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Famous Tax Evasion Cases

It's not a crime to reduce or minimize business or personal income taxes by taking advantage of the tax benefits provided in the U.S. tax code, or by structuring your finances to reduce your tax bill. However, you risk sizable penalties and even prison when you resort to deceptive or fraudulent tactics to avoid paying taxes. Although only a tiny fraction of returns are audited each year, the penalties for tax evasion and tax fraud are not worth the risk.

While thousands of Americans end up in court to face tax charges each year, it is usually only those cases involving celebrities or successful businesspeople that draw the public's attention. The Internal Revenue Service (IRS) is often more than willing to use the attention these trials draw to show other taxpayers what can happen if they don't obey the tax laws. The following is a list of famous individuals successfully prosecuted by federal and state tax authorities.

Walter Anderson

An American entrepreneur, Walter Anderson made his millions after the breakup of AT&T in 1984. He was convicted of the largest tax evasion case in U.S. history for evading more than $200 million in taxes. It was reported that in 1998, he paid $495 in taxes on $67,939 of income. The IRS alleged he made at least $126 million that year, hiding the income using offshore corporations. Anderson was sentenced to nine years in federal prison.

Richard Hatch

America was watching in 2000 as Richard Hatch received $1 million for winning the first year of the reality TV show "Survivor." CBS sent the IRS and Hatch Forms 1099 reporting those winnings. However, he failed to pay taxes on that income and other earnings from his new celebrity status. In 2006, Hatch was convicted of tax evasion in federal court and served a 51-month prison sentence as a result. Hatch returned to prison for nine more months after he failed to amend his 2000 and 2001 returns.

Lil Wayne

The Grammy Award-winning rapper, whose real name is Dwayne Carter Jr., has had numerous tax liens against him for back taxes. With liens dating back to 2002, the IRS increased the size of the liens against him until they reached more than $12 million in 2014. In 2019, Lil Wayne finally settled his outstanding tax debt.

Nelly

In 2016, the IRS put a tax lien on the property of hip-hop performer Nelly, whose real name is Cornell Iral Haynes, Jr. The IRS alleged Nelly owed more than $2.4 million in back taxes from 2013.

Ron Mix

Ron Mix was a Hall-of-Fame offensive lineman with the San Diego Chargers who became a successful workers' compensation lawyer after his playing career ended. He pleaded guilty to reporting $155,000 in referral fee payments as charitable donations between 2010 and 2013 and paid a fine of nearly $50,000.

Nicolas Cage

The IRS filed documents in 2009 alleging that Nicolas Cage failed to pay more than $6 million in taxes for 2006. Cage contended his failure to pay taxes was due to his management team, and he ended up suing his money manager for fraud and negligence. After taking any role he was offered, Cage announced in 2022 that he had finally paid off his tax bills and would be more selective with his film roles.

Willie Nelson

Willie Nelson was a household name for having written and performed such country music standards as "On the Road Again" and "Whisky River" when he began his decades-long struggle with the IRS over unpaid taxes in the 1990s. The federal government ended up seizing most of Nelson's property to pay his reported $32 million tax liability. It's believed that his tax woes were the result of bad advice he received from an accountant who hid Nelson's money in bogus tax shelters.

In the end, Nelson negotiated a settlement with the IRS. and recorded The IRS Tapes: Who'll Buy My Memories? as part of the settlement to pay down his tax debt. The IRS only collected $3.6 million from sales of the album, but Nelson's career eventually picked up and he paid off the rest of his debt.

Al Capone

Alphonse Gabriel Capone was an infamous Chicago gangster in the early Twentieth Century who was linked to murder, extortion, and bootlegging. He was eventually brought down for tax evasion after prosecutors failed to make any other charge stick. In 1931, Capone received an 11-year sentence for not paying $215,000 in taxes. He did not serve the full term and retired in Florida.

Paul Daugerdas

In a case dubbed by federal prosecutors as the biggest criminal tax fraud in history, former attorney Paul Daugerdas received a 15-year prison sentence and was ordered to forfeit $165 million for helping his clients evade taxes. He was convicted of creating a fraudulent tax shelter that would claim fictional losses to reduce the tax bills of the extremely wealthy. During its operation, the tax shelter generated more than $7 billion in fraudulent losses, resulting in $1.6 billion in lost tax revenue.

Wesley Snipes

Wesley Snipes received a three-year prison sentence for willfully failing to file income tax returns for six consecutive years and avoiding $7 million in taxes. He claimed he was following the advice of tax advisors who said he wasn't legally required to pay taxes. His advisor turned out to be wrong, and Snipes was sentenced to four years in prison, serving 24 months.

Martha Stewart

In addition to her high-profile conviction for insider trading, television personality and entrepreneur Martha Stewart was fined $221,677 for unpaid New York state taxes on her home in the Hamptons.

Leona Helmsley

Leona Helmsley and her husband, Harry, were indicted on 188 counts of tax fraud by then-U.S. Attorney Rudy Giuliani in 1988. The couple owned a $5 billion hotel empire. While both of the Helmsleys were charged, Harry was found mentally and physically unfit to stand trial due to his poor health and deteriorating mental condition. That left Leona to face the tax evasion charges alone.

In 1992, 71-year-old Leona was found guilty of 33 felonies. She was initially sentenced to 16 years in prison, fined $7.1 million, and ordered to do 750 hours of community service. However, the prison sentence was reduced to four years on appeal, and she ended up serving only 21 months.

Have Questions About Tax Crimes? Talk to a Lawyer

Failing to file or pay taxes can have serious consequences. There may be a fine line between legal tax avoidance techniques and unlawful tax evasion. As you can see from the famous examples shown above, it is important to understand what happens if you go too far. If you have tax questions or received a notice from a tax agency, it's a good idea to contact an experienced tax attorney to discuss your situation and find out about your options moving forward.

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