Small business owners and independent practitioners such as dentists and doctors often have complex financial structuring plans. When it comes to finances, the feat of sorting and figuring out personal and business assets and debts can be a complex and arduous process. For these reasons, many small business owners and independent practitioners turn to financial professionals like accountants and tax preparers.
Financial professionals have a fiduciary duty to provide advice and carryout financial actions that are in a client’s best interest. In some cases, however, these individuals devise schemes to help clients retain more assets and avoid paying taxes while the tax professional is paid handsomely for their services.
Reassured by the financial professional that the IRS will not find out about the questionable or illegal tax sheltering activities, some otherwise law-abiding individuals may be swayed to participate in activities that ultimately can be defined as tax evasion.
A 54-year-old dentist recently pleaded guilty to criminal charges that he participated in a tax sheltering scheme in which he avoided paying the IRS $437,456. According to court documents, the dentist relied upon the advice of a financial expert and accountant when he set up and funded phony trusts to avoid paying Uncle Sam.
Additionally, in 2012, the dentist filed for federal bankruptcy protection under Chapter 13 which, IRS officials contend, was an attempt to further evade paying taxes he owned from 2008 through 2011. When filing for bankruptcy, the dentist included false financial information, an act for which he will pay additional penalties.
In total, as a consequence of his actions, the dentist will pay civil penalties in excess of $100,000 and more than $608,000 in restitution fees to the IRS. It’s not clear whether those who advised the dentist will face any criminal charges.
Source: DrBicuspid.com, "Nev. dentist pleads guilty to $437K tax evasion scheme," June 30, 2014
