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Social Security and OB3: Fact vs. Fiction

The One Big Beautiful Bill Act (OBBBA, or OB3) has sparked a lot of conversation — and confusion — online. Some social media posts claim that OB3 eliminates taxes on Social Security benefits entirely. Others suggest that it changes the formula for calculating how much of your benefits are taxable.

Let’s set the record straight by separating fact from fiction — and walk through a real-life example to show exactly how the new $6,000 senior deduction works.

Fiction #1: OB3 stops Social Security from being taxed and/or reduces the income used to calculate the tax

The truth: OB3 did not change the formula for determining whether Social Security is taxable. Your benefits are still taxed based on provisional income, which equals:

Other income (pensions, IRA/401k withdrawals, dividends, capital gains, etc.)
+ tax-exempt interest
+ ½ of your Social Security benefits.
= Provisional Income

If your provisional income is low, you may owe little or no tax on your benefits. If your other income is higher, some to most of your Social Security will still be taxable. Up to 85% of your Social Security is taxable.

The new $6,000 senior deduction (or $12,000 if married filing jointly and both are 65+) is applied after your adjusted gross income (AGI) is calculated. It does not reduce provisional income, and it does not change the taxable portion of your Social Security benefits.

Example: Before vs. After OB3

Scenario:

    • Pension income: $50,000
    • Social Security benefits: $20,000
    • Filing Status: Single, Age 65
    • No other income

Step 1 – Provisional Income:
50,000 (pension) + $0 (tax-exempt interest) + $10,000 (½ of SS) = $60,000

Step 2 – Taxable Social Security:
With $60,000 provisional income, the formula results in 85% of Social Security taxable = $17,000

Step 3 – Adjusted Gross Income (AGI):
$50,000 pension + $17,000 taxable SS = $67,000

Step 4 – Taxes:

Before OB3:

Standard Deduction (age 65 single): $17,750

Taxable income: $67,000-$17,750 = $49,250

Tax: $5,749 (marginal rate 22%)

After OB3:

Standard deduction (age 65 single): $17,750

Senior deduction: $6,000

Taxable income: $67,000 – $17,750 – $6,000 = $43,250

Tax: $4,951 (marginal rate 12%)

Tax Savings: in this example, your taxable income would be reduced by $6,000, and taxes by $798.

 

 

Fiction #2: Statements from the Social Security Administration prove benefits are now tax-free

The truth:

Shortly after OB3 passed, the Social Security Administration sent out an email that included several incorrect or possibly misleading statements about the law. Here’s what was said — and the reality:

Claim: “The bill ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits…”
Fact: Possibly true for 2025 depending on income levels, but misleading. It’s not because Social Security benefits are now tax-free — it’s because many lower-income seniors will have their taxable income reduced to zero due to the new deduction.

Claim: “The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries…”
Fact: False. The calculation for taxing benefits hasn’t changed, and benefits can still be taxable depending on your income.

Claim: “Additionally, it provides an enhanced deduction for taxpayers aged 65 and older…”
Fact: True — there is a $6,000 deduction ($12,000 for joint filers if both are 65+), but it’s not in addition to another related Social Security tax break or exemption. It’s simply a new deduction with its own eligibility and phase-out rules.

Fiction #3: Everyone who receives Social Security will benefit from the new deduction

The truth:

  • Eligibility: You must be 65 or older at the end of the tax year.
  • Income limits: Deduction is available in full if your Modified Adjusted Gross Income (MAGI) is $75,000 or less for single filers or $150,000 or less for married filing jointly.
  • Phase-out: Starts above these thresholds, reducing the deduction by $100 for every $1,000 over the limit. It’s fully phased out at $135,000 for singles and $210,000 for joint filers.

For many lower- and middle-income seniors, the deduction could completely eliminate their federal tax liability. Higher-income seniors may see only a partial benefit or none at all.

Bottom Line

OB3’s $6,000 senior deduction is real — but it’s not a Social Security tax exemption, and it doesn’t change how Social Security benefits are taxed.

It’s a midline deduction for those age 65+ under specific income limits, and it can apply even if you don’t receive Social Security yet. For many, it could mean owing no federal income tax in 2025, but for others, the benefit may be reduced or phased out entirely.

 

This post is for general information only and isn’t tax, legal, or accounting advice. Tax rules change often, and what’s here may not apply to your specific situation. Please consult a qualified tax professional before acting on any information. Reading this does not create a client–practitioner relationship.

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Major Federal Energy Tax Credits Are Ending Soon — Here’s What You Need to Know

The recently passed One Big Beautiful Bill Act (OBBBA or OB3) makes sweeping changes to federal energy-related tax incentives for individuals. Many of the credits for home energy efficiency upgrades, clean energy systems, and electric vehicles are being phased out much sooner than expected. In some cases, the deadline to qualify is less than a year away.

If you’ve been thinking about installing solar panels, upgrading your home’s energy efficiency, or purchasing an electric vehicle, now may be the time to act. Here’s a breakdown of the changes and the important dates to keep in mind.

  1. Energy Efficient Home Improvement Credit
  • Ends: For property placed in service after December 31, 2025.
  • What it covered: A credit of up to 30% (maximum $3,200 when two different credits are combined) of the cost of qualified improvements such as insulation, energy-efficient windows and doors, and certain heating/cooling systems—subject to annual and per-item limits.
  1. Residential Clean Energy Credit
  • Ends: For expenditures made after December 31, 2025.
  • What it covered: A credit of up to 30% for installing solar panels, solar water heaters, geothermal systems, small wind turbines, fuel cells, and battery storage at your home.
  1. Clean Vehicle Credits
  • New EVs: Ends for vehicles acquired after September 30, 2025.
  • Used EVs: Ends for vehicles acquired after September 30, 2025.
  • What they covered: Up to $7,500 for new EVs and up to $4,000 for qualifying used EVs.
  1. Alternative Fuel Vehicle Refueling Property Credit
  • Ends: For EV charging equipment placed in service after June 30, 2026.
  • What it covered: Up to $1,000 for installing a home EV charger.

 


Why It Matters

These credits can save you thousands of dollars—but only if you act before the deadlines. Whether you’re planning to go electric for the first time, upgrade your business fleet, or install a charger at home, waiting too long could mean missing out on some serious tax savings.

What You Can Do Now

If any of this is on your to-do list for the next year or two, we recommend moving sooner rather than later. With the credits set to expire in late 2025 and mid-2026, and demand already high for EVs and charging equipment, you’ll want to give yourself plenty of time to make your purchase and have everything installed.

Need help figuring out the tax side of things? That’s what we’re here for.

 

This post is for general information only and isn’t tax, legal, or accounting advice. Tax rules change often, and what’s here may not apply to your specific situation. Please consult a qualified tax professional before acting on any information. Reading this does not create a client–practitioner relationship.

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Boulder CO, Accounting Firm
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You Survived Your Tax Return: What’s Next?

How was filing your tax return this year? Now that the joy of tax season has come to a close, it’s the perfect time to start thinking about next year’s filing. Let’s face it, taxes can be a bit of a headache, but with some proactive steps, we can make the process a whole lot smoother, and perhaps achieve a more favorable outcome.

Here are a few actions you can take now to prepare for next year’s tax season:

Organize Your Documents: Start keeping track of receipts, mileage, charitable donations, and statements throughout the year. Making a list of the documents and information that your tax professional needed this year will help save you from scrambling next year.

Review Your Withholding: Not having enough withheld from your paycheck for taxes is the most common reason taxpayers owe when filing their returns. Consider adjusting your withholding or estimated tax payments if you continually owe or your financial situation has changed. This can help prevent any surprises when it’s time to file.

Investment Planning: Many tax planning strategies involve your investments. Retirement accounts, brokerage accounts, crypto wallets, real estate, and other investments offer opportunities to minimize your tax bill while helping you reach your goals.  Now is the time to think about your goals and investigate any tax advantages or consequences.

Additionally, consider consulting with a tax professional to ensure you’re taking advantage of all available credits and deductions. Taking steps now will set you up for a less stressful tax season next year. Here’s to smooth sailing and bigger refunds in the future!

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Boulder CO, Accounting Firm
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Where’s My Refund?

So you’ve filed your tax return with the IRS and are looking forward to getting your refund. But day after day, it doesn’t arrive. Why?

There are several possible reasons why it hasn’t hit your bank account. Most require no further action from you; it’s simply a matter of waiting. The most common causes of a delayed refund are:

Return Not Processed – The IRS says it usually takes 21 days to process an electronically filed return and 6 weeks for paper returns. But ‘usual’ doesn’t mean ‘always.’ Processing could be held up for several reasons, or for no reason at all.

Identity Verification – The IRS is working to cut down on fraudulent tax returns. Occasionally, they stop processing a return and send you a letter asking you to verify your identity. You do this by calling the IRS and confirming your identity by providing additional information. In rare instances, you’ll need to go to the closest IRS office and confirm your identity in person. Receiving a letter does not mean there is a problem with your return or that someone has used your information fraudulently. However, the IRS will not continue processing your return until the identity verification process has been completed.

Inaccurate or Incomplete Information – A tax return is initially processed through a computer system. If the information on the return doesn’t match the system, it may be flagged for review by a human. This can add days, weeks, or even months to the processing of your return. Anytime you add a human to the process, it’s going to slow things down.

Tax Credits – Certain tax credits are prone to being claimed fraudulently. Examples include the Earned Income Credit (EIC), Additional Child Tax Credit (ACTC), and the Fuel Tax Credit. If one of these credits is present on the return, the return may be flagged for human review.

Refund Sent to the Wrong Bank – Direct Deposit is the fastest way to receive your refund. However, if your account number is entered incorrectly, your refund may be deposited into the wrong account.

Amended Return – Filing an amended return to add or correct information on the return can cause delays. The processing frequently takes 20 weeks.

Refund Offset to Pay a Debt – Your refund can be offset to pay certain debts, such as an unpaid balance from a previous tax year, unpaid child support, unpaid state taxes, or delinquent federal loans. If this happens, you’ll receive a letter from the Bureau of Fiscal Service explaining how much of your refund was taken and why.

 

To check the status of your refund, you can use the IRS’s Where’s My Refund . You can also sign into your IRS account for further information, including any notices and letters that have been sent to you.

Most of the time, your return and refund will be processed without you needing to do anything except wait. Occasionally, there is an issue that needs to be addressed. If you believe that the delay in your refund falls into this category, your tax professional, or an Enrolled Agent (EA) or CPA that specializes in tax resolution, may be able to help you resolve the matter.”

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Accounting Firm, Boulder CO
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Unraveling Tax Credits: A Guide to Refundable and Non-Refundable Credits

The details of refundable and non-refundable tax credits can be confusing. But the difference between the two matters; they can have a direct on how much you owe or receive as a refund at tax time.

 

Tax Deductions vs Tax Credits:

Tax deductions reduce taxable income, lowering the amount subject to taxation. They include expenses like mortgage interest or charitable contributions. For example, if you have a $100 deduction, and you are in the 10% tax bracket, the deduction will save you $10.

Tax credits, on the other hand, directly reduce the amount of taxes owed. They are a dollar-for-dollar reduction in the actual tax liability and can be more valuable. While deductions influence the taxable income, credits impact the final tax bill, making them a more impactful way to lower the overall tax burden. That same $100, if a tax credit instead of a tax deduction, could save you $100.

 

Non-Refundable Tax Credits:

Non-refundable tax credits can help you lower your tax bill, but they won’t give you money back if they’re more than what you owe. They’re useful for things like education or childcare costs, making your tax situation more manageable. Some non-refundable tax credits for the 2023 tax year include:

  • Child and dependent care credit – allows a credit of up to 35% of qualifying childcare costs to help parents be able to work or attend school. The credit is calculated on up to $3,000 of expenses for one qualifying child, and $6,000 for two or more children.

 

  • Electric vehicle tax credit – Purchasing a qualifying vehicle could get you up to $7,500 for a new electric vehicle, or up to $4,000 for buying a used one.

 

  • Residential clean energy tax credit – It is commonly known as the solar credit and can get you a credit of up to 30% of the cost of installing systems that use solar energy, such as solar panels, solar water heaters, and battery storage systems.

 

  • Energy Efficient Home Improvement Credit – Available on the purchase of energy-saving items, this credit could save you up to $3,200 in taxes. Qualifying items include windows, doors, and heat pumps.

 

Refundable Tax Credits:

A refundable tax credit can give you a refund if it’s more than what you owe in taxes. Unlike non-refundable credits that just reduce your tax bill to zero, refundable credits can put money back in your pocket, even if you don’t owe any taxes. They’re especially helpful for low to moderate-income taxpayers.

  • Earned income credit (EITC) – This credit aims to help lower and middle-income households remain in, or re-enter, the workforce. In tax year 2023, it provides a refundable credit between $600 and $7,430 to qualifying households. The amount is based on tax filing status, household income level, and (usually) the number of qualifying children. You do not have to have children to qualify, but having children in the household often leads to a higher credit amount.

Partly Refundable Tax Credits:

Partly refundable tax credits blend features of refundable and non-refundable credits. While they lower tax liability similar to non-refundable credits, they also have a limited refundable part. If the credit exceeds owed taxes, only a portion may be refunded, with the rest non-refundable. This category offers a balanced mix of immediate relief and potential refunds, providing taxpayers with a flexible approach to tax benefits. Notable partly refundable credits include:

  • Child tax credit – up to $2,000 per qualifying child, with $1,600 potentially being refundable by using the additional child tax credit.

 

  • American Opportunity Credit (AOTC) – this credit can be up to $2,500 for qualifying expenses for the first four years of college. If your tax liability is zero, up to $1,000 can be refundable.

 

Non-refundable, refundable, and partly refundable tax credits can be important tools used to lower your tax liability and could potentially increase your tax refund. The credits mentioned above are just a few of the available credits and the explanation is greatly simplified. Please consult with your tax professional to determine whether you qualify to use the credits, and how they can be used to your advantage.

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Accounting Firm, Boulder CO
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Innocent Spouse vs. Injured Spouse: Navigating Tax Relief Safeguards

The Innocent Spouse Relief and Injured Spouse provisions are separate mechanisms within the U.S. tax code, each aimed at helping spouses facing tax challenges related to the other spouse.

Innocent Spouse Relief

Purpose: Protects individuals unfairly burdened by a partner’s errors on a joint tax return. Situations that may qualify are underreporting of income, inaccurate deductions, and fraudulent activity.

Eligibility: Requires proving the innocent spouse’s lack of knowledge regarding inaccuracies and the inequity of holding them accountable. Another factor that is considered is whether the innocent spouse benefitted from the activity.

Injured Spouse

Purpose: Safeguards a spouse’s share of a joint tax refund from potential loss due to the other spouse’s outstanding debts. Examples of outstanding debts include unpaid child support, defaulted student loans, and outstanding spousal support (alimony).

Eligibility: The affected spouse must have reported income or made payments on the joint return and is not liable for the specific debts in question.

Understanding these distinctions is crucial for couples navigating tax challenges. Innocent Spouse Relief protects those unfairly burdened by their partner’s tax errors, while Injured Spouse safeguards a spouse’s share of a tax refund in the presence of the other spouse’s outstanding debts. Each provision addresses unique circumstances, offering financial protection in different scenarios. Being aware of these options empowers individuals to make informed decisions and seek the appropriate relief based on their specific situation.

If you believe that either of these options may apply to your situation, discuss them with your tax professional, and retain the services of an Enrolled Agent, CPA, or Tax Attorney if needed.

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Accounting Firm, Boulder CO
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Unveiling IRS Transcripts: A Crucial Key for Taxpayers

Have you ever needed to verify information related to your taxes and tried to call the IRS? It can be a frustrating experience. Luckily, there are official IRS documents, transcripts, you can request that provide taxpayers with a comprehensive overview of their tax-related history. But why do these transcripts matter so much?

First and foremost, IRS transcripts serve as a valuable tool for verifying and cross-referencing financial information. Whether you’re applying for a loan, undergoing a financial review, or addressing identity theft concerns, having access to your tax transcripts ensures the accuracy of your reported income and deductions.

Taxpayers can also use IRS transcripts to monitor any changes made to their tax returns after the initial filing. This level of transparency empowers individuals to stay informed about adjustments and corrections, helping to prevent potential discrepancies or misunderstandings with tax authorities.

Furthermore, in the unfortunate event of an audit, IRS transcripts become indispensable. These documents provide a detailed record of the information that the IRS has, acting as a reliable reference point to address any inquiries raised by tax authorities.

There are four main transcripts that taxpayers can request:

Tax Return Transcript: This transcript provides a summary of your originally filed tax return, including key details such as your filing status, income, and deductions.

Tax Account Transcript: Offering a more detailed view, this transcript provides information on any adjustments made after the filing of your tax return. It includes changes made by you, the IRS, or even by third parties, offering transparency in your tax history.

Record of Account Transcript: Combining the features of both the Tax Return Transcript and the Tax Account Transcript, this comprehensive document displays a complete overview of your tax account, incorporating your tax return information and any subsequent adjustments.

Wage and Income Transcript: This specific transcript provides a detailed breakdown of your reported income, including W-2s, 1099s, and other income sources. It is particularly useful for verifying the accuracy of income reported on your tax return.

In essence, IRS transcripts are not just bureaucratic paperwork; they are a lifeline for taxpayers navigating the intricate landscape of tax obligations. By recognizing the importance of these transcripts, individuals can take proactive steps to ensure financial accuracy, compliance, and peace of mind in their fiscal matters.

At Treu Accounting, we understand that the language of tax transcripts can be complex, and deciphering the information within them may pose a challenge. Our experts not only facilitate the seamless retrieval of your transcripts but also go the extra mile to ensure that you comprehend the data contained within them. We believe that knowledge is power, and by utilizing our services, you not only gain access to your tax transcripts efficiently but also gain a clearer understanding of their implications.

 

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Accounting Firm, Boulder CO
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Tax Deductions for Influencers and Content Creators

As a self-employed influencer, taxes can significantly impact your income. You’ve probably found yourself wondering if there are ways to reduce your tax bill legally.

Thankfully, the IRS recognizes that some expenses are necessary to run your business and allows you to deduct them from your business income before it is taxed. This in turn lowers your income, resulting in less taxes.

 

What Expenses Qualify as Tax Deductible?

There are a number of business expense categories that may be deductible. Here are a few that are commonly used by influencers:

 

Clothing and Beauty Products

While essential for crafting the desired image in content creation, not all clothing and beauty products qualify for deduction.

Examples of possibly deductible expenses:

  • Fitness clothing for workout videos
  • Lingerie – deductible for models or OnlyFans content creators
  • Beauty products, including hair products and tools that are used during the video, and stage makeup not suited for everyday use.
  • Props – wigs and items used regularly to differentiate characters in your content.

Examples of items that would not be deductible:

  • Clothing that could reasonably be worn outside of work. The rule isn’t if you would wear it, but could you wear it.
  • Items that aren’t visible in the content.
  • Personal care or beauty products not specifically used in the content – if you’re not actively using it in the content, it’s not deductible. If you’re not having your nails done in the video, your manicure is not deductible

 

Advertising and Marketing

Business expenses related to marketing and advertising are potentially deductible, such as ads (including sponsored posts and Facebook ads), branded clothing, website expenses, and giveaway prizes.

 

Home Office Deduction

For influencers working from home, a home office deduction is available. This deduction allows you to write off a percentage of your rent, mortgage interest, property taxes, qualified mortgage insurance premiums, and home insurance as business expenses. To qualify, your home office must be your primary place of business, and you can only claim the area used regularly and exclusively for business, as defined by the IRS.

 

Travel Expenses

Deductible travel expenses include flights, hotels, transportation, and meals, provided they are business-related and necessitate an overnight stay. It’s crucial to allocate expenses only for the business portion of a trip. Additionally, mileage for business-related travel, such as meetings with clients or picking up supplies, can be deducted if you maintain a home office, but meticulous tracking of miles is necessary.

 

Business-Related Education

Investing in courses to enhance your skills as an influencer can help your business succeed. Classes in topics such as social media marketing, photography classes, or business management may be deductible, along with course materials and associated fees.

 

Final Thoughts

Creating content can be expensive. Being a self-employed influencer requires proactive efforts to claim every eligible deduction and tax credit, thereby reducing taxable income.

Tax law is constantly changing, and it’s important to stay up to date on the latest rules in order to take advantage of every opportunity and avoid any missteps. Working with a qualified tax professional can be a good business decision (and is a deductible expense).

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Accounting Firm, Boulder CO
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Failure-to-Pay Penalty Relief for Tax Years 2020 and 2021

When it comes to taxes, several penalties can be assessed if you don’t do things as required by the IRS. One of these is the Failure-to-Pay penalty. It kicks in if you don’t pay what you owe by the original due date on your tax return. The amount of the penalty depends on how much you owe and how late you are.

In February 2022, the IRS hit a pause on sending automated reminders for overdue tax payments. These reminders are normally sent after the initial notice of taxes due. Even though you weren’t getting these reminders because of the pause, the penalties and interest kept piling up if you didn’t pay the balance in full after the initial notice.

Next year, the IRS is hitting play again on sending reminder notices for tax years 2020 and 2021. The increase in penalties and balance due might catch you by surprise, especially if this is the first notice you’ve seen in over a year.

But on December 19th, 2023, the IRS announced some good news! They’re offering penalty relief for around 4.7 million taxpayers dealing with back tax issues, specifically those who weren’t sent reminders. The IRS is waiving the Failure-to-Pay penalties for eligible taxpayers. This is a one-time deal and not everyone qualifies. To get the relief, you must meet a few conditions:

  • You’re an individual, business, trust, estate, or tax-exempt organization.
  • You filed forms 1040, 1120, 1041, or 990-T income tax returns.
  • Your return was for tax years 2020 or 2021.
  • The tax you owe is less than $100,000 (that’s the total tax on your return).
  • You were in the IRS collection notice process, -or-
  • You received an initial balance due notice between Feb 5, 2022, and Dec 7, 2023.

According to the IRS, you don’t have to do anything to get this relief; it’s automatic. The IRS has adjusted individual accounts, and they’ll be adjusting business accounts in late December to early January. Trusts, estates, and tax-exempt organizations are up next in late February and early March 2024.

If you’ve already paid your balance in full, and the relief leads to a refund or credit, the IRS will send you a refund or apply the credit to another outstanding balance. Refunds are scheduled to be sent from December 2023 through January 2024.

However, even though the adjustment is automatic, it wouldn’t hurt to check your account if you believe you are eligible. You can see the adjustment on the next reminder you receive, or you can view your transcript through your account at irs.gov. If you have questions on penalty relief, individuals can contact the IRS after March 31, 2024.

This relief only covers the Failure-to-Pay penalty. If you have other penalties on your account, such as failure-to-file, accuracy-related, or underpayment penalties, they’re not going away. And the interest stays put as well.

Unfortunately, all good things must come to an end. If you were enjoying the break from failure-to-pay penalties, they’re making a comeback on April 1, 2024, for accounts that still owe money by then.

This penalty relief will help millions of taxpayers catch up on the amounts they owe the IRS, but for most people it will not erase their entire balance. If you’d like help with assessing your options or want to verify that the adjustment was done correctly, contact your tax professional.

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Accounting Firm, Boulder CO
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IRS Fraud Round-up

Admit it, you’re addicted to true crime shows. Well, the IRS has you covered with their Criminal Investigation (CI) unit. Each month they release a report of the cases that have been closed. Included in December’s round up are convictions and prison sentences for the following taxpayers and tax preparers. Enjoy.

 

Riverview, FL – Tax Preparer Fraud

Ashley Flournoy of Riverview was sentenced to two years in federal prison for her involvement in a conspiracy to commit tax fraud and aid in the preparation of false income tax return documents. The court had previously sentenced co-defendants Jamica Nelms, Capriesha Cummings, and Camille Harper, all from St. Petersburg, to varying prison terms for the same charges. From January 2017 to April 2019, the defendants, working as income tax return preparers, conspired to defraud the U.S. by submitting false income tax returns to the IRS. They documented fictitious businesses on Schedule C forms, allowing clients to maximize Earned Income Credit claims and increase their tax refunds. The group also fraudulently reported fuel taxes and education expenses to further increase tax refunds for their clients. The defendants collectively owe $1,006,881 in restitution to the IRS and are prohibited from preparing tax returns for third parties in the future. Tara K. Reed, IRS-CI Acting Special Agent in Charge, stressed the importance of vigilance in choosing tax preparers to prevent fraud and protect American taxpayers.

 

Orchard Park, NY – Trust Tax Fraud (employment taxes)

Julie Dotton, of Orchard Park, NY, who was convicted of willful failure to truthfully account for and pay employment taxes, was sentenced to four years’ probation, and ordered to perform 100 hours of community service. Dotton was also ordered to pay restitution of $1,585,538 to the IRS and $117,277 to the SBA.

Dotton was the President, CEO, and majority shareholder of Applied Sciences Group (ASG), a technology business, and was also the founding partner of the partnership KRP Holdings (KRP). By law, businesses must account for income tax, social security tax, and Medicare tax in the wages of individual employees, equal to a percentage of the wages earned by the employee. These taxes are commonly referred to as “trust fund taxes” because employers hold these taxes in trust for the government. For all of 2018 and three quarters of 2019, Dotton failed to submit payment of the trust fund taxes to the IRS on behalf of the employees of ASG and KRP, resulting in a loss of approximately $1,100,837 to IRS. Dotton also admitted that she obtained a Paycheck Protection Program (PPP) loan from the federal government in the amount of $117,277, to which she was not entitled.”

 

Greenbelt, MD – Tax Preparer Fraud

Ronald Eugene Watson, also known as Sabir Muhammad of Brandywine, Maryland, has been sentenced to 27 months in federal prison, followed by one year of supervised release, for 23 counts of aiding and assisting in the preparation of false tax returns. The sentence also includes an order for Watson to pay restitution of $268,634.35. Watson’s conviction, following an eight-day trial on March 9, 2023, revealed that he operated SW Accounting Associates (“SWAA”) in Largo, Maryland, where he prepared and electronically filed fraudulent Forms 1040, along with related Schedules A and C, for clients from at least 2015 to 2017.

Evidence presented during the trial demonstrated Watson’s inclusion of inflated and fictitious tax deductions, as well as false business profits and losses, resulting in unjustly larger tax refunds for clients. Witness testimonies revealed that Watson adjusted his preparation fees based on the requested refund amount, typically ranging from $500 to $1,500. The tax loss to the United States amounted to $325,330. Furthermore, Watson failed to file his own tax returns for two years and willfully submitted false tax returns in three other years, which is a violation of the IRS requirements to be a tax preparer.

Denver, CO – Covid Program Fraud

Chandler Simbeck has been sentenced to 37 months in prison, followed by three years of supervised release, for conspiring to defraud the United States, alongside an order to pay $151,000 in restitution. The case involved a conspiracy between Simbeck and Russell Foreman from March 2020 to October 2020, wherein they submitted fraudulent loan applications to the Small Business Administration (SBA).

Simbeck and Foreman established a limited liability company, Fusion Group, in June 2020, and applied for an Economic Injury Disaster Loan (EIDL) from the SBA. The application contained false information about Fusion Group’s establishment date, revenues, and costs of goods sold. Despite Fusion Group never engaging in any business activities, the SBA approved the loan, depositing $149,900 into Simbeck’s account. Subsequently, Simbeck withdrew funds, including checks and wire transfers, benefiting both himself and Foreman.

Simbeck also obtained a $1,000 EIDL grant through a misleading application in his name, and he attempted to secure Paycheck Protection Program (PPP) loans for two other businesses through applications containing false information. The fraudulent activities took advantage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, designed to provide financial assistance during the COVID-19 pandemic.

 

It’s worth noting that the oldest case dates back to a 2013 fraud incident, and in another case the CI pursued a taxpayer for over $151,000. Prosecuting tax fraud has no statute of limitations, regardless of the amount involved. As tax season approaches, it’s a good idea to remember the importance of sticking to the rules, and staying compliant with tax regulations. Unless orange is your color.

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