Debra Wong Yang
United States Attorney
Central District of California
United States Courthouse
312 North Spring Street
Los Angeles, California 90012
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February 7, 2006
Thom Mrozek (213) 894-6947
Los Angeles, CA - A Yorba Linda man who ran a fraudulent tax return mill has pleaded guilty to conspiring to defraud the Internal Revenue Service and aiding and assisting in the filing of false tax returns.
Samuel Joseph DeAngelo, 59, who ran Western Tax Service in Anaheim, pleaded guilty Friday before United States District Judge James V. Selna.
According to a plea agreement filed in federal court in Santa Ana, DeAngelo and his employees prepared tax returns that claimed false deductions. For instance, DeAngelo and his preparers asked questions designed to cause the taxpayers to falsely claim that they made charitable contributions amounting to 10 percent of their income, regardless of whether the taxpayer in fact made such contributions. DeAngelo admitted that he believed that limiting charitable contributions to 10 percent would minimize the risk of an IRS audit. DeAngelo and his preparers also caused taxpayers to claim false deductions for "employee business expenses" and "depreciation."
DeAngelo admitted that Western Tax Service charged fees that were substantially higher than the market rate for tax preparation services, fees that Western Tax Service was able to charge because the taxpayers were receiving inflated tax returns from the IRS.
Western Tax Service prepared more than 8,000 tax returns in 2001. The IRS has determined that the tax returns filed by taxpayers who had their returns prepared by DeAngelo's preparers caused the government to lose more than $15 million in unpaid taxes for the 2000 tax year.
DeAngelo also pleaded guilty to a "structuring" charge for using others to engage in a series of cash transactions - each of which was less than $10,000 - in a willful effort to evade federal reporting requirements. Federal law requires domestic banks to report any currency transactions in excess of $10,000. DeAngelo admitted sending his handyman to the bank more than 20 times in less than two months to cash checks for $9,990.
DeAngelo is the sixth defendant in this case to plead guilty to charges arising from the federal government's investigation of Western Tax Service's preparation business. The other defendants who previously pleaded guilty are:
- Joe Gordon Shields, 62, of Newport Beach;
- Jeffrey Russell Wright, 31, of Anaheim;
- Heather Lee Chaffin, 32, of Costa Mesa;
- Erin Cordes Bactat, 34, of Torrance; and
- Douglas Shields, 42, of Orange.
Three other defendants are scheduled to go to trial before Judge Selna on May 23.
Judge Selna is scheduled to sentence DeAngelo on August 14, at which time he faces a maximum possible sentence of 24 years in federal prison.
Acting IRS-Criminal Investigation Division Special Agent-in-Charge Debra D. King said: "Fraudulent tax preparer schemes that use false and inflated deductions and expenses cost the government millions of dollars every year. In addition to shutting down these unscrupulous tax return preparers, IRS-Criminal Investigation will also vigorously investigate and seek prosecution of those involved in these schemes."
The cases against DeAngelo and the preparers of Western Tax Service are the result of an investigation by IRS-Criminal Investigation Division.
Release No. 06-016
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