The Internal Revenue Service is always cracking down on preparers that charge big fees to get big (and fraudulent) tax refunds at this time of year. But the U.S. Attorney's office in San Diego announced today that they nabbed a preparer named David Canales, who was operating a very different tax scam.
He told his clients, primarily Mexican businesses operating in the U.S., that they owed huge sums of federal and state income tax money to the IRS and the Franchise Tax Board, California's taxing authority.
What was the scam? Canales controlled two bank accounts, one in the name of International Recovery Systems (IRS) and one in the name of Freight Transport Brokers (FTB). His clients wrote checks to the IRS and FTB, assuming the money was going to tax authorities. But it went to David Canales' bank accounts that operated with the same initials.
When Canales' clients would get letters from the real IRS or FTB, telling them to pay-up, Canales told them not to worry. He'd handle the inquiry (like most legitimate tax preparers would). The tax authorities thought the clients were scofflaws. The clients thought the tax authorities were inefficient. Neither realized that their middle-man was just a crook.
Canales plead guilty to mail fraud and tax evasion charges after defrauding his clients of a cool $1 million.
"Canales took advantage of his clients who thought they were hiring an honest tax specialist to assist them with complying with the United States tax laws," said U.S. Attorney Karen Hewitt. "This case demonstrates just how careful the public must be when choosing a tax specialist."