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MANHATTAN---Two Manhattan accountants have been indicted on 21 counts for failing to pay their own personal New York State and City income tax and for orchestrating the filing of false income tax returns for at least 600 of their clients resulting in millions of dollars of tax evasion.
Jeffrey C. Rosner, 52, and David E. Cohen, 55, operated the firms of Rosner & Cohen, Empire 4912, Inc., and EXTC Inc., d/b/a Empire Tax, with offices located at the Empire State building in Manhattan.
The indictments resulted from a two year-long investigation conducted jointly by the District Attorney's Office and the New York City Department of Finance, with the assistance of the New York State Department of Taxation and Finance. The investigation began as a result of an unrelated case brought by the Manhattan District Attorney's Office against one of the defendants' clients. That investigation uncovered highly questionable deductions, which led to an investigation of the defendants and their businesses. As part of the investigation, court-authorized search warrants were executed on June 2, 2004, at the firm's offices at the Empire State building, as well as Rosner's home in Flushing, Queens, and Cohen's home on Staten Island.
The indictment charges that the defendants each filed false New York State and City personal income tax returns on behalf of themselves and their wives from 1999 through 2003. During that five-year period, Rosner allegedly failed to report any of the $1.2 million in income he earned through his services as a tax preparer. He also allegedly failed to report interest he charged on personal loans extended to some of his clients, and failed to report a portion of the rental income he received on three properties he owned in New York.
Prosecutors said that as a result of his failure to report this income, Rosner actually received refunds from the state and city totaling $5,000. In addition to his alleged failure to pay income tax, Rosner also failed to pay New York City business taxes. His total tax liability owed to the state and city is approximately $225,000, not including penalties and interest, prosecutors said.
Meanwhile, for the same period, prosecutors said Cohen under-reported $500,000 in gross income from his accounting business. Although he did report some income, he allegedly only reported about one-third of his actual income. In addition, prosecutors said Cohen did not report any income generated from a rental property he owned on Staten Island. As a result, like his partner, Cohen received refunds totaling $5,900 from the state and city. Finally, Cohen also allegedly failed to pay any New York City business taxes for those years. His tax liability is approximately $100,000, not including penalties and interest, prosecutors said.
According to the district attorney's office, beyond their personal tax evasion schemes, the defendants and their firm assisted at least 600 of their tax clients in evading the clients' income taxes by preparing false tax returns. The defendants allegedly used a number of recurring techniques to effectuate their clients' tax evasion:
They falsely claimed that certain clients rented out between one-half and three-quarters (and in some cases 100%) of their homes. They then offset the "rental income" with payment of mortgage interest, real estate taxes, insurance, utilities and depreciation, leaving the taxpayer with little or no taxable income.
They falsely claimed large fraudulent business losses and depreciation on non-existent equipment, which offset most, if not all, of the taxpayer's income.
They falsely claimed or inflated Schedule A expenses, including charitable contributions and un-reimbursed business expenses. In fact, such expenses were often reported in identical amounts on the tax returns of unrelated taxpayers.
They falsely represented that married taxpayers were living separately to evade the so-called "marriage penalty."
They falsely represented that the taxpayer resided outside of New York State and/or New York City for all or part of the tax year to evade City and State income tax.
They changed clients' corporate names every few years for the same business operation to avoid taxes entirely and to avoid detection, and instructed clients to ignore liabilities for the clients' previous corporate names.
The amount of taxes evaded through the defendants' schemes on behalf of their clients totals millions of dollars, prosecutors said. According to the New York City Department of Finance, at least $7.5 million is expected to be recovered in city and state personal income, business and sales taxes as a result of this case. Millions more may be collected as business clients and individuals come into full compliance with the tax laws.
Amounts owed by individual taxpayers range from a few thousand dollars to $250,000. Two clients have already pleaded guilty to participating in the schemes and other guilty pleas are expected soon. A number of clients are cooperating with the continuing investigation. The continuing investigation is also looking into whether falsified tax returns were fraudulently used to obtain loans for some of the clients.
All clients will be required to file amended tax returns and pay fraud penalties. The defendants operated a general tax practice, servicing many different types of clients including, jewelers, doctors, nurses, small businesses and individuals from across all five boroughs of New York City, as well as from Long Island, Westchester, New Jersey and other states. They attracted clients by word of mouth and by advertising on their website.
Specifically, the indictment charges Rosner and Cohen with grand larceny in the second and third degrees, scheme to defraud in the first degree, multiple counts of offering a false instrument for filing in the first degree and the tax crimes of false returns; personal income and earning taxes, as well as aiding or assisting in the giving of fraudulent returns, reports, satements or oher dcuments; personal income and earnings taxes. Each faces up to 15 years in state prison on the count of grand larceny in the second degree. 1-26-06
© 2005 North
Country Gazette
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