Crazy Stories of Tax Cheats

July 16, 2013

Lest you be concerned that the IRS is spending all its time discriminating against various political entities, rest assured that the agency is doing its job by also catching a number of people who are cheating on their taxes. In fact, here’s a round-up of some of the most outrageous cheaters that were prosecuted successfully by the IRS last year.

A dollar bill chained.

Ripping Off their Adopted Child

It’s one thing to steal from an adult, or from a company, but there has to be a special place reserved in Hell for someone who steals from the most vulnerable members of society, the children. And when you are the adult who was given the sacred trust of protecting that child, the IRS penalties and prison time should be the least of your problems.

In Alaska, Lori Wiley-Drones and Edward Drones adopted a child from the foster care system who had been awarded a trust fund of nearly a million dollars, as compensation for abuse suffered under the care of a previous foster family. The Drones were required to keep the trust fund separate from their own expenses, but they raided the account regularly, to pay for remodeling their home, expensive cars, and jewelry. By the time authorities discovered the theft, there was only $15 left in the trust fund.

Not only were the adoptive parents jailed for theft, but the IRS also nailed them for failing to report the trust fund money as income when they filed their taxes. (Remember, even if the money is not earned by any legal means, you still must report and pay taxes on it!)  In January they were jailed and ordered to pay restitution to the child.

Ill-Gotten Gains and all that

Remember, the Feds eventually nailed Al Capone on charges of tax fraud. Last year the IRS managed to catch Archie Cabello, who stole $3 million from an armored truck that he was driving by faking a robbery. Despite its illegal source, Cabello was required to report the money and pay taxes on it, which he failed to do. He pleaded guilty to charges of money laundering and filing a fraudulent tax return, as well as conspiracy to commit bank larceny, and was sentenced to twenty years in prison.

Honest, Mr. IRS Man, I’m Not a Conscious Entity

Over the years, people have tried all sorts of crazy arguments in order to get out of paying taxes. Many claim that they are “sovereign entities” that are not citizens of the United States, and thus the IRS has no jurisdiction over their income.

These arguments have always been denied, but that doesn’t stop people from trying.

From 2005 to 2007, James Stuart neglected to report $900,000 in income, and failed to pay over $200,000 in taxes owed. He made many assertions when confronted by the IRS, but the most interesting twist was his claim that he had “loaned his consciousness to a trust entity”, which did not impress the IRS.

Stuart was sentenced to over three years in prison, and fined a mere $6,000.

Tax Evasion

Seriously Large…

Donus R. Sroufe claimed that he had paid over $2.6 million in taxes from the proceeds of a U.S. Treasury Bond, and filed an income tax return claiming a $1.7 million refund. When the IRS notified him that the bond was fake and that he had not paid any tax on it, he responded by sending them a duplicate copy of the tax return claiming the $1.7 million refund.

In June, Sroufe was sentenced to 51 months in prison and ordered to pay a $75,000 fine for interfering with the administration of revenue laws and filing a false return claiming a refund.

More Fun Reading

There are so many stories from the IRS regarding the crazy ways that people attempt to avoid paying legitimate taxes, it’s hard to choose just a few to highlight.

For more entertainment, check out the IRS website for details of the successful cases that have been prosecuted in fiscal year 2013.

It’s good to know that the fabulous people at the IRS are keeping tabs on these tax-shirkers for the rest of us.