5 High Profile Tax Evasion Cases (and What You Can Learn from them)

“Nothing in this life is certain but death and taxes,” so the saying goes. Love them or hate them (and most people absolutely hate them) taxes are a huge part of our lives with which each one of us must contend. From our wages being taxed to levies, duties, and tariffs being imposed on everything we buy, there is simply no way to avoid paying some form of taxes to your government.

That is not to say that some people don’t try to avoid paying them all the same! In the past, there have been many high-profile tax evasion cases that have placed a bright spotlight on just how inconveniencing being caught in this racket can be.

One of the most outstanding cases was perhaps that of Al Capone: a murderous mob Kingpin that was clever at keeping his hands clean until he was nabbed for tax evasion. He is not the only one. There are Hollywood superstars who have felt the sharp sting of the IRS in their lives.

While some have recovered and managed to skate through life without doing time in prison, there are those that weren’t so lucky. From movie stars to mobsters, it is clear that the long arm of the taxman takes no prisoners (pun intended).

Here are 5 high-profile cases of tax evasion and what you can learn from them:

High-profile Cases and the Lessons You Can Learn

Martha Stewart

Most of you will be familiar with Martha Stewart’s case. As one of the most respected entrepreneurs and TV personalities, there is no doubt that Martha Stewart is a successful individual. As a leading home and garden guru, Martha Stewart owns a few homes including an East Hampton mansion in New York that got her into this whole mess.

According to Martha, since she hardly ever used her mansion in the Hamptons, she did not see the need to pay taxes on it. In addition to unpaid taxes, she was also convicted of insider trading. The State of New York forced Martha Stewart to pay about $220,000 in back taxes and do some time in jail for her insider trading charges.

  • Lesson: Just because you do not use the property you own does not mean that you can avoid paying taxes on it. As long as you own it, you are responsible for the taxes and penalties levied upon it by your local government. That and insider trading is a big no, no!

Wesley Snipes

One of the biggest names in Hollywood, Wesley Snipes is a huge action movie star that is best known for his role as the vampire-slaying Blade. A very successful individual, Wesley Snipes was found guilty of deliberately deceiving the IRS by trying many dubious methods to hide his lofty income.

Convicted of three counts of tax evasion, Wesley Snipes was handed a three-year prison sentence and ordered to pay $17 million in penalties and back taxes including interest. During his trial, he tried to pay down this sum so that he could avoid jail time to no avail.

  • Lesson: Just because you can pay down whatever the IRS says you owe them does not mean that they will go easy on you. The crime is in the attempt to evade taxes in the first place. Whether or not you can pay it off is of no consequence. They will take the money and still send you to the slammer just to serve as a lesson and warning to others like you.

Nicholas Cage

This “National Treasure” hero may have a knack for finding hidden treasure, but he has a problem keeping up with his taxes. Found guilty of owing the IRS $6 million in back taxes and penalties in 2009, Cage pleaded his case saying that it was his accountant and ex-manager for making poor real estate investment and failing to pay his taxes for him. He did not see any jail time, but he was ordered to pay the 6 million dollars even though he wasn’t to blame for his woes.

  • Lesson: Be careful who you trust with your financial information and well-being and always keep a close eye on whether or not they are paying your taxes because you will be responsible for them in the end.

Richard Hatch “Survivor Winner”

Richard Hatch won the first season of CBS’ Survivor and got a million dollars for his troubles. The problem is that he did not pay taxes on his winnings and when asked about it, he said that CBS had promised to pay them for him.

He was found guilty of tax evasion in 2006 and sentenced to 6 years in prison where he served part of the sentence. Then in 2011, he was found guilty yet again for failing to file amended income tax returns.

  • Lesson: You can’t just claim that someone else said they would pay your taxes for you. They are your taxes, and when you win a million dollars in front of millions of viewers, including the IRS, you had better make sure that the taxation issue is properly handled.

Heidi Fleiss

Dubbed the “Hollywood Madam.” Heidi Fleiss had a wonderfully lucrative prostitution business in Hollywood. She was found guilty of tax evasion in 1997 and sentenced to seven years in prison. Her reason for not paying her taxes was that it is a little tricky to declare proceeds from an illegal venture.

  • Lesson: Like Al Capone, just because you are making a living from illegal ventures doesn’t mean that the IRS will look the other way. Even if you have high-profile clients who can pull some strings through blackmail, you still have to answer for your tax evasion crimes yourself.

Your taxes can be annoying and painful to pay, but if you do not make an effort to file your returns each year (honest returns), then you might end up with a hefty charge on both your back taxes as well as penalties for failing to do so. With so many Los Angeles wealth management companies out there, you can find a way to manage your funds correctly, without resorting to questionable practices, like the celebrities above.

Should you happen to have a plausible reason for not paying them then you will only be required to pay the penalties and that will be the end of it. Most of the time, however, you will get some jail time.