Mike D. Gullible is an airline pilot. While Mike never graduated from college, he does have several professional pilot licenses. For 10 years, Mike filed tax returns properly reporting his W-2 wages. Last year, Mike's brother introduced him to a new return preparer, Cindy Scammer. Ms. Scammer told Mike and his brother that they paid too much in taxes. Ms. Scammer told Mike and his brother that they could create S-Corporations and that they should deposit their wages into the S-corp's bank accounts. Ms. Scammer then prepared a corporate tax return claiming his wages as corporate income. Ms. Scammer also deducted on the corporate 1120-S personal expenses (ie mortgage payment, personal credit cards). The corporate taxable income then flowed through to Mike's personal tax return. By following Ms. Scammer's advice, Mike paid $75,000 less in tax for year 2011. Mike's brother did not follow Ms. Scammer's advice, but he was present when the three of them discussed Ms. Scammer's new tax strategy. Mike's brother did help Mike open the corporate bank account. Mike and Ms. Scammer each signed the corporate and personal tax returns under the penalties of perjury.
REQUIRED:
a. What felony crimes, if any, can Mike, his brother, and Ms. Scammer be charged with? Discuss the evidence that would be presented to satisfy the elements.
b. Did Mike act willfully? What additional questions would you ask Mike to help you make this determination? What documents would you request Mike to produce to help you in this determination?