Tax Evaders Beware: Don’t End Up Like These Celebs

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Tax Evasion

Should we? Do we dare? Would we actually get caught? Everyone has thought about cheating a bit to get ahead financially. The government has millions of people to watch. And a lot of people must be cheating. And cheating worse than me. They’ll never look my way; I can do this! Usually, hopefully, leveler heads (maybe yours or more likely your accountant’s or attorney’s) prevail and you play it honestly. But, in case you need a few more reasons to do the right thing, here are some ways that celebs have tried to cheat and got caught.

So, let’s start with a guy who tried to cut his tax bill to nothing on principle – the original Blade, Wesley Snipes. The action star did not file any tax returns and paid no taxes from 1999-2001. During those years, he evaded $7 million of taxes. He was advised to do this by his accountant and an anti-tax ideologue, who ended up being co-defendants during his trial in 2008. Ultimately, Snipes was sentenced to 3 years in prison and several months of house arrest. Snipes and his co-defendants are not the only ones to try this approach, however. Check out Irwin Schiff, who completely stopped paying federal income tax and encouraged everyone to follow suit, even writing books about it – more here. The IRS is not going to stand for that though - they’ve even created a whole section on their site dedicated to “The Truth About Frivolous Tax Arguments.”

Then some people simply don’t pay close enough attention to their financial affairs (or so they claim). If you’re thinking this could happen to all sorts of people – it kind of seems like it can. Our two celebs who fell into this trap are worlds apart from one another – skiing phenom Lindsey Vonn and country music star Willie Nelson. Vonn had a $1.7 million tax lien filed against her and her estranged husband by the IRS for delinquent taxes. She paid the bill as quickly as she could and said that she would not make the mistake of “relying on someone else who you (she) believed had your (her) best interest at heart” again. Nelson was hit with a $16.7 million debt to the IRS, with an incredible $10.2 million coming from just the penalties and interest. Willie said that it was due to mismanaged earnings and bad direction from his accountants. He even sued them and the collections went toward the bill. Additionally, he took several other courses of action to help settle the bill, which was decreased to $9 million, including releasing an album called The IRS Tapes: Who’ll Buy My Memories. It took 3 years to get the debt fully settled.

Of course, some people are just plain greedy, like Martha Stewart and Daryl Strawberry. In 2001, Stewart was suspected of insider trading when she sold 4,000 shares of a biotech company called ImClone right before the company went public and one of their drugs was rejected by the FDA. She was ultimately convicted in 2004 on four charges related to the case; conspiracy to obstruct justice, obstruction of justice, committing perjury, and giving false statements. The sentence was five months in federal prison and five months of home arrest. Mr. Strawberry, of the New York Mets (or possibly Yankees depending on who you support and when you started watching baseball), pled guilty to tax evasion in 1995. He tried to dodge more than $100,000 in taxes by not reporting upwards of $350,000 in income from autograph shows and promotional appearances. He was sentenced to 3 months in prison and 3 months of house arrest.

Then you have people who take greed to a whole 'nother level – enter billionaire Beanie Baby creator Ty Warner. He was sentenced to a staggering two years’ probation, 500 hours of community service and a $100,000 fine for hiding millions of dollars in a Swiss bank account. This is in addition to the $53 million civil penalty he paid and the $27 million in back taxes. It’s no wonder folks get greedy! That’s a very light punishment considering the extent of his crime if you ask me. The judge said he gave lenient sentencing because he felt society would be better off if Warner was allowed to continue his good works.

And, of course, some people are just your standard, straight-up criminals. Al Capone, the infamous Chicago gangster and businessman, was arrested and convicted of tax evasion in 1931 because even an illegally earned income is subject to income tax. He was sentenced to 11 years in federal prison for his crimes. Interestingly, part of the evidence used to estimate his income came from his own lawyer. They presented the information during prior negotiations about what he was willing to pay to avoid a hearing.

Whether it be principle, ignorance, greed, or plain old criminal activity, you can get caught. Just like these guys and many, many others. Losing out on some money stinks. I understand that. But do the right thing – pay your taxes so you can stay out of jail, pass go, and collect your $200.



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