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Can You Believe This? Former US Tax Court Judge Tries to Outsmart the IRS…and Fails!

Diane Kroupa, a former tax court judge, pled guilty to one count of conspiracy to defraud the United States and her husband, Robert Fackler, also pled guilty to one count of obstructing an IRS audit.

According to court documents, between 2002 and 2012, in an effort to conceal their true income, the couple deducted numerous personal expenses as business expenses on their joint return.  Fackler, who owned Grassroots Consulting, deducted rent and utilities on the home in which Kroupa lived while working as a judge in Washington D.C.  In addition, they deducted spa and massage visits, Pilates classes, clothing and jewelry, wine club fees, renovations on their Plymouth home, and vacations to Alaska, the Bahamas, China, England, Greece, Hawaii, Mexico and Thailand. The amount of these deductions was over $500,000.

The couple kept documents from their tax preparer and an IRS auditor while undergoing an audit of their 2004 and 2005 returns.  During an audit of their 2012 returns, the couple falsified documents to convince the IRS auditor that their personal expenses were business related.  They also failed to report they had been reimbursed by Grassroots Consulting in the amount of $450,000 and profits from a sale of land in South Dakota, which resulted in their taxable income as being understated on their returns by approximately $1 million.  Kroupa and Fackler received sentences of 34 and 24 months in prison respectively.

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