What is Tax Evasion and a List of Tax Cheaters
Tax evasion has long been a problem for the IRS. Tax cheats cost both federal and state governments a significant share of tax revenue every year. Ever since the creation of the IRS, the government has continually employed measures to combat tax evasion by attempting to close off loopholes and administer penalties to tax offenders. Learn about the history of the IRS and history of taxes in the United States.
The Cost of Tax Evasion
Recently, tax evasion cases have become more and more public. Numerous states, such as California and New York (as well as many municipalities), compile public lists of the biggest tax evaders in their states. In California alone, the top 250 tax evaders collectively owe the state almost $175 million as of June, 2011. The cost of tax evasion on federal and state levels could amount to hundreds of billions of dollars per year. It is estimated that the collective cost of tax evasion over the last decade amounts to $3.09 trillion.
High-Profile Cases of Tax Evasion in the United States
Income tax has made more liars out of the American people than golf.
- In 2014, the IRS filed a $369,249 tax lien against singer-actress Vanessa Williams for unpaid 2011 taxes.
- Busta Rhymes, a rapper who rose to fame in the mid-90's, is facing two tax liens from the Department of Treasury: $611,000 for 2008 and $178,000 for 2012. Altogether, he owes the IRS nearly $800,000 in unpaid taxes.
- In 2008, former businessman William Berroyer was settling a repayment deal with the IRS for his $60,000 tax bill when he tripped and fell over a telephone cord in a Hauppauge, NY IRS office. He spent 17 days in hospitals and rehab clinics for his injuries, and sued the IRS for $10 million (claiming that the injuries prevented him from enjoying his favorite activities). A judge ruled in favor of Berroyer in 2014, but reduced his payment to $862,000. In addition, Berroyer's tax bill was waived.
- H. Ty Warner, creator of the famous 90s plush toy Beanie Babies, pled guilty in January 2014 to tax evasion of $25 million using Swiss bank accounts, but was able to avoid a prison sentence. Warner was given leniency by the judge for his philanthropic activity and charity donations. He will instead serve two years’ probation and perform 500 hours of community service. Warner also agreed to pay $27 million in back taxes and interest, as well as a civil penalty of more than $53 million.
- Lauryn Hill, a 90’s Grammy-winning singer, was convicted in May 2013 of failing to pay nearly $1 million in taxes. She served her sentence and was released on October 2013 from her three-month sentence at a federal prison in Connecticut. The singer was allegedly unable pay her taxes due to during a period of time when she was inactive as a musician.
- In 2013, the Pennsylvania Department of Revenue filed a $39,000 tax lien against former reality TV star Jon Gosselin for taxes he did not pay in 2009.
- Legendary R&B singer Dionne Warwick filed for bankruptcy in 2013 after she battled the IRS for years over $10 million worth in tax debt dating back to 1991.
- Former NFL player O.J. Simpson has found himself in hot water numerous times. He was accused of murder, acquitted, but then found liable in a civil suit. In 2008 he was sentenced to 33 years in prison for the robbery and kidnapping of a sports memorbilia salesman. Now he is guilty of tax exasion. According to the IRS, he hasn't paid any taxes since 2007, and reportedly owes almost $180,000. A second lien was filed early in 2013, covering $17,015.99 in income taxes for 2011.
- The IRS has filed two tax liens on comedian Katt Williams: one in 2012 for failing to pay $3.2 million for 2008 and $829,352 for 2009, and another in 2010 for failing to pay $284,000.
- In 2012, the IRS filed a tax lien on legendary singer/songwriter Lionel Richie for $1.1 million in unpaid taxes from 2010.
- In 2012, Krystle Marie Reyes fraudulently filed an Oregon state tax return that reported $3 million in earnings and managed to receive $2.1 million in tax refunds through state-issued refund debit cards. She then proceeded to go on a shopping spree, spending her fraudulently obtained refund money at a rate of tens of thousands of dollars per week. This case is considered to be one of the largest instances of tax fraud in the history of Oregon.
- Plaxico Burress, a Super Bowl champion wide receiver, had a federal tax lien filed against him in 2012. The IRS said he and his wife did not pay income taxes in 2007 and 2009, leaving an outstanding bill of $98,064.76. He was also the target of a New York State lien, alleging he owed $59,241 in unpaid income tax for 2007.
- Stephen Baldwin, who made his name in movies and reality TV, was arrested in December 2012 and charged with failing to pay more than $350,000 in New York state income taxes. In addition, he reportedly did not file tax returns for 2008, 2009, and 2010. By pleading guilty to one count of repeated failure to file and paying $100,000 to New York in restitution, he avoided prison time. He submitted his final payment of $100,000 in April 2014.
- The IRS seized actress Lindsay Lohan's bank accounts due to her unpaid tax debt. Foretunately, the IRS released her from a tax lien in 2012 when she was able to pay off her 2009 using a $100,000 check actor Charlie Sheen gave to her. However, debts from 2010 and 2011 remain, but her business manager reportedly said he is working on a settlement to pay off the six figure balance.
- Rapper Lil Wayne has three separate tax liens against him: $1.13 million in December 2010 for tax years 2004, 2005, and 2007; $5.6 million in 2011 for tax years 2008 and 2009; and $7.72 million, which he paid at the end of 2012. He currently has a $12,155,084.46 tax bill.
- Popular R&B singer R. Kelly gained his fame in the 90’s and early 2000’s and sold an estimated 50 million records worldwide, earning him a great fortune. However, he failed to pay his taxes between the years 2005 and 2010 and reportedly owes $4.8 million for that time period. In addition, he owes nearly $1.4 million for 2011.
- American skier Lindsey Vonn and her estranged husband reportedly owed $1,705,437 in back taxes from 2010, the year she won the gold medal during the Vancouver winter Olympics.
- Kevin Federline, the ex-husband of famous pop star Britney Spears, faces $57,615 tax lien filed by the IRS for unpaid taxes in 2009 and 2010.
- In 2009, professional race car driver Hélio Castroneves was charged with filing years of false tax returns and evading $80 million in income taxes. His defense attorney does not deny the charges, but says that the racer is not to blame due to a brain injury which had compromised his decision-making abilities.
- In 2009, Floyd Mayweather Jr. , a successful boxer with a history of tax problems, was given a $5.6 million bill by the IRS for unpaid taxes. He has agreed to pay them since then.
- Bronx-born rapper Fat Joe (Joseph Cartagena) faces up to two years in prison, as well as a fine of $200,000 plus IRS penalties and court costs, after pleading guilty to failing to file tax returns in 2007 and 2008, when he made almost $3 million.
- Actor Nicolas Cage failed to pay $6.2 million in taxes on the $24 million he earned in 2007. He claimed that his accountant made mistakes. In the end, he had to sell several of his houses to obtain the money to pay back the IRS.
- Ja Rule (Jeffrey Atkins), amoderately successful rapper and actor, was charged with 3 counts of tax evasion for neglecting to pay his taxes from 2004 to 2006. He served 28 months in prison.
- Allegedly, Flavor Flav (William Jonathan Drayton, Jr.), frontman of hip hop group Public Enemy, owes $906,250.56 in back taxes from 2004-2006.
- Wesley Snipes, an actor who starred in several movies in the 90's and early 2000's, failed to pay taxes from 1999 to 2004. He tried to make the claim that he was a resident alien of the United States (he failed to realize that they have to pay taxes too). Naturally, because he was born in Florida, the IRS didn’t accept his claim and he was sentenced to 3 years in prison. He managed to get out on bail, but he owes the IRS $17 million in taxes.
- Pete Rose, a famous baseball player, was accused of betting on baseball games, which he adamantly denied, but was later found guilty. In addition, the IRS accused him of not reporting income from special appearances and autographs, which led to a $50,000 fine and 1,000 hours of community service. In 2003, he was found guilty of not paying taxes again, and had to pay $154,000 and sell his condo in Los Angeles.
- Famous bounty hunter and reality TV star Duane “Dog” Chapman reportedly owes the IRS $2 million in unpaid taxes dating back to 2002.
- Daytime TV host and home guru Martha Stewart failed to pay $220,000 worth of taxes on an estate she owned, claiming that she wasn’t there enough, so she shouldn’t pay them. The IRS disagreed and forced her to pay the amount in 2002.
- Actor and comedian Chris Tucker reportedly owes the IRS over $14 million in unpaid taxes, dating back to 2001.
- Richard Hatch, a contestant on the popular reality TV show Survivor, neglected to pay income taxes on the $1 million prize he won on the game show in 2000. He was found guilty and sentenced to time in prison. After his release he was sent back to prison, this time for violating the terms of his release by failing to file his income taxes again. He claimed that he was innocent and was being discriminated against because he is gay.
- Former Washington D.C. mayor (and current council member) Marion Barry was accused of failing to pay his taxes after he left his post as mayor in 1999.
- Famous real estate investor Leona Helmsley was convicted of tax fraud in 1992 for claiming $2.6 million in ineligible business expenses. She reportedly said, “We don’t pay taxes, only little people pay taxes”.
- Despite selling 50 million records, thanks to his 1990 rap hit "U Can't Touch This," MC Hammer owes the IRS and the state of California a total of $671,000.
- In 1990, famous country singer Willie Nelson owed the IRS $16.7 million in unpaid taxes. The IRS proceeded to seize most of his possessions, but that wasn’t enough to cover the amount he owed. He released an album specifically to raise money to pay off his tax debt. Interestingly enough, most of his possessions that were seized by the IRS were later bought at auctions by his fans and friends who were more than happy to return them to him. After he paid back the IRS, he sued his accounting firm for an undisclosed amount, blaming them for his troubles.
- Comedian Richard Pryor spent 10 days in jail in 1974 for not paying his taxes. During his trial he told the judge that he forgot to pay them.
- Rock n roll legend Chuck Berry spent most of his time on tour in the 1970’s and was paid in cash for his performances. The IRS charged him with failure to pay taxes on those earnings (totaling $110,000) and he pled guilty in 1979. He was sentenced with 4 months in prison and 1,000 hours of community service, which he fulfilled by performing benefit concerts.
- IRS commissioner Joseph D. Nunan, Jr. made, and won, a $1,800 bet that Harry Truman would win the presidential election. However, he neglected to report those winnings when filing his taxes. In 1952, his story became public and he was convicted of tax evasion.
- Famous and ruthless gangster Al Capone ran a bootlegging business during Prohibition, and that brought him incredible profits, but he concealed them from the IRS. When he was captured and put on trial for handgun charges, the IRS was able to prosecute him for tax evasion, and in 1931 he received a sentence of 11 years in jail.
Infamous International Tax Evaders
- In 2014, Swiss bank Credit Suisse plead guilty to criminal charges of helping wealthy Americans file false U.S. tax returns and hide billions of dollars from U.S. tax collectors into overseas bank accounts. This deed will cost the banking giant $2.6 billion in fines. Credit Suisse is the largest bank in 20 years to admit these charges publicly.
- Italian fashion designers Domenico Dolce and Stefano Gabbana were sentenced to a prison term of one year and eight months in June 2013 for hiding hundreds of millions of Euros. However, Italian law states that people with sentences of less than two years do not actually have to go to prison to serve their sentence. In October 2014, Italy's highest court overturned the sentences.
- Famous 80’s movie star Paul Hogan was linked with Australia’s 300 million dollar tax evasion probe which involved 23 companies, including one that he owns. The Australian Taxation Office claimed that he owes as much as 37.5 million Australian dollars in unpaid taxes and banned him from leaving Australia without first paying his taxes. Since then, he has been allowed to leave Australia as part of a deal, and in early 2011 he decided to sue the Australian government over false accusations of tax evasion, which he claimed damaged his reputation. In 2012, the issue was resolved on a "without admission" basis.
- Octogenarian New York resident and former USB customer Ernest Vogliano was accused of conspiring with the Swiss bank to hide $4.9 million in a foreign account between 2000 and 2002 to avoid paying taxes. He was convicted on five counts of filing false income tax returns and was forced to pay a fine of $940,381.
- In early 2000’s, former Number 1 German male tennis player Boris Becker was accused of living in Germany while claiming to live in Monte Carlo, and thus not paying 1.7 million Euros in taxes to the German government from 1991 to 1993. He admitted to tax evasion, and received a $500,000 fine and 2 years of probation. He later moved to Switzerland to avoid paying taxes.
- William H. Millard, founder of 1980's computer retail chain ComputerLand Corp., reportedly owes over $100 million in unpaid taxes to the IRS. After selling the company in the late 1980's he moved to The Northern Mariana Islands, which is a U.S. commonwealth. He never reported his income to the IRS while in the commonwealth, and thus paid no taxes during that period. Soon after he disappeared, and it is reported that he now resides in The Cayman Islands, a notorious tax haven.
- In 1982, Italian actress Sophia Loren served 18 days in prison for tax evasion.
Other Notable Cases of Tax Evasion and Tax Delinquency in the US
- New York releases a list of delinquent taxpayers every year, dividing it into individual and business categories. The largest business delinquent taxpayer is a New York City-based company that owes $14.6 million to the state.
- A New York construction company specializing in home remodeling owes the state around $8.2 million in unpaid taxes.
- A communications company owes the state of Florida around $2.5 million in unpaid taxes.
- A donut chain owner in Westchester County, New York reportedly owes the state around $2.2 million in unpaid taxes.
- Many individual delinquent taxpayers on the New York list are owners of various businesses.
- A fast food chain franchise operator owes $1.7 million in unpaid taxes. In 2008, he filed for bankruptcy, owing millions to sources other than the state of Florida.
- There is a man who owes the District of Columbia $1.17 million in unpaid taxes.
While some people avoid taxes by not paying them, others go to the court of law to present strange and often incorrect legal and constitutional arguments trying to claim that taxation is illegal. Learn more about strange and absurd arguments against taxation.
Learn about strange and unusual taxes throughout history and around the world.
Read about unpleasant IRS tax experiences here.
Detailed overview of tax history in United States and the world.