This Florida man story is much more serious that the Sunshine State memes you tend to see online. Aug. 13, Roger Whitman pleaded guilty to evading more than $2.4 million in taxes on income he earned from his business.
The 76-year-old Ormond Beach, Florida, man’s business was manufacturing and selling medical equipment.
Court documents and statements made in during the official legal proceedings revealed that between 2002 and 2018, Whitman generated millions of dollars in gross receipts from the medical device sales.
However, Internal Revenue Service Criminal Investigation agents and federal prosecutors alleged that Whitman didn’t bother to file any individual income tax returns or make any tax payments starting in 2000.
Trust created to thwart IRS collections: In 2012, the IRS assessed nearly $800,0000 in taxes against Whitman for tax years 2002 through 2009.
But instead of dealing with that action, federal officials charged Whitman with forming a trust with to conceal his income and assets.
Court filings show that Whitman' named his girlfriend as trustee. Since she had sole signatory authority over the financial vehicle, he had her open two bank accounts in the trust’s name.
Whitman then directed his medical equipment income into the trust’s bank accounts, according to the charges against him. Law enforcement officials said he used the trust account funds to pay personal expenses.
But wait. There’s more.
Court documents charge that around July 2019, Whitman formed a new entity to operate his business to further stymie IRS tax collection efforts.
Federal officials say all of Whitman’s machinations caused a tax loss of more than $2.4 million.
Whitman’s plea this week could lead to a maximum prison sentence of five years, as well as supervised release and monetary penalties. A Florida federal court judge will make that decision when Whitman is sentenced on Nov. 13.
Trusts OK when used properly: A trust is a legal financial entity that holds money and assets for future distribution or management.
Trusts often are used for funds for children’s college costs. The trust’s provisions allow the student to withdraw money only to pay those costs when the young person heads to school.
Trusts also are a good way to keep financial information private. Before the assets you bequeath in your will can be distributed per your last wishes, they must go through probate. That legal process is part of the public record. But with a trust, the transactions stay private.
Trusts also can be complicated. There are living trusts, as well as revocable and irrevocable versions. Certain trusts can only be irrevocable. But in some instances, changes can be made to these irrevocable financial instruments.
There also are, of course, trust tax considerations. A quick search of “trusts” on IRS.gov came up with 1,849 results.
And sometimes, as alleged in Whitman’s case, these legitimate financial tools are used to commit fraud. The privacy component helped the Florida man access his funds and, for the most part, avoid IRS scrutiny of the IRS.
So, if you’re interested in whether a trust might be a wise, and totally legal, move for you, consult a financial expert with experience in the field.
And, as the previously noted IRS website search result demonstrates, make sure that adviser also is qualified to deal with trust tax matters.
Tax Felon Friday: When you take a break from your consideration of opening a trust, you can catch up on situations where financial shenanigans have created major criminal problems for the perpetrators.
You’ll find examples at the ol' blogs' special Tax Felon Friday page.
If you want to peruse even more tax crime posts, notably those that were published long before I gave them a special end-of-week feature designation, you can scroll through, what else, the tax crimes category.
You'll find this post at the top of that collection right now, so just scroll down for more.
You also might find these items of interest:
- N.C. tax refunds available in wake of SCOTUS trust ruling
- IRS files $3.2 billion tax lien against Texas man, his brother's estate
- Inflation eases tax bites in 2024 on capital gains, estates, and other wealth-related income
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