LOS ANGELES – The operator of a Glendale tax preparation business was arrested this morning on charges that he defrauded customers of his tax preparation business by diverting their tax refunds into his own bank accounts.
Michael Joseph Calalang Cabuhat, 40, a resident of the Hollywood Hills West neighborhood of Los Angeles, who refers to himself in online postings as “celebritytaxguy,” was arrested by special agents with IRS Criminal Investigation and the United States Treasury Inspector General for Tax Administration (TIGTA).
This morning's arrest was made pursuant to a criminal complaint that charges Cabuhat with wire fraud, aggravated identity theft and structuring financial transactions to evade reporting requirements.
“Corrupt tax return preparers harm their clients, other taxpayers, and the United States government,” said United States Attorney Eileen M. Decker. “Mr. Cabuhat's clients entrusted him with an important duty that we all have at this time of year, and he abused that fundamental trust.”
Cabuhat is half-owner of VisionQwest Resource Group, Inc., which operates VisionQwest Accountancy Group and Icon Tax Group, Inc., in Glendale. According to a 36-page affidavit filed in the case, Cabuhat defrauded his clients in at least two ways.
In some instances, the taxpayer-client was given a copy of a tax return that showed a much smaller refund amount than on the tax return that Cabuhat actually filed with the IRS on behalf of the taxpayer, according to the affidavit. Sometimes, Cabuhat would simply increase the amount of tax owed on the taxpayer's copy of the return, thereby decreasing the refund; and sometimes he would manipulate the expenses reported on the filed returns to increase the refund. Without the taxpayer's knowledge, Cabuhat directed the IRS to deposit the small amount reflected on the taxpayer's copy of the tax return into the taxpayer's bank account, and to deposit the remainder into a bank account that Cabuhat controlled.
In other instances, according to the complaint, Cabuhat gave the taxpayer-client a copy of a tax return that falsely showed a tax due, but Cabuhat would file with the IRS a tax return that sought a refund. In these instances, Cabuhat would tell the taxpayer to make the “tax payment” directly to him so he could remit the payment to the IRS. In fact, Cabuhat allegedly kept the “tax payment” and directed the IRS to deposit the refund that the client should have received into a bank account that he controlled.
From 2010 through 2015, Cabuhat allegedly used this scheme to steal more than $1.2 million in refunds that should have gone to 144 clients.
In addition to the tax refund scheme, in September of 2014, Cabuhat structured cash deposits to avoid federal bank reporting requirements. Specifically, Cabuhat structured a $29,700 cash deposit into three separate transactions of $9,900 over seven days, allegedly to evade the reporting requirement triggered by cash transactions of more than $10,000. On the day after these structured transactions were completed, Cabuhat wrote a $24,500 check to purchase a Ferrari 360 Spider. That vehicle was seized today by federal agents.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
Cabuhat is expected to make his initial appearance this afternoon in United States District Court.
If convicted of the charges in the complaint, Cabuhat would face a statutory maximum sentence of 27 years in federal prison.
Return preparer fraud is one of the Internal Revenue Service's Dirty Dozen Tax Scams for 2016. The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers. Additional information about and enforcement efforts by the United States Department of Justice may be found on the Tax Division's website.
CONTACT: Assistant United States Attorney Ranee Katzenstein
Major Frauds Section (213) 894-2432
Central District of California DOJ / 16-068 / April 7, 2016