CANADA missed filing TD F 90-22.1 in 2006 - Jerome Schneider - and other scams - CPA and other professionals go to jail for tax

QUESTION:I am concerned about secrecy in regards to a very legitimate business beingconducted on an international level. Mainly the safety of those employed inwhat would be a very profitable endeavor. By forming an offshore LLC, sayin Nevis would this secrecy be maintained.Secondly as an American citizen I have no problems with the payment oftaxes. But I remember working as a merchant marine officer, and almostfainting when looking at how I was Taxes for what I call blood moneyearnings. I put in a lot of time, hours, physical effort, and mental effortto be taxed such as I was. It left a bitter taste in my mouth regardingtaxes. I called it legal robbery. As I said I don't really mind reasonabletaxes, but I' afraid that the situation in our society dictates that myearnings will somehow be shanghaied. Can I find some relief of heavy Americantaxes through a foreign LLC.Thank you very much for your time, and consideration Looking forward tohearing from you as time permits----------------------------------------------david ingram replies:Taxes are all in the eyes of the beholder.I had a fellow from India yesterday.  He was so happy to be here that hepaid significantly more US taxes than he had to for the benefit of being alegal resident of Canada while working in the United States.It wasn't his expression but it reminded me of another client who told methat the best life was to have:*	an Indian Wife*	Chinese food*	A British Home and*	an American salary.I assure you that there is no way that you can go offshore legally as a UScitizen and exempt all of your income as a ship's officer unless you marrysomeone in a tax free zone such as Panama or Costa Rica, father somechildren, and return to that home whenever you get a leave.  i.e. you"really" do live there. Establishing a bone fide residence in another countrywould allow you to exempt up to $80,000 US from US tax and as long as youwere genuinely living in that jurisdiction, you would only be taxable by theUS on amounts over $80,000 US. See form 2555 as part of your US 1040 IncomeTax Package - www.irs.gov forms will let you see it.Three years ago a fellow named Jerome Schneider set some 1,070 US citizensup with offshore corporations over a 12 year period.  Jerome was charged andconvicted and plea bargained a possible 20 years in jail down to less than ayear by turning over the accountants and lawyers who had helped him and over1070 clients to the IRS - you can read more from an old Q & A as follows:--------------------------------------I attended a seminar a couple of nights ago which dealt with a CorporationSole as a method of avoiding Income tax - Is this a good deal. Will it work?It was going to be set up in New Mexico because they have some old SpanishLaw which makes it work in New Mexico.======================david ingram replies:Forget it - there is no such thing as a corporation sole making your taxliability go down unless you are a legitimate religion.  You can read morespecifically about Corporation Sole scams at the IRS site at:http://www.irs.gov/newsroom/article/0,,id=121566,00.htmlStay away from any offshore schemes or set-ups.  I guarantee that the IRSand CRA have covered just about everything and are prosecuting people fromMiami to Alaska, from Los Angeles to St John's Newfoundland.  The ones Ihave shown are all American but there have been an amazing number in Canadain the last two years as well.If you go tohttp://www.irs.gov/compliance/enforcement/article/0,,idYou will get the following.You will notice that a lot of accountants and lawyers have gone to jail forthe false advice and work they have done.  Vancouver's own Jerome Schneideris mentioned twice.  He pled guilty and is already out of jail but he iscooperating fully with the IRS in helping them track down and prosecute over1,000 of his clients and the attorneys and accountants who assisted him.  Alot of the paperwork he handed out at his seminars was taken from my stuffcomplete with the same printing errors.You can read more specifically about Schneider at:http://www.quatloos.com/schneider_witmeyer_guilty.htmFY2005 Examples of Abusive Tax Scheme InvestigationsThe following examples of abusive tax schemes and fraud investigations areexcerpts from public record documents on file in the courts in the judicialdistrict in which the cases were prosecuted.Two Reno-Area Accountants Plead Guilty to Tax Crimes in Connection WithClient’s Use of Abusive Offshore SchemeOn September 29, 2005, in Las Vegas, NV, Roger Steele, owner of SteeleAccountancy, Inc., pleaded guilty in connection with the advice andassistance he gave to a client, Dale Brown, regarding Brown’s 1998individual income tax return and the 1998 income tax return of Brown’sdomestic corporation.  Kimberly Steele pleaded guilty in connection with herobstructive conduct while representing Brown during the course of the IRS’s1999 civil audit.  Brown, an author, previously pleaded guilty in April 2004to filing a false 1998 corporate tax return on which he falsely claimed morethan $450,000 in bogus business expenses as a result of his participation inthe offshore scheme promoted by Roger Steele.   According to documents filedwith the court, in 1998 and 1999, Roger Steele assisted Brown in forming twooffshore corporations.  He advised Brown to transfer monies from hisdomestic corporation to the offshore corporations and to record bogusexpenses on the domestic corporation’s records for services that were neverperformed or provided by the offshore corporations.  Roger Steele alsoadvised Brown that he could bring the monies transferred to the offshorecorporations back into the country disguised as loans or by using a creditcard issued by an offshore bank.  Steele admitted that as part of thescheme, he knowingly prepared two false tax returns for Brown: a false 1998income tax return for Brown’s domestic corporation that included fraudulentbusiness deductions of more than $450,000, and a false 1998 individualincome tax return for Brown that understated Brown’s income tax liability byapproximately $223,000.  Kimberly Steele admitted that during the IRS’s 1999audit, she assisted Brown in presenting to the IRS auditor a falseexplanation about Brown’s use of an offshore credit card. To support thefictitious explanation, she knowingly signed and presented to the IRSauditor a false affidavit.$8 Million Foreign Investment Nets Prison Terms for Central CoastFather-and-Son TeamOn September 27, 2005, in Los Angeles, CA, James Carroll Sexton wassentenced yesterday to 88 months in federal prison. His son, James CarrollSexton Jr. was sentenced yesterday to 21 months in prison.  The Sextons eachpleaded guilty on March 10, 2005, Sexton Jr. pleaded guilty to four countsof mail fraud and a conspiracy to launder money.  The elder Sexton pleadedguilty to 11 counts of mail fraud, two counts of wire fraud, four counts ofmoney laundering, and one count of conspiracy to money launder.   The elderSexton posed as an attorney and told victims he would establish a "bankwithin a bank," or a trust account, at banks in Liechtenstein, a countrynear Switzerland with strict bank secrecy laws. Victims testified that theywere told their money would be safe, secure and held under their solecontrol.  Bank records and witnesses showed that between May 1998 andFebruary 1999 victims transferred more than $8 million to the accountsostensibly established on their behalf by Sexton. In reality, Sexton was thesole owner and controller of the accounts. When foreign bankers began toquestion Sexton about the true owners of the funds, he misrepresented thesource of funds and, with the assistance of Sexton Jr., withdrew thevictims' funds and moved the money through various other foreign bankaccounts under fictitious names and nominees in an effort to conceal anddisguise ownership. Liechtenstein law enforcement authorities providedextensive and prompt assistance to United States authorities and returnedmore than $4 million of the fraud proceeds to the U.S.Two CPA’s Sentenced in $120 Million International Tax Shelter CaseOn September 16, 2005, in Seattle, WA, two Anderson’s Ark & Associates (AAA)accountants were sentenced for aiding and assisting in the preparation andfiling of fraudulent income tax returns. Tara LaGrand, of Naples, FL, wassentenced to 24 months in prison, to be followed by one year of supervisedrelease. Lynden Bridges, of Wheat Ridge, CO, was sentenced to 18 months inprison, to be followed by one year of supervised release.   LeGrand andBridges, each a Certified Public Accountant, were part of AAA, anorganization through which fraudulent tax shelters and investment scams werepromoted and sold. From 1996 through 2001, AAA had approximately 1,500clients, nearly 300 of whom reported over $120 million in fraudulent incometax deductions.  In their plea agreements, they admitted that they eachassisted AAA clients by preparing and filing the partnership agreements,promissory notes, and income tax returns required to implement the “LookBack” program—one of two fraudulent schemes promoted by the AAAorganization.Indictments also have been returned against 15 AAA clients nationwide,several of whom have pleaded guilty. Most recently, on September 13, 2005, ajury in Milwaukee, Wisconsin, convicted one AAA client, Glen J. Murphy, ofseven counts of filing false tax returns and three counts of willfullyfailing to file income tax returns.Five Defendants Convicted of Tax Crimes in Connection With Promotion ofAbusive Trust SchemeOn September 8, 2005, in Phoenix, AZ, five persons associated withInnovative Financial Consultants (IFC) were convicted of tax crimes inconnection with the promotion of a tax evasion scheme utilizing abusivetrusts called “pure trust organizations.  IFC advanced its scheme throughseveral avenues, including domestic and offshore seminars; a promotionalwebsite; and an interactive telephone conference line.  As a result of theprosecution, the following individuals were convicted:1.	Dennis Poseley, a former resident of Phoenix, Arizona and co-founder of IFCon charges of conspiracy to defraud the government and willful failure tofile tax returns;2.	Patricia Ensign, a former resident of Phoenix, Arizona and co-founder of IFCon charges of willful failure to file tax returns;3.	David Trepas, a former resident of Scottsdale, Arizona and consultant forIFC on charges of conspiracy to defraud the government and willful failure tofile tax returns;Rachel McElhinney, a resident of Scottsdale, Arizona and consultant for IFCon charges of willful failure to file tax returns;Keith Priest, a former resident of Tempe, Arizona and a “trustee” for IFC oncharges of willful failure to file tax returns.According to evidence the government presented at trial, from 1996 throughearly 2003 the defendants received $4.7 million dollars in fees from theirsale of 2,000 “pure trusts,” falsely claiming that their customers couldlawfully avoid income taxes by placing their income and assets into eitheran “onshore” or “offshore” trust package.  The evidence revealed that thedefendants charged IFC customers approximately $10,500 for the offshoretrust package and approximately $4,154 for the onshore trust package.  Trialevidence showed that IFC was a prominent vendor with the Institute of GlobalProsperity (IGP).  At offshore seminars hosted by IGP, defendant DennisPoseley promoted IFC’s trust schemes to thousands of people.Husband and Wife Sentenced for Tax Evasion SchemesOn August 31, 2005, in Honolulu, HI, Royal Lamarr Hardy was sentenced to156-months in prison, followed by 36 months supervised release, ordered topay a fine in the amount of $59,267.88, costs of prosecution in the amountof $59,267.88, and $197,555 in restitution to Internal Revenue Service forselling tax evasion schemes and failing to file his own income tax returns.Hardy’s wife and co-defendant, Ursula Supent, was also sentenced to 60months in prison, followed by 36 months of supervised release, andrestitution of $197,555. Two other co-defendants, Michael L. Kailing, aself-styled tax accountant, and Fred M. Ortiz, a tax-return preparer, wereeach sentenced yesterday to 36 months confinement and three years ofsupervised release.  On May 13, 2005, a federal jury convicted Hardy and hisco-defendants of conspiring to defraud the United States by selling varioustax-evasion schemes over several years for the purpose of impeding thefunctions of the Internal Revenue Service. Hardy and Supent were eachconvicted of a second conspiracy to defraud the United States with respectto their own income taxes. Hardy was also convicted of three counts ofwillfully failing to file his own income tax returns for 1995, 1996, and2001.  Hardy and his co-defendants were convicted of promoting what theycalled the Reliance Defense from 1985 to 2002, which consisted of books andbinders filled with materials purporting to show a studied conclusion thatthe federal income tax laws were voluntary. By “voluntary,” the defendantsmeant that the laws imposed no legal obligation to file a return or pay atax. The defendants marketed these materials throughout the United Statesunder the business names The Research Foundation and—earlier—TheCornerstones of Freedom. In addition, Hardy’s organization promoted the useof trusts and bankruptcy proceedings to evade the collection of incometaxes. Senior U.S. District Court Judge Edward Rafeedie found that theseschemes cost the United States treasury more than $8,600,000.Attorney Sentenced for Using Aegis Offshore Trust Program to Evade TaxesOn August 11, 2005, in Houston, TX, James S. Quay was sentenced to 15 monthsin prison to be followed by one year supervised release.   Quay was alsoordered to pay a fine of $4,000 and to cooperate with the IRS to determinethe amount of taxes he evaded which, according to his plea agreement, isbelieved to be approximately $61,880.   In his plea agreement, Quay admittedto diverting $221,000 in income from his personal tax return to an offshorecompany via intervening transfers to intermediary domestic and foreigntrusts under a foreign abusive tax shelter program called Aegis.Tulsa Man Sentenced in Pennsylvania Tax CaseOn July 19, 2005, in Philadelphia, PA, Robert Singleton was sentenced to 60months in prison and ordered to pay $2.78 million in restitution afterpleading guilty to a one count Indictment charging him with conspiracy todefraud the United States.  Singleton, through his company, The WorthingtonGroup, established domestic and foreign trusts in order to transfer clients'money to off-shore accounts. Singleton conspired with William Perkins, a taxreturn preparer from St. George, Utah, to file false income tax returns onbehalf of their clients in connection with the abusive, off-shore trustscheme. The IRS has calculated the total tax loss stemming from Singleton’soff-shore scheme at approximately $3.1 million.Tax Preparer Sentenced on Conspiracy in Trust SchemeOn July 1, 2005, in Phoenix, AZ, James D. Sherriffs was sentenced to 12months and a day, ordered to pay restitution in the amount of $482,252.68and was given a four year restriction against preparing tax returns anddoing bookkeeping services.  According to the plea proceedings, Sherriffsagreed to participate through PROTEC Services Trust in the promotion andmarketing to taxpayers a system of trusts and to prepare tax returns forthese taxpayers for the intended purpose of defrauding the United States byimpeding the IRS from collecting the proper amount of federal taxes.Sherriffs admitted to making false statements to a potential client relatedto his business background and admitted that he knew the PROTEC trust systemwas set up to evade the payment of federal taxes.Owner of Insurance Company Convicted of Using Abusive Trust Arrangements toEvade TaxesOn July 1, 2005, in Urbana, IL, Denny R. Patridge, operator of PatridgeInsurance Services, Inc., was convicted of tax evasion, wire fraud, andmoney laundering.  The evidence presented at trial established that Patridgeestablished "trusts" which he used to conceal his earnings, hide the originof his income, deceive the IRS, and circumvent personal income taxes.Patridge placed funds in bank accounts which bore the names of his "trusts"and claimed on trust tax returns that the funds had been distributed to anoffshore trust.  At all times, however, Patridge retained full control overfunds in the trust bank accounts and enjoyed the beneficial use of thosefunds, which made the income taxable to him personally.The trial evidence also established that Patridge did not report asubstantial amount of his income on returns he filed for 1996 and 1997.  In2000, after the IRS notified Patridge that it had made a formal assessmentof the 1996 and 1997 back taxes he owed, Patridge liquidated his investmentaccounts, set up an "offshore" account, and placed approximately $200,000 inthe offshore account.   Patridge also evaded approximately $19,523 in taxesfor calendar year 1999 on taxable income of approximately $76,796.  Heevaded those taxes by, among other things, transferring money he earned asincome to a foreign account, concealing that money from the IRS, using themoney to pay personal expenses, and failing to file an individual income taxreturn.According to the evidence presented at trial, shortly after the IRS informedPatridge that a lien could be placed on his property if he failed to pay his1996 and 1997 income taxes, Patridge set up a system to hide his assets fromthe IRS.  He began to move his money offshore to an account that was underhis control but not under his name.  He established a new account at EdgarCounty Bank and Trust in Paris, Illinois, in his own name, through whichfunds could be directed offshore.  In October, 2000, he wired approximately$200,000 in funds from the account at Edgar County Bank to an account at abank in St. Kitts held in the name of Nevis American Trust Company, anentity which maintained the funds on behalf of Sultan Services, Ltd.  Sultanwas under Patridge's direction.After he transferred $200,000 to St. Kitts, Patridge then took steps toprevent the IRS from obtaining a first lien on his real estate.  He causedthe mortgage on his home in Strasburg to be recorded with the clerk ofShelby County, Illinois, with a $100,000 "loan" from a corporationcontrolled by Patridge.  In October 2000, Patridge wired $100,000 from anoffshore location to a corporation he controlled in the U.S.  The purpose ofthe transfer was to provide the corporation with sufficient funds to "loan"Patridge $100,000, using his home in Strasburg as security for the loan.Then, after Patridge transferred $100,000 from offshore to the U.S. andestablished a false mortgage, he transferred the money back offshore and wasable to use the money as he personally desired.The evidence also showed that Patridge had obtained the sham trusts that heused to conceal assets and evade taxes from an entity known as Aegis,located in Palos Hills, Illinois, and that Patridge assisted in the sale ofat least one Aegis trust package.  Patridge also utilized a business, knownoccasionally as Offshore Consulting Services (OCS) and Laughlin, Inc., runby Terry Neal out of Portland, Oregon to set up a nominee company in St.Kitts, and Nevis and one in Reno, Nevada.Business Owner Pleads Guilty to Submitting False Claim for Employment TaxOn June 27, 2005, in Los Angeles, CA, George Henry Jesson, owner of No TimeDelay Electronics, Inc., pleaded guilty to submitting a false claim to theInternal Revenue Service for the 1997 federal employment tax withholding forhimself and his wife in the amount of $61,388.  Jesson admitted that in May2000 he signed and filed a false, fictitious, and fraudulent IRS Form 941c,Supporting Statement to Correct Information, and amended Forms W-2c,Corrected Wage and Tax Statements, for No Time Delay Electronics for 1997which falsely reported that $0 in wages had been paid to employees of hiscompany.  In reality, No Time Delay Electronics, Inc. paid wages of$177,083.22 to Jesson and $273,236.20 to Jesson’s wife in 1997, which Jessonacknowledged to be taxable income.  Based on the false statement that NoTime Delay Electronics had paid $0 wages in 1997, Jesson falsely claimedthat the total amount of all employment taxes paid by the company in 1997should be refunded.  In fact, the total refund requested for all employeesof No Time Delay Electronics was $215,454, although only $61,388 wasattributable to the employment tax withholding from the wages of Jesson andhis wife.  Jesson also admitted that prior to filing the false form 941c for1997, he had attempted to obtain a refund of $61,388 by filing an IRS form1040X (an amended federal income tax return) for himself and his wife,claiming a refund of the $61,388 based on an assertion that wages were nottaxable income.  Jesson also admitted that he had filed an IRS Form 843,Claim for Refund and Request for Abatement, requesting a refund of the$61,388.  Jesson also admitted that the IRS did not refund any money to himbased upon those claims, but rather issued him a bill for additional taxes,penalties and interest on the wages that defendant and his wife earned in1997.  As part of the plea agreement, Jesson has agreed to pay restitutionto the IRS in the amount of $215,454, the amount originally refunded toJesson, and to file true and accurate tax returns for 1997 through 2004 andpay over to the IRS all taxes, penalties, and interest assessed on such taxreturns.Husband and Wife Sentenced for Using Abusive Trust Scheme to Evade TaxesOn June 27, 2005, in Denver, CO, Charles William Ledford was sentenced toserve 24 months in prison for conspiracy to defraud the United States.Ledford was also ordered to pay restitution totaling $506,000 to theInternal Revenue Service.  Ledford pleaded guilty on April 11, 2005.According to the plea agreement, Ledford and his wife were co-owners ofService Engineering, Ltd., a heating ventilation air conditioning (HVAC)service and sales business in Colorado Springs, Colorado.  The businesslater operated as Service Engineering Trust.  In June 1992 the defendantsjoined the Pilot Connection, a known organization that advocated thatindividuals could "untax" themselves by hiding income through the use oftrusts.  Thereafter, the Ledfords created and recorded a number of trustswithin the State of Utah.  The Ledfords then began moving various personaland business assets into these trusts to hide those assets and income fromthe Internal Revenue Service.  >From 1992 through 1995, the Ledfords failedto file personal income taxes or under reported their income to the IRS.  Aspart of the conspiracy the defendants took distributions from the varioustrusts for cash and personal expenses.  These distributions were notreported to the IRS as income.  Some of the distributions were used to builda new home, pay for their son's college tuition, and to pay Teller Countyproperty taxes.  In 1998 the IRS notified Charles Ledford that he owed$531,268 in taxes for years 1993 through 1995.  This amount was based on themoney he and his wife personally received from their business.Owner of Apartment Complexes Sentenced to 100 Months for Conspiracy, TaxEvasion, and Bankruptcy FraudOn June 22, 2005, in Salt Lake City, UT, Stanley L. Wade was sentenced to100 months in federal prison to be followed by three years of supervisedrelease.  In addition, Wade was ordered to file accurate tax returns within18 months of his sentencing.  Wade was convicted by jury in March 2005 onone count of conspiracy to defraud the United States, four counts of taxevasion, one count of bankruptcy fraud and one count of making a falsestatement in a bankruptcy proceeding.  According to evidence introduced attrial, Wade owned eight residential apartment complexes which contained morethan 400 rental units.  Wade, along with his wife, conspired to hideownership of the rental units so they could conceal the income from therental units and avoid paying taxes.  The Wades transferred ownership of theapartments to sham entities which they called Unincorporated BusinessOrganizations (UBO) and opened more than 40 bank accounts with signatureauthority in their own names or nominees.  The Wades advised theiraccountant that they had no income from the apartments because, havingtransferred the rentals to the UBO, they no longer owned the rentals.  Theythen filed false tax returns, failing to report the income derived from theapartments, together with other sources of income.  Evidence at trial alsoshowed that Wade submitted documents as a part of a bankruptcy filing thatfraudulently omitted bank and brokerage accounts he had maintained withintwo years immediately preceding the filing of a bankruptcy petition, realestate he owned, residences, vehicles, boats, and wages.  During the yearsof the conspiracy, the Wades failed to pay more than $5 million in federaltaxes.Promoters of "We the People" Tax Fraud Group SentencedOn June 7, 2005, in Los Angeles, CA, five individuals associated with a taxfraud group known as "We the People" were sentenced for promoting bogus taxshelters that falsely promised to limit exposure to federal income taxes.1.	Lynne Meredith, the leader of the operation, was sentenced to 121 months inprison.  2.	Gayle Bybee was sentenced to 60 months in prison;  3.	Teresa Manharth Giodano was sentenced to 40 months in prison; 4.	Willie Watts was sentenced to 36 months in prison; and 5.	Gregory Paul Karl was sentenced to 20 months inprison.  Two more defendants in this case, 6. & 7.	Nora Moore and Betty Erickson,are scheduled to be sentenced on June 20, 2005.On May 3, 2004, all seven individuals were convicted on various counts inthe indictment including failure to file income tax returns, conspiracy, andmail fraud.  During the 13-week trial, evidence showed that the defendantsassisted taxpayers in forming phony “pure trusts” to conceal income andassets from the government. Also, the defendants falsely told theircustomers that paying taxes was “voluntary” and that they should file a W-4or W-8 form with their employer claiming to be exempt from federal taxwithholding and encouraged taxpayers to send protest correspondence to theIRS with the purpose of impeding and obstructing the IRS from collectingthese taxpayer’s taxes.Trial evidence also illustrated that beginning in 1991 and continuing untilApril 2002, Meredith conducted seminars at which she sold books and bogus“pure trusts” to people with the purpose of leading them to believe theycould legally shield income and assets from taxation. Meredith also wrotebooks including “How to Cook a Vulture” and “Vultures in Eagle’s Clothing,”in which she falsely claimed that individuals could lawfully stop payingincome taxes, stop their employer from withholding income taxes, and refuseto produce financial books and records to the IRS.  The books containedexamples of frivolous tax returns and protest letters.  Meredith earned morethan $8.5 million as a result of the scheme and, as with the otherdefendants, did not file a Federal income tax return during these years.Veterinarian Convicted of Tax FraudOn June 3, 2005, in Erie, PA, Daniel Leveto, a veterinarian, was convictedby jury on one count of conspiring to defraud the United States for thepurpose of impeding the IRS and on two counts of filing false individualfederal income tax returns.  According to the testimony presented at trial,Leveto failed to disclose on his 1994 and 1995 federal tax returns more than$2.5 million in gross receipts from his veterinary practice.  He also failedto disclose on the tax returns that he controlled accounts in financialinstitutions in the Cayman Islands and the Turk and Caicos Islands.  Levetohas been incarcerated since his arrest on March 24, 2004.Three CPAs Plead Guilty in Anderson's Ark and Associates International TaxSchemeOn May 16, 2005, in Seattle, WA, Tara Lagrand of Naples, FL; Gary Kuzel ofDowners Grove, IL; and Lynden Bridges of Wheat Ridge, CO, pleaded guilty toaiding and assisting in the filing of false income tax returns.  Theestimated tax loss as a result of the defendants filing false income taxreturns was between $2.5 and $5 million for each defendant.  These threeaccountants were part of Anderson's Ark and Associates (AAA), anorganization through which fraudulent tax shelters and investment scams werepromoted and sold.  In their plea agreements, each defendant admitted thatthey assisted AAA clients, from their respective states, by preparing andfiling the partnership agreements, promissory notes, and income tax returnsrequired to implement the "Look Back" program -- one of the two fraudulentschemes promoted by the AAA organization.Grass Valley Woman Sentenced in Tax Fraud SchemeOn May 9, 2005, in Sacramento, CA, Karen Louise Younce was sentenced to 37months in prison followed by three years of supervised release and orderedto pay a special assessment of $100 for her role in a large-scale abusivetrust scheme. Younce previously admitted, as a part of her plea, that during1992 through August 2002, she participated in a conspiracy to impair, impedeand obstruct the IRS in the computation, assessment and collection of morethan $2 million in federal income tax liabilities. For a fee, Younce advisedand assisted her clients in transferring assets and income-generatingentities into domestic and foreign trusts, which she created and marketedfor the purpose of evading federal income taxes.  Younce also advised andassisted her clients in cycling their U.S. income through off-shore bankaccounts she controlled and then returned the income to the clients.Tax Attorney Sentenced to Prison for 15 YearsOn May 5, 2005, in Little Rock, AR, Bobby Keith Moser, a former Little Rocktax lawyer, was sentenced to serve 15 years in prison. Moser was sentencedfor violations of tax evasion, obstruction of justice, and money laundering.He was ordered to pay $2.25 million in restitution for sophisticated schemescarried out between 1996 and last year. Part of the restitution included$212,648 to the IRS.  Moser was scheduled to enter a guilty plea in Detroit,Michigan, but instead, he drove to Montreal, boarded a plane to Paris, andthen flew to Madagascar, where federal agents tracked him down in March2004 — about the same time they discovered he had been bilking his clients’trust funds.  Moser admitted that he arranged for about $9 million inprofits from the sale of a 1996 communications company to be hidden from theIRS.  The $9 million was funneled into a trust represented as a taxqualified retirement plan which would, in theory, owe no taxes on the trustmoney until it was distributed.  The trust funds were made to appear to bein the control of a third party, when in fact, they were controlled andaccessible by the client.  More than $1 million in Moser’s assets have beenrecovered by the government and forfeiture proceedings are pending.  Thesefunds will be used to repay some of his victims.Jury Convicts Two Colorado Tax Fraud Promoters - Scheme Used Offshore BankAccounts, phony Loans and Debit Cards to Hide Income and Assets from IRSOn April 27, 2005, in Denver, CO, Paul D. Harris and Lester R. Retherfordwere convicted on charges of conspiracy and willfully aiding and assisting inthe preparation of fraudulent tax returns.  The jury did not reach aunanimous verdict as to the third defendant, Robert N. Bedford.  Accordingto the indictment, Harris, Retherford, and Bedford set up shell corporationsfor small business owners that were used to conceal nearly $9 million intaxable income in secret accounts in the Turks and Caicos Islands and otherforeign countries from 1992 through 1999.  The indictment also alleged thatalthough the defendants made it appear as though the offshore transfers werepayments for consulting services, most members used debit cards and loans tospend the money they had concealed offshore.  To make use of this service,many members allegedly paid an initiation fee of $50,000, according to theindictment.Two Colorado Defendants Sentenced in $120 Million Anderson’s Ark andAssociates International Tax Shelter CaseOn April 26, 2005, in Seattle, WA, James and Pamela Moran, residents ofMontrose, Colorado, were each sentenced to seven years imprisonment, to befollowed by three years supervised release, ordered to pay restitution of$42,311,742, costs of prosecution totaling $66,488 and also ordered toforfeit $850,863 in proceeds they earned from Anderson's Ark and Associates(AAA), as well as their Colorado home and their Jeep Cherokee automobile.On December 27, 2004, the defendants were convicted in connection with oneof the most wide-ranging tax schemes ever prosecuted.  The defendants wereconvicted on a variety of charges, including conspiracy to defraud the IRS,mail and wire fraud, money laundering and aiding and assisting the filing offalse tax returns.  The evidence introduced at trial established that, from1997 through early 2001, the Moran’s earned tens of millions of dollars infees from the sale of several fraudulent tax shelter plans over theInternet.  The Moran’s were the AAA Executive Education Officers.  As such,they trained Information Officers, who were the primary sales force.  Inaddition, the Morans promoted the fraudulent tax shelter plans domesticallyand internationally.  The Morans cultivated their own AAA clients, with whomthey worked closely to further the AAA schemes.Four Defendants Sentenced in $120 Million International Tax Shelter CaseOn April 22, 2005, in Seattle, WA, four Anderson’s Ark and Associates (AAA)defendants were sentenced to prison terms ranging from eight to 20 years.The defendants received the following sentences:• Keith Anderson was sentenced to 20 years of prison to be followed by threeyears supervised release and ordered to pay restitution of $63,525,860;• Wayne Anderson was sentenced to 15 years of prison to be followed by threeyears supervised release and ordered to pay restitution of $63,525,860 and afine of $25,000;• Richard Marks was sentenced to 15 years of prison to be followed by threeyears supervised release and ordered to pay restitution of $42,311,742 and afine of $25,000;•  Karolyn Grosnickle was sentenced to eight years of prison to be followedby three years supervised release, and ordered to pay restitution of$42,311,742.Each of the defendants was also ordered to pay costs of prosecution of$66,288. Additionally, seven properties located in Costa Rica, the AAAAdministrative Office, and $28 million in laundered funds were orderedforfeited. AAA spanned five countries and over 1,500 clients.  BothAndersons, Marks and Grosnickle were convicted on charges of conspiracy todefraud the government, mail and wire fraud, money laundering and aiding andassisting the filing of false tax returns.  From 1997 through early 2001,the defendants earned tens of millions of dollars in fees from the sale ofseveral fraudulent tax shelter plans over the Internet.In addition to the sentencing on these four individuals, RichardGrossnickle, executive director of two AAA entities, pleaded guilty on April13, 2005, to a charge of obstruction of justice and is currently awaitingsentencing."Institute of Global Prosperity" Principal Pleads Guilty to Tax ChargesOn April 12, 2005, in Seattle, WA, Dwayne Robare pleaded guilty to asuperseding information charging him with income tax evasion for the 2000tax year.  The information alleges that Robare became affiliated with theInstitute of Global Prosperity (IGP) in 1997 and for several yearsthereafter operated and maintained its teleconferencing system located inMarlboro, MA.  IGP members subscribed to the teleconferencing services byremitting fees to a nominee entity named Independent Diversity Entrepreneursand Associates (IDEA).  Robare was a partner of IDEA and shared in theprofits generated from fees paid to IDEA.  In a statement of facts providedto the court, Robare admitted to receiving income from his work with IGPfrom approximately 1997 through 2002.  He further admitted that he usedvarious means to conceal his income from the IRS.  This included a falsetrust with a domestic bank account which he obtained from InnovativeFinancial Consultants in Arizona and an offshore trust and foreign bankaccount which he obtained from Prosper International League Limited in theBahamas.  Robare admitted that the resulting tax loss totaled between$120,000 and $200,000.  Robare agreed to cooperate fully with the IRS in theascertainment, computation, and payment of his correct federal and stateincome tax liabilities.Chiropractor was Client of Anderson's Ark & AssociatesOn March 23, 2005, in Sacramento, CA, Dr. David R. Funk, a formerchiropractor, was sentenced to a year in prison to be followed by one yearof supervised release.  Funk was also ordered to pay costs of $1,227 and anassessment of $200.  Funk pleaded guilty to two counts of filing falseincome tax returns on November 3, 2004.  Funk admitted in his plea agreementthat he filed false tax returns reporting negative adjusted gross incomewhich reflected his use of two tax evasion schemes that involved thecreation of shell companies to hide taxable income and create paper losses.In one of the schemes, taxable income was diverted away from Funk on paperthrough a series of corporate entities that in fact had no economicsubstance.  Although Funk earned and used income, he did not report it onhis returns. The other scheme, Funk created a joint venture entity whichreported bogus losses which he reported on his personal tax return.  Funkadmitted evading over $183,000 in federal income taxes for tax years 1997,1998, and 1999.  Funk was a client of Richard Marks, who was a leader of theAnderson's Ark and Associates organization.  Marks was sentenced to 81months in prison on November 14, 2002.San Diego County Inventor Sentenced for Failing to Pay Taxes on Sale ofCompanyOn January 31, 2005, in Los Angeles, CA, John Zentmyer was sentenced to 33months in prison for failing to pay income taxes on money generated from thesale of his company.  Zentmyer was found guilty of tax evasion, one count ofloan fraud and three counts of structuring cash transactions to avoidfederal reporting requirements.  Zentmyer invented a wheel-locking device tobe used on four-wheel-drive off-road vehicles. After forming a company tomarket his product, he sold the company for $1,008,000.  Zentmyer failed tofile a tax return that reported any of the funds generated by the sale, nordid he pay any taxes on the income. Instead, he placed the funds intooffshore bank accounts, used bank accounts in the names of other persons andentities, and conducted financial transactions using large amounts of cash.Zentmyer owes $264,335 in back taxes.  The loan fraud conviction was basedon the submission of a false employment letter in connection with a loanapplication to purchase a house.  Zentmyer, who represented himself at thebeginning of the trial and later represented himself jointly with anadvisory counsel, argued that he was not guilty of tax evasion because hebelieved in good faith that he did not have to pay income taxes afterreviewing old Supreme Court cases. He also claimed that he structured hisfinancial transactions only because the bank required his social securitynumber to file its report with the government and his religious beliefsprevented him from divulging his social security number.Man Sentenced to Prison for Filing False Tax ReturnOn January 4, 2005, in Cedar Rapids, IA, Troy Davis was sentenced to 21months in prison, followed by one year supervised release and ordered to pay$318,000 in restitution to the IRS.  Davis admitted that he filed his 1996tax return knowing he falsely understated his income by excluding income hereceived from the sale of his business, Excel Medical.  Davis attempted tohide his taxable gain through the use of off-shore trusts.For more information on these convictions, see U.S. Department of Justicepress release.Offshore Tax Shelter Promoter Sentenced to PrisonOn December 6, 2004, in San Francisco, CA, Jerome Schneider was sentenced tosix months in prison for his role in a conspiracy to defraud the IRS.Schneider was also ordered to pay a fine of $4,000 and a $100 specialassessment.  He had previously paid $100,000 in restitution.  Schneider wasindicted on December 19, 2002, on one count of conspiracy and 22 counts ofmail and wire fraud in connection with the marketing and sale to taxpayersof offshore banks and corporations.  He pleaded guilty on February 11, 2004,to the conspiracy charge.  Schneider admitted marketing and selling offshoreentities such as those licensed by the South Pacific Island of Nauru asinternational banks.  According to Schneider's plea agreement, he wouldcooperate with the Government.  His plea agreement also stated he wouldappear in national media outlets to explain his offshore arrangements were asham and urge taxpayers who bought into his scheme or other offshore schemesto contact the IRS and reconcile their tax matters.Former Chiropractor, Nutrition Specialist and Syndicated Radio Talk ShowHost sentencedOn October 22, 2004, in West Palm Beach, FL, Bruce E. Hedendal was sentencedto a term of imprisonment of 36 months, supervised release term of 3 yearsand ordered to pay restitution of $717,899 to the IRS.  In August 2000, afederal grand jury charged Hedendal with three counts of income tax evasionfor the years 1993 through 1995.  According to the indictment, Hedendalattempted to evade paying a total of about $180,000 in taxes on income ofabout $561,000; failed to file income tax returns; concealed his true incomethrough the use of sham trusts and made false representations to the IRS.When summonsed to face tax evasion charges, Hedendal fled to Canada andultimately to Australia, where he practiced under the names Erick Hedendal.In October 2003, the Defendant was located in Australia and was extraditedback to the U.S.    On July 2004 Hedendal pled guilty to one count of incometax evasion.FY2004 Archive Examples of Abusive Tax Schemes Investigations FY2004 Examples of Abusive Tax Scheme InvestigationsThe following examples of abusive tax schemes fraud investigations areexcerpts from public record documents on file in the courts in the judicialdistrict in which the cases were prosecuted.Michigan Couple Sentenced for Tax FraudOn September 27, 2004, in Grand Rapids, MI, Andrew Stuart Ouwenga and KarenAnn Ouwenga were sentenced following a May 26, 2004, jury conviction onseveral tax-related felony offences. Andrew Ouwenga received 60 monthsimprisonment and Karen Ouwenga received 51 months imprisonment, which areeach followed by two years' supervised release. They must also cooperatewith the Internal Revenue Service, file back tax returns and makearrangements to pay all taxes due and owing, along with any interest andpenalties. They must also pay court cost of $5,016.  The Ouwengas wereconvicted of conspiracy to defraud the United States by impeding andobstructing the lawful functions of the Internal Revenue Service, evadingtheir 1997 federal income tax, and two counts of willfully and unlawfullydisobeying a grand jury subpoena. In addition, Andrew Ouwenga was also foundguilty on three counts of tax evasion involving his 1998, 1999, and 2000 taxyears.  The Ouwengas' accountant prepared their 1994 federal income taxreturn, which claimed more than $75,000 in income, however, the defendantsinstead filed a frivolous tax return claiming they had no income andrequested a tax refund of their 1994 withholdings of more than $10,000.Andrew Ouwenga informed his accountant that he would not file tax returns orpay income taxes because "the Sixteenth Amendment was never ratified."Despite gross deposits of over $6.3 million and gross business receipts of$1.7 million into their bank accounts, the Ouwengas failed to file their taxreturns. From 1993 through 1999, the Ouwengas created at least nine shamtrusts, which enabled them to conduct their personal and business affairswhile evading their income tax obligation.Attorney Pleads Guilty for Role in Offshore Tax Evasion SchemesOn September 17, 2004, in San Diego, CA, B. Roland Frasier, an attorney fora prominent San Diego ophthalmologist, Dr. Glenn Kawesch, pleaded guilty totax evasion, filing false returns, and money laundering.  Frasier admittedthat he transferred $1.25 million of Dr. Kawesch’s profits from his medicalpractice to an offshore account at the Bank of Nevis to avoid paying incomestaxes.  Frasier also admitted he underreported $3.3 million of his ownincome for the tax years 1997 through 2001, which resulted in a tax loss of$934,000. In addition, Frasier admitted he entered into a series of shamagreements involving a business he helped take public. He did not discloseto the company's president about his ownership of a corporation in Nevisthat received $300,000 and 7 million shares.  Frasier had telemarketers sellmore than 1.3 million of the shares which netted more than $1 million.Consultant Used Abusive Trust Arrangements to Hide IncomeOn September 16, 2004, in Grand Rapids, MI, John F. Napieralski wassentenced to 30 months in prison to be followed by 2 years supervisedrelease and ordered to pay a fine of $5,000.  Additionally, Napieralski wasordered to cooperate with the IRS in filing all back tax returns and payingall taxes due and owing, along with any interest and penalties.On June 17, 2004, Napieralski pleaded guilty to four counts of tax evasionfor the tax years 1997 through 2000.  He admitted that he created a shamtrust called, “The Educational Systems Trust” (T.E.S.T.) and instructedpayments, from his consulting services to Sto-Ex, Inc., to be made payableto T.E.S.T.  During 1997 through 2003, more than $950,000 was deposited intoT.E.S.T.’s bank account, with more than $600,000 in income coming fromSto-Ex., Inc. Napieralski admitted that he willfully attempted to evade anddefeat a substantial portion of his income tax due and owing by failing tofile tax returns reporting his business gross income received from Sto-Ex,Inc., coupled with affirmative acts of evasion.Former Owner of California Dietary Supplement Company Sentenced in FederalFraud ConspiracyOn September 13, 2004, in Los Angeles, CA, Almon Glenn Braswell wassentenced to 18 months in prison and ordered to pay $10,455,367 in backtaxes, interest, and penalties.  Braswell pleaded guilty on March 2, 2004,to conspiring to evade millions of dollars in corporate income taxes duringa scheme that overstated the business expenses incurred by one of hiscompanies, Gero Vita International, Inc. on its federal tax returns.Braswell acknowledged that his scheme caused Gero Vita to underpay its taxesby $4,468,460.Accountant Sentenced to 37-Month Prison Term for Mail Fraud and Tax EvasionOn August 23, 2004, in Miami, FL, Thomas Sewell, a certified publicaccountant, was sentenced to 37 months in prison, followed by three yearssupervised release, and ordered to pay restitution in excess of $7 millionto the victims.  Sewell previously pleaded guilty to conspiracy to commitmail fraud and for filing false tax returns. Sewell was charged inconnection with his participation in an investment fraud scheme, as a resultof which investors lost over $7 million.   Sewell associated himself withthe scheme by recruiting investors from among his accounting practiceclientele. Sewell falsely advised his clients that their investments wouldbe safe and that he was personally monitoring the funds. Significantly,Sewell failed to advise his clients that he was receiving commissions on theinvestments that he brought in and failed to disclose on his 1997 and 1998federal income tax returns that he had received additional income of morethan $140,000 from his participation in the scheme.Four-Week Trial Ends in Five Convictions in Tax Evasion CaseOn August 20, 2004, in Salt Lake City, UT, after a four-week trial, afederal jury convicted five Utahans of conspiring to defraud the UnitedStates through the establishment of an abusive trust scheme involvingoffshore entities marketed through the name of Anglo-American International,Provo, Utah.  Convicted of conspiracy were 1.	Ozy J. Neeley, 2.	Paul J. Young,3.	Kevin J. Crockett, 4.	Chad L. Merica, and 5.	Robert F. Dodenbeir.  Crockett was also convicted of two counts of aiding and assisting in the filing of falseincome tax returns.  Eight people have been convicted of participating inthis conspiracy.  The leader of the Anglo-American entities, 6.	Kirk Koskellais currently serving a 10-year sentence in federal prison.  Two otherindividuals, 7.	Dennis Shaw and 8.	Stacie Bateman are awaiting sentencingfollowing their guilty pleas to conspiracy at an earlier date.Three Sentenced for Using Sham Trusts and Corporations to Hide BusinessProfits from IRSOn July 20, 2004 in Akron, OH, Gary Harris was sentenced to 151 months inprison to be followed by 3 years supervised release and fined $95,000.  OnJune 23, 2004, Michael Kotula was sentenced to 70 months in prison to befollowed by 3 years supervised release.  In addition, Kotula was ordered topay a $100,000 fine, the costs of prosecution, and $82,806.83 in restitutionto the Internal Revenue Service.  Also sentenced was Tamara SchwentkerHarris receiving 15 months imprisonment to be followed by 2 years supervisedrelease, and ordered to pay $17,054 in restitution to the Internal RevenueService.  In March 2004, after a four-week trial, the jury found all threedefendants guilty of conspiring to defraud the United States.  In addition,the jury convicted Harris and Kotula on three counts and one count of incometax evasion, respectively.  At trial, the evidence proved the defendantsused a maze of trusts and corporations to try to hide approximately $18million in income generated by various businesses they controlled.  BetweenJanuary 1, 1994 and July 8, 2003, they paid little or no taxes on the incomeearned.  Nonetheless Mr. Harris lived lavishly, acquired several homes, ajet way for his ranch in Conneaut, and an antique Mercedes sports car whichhe claimed was worth $250,000.  Mr. Harris has been in federal custody sincehis arrest in July 2003.  He had previously been convicted of tax evasionfor tax years 1987, 1989, and 1990.  In addition, between 1998 and 2002,when Mr. Harris was in federal prison after convictions for racketeering andincome tax evasion, Mr. 

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CANADA missed filing TD F 90-22.1 in 2006 - Jerome Schneider - and other scams - CPA and other professionals go to jail for tax

[Income Tax Help - CEN-TAPEDE] taxation, and secrecy - JeromeSchneider - Hoffman, Brown, Masee - a whole bunch of Americans andCanadians sentenced to jail for tax avoidance schemes. - internationalnon-resident cross border income tax help assistance expert preparation& immigrant

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