Wednesday, June 22, 2011

Man Received Wrong Tax Refund from IRS, Faces Jail

Man Received Wrong Tax Refund from IRS, Faces Jail
Los Angeles (June 20, 2011)
By Accounting Today Staff
A man who mistakenly had another taxpayer's refund of $110,000 deposited in his bank account by the Internal Revenue Service could be facing jail time for not reporting the error.
Stephen Reginald McDow, 34, of Laguna Beach, Calif., was charged last week with one felony count of theft of lost property, with a sentencing enhancement for taking property over $65,000. If convicted, he faces up to four years in state prison, according to the Orange County District Attorney’s Office. McDow was arrested June 14 by the Santa Ana Police Department.
In August 2010, a taxpayer referred to by prosecutors as Michelle D. electronically filed her 2009 federal income tax returns with the expectation of a $110,000 tax refund from the federal government. She filed her taxes with the request that her refund be directly deposited into a numbered bank account.

In December 2010, after months of waiting for her tax refund, she asked her accountant to check on the status of the return. They learned that $110,000 had been deposited in September into the bank account requested on her tax return, but she then discovered that she had inadvertently provided a Citibank bank account number that had been closed in 2004. That account number was later re-assigned to another bank customer, McDow.
At the request of Michelle D. and Citibank, McDow called her attorney on Feb. 28, 2011, and provided an email address. He subsequently received a letter from her attorney indicating that the $110,000 erroneously deposited into his account was a tax refund belonging to Michelle D. He also received instructions on how to transfer the money to the rightful owner.
However, on March 6, McDow allegedly emailed the attorney to say that he had already spent most of the $110,000 to pay for a car loan, student loan and foreclosure debt. He has been accused of immediately spending the money, knowing it did not belong to him.
Michelle D. mailed a certified letter on March 16 to McDow with instructions for returning her money. He allegedly failed to respond to her and ignored several further attempts to get her money back. After unsuccessfully attempting to contact McDow, Michelle D. reported the theft to the police, who investigated the case and arrested him. Deputy District Attorney Matt Lockhart of the Major Fraud Unit is prosecuting the case.

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