Victims of tax fraud family hit hard by IRS

Posted: Saturday, January 15, 2011 5:00 am | Updated: 8:26 am, Sat Jan 15, 2011.

Terence Corrigan - The Independent

WHITE MOUNTAINS – At least one local couple is expecting a foreclosure notice any day. The IRS has garnished their wages and even tried to get at their 401K.

The couple involved asked that their names not be used because they’re in litigation with the IRS. For this story we’ll call them Hugh and Laurie Smith.

The Smiths are both employed and have a combined income of about $200,000. They have considerable equity in the home they bought 17 years ago but because of the tax liens on their property they can’t tap into the equity to pay off the $100,000 they owe the IRS.

The IRS has had “no sympathy whatsoever,” said Laurie.

The Smiths are friends with five other families that are in a similar situation. One family they know lost their home and vehicle. That couple and their five children are now living in a travel trailer.

The Smiths and their friends got into this tax trouble because of tax returns prepared by Accurate Consulting, LLC of Heber.

The owners of Accurate Consulting are facing felony charges for preparing fraudulent tax returns. The tax business was run by 70-year-old Kennith Lee Defoor, his daughter Shelia Ruth Young and Shelia’s husband Deane James Young.

The Youngs and Defoor are accused of preparing 337 fraudulent tax returns since 2001. On these returns the refunds were exorbitant ranging from $12,000 to $368,000, most in the $50,000 to $70,000 range. In many cases the amounts of the returns exceeded the filers’ total income.

According to the federal indictment, the Youngs and Defoor “preyed” on their clients. Over the eight years of what federal investigators described as hundreds of claims for “fraudulent refunds” the Youngs and Defoor tried to get $25 million in tax refunds for their clients and the IRS actually issued some $2.3 million in erroneous refunds.

The Smiths started having their tax filings prepared by the Youngs in 2004. Until the tax year 2008 they’d gotten modest returns, “a few hundred here and there,” according to Laurie. When they called the Youngs to prepare their 2008 return, Laurie said, “Shelia said they had a new way of doing it.” Shelia told Laurie that they had taken some classes and that they would be able to get the Smiths a larger return.

When the Youngs completed the tax filing for the Smiths it showed the IRS owing them an $80,000 return. Laurie said her first reaction to such a “huge” return was, “That’s impossible.” Laurie said she talked to other people that had tax returns prepared by the Youngs and Defoor and questioned Shelia Young. “It’s didn’t sound right to me,” Laurie said, “but Shelia told me they had a tax attorney on retainer and that they had a tax advocate on staff to help. I talked to others that use these people and then I went ahead.” Laurie said she met with the Youngs and she and her husband decided to go ahead thinking that the IRS would never refund such a large amount.

Much to her surprise, the IRS did send them the $80,000 check. The Smiths deposited the check and waited, expecting that the IRS would come for the money. After six months, Laurie said, they started using the money to remodel their home.

And finally in September 2009, the letters started coming from the IRS and they heard that there was a criminal investigation involving the Youngs and Defoor.

The Smiths have hired an attorney who tells them the IRS will usually allow a year to settle the debt, but Laurie said without being able to access the equity in their home they will not be able to meet that deadline.

In hindsight, Laurie said, it’s clear that they should have known that the methods the tax preparers were using were “off the wall.” It “didn’t sound right,” she said, “but we trust people.”

Reach the reporter at tcorrigan@wmicentral.com