A high-rolling insurance agent who did some planning on the side told the IRS for five years in a row that he earned no commissions whatsoever. He's since been arrested.
Ronald Patetta failed to report $900,000 in income between 2001 and 2005.
He also got in over his head with real estate, buying a $600,000 house in New Jersey in 2002 and refinancing it for $648,000 two years later -- right before the housing markets started to weaken.
Once the IRS caught up with him, he filed for bankruptcy in 2007 to, among other things, get out of a $440,000 income tax bill.
But instead of working with the authorities, he antagonized them with "letters and court papers challenging the legality of the IRS's conduct."
That's a recipe for pain, and now he faces five counts of tax evasion, five counts of filing false returns, and up to $1.7 million in fines.
Patetta's case hammers it home: planners need to lead by example. Not every planner needs to be incredibly wealthy, but if he or she can't recognize the futility of paying income taxes, maybe the clients need to go elsewhere.