Don’t Repeat These Mistakes: The Biggest Tax Evasion Cases in History

admin | September 8, 2018 | 0 | More of the Richest People , Trending Net Worth Topics

Have you ever wondered what the biggest tax evasion cases are?

Every year, tax evasion costs the U.S. Treasury $458 billion. The IRS will recover some of that money through audits and criminal prosecution in the most severe cases.

Tax evasion changes can occur if you willfully hide details to avoid paying taxes. It can also lead to an average of 34 months in incarceration.

If you’re about to come into a windfall of cash, you don’t want to be like these cases that turned into high profiles. Check out these top tax evasion cases and find out how you can avoid this type of punishment.

Biggest Tax Evasion Cases

The biggest tax evasion cases involve the wealthy and newly wealthy. Some are sports heroes, others are mob bosses or corporate tycoons.

Leona Helmsley

In the 1980s, Leona Helmsley was one of the most famous New Yorkers. She didn’t treat her employees well, and they testified against her. One of them quoted Helmsley saying “We don’t pay taxes. Only little people pay taxes.”

The courts convicted her for tax evasion. She owed $1.2 million in taxes, plus fines of $1.8 million. She spent 18 months in prison.

The Creator of Beanie Babies – Ty Warner

Have you ever thought to yourself that the guy who created Beanie Babies was a genius? It made him very rich.

However, in 2014, he was convicted of hiding more than $24 million in Swiss bank accounts. His sentence: $27 million in taxes owed, $53 million in penalties, and 500 hours of community service.

Al Capone

It wasn’t all the murders and crime sprees that brought the famous mobster down. It was tax evasion.

He attempted to bribe people involved in his case, but it didn’t work. He was sentenced to 11 years in prison, some of them served in Alcatraz.

Wesley Snipes

About 10 years ago, the actor was found guilty of not filing tax returns between 1999-2001. He was found to have owed $7 million in taxes. He served three years in federal prison.

Martha Stewart

In the early 2000s, long before Snoop Dogg became her buddy, Martha Stewart was a billion dollar empire. She had TV shows, magazines, and a home decor line. She went to prison in 2004 for insider trading. Her net worth dropped to $330 million.

Before that, she owed New York State $220,000 for property taxes for a home she had there. She said she didn’t owe taxes because she didn’t spend time at the house. She lost that case.

Tax Evasion Cases Aren’t Just in the U.S.

Even across the pond, there are famous soccer stars got caught up in tax evasion schemes.

In Spain, top stars like Cristiano Ronaldo, Neymar, and Lionel Messi have all been part of tax evasion cases. In each case, they owed millions to the Spanish government.

The Difference Between Lowering Taxes and Tax Evasion

As a taxpayer, you want to make sure that your tax burden is as little as possible. That’s the case for every taxpayer.

That’s why you hire accountants and tax attorneys and financial planners to help guide you in your financial decisions. They can give you the best advice and you make the decision as to how to proceed.

The thing to remember is that ultimately, you are responsible for your decision. If you get bad advice that’s illegal, you’re still liable for those situations.

That’s a big lesson to learn. In some of these cases, they got bad advice and were held responsible.

You can’t afford to take a hands-off approach to your finances and hand them off to someone else. You have to educate yourself about the law, so you know the difference between tax evasion and tax avoidance.

It’s really simple. Tax avoidance is using strategies to lower your tax burden. You report all of your income and bank accounts around the world.

You can’t hide any of those accounts from the IRS. If you’re tempted to hide those accounts, know that foreign banks must report accounts held by U.S. citizens to the IRS.

Tax evasion means not reporting all of your income. Interest income, foreign income, whatever income you have needs to be reported.

Another means of tax evasion is knowingly adding deductions or expenses that did not occur.

Tax Evasion Cases Aren’t Just Celebrities

Tax evasion isn’t reserved for those who just won the lottery or are rich and famous. Take restaurant servers as an example.

Restaurant servers usually make the bulk of their earnings from cash tips. If a server deliberately underreports those earnings, then that becomes tax evasion.

The best rule of thumb when it comes to filing your taxes is to be smart and follow the law. Be honest about your expenses and income and utilize the right professional advice to keep you within the law.

Plan Ahead for Taxes

If you’re self-employed, a contractor, or are otherwise responsible for paying taxes, your best bet is to plan ahead.

For example, the self-employment tax rate is 15.3% of your net earnings. You can plan ahead by setting aside 15% of your income for taxes.

If you’re going to have to pay more than $1,000 in taxes, you’ll have to pay estimated quarterly taxes. This saves you from having one large tax bill at tax time.

By planning ahead, you avoid a situation where you have a large tax bill that you can’t afford to pay, and then you’re on the hook for back taxes.

Tax Evasion is Illegal, Plain and Simple

Every so often you turn on the news and see a case where someone famous or someone who recently became wealthy got in trouble with the IRS for tax evasion. As these tax evasion cases showed, it doesn’t pay to lie to the IRS.

There’s a difference between avoiding your taxes by planning ahead and using smart strategies to lower your taxes and deliberately underreporting income to avoid paying taxes.

Even if you don’t have the net worth of Taylor Swift, you can still be prosecuted for tax evasion.

Would you like to learn more about improving your finances? Check out this article about building wealth today.