IRS Puts Reins on Stingray Technology

IRS Puts Reins on Stingray Technology

It will be Christmas time soon and thoughts often turn to gift giving and getting. For some, the gift they would like most is the latest high tech toy. This year one of the hottest tech gifts is the Hoverboard. Next year it could be a personal rocket ship. Boys will be boys, and they tend to enjoy imagining themselves starring in a James Bond flick with the latest technology at their fingertips.

The boys at the IRS are no different, although some of them are surely lamenting the potential limitations placed on their toy commonly knows as the Stingray. The Stingray is a cell phone surveillance device that can mimic a wireless cell tower, intercepting signals and giving the user private cell data of anyone in the area. Special agents with IRS Criminal Investigations have used this device since 2011 to track down some big time tax criminals.

Under pressure from the Justice Department, the IRS has begun drafting rules that would require their employees to obtain a warrant before using this controversial device. Of course a warrant requires a finding of probably cause by a judge, and if you’ve ever seen any crime shows on TV you know it’s a pain to have to get a warrant.

The IRS apparently has only one Stingray now, but they ordered a second one back in July. It hasn’t arrived yet, which I’m sure has the CI boys as anxious as 8-year-olds on Christmas Eve.

Mastermind of IRS Phone Scam Gets 14 Year Prison Sentence

You would have to be living under a rock if you’re not aware of the pervasive IRS impersonation phone scams going around.  These scammers prey on the least-informed, most vulnerable people in society, convincing them that the IRS is on the brink of throwing them into prison for unpaid taxes when, in many cases, no taxes are owed.  Now at least one of the masterminds behind this, Sahil Patel (36), is going to be put away for 14 years.  Patel was sentenced a couple days ago in a U.S. District Court in New York for conspiring to extort, to impersonate government officials, and to commit wire fraud.

The government considers Patel one of the ringleaders in a scam that duped nearly 4,000 people out of a combined $20 million over the past two years.  However, this criminal group is obviously run by more than just Patel as the phone calls have not stopped since his conviction.

Maybe 14 years seems like a long time to you for a crime that doesn’t involve taking a life, but this is what the district judge had to say about it:

The nature of this crime robbed people of their identities and their money in a way that causes people to fee that they have been almost destroyed.

He definitely wanted to “ensure adequate deterrence.”  Plus I don’t think it helped that Patel came across as an “unfriendly” witness.  He reportedly made some sexist comments about the women he hired to do the dirty work and how they were ignorant and gullible.  I know that 14 years seems like a heavy penalty, and you can’t really expect a higher level of severity, but I wonder if this will really deter the co-conspirators who appear to be keeping the scheme operational.  The rewards are so incredibly high for them and, at this point at least, the risks seem to be just low enough.

We can increase the risk by finding more of these guys, and I think the IRS, in cooperation with law enforcement, is doing the best they can.  We can reduce the reward by informing the public — and this is where I think they can improve.  I started this article by saying that one would have to be living under a rock to not be aware of these phone scams, but I don’t know if that is true.  As a tax attorney, I hear about this kind of thing all the time because I am dialed into tax news and events.  But is the average taxpayer getting the message?  I think IRS public service messages are focused on tax professionals.  Maybe there should be a broader kind of outreach through TV and radio.  I suppose there is a reason why they haven’t gone there; maybe they don’t want to freak everyone out.

2014 Dirty Dozen Revealed

Every year around the beginning of tax season, the IRS comes up with its “Dirty Dozen” tax scams list.  In recent years the top three have been (1) Identity Theft; (2) Phishing; and (3) Return Preparer Fraud.  The 2014 list includes Identity Theft and Phishing in the top three again, this time along with “Pervasive Telephone Scams.”  Phone scams often take advantage of recent immigrants, the elderly, or uneducated.  It is easy to avoid a phone scam if you know what to look for and if you maintain a certain degree of skepticism when receiving an unsolicited phone call.  However, as easy as it is in theory, these phone scams must be at least somewhat successful or they wouldn’t be described as “pervasive,” and they wouldn’t have made it to the top of the Dirty Dozen this year.

Here is the Commissioner’s official generic statement:

Taxpayers should be on the lookout for tax scams using the IRS name. These schemes jump every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves and use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues.

The reason that the IRS releases the Dirty Dozen list in February is that they have noticed a spike in tax scams around this time of year.  However, just as the IRS can (and will) collect on delinquent tax accounts by issuing a wage garnishment or bank levy throughout the year, tax thieves and scam artists pretty much work around the clock.

Would you rob the IRS to fund your “before I die” fund?

Reading between the lines, it appears that Frank F. Frink of Washington lost his gamble that the government wouldn’t catch up with his tax crimes until after he left this world on a high note and a pocket full of cash.

Although the IRS is usually slow to pick up on tax evasion and other tax crimes, they do eventually usually catch up to criminal and civil tax shenanigans … it’s just a matter of time. Mr. Frink doesn’t have to report to prison until September for his tax crimes, allowing him time to seek treatment for undisclosed medical issues. If he’s still around in September, he will have to serve a one year prison term for his tax crimes.

My assumption that he wanted to leave this world with a pocket full of cash is based on the referenced medical problems and absurdly bold manner in which he robbed the IRS. Frink plead guilty to filing a false, fictitious and fraudulent tax claim on his 2008 tax return and was sentenced earlier this week. According to the U.S. Attorney’s Office, Frink hired a tax preparer to prepare his 2008 return and calculated he was owed a refund of $7,413. This is a pretty substantial refund for most households these days. However, for Frink, it was not enough. So he sought the help of a witless tax preparer to fund his final days; he went to H&R Block.

After his first tax preparer determine that he was owed a federal tax refund of $7,413, Frink went to an H & R Block branch with bogus tax forms showing that more than $1 million had been withheld in taxes. H & R Block then calculated he was therefore owed a tax refund of $827,117. The IRS issued Frink this windfall and didn’t catch the fraud for some time as he wasn’t criminally charged until September 2012, approximately three years later. Even when the IRS began to investigate Frink’s tax crimes, he continued to spend his generous tax refund.

While Frink may be living on borrowed time and took advantage of the IRS, most taxpayers want to resolve their tax headache without the specter of prison time. If you’re fighting the IRS, and don’t have Frink’s exit strategy, our tax law firm offers a free consultation so you may determine if we’re the right tax attorneys to fight the IRS for you.

Pimping Isn’t Easy When the IRS is Watching You

You usually hear about the IRS wielding its power to criminally prosecute tax offenders in those cases where the dollar amount involved is great or the notoriety from the case will make lawful taxpayers think twice before fudging the numbers on their tax returns. I was a little surprised when I read about Johnny Ray Taylor, who recently pled guilty to tax evasion in U.S. District Court in Las Vegas earlier this week, until I read-on.

At first glance, the headlines capture you about a panderer and pimp, needing to cut a deal with the IRS. How much could such a “profession” really bring in? Surely not enough to catch the attention of the IRS; wrong! According to Taylor’s plea agreement, he copped receiving gross income in excess of $230,000 for tax year 2010. Although he didn’t file tax returns for tax years 2008, 2009, and 2010, he agreed to pay restitution in the amount of $117,559.82 to the IRS for those tax years. He’s presently awaiting sentencing. I’m still curious as to how much money he really “earned” since he cut a deal admitting that he earned in excess of $230,000 for just one tax year alone.

Fighting the IRS Alone? You May Have a Fool For a Client

Nancy Cicero had a fool for a client in her fight with the Internal Revenue Service (IRS); she represented herself. Rather than seeking the advice of a tax attorney with the tools and experience needed to successfully fight the IRS; she went it alone, saved a few bucks, and is now a felon awaiting sentencing.

Cicero was found guilty on four counts for illegally claiming more than $3 million in tax refunds on her tax returns for tax years 2005 – 2008. Each count of filing false claims with the IRS carries a maximum penalty of five years in prison and/or fines up to $250,000.

According to the St. Louis Post-Dispatch, while self-represented, Cicero made no real opening statement or closing argument, and asked no questions of witnesses. When the judge would ask her if she wanted to object to the admission of evidence against her, she provided indecisive answers, such as, “I object. It is not my wish. Let the record show it is my wish.”

She should have wished for sound legal advice from her tax attorney. While saving a buck by representing yourself in a fight with the government is a legal right, common sense and Cicero’s predicament is proof positive that not all rights should be exercised. If you find yourself having to fight the IRS, don’t fight them alone, the tax attorneys at Montgomery & Wetenkamp are available to take your call and offer a free consultation.

Singer Lauryn Hill is Going to Prison for Tax Crimes

Looks like our girl Lauryn Hill is going to spend some time in prison for her tax crimes.  She pleaded guilty last year to failing to pay taxes on about $2.3 million during a 5-year period.

Here’s a breakdown of what tax fraud got her.  She’ll have to:

  1. Pay what she owes to the IRS ($1,006,517)
  2. Pay a $60,000 fine
  3. Three months in federal prison
  4. Three month house arrest with electronic monitoring
  5. One year of supervised release

Hill says she recently cut a deal with Sony, but I wonder how the creative juices are going to flow staring at the inside of a prison cell for 3 months and then being stuck inside for another 3 months.  She will probably be allowed to work while serving her home confinement term, but may be given a curfew and restriction on travel.

I hope Hill does release new music and I hope she makes a lot of money so she can pay her tax debt.  Based on the public comments I have seen, she does not appear to harbor any bitterness or anger against the government.  But with any luck, maybe we’ll hear tax themes and undertones in her new music.  That would be nice.

United States Files Criminal Tax Charges Against Bubba

According to the associated press, three time Super Bowl champion and former San Francisco 49er Bubba Paris has been charged with failing to file his federal income tax returns over a three year period.

The U.S. Department of Justice announced that Paris has been charged with three misdemeanor charges of failing to file tax returns in 2006, 2007 and 2008. Prosecutors allege that Paris received gross income of more than $57,000, nearly $84,000 and almost $42,000, respectively, in each of those years.

What interests me about this case, besides the 49er who was one of my favorites in the 1980’s, is the amount of money involved and Paris’ lack of true notoriety. While there are exceptions, the government generally prosecutes criminally for non-filing or non-payment of taxes only in cases of extreme income or evasion, or major notoriety i.e. the press garnered from the prosecution will warn the general public to timely file and pay their taxes. Here, the income levels alleged, if correct, are hardly kingpin status. In regards to Paris’ notoriety, the government missed their mark by about 25 years. Even in the Bay Area, most 49er fans may not know the difference between Bubba Paris and Bubba Gump.

Nonetheless, Paris now needs a tax attorney to get him tax relief. I suppose the government’s purpose would be to warn those with smaller incomes, that they too may be the subject of criminal prosecution for otherwise minor tax crimes. Be warned … if you earn approximately $45,000 a year and you miss a tax deadline … you may be doing hard time.


IRS to Sell Drug Cartel Horses at Auction

photo via

The Zeta drug cartel has a little IRS problem, and it’s no ordinary tax debt.

Zeta had been laundering drug money under the cover of a race horse ranch run by one Miguel Angel Treviño Morales near Oklahoma City.  The Criminal Investigation division of the IRS (CI) went in with other law enforcement to seize the property and arrest the suspects back in May, and now a judge has decided that the property will be sold.  Hopefully CI did not have to brandish any weapons in the raid.  Probably not, since it appears the bust went smoothly and without incident.  The IRS plans to sell 379 horses at auction November 1-3.

CI is a special division of the IRS responsible for investigating financial crimes and criminal violations of the Internal Revenue Code.  CI targets both “legal source” and “illegal source” financial crimes, including narcotics related financial crimes.  That’s why CI would be involved in the activities of drug cartels that occur on US soil.

These Mexican cartel families are so arrogant; they think they are invincible.  They just couldn’t resist using drug references in the names of some of their prominent horses.  Also, they do not appear to have been trying to keep a low profile since their horses were winning major races (and prize money) left and right.

Ironically, the last time I blogged about CI, I quipped (in reference to the fact that they don’t have many opportunities to use their weapons) that they aren’t chasing down drug dealers.  Well, I stand corrected.

Can We Trust the IRS with Guns?

"desk pop" from the movie The Other Guys

TIGTA recently audited and reported on the firearm policies of the Criminal Investigation (CI) division of the IRS and found them to be somewhat lacking.  Usually I like to focus on tax relief, but this has got to be the strangest TIGTA report I have ever seen.  I couldn’t pass it up.

CI special agents are a unique breed, to say the least.  They are like the offspring of two completely opposite carreers: one’s tools are a pocket protector and calculator, and the other’s are a bullet proof vest and concealed handgun.  These are probably guys who really wanted to be FBI or CIA but ended up at the IRS instead.  And, let’s face it, a tax attorney probably sees as much action as they do.  They aren’t chasing down drug dealers; they are apprehending people who cheated on their taxes or who are running from a massive tax debt.  They definitely aren’t firing their weapons on a regular basis, so it’s no huge surprise to me that the firearm policies are subpar.

Their firearms qualification passage rate is pretty high; that’s not the problem.  TIGTA’s report has more to do with CI putting in place consistent policies and consequences.  The scenario that really stood out to me was what to do when a CI special agent accidentally discharges his firearm!  The report states that this is not a common occurence, but according to the report, there are more accidental discharges than intentional discharges!

During fiscal years 2009-2011, there were a total of 19 reported discharge incidents in all of CI; 8 intentional and 11 accidental.  Is is just me or does this report make CI agents look like a bunch of clowns?