Sole Responsibility

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The Internal Revenue Service (IRS) issues an annual list called the ”Dirty Dozen,” which details the top 12 tax scams that taxpayers need to know about. The agency’s goal is to educate and prevent honest taxpayers from falling victim to any of these illegal activities. A Department of Justice press release explains one of the most popular tax scams from a decade ago and the outcome of a case where a man and a woman illegally advised clients on how to evade paying taxes.

According to the IRS, the “Corporation Sole” tax scam revolved around the tax filing status for legitimate churches, religious institutions and their leaders. However, in today’s Fraud of the Day the special filing status was illegally used to establish one-person, nonprofit religious corporations that were exempt from taxes.

The story states that a man from Utah and a woman from Nevada conspired to defraud the government by promoting the ”Corporation Sole” tax fraud scheme to their clients. The pair advised their clients that by filing under the special status they were exempt from U.S. income tax laws and had no obligation to file tax returns. (Wouldn’t that be nice?)

For nearly three years, the pair advised clients that they could skip paying taxes on their income by assigning it to the ”Corporation Sole,” draw a tax-free stipend from it and provide a tax-free shelter for any property by transferring it to the entity. The two kept the scam going by referring clients to one another and by paying referral fees to each other. (I suppose that one illegal deed deserves another.)

The 73-year-old Utah man and the 75-year-old Nevada woman were convicted by a jury trial. The man received a four-year prison sentence, while the woman was sentenced to three years. Both sentences will be followed by three years of supervised release.

This case is a good example as to why it is important to have a competent tax advisor. (If it sounds too good to be true, it probably is.) Fraudsters often forget to think about the consequences of their actions until they are caught. In this case the ”Corporation Sole” tax scam backfired and they are now both solely responsible for their actions.

Source: Today’s ”Fraud of the Day” is based on a press release titled, ”Tax Fraud Promoters Sentenced to Prison for Conspiring to Defraud Internal Revenue Service,” released by the Department of Justice on May 21, 2015.

A Midvale, Utah, man and a Henderson, Nevada, woman were sentenced yesterday in the U.S. District Court in Salt Lake City for tax crimes, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Carlie Christensen of the District of Utah.

Gerrit Timmerman III, 73, of Midvale, was sentenced to serve 48 months in prison to be followed by three years of supervised release. Carol Jean Sing, 75, of Henderson, was sentenced to serve 36 months in prison to be followed by three years of supervised release. In February 2015, Timmerman and Sing were convicted at trial by a federal jury of conspiracy to defraud the United States related to their promotion of a tax fraud scheme.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.