Don't Mess With Taxes

No, not that guy.

However, this month's federal tax trial in a North Texas courtroom does have a connection to Donald J. Trump and some interesting similarities to his falsification of business records trial just concluded in New York City state court.

In the Texas trial, John Anthony Castro, who briefly sought nomination as the GOP’s 2024 presidential candidate and pestered the Party's presumptive nominee with lawsuits, was convicted on May 24 on 33 counts of federal tax fraud.

Federal prosecutors said Castro’s scheme resulted in more than $15.5 million in tax losses to Uncle Sam.

Global marketer of tax services: Castro, a resident of Mansfield, Texas, owns a virtual tax preparation firm. In addition to in the Dallas-Fort Worth metroplex office, the firm also offered services through Orlando, Florida, and Washington, D.C., operations.

The 40-year-old Castro, has two tax law degrees, although he has not passed any bar exam. And while he might not be a good test taker, he apparently is a successful self-marketer.

Federal investigators said Castro obtained global tax clients by claiming to be a “federal practitioner” who was an “international tax expert.”

Court records from his five-day bench trial before Senior U.S. District Judge Terry R Means show that between 2017 and 2019, Castro filed more than 1,900 tax returns on behalf of individuals from all over the world.

As part of his pitch, Castro promised his clients a significantly higher refund than they would receive from other preparers, claiming he knew how to identify and claim deductions that others did not, said the Department of Justice (DoJ).

Castro added there was no risk, said prosecutors, as he would simply split the additional refund amount with them to account for his fee. On many occasions, federal officials said he filed tax returns on behalf of clients without their permission or knowledge.

Questionable deductions downfall: In other instances, the DoJ said that Castro claimed deductions for clients that had no basis in fact.

Deductions based on what investigators, including an undercover IRS Criminal Investigation agent who worked the case, characterized in court filings as extreme and unsupported legal theories included deductions such as

• any expense related to preventing an illness qualified as an “impairment related work expense,”
• expenses related to commuting to and from work,
• claims of the full value of one’s mortgage and utilities as long as the taxpayer had some type of Schedule C business to claim,
• expenses related to dry-cleaning for work clothes, and
• claims of the full value of one’s cell phone bill even when their employer provided them with a work phone.

In one example cited in court documents, in one client filing Castro deducted over $26,000 in expenses related to a nascent cupcake business that had generated only $250 in revenue.

Guilty on all counts: Castro took the stand in his own defense, but upon cross-examination, admitted that his positions were extreme, outlandish, and not supported by the law, said the DoJ. He also admitted to a bevy of prior falsifications and vindictive actions, noted prosecutors.

Such prosecutorial grilling was a reason, Trump said at a Trump Tower lobby press conference this morning, was why he chose not to testify in his case. "The theory is you never testify because as soon as you testify … they'll get you on something that you said slightly wrong, and then they sue you for perjury, but I didn't care about that. I wanted to," he said. 

After hearing evidence for five days in the Castro case, including the defendant's testimony, Judge Means found Castro guilty on all of the indictment’s counts.

Castro was immediately taken into custody following his conviction. He’s awaiting sentencing on Sept. 17, at which time he could get up to 99 years in federal prison, three years on each count.

Many of Castro’s client victims already have paid a price. The DoJ said many of these taxpayers have since been audited by the IRS and/or have filed amended returns, causing them significant financial hardship.

Federal officials cited those clients in announcing the Castro convictions.

“While most tax preparers are honest and provide honest tax services to their clients, some like Mr. Castro victimize their clients all in the name of greed,” stated Jenifer L. Piovesan, Special Agent in Charge, IRS Criminal Investigation, Newark Field Office.

Tax Felon Friday with politics on the side: In addition to operating his tax services firm, Castro has been a perennial office seeker for various positions, both in Texas and on the federal level He ran variously as both a Democrat and Republican.

Most recently, Castro sought to become the GOP’s 2024 nominee for U.S. president. Part of his effort included filing many of the lawsuits seeking to keep Trump off presidential primary ballots in at least 27 states.

Castro’s drop-Trump efforts failed. He also ultimately conceded he had no chance of winning the current presidential nomination.

However, Castro said his political efforts would expand his name recognition and potentially help him get the job he really covets.

"I want to be Commissioner of IRS," Castro said.

That’s not going to happen now.

As for Castro’s recent GOP rival, we’ll have to wait until November to see what effect, if any, the New York trial result has on that fellow felon’s political future.

In the meantime, if you want to catch up on all sorts of tax miscreants, the ol' blogs' special Tax Felon Friday page is a good place to start.

And if you want more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:

• Turning in tax pros who break bad
• The dark side of taxpayer-tax pro trust
• DoJ touts successes in taking down unscrupulous tax preparers
• Ghost tax preparers, global tax schemes, and wealthy filers wrap up the 2024 IRS Dirty Dozen

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