JUSTICE DEPARTMENT SUES TO HALT ALLEGED BUSINESS TAX SCAMS

Two Southern Californians Allegedly Help Businesses Evade Tax

WASHINGTON, D.C. - The Justice Department announced today that it has sued two Southern Californians—David Clancy Jr. of Hacienda Heights and Jovita Arcaro of Rancho Cucamonga—seeking to block them from promoting two alleged tax scams. Also named as defendants are a number of businesses that Clancy and Arcaro allegedly operate— Ideal Management Ltd.; Ideal Financial Partners Ltd.; Ideal Payroll Plus Ltd.; Ideal Advisors Ltd.; Ideal Payroll Plus II Ltd.; Onestone Ltd.; Bluestone Management Ltd.; and Hillstone Advisors Ltd.

According to the government’s civil injunction complaint, filed in U.S. District Court in Los Angeles, the two promote a scheme that helps businesses evade federal employment tax by disguising a portion of employees’ wages as other payments. Employers are required to pay employment tax on wages paid. The suit alleges that in the second scam the defendants help individual customers use sham trusts to claim income-tax deductions for such non-deductible items as depreciation on their residences and other personal expenses.

The complaint alleges that the defendants have approximately 50 business customers for the payroll-tax scheme, which has purportedly cost the government approximately $1.7 million. The IRS has not yet determined the harm from the alleged sham-trust scheme.

Employment tax evasion and misuse of trusts are both on the IRS’s 2006 list of the Dirty Dozen Tax Scams found at http://www.irs.gov/newsroom/article/0,,id=154293,00.html.

Since 2001, the Justice Department has obtained injunctions against more than 200 federal tax return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website at http://www.usdoj.gov/tax/taxpress2006.htm. More information about the Justice Department’s Tax Division can be found at http://www.usdoj.gov/index.html