Don't Mess With Taxes

Most of us would love to win the lottery. And most of us know that hitting a jackpot means the U.S. Treasury is a winner, too.

Taxes due on gambling winnings are just part of the price of such payoffs. But an Ohio man pushed his luck a bit too far. He's now awaiting sentencing on his attempt to evade taxes on a lottery jackpot.

The Hillard, Ohio, man pleaded guilty this week in U.S. District Court to one count of filing a false tax return with the Internal Revenue Service in connection with his $1 million lottery win 2015.

The man pocketed $710,000 after $290,000 was withheld when he collected on his winning ticket, according to the U.S. Attorney's Office for the Southern District of Ohio. But the charges filed last October against him alleged that when he filed 2015 tax return, he tried to reduce his winnings to avoid additional taxes.

The Department of Justice (DoJ) said he reported overall gambling winnings of $1,069,100 and falsely claimed gambling losses of $1,069,100 in an attempt to zero out his winnings. However, according to court documents, the man knew that his actual gambling losses were no more than $300,000.

That overstatement of gambling losses, as the DoJ delicately put it, on his 2015 tax return produced a $255,967 tax loss.

International wire transfers and travel: Investigators put together a case that detailed not only international financial account transfers, but also multiple trips abroad to put money into the foreign accounts.

In none of these cases, said law enforcement, did he file the required Form 105, Report of International Transportation of Currency or Monetary Instruments. He also failed to file the FinCen Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

And on the 2015 federal tax return in question, the DoJ alleged that the man also didn't disclose that he had a foreign bank account. In fact, say prosecutors, he told his tax preparer that he didn't have any money abroad.

Maybe it's just greedy me, but it sure seems like this guy went to a whole lot of trouble and probably added expenses for a relatively small $1 million lottery win. Not that I'd turn down a $1 million winning lottery ticket. But I'd be happy with, and take without further ado, my cut after federal taxes.

IRS CI on the case: The special agents of the IRS' Criminal Investigation (CI) division definitely weren't dissuaded by it just being just a million-dollar case.

"Concealing bank accounts overseas and inflating losses on a tax return is a recipe for criminal tax prosecution," said Bryant Jackson, Special Agent in Charge for the IRS Criminal Investigation field office in Cincinnati. "IRS CI will continue to apply substantial resources towards and vigorously investigate criminal tax fraud."

And their investigation obviously was strong enough to prompt the man's guilty plea.

Now the former lottery winner is facing up to three years in prison and a maximum fine of $100,000. We'll see what kind of luck he has at sentencing.

You also might find these items of interest:

• 6 tax & financial tips for the next lottery millionaire
• Swiss banker wanted in U.S. tax evasion cases escapes IRS clutches
• Massachusetts trio charged in $21 million state lottery, tax evasion scheme
• Reporting all your income, including gambling winnings, on Form 1040 Schedule 1

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