Famous Tax Evasion Cases
By FindLaw Staff | Legally reviewed by John Devendorf, Esq. | Last reviewed December 09, 2021
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Everybody likes to save money, especially on taxes. It's not a crime to reduce or minimize business or personal income taxes by legitimate accounting methods. State and federal tax codes provide for many exceptions and deductions to reduce tax burdens.
However, when you resort to deceptive or fraudulent tactics to save on taxes, you run the risk of sizable penalties and even jail. Although only a tiny fraction of returns are audited each year, the penalties are not worth the risk. These famous tax evasion cases show just how high a price you can pay for this crime.
Tax Evasion Hall of Fame
From the famous to the infamous, tax evaders end up paying a high price for their crimes.
Walter Anderson
An American entrepreneur, Walter Anderson made his millions after the breakup of AT&T. He was convicted of the largest tax evasion scam in U.S. history for evading more than $200 million in taxes. It is 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 through offshore corporations. Mr. Anderson was sentenced to nine years in prison.
Richard Hatch “Survivor" Fame
America was watching as Richard Hatch won $1 million the first year of the reality TV show “Survivor." Hatch received a Form 1099-MISC for his winnings from CBS because winnings from contests are taxable. However, he failed to pay taxes on his winnings and other earnings from his new celebrity status. He was convicted in federal court, receiving a combined prison sentence and fines and fees of more than $300,000.
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 has a number of increasing liens against him for more than $12 million in 2014. In 2019, Lil Wayne finally settled his outstanding tax debt.
Nelly, It's Getting Hot in Here
In 2016, the IRS put a tax lien on 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, Football Hall of Famer
Ron Mix was a former offensive lineman with the San Diego Chargers, who turned successful worker's compensation lawyer since retirement. He faced a three-year prison sentence and $250,000 in fines for listing referral fee payments as charitable donations. Between 2010 and 2013, Mix reportedly donated $155,000 to charity in this manner.
Nicolas Cage
The IRS charged Nicolas Cage for more than $14 million in unpaid taxes. Cage accounts for the failure to pay taxes to his management team. He ended up suing his money manager for fraud and negligence. In 2012, Cage paid off more than $6 million of his tax bill, which was for the balance of what he owed for tax year 2007.
Willie Nelson
It's hard to say what made Willie Nelson more famous, the songs he wrote in the late 1950s or his decades-long struggle with the IRS In the late 1990s, federal agents seized most of Nelson's property and alleged a $32 million tax debt. It's believed that bad advice from his accountant who hid money in bogus tax shelters caused his tax woes.
In the end, Nelson negotiated a settlement with the IRS. and recorded The IRS Tapes: Who'll Buy My Memories? That album was recorded as part of the settlement to pay down Nelson's tax debt. The IRS only collected $3.6 million from the sales of the album but Nelson's career picked up and he was able to pay off his debt.
Al Capone
The infamous Chicago gangster of the early Twentieth Century was linked to murder, extortion, and bootlegging. He was eventually brought down by a tax scandal 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 Daugerdas received a 15-year prison sentence for helping clients evade taxes. He was convicted of creating a fraudulent tax shelter that would create fake losses to reduce the tax bills of the extremely wealthy. During its operation, the tax shelter generated more than $7 billion in fraudulent losses, creating $1.6 billion in lost tax revenue.
Wesley Snipes
Mr. Snipes received a three-year prison sentence for willfully failing to file IRS tax returns for six consecutive years and avoiding $7 million in taxes. He reportedly was following his advisors that claimed he didn't legally have to pay taxes. His advisor was wrong.
Martha Stewart
In addition to her high-profile conviction for insider trading, television celebrity and entrepreneur Martha Stewart was fined $221,677 in back New York State Taxes for her home in the Hamptons.
Learn More About Tax Evasion from 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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