Some Other Tax Related Scams You Need to Know About

Americans with Disabilities Act (ADA) Scam

The ADA, passed in 1990, prohibits discrimination against persons with disabilities.  One part of the ADA requires existing business facilities to be made more accessible where it is readily achievable, or can be done without much difficulty or expense. Whether a business must remove barriers to access depends on the size and resources of the business as well as the cost.

We have first hand knowledge of this scam as Steve Kassel was approached by promoters from Denver pitching this scam several years ago. In fact, we were some of the very first people in the country to learn of this scam.

The scam involves selling bogus “websites” designed to help customers claim improper tax deductions and credits. The “websites” are allegedly designed to help customers claim to have a business with a website, and then improperly claim tax deductions and credits for supposedly “modifying” the website-purportedly to comply with the Americans with Disabilities Act (ADA). The scam promoters charge customers $2,495 to make sham website modifications, but also adds a sham $7,980 promissory note as part of the ostensible purchase price to artificially raise the total cost to $10,475. The scam promoters tells prospective purchasers that they can use that inflated cost to claim a $5,000 ADA income-tax credit and a $5,475 business tax deduction, thereby reducing their taxes by more than double the $2,495 they paid for the “modifications.”

National Audit Defense Network (NADN)

National Audit Defense Network Founder Found Dead

National Audit Defense Network Permanently Shut Down

Federal Trade Commission Press Release on NADN

Troubleshooter.com Column on Continuing Problems with NADN

NADN Files Bankruptcy

FEDERAL BANKRUPTCY COURT PERMANENTLY BARS TELEMARKETING FIRM “NATIONAL AUDIT DEFENSE NETWORK” FROM SELLING TAX SCAMS AND PREPARING TAX RETURNS

Justice Department To Obtain NADN’s Claimed 640,000-Person Customer List;
NADN’s Tax Scams Have Allegedly Cost U.S. Treasury $324 Million

WASHINGTON, D.C. – The Department of Justice announced today that on June 9 a federal bankruptcy court in Las Vegas entered a permanent injunction against Las Vegas-based telemarketing firm National Audit Defense Network, known as NADN. The injunction order, submitted jointly by NADN’s bankruptcy trustee and by the Justice Department, prohibits NADN from selling abusive tax schemes and from preparing federal income tax returns. The order also gives the Justice Department “full and complete access” to NADN’s records, including customer information.

NADN’s earlier court papers acknowledged that the company’s database had more than 640,000 customers. Court papers filed by the United States estimate that customers who followed NADN’s tax advice have underpaid $324 million in federal income taxes over the past three years alone. NADN ceased operating on May 27, 2004, and filed a petition to liquidate its operations under Chapter 7 of the bankruptcy code.

The Justice Department, in cooperation with the bankruptcy trustee, William Leonard, Jr., and the Internal Revenue Service, intends to contact NADN’s customers who purchased NADN’s tax schemes or to whom NADN may have given false tax advice. This communication will inform the customers of the entry of the permanent injunction and provide information about amending tax returns containing erroneous NADN-initiated credits and deductions.

“Shutting down a tax scam promotion prevents further harm to the tax system. But it is only step one,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “In the next steps, the Department of Justice and the Internal Revenue Service will seek to repair the harm by following the scam to its users and seeking to recover the losses it caused to the federal treasury.”

The Justice Department continues to seek permanent injunctions against ten other defendants in this suit: Weston Coolidge, NADN’s former president; Al Rodrigues, NADN’s former general manager; Robert Bennington, NADN’s former owner; Adam Mangabang, a former NADN sales manager; Christine Reid, a former NADN employee; Mary Orie, NADN’s former return-preparation department manager; ALR, Inc., operating as Success Matrix Group; Lee Panelli; Ric Klingenberg; and Jeff Klingenberg. The other six defendants named in the lawsuit, Oryan Management and Financial Services, Robert Goetsch, Daniel Porter, Joseph Prokop, Michelle Herandez, and ADA Adventure, Inc., agreed to a permanent injunction, which was entered by a Nevada federal court on May 7, 2004. This injunction and a related press release are available at https://www.usdoj.gov/tax/04_tax_309.htm. 

A copy of the Justice Department’s complaint, motion for temporary restraining order, and reply brief are posted at https://www.usdoj.gov/tax/04_tax_233.htm. 

Assistant Attorney General O’Connor thanked Department of Justice Tax Division trial attorneys Evan J. Davis and Phyllis Jo Gervasio, who represent the United States in this case. She also thanked the agents of the IRS’s Small Business/Self-Employed Division who investigated it.

This case is part of the Justice Department’s strategy to stop the promotion and use of fraudulent tax schemes. More information about the Justice Department’s Tax Division is available at http://www.usdoj.gov/tax/index.html. 

Alexander Kleyman, CPA, Forest Hills, NY

Two years ago, Alexander Kleyman, a CPA from Forest Hills, NY was arrested & charged with operating a website that elicited personal information and charged an $11.95 fee for an online Social Security Card application while misleading the public into believing the site was run by employees or agents of SSA. Here is the link to the official report from the Social Security Administration Office of the Inspector General:

www.ssa.gov/oig/executive_operations/news06282002.htm

Kleyman has now jumped into the tax arena offering “services” for which there is no need for anyone to pay anything. In PenaltyAbatement.com, for a fee of $9.99, he will mail a penalty abatement request to the IRS. You can do this yourself at no fee and Kleyman offers no service which is worth even a penny. While there is no doubt that he will charge your credit card, anything else is dubious. And, the site is NOT secure so your SSN and credit card numbers are NOT protected.

In FederalNumber.com, the fee is the same. He claims to be able to get a Federal tax identification number for your business in 10 minutes. You can get it yourself online at IRS.gov or by phone, fax and mail for absolutely no charge whatsoever.