016 tax season,” IRS Commissioner John Koskinen said. “We are breaking new ground in the battle against identity theft. Taxpayers will have more protection than ever when they file their tax returns.”
Known as the Security Summit, the unprecedented collaborative effort began in March and culminated in the development of several recommendations in June between the IRS, leaders of tax preparation and software firms, payroll and tax financial product processors and state tax administrators. Security Summit participants also identified additional topics for collaboration in the months ahead, and have continued to work together as a group to leverage their collective resources and efforts to protect taxpayers.

Koskinen and other leaders met in Washington, D.C., Tuesday to update the effort. To date, 34 state departments of revenue and 20 tax industry members have signed memorandums of understanding regarding roles, responsibilities and information sharing, with more expected to sign later.

As part of the Security Summit process, members from the IRS, states and industry are co-chairing and serving on several teams. The teams have focused on a number of areas including improved validation of the authenticity of taxpayers and information included on tax return submissions, increased information sharing to improve refund fraud detection and expand prevention, as well as more sophisticated threat assessment and strategy development to prevent risks and threats.

The industry and government groups identified numerous new data elements that can be shared at the time of filing with the IRS and states to help authenticate a taxpayer and detect identity theft refund fraud. There are more than 20 new data components that will help detect possible identity theft. The data will be submitted with the tax return transmission for the 2016 filing season, a step that will help detect and prevent refund fraud on both the federal and state level.

Another component will enhance identity validation for taxpayers using tax software. These stronger steps will protect taxpayer accounts by creating stronger verification of customers. This effort will include creation of security questions and device identity recognition at the time of log-on — both steps being used in the financial sector.

“We are taking new steps upfront to protect taxpayers at the time they file and beyond,” Koskinen said. “Thanks to the cooperative efforts taking place between the industry, the states and the IRS, we will have new tools in place this January to protect taxpayers during the 2016 filing season.”

In addition to the states and companies from the private sector, the summit team includes several groups including the Federation of Tax Administrators (FTA) representing the states, the Council for Electronic Revenue Communication Advancement (CERCA) and the American Coalition for Taxpayer Rights (ACTR). A wide variety of groups have also joined in supporting the summit effort, including Free File Inc., the National Association of Computerized Tax Processors, the Network Branded Prepaid Card Association and the Financial Services Roundtable.

If you have any questions or concerns, contact Neikirk, Mahoney & Smith PLLC at 502-896-2999.

Tax Tips From the IRS for Self-employed Folks

IRS recognizes Small Business Week May 4 – 8, 2015, by highlighting some of its most popular educational products, videos and webinars to help your small business thrive. If you are self-employed, be sure to view the IRS webinar “Business Taxes for the Self-Employed: The Basics.” 

Here are some topics included in the webinar or on IRS.gov that you should know:

Accounting Method.  An accounting method is a set of rules about when to report income and expenses. Many small businesses use the cash method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Find out more in IRS Publication 538, Accounting Periods and Methods.

Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. You may have to pay self-employment tax as well as income tax if you make a profit. Self-employment tax, or SE tax, includes Social Security and Medicare taxes. You may need to pay your taxes by making estimated tax payments. If you do, use IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.

Tax Forms.  There are two forms to report self-employment income. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form. Use Schedule SE, Self-Employment Tax, to figure your SE tax. If you owe this tax, make sure you file the schedule with your federal tax return.

Allowable Deductions.  You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business. View the webinar “Small Business Owners: Get All the Tax Benefits You Deserve” to learn more.

Business Use of a Vehicle.  If you use your car or truck for your business, you may be able to deduct the costs to operate the vehicle for the business use. Refer to IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses for details.

Follow the IRS on Twitter! The IRS has three key accounts: @IRSnews, @IRStaxpros and @IRSenEspanol. For all the IRS Small Business Week information, keep an eye on these IRS Twitter accounts and the key hashtags: #IRSsbw15 and #DreamSmallBiz.

Most Suspicious IRS Audit Triggers

According to Accounting Today, the Minnesota Society of CPAs has compiled a list of red flags that could trigger an audit from the IRS if they apply to your clients' tax returns.

1. Misreporting Your Income
Always make sure your income on your Form W-2 and Form 1099 matches the reported income on your return.

2. Unusually High Charitable Deductions
You may raise some eyebrows if your charitable donations are well above average for your income range.

3. Unusually Low Salaries
The IRS takes a close look at S corporation compensation practices, particularly if the salary paid to a principal owner looks suspiciously low.

4. Your Social Security Number Is Wrong
Make sure you clearly write or carefully type your Social Security number to avoid added scrutiny over your hand-filed return, or the rejection of your e-filed return.

5. Claiming Losses from “Hobby” Activities
Certain types of businesses showing losses, such as horse racing or horse breeding, will often generate increased attention.

6. Claiming a Different Amount for Your Alimony Deduction or Alimony Income than Your Ex-spouse Claimed for the Corresponding Item This is easy pickings. You must report the Social Security number of your ex-spouse when you report your alimony deduction.

7. A Large Amount for Meals and Entertainment Expenses
Sizable meals and entertainment expenses for your type of business are common targets.

CVC Investing Showing Growth

by Mark Lennon, Crunchbase

Corporate venture capital has always been dubiously titled ‘dumb money’, supposedly less interested in financial performance and only willing to make bets on strategically aligned startups. 

CVC investing, however, has grown significantly over the past few years and many leading tech companies are diversifying their investments by operating autonomous VC funds that look more and more like traditional private VCs. 

In 2013, both the number and size of CVC investments has continued to rise. In October 2013, 48 venture funding rounds valued at over $719M included CVC investor participation. This represented a 14% participation rate, the highest month in the CrunchBase dataset. Read full article

GAO Says IRS' Internal Controls Could Result in Security Breaches

Neikirk, Mahoney & Smith, an accounting firm based in Louisville, reports that in their most recent audit, the General Accounting Office (GAO) has slammed the Internal Revenue Service, citing ongoing weaknesses in internal controls and management that could result in taxpayer security vulnerabilities.

Citing "serious control deficiencies", the GAO says the corrective actions the IRS has taken have fallen short because of the failure of the IRS to fully address the system enhancements that will be required to fix the problems. System weaknesses cited in the audit include weaknesses in information security, including missing security updates, insufficient monitoring of financial reporting systems and mainframe security, and ineffective maintenance of key application security.

The most frightening aspect of the GAO's report is until the problems are resolved, there is an increased risk that taxpayer data will be vulnerable to "inappropriate and undetected use, modification or disclosure."

From the audit report, the "IRS did not maintain effective internal control over financial
reporting as of September 30, 2014, because of a continuing material weakness in internal control over unpaid tax assessments. GAO’s tests of IRS’s compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements detected no reportable instances of noncompliance in fiscal year
2014.

The material weakness in internal control over unpaid tax assessments was primarily caused by financial system limitations and errors in taxpayer accounts that rendered IRS’s systems unable to readily distinguish between taxes receivable, compliance assessments, and write-offs in order to properly classify these components for financial reporting purposes. These deficiencies necessitated the use of a compensating estimation process to determine the amount of taxes receivable, the most material asset on IRS’s balance sheet.

Through this compensating process, IRS made almost $17 billion in adjustments to the 2014 fiscal year-end gross taxes receivable balance produced by its financial systems. Serious control deficiencies related to unpaid tax assessments are likely to continue to exist until IRS significantly enhances the capabilities of the systems it uses to account for unpaid tax assessments, and improves
controls over the recording of information in taxpayer accounts so that reliable transaction-based balances for taxes receivable can be ultimately recorded in its general ledger system.

However, IRS’s current corrective action plan does not fully address all of the system enhancements needed to accurately classify unpaid tax assessment transactions, and IRS has yet to identify the underlying control deficiencies causing the errors in taxpayer accounts.

During fiscal year 2014, IRS continued to make important progress in addressing deficiencies in internal control over its financial reporting systems. However, GAO identified new and continuing deficiencies in internal control over information security, including missing security updates, insufficient monitoring of financial reporting systems and mainframe security, and ineffective maintenance of key application security, that constituted a significant deficiency in IRS’s
internal control over financial reporting systems.

Until IRS fully addresses existing control deficiencies over its financial reporting systems, there is an
increased risk that its financial and taxpayer data will remain vulnerable to inappropriate and undetected use, modification, or disclosure.

In addition to its internal control deficiencies, IRS faces significant ongoing financial management challenges associated with (1) safeguarding the large volume of sensitive hard copy taxpayer receipts and related information, (2) its exposure to significant invalid refunds from identity theft, and (3) implementing the tax provisions of the Patient Protection and Affordable Care Act. The difficulties confronting IRS in its efforts to effectively manage each of these challenges are further magnified by the need to do so in an environment of diminished budgetary resources.

Read the full audit report here. http://www.gao.gov/assets/670/666863.pdf

Lois Lerner Gets Some Payback

In an absolutely hilarious article by Michele Kirk in BizPac Review, conservative activist Jason Mattera recently found himself in a position that a lot of conservative Americans with they could be in as he happened along Lois Lerner walking her dogs.

Unlike a lot of us, though, Mattera had the nerve to say things to Lerner that a lot of us can only fantasize about.

"Mattera brutally pummeled the shamed former IRS director with requests for an apology to conservatives for using the government as a weapon to target them. He taunted her by saying things like “How does it feel to be targeted? You don’t like it do you?”

"Lerner ran for cover to a neighbors house where she knocked, and knocked and begged to come in.

"Oops, it must have been a conservative neighbor because, they wouldn’t let her in!

"When the man of the house finally came around from the back, Lerner told him she had been asking his wife to let her in because the press was bothering her.

"Not hearing what Lerner said to him, the man was still confused."

Mattera explained “She’s trying to get in your house, she doesn’t want to answer questions.”

"The elderly neighbor’s classic response, “I don’t want her in my house.” OUCH!

"Mattera didn’t miss a beat. “I don’t blame you,” he said. “I wouldn’t want her in my house either.”

"Thoroughly scorned, Lerner scurried to another house for cover."

Mattera has a history of ambushing deserving liberals.  His latest book, “Crapitalism” takes them on in writing.

IRS Issues Alert for Telephone Scams

WASHINGTON — The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

“These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

• If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or atwww.tigta.gov.
• If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add &quotIRS Telephone Scam&quot to the comments of your complaint.

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.

Additional information about tax scams are available on IRS social media sites, including YouTubeand Tumblr where people can search “scam” to find all the scam-related posts.

Accounting News Weekly Wrapup

As we prepare to wrap up the end of Q2 of 2014, here's a recap of the week's top stories and articles.

Businesses are cutting back on supplying cell phones to employees

Do you feel a tad screwed when your employer calls you on your personal cell phone and doesn't offer to reimburse you? Well, get used to it because, according to the Sage Mobile Device Survey, its not happening much these days.
Fewer businesses are supplying their employees with mobile devices this year over last, according to the second annual mobile device survey from Sage, with a little more than half of responding companies (54 percent) giving their staff devices, down from 69 percent in 2013.

Respondents are seeing the positive effects of mobile technology, however, with the biggest impact in customer service, according to 70 percent of the 1,090 U.S. small businesses polled. They also reported devices to be helpful for performing business in bad weather (32 percent), bringing more work to the company (21 percent) and enabling them to conduct meetings remotely (20 percent).

Despite these benefits, most businesses (more than three quarters) report they are not budgeting for mobile devices and instead purchasing them as the need arises. Five percent said that their business sets an annual budget for mobile items and sticks to it and 12 percent set an annual budget and adjust expenditures as needed.
Read More

Congress working to simplify education tax credits

The legislation, H.R. 3393, the Student and Family Tax Simplification Act, emerged from one of the 11 tax reform working groups that Ways and Means chairman Dave Camp, R-Mich., set up last year to study ways to improve areas such as education tax credits. Rep. Diane Black, R-Tenn., chaired the committee’s Education Tax Reform Working Group and she applauded passage of the bill Wednesday.

“It’s a well-known fact that the cost of education is climbing, and that for too many, the ability to save and pay for college without ending up under a mountain of debt is simply out of reach,” Black said in a statement.

Read More

CPA pleads guilty in Madoff corruption scheme

Peter Konigsberg, an accountant and lawyer who provided services to numerous clients of Bernard Madoff’s investment firm, and who was a personal tax and business adviser to Madoff, pleaded guilty Tuesday in a Manhattan federal court to various charges and faces up to 30 years in prison.

Konigbserg pleaded guilty to a three-count superseding information charging him with one count of conspiracy to falsify the books and records of Madoff Securities and to obstruct the administration of the tax laws, as well as two substantive books and records counts. In addition to pleading guilty, Konigsberg has agreed to cooperate with the government in its ongoing investigation of the fraud at Madoff Securities.
Read More

IRS hard drive failure ignites more furor in halls of Congress

(Bloomberg) U.S. lawmakers argued late into the night over a computer hard drive that crashed in 2011, taking the controversy surrounding the Internal Revenue Service to a new level of acrimony.

Republicans said the broken device that belonged to former IRS official Lois Lerner is crucial evidence in their investigation of the agency and said the IRS was covering up its misdeeds. Lerner headed the IRS office that gave extra scrutiny to small-government groups seeking tax-exempt status.

“I’m sick and tired of your game-playing in response to congressional oversight,” Representative Darrell Issa, chairman of the House Oversight and Government Reform Committee, said to IRS Commissioner John Koskinen at a hearing last night.

Read More

AICPA nixes IRS' Voluntary Tax Preparer Program

The American Institute of CPAs has sent a letter expressing strong concern with the Internal Revenue Service’s proposed voluntary certification program for tax return preparers, saying it “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.”

The AICPA expressed its concerns to IRS commissioner John Koskinen in a meeting and letter last month, but has increased its level of concern in the latest letter (see AICPA Opposes IRS Voluntary Tax Preparer Certification).

In a letter Tuesday to Koskinen, AICPA chairman Bill Balhoff and AICPA president and CEO Barry C. Melancon wrote, “We have repeatedly expressed to you and your colleagues that our members have very significant concerns regarding a voluntary certification program...

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Lerner is alleged to have targeted Sen. Grassley for audit

House Republicans are accusing Lois Lerner, the former director of the Internal Revenue Service’s Exempt Organizations unit, of emailing a colleague about subjecting Sen. Charles Grassley, R-Iowa, the former chairman of the Senate Finance Committee, to an IRS examination.

House Ways and Means Committee chairman Dave Camp, R-Mich., has been among those investigating the scandal that erupted after Lerner revealed that the IRS had been using terms such as “Tea Party” and “Patriot” to screen applications from groups applying for tax-exempt status. 

He revealed a series of emails Wednesday between Lerner and a colleague over an invitation that had been sent to Grassley to speak at a seminar to which Lerner had also been invited to speak. The unidentified group offered to pay for both Grassley and his wife to attend the event. In the email messages, Lerner says...

Read More

Regions Bank hit hard by fraud charges

Regions Bank plans to pay $51 million to resolve charges related to the intentional misclassification of loans and accounting fraud.

The Securities and Exchange Commission said Wednesday it has filed fraud charges against three former senior managers of Regions Bank for intentionally misclassifying loans that should have been recorded as impaired for accounting purposes

The SEC said the scheme resulted in the bank’s publicly-traded holding company overstating its income and earnings per share in its financial reporting.

Read More

IRS apparently ignoring AICPA and proceeds with program

The Internal Revenue Service is moving ahead with a voluntary tax preparer education program after legal challenges derailed an earlier mandatory testing and continuing education program.

The IRS said Thursday that guidance will soon be issued outlining the new voluntary program to encourage education and filing season readiness for paid tax return preparers. The program will be in place to help taxpayers during the 2015 filing season. It does not include a testing component, although the IRS hopes to add it in future years.

“Today we’re announcing a new program that will help taxpayers by improving the tax know-how and filing season readiness of paid tax preparers,” said IRS commissioner John Koskinen in a conference call with reporters. 

Read More

ObamaCare could benefit from tax season enrollment

A new study suggests that tax filing season could be the best time to sign up clients for health coverage under the Affordable Care Act rather than the current open enrollment period.

The study, by Katherine Swartz of Harvard University and John Graves of Vanderbilt University, published Wednesday in the journal Health Affairs, offers strong evidence for why the ACA open enrollment period should be changed to align with tax season. Currently, Americans who are eligible for tax credits for assistance with paying health insurance premiums only have from until February 15 to apply. The open enrollment began last October 1 during a botched rollout that quickly revealed technical glitches in the federal government’s HealthCare.gov health insurance exchange, along with many state-run exchanges.

The study evaluates the misalignment of the financial calendar of average low-income Americans with the open enrollment period for ACA health coverage, along with the impact that financial stress has on purchasing decisions. The researchers used data on Google search engine queries to evaluate when people were using search terms such as “health insurance.”

Read More

Startups concerned about US tax structure

Nearly two times as many startup business owners cite the U.S. tax structure over health care reform as the issue they anticipate having the biggest impact on their business this year, according to a new survey by the payroll technology provider Paychex.

Of the more than 250 business owners surveyed, 47 percent ranked the U.S. tax structure as the top issue affecting their small business, nearly double the number that selected health care reform (25 percent).

Overall government regulation (20 percent), potential government inaction (6 percent), and immigration reform (2 percent) ranked below those among the top issues.

by Michael Cohn, Accounting Today

Exports of unrefined American oil could begin soon

The Obama administration cleared the way for the first exports of unrefined American oil in nearly four decades, allowing energy companies to start chipping away at the longtime ban on selling U.S. oil abroad.

In separate rulings that haven't been announced, the Commerce Department gave Pioneer Natural Resources Co. and Enterprise Products Partners LP permission to ship a type of ultralight oil known as condensate to foreign buyers. The buyers could turn the oil into gasoline, jet fuel and diesel.

The shipments could begin as soon as August and are likely to be small, people familiar with the matter said. It isn't clear how much oil the two companies are allowed to export under the rulings, which were issued since the start of this year. The Commerce Department's Bureau of Industry and Security approved the moves using a process known as a private ruling.

Read More

BMW looking to build new plant; choosing between US and Mexico

MUNICH—German luxury car maker BMW AG BMW.XE -0.13%  will decide before Bavarian summer vacations whether to build a new auto plant in Mexico or the U.S., Chief Executive Norbert Reithofer said on Wednesday.

Speaking at industry event in Munich, Mr. Reithofer said BMW would decide on the location of a second plant to serve the North American market "clearly before the summer break."

Summer school vacations in Bavaria begin on July 30 this year.

BMW said earlier this year that it was considering building a second factory in North America to meet growing demand. BMW delivered about 376,000 vehicles in the U.S. last year, according to Autodata, about 19% of its world-wide deliveries.

It is widely expected that BMW will locate the new plant in Mexico instead of Spartanburg, S.C., an existing factory that builds its X series sport utility vehicles. Earlier this year, the company said it would invest $1 billion over several years in Spartanburg to expand production, including a proposed seven-seat SUV.

by Hendrik Varnholt, Wall Street Journal

IRS Cracking Down on Fraudulent Minnesota Tax Advisors

Tax Cheats Beware! -

A 63-count indictment has been unsealed charging Chatonda Khofi, Ishmael Kosh, Amadou Sangaray and Francis Saygbay in a conspiracy to defraud the IRS.

The indictment alleges that Primetime Tax Services Inc., where Khofi was CEO and Kosh and Sangaray managers, prepared false returns. According to court documents, Khofi, Kosh, Sangaray and Saygbay conspired among themselves and with others to prepare and file false individual returns for clients. Some of these returns reported false dependents, false deductions, false Schedule Cs and false wage income, resulting in inflated refunds.

As part of the scheme, court documents alleged, the defendants prepared and filed false Minnesota state returns for clients that contained the same or similar false information as reported on the federal returns. From 2007 to 2009, Primetime filed more than 2,000 customer federal income tax returns with the IRS.

The indictment further charges each defendant with multiple counts of aggravated ID theft and aiding and assisting in the preparation of false individual returns. The aggravated ID theft charges stem from the defendants’ alleged use of the names and Social Security names of actual persons to falsely claim as dependents on clients’ individual returns. According to the indictment, the defendants also accompanied some clients to check-cashing businesses to cash their falsely inflated refund checks, then demanded a portion of the cashed check in addition to tax prep fees already collected.

The indictment further alleges that in some instances the defendants withdrew cash from debit cards containing clients’ refunds without permission, again in addition to the prep fees already collected. 

If convicted, the defendants face a maximum of five years in prison for the conspiracy count and three years of prison for each count of aiding in the preparation of a false return. The ID theft counts carry a mandatory two-year sentence. This was also provided by Accounting Today!

Make 2014 a banner year for your company, too, by trusting your financials to Neikirk, Mahoney & Smith, PLLC. Call today!

Will this be The Winter of Our Discontent?

     With apologies to Shakespeare this is a little preview of some of the emerging economic concerns that will start to focus the mind before the winter months give way. Much of what we will be dealing with in the months to come will be extensions of what we have been wrestling with for the past three years but there are some new issues that are rearing their ugly heads and that will complicate the
strategies that have been in place thus far.
     The three to focus on for the moment are inflation threats, the impact of long term unemployment and the impact of a new Congress with more deficit hawks than before. Up to this point the strategy from Congress, the Executive branch and the Federal Reserve has been basically in sync and focused on economic pump priming. There has been no real concern over inflation as deflation had seemed more
imminent only a few months ago. The issue of employment has been front and center for the entire recession although there has clearly been a limit as to  what could practically be done. The deficit hand wringing was universal but very few in Congress had anything approaching a mandate to do something about all this.
     Now there is some evidence developing that will force a new look at the inflation threat in the future. Reports from the regional Fed banks in Philadelphia and New York show that manufacturers are universally reporting an expectation of higher priced inputs and when that hits the economy there will be increased price pressure.
    The employment situation is vexing and there is about to be a real crisis for
those who have been without jobs for the longest period of time. Getting this group back into the work force will be a major undertaking. The deficit hawks will be put to the test but there has already been a rejection of the budget for next year.