Tax fraud did not work out for an Ohio man who came up short in front of a federal jury.
John Everson of Liberty Center, Ohio, is a successful electrical engineer who owned his business. As any business entrepreneur knows, it can be difficult maintaining the bottom line, keeping up with tax reporting, and a myriad of other responsibilities that come from heading up your own business.
By all accounts, Mr. Everson ran a going concern. Between 2009 and 2016, he earned over $2.3 million. The narrative pauses here to consider the criminal tipping point—that space and time when an individual decides that a ploy or scheme to avoid taxes might suit their interests better than remaining compliant. Some people are driven to tax fraud by circumstance—it may seem the only way to rescue a sinking business. Or—simple proximity to the levers of business makes tax crime easy. In both scenarios, warning flags about ground-level consequences are ignored.
For Mr. Everson, the aim was to conceal income to avoid paying taxes—a common goal carried out across the U.S. every year. The mode in his case was a trust. The Internal Revenue Service (IRS) takes a hard line on abusive trust schemes. The IRS notes scammers use abusive trusts for reasons that include:
- Reduce or eliminate income, gift and estate, and self-employment taxes
- Increase deductions for personal expenses paid out by the trust
- Ability to boost deductions for depreciation on expenses, homes, and other property
As noted by the IRS, “Abusive trust arrangements often use trusts to hide the true ownership of assets and income or to disguise the substance of transactions.” Trusts are intended to separate the control of trust funds from those who benefit from the trust. In abusive trust set-ups, the owner continues to control and direct funds in the trust.
For his part, Mr. Everson directed his clients to pay invoices to his trust. He then transferred the money into financial accounts created for non-profit organizations he had created which were owned by his family members. According to the IRS, Mr. Everson registered his home and airplane as owned by a non-profit entity.
It is unclear how the IRS criminal investigation into the business of Mr. Everson began. But, in the end, he owed $658,487 via his actions. Mr. Everson was so sure of his scheme that he took his case before a federal jury—rather than negotiating a potentially more favorable resolution to his dilemma. He was convicted and sentenced to over two years in prison, along with restitution, and supervised release. It comes down to—was it worth it? Only Mr. Everson, headed for prison, can say.
If you are aware that the IRS is interested in your business, or if you would just like to get out from under a scheme that you wish to shed—speak with an experienced criminal tax attorney. The guidance could get you ahead of potential criminal tax charges coming your way.
Contact an experienced Ohio tax lawyer about tax challenges or IRS litigation
Talk to the tax group at Robert J. Fedor, Esq., LLC when you have concerns about offshore compliance, payroll tax issues, or other tax controversy. With offices in Chicago and Cleveland, our knowledgeable tax group is here to help. For more information, contact our office or call us at 800-579-0997.