Who doesn’t want to save money on taxes? “Anyone may organize his business so that his taxes may be as low as feasible… because nobody owes any public obligation to pay more than the law asks,” said Judge Billings Learned Hand, summarizing the American tax system. Avoiding taxes is one thing, but evading income taxes is quite another. Tax evasion happens when a person or company employs unlawful methods to avoid paying taxes, while tax avoidance occurs when a person or corporation utilizes legal means to reduce the amount of taxes owing. These well-known tax evaders used innovative (and unlawful) methods to avoid paying their taxes. Learn how much they owed and how they were apprehended.
Walter Anderson
Anderson’s case is the greatest tax evasion case in American history. This former telecoms executive was accused of concealing his income by using aliases, offshore bank accounts, and shell businesses. Anderson made a guilty plea in 2006, admitting to concealing nearly $365 million in income. He was condemned to nine years in jail and ordered to pay $200 million in compensation. Anderson avoided having to pay the bulk of the taxes owing due to a typographical mistake in the amount of the federal government’s judgment against him. The IRS agreed to accept taxes and penalties from three years included in Anderson’s case; nevertheless, Anderson is still liable for $23 million owing to the District of Columbia government.
Al Capone
This infamous mobster’s name has been associated with a variety of illegal acts including bootlegging, prostitution, and murder. However, only one illegal act landed Al Capone in prison––income tax evasion. Under Capone’s watch as boss of the Chicago Outfit, the organization generated estimated revenues of $100 million per year.
Due to the removal of the word “lawful” from the 16th Amendment in 1916, even income earned via illegal activities is subject to tax. This put criminals like Capone in a bind because they could either admit breaking the law and file proper taxes (essentially confessing), or cheat on taxes and risk getting jailed for evasion. In addition to paying fines and the outstanding tax bill, Capone was sentenced to 11 years in prison.
Joe Francis
The creator of “Girls Gone Wild” is no stranger to controversy. He was charged with felony tax evasion in 2007 for allegedly submitting fake company tax filings. Authorities accused Francis of falsifying nearly $20 million in company costs in order to avoid paying taxes.
He was able to avoid the felony accusation by entering a guilty plea.
However, it seems that Francis has not completely dodged his tax problems. Francis was served with a tax lien by the IRS in November 2009. The bill comes to a hefty $33.8 million.
Wesley Snipes
Federal prosecutors have charged the “Blade” actor with a slew of charges. Snipes is accused of concealing money in offshore accounts and failing to submit federal income tax returns for numerous years. The actor’s federal tax debt is reported to be in the $12 million areas.
Snipes was cleared of felony tax fraud and conspiracy charges in 2008 but convicted of minor counts. Snipes received a three-year jail term. Douglas P. Rosile, his accountant, and tax protester Eddie Ray Kahn were indicted as co-defendants. Rosile received a four-and-a-half-year sentence. Kahn was sentenced to ten years in prison.
Leona Helmsley
Known as the “We don’t pay taxes, Queen of Mean,” this hotel operator allegedly informed a former cleaner. Taxes are only paid by the poor.” Helmsley and her husband, Harry, have amassed a multibillion-dollar real-estate empire. Despite their enormous riches, they were accused of charging millions of dollars in personal costs to their firm in order to avoid paying taxes.
Helmsley was convicted of three charges of tax evasion in 1989. She was sentenced to 18 months in federal prison. She was ordered to go to jail on April 15, 1992, the day before the income tax deadline for that year.
The Verdict
Some individuals may go to extraordinary lengths to save money, but there is a fine line between ingenuity and violating the law. Tax avoidance is lawful and acceptable, but tax evasion has serious repercussions. As we can see from these five people’s problems, what you save today will not be worth what you have to pay afterward.
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