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Tax Fraud Blotter: Down the drain

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Very inventive; that’s Sick; sweet charity; and other highlights of recent tax cases.

Washington, D.C.: Texas attorney and former member of the Idaho legislature John O. Green and his client, Texas inventor Thomas Selgas, have been sentenced for conspiracy to defraud the U.S. and for tax evasion.

Selgas was sentenced to 18 months in prison and Green to six months.

Selgas conspired with Green, an attorney licensed to practice in Texas, to obstruct IRS efforts to assess and collect Selgas’s taxes. Selgas and his wife owed approximately $1.1 million in taxes that Selgas refused to pay.

Selgas concealed, with the assistance of Green, substantial funds by using Green’s Interest on Lawyers Trust Account, rather than using financial accounts in Selgas’s name. (An IOLTA is an escrow bank account used by a lawyer to hold money in trust for clients.) From 2007 to 2017, Selgas deposited proceeds from the sale of gold coins and other income into Green’s IOLTA. At the direction of Selgas, Green would then use that escrow account to pay the personal expenses of Selgas and his wife, including their credit card bills.

Selgas and Green also filed a false return on behalf of MyMail Ltd., an intellectual property development and licensing partnership Selgas co-founded, omitting a substantial portion of the partnership’s income.

Selgas was also ordered to serve three years of supervised release and pay some $1,323,776.92 in restitution to the U.S, Green was ordered to serve three years of supervised release and pay some $679,501.50 in restitution to the United States.

New York: Business owner Sergei Denko, of Queens, has been sentenced to 20 months in prison for failing to collect and pay over to the IRS $732,462 in employment taxes.

He owned and operated Denko Mechanical and Independent Mechanical, contracting businesses that specialized in plumbing. From 2010 through 2014, Denko cashed more than $5 million in checks made out to companies he owned and operated to fund an off-the-books cash payroll. He did not report the cash wages to the IRS, filed false employment tax returns and did not pay to the IRS the employment taxes arising from the cash payroll. Denko admitted to causing a total tax loss of $732,462.

He was also ordered to serve a year of supervised release. He has already paid $366,231 in restitution.

Rockford, Illinois: A federal court has permanently enjoined tax preparer Gretchen Alvarez, a.k.a. Gretchen Trejo, from preparing returns for others and from owning, operating or franchising a tax prep business in the future.

The order requires that Alvarez, both individually and doing business as Sick Credit Repair, Tax and Legal Services, send notice of the injunction to multiple individuals and, during the filing season, advertise the injunction where she conducts business.

The civil complaint alleged that she prepared federal income tax returns for area taxpayers that significantly understated tax liabilities by fabricating business losses. It also alleged that Alvarez falsely claimed that some of her customers attended higher education institutions to fraudulently claim education credits.

Alvarez consented to entry of the injunction, which permits the government to monitor compliance.

San Diego: Retired pediatric dentist Dr. Bruce Baker has been sentenced to 15 months in custody for evading more than $644,000 in taxes as part of a decades- long tax evasion with former Chabad of Poway Rabbi Yisroel Goldstein.

Until around 2018, Rabbi Goldstein was the director and head rabbi at Chabad of Poway, a tax-exempt religious organization. Starting as far back as the mid-1990s, Dr. Baker engaged in various ploys with Rabbi Goldstein to cheat on his taxes. On most occasions, Dr. Baker purported to donate money to the Chabad of Poway, got a receipt for a charitable deduction then received back 90 percent of his “donation” from Rabbi Goldstein.

In this fashion, Dr. Baker paid for his child’s private school tuition, his son’s dental school and post-doctoral residency, and nearly three-quarters of a million dollars in renovations and supplies, all using funds he had supposedly donated to the Chabad. Rabbi Goldstein also helped Baker move tens of thousands of dollars in undeclared income to bank accounts in Israel and Switzerland.

Between 2004 and 2018, Dr. Baker donated at least $2.6 million to the Chabad, of which $2.4 million was funneled back to him.

In July 2020, Rabbi Goldstein pleaded guilty to fraud, his plea agreement outlining the scheme with Baker.

Separately, Dr. Baker agreed with another San Diego religious leader to make a sham donation of an ancient Iranian Torah, supposedly valued at $1.2 million, to that leader’s charity. Dr. Baker secured a tax deduction of $1.2 million but in reality, the Torah did not exist and no $1.2 million donation was ever made.

Windham, New Hampshire: Roofing contractor Ronald McPhail has pleaded guilty in connection with failing to report income from his roofing and siding business to the IRS.

McPhail owed more than $700,000 in income taxes to the IRS after he failed to report more than $7.1 million in revenue and approximately $2.43 million in income from his business on his federal returns for tax years 2014 through 2019. To conceal his scheme, McPhail cashed customer checks without first depositing them and withheld information concerning these checks and other business revenues from his tax preparers.

Filing a false tax return provides for up to three years in prison, a year of supervised release and a fine of $250,000. Sentencing is Oct. 7.

Hillsboro, Oregon: Bookkeeper Melodie Ann Eckland has pleaded guilty to wire fraud, aggravated ID theft, filing a false return and willfully failing to collect or pay payroll taxes.

From at least 2011 and until April 2018, Eckland was a bookkeeper for a local adoption and surrogacy agency. She used her position to steal by making unauthorized wire transfers and writing unauthorized checks to herself. She also transferred agency funds in the form of bonuses to her personal bank account.

Eckland maintained two sets of financial records, one for the board of directors and the other showing the true payments she made to herself. Eckland applied for loans from at least five lending agencies on behalf of the adoption agency, using the names of the agency’s owners without their permission and altering financial records to make it appear as though she owned the agency.

Beginning in 2016, Eckland stopped making the agency’s quarterly employment tax payments to the IRS and stopped filing employment tax returns. As a result, the agency owed more than $94,000 in past due employment taxes.

She also stole from a bank account opened on behalf of her deceased brother-in-law’s estate, of which her husband was executor. Eckland forged her husband’s signature on unauthorized estate checks and made unauthorized wire transfers of estate funds to herself. She sent a portion of more than $123,000 stolen from the estate to the adoption agency’s bank account to conceal her theft of agency funds.

She reported none of the embezzled funds on her federal returns for 2013, 2014 and 2017. In 2015 and 2016, she reported more than $550,000 as “other income” but failed to pay the taxes due. Between 2013 and 2017, Eckland failed to report more than $675,000 in income, resulting in a tax loss of more than $345,000.

Eckland’s victims — including the adoption agency and its owners, her brother-in-law’s estate and the IRS — lost a total of more than $1.5 million.

She faces a maximum of 30 years in prison, a $750,000 fine and three years of supervised release. Sentencing is Nov. 8. Eckland has agreed to pay restitution of up to $2.5 million and forfeit more than $1.5 million in stolen proceeds.

Aberdeen, Maryland: A federal jury in the District of Columbia has convicted tax preparer Charese Johnson of preparing three false returns for D.C. residents that claimed more than $1.1 million in fraudulent refunds.

Johnson operated Prodigy Accounting Services and prepared false amended income tax returns in 2014 for three taxpayers. Those returns fraudulently claimed large refunds based on phony refundable credits and withholdings.

Sentencing is Sept. 17, when she faces a maximum of three years in prison on each count.



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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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