Scams & Theft

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Better Call Saul!

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On January 20, 2008, AMC debuted a promising new drama called Breaking Bad. The series chronicled the highs and lows of high-school chemistry teacher Walter White, who was diagnosed with terminal lung cancer and put his knowledge to work opening a meth lab to secure his family's financial future. Millions of viewers became addicted to White's exploits as he plunged deeper and deeper into a life of crime, breathlessly watching him juggle relationships with his DEA-agent brother-in-law, arms dealers, cartel soldiers, and crooked strip-mall lawyer Saul Goodman. All fun to watch, sure . . . but there's a reason the announcer always says, "Kids . . . don't try this at home."

Jack Vitayanon is a 41-year-old, Ivy League-educated attorney in the IRS Office of Professional Responsibility, where he investigates crooked accountants, attorneys, and IRS agents. He even taught a class called "Tax Lawyering and Professional Responsibility in Tax Practice" at Georgetown Law School. But apparently he needed to crank out some adventure in his life. And while we may never know if he drew his ambition from AMC's antihero, it's crystal clear that he decided to join the methamphetamine trade.

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A Little Bit of Tax

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It seems like every day brings new questions about the digital currency called bitcoin, which first appeared in 2009. Who is the shadowy "Satoshi Nakamoto" who created the currency's protocol and software? Who stole $450 million worth of bitcoin from the Tokyo-based Mt. Gox exchange? Who was the mystery buyer who used bitcoin to snag a $500,000 house on the Indonesian island of Bali?

Last week, the IRS solved a mystery by ruling on how bitcoin would be taxed, at least here in the United States. And their answer to that question may shoot a hole in bitcoin's hope to become more widely accepted.

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Fast Track to the Presidency

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Last week, we talked about the IRS Criminal Investigation unit's Fiscal 2013 annual report. We told you about four of the 2,812 offenders who drew prison sentences for their efforts: the drag racer who applied for $83 million in fraudulent gas tax refunds, the surgeon who "operated" on his tax bill using foreign trusts and shell companies, the Japanese restaurant owner who hid receipts in boxes marked "seasoned octopus," and the prisoner who filed false tax returns for his fellow inmates and sent the refund checks to his mother. But the IRS report detailed over 100 such stories — so, at the risk of beating a dead horse, we couldn't resist sharing just a few more:

  • They say everything is bigger in Texas. Apparently that includes public corruption, which is an IRS priority. Abel Limas was a former police officer and state judge in Brownsville who discovered he could supplement his government salary by turning his office into "a criminal enterprise to enrich himself and others through extortion." In 2008, Limas issued a series of pretrial rulings in a case involving a helicopter crash. Later that year, he joined a law firm working on behalf of victims in that same crash. It turns out the law firm had promised him a cool hundred grand, plus a share of their fees, in exchange for those rulings. Now Limas is spending six years in a federal prison camp.

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Largest IRS Phone Scam Spreading

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It is tax preparation season and the scammers our there know that taxes are weighing heavy on the minds of many taxpayers. The scammers are relying on the fact that you are thinking about taxes and the IRS right now.

Yesterday the Treasury Inspector General for Tax Administration (TIGTA) is warning all taxpayers to beware of phone calls from individuals who claim to represent the Internal Revenue Service, but in reality are trying to defraud you, in what it is saying is the largest ever scam it has seen to-date.

“This is the largest scam of its kind that we have ever seen,” said TIGTA Inspector General J. Russell George in a statement. He commented that TIGTA has thus far received reports of over 20,000 contacts and is aware of thousands of victims who have collectively paid over $1 million (and climbing) as a result of the scam.

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Seasoned Octopus

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Most of the Internal Revenue Service's 90,000 employees are financial bureaucrats, working to collect the taxes that finance our government. But the Criminal Investigations unit, or IRS-CI, is an elite division of 3,700 financial crime fighters dedicated to protecting those taxes. Last month, they released their Fiscal 2013 annual report. And business sure is booming! In 2013, IRS special agents initiated 5,314 investigations (up 3.7% from 5,125 in 2012) and recommended 4,364 prosecutions (up 17.9% from 3,710 in 2012). There were 3,865 indictments and 3,311 convictions (the IRS doesn't take someone to criminal court unless they're pretty sure they can win). And 2,812 miscreants won themselves the proverbial "three hots and a cot" for terms averaging 25 months.

Most of IRS-CI's targets are plain old crooks. But some of them are just so awkwardly entertaining, we had to share their stories:

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Excuses, Excuses

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So-called "tax protestors" have dreamed up dozens of excuses for not paying the taxes the rest of us grumble about. They argue that the Sixteenth Amendment, which authorizes the government to levy an income tax without apportionment among the states, was never "properly ratified." They accuse the "alleged" Internal Revenue Service of being a massive premeditated conspiracy to defraud U.S. citizens. Some groups assert that the gold tassels around the American flags that stand in many federal courts are a "mutilation," rendering them "courts of admiralty" with no proper jurisdiction. Still others contend that taxpayers aren't required to file a federal tax return because the instructions associated with Form 1040 don't display an OMB control number as required by the Paperwork Reduction Act. (Can you imagine risking jail time on an argumen t like that?)

Well, the IRS has heard it all. They've published a web page identifying 40 Frivolous Positions for Taxpayers to Avoid. They've warned taxpayers about a $5,000 penalty for using any of these arguments