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Tax News
Criminal Corner

We are committed to closing California's $6.5 billion tax gap, defined as the difference between tax that is owed, and tax that is paid. Our special agents work cooperatively with law enforcement agencies throughout California to uncover illegal behaviors that contribute to the tax gap. These include underreporting income, overstating deductions, failing to file returns, failing to pay taxes due, and making illegal cash payments to employees.

Tax fraud is not a victimless crime. You can report suspected tax fraud by calling FTB at (800) 540-3453.

Taxing time for Southland tax preparers: Two arrested in unrelated cases

An Upland tax preparer and his spouse, and a San Pedro tax preparer were arrested on felony charges of filing fraudulent state income tax returns. The two cases are unrelated, but are part of FTB's ongoing effort to crack down on dishonest tax preparers.

Guillermo B. Garcia, 63, and Maria J. Garcia, 60, of Rancho Cucamonga were arrested on April 19, 2007. Guillermo operates B. Garcia Income Tax Service. According to FTB special investigators, Garcia allegedly filed fraudulent 2001- 2004 joint personal state income tax returns, and failed to report more than $772,000 in income. The couple owes the state more than $230,635 in unpaid tax, penalties, interest, and the cost of the investigation. The Garcias also face one felony count of negotiating a fraudulently obtained state income tax refund. FTB seized $92,000 in cash during the execution of a search warrant several months ago and this will be applied towards their outstanding tax liability.

In the second case, San Pedro police arrested Eddie B. Lewis, 29, owner of Lewis Tax Service on April 20, 2007. According to FTB special investigators, Lewis allegedly filed fraudulent returns for his 2001 - 2004 tax years. Lewis owes the state more than $68,300 in unpaid tax, penalties, interest, and the cost of the investigation.

Lewis and Guillermo Garcia also allegedly filed fraudulent returns on behalf of their clients, inflating itemized deductions, and claiming Child and Dependent Care Credits for providers who do not exist.

Under California law, preparers must be licensed or registered to prepare income taxes for a fee. If they are not, they are preparing returns illegally. CPAs, public accountants, enrolled agents, and attorneys are licensed by either the state or federal government, and may charge a tax preparation fee. All other tax preparers who charge a fee for their services must be registered with the California Tax Education Council (CTEC). The Council is a nonprofit organization established in 1997 by the Legislature to protect the public and promote competent tax preparation.

The IRS and FTB have recently issued a brochure, FTB Publication 982, How to Select an Income Tax Return Preparer where taxpayers can learn more about choosing a tax professional.

The Garcias were booked into the West Valley Detention Center in Rancho Cucamonga, and are free on $40,000 bail each. Lewis was booked into the Inmate Reception Center in Los Angeles. His bail is $80,000.

Riverside County couple failed to report more than $5.5 million in income - arrested on tax charges

A Palm Desert couple was arrested April 23, 2007, on three felony charges of filing fraudulent state income tax returns.

William Greenberg, 63, and Marta S. Greenberg, 54, formerly owned and operated a furniture store in Tustin. The Greenbergs allegedly filed fraudulent 1999-2001 joint personal state income tax returns, and failed to report more than $5.5 million in income from the furniture store. FTB special investigators say the couple owes the state more than $500,000 in unpaid tax, penalties, interest, and the cost of the investigation. Each felony tax count carries a maximum sentence of three years in state prison.

Each year the FTB reviews income records from numerous sources, including the Internal Revenue Service, the California Employment Development Department, the Board of Equalization, employers, and banks. The FTB compares this data with its database of tax returns filed to identify individuals who should have filed taxes but didn't, or to find discrepancies between the income reported and income claimed.

The program annually identifies about 800,000 individuals, and collects nearly $500 million.

The Greenbergs were booked into the Riverside County Sheriff Station at Indio on $500,000 bail each.

Million-dollar embezzlement, tax evasion results in state prison

A Los Angeles man pleaded guilty on April 26, 2007, to felony charges of embezzling more than $1 million from his employer and filing a false state income tax return.

Gary Seiden, 42, was sentenced to five years in state prison.

According to court documents, a Culver City job placement company employed Seiden as its bookkeeper/controller. Seiden abused his position of trust by writing checks to himself on the company account. He also failed to claim the embezzled funds on his state income tax returns.

Seiden, who was arrested in February, was ordered to pay restitution of $1,197,040 to the victims, including $104,847 to the state in unpaid tax, penalties, interest, and investigations costs.