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A Look at Celebrity Tax Evasion

September 17, 2018

So far, we’ve devoted a couple of blog posts to look at the celebrity financial difficulties. We’ve looked at celebrity bankruptcies and, more generally, looked at celebrity tax troubles.  Here, we’d like to continue this review.  Accordingly, in this post, we’re going to look at a few public figures who’ve gotten themselves into really big trouble.   We’ll look at three individuals, from different occupational fields, that have been charged with tax evasion.  One is a former professional baseball player, the second, a singer and the third is an actor.

We’ve stated it before, but it’s worth repeating: being a celebrity doesn’t provide protection from hardship or financial trouble.  As we’ve seen, some of the most serious financial difficulties have been experienced by high profile celebrities. In some cases, their financial woes are noteworthy mostly because of the individual involved.  In other cases, though, celebrity financial mishaps are fascinating because of the details. A good for instance is the case of actor Randy Quaid, which we’ve previously profiled.  That was a case of a celebrity making critical financial errors or acting in what appears to many to be a bizarre manner.

A Definition of Tax Evasion

A definition is in order here. Section 7201 of the Internal Revenue Code reads, “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”

In plain English, tax evasion is using illegal means to avoid paying taxes.  Armed with this definition, let’s now take a look at a few more examples of celebrity financial misbehavior.

Pete Rose 

Pete Rose is the current record holder for most career hits among Major League Baseball (MLB) players.  Even so, he’s still not in the MLB Hall of Fame. The reason for his absence is related to his gambling problems.  Sadly, this same addiction to gambling has created other problems for Rose.  In 1990, Rose plead guilty to two separate charges of filing false tax returns. During a four-year period in the mid-1980s, Rose failed to report approximately $355,000 in earnings from memorabilia sales, autograph signings and other revenue sources. Fortunately for the man nicknamed “Charlie Hustle” by baseball legend Whitey Ford, the guilty plea helped him avoid more serious charges. 

Rose was also lucky that he received a much lighter prison sentence then he otherwise might have. In fact, Rose was sentenced to just five months in prison.  That, of course, was in addition to paying a modest fine, the back taxes and interest, and performing community service. In the end, the Rose case points to the fact that no matter how talented a player may be, it’s still important to seek help to avoid financial potholes. 

Wesley Snipes 

Star of the well-known and popular “Blade” film series, actor Wesley Snipes was convicted in 2008 on three misdemeanor charges of failing to file federal taxes. Snipes received a total of three years in prison, one year for each charge, and an additional one year of probation.Snipes started serving time at McKean Federal Correctional Institution, a medium-security prison in Pennsylvania, and finished at a nearby minimum security prison.  Perhaps the most noteworthy aspect of Snipes’ case is the dollar amount involved.  All told, Snipes faced a tax liability of nearly $17 million of back taxes, penalties and interest. It all could have been much worse.  Snipes caught a big break when his legal team won an acquittal on felony tax fraud and conspiracy charges.

Willie Nelson 

Leave it to a musician to handle financial problems in a creative way.  In 1990, renowned singer-songwriter Willie Nelson was slapped with a tax bill of roughly $16.7 million. Under similar circumstances, many people would understandably panic.  Nelson, though, appears to have calmly dug into his creative genius and found a workable solution.  His solution?  He released an album making light of his fiscal plight which he used to generate funds to settle his tax debt. The album, entitled The IRS Tapes: Who’ll Buy My Memories, sold well and, by 1993, Nelson was able to pay off the back tax debt in full. Nelson was assisted greatly by his attorney who creatively crafted a revenue sharing arrangement with the IRS.  Under it, Nelson received $6 from the sale of each album, with the IRS receiving $3 from each sale.

Before the new albums release, Nelson faced serious consequences, such as the loss of his house and other major possessions. With his IRS deal in place, though, Nelson was able to fully pay his tax debt in a few years. As an IRS spokesperson said about the deal “we try to work with taxpayers… And if we have to come up with some creative payment plan, that’s what we’re going to do, because it’s in everyone’s best interest.”

New York Tax Evasion Attorneys

As the celebrities referenced in this post demonstrate, it’s not uncommon for uncommonly talented individuals to make poor fiscal decisions. We’ll continue to feature more articles on high visibility tax cases.  They help our readers understand the consequences of letting their financial lives get out of control. As we’ve hinted before, the rise to the top is wonderful, but any subsequent fall becomes that much more painful.

The New York tax lawyers at Mackay, Caswell & Callahan, P.C., are dedicated to help clients put themselves in the best financial situation.  That includes situations including criminal tax evasion.  They work hard to resolve the various complex issues our clients bring up. If you have a tax issue or business law matter, don’t hesitate to reach out and our dedicated New York tax attorneys will be there to help.  With offices in Albany, New York City, Rochester and Syracuse, we’re sure to have a New York tax attorney that can get started working with you right away. 

Image credit: JD Hancock

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