PITTSBURGH, Pa. — A 70-year-old Pennsylvania man faces up to a year and half in prison for having more than 40 people cash in lottery tickets worth $520,000 so he could avoid paying federal income tax on the winnings.
Sherman Friend, of McClellandtown, faces a sentence of 12 to 18 months in federal prison when he is sentenced Feb. 15 on the tax evasion charge he pleaded guilty to Friday before U.S. District Judge Arthur Schwab in Pittsburgh.
Assistant U.S. Attorney Nelson Cohen said Friend won big when he bought 208 50-cent tickets on the number 1127 for the lottery's mid-day Big 4 drawing on Dec. 17, 2009. Each ticket was worth $2,500, so Friend asked more than 20 friends who, in turn, recruited others, to cash the tickets so the tax liability couldn't be traced back to him.
In most instances, Friend paid the ticket-cashers $250, or 10 percent of each ticket's value, Cohen said.
Friend's attorney, John Cupp Jr., declined to comment about how often Friend plays the lottery or whether he was using a system to place his bets.
"I wish I knew," Cupp said.
Friend had previously won a vehicle in a fire department raffle in Maryland in 2007 and became angry when he learned he owed income tax on the vehicle, which he had given to a relative, Cohen said.
"We would submit that as evidence of his knowledge that if you won a lottery or raffle, you have to pay the tax," Cohen told the judge.
So, when Friend hit big on the lottery, he was determined to avoid the taxes.
"He went on to explain that he didn't feel he owed the taxes on these moneys," Cohen told the judge, referring to a statement Friend gave to Internal Revenue Service investigators.
In all, Friend avoided more than $132,000 in federal income taxes by failing to declare his cut of the winnings, which added up to more than $481,000 in 2009 and 2010, the two years in which he had the others cash the tickets. The lottery winnings were Friend's primary source of income in those years.
Cohen told the judge that Friend has agreed to repay the back taxes and that he may be sued by the IRS for penalties and interest, which have yet to be calculated.
mr.friend tried his best efforts NOT to pay taxes and now he is caught he should pay the penalty and serve the law ful time in jail he has earned the jail time
"Friend's attorney, John Cupp Jr., declined to comment about how often Friend plays the lottery or whether he was using a system to place his bets."
Sounds like they not only wanted to punish him and get the unpaid taxes, but someone wanted to get his system too.
i know right.
i probably would have tried the same thing. i have played .50 straights before of cash 4 so that i wouldn't have to pay the taxes if i won i still do. i gotta give it to give him for trying. i don't blame him ,i want all my money too. but i havent went to the extreme as 208 tickets. wow. but if he did have a system. he could have gotten away with it, he just went about it all wrong concentrating on that one number like that. he could have play ten and this number . 50 straight, a couple of days later. ten on that number . 50 straight... and so on and just slowly cash them in with just you and probably 2 other people. he caused to much attention to himself on that number.
Sounds like he didn't try hard enough. He should had set up his system as some kind of investment scheme rather than income, that way he wouldn't have had to pay any more taxes than he paid his friends to cash those tickets for him. I'm sure he could have found some lawyers like Romney used to get his tax rate to 13% or less.
<snip> what a win! Tim Geithner cheated on his taxes and got a job as Sec. Of treasury lol
Wow, i thought taxes is already taken out as soon as you Win
Wow, wish I won more than 500Grand. I'll gladly pay 25% fed tax and keep 375Grand for myself. Better than not winning. Could have sold the strategy and made more money. If there was one. Dropping $104 on one number takes some balls...
Its my guess that this guy is wealthy...... remember when the IRS showed up at Willie Nelsons house??
The rate is 35% and the President wants to make it 45% after the first of the year.
Yeah but thats only on the rich.............. Right????????
It'll come out of your jackpot no matter if you're rich or poor.
Hello Friend, said the cell mate.
your rate is 35%, mine is 25% buddy.
The "current" president.
If you win a jackpot, you will pay 35%, pal.
Unless you cheat on your taxes.
In which case there may be a Cabinet Position for you.
The Good Lord willin' and the creek don't rise.
Im putting mine in a Foundation, like Bill Gates does.
Not until you've paid the utmost farthing.
Seeking tax shelters to avoid government confiscation is now unpatriotic according to Obama and Reid.
Ask Romney.
We're supposed to be proud to give the government all they want of what's ours.
And I know you wouldn't want to be unpatriotic.
I don't know where you get your info from. But I ain't from appalachia, pal. Don't be accusing someone without knowing the facts, pal. ...maybe I should tell you to stop smokin and drinking that appalachia mountain funny stuff... pal.
I would buy a book by Ridge.
The fact we have to pay taxes on lottery winnings and gambling winnings in this country is disgusting. We are playing a game that is taxed at upwards of 50% to begin with. This backward type of thinking is why we are 15 trillion in the hole as a country. Instead of incentivizing people to play and to churn more handle it is an absolute money grab at every turn. Let us face it. 99.9% of people lose money gambling whether it be horses, casinos, or lotteries. But the goverment knows that most people are lazy and will not keep track of winnings and losses and will pay up. Just like many lotteries have these crazy bonus areas on scratch off tickets because they know some people will just throw tickets away thinking they lost.
The smarter way to pay less on taxes is to pick up losing tickets at 7-11 or the track and write them off against your winnings if you are every lucky enough to hit a 10000 to one shot so many times like this guy did. One day it might be me because I fire away at 1125 here in Illinois as it is my bday and it has never come up!
No you're from some little hick town of 400 hicks on the MD line.
You wouldn't make it in the Apps, boy.
Run along now, numbnuts, I'm through with ya.
just like I thought. got nothing to do in your little old cabin so start an arguement without any facts and start calling names. take your negativity and shove it like the furry tale rats you eat, old man.
I say buy 208 of them right away....... And don't forget to save your losing tickets for tax purposes.
You are too funny Woody, the base tax rate depends on how much you win.......
Well, thank you, Artist.
I just might commence to writin' one now!
Anything over $388,350. pays 35% tax.
http://taxes.about.com/od/Federal-Income-Taxes/qt/Tax-Rates-For-The-2012-Tax-Year.htm
You started with the names, son.
Remember? You called me buddy so I called you pal. Go look.
So why don't you just blow it out yer @$$, hick boy?
It would be ironic if this guy was one of those people running around saying, "The rich need to pay their fair share."
I'd say there's a good possibility. It's always "someone else" who should pay.
where I'm from "buddy" isn't derogatory. Pal isn't either, but you used it sarcastically and called me hick. Info alert, last time i checked Delaware County, Pa is no where near hickville. You are so clueless, oracle my Azz, sounds more like sour grapes because you had a hard life. Stop holding grudges and enjoy your twilight years... please fade away...
I was ruminatin' on the same thing, Todd.
They all the time wanna sock it to the rich guy until they're the rich guy.
Then they want new rules.
You still here, numbnuts?
I thought I told you to run along a while ago?
Now beat it, hick boy. Go whittle on a stick or somethin'.
LOL.... The old "you used it sarcastically but I didn't" reasoning??? Way to funny, Woody...
Until you get out of paying the 35% I think you lost the argument..... lol. lol. lol.
numbnuts? is that appalachia oracle speak? ...fade away...or do you want to tell your story on the couch.
Numbnuts.
Well son, if the shoe fits...
It appears many folks are confused at what the true Federal tax rate is on Lottery winnings. The 25% Federal tax that gets witheld on major Jackpots is just the initial down payment. The top tier Federal tax rate is currently 35% and is set to go up in 2013. The winner is still responsible for the other 10% but he/she can mitigate the additional tax owed by working with an experienced CPA and tax attorney.
This is the number one reason why so many Jackpot winners get in trouble because they assume that ALL Federal taxes have already been paid prior to collecting their winnings.
hey Ronnie, you must understand that Federal tax is flexible. There are variables in everything we do, its called choice. Look at Romney, for example. why 13% and not less... or more. I'm not condoning breaking the law, more like playing the game we know the rich plays.
Your trying to say people are responsible for understanding and obeying the law??? Interesting!!
Dude, Romney (or ANYONE) would pay that rate on their INVESTMENT INCOME. Winning the lottery is REGULAR INCOME.
If you take some of that lottery money and INVEST it, then your INVESTMENT INCOME will only be taxed at the INVESTMENT INCOME rate.
Get it?
(I don't think you know the "game the rich play", because there is no game, other than getting taxed twice: once when they first earn money, and then a second time when they invest their money and get investment income based on risking that money they've earned.)
thank you, Jill. Yes, that 10% isn't due until the next file date. Like I said variables, timing is crucial, let the winnings work in your favor.
Is that whats bothering you..... "the game we know the rich plays" ???
He should have just paid and been done with it. He could have invested a portion of his winnings and still be making money. Nice hit. But for the life of me..50 cent tickets? $104.00 on 1 number. I know folks who put up to 20 bucks on 1 number..
I would be willing to bet he played that number 1000 times.
Nothing really bothers me. I'm too laid back. i just wish I had the money to invest so I can pay the low capital gains tax and let the money work for me.
"But for the life of me..50 cent tickets? $104.00 on 1 number."
Folks round here would say "he knowed somethin'."
But then he got greedy.
In Pa everyone plays 50 cent tickets on big4. That way the retailer can pay immediately. anything over and you have wait for the check in the mail. Good luck, thanks for the conversation.
Are you conceding that your tax rate on regular income over $388,350. is 35%??
Want my Vote?
Make Lottery Winnings Tax Free.
Sorry I missed all the fun here.
Sounds like when Friend's "friends" started recruiting other warm bodies to do his dirty work, is when everything became compromised.
Nothin' like a juicy topic of tax evasion, to bring out the warm humanity out of people.
It would be rare for someone to pay 35%. They would have to have no deductions at all.
For example, Mitt Romney gave more than $4 million of his investment income last year to charity -- a huge percentage of his income. You do not typically pay tax on money that you gave away to charity, so his overall tax percentage would be less than it would be if he didn't give away anything.
So, in other words, if you won an $8 million jackpot, and you gave away half of it to charity ($4 million), then you would be taxed on the $4 million you kept. (Wouldn't it be strange to pay taxes on all $8 million, even though you gave away $4 million to charity?)
So, if you calculate a straight 35% on the $4 million you have left (which as you mentioned is not a correct calculation, because you only pay the 35% on the amount over $388,000, or whatever it is), then you would end up paying $1.4 million in taxes.
Now, if the average non-tax-paying American looked at that $1.4 million in taxes you paid and compared it to the $8 million jackpot you won, they would say something like, "Hey, rich guy, you only paid 17.5% in taxes! That's less than your secretary pays!" (Or insert an ignorant statement of your own choosing there.)
Of course, that non-tax-paying American would not be taking into account that you gave away half of your jackpot. They would only be interested in foolishly saying that you're "a rich guy playing games to pay nothing in taxes."
Why pay any taxes.
Just kick in a dozen eggs from our chickens, one gallon of milk from our cows, and a little moonshine to uncle Sam once a month.
That's really all it takes to keep this country running anyways.
I live 20 miles from there- lol I bet I know the place where he played- maybe even those he recruited to cash in his tickets. And regarding Mr. Cupp, he was my lawyer once and needless to say.... NEVER AGAIN
I think I'm seeing the light...... It sounds like "a rich guy playing games to pay nothing in taxes"
PAYS MORE IN TAXES
than "the average non-tax-paying American" and the rich guys secretary put together.
That explains why he got 50 cent tickets because taxes must still be paid on $2500 in winnings; that and the fact he knew lots of "10 percenters". It made it easier for him to make sure none of the "10 percenters" kept all the money and had it been $1 tickets, it would be more difficult to find someone to cash it.
In the two states where I've had $1 straight winners, it was very easy to collect the winnings. Depending on how far they live from lottery authorized bank, Ohio players can get paid up to $5000 in a couple of hours and in KY when I had three straight tickets, the cashing agent wrote me a check for $15,000 after filling out the W2-Gs. Had I won over $25,000, I would have taken the tickets to Lottery Headquarters and they would have withheld 25% in taxes.
What. An. Idiot. You should have just paid your taxes upfront, dumbass, and enjoyed your windfall with no stress or worry; now, you're facing jail & possibly losing a big portion of it to penalties & interest. Moron!
Make the Government a donation based entity.
There you go!
I've got my eggs ready, I'll be the first to donate.
Your rate is 35%,too.The lottery will withhold 25% right off the top,but on April 15th you will still owe the feds another 10 %.Thats a fact!
Jill I don't know what you mean when you wrote, "mitigate the additional tax owed." Currently, the marginal tax rate for income over $388,350 is 35% and nothing in the world is going to change that.
Tax deductions, like giving money to charity, would lower your effective tax rate but the money you give away will not lower your tax liability dollar for dollar.
In other words, if your marginal tax rate is 35%, every dollar you gave to charity would only lower your tax liability by 35 cents. So you end up losing 65 cents for every dollar you gave away.
Dear Lottery Players;
You can avoid paying any/all income taxes on your winnings by knowing how to endorse(sign) the lottery check before depositing into an account.
Make a "Demand for Lawful Money"on the back of the check, eliminating the use of Federal Reserve Notes,which eliminates the IRS tax liability on YOU the winner !!!!!!
There's plenty of information out there on this subject matter.........READ and LEARN people.
Funny you should mention this geerod2001,
because the courts determined that federal reserve notes are "lawful money" in 1974, which upheld court rulings from 1874......... Feel free to read about it for yourself........
http://www.federalreserve.gov/faqs/money_15197.htm
geerod2001,
That's the kind of stuff Irwin Schiff used to teach.
Look him up and see what you find.
The difference between tax avoidance and tax evasion?
About 5 to 20 years.
As for the guy in the OP, you think he would have learned something when he won the car.
Yes, that is the "Hope" the I.R.S. is banking on and the "Change" we citizens don't want to move "Forward" which will take us backward. Just cut the spending dude, Mr. President!
I feel so sad about this, but the man should be punished for what he have done. Just remember that paying taxes is our obligation as a citizen. Every one is obliged to do that.
True fact: George Washington, Thomas Jefferson and the other founding fathers didn't pay income tax. Income tax is a relatively new annoyance for American citizens. I'm not excusing Sherman Friend for what he did but paying taxes has little to do with patriotism.
What is now the Federal Income Tax started as a temporary tax to finance America's involvement in WW I.
What about the peeps that signed the ticket. They must of testified to get off easy.
Reminds me of the guy who wagered $700 on 2912 after dreaming about his mother. His mom and my mom shares the same D.O.B. Needless to say he and I are not on speaking terms after that.
Yeah, I remember that guy.
He "knowed something" too.
lol I knowed something too. All lottery winners are shape shifting reptiles.
In Washington State taxes are only taken out if your win is over $5000
So when you go cash your ticket in as I have they tell you that you are responsible to pay the taxes on the money and they hand you a check for the full amount.
Lets not forget that this country was built on the revenue of the lottery dating back hundreds of years.
I think it would be so stupid to put this guy in jail, guess who pays for the jail time, taxpayers (You and I).
Now if they calculated the cost to keep him in jail and add that amount to the interest and penalties he owes on the taxable amount and made him pay that too, now that would be justice!.