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Karen Connelly and Bryan Thiel

Following the money


Karen Connelly and Bryan Thiel are pleasant individuals. But when they tell you what they do for a living, a chill runs through the room. Connelly is a regional media relations specialist for the Internal Revenue Service, representing Idaho, Colorado, Montana and Wyoming. Thiel is even more imposing: a special agent with the Department of the Treasury investigating the worst of the worst tax cases. He'd be the first to say he and his colleagues usually get their man (or woman). The cases are rather elaborate but their investigative methods are direct--they follow the money.

Is there anything different about filing this year?

Connelly: April 15th is Sunday and the 16th is Emancipation Day in the District of Columbia. So the deadline is Tuesday, April 17.

You must scare people when you walk in the door.

Thiel: I work for the criminal investigation of the IRS. We only work the most egregious cases.

How do you define egregious?

Thiel: When people are intentionally trying to hide their income or overstate their expenses.

Is bad behavior recession-proof?

Thiel: People are already in that mind set. There might be some people who do it because of the economy, but for the most part, we don't see big changes.

Do you like what you do?

Connelly: He has the best job in the IRS.

Thiel: The cases are exciting. It's a great job.

Each year, the IRS publishes its "dirty dozen" tax scams. Does the 2012 list include anything out of the ordinary?

Connelly: Identity theft tops the list. Quite often, the first time someone finds out that their identity has been stolen comes in a notification from the IRS: a tax return has already been filed by someone else using the same Social Security number. The scammer usually files a return as soon as possible in order to get a refund check before the bona fide taxpayer can fill out his or her return.

Does the IRS delay refunds because of extra layers of verification?

Connelly: We're still within a 10- to 21-day window for an expected return. But we've put in some new filters to identify suspected fraud before the refunds are delivered.

How about fraud perpetrated by tax-return preparers?

Connelly: Sixty percent of taxpayers use someone else to prepare their returns. You really need to check into your preparer's background. Plus, some preparers charge a percentage of your return as their fee. That's not a good idea.

Thiel: We had a case indicted last December where a Rigby woman was part of a scheme involving seven preparers who charged a 10 percent fee. There were 380 returns with returns totaling $120 million.

We often hear about individuals or businesses trying to hide their income offshore.

Connelly: Some people put large amounts of funds overseas thinking that their money is safe and they're not going to get in trouble.

Thiel: We indicted a bar owner from Fruitland last September. He had about $1 million in profits, some legal and some illegal, that he had transported down to Mexico for deposit.

How about falsely inflated income or expenses?

Connelly: Sometimes we'll see small business owners who get creative to make their bottom line smaller.

Thiel: We just had a case in February where a Twin Falls home builder was indicted. He would have customers write checks to him personally instead of his business. Plus, he was claiming things like helicopter lessons and a powerboat as business expenses.

Let's talk about frivolous arguments. You must know that we have one Idaho lawmaker [Athol Republican Rep. Phil Hart], who regularly protests his unpaid income taxes.

Connelly: I can't comment on that case. We have a long-standing issue where people claim they don't owe income taxes based on their interpretation of the U.S. Constitution.

Thiel: We see these cases all the time. The courts continue to show that the law is the law.

Connelly: Time and time again, the IRS wins in court over frivolous arguments.