A Tampa man recently gained national attention for receiving — and partly spending — a $980,000 tax refund on a reported income of just $18,497,
But tax shenanigans are nothing new in the Tampa Bay area. Remember Tampa's "Tax Fraud Queen,'' who collected at least $3 million in fraudulent refunds and used some of the money to throw a $30,000 birthday bash? Or the Tampa man who bought an $85,000 Porsche Panamera with proceeds from a scam involving false tax returns?
Just a few weeks before news of the $980,000 refund went viral, a Pinellas County resident was indicted on multiple counts of fraud and money laundering. He is accused of conspiring with overseas call centers to to extort money from U.S residents by impersonating IRS agents.
"Central Florida and Tampa are two of the hotbeds for tax fraud in the country,'' said Larry Heinkel, a St. Petersburg tax lawyer whose web site, taxproblemsolver.com, attracts clients nationwide.
Most of those who contact Heinkel aren't crooks but simply people who put off paying taxes for so long that the IRS finally starts to hound them. But in his line of work he also comes across plenty of scams and scamsters.
"The biggest one lately is where they impersonate the police and say you owe the IRS and we're going to arrest you but if you show good faith and get me 100 Walmart gift cards I'll call them off,'' Heinkel said. "How do they know you owe money? It's in the public record. They do a little digging and find an address and phone number and scare them.''
April Serrano, an associate in Heinkel's firm, recently dealt with a client who owed taxes as shown by an IRS lien. The woman got a call telling her to immediately go buy $300 worth of iTunes cards and give the caller the card numbers.
"They kept her on the phone the whole time she drove to the store,'' Serrano said."They scared her so badly she didn't want to hang up.''
The United States began assessing an income tax in 1862, originally to help fund the Civil War and then to support the myriad functions of government. Strong enforcement measures assured a high degree of compliance. A charge of tax evasion also proved a useful tool for nabbing criminals like mobster Al Capone who otherwise might have eluded prosecution.
With the growth of electronic filing, however, thieves began using stolen Social Security numbers and other personal information to file fraudulent returns and collect refunds. Nationwide, the number of cases of identify theft soared from only 48,000 in 2008 to 1.2 million cases in 2012. The IRS estimated that between 2012 and 2016 it lost $26 billion to fraudulent refunds, with Tampa and Miami among the centers of identify theft.
"We're on top of a national trend that is causing a hemorrhage of tax dollars,'' Wilfred Ferrer, then-U.S. Attorney for South Florida, told Reuters in 2013. "It's a tsunami of fraud.''
Among the most notorious scamsters was Rashia Wilson, Tampa's self-described "tax fraud queen'' who taunted police by posting photos of herself flashing stacks of cash. A single mother of three, she used part of the money from illicit refunds to buy a $90,000 Audi and rent carnival rides for her 1-year-old's birthday party. The spending spree came to an end in 2015 when a judge ordered Wilson, now 33, to spend 21 years in prison.
Identify theft and refund fraud had become so rampant by the time of Wilson's sentencing that the IRS convened a "security summit'' that year with representatives of state tax agencies, tax preparation firms, software developers and financial institutions. That led to creation of a public/private parternship to share information and develop better means of detecting fraud. Since the summit, "the number of tax-related identify theft victims has fallen by almost two-thirds and billions of dollars of taxpayer refunds have been protected,'' the IRS said in a report last year.
But problems clearly persist.
In 2017, Ramon Christopher Blanchett of Tampa electronically submitted a self-prepared tax return with W-2 forms showing he earned $18,497 as a "freelancer'' and that an employer had withheld $1 million in taxes. The IRS sent him a refund of $980,000, part of which he spent on a Lexus last August.
The 29-year-old Blanchett has not been charged with a crime although the government has seized the car, the $919,251 remaining in his bank accounts. It is trying to get another $809 that Blanchett received as a refund on his car insurance.
The IRS will not comment on his case, citing privacy reasons, nor would it talk in general about how it flags suspicious refunds before they are sent out.
Harvey Bezozi, a certified public accountant and forensic tax expert in Boca Raton, said the IRS typically cross-checks information provided by the taxpayers with information provided by employers.
"Not only did IRS computers fail to flag this ridiculous refund during its cross-checking process, there was no managerial review of this refund based on its lack of 'reasonableness,' '' Bezozi said. " How many people in the whole country are getting million dollar refunds? I can't imagine very many, and it should have been flagged before the check goes out.''
Heinkel, the St. Petersburg tax lawyer, thinks part of the problem is that members of Congress, trying to keep their constituents happy, pressure the IRS to issue refunds as fast as possible.
"If they had time to verify the accuracy of the filings, this wouldn't be a problem,'' he said.
Heinkel's firm has several clients in the Orlando-Kissimmee area who have been caught in a current scam that capitalizes on the refund rush. It involves phony 1099s — the form that reports income from a source other than the taxpayer's employer —- and targets people that Heinkel describes as "relatively unsophisticated'' financially.
Here's how it works: Scamsters ingratiate themselves with people they meet in in church and convince them that if they take out a mortgage from say, Wells Fargo, the bank is using “their’’ money so they're entitled to a benefit from that use. The scamster provide a false 1099 and recommends a particular tax preparer. The return shows that that the taxpayer received $150,000 "income'' from Wells Fargo and that the bank withheld $100,000 in taxes. The taxpayer's total reported income is low enough that he or she gets a large refund because so much tax was was withheld. The taxpayer keeps two-thirds of the refund and gives a third to the scamster.
Using its 1099 matching program, the IRS eventually realizes that it has nothing from the bank that matches what's on the taxpayer's return. By then, the refund has been issued, the money spent and the scamster is nowhere to be found.
"These people have very limited means so there is nothing to collect,'' Heinkel said. "They've been assured by people that this is legal and they met typically through church so there's this cloak of legitimacy.'' He negotiates a small repayment plan and will later try to eliminate the tax debt through bankruptcy or a settlement offer.
Heinkel said many of his clients are self-employed lawyers, Realtors and small business people who get in trouble not because of criminal intent but because they don't have an employer who pays them a regular wage and withholds taxes.
"They owe $15,000 or whatever but don't have it so instead of addressing it, they figure they'll get caught up this year,'' Heinkel said. "Then another year goes by and another. It's an easy one to get away with for a while but very expensive.''
Every now and then, people get so worked up about their tax liabilities that they threaten to turn violent. The IRS has a name for them - Potentially Dangerous Taxpayer, or PDT.
"I had one guy tell me that if the IRS showed up at his house, he was going to shoot them,'' Heinkel said. Even though Heinkel's license plate reads BEAT IRS, he felt obligated to warn the agency about the threat.
"I scored a lot of points that time,'' he said.
Contact Susan Taylor Martin at [email protected] or (727) 893-8642. Follow @susanskate.