Republican Congressman Michael Grimm to Resign Following Guilty Plea to Tax Charge
Board of Equalization Will Look for Sales Suppression in 2015
Earlier this month, the DOJ issued a press release that buried the lead, titled, “Former eBAY Manager Pleads Guilty To Stealing More Than $200,000 In IRS Refunds.” Yes, the perpetrator did happen to work for eBay at the time of the crime and, yes, the amount stolen was over $200,000. However, what should make everyone stand up and pay attention is the fact that Sanjeev Bais, the criminal in question, was essentially a tax return preparer who misused client information to claim false refunds and keep the money for himself. It can happen to anyone, and has happened several times in Southern California over the last several years (in fact, my old haunt, the Tax Division of the federal prosecutor’s office in Los Angeles, issued press release on several of these incidences that were charged or sentenced last year).
The case, prosecuted by one of my old supervisors, Northern District Tax Division Chief AUSA Tom Moore, was only a bit more complicated than that. Bais sent an email to employees of various San Jose tech companies soliciting return preparation services by a CPA named Raj Malhotra. The twist is this person was not a CPA. The double-twist is there was no Raj Malhotra. Malhotra was an alias used by Bais and his partner to perpetrate their scheme.
Lesson 1: Bad return preparers lie about being CPAs. Don’t ever assume someone is a CPA, even if they say so. Ask for proof.
Lesson 2: Even if you live in Silicon Valley, you should consider meeting your return preparer in person at least once. Choosing your return preparer over email is little better than choosing your investment company by scouring your spam folder for a credible Nigerian prince, at least in my opinion.
Bais and his partner’s scheme otherwise was similar to many others I’ve seen. Once they had a client, they pretended to file a legitimate return and fronted a legitimate refund to the client, even going so far as doing an electronic deposit to the client’s account. However, they actually filed a false return claiming an inflated refund and pocketed the difference.
Lesson 3: Okay, this one is harder. Lord help you if you are using one of those refund anticipation/advance deals, because these systems seem to facilitate the ability of these schemers to go undetected. Outside of watching your return preparer physically file your return, it is difficult to tell what they are actually filing. If you don’t get an official treasury check as confirmation, you may never know. I haven’t tested this, but when you e-file a return, I know that Turbo Tax will let you track your refund and the processing of your return. I don’t see any reason why you can’t request that from your return preparer – tracking your refund and proof of the actual treasury deposit. You can also go to http://www.irs.gov/Refunds to track your refund. I can’t say this is the most effective way to check if your refund was the real deal, but it could help. (Also, if your refund is electronically deposited to your account, it should have some indication that it came from the US treasury, which would have been a tip off in this case.)
Happy hunting for those of you choosing a new return preparer, and have a happy new year!