A stiff prison sentence imposed by a district court on an individual convicted of filing a false refund claim and interfering with the administration of internal revenue laws has been upheld by the U.S. Court of Appeals for the Eleventh Circuit.
Taxpayer Donus R. Sroufe had submitted an unsigned Form 1040 return to the Internal Revenue Service for tax year 2008. The return contained fictitious revenue items from various sources, including the United States Department of Treasury. The total amount of income reported was $2.5 million.
Sroufe also listed a number of companies that supposedly had made estimated income tax payments to the IRS on his behalf. Sroufe claimed that such payments totaled more than $2.6 million. The tax return stated that a refund was due in the amount of nearly $1.76 million.
In addition to the tax return, Sroufe submitted a Form 56, Notice Concerning Fiduciary Relationship, listing the Secretary of the Treasury Department as his fiduciary. He also submitted a letter making an odd request of the Commissioner of the IRS to “file the enclosed 2008 Federal Tax Form 1040 along with any forms and/or returns that may be due, including those that may be required for tax years 2006 and 2007.”
The IRS deemed the submission a frivolous tax return and sent it to the Frivolous Return Program (FRP).
A letter from the FRP informed Sroufe that he had taken a frivolous position and had 30 days to file a correct return to avoid a monetary penalty. The FRP viewed Sroufe’s submissions as an attempt to “delay or impede the administration of Federal tax laws.”
In a reply letter to the FRP, Sroufe stated that he had reviewed his 2008 submissions, which he considered proper and correct.
Sroufe later sent another letter to the FRP stating that the original Form 1040 was incorrect and he was in the process of correcting it. He also said that he intended to complete and file his tax returns for 2006, 2007 and 2008. But he never filed returns for 2006 and 2007 – and never amended or corrected his 2008 return.
The result was that Sroufe was indicted by a federal grand jury for interference with administration of internal revenue laws and filing a false claim against the United States for a tax refund. Sroufe pleaded not guilty, and the case proceeded to trial where he was convicted on both counts.
The judge stated that Sroufe had intended to defraud the IRS and had attempted to obtain a $1.7 million tax refund to which he was not entitled. He was sentenced to 51 months in prison on this charge.
In addition, the judge found Sroufe guilty of interference with administration of internal revenue laws because he had submitted fictitious documentation to the IRS in response to various inquiries from the agency. The taxpayer was sentenced to 36 months in prison on this charge (United States of America v. Donus R. Sroufe. U.S. Court of Appeals, Eleventh Circuit, 2014-2 U.S.T.C.).
Both sentences were at the high end of the sentencing guidelines due to the taxpayer’s prior issues with the IRS. The sentences are to run concurrently.