Are you familiar with the song “I always feel like somebody’s watching me?” Most likely they are. This blog is about just that. Someone is always watching. In this case, it is our good friends over at the Internal Revenue Service. They just want to give you a little tap on the shoulder to let you know of their presence. Especially when it comes to your business tax reporting and deductions. Working in my profession, I can tell you quite confidently that I have seen a lot of very creative things that people want to write off and take as a tax deduction. As a bookkeeper, it is our job to find these creative blips, code them correctly, and educate our clients. Most people are not trying to intentionally pull one over on “The Big Brother,” “The Man,” “The Revenue Police,” or whatever term of endearment you want to call your friends over at the IRS , but claiming false deductions can turn into a bad situation, whether it’s done knowingly or not. Unless you have no friends and your life is lonely and vacant, going to JAIL to acquire a circle of buddies should NOT be your number one business goal!
With a quick Google search, I have found a few noteworthy cases to share. Grab your popcorn and put your feet up because this is a good read. The following are the Top 10 Most Famous Cases of Tax Evasion that will leave you wondering WTH were they thinking, and just for fun, I have included the Top 10 Celebrity Cases.
These are all true cases and are public knowledge. ENJOY.
Top 10 Famous Tax Evasion Cases:
- Al Capone – The infamous gangster tried to claim he had no income, despite running a vast empire of illegal activities. Capone’s claim that he was simply a humble businessman with no income got him 11 years in Alcatraz.
- Leona Helmsley – The “Queen of Mean” insisted that only “little people” pay taxes while she attempted to deduct her multimillion-dollar home renovations as business expenses. A jury disagreed, and she got 18 months in the slammer.
- Paul Manafort – Trump’s former campaign manager hid millions in foreign income using offshore accounts and then tried to claim his lavish lifestyle was just “business as usual.” He was sentenced to over 7 years in prison.
- Wesley Snipes – The “Blade” actor tried to argue he didn’t owe any taxes because, according to him, the IRS didn’t have jurisdiction. The government politely disagreed, and Snipes spent three years behind bars.
- Richard Hatch – The first “Survivor” winner thought he could outwit the IRS by not declaring his $1 million winnings. Spoiler alert: he couldn’t. Hatch ended up serving 51 months in federal prison.
- Michael Vallone – Promoted a fake “church” scheme that promised members a tax-free life. His congregation was left out to dry as Vallone found himself with a 10-year prison sentence for fraud.
- Michael Minns – A tax attorney who claimed false charitable contributions on behalf of his clients. The IRS was not charitable in its judgment, and Minns received 2 years in prison and lost his law license.
- Walter Anderson – A telecommunications tycoon who went to great lengths to hide $365 million in offshore accounts. He was sentenced to 9 years in prison for his efforts.
- Joe Francis – The creator of “Girls Gone Wild” tried to write off thousands of dollars in personal expenses as business costs, including a $5,000 meal with casino mogul Steve Wynn. He ended up in jail and faced heavy fines.
- Lauryn Hill – The Grammy-winning singer-songwriter failed to pay taxes on over $1.8 million in income, citing her desire to escape the music industry’s commercial pressures. The IRS didn’t buy it, and she served three months in prison.
Top 10 Celebrity Tax Evasion Cases:
- Nicolas Cage – The Oscar-winning actor blamed his money manager for failing to pay $14 million in taxes. The IRS wasn’t starstruck, and Cage had to sell off many of his eccentric purchases, like dinosaur skulls and haunted mansions, to settle his debt.
- Martha Stewart – Though more famous for insider trading, Stewart also had a few tax evasion woes, particularly regarding her New York property taxes. She served five months in federal prison, partly due to her tax-related missteps.
- Lindsay Lohan – The troubled actress racked up hundreds of thousands in unpaid taxes, landing her in more trouble with the law. While she didn’t serve time for tax evasion specifically, her financial woes added to her legal challenges.
- Willie Nelson – The country music legend owed the IRS a whopping $16.7 million after his tax shelters were disallowed. He didn’t go to jail, but he did lose nearly everything and famously released the album “The IRS Tapes” to help pay off his debt.
- Wesley Snipes – A double entry here because of his high-profile case. Snipes not only claimed that taxes were illegal but also failed to file returns. His prison sentence made headlines worldwide.
- Ja Rule – The rapper was sentenced to 28 months in prison for failing to file tax returns on more than $3 million in income. His attempt to rule without paying taxes ended up costing him his freedom.
- Fat Joe – The rapper and producer failed to pay taxes on over $3 million in income, resulting in a four-month prison sentence. Looks like the IRS made sure he “Lean(ed) Back” into compliance.
- Marc Anthony – The salsa superstar failed to file returns for several years, owing over $3 million to the IRS. While he didn’t serve jail time, his tax troubles were widely publicized, forcing him to settle quickly.
- Chuck Berry – The rock ‘n’ roll legend spent four months in jail for failing to pay taxes on income he claimed was non-taxable because he was paid in cash. The IRS showed him that cash isn’t king.
- Richard Pryor – The legendary comedian and actor tried to evade taxes by not filing returns, believing his comedy income didn’t count. The IRS didn’t find his reasoning funny and sent him to prison for 10 months.
Moral of the Story:
This is something that shouldn’t have to be said, but I will say it anyway: Pay your taxes, file your reports, don’t claim bogus charity contributions, and remember that the IRS is not going to give you a “Get Out of Jail Free” card just because you have a lavish lifestyle that you feel your company needs to pay for. And for God’s sake, if you decide that having an offshore bank account makes you cool, just be aware that the “Audit Me” hat you’ll be wearing will make your invisibility cloak disappear. The Men in Black love it when you make their jobs easy. No one wants to be under the IRS microscope, with their hands all over your ASSets. Consult a professional like LEOZIE Bookkeeping LLC to organize your expenses and work with your CPA to help keep you at arm’s length from the law.