You've heard the warnings about how to avoid a tax-time audit. Here's one more tip: Don't try to cover up drug money.
Doing just that has Rebecca Renae Powell of Wasilla facing a combined total of 18 years in prison and a possible $1.5 million fine, according to federal prosecutors. On Tuesday – the day federal income taxes are due – they charged Powell with six counts of preparing false income tax returns.
Powell is a majority owner in AK Contractors Bookkeeping Services. If you were an average Joe on the up-and-up, she'd charge $50 to prepare your tax return. But drug dealers had to pay 20 times more – between $1,000 and $1,200, according to investigators, who used an undercover IRS agent to build their case against her.
Taking on clients whose money comes from illegal drug sales puts any bookkeeper in a bind. Failing to report the extra income can get you in trouble with the feds. At the same time, offering up line-item profits from illegal drug sales outs your client's dirty deeds to law enforcement. What to do?
According to prosecutors, Powell under-reported drug dealer incomes while at other times scheming to make the money look like it came from legitimate business operations. What follows is their version of what Powell was up to.
In one case, they contend income from a drug trade went undocumented for marijuana dealer, whose taxes Powell prepared. Consequently, the dealer was able to get money back from the feds through the Earned Income Credit program five years in a row.
A second client was selling marijuana and heroin. Powell created false invoices, sales receipts and other documents to help that client withstand a possible audit.
Contact Jill Burke at jill(at)alaskadispatch.com