Continuing the countdown of IRS: CI's top ten tax crimes of 2022, number seven belongs to Michael Dexter Little, a gentleman with a great appetite for tax crime.
Tax fraud is a serious term that can seem surprisingly innocuous. You claim a fake deduction or shave some income off your tax return. It can easily turn into a larger criminal enterprise, involving falsified documents, money laundering, offshore accounts, and identity theft. Whatever the type of fraud, it is a crime of choice and intent. Once the decision is made, it is very difficult to claim ignorance when you are using the identity of another to pull in an unearned refund from the Internal Revenue Services (IRS).
For Mr. Little, the decision to commit—and remain committed—to a tax crime led him to where he is now—in prison.
The name of the game for Mr. Little was fuel tax fraud. Fuel tax credits allow an end-user to reduce their taxable income for using certain type of fuels. The tax credit is dollar for dollar and intended to benefit off-highway businesses and agricultural concerns and encourage the use of renewable fuels. Fuel tax credits are specialized and not available to most taxpayers. When claiming the credit, a taxpayer fills out a form specifying the type of fuel used and the credit claimed.
Because of an uptick in taxpayers fraudulently claiming the credit, tax returns claiming this type of credit are subject to greater scrutiny. If the credit is disqualified, there are generally two reasons why. First, a taxpayer may have legitimately made a mistake in claiming the credit. Or, the taxpayer has fallen victim to preparer fraud.
This type of fraud involves a tax preparer who charges a fee, oftentimes guaranteeing a higher-than-usual tax refund. The return is prepared and signed by the taxpayer. The return directs the IRS to route the refund to an account controlled by the tax preparer who removes their fee—and then some. The taxpayer is paid out a refund and the tax preparer closes up shop and moves on before anyone is the wiser. For the taxpayer, claiming a fraudulent fuel tax credit can return a $5,000 penalty.
With fuel tax fraud, groups of people are taken in by fraudsters who fleece the taxpayer for their money and oftentimes, their identity. This is the type of fraud for which Mr. Little, and a group of associates, were arrested. Mr. Little filed false income tax returns for many clients, himself, and his co-conspirators. The crew managed to earn $12.3 million in fraudulent tax returns and had attempted to obtain $27 million more.
Unfortunately for Mr. Little, he was known to the IRS, having been convicted of tax fraud in 1999 and 2003. Mr. Little pled guilty to wire fraud, aggravated identity theft, and conspiracy to commit money laundering. He was ordered to pay at least $12.3 million which represents the funds that were traceable during the IRS criminal tax investigation.
Mr. Little will have a long time to consider his next move. He was sentenced to 19 years and six months in federal prison. Notes a Special agent with IRS: CI, “Identity theft schemes often leave their victim's financial lives in ruin. These crimes are a high priority for IRS-CI, especially when the stolen identities are used to file false tax returns.”
Thinking of tax fraud involving fuel credits? It is already on the IRS hot list. If you are involved in a tax crime or scheme, seek confidential legal guidance from an experienced criminal tax attorney.
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