Yesterday, I mentioned the ongoing issues the IRS is having regulating tax preparers. Today, two more preparers have been brought into the spotlight because of their actions. There is also a bonus story about six college students who thought they could out-smart the IRS.
Jeffrey Shelby, Jr. plead guilty to filing hundred of fraudulent tax returns from 2009 to 2012. The end result of his actions cost the IRS over $5 million! In order to reduce tax and inflate refunds, Mr. Shelby overstated the earned income tax credit and education credit for most of his clients. He has not been sentenced, but will be required to pay full restitution. Although no other years are in question, there is a good chance Mr. Shelby was using these unscrupulous methods prior to 2009 and has cost the IRS even more than $5 million.
That brings us to Pepe Anetipa from Anchorage, Alaska. Ms. Anetipa got fairly creative in her scheme, and defrauded the IRS out of $200,000 by changing the tax status of many of her clients. She worked with many clients who were residents of American Somoa, an area not subject to U.S. taxation. She fraudulently transferred the information on Form W-2AS (American Somoa Wage and Tax Statement) to Form W-2 and claimed her clients lived in Alaska and Texas. This caused the IRS to refund withholdings that never occurred. Ms. Anetipa kept most of the fraudulent refunds for herself and will now face up to five years in jail for each count of fraud.
And finally, not all fraud is committed by tax preparers. Six former University of South Dakota athletes hatched a scheme that defrauded the IRS of $400,000 in just over a year. One of the members of the group was employed by an insurance agency. Her position allowed her access to client social security numbers, addresses and other identifying information. The social security numbers were used to create bogus tax refunds, which were returned as prepaid debit cards. The six involved were ordered to pay full restitution and can each face up to five years in jail for their actions.