Accountant Sentenced on Tax Fraud Charge

A Costa Mesa accountant who told the IRS he was a handyman in an effort to hide thousands of dollars in income was sentenced Monday to four months in prison for failing to report all his income on his 1991 tax return.

In a plea agreement, John Johnstone, 58, said he avoided paying $41,600 in federal income tax. As part of his sentencing, he was ordered to serve an additional four months under house arrest and to pay $31,196 in fraud penalties.

Johnstone, 58, worked as a tax preparer and accountant on hundreds of individual and business tax returns. He said in the agreement filed in federal court that from 1991 through 1994 he listed his occupation as handyman on his own returns.

Johnstone said he drew up phony invoices as evidence that he worked as a handyman. He claimed in his own returns that all his income was in cash and that he deposited it into a single bank account.

But his income during that period was from his accounting work, and most of it was paid with checks that he deposited into an account held in trust in the name of “HBBS,” court documents show. Johnstone did not report that income.