Last month, Knoxville, Tennessee residents James and Beverly Beavers were found guilty by a jury of their peers of conspiring to defraud the federal government and for filing false claims for tax refunds in U.S. District Court for the Eastern District of Tennessee. The couple is scheduled to be sentenced on August 7, 2013.
According to a press release from the Department of Justice, James Beavers, a former director of an academic engineering center at the University of Tennessee, and Beverly Beavers, a former jewelry store owner, hired PMDD Services, LLC (PMDD) to prepare their tax refunds. PMDD aided its clients in claiming enormous tax refunds in order to pay off personal debt. In the Beavers' case, PMDD falsely reported their mortgage amount, credit card limits, and other personal debts as income in order to withhold federal income tax on the money via Forms 1099-OID. This led to the Beavers claiming a tax refund for 2008 of over $591,000. In addition, the Beavers requested, via amended returns prepared by PMDD, a tax refund of $193,056 for 2006 and $202,625 for 2007. The Beavers used the 2008 tax refund to pay off the mortgage on their home.
Penny Jones, of PMDD, prepared the returns for the Beavers based on information the Beavers submitted to her. She is currently serving a 144-month sentence in federal prison for her involvement in the scam. The "1099-OID" scam is routinely included among the IRS' Dirty Dozen Tax Scams.