Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

Tax Refund and Mortgage Fraud Scheme Uncovered in New Jersey

The IRS’s Top Ten Identity Theft Prosecutions of 2015


Julio C. Concepcion, age 50, his two sons, and two others


New Jersey

What they did

Stolen identity refund fraud and mortgage fraud conspiracy using the identities of Puerto Rico residents, among others.

How they did it

From around October 2009 through May 2013, Julio C. Concepcion, his sons Angel L. Concepcion-Vasquez and Julio Concepcion-Vasquez, Jose Zapata and Romy Quezada, used the social security numbers and other personal identification information of people living in Puerto Rico to create false W-2s, file false tax returns, and collect bogus tax refunds. Puerto Rican social security numbers are a prime target for identity theft and tax refund fraud because its residents are not required to file tax returns or pay U.S. income tax unless they work for a U.S. company or for the federal government.

Concepcion and his co-conspirators deposited more than 350 fraudulently-obtained tax refund checks totaling an estimated $2.5 million into bank accounts held by 10 shell companies that they controlled. Between $75,000 and $725,000 was deposited into each company account. Funds were also transferred to their families and friends, who were provided with fake IDs, including social security cards and driver’s licenses, so that they could open accounts to deposit the fraudulently-obtained checks. Some of the fake checks were mailed to a New York City address which had at various times served as a homeless shelter and youth hostel. Other checks were mailed to a housing development in Fort Myers, Florida.

From January 2008 through March 2010, Concepcion and his co-conspirators also ran a mortgage fraud scam. They enabled a number of people to commit mortgage fraud by helping them purchase homes and obtain mortgages through false documents and misrepresentations. The Federal Housing Administration (which insured some of the mortgages) and other parties (that approved the mortgages) lost over $2.5 million as a result of the scheme.

Concepcion was caught following a detailed investigation, which uncovered: (1) many cases of two or more W-2 forms having been filed in a single year for the same individual, with workplaces and home addresses hundreds or thousands of miles apart; (2) multiple treasury checks issued to the same address or neighborhood, to names that did not match those of the building’s or area’s residents; (3) multiple checks deposited into numerous bank accounts, all of which were opened by companies owned by the same person; and (4) surveillance cameras showing Concepcion and his accomplices depositing multiple tax refund checks totaling thousands of dollars, and withdrawing the funds within a short time frame.

Note that Concepcion had no prior criminal record and promptly admitted to his guilt following his arrest. He issued a public apology prior to sentencing, stating "I apologize to the United States and to all of my family."

The charges

The sentences

On June 25, 2015, the conspirators were sentenced as follows:

  • Concepcion was sentenced to 7 years imprisonment and 3 years of supervised release. He was also ordered to pay $5,643,695 in restitution.
  • Concepcion’s sons Angel and Julio were each sentenced to 16 months in prison.
  • Co-conspirator Jose Zapata was sentenced to three years’ probation.
  • Romy Quezada was sentenced to two years’ probation.

Criminal Tax Defense Attorneys

If you are under investigation by the federal government for a tax crime, contact the experienced criminal tax defense attorneys at Moskowitz, LLP today.

October 2016 Tax Newsletter

Tax Calendar

October 17
Deadline for filing your 2015 individual tax return if you requested an automatic six-month extension from the April deadline.

October 17

If you converted a regular IRA to a Roth IRA in 2015 and now want to switch back to a regular IRA, this is the deadline to do so without penalty.

October 17

This is the last day to fund your Keogh or SEP or other retirement plans if you requested an extension of time to file your income tax return.

Plan Ahead for Year-End Business Tax Savings

As the end of the year approaches, turn your attention to ways you can reduce your 2016 tax liability. Here are some suggestions:

  1. Business equipment. Take advantage of end-of-year sales for business equipment. In 2016, the maximum Section 179 deduction of $500,000 and 50% bonus depreciation are generally available for qualified property placed in service anytime during the year. Be aware that special limits apply to vehicles.
  2. Business trips. When you travel to wrap up year-end business deals, you can write off your expenses – including airfare, lodging, and 50% of the cost of meals – if the primary motive of the trip is business-related. Costs attributable to personal side trips are nondeductible. If you travel by car, deduct actual business-related auto costs or a flat rate of 54 cents per mile (plus tolls and parking fees).
  3. Entertainment and meals. Generally, you can deduct 50% of the cost of entertainment and meals that precede or follow a “substantial business discussion.” For example, you might treat a client to dinner and drinks after completing a contract earlier in the day. In this case, you can include 50% of the expenses for the business purpose of entertainment.
  4. Company outings. Generally, deductions for business entertainment and meals are limited to 50% of the cost. However, if you throw a company-wide holiday party before year-end, you might be able to deduct 100% of the cost when you meet certain requirements, such as inviting your entire staff.
  5. Hire your child. If you hire your child, reasonable wages paid for actual services rendered are deductible, the same as wages paid to other employees. The wages will be taxable to your child at your child's tax rate, which may be lower than your rate or that of your business. Also, if your child is under the age of 18 years, then he or she is exempt from paying social security taxes.
  6. Job credits. When your business hires workers from certain “targeted groups,” such as veterans and food stamp recipients, you may be able to claim the Work Opportunity Tax Credit. The maximum credit is generally $2,400 per qualified worker.
  7. Give to Charity. Generally, charitable contributions typically 'flow through' a business and are claimed as deductions on the individual tax returns of the shareholders of the company. This is true whether you are running a sole proprietorship, partnership, limited liability company, or S corporation.
  8. Fully Utilize Pensions. Did you know there are tax incentives for certain retirement plans? If you own a business of any size, you may benefit greatly in multiple ways by setting up a retirement plan. Many plans require creation before the end of 2016, but many also allow funding up to the time of filing the tax return. This includes the tax filing extension, which is ¾ of the way into the year of 2017 and even cash basis taxpayers, which otherwise would have to make the payment by 12/31/16. Moskowitz LLP will do all of the calculations to show you the amounts you can put away in each plan and explain the options of each plan.
    Individual tax deductions range from small amounts up to hundreds of thousands of dollars per year. Unlike other investments where earnings are taxed every year, the earnings in a retirement account are not taxed while they remain in the retirement account.
    Many different types of investments are allowable through a retirement account. Retirement accounts also enjoy asset protection via the federal government; namely, if you file bankruptcy, you may assets, a pension is considered an “exempt” asset and you are entitled to keep a 100% of it while discharging your dischargeable debts. This advantage may give you the opportunity to settle the judgment for a tiny fraction of its award and avoid the bankruptcy altogether.
    Example: If you are in the top federal and state tax bracket, approximately half of your income is taxed. If you made a $100,000 pension contribution in 2017, you would save $50,000 in 2016 taxes. Half of your pension contribution would be paid for with 2016 tax savings and you would have ¾ of a year in 2017 to fund the other half. Why pay those taxes when you can put the money away for your retirement and have it grow with tax free earnings!
    Please see our post regarding Retirement Plans for Small Business Owners and Solo Practitioners for more information and consider implementing a plan before the end of the year.

New Procedure for 60-Day Rollover Errors

Did you inadvertently miss the 60-day time limit for making an IRA or retirement plan rollover? You may be able to avoid taxes and potential penalties by notifying your account trustee with a "self-certification."

When you take a distribution from your IRA or qualified plan with the intention of depositing it, or “rolling it over,” into another IRA or qualified plan, the 60-day rule says you're required to complete the rollover within 60 days of receiving the distribution. In the past, when you missed the deadline, you generally had to request relief from the IRS. That meant paying a fee and going through a process to obtain a written statement waiving the rule.

Now, the IRS says that in some cases you can “self-certify” by submitting a written letter to your financial institution or trustee explaining why you missed the 60-day deadline. Your error must be one of eleven allowable reasons. Contact Moskowitz LLP for more information regarding this new procedure.

Tax Relief for Louisiana Storm Victims

Victims of the August storms and floods in Louisiana have until January 17, 2017, to file individual and business federal tax returns with due dates on or after August 11, 2016. Taxpayers can also choose to claim casualty losses on current or prior-year federal income tax returns in order to obtain an earlier refund. Contact Moskowitz LLP for assistance filing your return.

Charitable Private Foundations

Giving to charity can be part of your tax planning. If you have the means, you can even create your own Private Charitable Foundation to carry out your charitable wishes. The California Attorney General's Guide for Charities advises that California common law defines "chartiable purpose" very broadly to include relief of poverty, advancement of education or religion, promotion of health, governmental or municipal purposes, and other purposes that are beneficial to the community. Federal and California tax laws define charitable purposes more specfically for exemption from income tax. Federal and state laws have been enacted to encourage the making of charitable gifts and to facilitate the operation of charitable organizations. As a result, certain benefits and privileges are conferred on charities that are not available to for-profit businesses.

However, for those involved with charitable private foundations because there are certain tax advantages involved, it is very important to properly maintain the organization with respect to donations, self-interests, mandatory distrubitions, tax and state filings, and otherwise complying with the requirements of the law because the charity and its founders are under much greater scrutiny from the taxing authorities. This is generally not a problem and seen as rountine within the industry.

However, for those who are not properly advised or fail to follow best practices with regards to tax and procedural guidelines for operating a charitable foundation, there are severe punishments that may be imposed. Recently, in San Jose, a CPA was charged (and has since pled) to tax evasion charges resulting from his personal use of his charitable private foundation. In addition, it turns out that this CPA had advised other California residents on Charitable Private Foundations and even established and maintained them. These individuals, his clients,have a high likelyhood to be subject to further investigation by the State Franchise Tax Board and Internal Revenue Service given their relationship to this CPA. See here for more resources and information.