Remember Mo Vaughn? Big man and big hitter. American League MVP in 1995 with the Red Sox. Mo had his best year in 1996, when he hit for a .326 average, played in 161 games, with 44 home runs and 143 RBIs. His recent case before the Sixth Circuit Court of Appeals is a cautionary tale: you can’t delegate your responsibilities to report and pay your taxes.
After he retired from baseball, in 2004 Maurice Samuel Vaughn engaged a financial manager and a CPA to take care of all of his financial affairs. Seems to me like the prudent thing to do. This arrangement continued until late 2008. Mo would deposit all his income into two accounts – one personal and one business. The financial manager was the sole signatory on both accounts.
In 2004, 2005 and 2006, the financial manager properly filed all of Mo’s income tax returns. In 2007, the financial manager neither filed Mo’s returns nor paid his taxes.
In 2008, Mo decided to manage his financial affairs on his own and terminated his relationship with the financial manager and the CPA. To Mo’s utter surprise, he discovered that the financial manager had been stealing his money for years.
Mo sued the financial manager and won judgements of $4 million against her and her company upon which he has not collected.
Mo didn’t have enough cash to pay his 2007 taxes. It took him a while to get square with the Feds. He asked that his penalties be abated for reasonable cause: he had hired experienced financial professionals to take care of his financial affairs.
The Sixth Circuit rejected his appeal. The court said it was a simple case. Acting on advice of a tax expert may show exercise of due diligence and constitute a reasonable cause for such actions. However, it does not take a tax expert to know that one has to file a return and pay his taxes. Those responsibilities are non-delegable statutory obligations of the individual. The court said the lack of oversight of his agents foiled Mo’s reasonable cause argument.
So, that’s the sad tale with an important lesson. In case you are wondering, Mo’s financially just fine today. He is a very successful real estate investor and owns a trucking company. According to Forbes, he now writes his own checks.
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