As we all know, taxes for 2017 were due about a month ago. In keeping with the remaining spirit of the season, and to help you plan for next year, we compiled a handy guide in what not to do and who not to emulate when filing for taxes.
What is Tax Evasion?
Tax evasion occurs when an individual knowingly underpays or fails to pay the taxes that he or she owes. The IRS estimated that between 2008 and 2010, tax evasion cost the federal government an average of $458 billion per year. Among fraud, embezzlement and money laundering, it is considered just one form of white collar crime. And it doesn't get more white collar than Hollywood's elite. While many celebrities have been convicted with tax evasion charges, a good handful of them are able to scrape by without going behind bars. Others, however, aren't so lucky.
Celebrities Who Went To Jail for Tax Evasion
In 1979, Chuck Berry pleaded guilty to the charges that he evaded paying almost $110,000 in income taxes in 1973. His punishment included four months in prison and 1,000 hours of community service, which he fulfilled by putting on benefit concerts.
While in prison, the singer brought his guitar, writing materials and two dictionaries into his cell, where he intended to write his autobiography.
In 1997, “Hollywood Madam” Heidi Fleiss was sentenced to 37 months in prison for tax evasion and money laundering. While the maximum suggested punishment was 78 to 97 months, Fleiss still spent 20 months in prison and rode out the remainder in a halfway house.
Adding to her punishment was 300 hours of community service, three years of supervised release, a $400 fine and mandatory attendance at a substance abuse program.
In 2009, Joe Francis pled guilty to two misdemeanor counts of filing false tax returns, where $500,000 in income taxes was withheld. The "Girls Gone Wild" founder was ordered to pay almost $250,000 in restitution to the IRS. His sentence included 301 days already served and one year of probation.
In 2013, Hill spent three months in prison after failing to pay over $1 million in taxes from over a decade. The singer admitted to not paying taxes on $1.8 million from earnings for 2005 to 2007. Adding to her debt was unpaid state and federal taxes from 2008 and 2009, equaling to an approximate $2.3 million in tax debt.
Hill was released from prison early and given one year of probation, which included three months of home confinement. Six months later, though, she had seven tax liens from 2005 to 2001, adding up to almost $867,000.
In 2008, Wesley Snipes was convicted of three misdemeanor counts of failing to file tax returns from 1999 to 2001, totaling up to $7 million in taxes that were kept from the federal government. The actor was sentenced to three years in prison but was released early; he finished the remaining three and a half months in home confinement.
Worried about your tax file?
The IRS understands that filing your tax return is a long and complicated process, so an unintentional mistake on your paperwork is not considered tax evasion. This gives you a little breathing room because the government must prove that you intentionally failed to file or lied on your tax return. Still unsure? Contact Watson CPA to get your questions answered.