Friday, December 14, 2012

A Tiger, Tax And Magic



There is an accounting firm in St. Louis that seems determined to remain highlighted in the professional literature, and not in a good way. In 2008 the federal government sued Zerjav & Company P.C.  (Zerjav) to permanently ban it from the tax business. There are two Zerjav’s in the firm: the father “Frank” and the son “Tiger.” The father is the CPA. Tiger’s co-workers have called him “the magician” because the numbers on tax returns employees prepare are “magically” different after he reviews the return. I have known people like Tiger. One is soon headed to jail for tax fraud.

The IRS must have gotten way ahead of itself with Zerjav, however, requesting but being denied a preliminary injunction. The government then reached a settlement in 2010 rather than prosecuting the case. Each side can claim victory in a settlement, of course, and the terms of this settlement were not especially harsh. Tiger was prohibited from preparing tax returns or giving tax advice for three years. His father was barred from certain conduct, including:

  • claiming business deductions for personal expenses
  • improperly deducting restaurant meals, child care or education expenses
  • claiming wage deductions for children, unless the children actually worked and the wages were reasonable
  • changing accounting records without informing the client

That is, the father was barred from doing things that CPAs are not allowed to do in the first place! The father manufactured deductions virtually out of thin air, but it must not have risen to the level of fraud. As a consequence, the father was permitted to continue his tax practice, although with oversight for a five-year period. 

Tiger could not prepare returns for a few years – but his father could. Really? One doesn’t have to be Houdini to figure an escape from that box.

Well, Tiger is back in the news. 

Last month the government filed an indictment alleging the following:

  • Tiger and his wife filed a fraudulent 2001 return showing taxable income of $43,124,whereas the correct income was $210,268
  • Tiger and his wife filed a fraudulent 2002 return showing taxable income of $14,053,whereas the correct income was $225,449
  • Tiger and his wife filed a fraudulent 2003 return showing taxable income of $23,627,whereas the correct income was $158,984
  • Tiger and his wife filed a fraudulent 2004 return showing taxable income of $149,415,whereas the correct income was $231,804

How did Tiger accomplish this sleight of hand? In each case, the government alleges that he altered QuickBooks to conceal his correct taxable income. The IRS issued its QuickBooks summons in 2011. Zerjav resisted but a District Court determined that Zerjav had to produce its electronic QuickBooks backup file.

Folks, this is fraud, and it will get one into HUGE problems with the IRS. Fraud brings in the Criminal Investigation Division of the IRS. These are the guys/gals who have badges and carry guns, and they have little to nothing to do with regular civil tax matters. If convicted, Tiger faces up to five years imprisonment and a $250,000 fine on each count.



Seems like Tiger’s magic may have run out.



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