TAX NEWS - June 2010

Arizona Tax: Arizona couple convicted of $7 million tax fraud

A federal jury in Portland, Ore., has convicted a Mesa couple of defrauding the Internal Revenue Service of $7 million over 10 years.

Micaela Dutson, 48, and Tony Dutson, 53, are expected to be sentenced Sept. 20 in U.S. District Court following their conviction on nine counts of criminal tax violations. The couple moved to Mesa in 2003.

They were convicted earlier this month on charges they conspired to defraud the IRS by filing false financial reports and tax returns for themselves and about 150 clients they had across the country, federal court documents state.

Micaela, a former attorney, used her office in Tigard, Ore., to sell tax trust accounts, which the couple told clients could be used to avoid paying taxes on their income, court documents state.

"The Dutsons then set up bank accounts and corporations in an effort to deceive the IRS by making it difficult to trace their client's income and assets," a release from the U.S. Department of Justice states. "The couple made over $1 million from the scheme and paid no income tax."

Federal authorities were alerted to the scheme after a number of the Dutsons' clients ended up being audited by the IRS for failing to file income-tax returns.

The IRS began an audit on Micaela when it learned she was paid by the state of Oregon to provide indigent legal services and never reported the income on her taxes.

Micaela resigned from the Oregon State Bar in 2002.

In the meantime, the IRS had tried unsuccessfully to stop the Dutsons from selling "abusive tax shelters," court documents state.

"The Dutsons continued to sell the trust packages for years, ignoring several warning letters from the IRS," the release states. In 2006, a U.S. District Court judge in Phoenix ordered the couple to cease their activities.

As the IRS began investigating the couple and their clients, the Dutsons retaliated by intimidating IRS employees and filing several lawsuits of their own and on the behalf of their clients. The couple charged clients $3,500 to represent them in court but failed to notify them many of the cases had been dismissed.

The couple then filed a $1 trillion lien in California against several IRS employees and the Department of Justice attorneys who filed charges against them. A federal court later ruled the lien was "null, void and without legal basis."

The Dutsons also filed about 30 fraudulent tax returns in an attempt to claim $185 million in tax refunds.