F.C. Manager on Trial for Tax Evasion

Harry Redknapp, former manager of the Tottenham Hotspur F.C., was recently accused of tax evasion related to a bung he received for player transfers. What!?  I know, English news articles are fun, but sometimes difficult to decipher.

Translation for American readers:

  • Harry Redknapp is the current manager of the Tottenham Hotspur Football Club. The spherical kind of football, not the prolate spheroid with pointed ends so popular around this time of year in the United States.
  • Tottenham Hotspur has been around since 1882, often referred to as the “Spurs.”
  • A “bung” is an English word used to mean a BRIBE.

Redknapp allegedly hid his bonuses in an offshore account in Monaco which he named “Rosie 47″ after his dog and his own birth year. Once again we see that people will do whatever it takes to find tax relief these days, even if it means resorting to nefarious tricks and schemes. Full story here.

Another Tax Preparer Fraud Case

A Cincinnati man has proven there is more than one way to cheat on your taxes. And now, in addition to his huge tax debt, he has criminal charges levied against him.

Yesterday John Humphrey, III, 46, was sentenced to 12 months of home confinement and ordered to pay more than $65,000 in restitution to the IRS. Humphrey, a tax preparer by trade, pleaded guilty to filing false tax returns for both himself and his clients.

His own returns appear to be a mixed bag of illegal tax tricks:

  • 2004 – failed to report wage income
  • 2005 and 2006 – claimed niece as a dependent to claim a false exemption deduction
  • 2007 – omitted more than $100,000 in gross receipts from his business, The Tax Place
  • 2008 – claimed a false “Contract Labor” business expense

Besides the 12 months of home confinement, Mr. Humphrey will also have 3 years of probation and will likely have to find a new profession. His sentencing included a prohibition from preparing his own tax return and from working at a tax preparation firm.

TIGTA – Office of Investigations

If you are familiar with this blog then you know that one of the roles of the Treasury Inspector General for Tax Administration (TIGTA) is to audit IRS programs and operations to ensure they are functioning properly.  And while it is certainly not their objective to extend tax relief to the masses, they must administer taxes fairly and competently.

Most of my TIGTA blog posts have to do with the TIGTA Office of Audit and their dreadfully boring reports.  But did you know that there is a separate Office within TIGTA — the Office of Investigations — that investigates and reports on much juicier topics?

According to the Office of Investigations (OI), their role is to address “threats arising from (1) lapses in IRS employee integrity, (2) violence directed against the IRS, and (3) external attempts to corruptly interfere with federal tax administration.”  In other words, the OI is responsible for nailing obstinate or potentially dangerous taxpayers and corrupt IRS employees.

Every week the OI highlights a couple new investigations complete with names, dates, dollar amounts, and all the gory details.  They keep an archive of investigation highlights going back to 2004, and updates are available by email so you can be the first to know.

IRS Claims Erroneous Refund Issued to Hal Steinbrenner

No doubt the Steinbrenners can still stir up controversy. This time it’s tax problems.

The Justice Department has sued Harold “Hal” Steinbrenner, co-owner of the New York Yankees and son of the late George Steinbrenner, over a $670,000 refund that they say was issued to him in error two years ago.  In 2009 Hal filed an amended 2001 return, seeking a refund because of a $6.8 million net operating loss carried back from 2002. The IRS paid out the refund but then determined that the amendment was filed 5 months too late. Full story here.

Hal Steinbrenner’s representatives had no knowledge of the lawsuit and had received no prior notices regarding this matter from the IRS or any other governmental agency.

~ Alice McGillion, a family spokeswoman

The IRS is notorious for dropping bombs on people without prior notice, but even I am a little surprised by this one. It seems like the IRS would have initially sent letters to the taxpayer informing him of the erroneous refund and requesting he pay it back. I can’t imagine they would have referred the case out to legal and then to the Justice Department unless they were up against some filing deadline and they needed to preserve their rights by filing suit.


If you’ve ever stumbled upon the TMZ website, you know how they love to expose celebrity tax problems.  If I didn’t know better, I’d say they have some secret relationship with the IRS.  I mean, what a huge benefit to the IRS to have these cases all over the internet where people can see them.

A quick perusal of the TMZ website reveals the tax issues (past and present) of the following celebs:

  1. Christie Brinkley
  2. Bow Wow
  3. Chris Tucker
  4. Sandra Oh
  5. Al Pacino
  6. The Osbournes
  7. Nicolaus Cage
  8. Val Kilmer
  9. Toni Braxton

The list goes on and on.  My apologies if this blog is starting to look TMZ-ish, but celebrities just can’t stay out of tax trouble.  As their fame (and income) start to slide, they find themselves overextended and tax bills often go unpaid. Besides, I do think it is constructive to call out the celebs, especially if it gets us to ponder our own spending habits and live more frugally.


DOJ Shuts Down “Redemption Theory” Tax Fraud Ring

This week the US Department of Justice released the names of seven individuals who have been charged in a $120 million tax fraud scheme. According to the indictment, the false return scheme was national in scope, causing the filing of tax returns for at least 180 clients from 30 different states, and requesting more than $120 million worth of fraudulent tax refunds. The indictment alleges that the defendants and clients of the scheme collectively filed more than 380 tax returns, mostly from tax year 2008, reporting the amount of their personal debt obligations as both income and as federal tax withholding.

Other reports mention the scammers were promulgating a “redemption theory.” Here’s the scoop on this bizarre tax protestor theory according to Wikipedia:

Redemption theory involves claims that when the U.S. government abandoned the gold standard in 1933, the government pledged its citizens as collateral so that the government could borrow money. The movement also asserts that common citizens can gain access to funds in secret accounts using obscure procedures and regulations.

According to the theory, the government created a fictitious person (or “straw man”) corresponding to each newborn citizen with bank accounts initially holding $630,000. The theory further holds that through obscure procedures under the Uniform Commercial Code, a citizen can “reclaim” the straw man and write checks against its accounts.

The “straw man” argument is cited by the IRS as one of the 40 frivolous tax arguments which, if made, subjects the taxpayer to tougher penalties. The “straw man” argument is #18.