Wacky Scheme Ended by IRS

published April, 2013

From the IRS: On July 20, 2010, in San Diego, California, David Canales was sentenced to 41 months in prison and ordered to pay $1,021,063 in restitution. On March 24, 2010, Canales pleaded guilty to one count of mail fraud and one count of tax evasion. According to the plea agreement, between 2001 and 2008, Canales operated a tax preparation and bookkeeping business in Chula Vista, California. Canales admitted that he controlled two bank accounts in the fictitious business names International Recovery Systems (“IRS”) and Freight Transport Brokers (“FTB”). Canales further admitted that he falsely represented to his clients that they owed substantial amounts of tax to the Internal Revenue Service and California Franchise Tax Board and directed his clients to write checks to “IRS” and “FTB.” Canales admitted that instead of forwarding these checks and the tax returns to the IRS and FTB, Canales deposited the checks into his own “IRS” and “FTB” bank accounts and either did not submit the clients’ returns to the relevant taxing authority or submitted different returns showing little or no tax due and owing. Canales admitted that he caused losses in excess of $1,000,000 and willfully evaded payment of income taxes on $457,653 in income he earned for the years 2003–2007.