An article in Accounting Today titled Ex-IRS Agent Pleads Guilty to Ordering Hit Job on Tax Clients reports on a former IRS inspector/tax preparer who is facing criminal prosecution for masterminding a tax fraud case that involved (among other things) money laundering, filing false returns and attempted murder.
According to the article, former IRS revenue agent and tax preparer Stephen Martinez pleaded guilty on August 10 to criminal charges that he attempted to hire a hit man to murder four of his former clients who were scheduled to testify against him in a tax fraud case. As part of his guilty plea, Martinez admitted that in February 2012, he tried to prevent testimony by his former clients by offering $100,000 to a third party “hit man” to murder them. The hit man secretly informed the FBI in San Diego of Martinez’ murder-for-hire plot.
The ex-client testimony and beef against Martinez was for stealing over $11 million in tax payments from them. He was able to accomplish this tax theft by doing the following:
- Presented his clients with completed tax returns stating they owed a significant amount of tax.
- Requested that his clients write checks for the taxes due made payable to an alleged client trust account, instead of writing them to the IRS or the California Franchise Tax Board.
- Convinced the same clients during the tax year to write checks for estimated tax payments payable to the same alleged client trust accounts.
- Deposited the checks into several nominee bank accounts instead of depositing into a true trust account.
- Filed a different set of false tax returns for these clients indicating that they owed little or no income tax.
To add insult to injury, Martinez was guilty of fraud against federal agencies by:
- Committing Social Security fraud and aggravated identity theft for using clients’ Social Security numbers without authorization when he filed the false tax returns with the IRS.
- Committing mail fraud because he mailed the false tax returns to the IRS.
- Laundering approximately $2 million through nominee bank accounts for his business and personal use.
- Admitting that he knowingly and intentionally filed false personal income tax returns for tax years 2004, 2005, 2006 and 2007.
Martinez’ used the nearly $11 million in stolen taxpayer funds to fund a lavish lifestyle that included buying a beach home in Mexico (and other properties), paying for the use of a private airplane, using over $2 million to make personal/business investments, and using over $2 million in personal use credit cards and loans.
This case is being investigated by Special Agents with the IRS’s Criminal Investigation division (CID), and the FBI. While this case shows extreme abuses by a trusted tax professional against his clients, it demonstrates how easy financial confidence can be betrayed if taxpayers are not careful.
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