Retired federal employees busted for $4 million ‘sovereign citizen’ tax fraud scheme

A married pair of former Federal Aviation Administration employees from Washington was sentenced this week for their role in a tax fraud scheme.

Debra and Samuel Aaron, of Whidbey Island, were convicted on charges of conspiracy to defraud the government and making false or fraudulent claims.

The couple promoted the 1099 OID tax fraud scheme often used by so-called sovereign citizens.

Debra Aaron claimed more than $14 million in tax refunds on behalf of 30 people and was paid $4 million before the IRS caught on.

The couple used a shell company to launder the money from their scheme and claimed some of the funds were used to help impoverished women in third-world countries.

In fact, federal authorities said, the couple used the money to remodel their home and take “lavish” vacations to Las Vegas; Sedona, Arizona; and the Caribbean.

Retired federal employees busted for $4 million ‘sovereign citizen’ tax fraud scheme

See also: 

Former Federal Employees Sentenced To Prison For Tax Fraud

The IRS has repeatedly publicized 1099-OID fraud, warning taxpayers about submitting fraudulent claims.  The IRS website states:

False Form 1099 Refund Claims

In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Busted: Utah man sets up church where everyone is a minister, no one pays income tax

How one can leave their critical thinking skills at the door of a "church" is beyond me, "All of Calkins’ [earned] income [from a "real" job] was paid straight into church accounts after he took his vow of obedience and poverty."
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A three-judge panel in Utah’s Tenth District Federal Court of Appeals ruled against an appeal by

Kevin Hartshorn, a Christian minister who has been convicted of founding his church as a tax avoidance scheme.

In a decision issued Monday by the judges, upheld an injunction against Hartshorn and the Church of Compassionate Service, a body that the panel deemed to be an “abusive tax shelter.”

Hartshorn’s ministry was first sued by the U.S. Attorney’s office in Utah in 2010. The Church of Compassionate Service was accused of being a “tax fraud scheme” by the government. In the church, Hartshorn commanded his “ministers” to sign over their income and possessions to Hartshorn and the church. They were issued debit cards to use for their daily and household expenses.

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“As the head minister of the Church of Compassionate Service,” wrote the judges, “Defendant [Hartshorn] has assisted individuals in executing vows of poverty and transferring their property to the church, and he has made representations to them about the tax consequences of doing so. He has told ministers they need not pay taxes on money they earn that is assigned to the church pursuant to a vow of poverty.”


Busted: Utah man sets up church where everyone is a minister, no one pays income tax