Feds say Charlotte tax lawyer is chronic tax cheat who owes $500K to the IRS
David Newman’s resume details his bonafides as a tax expert — from his Ivy League education and 45-year legal practice to his law school lectures at Harvard and Cornell.
Federal prosecutors say the Charlotte tax attorney has earned another distinction: tax cheat.
In a federal lawsuit filed this month, Newman and his wife, Penny, are accused of going to dogged and illegal lengths to avoid paying their income taxes — an IOU to the IRS that dates back a decade, and now stands at more than $550,000 combined.
Federal prosecutors and the Internal Revenue Service are no longer waiting for the Newmans to settle up. They have asked U.S. District Judge Bob Conrad of Charlotte for the go-ahead to seize and sell the couple’s 8,400-square-foot residence along La Maison Drive in south Charlotte’s Pellyn Wood neighborhood.
Newman did not respond to an Observer phone call Wednesday seeking comment.
In an advertising video on YouTube, Newman discusses his guiding philosophy this way:
“My primary motivations in terms of taxation relate to the intellectual challenge that the law presents,” he says, “coupled with the ability to meaningfully help people in difficult situations.”
The veteran attorney’s own difficulties with the federal government date back to 2011 and 2012, when the lawsuit claims Newman and his wife paid only a portion of their $188,465 income tax bill. In 2013, the IRS attached liens to the couple’s estate to collect.
The Newmans appealed and pledged they’d make good on the debt, leading the IRS to lift the liens in 2014.
The couple’s game of chicken with the tax authorities only grew from there, the complaint shows. First, the Newmans failed to make any of the promised tax payments. David Newman also transferred sole ownership of the home to Penny, part of what prosecutors describe as an effort to wall themselves off from future IRS exposure.
According to Mecklenburg County tax records, the house remains under her name today.
After the change in ownership, David Newman continued to live at the home rent free while he paid the mortgage and utilities, the government alleges.
Federal prosecutors claim the title change was a ruse designed “to hinder, delay and defraud” the IRS’ efforts to collect what the Newmans owed, and they are asking the courts to throw it out.
Meanwhile, David Newman began checking the “married but filing separately” box on his income tax form and resumed evading taxes, prosecutors allege. During 2013-16, the tax lawyer paid only $11,000 of the almost $400,000 he owed the IRS over the four-year period, the lawsuit says.
In 2017 and 2018, the liens on the home returned.
Pennies on the dollar
Every year the U.S. Treasury is skimmed by more than $400 billion in uncollected taxes. More than 80 percent of that results from taxpayers underreporting income, according to the IRS. Tax authorities recoup an estimated $52 billion annually after contacting the delinquent taxpayers.
To be sure, tax complaints, particularly those with celebrity defendants, can involve millions in overdue payments. In 1992, hotel mogul Leona Helmsley served 18 months in federal prison after claiming more than $2.6 million in illegal tax exemptions. “We don’t pay taxes,” Helmsley said. “Only the little people pay taxes.”
That the complaint against the Newmans alleges tax fraud against a tax attorney is an ironic twist.
The couple’s home remains one of the cornerstones of the dispute. According to the lawsuit, the Newmans bought it for $575,000 in 1999. The house and its 1-acre lot are now worth more than $1.75 million, prosecutors say.
Meanwhile, David Newman makes more than $25,000 a month in income, the complaint shows. Yet, prosecutors claim he continues to pay only pennies on every income-tax dollar.
In 2017, for example, David Newman earned more than $300,000 and reported nearly $120,000 in federal income tax, the lawsuit claims. But he paid $12,000, or 10 percent, of what he owed.
While his tax liabilities, penalties and interest have mounted, Newman found other ways to spend his money. According to the lawsuit, he gives $50,000 each year to his daughters.
The couple’s tax liabilities, entering their 10th year, remain.
Jointly, the Newmans’ outstanding tax bill for 2011 and 2012 was almost $148,000 as of March 1, the complaint alleges.
David Newman alone owes another $404,000.
