Sock in Lou of Cash Tax Fraud

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Sep 29, 2014, 02:39pm EDT |

How To Get Away With Tax Fraud

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Okay, so I'm not really going to tell you how to get away with tax fraud. I don't have a breathy, dramatic voice, I'm not as cool as Viola Davis and let's face it, I just can't pull it off. I have, however, been at this gig for awhile so I have a general idea about what will land you behind bars - or at the least, in front of a judge. Here's some information to keep in mind for the criminally inclined:

• Be consistent. Audits and examinations aren't random. They're generally based on patterns. When you swerve outside of the lines a bit, you might attract attention. Sometimes, that's okay: you have a good year, you have a bad year. Taxing authorities understand that your income and expenses aren't going to be exactly the same every year. But there's a difference between a good year - business turned or you got a raise - and a completely unbelievable year. And I would suggest that a $94 million claim for refund might be classified as the latter. Brigitte Jackson apparently didn't think so. That's how much she tried to steal (allegedly) from the Georgia Department of Revenue by filing a phony state tax return. Either she had a really, really good year or there's some basis for her arrest on charges of attempted theft by taking and conspiracy to defraud the state.
• Be good at math. Unless you are due a lot of refundable tax credits (more on that later), you'll want to make sure that your math makes sense. I didn't see Jackson's tax return. And I'm not licensed in Georgia. But even I can figure from peeking at the Georgia Department of Revenue's web site that the highest income tax rate for individuals is 6%. To have paid in $94 million of tax, the amount of her refund claim, you'd have to have earned about $1.56 billion in income - in one year (assuming no carry forward or carry back). That kind of money should have landed Jackson on the newly released Forbes' 400 Richest Americans list. Spoiler alert: she's not on the list.
• Keep good records. Deductions and/or refundable tax credits aren't magical numbers that you simply conjure up. You'll want to have paperwork to substantiate those numbers. It could be the case that you forgot about all of those estimated payments you made - you know, the ones that would have had to total nearly $24 million each quarter to result in an overpayment of $94 million? You'll want to keep track of those. I recommend, at the least, that you have duplicate checks and a scanner. And a good accountant. You're going to want something to back up that claim. You know, other than stuff you simply make up on your own (as the Situation and his brother are alleged to have done).
• Know your credits. Your biggest chance of getting a tax refund - other than overpaying in the first place - is to take advantage of tax credits. Tax credits are dollar for dollar reductions in your tax due, as compared to deductions which are dollar for dollar reductions in your taxable income. Combined with overpayments, tax credits can result in a tax refund. If the credit is refundable - meaning that you can take advantage of the credit even if you don't owe tax - you can pad your refund quite nicely (granted, not usually $94 million nicely but still). On the federal level, the earned income tax credit (EITC) and the American Opportunity Credit (AOC) are examples of refundable - or partially refundable - tax credits. Georgia offers a few credits for individual taxpayers, like the credit allowed for tax paid to another state and the Georgia child and dependent care expense credit; the latter offers just 30% of the federal child and dependent tax credit up to $315 for one child and $630 for two more more children. In other words, there aren't a lot of opportunities to claim tens of millions of dollars in credits. So be selective.
• Be realistic about your dependents. I have three kids. And I understand that some days, it's hard to keep them all straight. They're underfoot and you're running them to hockey and to soccer and it feels like there are more of them than there actually are - especially when it comes time to do the laundry (I'm still not convinced there aren't more children living in my son's room, based on the sheer number of soccer socks alone). But as a rule, most days, I can nail down the numbers and names of my kids. You'll want to do the same on your tax return. And while Georgia doesn't appear to have a limit on the number of dependents you can claim at $3,000 each, there's a point where it's just not realistic to claim dozens. Not everyone has the counter space to support a family like, say, the Duggars. I've seen pictures of Jackson. She might have a kid or two, just not 100.
• Don't tell anyone. Especially your cousin. Because you know how family is... They always want what you have. You get a chocolate bunny at the Easter egg hunt, they want a chocolate bunny. You get a new bike at Christmas, they want a new bike. You have a claim for millions of dollars as a tax refund, they want millions of dollars as a tax refund. Oh yes. That actually happened. Jackson's cousin, Darrius White, also allegedly reported $99 million in income, and tried to claim a large refund. White has also been charged in the scheme and perhaps, not surprisingly, is already on felony probation for another crime.
• Don't call the tax authorities. If you're going to claim a big refund that you might not be entitled to, you might want to play it down a bit. And you know, not call the Department of Revenue and ask about the status all of the time. It makes you look desperate. Also stupid. But mostly desperate. Both Jackson and White reportedly "kept calling" to check on their refunds. Their calls were recorded and used to snare the two - because, well, why not? The best part? Jackson thanked the agent profusely, telling her that she was "so happy" after being informed that she would receive her refund - yes, the one for $94 million - in "7-10 business days."
• Check your bank or the mail for your refund. Lean in closer to the computer because this part is key: if you manage to wrangle a multi-million dollar fraudulent tax refund from the Treasury, you should be prepared to receive it just like any other tax refund. The tax authorities won't be handing it out at the supermarket. It will be direct deposited into your bank account or issued as a check in the mail. You won't get it as cash. Or gift cards. Or magic beans. Jackson must not have had a handle on this part because she was arrested when she went to the bank counter inside of a Kroger to pick up her check. At the grocery store. Because they called her. Folks: that's not how that really happens.

While it's tempting to think that Jackson's efforts were so outlandish that they don't even count as fraud because really - who does this sort of thing? - it doesn't change the result. It's still against the law and fraud is fraud. According to Special Investigations Chief Josh Waites:

It doesn't matter if it's $94 or $94 million. We're going to go after you and hold you accountable.

You see, the amount doesn't change whether it constitutes fraud. All it changes is how many times someone will share your story as a good example of what not to do - and now you know.

(You can watch the news footage about the story from Channel 2 in Cobb County here. It's pretty awesome.)

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Sock in Lou of Cash Tax Fraud

Source: https://www.forbes.com/sites/kellyphillipserb/2014/09/29/how-to-get-away-with-tax-fraud/

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