Tax Fraud Blotter: Let it snow

The Lady in fed; an education in fraud; dependent-happy; and other highlights of recent tax cases.

Greenbelt, Maryland: Tax preparer Kymberly Starr, a Minnesota woman who previously ran a tax prep business in Maryland, has pleaded guilty to aiding in the preparation of false returns.

Starr owned and operated The Tax Lady, a.k.a. 5 Starr Business Solutions, and from 2013 to at least 2018, she inflated clients’ refunds by preparing and submitting false federal returns that claimed fraudulent deductions and fictitious business profits and losses. The loss to the IRS was at least $400,000.

In 2020 and 2021, Starr also obtained more than $83,000 in Paycheck Protection Program loans by submitting fabricated IRS forms containing purported business income from bogus businesses. She also filed a false claim that included fabricated federal tax forms for unemployment insurance with the Maryland Department of Labor, from which she received more than $55,000.

Sentencing is April 26. She faces up to three years in prison as well as a period of supervised release, restitution and monetary penalties.

Freeland, Pennsylvania: Tax preparer Leidi M. Paulino, 46, owner of the prep business LP Multiservices, has been sentenced to two years in prison to be followed by a year of supervised release for aiding and assisting in the filing of false returns claiming hundreds of thousands of dollars in unearned education credits.  

Over 2019 and 2020, Paulino helped hundreds of clients prepare and file returns that were materially false in that they sought undeserved education credits, including the American Opportunity Tax Credit. Most of Paulino’s clients were not enrolled in college.

She was also ordered to pay $888,377 in restitution to the IRS.

Denver: Steven Darbee, formerly of Brighton, Colorado, has been sentenced to a year and a day in prison for tax evasion.

Darbee last filed a federal return in 2014. Beginning in April 2013 and continuing until January 2021, he evaded federal income tax by submitting to his employers false W-4s claiming multiple dependents so that his employers would not withhold federal income tax. During the time in question, he claimed up to 99 dependents and in 2021 claimed he was “exempt” from paying federal taxes. IRS attempts to bring Darbee into compliance were unsuccessful.

Darbee was also ordered to pay $308,370.59 to the IRS in taxes, interest and penalties and was ordered to serve three years of supervised release after his prison sentence.

Newington, Connecticut: Anthony and Nanette Niro have pleaded guilty to offenses stemming from tax evasion.

Anthony Niro was a co-owner of A. Niro Landscape Contractors, which provided landscaping and snowplowing for large commercial properties and personal residences. Nanette Niro, his wife, was the bookkeeper for A. Nori Landscape and  maintained the company’s financial records.

For the 2006 through 2010 tax years, Anthony Niro, his business partner and Nanette Niro conspired to evade both corporate and individual income tax by causing a large portion of A. Niro Landscape’s receipts to be deposited into two non-interest-bearing checking accounts and then transferred money out of the accounts to themselves for their benefit.

The three failed to provide information about these accounts to the tax preparer who prepared the company’s federal income tax returns. Federal returns for 2006 through 2009 were filed; a 2010 return was not filed.

Nearly $14 million in the company’s gross receipts were unreported to the IRS for the 2006 through 2010 tax years, resulting in a tax loss of $2,931,011.

Anthony Niro and his business partner also owned residential and commercial properties through several entities and earned rental income through some of the properties; some of that income was also not reported to the IRS.

For the 2006 through 2010 tax years, Anthony and Nanette Niro failed to report to the IRS $8,022,644.90 in income, resulting in a tax loss of $1,472,735.

They each face a maximum of five years in prison. The couple has paid $1,472,735 in restitution and must still pay substantial financial penalties and interest.

Chelsea, Massachusetts: Anthony Catalano, formerly of Boxford, Massachusetts, and now living in Winthrop, Massachusetts, and former owner and operator of APC, a transportation and delivery company, has been sentenced for his involvement in mail fraud.

He was sentenced to six months in prison to be followed by three years of supervised release and ordered to pay restitution of $541,000 to The Travelers Insurance Co. Catalano, who pleaded guilty in October, was also ordered to cooperate with the IRS regarding personal and corporate taxes due and owing.

From 2017 to 2020, he cashed more than $8 million in APC checks from customers and failed to report the company income to the IRS. He pleaded guilty to using most of the cash to pay employees under-the-table wages that APC was also required to report to the IRS. Neither the company nor the employees paid employment or income taxes on the cash wages, resulting in a tax loss of more than $1 million to the IRS.

Catalano also pleaded guilty to mail fraud for failing to disclose the cash wages to Travelers when it provided workers’ compensation coverage for APC employees. He defrauded the carrier out of more than $500,000 in insurance premiums.

Byron, Georgia: Tax preparer Gladys Harun has been sentenced to five years in prison and ordered to repay more than half a million dollars she fraudulently obtained from COVID-19 small-business relief programs.

Harun was a franchisee of a prep service with multiple locations in Georgia. She admitted to lying to investigators from the Small Business Administration about applications she filed for herself and on behalf of others, including clients, to obtain more than $550,000 from a California lender through the PPP and Economic Injury Disaster Loan programs.

Harun was ordered to pay $552,679 in restitution and to serve three years of supervised release after her prison term. 

Adairsville, Georgia: Douglas K. Mittleider, who operated long-term care facilities throughout the U.S., has been sentenced to two years in prison for obstructing the IRS in its efforts to collect employment taxes.

From at least 2003, Mittleider was responsible for paying the IRS the federal income and Social Security and Medicare taxes withheld from employees’ wages. In June 2004, the IRS assessed against him personally the employment taxes he had not paid.

Beginning in at least November 2011, Mittleider took multiple steps to conceal business funds and impede the IRS from collecting. Among other moves, he directed the commingling of funds among businesses he controlled and used funds for purposes other than to pay the IRS. He also caused the creation of new operating companies and bank accounts to make it more difficult for the IRS to locate assets and levy accounts.

In total, Mittleider’s conduct caused a tax loss to the IRS of more than $17 million.

He was also ordered to serve a year of supervised release and to pay $17,080,566 in restitution to the United States.

Baltimore: Tax preparer Adis Smith, of Chula Vista, California, and formerly of Baltimore, has been sentenced to 27 months in prison for preparing false returns.

Smith prepared and filed false income tax returns for his clients to fraudulently lower the taxes they owed or to generate undeserved federal refunds. Smith typically reported fictitious or inflated business losses and itemized deductions. To conceal the fraud, he prepared and filed each client’s return as a ghost preparer.

Smith prepared more than 1,000 false returns and caused a tax loss to the IRS of some $4,729,311.

He was also ordered to serve a year of supervised release and to pay $4,729,311 in restitution to the United States.