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Online Selling Fraud with a Side of Tax Evasion

Online Selling Fraud with a Side of Tax Evasion

Selling ill-gotten goods online is never a wise decision, and attempting to hide the proceeds from the IRS only compounds matters.

The government says a company executive assistant bought unauthorized supplies from Staples and charged it to her employer, “intentionally assigning the fraudulent purchases to 23 different cost centers so each one would be less likely to notice the fraudulent charges.”

The Justice Department says she resold the items on eBay. On top of that, it says she used her employer’s Federal Express account “to ship the fraudulently purchased items to her buyers.”

She’s accused of costing the company $864,441.11 between January 2013 and December 2016 and of receiving at least $571,725.61 from the resale of the allegedly fraudulently obtained items.

Here’s where it got even more interesting, according to the DOJ press release:

“Martin did not provide her personal accountant with information regarding the online sales until she received a notice of additional income from the IRS. At that time, she provided her accountant false information regarding the cost of goods sold and other expenses she did not incur in order to significantly reduce her income tax liability. Based on this false information, her accountant then prepared a false and fraudulent 2014 amended tax return that was filed with the IRS.”

The case was investigated by the IRS, FBI, and the US Postal Inspection Service. The DOJ press release, which can be found on this page on the Justice.gov website, states the woman pled guilty and was sentenced to serve 33 months in federal prison followed by 3 years of supervised release for mail fraud and tax evasion.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.

4 thoughts on “Online Selling Fraud with a Side of Tax Evasion”

  1. I think there is going to be more and more of these type of tax fraud coming up in the near future as more and more Sellers are using FB and forcing buyers to pay with Friends and Family so they do not get a 1099 from Paypal and then do not report the income either. Many are going to wind up having their accounts closed by Paypal when they get caught and others are going to keep doing it since Paypal has not caught up with them yet, but eventually have their taxes audited or reviewed as the IRS starts looking more and more into how they can afford their style of living on what little they seem to make.

    Most just do not want to understand that all sales are subject to income tax and think that since they do not get a 1099 they are not subject to income tax on those sales.

  2. She’s just a really bad accountant. How could she know that the IRS wouldn’t catch her? I have received the letter from the IRS which requires you to report those sales on your tax return. Whenever you link your paypal or any payment to your own bank account that’s how the IRS tracks money.

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