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May 2009 - Inland Empire Tax Preparer Sentenced for Filing False State Income Tax Returns

An Upland tax preparer was ordered to pay restitution of more than $310,000, sentenced to time served, and placed on three years formal probation for filing false state income tax returns, we announced on April 2, 2009.

Jose A. Garcia, 29, owned and operated Mi Oficina Income Tax, a tax preparation business with several locations throughout the Inland Empire. Garcia pleaded guilty in February to four felony counts for preparing false personal state tax returns for tax years 2001 through 2004 and underreporting his income by more than $968,000. Garcia fully paid the $310,369 representing the unpaid tax, penalties, interest, and the cost of the investigation.

San Bernardino County Superior Court Judge Michael Dest presided over the case in Department 23 of the San Bernardino Superior Court. San Bernardino County Deputy District Attorney Melinda Spencer prosecuted the case.

Danville Couple Pleads in Underground Economy Case

A Danville contractor pleaded no contest yesterday to a felony charge of diversion of construction funds and he and his wife pleaded no contest to three felony counts of state income tax evasion, we announced on April 10, 2009.

According to court documents, Rick Alvin Powers, 55, and Cathy Powers, 55, failed to report more than $582,000 in income during the years 2001 – 2003. They owe us more than $42,000 in unpaid state income tax. The diversion of construction charge stems from eight formal consumer complaints to the Consumer State Licensing Board (CSLB) that the couple would take huge down payments, as much as 62 percent, for high-end cabinets, then do little or no work at all. They would then lead the consumers to believe the cabinets were about to be finished, but additional money would be needed.

The Powers face up to four years four months in state prison as well as payment of full restitution to their victims including us. Their sentencing and restitution hearing is scheduled for later this year.

”CSLB’s lengthy investigation is moving through the legal process with positive signs,” said CSLB Registrar Steve Sands. “We are hopeful that a determination on consumer restitution will be announced later this year.” The failure to file tax returns is part of the $6.5 billion tax gap California faces each year. The tax gap is defined as the difference between the tax that is owed and the tax that is paid. In addition, businesses operating in the underground economy have an unfair competitive edge over their legitimate competitors. By avoiding their fair share of income tax, withholding tax, workers’ compensation insurance, and not being properly licensed, they are able to underbid jobs hurting honest California businesses.

Contra Costa Superior Court Judge Mary Ann O’Malley accepted the plea in Department 1 of the Martinez Superior Court. Contra Costa Deputy District Attorney Steve Bolen prosecuted the case. This was a joint investigation between the Contra Costa District Attorney’s Office, CSLB, and us.