A U.S. Tax Court judge has ruled that Curt Ankerberg, a Medford certified public accountant running for state Senate District 3, filed fraudulent tax returns for three years — failing to report $111,366 in income while improperly claiming $67,000 in deductions.
Ankerberg’s “admissions and misrepresentations to the examining agent are further evidence of fraud,” Senior Judge Mary Ann Cohen wrote in a Jan. 8 opinion and findings of fact. “We do not accept his explanations, and we conclude that respondent (Internal Revenue) has established fraudulent intent for each year by clear and convincing evidence.”
According to Cohen, Ankerberg and the IRS agreed that Ankerberg’s unreported gross receipts amounted to $20,423 in 2012, $69,960 in 2013 and $20,983 in 2014. Improper deductions for the three years amounted to $29,000 in 2012, $14,000 in 2013 and $24,000 in 2014, she wrote.
The IRS is seeking to penalize Ankerberg $36,738 in two categories: accuracy-related penalties of $1,029 for 2012, $646.80 for 2013 and $1,193.20 for 2014; and fraud penalties of $6,076.50, $19,699.50 and $8,093.25 for the respective years.
Fraud penalties are civil sanctions levied to reimburse the government for the expense of investigation and loss from taxpayers’ fraud, Cohen wrote.
In a Friday email response to a Mail Tribune inquiry, Ankerberg wrote that multiple health problems led to inaccuracies on his returns, including temporary blindness and water on the brain during a four-year period. Ankerberg appealed the IRS findings to the Tax Court on Sept. 26, 2016.
Ankerberg filed his candidacy for the state Senate on Feb. 23, about a month and a half after Cohen released her findings on his appeal. This is Ankerberg’s 10th race for public office over the past 10 years.
Ankerberg said in his email, “So ... yes, I got hit with a tax-fraud penalty. The IRS was intent on hitting me with a fraud penalty from the start.”
Ankerberg said he had filed a formal legal complaint with the IRS’s Inspector General Office two years earlier against three IRS agents, claiming one had falsified legal documents against a client and other agents had denied his clients their civil rights.
“This fraud penalty was their retaliation against me, even though I was blind and incapacitated during the period I was audited,” he wrote.
He blamed an “angry IRS agent” for divulging private information about him to the Mail Tribune.
However, the information obtained by the Mail Tribune is part of the public record on the U.S. Tax Court website.
Ankerberg said he had agreed to a negligence penalty but disagreed with a fraud penalty. He said he was offered lesser penalties by the IRS but he declined.
“I specifically chose to fight this case in tax court because I was innocent. I could have settled out of court, but I believed in my innocence, and was willing to fight for it.”
Ankerberg said he was a “disabled blind person” during the audit.
“I was incapable of keeping daily, accurate records while I was going blind and had water on the brain at the same time,” Ankerberg said.
Judge Cohen found Ankerberg’s similar explanations to the Tax Court for his failure to properly prepare his tax returns unconvincing.
“The most telling additional badge of fraud is the lack of credibility in petitioner’s attribution of ‘mistakes’ on his returns to medical problems, particularly those affecting his eyesight,” Cohen wrote. “During those years in issue, he continued to prepare scores of returns for clients and to prepare his own returns without seeking assistance. He continued to drive his car.”
Ankerberg prepared more than 70 returns for clients in 2012, more than 60 in 2013 and more than 50 in 2014, Cohen wrote. He prepared returns for individuals, partnerships, S corporations and C corporations, Cohen wrote.
According to the Oregon Board of Accountancy, Ankerberg has been licensed as a certified public accountant in Oregon since 2000 and has practiced continuously. He worked for various accounting firms until 2005, when he began operating his own practice out of his home. He was previously licensed in California and Washington.
Cohen wrote that Ankerberg drove his car during each of the years he prepared his own returns that were deemed fraudulent, despite the eyesight problem he cited as a reason for not filling out his tax forms properly. Ankerberg told the Mail Tribune he drove only to the grocery store when he began to go blind and stopped driving in 2014 when he was “fully blind in both eyes.” He received cataract surgery in July and August 2015, according to a doctor’s letter Ankerberg gave to the Mail Tribune.
“During 2013-15, Mr. Ankerberg’s health became precarious with multiple issues affecting his daily life,” wrote Dr. Sanjeev Sharma of Ashland, adding Ankerberg suffered recurrent, debilitating migraine headaches and cerebral edema. “... His ocular edema became so severe that it led to near blindness during 2015.”
Ankerberg wrote in an email that the Tax Court considered his doctors’ letters as “hearsay” and would not allow them as evidence.
Ankerberg claimed 50 percent of his personal residence as a deduction on Schedule C but failed to attach required Form 8829, which relates to expenses for business use of a home, according to the Tax Court.
“He explained that he had not attached the form required to claim business use of the home expenses because that ‘would be a red flag for an audit,’” wrote Cohen.
The Tax Court, made up of 19 presidentially appointed judges, was established by Congress to resolve disputes between taxpayers and the IRS.
For his 2013 return, Ankerberg reported to the IRS gross receipts of $26,150 from his business, but the IRS later verified from returns prepared by Ankerberg’s clients that he had underreported his income by $8,850, according to Cohen.
Ankerberg paid the additional tax owed after agreeing to a lesser amount of unreported gross receipts for 2013, Cohen wrote.
The IRS examined Ankerberg’s returns at his Medford home and inspected areas Ankerberg claimed were used as an office.
“Petitioner (Ankerberg) referred to documents in his possession but failed to turn over documents requested by the examining agent,” Cohen wrote. “He gave several alternative explanations for repeated delays and failures to cooperate with the examining agent.”
Some of the explanations included being scheduled for cataract surgery in July 2015, awaiting the outcome of the complaint he filed with the Treasury Inspector General for Tax Administration, records were lost and his liability for 2013 was closed when he accepted the proposed adjustment for unreported income.
Ankerberg told the IRS he had bank statements but declined to turn them over, contending he could not see them, according to the judge.
The IRS later obtained Ankerberg’s bank records and analyzed deposits for each account.
“The agent determined unreported income for each year,” Cohen state. The agent “also obtained information about the number of filed returns in each year identifying petitioner as the preparer.”
Before Ankerberg’s trial in Tax Court, during which he represented himself, Ankerberg conceded disallowing many of the deductions he took, including unsubstantiated insurance, taxes and licenses, office expenses, repairs and maintenance, utilities, mortgage interest, car and truck expenses, depreciation and business use of home.
Cohen is preparing a final decision that will detail the amount that Ankerberg owes the IRS at a later date.
Ankerberg could appeal the judge’s decision to the U.S. Courts of Appeals. The appeal can be filed 90 days after the Tax Court decision has been entered, or 120 days if the IRS appeals first.
When informed of this option, Ankerberg told the Mail Tribune in an email, “It took a lot of time, effort, and energy to prepare for the first court case, and I really didn’t have the time, motivation, or the resources to continue the fight with an appeal. It wouldn’t be cost-effective.”
Ankerberg’s license with the Oregon Board of Accountancy is currently active with no disciplinary notices. He has no criminal history in Oregon.
According to the Board of Accountancy, a CPA’s license could be revoked under ORS 673.170 for dishonesty, fraud or misrepresentation in the practice of public accountancy, particularly signing or verifying of any false or fraudulent list, return, account statement or any other document.