Bluffing in poker can work quite well. However, if your opponent will always call, bluffing cannot work. One poker player learned that the IRS always call your bluffs (especially when they have evidence).
Guy Smith owns an interior construction business in Connecticut. He also enjoys playing poker, and had some success. With that success comes W-2Gs: They’re issued if you have a cash of $5,000 or more (net of the buy-in). Mr. Smith has had many, winning a poker tournament in Connecticut and finishing fifth in another in Florida.
Mr. Smith apparently didn’t tell his tax professional about those winnings. The IRS computer would, of course, send notices noting the discrepancies on the returns. Given the tournament winnings were more than $1 million, this is a big issue. Ignoring tax forms that are sent to the IRS has about a 0% chance of long-term success.
But like a bid informercial, that’s not all. Mr. Smith ignored $482,000 of income from his business (and didn’t tell his tax professional about that, either). Unfortunately for Mr. Smith, the IRS discovered this. With nearly $1.5 Million of unreported income and over $800,000 of unpaid federal income taxes, IRS criminal investigation was interested.
Mr. Smith pleaded guilty to one count of tax evasion last week; he is scheduled to be sentenced in March and faces up to five years at ClubFed. Given he has agreed to cooperate with the IRS and pay all outstanding taxes (and the penalties and interest), his actual sentence will likely be far less.
In just over two weeks I’ll be announcing this year’s winner of the “Tax Offender of the Year” award. To win this coveted award [1] it takes more than simply evading taxes. It has to be special; it really needs to be a Bozo-like action or actions. If you have any ‘deserving’ nominees, let me know.
[1] I’m not sure anyone really covets receiving this award, but given the actions of some of the previous winners it may be that some were actually trying to win the award.