Author Archives: J. Mark Olson

When and how to reopen businesses

We should be extremely careful about the businesses we start to open and the safety measures, testing and tracing systems we can put into place.  We need to listen to the experts about this.  I saw a documentary about the 1918 Spanish flu and it could have been stopped much sooner had social distancing been put in place.  However, we were in the middle of WWI and soldiers fighting the war were transmitting it around the world.  The US lost 675,000 lives due to that pandemic, which was more than the lives lost in several wars combined.  We need to learn from the past and be patient.

​For starters, I would open up outdoor public spaces, such as golf courses, parks and beaches with strict safety measures.  Then open up other businesses slowly.  Also continue the work from home model whenever possible, stagger work hours, have PPE on site, on site testing and on site contact tracing.

​This is going to be a slow recovery back to normal.  We can’t flip a switch on this.  All we can do is turn turn the dial slowly.  We all want to get back to normal.

It’s always best practice to file your tax return

It is always best practice to file your tax return.  To qualify for the new stimulus package and to facilitate payment, you need to have filed your 2018 or 2019 tax returns with your bank account information.  For those people who didn’t meet the filing thresholds and didn’t file, they find themselves scrambling now to ‘get er done’ during this crisis.  Oftentimes, clients don’t file their taxes for years, then suddenly an event happens that requires tax returns and sometimes several years of tax returns.  This can be very costly, not only for tax preparation fees, but opportunity cost by not being ready at a critical moment.


IRS releases more info on how to get coronavirus stimulus checks ASAP

WASHINGTON — New information from the IRS on Monday shines more light on what people can do to get the checks from the government as quickly as possible while many families worry about paying the bills and buying food during the coronavirus crisis that has cost millions of people their jobs.

For Americans eligible for stimulus cash under the new relief law, the fastest way to receive it is to make sure they’ve filed a tax return for 2019 or 2018 with bank information so the government can directly deposit the money.

The IRS says it will use a person’s 2019 return to calculate eligibility and automatically send the money to those who qualify. If they haven’t filed a 2019 return, it’ll be based on the 2018 return.

The agency said it would publish additional information about the new forms soon on

Treasury Secretary Steve Mnuchin has said he hopes to have the money flowing to Americans with three weeks of the passage of the $2 trillion stimulus plan late last week.

Payments up to $1,200 per person, with an additional $500 per child under 17, will be made to U.S. residents with a Social Security number who who earn under $75,000. The amount decreases by $5 per every $100 earned after that, zeroing out at $99,000. For married couples, the phaseout range is $150,000 to $198,000.

The IRS said Americans who weren’t required to file taxes in the last two years will have to file a “simple tax return” with basic information like filing status, number of dependents and bank information so the government can send the money.

“Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax,” the IRS said.

2018 Mileage Rate Increase

Starting on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
  • 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
  • 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
  • 14 cents per mile driven in service of charitable organizations.
You also have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

Pay your SALT Now!

The new Republican tax bill would cap the deduction for state and local taxes at $10,000 through 2025. This will be the total deduction allowable for state income tax, local tax and property taxes.  For those of you living in high tax states such as California and New York, pay your state and local income taxes and property taxes before December 31, 2017.  Pay the next installment of your property tax now.  If you have had a significant taxable event in 2017 such as the sale of your personal residence, or significant capital gains, your state will require their income tax be paid.  They don’t care about the deductibility on your federal return.  But if you don’t pay now, you will be limited by the amount you can deduct on your 2018 federal tax return to the $10,000 limit.

I fully expect the conference version of the proposed tax bill to be signed into law before Christmas.  We must live by the new rules beginning in 2018.  But you still have time to take advantage of current tax law for 2017.

By J. Mark Olson CPA | 949-291-9211

What’s in the New Tax Reform Plan?

House and Senate Republicans released the text of a bill to overhaul the federal tax code on Dec. 15, with final votes expected the following week. The bill represents a compromise between two significantly different bills the two chambers passed over the preceding weeks.

Senate Republicans passed a bill overhauling the federal tax code in the early hours of Dec. 2, following a number of last-minute changes. Fifty-one senators voted for the “Tax Cuts and Jobs Act”; just one Republican, Bob Corker (R-Tenn.), voted against the bill, citing projections that it would raise the deficit. No Democrats supported the legislation.

That bill differed significantly from the version the House passed on Nov. 16. by a vote of 227 to 205. Thirteen Republicans voted against the legislation, most of them from high-tax states likely to be negatively impacted by its provisions. No Democrats supported it.

Following the Senate version’s passage, the two bills went into conference to be reconciled into a single piece of legislation. President Trump has called for a bill to be sent to his desk by Christmas, and Democrat Doug Jones’ victory in the Alabama special election adds to the pressure to work quickly: once Jones takes his seat, currently occupied by a Republican appointed by the state’s governor, the GOP will have just 51 senators. That is likely to happen in January.

On Dec. 14, Marco Rubio (R-Fla.) threatened to vote “no” on the joint agreement unless it was revised to include a more generous child tax credit; the GOP gave in, and Rubio is expected to vote for the bill. So is Corker, who promised his support despite his view that the bill is “far from perfect.”

If a version of the tax overhaul does become law, it would represent the most significant rewriting of the federal tax code since 1986.


The descriptions below come from the Joint Committee on Taxation’s explanation of the final joint agreement.


Income Tax Rates

The bill would retain the current structure of seven individual income tax brackets, but in most cases it would lower the rates: the top rate would fall from 39.6% to 37%, while the 33% bracket would fall to 32%, the 28% bracket to 24%, the 25% bracket to 22% and the 15% bracket to 12%. The lowest bracket would remain at 10%, and the 35% bracket would also be unchanged. The income bands that the new rates apply to would be lower, compared to 2018 brackets under current law, for the five highest brackets.

The changes would be temporary, going into effect in 2018 and expiring after 2025, as would be the case with most personal tax breaks included in the bill. The expiration date allows the Senate to comply with “reconciliation” rules that block a Democratic filibuster – which Republicans do not have the votes to defeat – only if the bill does not raise the deficit in any year outside of a 10-year window and if it stays within its $1.5 trillion budget constraint during the 10-year window. Republican congressional leaders have signalled that indidvidual tax cuts would be extended at a later date.

Single filers, 2018-2025
Taxable income over Up to Marginal rate
$0 $9,525 10%
$9,525 $38,700 12%
$38,700 $82,500 22%
$82,500 $157,500 24%
$157,500 $200,000 32%
$200,000 $500,000 35%
$500,000 And up 37%
Heads of household, 2018-2025
Taxable income over Up to Marginal rate
$0 $13,600 10%
$13,600 $51,800 12%
$51,800 $82,500 22%
$82,500 $157,500 24%
$157,500 $200,000 32%
$200,000 $500,000 35%
$500,000 And up 37%
Married couples filing jointly, 2018-2025
Taxable income over Up to Marginal rate
$0 $19,050 10%
$19,050 $77,400 12%
$77,400 $165,000 22%
$165,000 $315,000 24%
$315,000 $400,000 32%
$400,000 $600,000 35%
$600,000 And up 37%
Married couples filing separately, 2018-2025
Taxable income over Up to Marginal rate
$0 $9,525 10%
$9,525 $38,700 12%
$38,700 $82,500 22%
$82,500 $157,500 24%
$157,500 $200,000 32%
$200,000 $300,000 35%
$300,000 And up 37%
Source: Joint Committee on Taxation.

Standard Deduction

The bill would raise the standard deduction to $24,000 for married couples filing jointly in 2018 (from $13,000 under current law), to $12,000 for single filers (from $6,500), and to $18,000 for heads of household (from $9,550). These changes would expire after 2025. The additional standard deduction, which the House bill would have repealed, will not be affected. Beginning in 2019, the inflation gauge used to index the standard deduction will change in a way that is likely to accelerate bracket creep (see below).

Personal Exemption

The bill would suspend the personal exemption, which is currently set at $4,150 in 2018, through 2025. Withholding rules may not change until 2019, subject to the Treasury Secretary’s discretion.

Healthcare Mandate

The bill would end the individual mandate, a provision of the Affordable Care Act or “Obamacare” that provides tax penalties for individuals who do not obtain health insurance coverage, in 2019. (While the mandate would technically remain in place, the penalty would fall to $0.) According to the Congressional Budget Office (CBO), repealing the measure would reduce federal deficits by around $338 billion from 2018 to 2027, but lead 13 million more people to lack insurance at the end of that period and push premiums up by an average of around 10%. Unlike other individual tax changes, the repeal would not be reversed in 2025.

Senators Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) proposed a bill, the Bipartisan Health Care Stabilization Act, to mitigate the effects of repealing the individual mandate, but the CBO estimates that this legislation would still leave 13 million more people uninsured after a decade, assuming the Senate’s tax bill becomes law.

Inflation Gauge

The bill would change the measure of inflation used for tax indexing. The Internal Revenue Service (IRS) currently uses the Consumer Price Index for all Urban Consumers (CPI-U), which would be replaced with the chain-weighted CPI-U. The latter takes account of changes consumers make to their spending habits in response to price shifts, so it is considered more rigorous than standard CPI. It also tends to rise more slowly than standard CPI, so substituting it would likely accelerate bracket creep. The value of the standard deduction and other inflation-linked elements of the tax code would also erode over time, gradually pushing up tax burdens. The change would not expire.

Family Credits and Deductions

The House bill would raise the child tax credit to $1,600 from $1,000 and provide filers, spouses and non-child dependents with a temporary $300 credit. Only the first $1,000 of the child tax credit would be refundable initially, but this amount would rise to $1,600 with inflation. The $300 credit would end after five years.

The bill would temporarily raise the child tax credit to $2,000 – originally $1,650 – with the first $1,400 refundable, and create a non-refundable $500 credit for non-child dependents. The child credit can only be claimed if the taxpayer provides the child’s Social Security number. (This requirement does not apply to the $500 credit.) Qualifying children must be younger than 17. The child credit begins to phaseout when adjusted gross income exceeds $400,000 (for married couples filing jointly, not indexed to inflation). Unde current law, phaseout begins at $110,000. These changes would expire in 2025.

Head of Household

Trump’s revised campaign plan, released in 2016, would have scrapped the head of household filing status, potentially raising taxes on a large number of single parents. The conference bill would leave the status in place.

Itemized Deductions

Mortgage Interest Deduction

The bill would limit the application of the mortgage interest deduction for married couples filing jointly to $750,000 worth of debt, down from $1,000,000 under current law, but up from $500,000 under the House bill. Mortgages taken out before Dec. 15 would be suject to the current cap. The change would expire after 2025.

State and Local Tax Deduction

The bill would cap the deduction for state and local taxes at $10,000 through 2025. The SALT deduction disproportionately benefits high earners, who are more likely to itemize, and taxpayers in Democratic states. A number of Republican members of Congress representing high-tax states opposed attempts to eliminate the deduction, as the Senate bill would have done.

The Senate bill was amended on Dec.1, apparently to win Susan Collins’ (R-Maine) support:

Other Itemized Deductions

The bill would leave the charitable giving deduction intact, with minor alterations (if a donation is made in exchange for seats at college athletic events, it cannot be deducted, for example). The student loan interest deduction would not be affected (see “Student Loans and Tuition” below). Medical expenses in excess of 7.5% of adjusted gross income would be deductible for all taxpayers in 2017 and 2018; the threshold under current law is 10%, and the age floor is 65.

The bill would however suspend a number of miscellaneous itemized deductions through 2025, including the deductions for home office expenses; laboratory breakage fees; licensing and regulatory fees; union dues; professional society dues; business bad debts; work clothes that are not suitable for everyday use; and many others. The moving expenses deduction would be suspended through 2025. Alimony payments would not longer be deductible after 2019.

Alternative Minimum Tax

The bill would temporarily raise the exemption amount and exemption phaseout threshold for the alternative minimum tax (AMT), a device intended to curb tax avoidance among high earners by making them estimate their liability twice and pay the higher amount. For married couples filing jointly, the exemption would rise to $109,400 and phaseout would increase to $1,000,000; both amounts would be indexed to inflation. The provision would expire after 2025.

Retirement Plans and HSAs

Health Savings Accounts (HSAs) would not be affected by the bill, as they would have under the version passed by the House.

Reports circulated in October that traditional 401(k) contribution limits might fall to $2,400 from the current $18,000 ($24,000 for those aged 50 or older). Individual retirement account (IRA) contribution limits, currently $5,500 ($6,500 for 50 or older), may also have been considered for cuts. The bill would leave these limits unchanged, but repeal the ability to recharacterize one kind of contribution as the other, that is, to retroactively designate a Roth contribution as a traditional one, or vice-versa.

Student Loans and Tuition

The House bill would have repealed the deduction for student loan interest expenses or the exclusion from gross income and wages of qualified tuition reductions. The conference bill would leave these breaks intact. It would also extend the use of 529 plans to K-12 private school tuition.


The bill would repeal the Pease limitation on itemized deductions. This provision does not cap itemized deductions, but gradually reduces their value when adjusted gross income exceeds a certain threshold ($266,700 for single filers in 2018); the reduction limited to 80% of the deductions’ combined value.


The bill would temporarily raise the estate tax exemption for single filers to $11.2 million from $5.6 million in 2018, indexed for inflation. This change would be reversed after 2025.


Corporate Tax Rate

The bill would set the corporate tax rate at 21%, beginning in 2018, and repeal the corporate alternative minimum tax. Unlike tax breaks for individuals, these provisions would not expire.

Immediate Expensing

The Senate bill would also allow full expensing of capital investments — rather than requiring them to be depreciated over time – for five years, but phase the change out by 20 percentage points per year thereafter.

Pass-through Income

Owners of pass-through businesses – which include sole proprietorshipspartnerships and S-corporations – currently pay taxes on their firms’ earnings through the personal tax code, meaning the top rate is 39.6%.

The bill would create a 20% deduction for pass-through income, down from 23% in the last version of the Senate bill (the House woud have introduced a new, 25% top pass-through rate). Certain industries, including health, law and financial services, are excluded, unless taxable income is below $157,500 (for single filers). To discourage high earners from recharacterizing regular wages as pass-through income, the deduction would be capped using a formula based on W-2 wages and qualified property.

Net Operating Losses

The bill would scrap net operating loss carrybacks and cap carryforwards at 90% of taxable income, falling to 80% after 2022.

Section 199

The bill would eliminate the section 199 (domestic production activities) deduction.

Foreign Earnings

The bill would enact a deemed repatriation of overseas profits at a rate of 15.5% for cash and equivalents and 8% for reinvested earnings. Goldman Sachs estimates that U.S. companies hold $3.1 trillion of overseas profits. As of Sept. 30 Apple Inc. (AAPL

) alone holds $252.3 billion in tax-deferred foreign earnings, 94% of its total cash and marketable securities.The bill would introduce a territorial tax system, under which only domestic earnings would be subject to tax.

Budget Impacts

Treasury Secretary Steven Mnuchin has claimed that the Republican tax plan would spur sufficient economic growth to pay for itself and more, saying of the “Unified Framework” released by Senate, House and Trump administration negotiators in September:

“On a static basis our plan will increase the deficit by a trillion and a half. Having said that, you have to look at the economic impact. There’s 500 billion that’s the difference between policy and baseline that takes it down to a trillion dollars, and there’s two trillion dollars of growth. So with our plan we actually pay down the deficit by a trillion dollars and we think that’s very fiscally responsible.”

The idea that cutting taxes boosts growth to the extent that government revenue actually increases is almost universally rejected by economists, and the Treasury has not released the analysis Mnuchin bases his predictions on. The New York Times reported on Nov. 30 that a Treasury employee, speaking anonymously, said no such analysis exists, prompting a request from Sen. Elizabeth Warren (D-Mass.) that the Treasury’s inspector general investigate. On Dec. 11 the Treasury released a one-page analysis claiming that the tax bill would increase revenues by $1.8 trillion over 10 years, more than paying for itself, based on high growth projections. (See also, Laffer Curve.)

Even the right-leaning Tax Foundation’s relatively sympathetic dynamic scores of the Senate and House bills forecast significant increases in the national debt: $516 billion over 10 years under the Senate’s version, $1.1 trillion under the House’s. Scott Greenberg, an analyst at the think tank, told the New York Times that the Treasury’s one-page analysis “does not appear to be a projection of the economic effects of a tax bill,” but rather “a thought experiment on how federal revenues would vary under different economic effects of overall government policies. Which is, needless to say, an odd way to analyze a tax bill.”

The Joint Committee on Taxation released an analysis (download) on Nov. 30 estimating that the Senate bill would increase the national debt by just over $1 trillion over 10 years. The estimate incorporates a slight boost to economic output, amounting to about 0.8% of GDP, which would offset the expected $1.4 billion increase in the debt (on a static basis).

The left-leaning Tax Policy Center (TPC) released an analysis on Dec. 1 forecasting a 0.7% boost to GDP in 2018 if the Senate bill became law. That additional growth would fade to zero by 2027, however, and be negligible in 2037.

The amended Senate bill was scored on Dec. 1 by the CBO, which found that it would increase the deficit by $1.4 trillion over 10 years on a static basis.

The Oil Addendum 

The budget resolution authorizing the tax bill to raise the deficit by $1.5 trillion tasked the Senate Energy and Natural Resources Committee with achieving $1.0 trillion in savings; the tax bill would achieve that by allowing oil and gas drilling in the Arctic National Wildlife Refuge, which is located in committee chair Sen. Lisa Murkowski’s (R-Alaska) home state. Murkowski voted against multiple Obamacare repeal bills over the summer, making it important Republicans to secure her support for tax reform.

Automatic Spending Cuts

The idea of a fiscal “trigger,” a mechanism to enact automatic tax hikes or spending cuts that some senators have pushed for, was rejected on procedural grounds. The Senate bill could potentially lead to automatic spending cuts anyway, however, as a result of the 2010 Statutory Pay-As-You-Go Act: that law requires cuts to federal programs if Congress passes legislation increasing the deficit. The Office of Management and Budget, an executive agency, is in charge of determining these budget effects. Medicare cuts are limited to 4% of the program’s budget, and some programs such as Social Security are protected entirely, but others could see deep cuts.

Whose Tax Cuts?

Speaking at a rally in Indiana shortly after the release of a preliminary Republican framework in September, President Trump repeatedly stressed that the “largest tax cut in our country’s history” would “protect low-income and middle-income households, not the wealthy and well-connected.” He added the plan is “not good for me, believe me.” (That last claim is hard to verify, because Trump is the first president or general election candidate since the 1970s not to release his tax returns. The reason he has given for this refusal is an IRS audit; the IRS responded that “nothing prevents individuals from sharing their own tax information.”)

Both versions of the Tax Cuts and Jobs Act would cut the corporate tax rate, benefiting shareholders, who tend to be higher earners. The Senate version would only cut individuals’ taxes for a limited period of time. Both bills would eliminate the alternative minimum tax, which requires high earners to calculate their liabilities twice and pay the higher amount; scrap the estate tax; reduce the taxes paid on pass-through income (70% of which goes to the the highest-earning 1%); and cut the rate married couples pay on income from $480,050 to $1 million. Neither version would close the carried interest loophole. The Senate would scrap the individual mandate, driving premiums up on Obamacare exchanges.

While it is not certain what form an eventual unified bill would take, these provisions taken together are likely to benefit high earners disproportionately and – particularly as a result of scrapping the individual mandate – hurt some working- and middle-class taxpayers. Yet Senate majority leader Mitch McConnell (R-Ky.) said on Nov. 4 that no one in the middle class would experience a tax hike:

On Nov. 10 he told the New York Times he “misspoke”: “You can’t guarantee that absolutely no one sees a tax increase, but what we are doing is targeting levels of income and looking at the average in those levels and the average will be tax relief for the average taxpayer in each of those segments.”

According to a JCT analysis released Nov. 16, the revised Senate bill would raise taxes on households making from $20,000 to $30,000 by 13.3% in 2021 and 25.4% in 2027, compared to current law.

The Estate Tax

The GOP bill would double the estate tax exemption. Speaking in Indiana in September, Trump attacked “the crushing, the horrible, the unfair estate tax,” describing apparently hypothetical scenarios in which families are forced to sell farms and small businesses to cover estate tax liabilities; the 40% tax only applies to estates worth at least $5.49 million. According to TPC, 5,460 estates are taxable under current law in 2017. Of those, just 80 are small businesses or farms, accounting for less than 0.2% of the total estate tax take.

The estate tax mostly targets the wealthy. The top 10% of the income distribution accounts for an estimated 67.2% of taxable estates in 2017 and 87.8% of the tax paid.

Opponents of the estate tax – some of whom call it the “death tax” – argue that it is a form of double taxation, since income tax has already been paid on the wealth making up the estate. Another line of argument is that the wealthiest individuals plan around the tax anyway: Gary Cohn reportedly told a group of Senate Democrats earlier in the year, “only morons pay the estate tax.”

Carried Interest

The bill would not eliminate the carried interest loophole, though Trump promised as far back as 2015 to close it, calling the hedge fund managers who benefit from it “pencil pushers” who “are getting away with murder.” Hedge fund managers typically charge a 20% fee on profits above a certain hurdle rate, most commonly 8%. Those fees are treated as capital gains rather than regular income, meaning that – as long as the securities sold have been held for a certain minimum period – they are taxed at a top rate of 20% rather than at 39.6%. (An additional 3.8% tax on investment income, which is associated with Obamacare, also applies to high earners.)

Corporate Taxes

In his Indiana speech Trump said that cutting the top corporate tax rate from 35% to 20% would cause jobs to “start pouring into our country, as companies start competing for American labor and as wages start going up at levels that you haven’t seen in many years.” The “biggest winners will be the everyday American workers,” he added.

The next day, Sept. 28, the Wall Street Journal reported that the Treasury Department had deleted a paper saying the exact opposite from its site (the archived version is available here). Written by non-political Treasury staff during the Obama administration, the paper estimates that workers pay 18% of corporate tax through depressed wages, while shareholders pay 82%. Those findings have been corroborated by other research done by the government and think tanks, but they are currently inconvenient for the institution that produced them. Treasury Secretary Steven Mnuchin sold the Big Six proposal in part through the assertion that “over 80% of business taxes is borne by the worker,” as he put it in Louisville in August.

A Treasury spokeswoman told the Journal, “The paper was a dated staff analysis from the previous administration. It does not represent our current thinking and analysis,” adding, “studies show that 70% of the tax burden falls on American workers.” The Treasury did not respond to Investopedia’s request to identify the studies in question. The department’s website continues to host other papers dating back to the 1970s.

The White House continued to press the point, however, releasing an analysis in October predicting that lowering the top corporate tax rate to 20% would” increase average household income in the United States by, very conservatively, $4,000 annually.” The executives who were supposed to be giving these raises, however, signaled some hesitation at the Wall Street Journal CEO Conference in November, when the paper’s associate editor John Bussey asked the audience to raise their hands if they would be increasing capital investment due to a corporate tax cut. Few hands went up, prompting National Economic Council director Gary Cohn (who was on stage) to ask, “Why aren’t the other hands up?”

What’s Wrong With the Status Quo?

People on both sides of the political spectrum agree that the tax code should be simpler. Since 1986, the last time a major tax overhaul became law, the body of federal tax law – broadly defined – has swollen from 26,000 to 70,000 pages, according to the House GOP’s reform proposal. American households and firms spent $409 billion and 8.9 billion hours completing their taxes in 2016, the Tax Foundation estimates. Nearly three quarters of respondents told Pew in 2015 that they were bothered “some” or “a lot” by the complexity of the tax system.

An even greater proportion was troubled by the feeling that some corporations and some wealthy people pay too little: 82% said so about corporations, 79% about the wealthy. According to TPC, 72,000 households with incomes over $200,000 paid no income tax in 2011. ITEP estimates that 100 consistently profitable Fortune 500 companies went at least one year between 2008 and 2015 without paying any federal income tax. ​There is a widespread perception that loopholes and inefficiencies in the tax system – the carried interest loophole and corporate inversions, to name a couple – are to blame.

Read more: Trump’s Tax Reform Plan | Investopedia
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Wells Fargo Employees Involved in Bank Fraud and ID Theft Scheme

Department of Justice
U.S. Attorney’s Office
Central District of California

Thursday, January 12, 2017

Ringleader of Bank Fraud Scheme that Used Information Stolen by Wells Fargo Employees Sentenced to over 7 Years in Federal Prison

            LOS ANGELES – The organizer of a bank fraud scheme in which Wells Fargo Bank employees stole customer account data – information that was used to impersonate scores of customers and steal well over a half-million dollars from their accounts – was sentenced today to 89 months in federal prison.

Ronald Charles Reed, 70, of Inglewood, was sentenced this afternoon by United States District Judge Fernando M. Olguin. In addition to the prison term, Judge Olguin ordered Reed to pay $580,332 in restitution to Wells Fargo Bank.

Reed pleaded guilty in March 2016 to bank fraud and aggravated identity theft.

Reed, who is also known as “Disco Ronnie,” admitted that he worked with former Wells Fargo employees and “runners” in a scheme that caused Wells Fargo to suffer approximately $580,000 in losses.

Reed recruited four Wells Fargo employees in 2013 and 2014, asked them to access the bank’s computer records, and then purchased personal identifying information belonging to bank customers. The stolen information included dates of birth, account numbers, driver’s license numbers, and social security numbers.

Reed provided this stolen information to the runners. Using fake IDs, the runners impersonated bank customers and made substantial cash withdrawals from the customers’ accounts. In some cases, the runners also used the customer’s account to deposit worthless checks and receive cash back. The fraudulent transactions were made at Wells Fargo branches across Southern California and in other states, including Minnesota and Nevada.

Reed also admitted that in 2014 he purchased personal identifying information for accounts at U.S. Bank. Unbeknownst to Reed, the information he bought was for undercover accounts supplied by a confidential informant who was working with law enforcement.

Over a 13-month period that ended in mid-2014, Reed’s scheme caused runners to withdraw approximately $580,332 from 75 accounts belonging to Wells Fargo customers and $12,000 from two undercover accounts at U.S. Bank.

“This defendant has a lengthy criminal history, much of which involved fraudulent schemes and identity theft, including a counterfeit credit card case in this district that led to a sentence of nearly five years in federal prison,” said United States Attorney Eileen M. Decker. “In the process of committing these crimes, he stole the identities and bank account funds from innocent people, creating unnecessary havoc in their lives. Innocent victims of identity theft deserve the protection of the criminal justice system, and this sentence attempts to achieve that goal.”

“Fraud ringleaders should be deterred by the strong hand of justice delivered in today’s sentence. We are proud to collaborate with our FBI partners by aggressively pursuing criminals attempting to exploit our nation’s financial infrastructure, ” said Rob Savage, Special Agent in Charge, U.S. Secret Service, Los Angeles Field Office.

“Mr. Reed mercilessly exposed sensitive information, violating his victims personal and financial security and leaving them vulnerable to additional fraud while convincing others to use their official position at the bank to steal from their employer,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI will continue to work with our partners at the Secret Service and investigators at financial institutions to detect insider crimes and hold the perpetrators accountable.”

The former bank employees who worked with Reed have all pleaded guilty and are pending sentencing. The investigation into the runners – who remain unidentified – remains ongoing. Anyone with information on any of these individuals should contact FBI Special Agent Watkins at (310) 477-6565.

This matter was jointly investigated by the Federal Bureau of Investigation and the United States Secret Service. Wells Fargo Bank and U.S. Bank fully cooperated during the investigation.

The case is being prosecuted by Assistant United States Attorney Christina T. Shay of the Violent and Organized Crime Section.

Press Release Number:

Credit Card Fraud and ID Theft – Beware of Wells Fargo!

My Horrible Experience with Wells Fargo in Dealing with Credit Card Fraud and ID Theft – Will the Problem Improve or Only Get Worse?

By J. Mark Olson CPA

As we now enter into the holiday season, I thought it was appropriate to share my horrible experience with recent credit card fraud and ID theft.  I have been with Wells Fargo Bank for 19 years and I have several accounts with them, personal, business and brokerage.  In October, I was notified by Wells Fargo’s fraud department of a suspicious transaction for a charge on my personal credit card for a charge in excess of $5,000 the day following the charge.  I said that I didn’t make the transaction and Wells Fargo promptly removed the charge, cancelled my card and re-issued a new card.  I thought nothing more of this and assumed that everything was fine.  I then received a call from Wells Fargo’s fraud department and they asked me a few questions on a recorded line.  The one question they asked was “Was I in possession of the credit card at the time of the fraudulent transaction?”.  I responded “yes” and again, thought nothing of it and again assumed that everything was taken care of and this would forever disappear from my account.  Wrong!

I received a letter in the mail stating that my fraud claim had been denied. I reviewed my credit card account and saw that Wells Fargo had put the charge back on my account.  I had several conversations with Wells Fargo’s fraud department and they repeatedly said that, because I had possession of the credit card at the time of the charge, I was liable and they would not remove the charge.  My credit card came with both an EMV chip and magnetic strip.  Wells Fargo claims that the transaction had been conducted using the EMV Chip and PIN and therefore, since I had the card, I was the only person who could have performed the transaction.  Wells Fargo said EMV chips are impossible to duplicate.  Wells Fargo said I could submit a letter of reconsideration, which I did after I had conversations with the Target store where this happened and the Los Angeles Police Department.  I discovered that the charge was for several gift cards at Target and that there was surveillance video of the transaction.  I explained this in my reconsideration letter to Wells Fargo and also stated that I had filed a police report with the LAPD. I attached a copy of the police report.  The LAPD told me that the bank would contact them and take over from there now that a police report had been filed.  LAPD said, based upon past experience, they expected this charge to be removed from my account.  My reconsideration was promptly denied by Wells Fargo.  I later learned from LAPD, the bank never called them to discuss my case.

I again contacted Wells Fargo fraud and they gave me the same reason for denial and cited SEC regulations that prevented Wells Fargo from removing the charge from my account.  They said that I could write a second letter for reconsideration offering new facts in the case.  I then contacted the Target store again and spoke to Assets Protection.  They said they had the surveillance video and had viewed it.  They said they would release the video and the credit card sales receipt to a police officer.  I contacted the local police department and arranged to meet with them the next day.  The next day, we met with Target security and the Officer and Target security viewed the video and discovered the charge was conducted by either a Hispanic or African American male in his 20’s and that the card had been swiped and a signature was made on the electronic signature pad and ID was presented.  I am in my early 60’s and Caucasian.  This person obviously had a fraudulent duplicate card and fake ID.  The local police officer has opened a new case.  I composed, faxed and mailed my second letter of reconsideration with these facts to Wells Fargo Fraud Claims and copied several senior executives from Wells Fargo and Target Stores, elected officials and my credit reporting agencies.  It will be very interesting to see how they respond.

Credit card fraud and ID theft are very serious crimes.  As citizens, we have a responsibility to stand up and be strong against the perpetrators and those who are supposed to protect us.  We have rights that are often trampled on.  I see this problem only getting worse as there are more security breaches and continued lack of will by executives and government officials to stop this problem.  For you bankers and retailers, please do the very best you can to help resolve these problems in the best interests of the victim and do everything you can to beef up your cyber security systems and credit card processing practices.

From Mark:  Knowledge is power.  Have a great Thanksgiving and watch your credit cards!

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