Supermodel Gisele Blames IRS Audit on her Forbes List Ranking

Are you not making the millions you planned to make?  Is your face not occupying magazine covers? Is your name nowhere to be found on any Forbes lists?  Well, the silver lining is that you are not subject to any extra scrutiny by the IRS.  Supermodel Gisele Bündchen was audited recently and believes that her 7-year stint at the top of Forbes’ “Highest Paid Supermodels” list was at least partly to blame.  Perhaps Gisele gets a double dose of said scrutiny, being married to football star Tom Brady, who also sits atop his respective Forbes highest paid list.  Maybe living life in relative anonymity isn’t such a bad thing after all.

Gisele’s beef with Forbes is that they don’t have the details of her accounting, they don’t have her bank statements, and their estimates are too high.  She obviously makes a lot of money, but nowhere near the $42 million that Forbes has her making.  Forbes countered by citing all the various sources of their income estimates: editorial shoots, independent licensing ventures, spokesperson gigs, and contracts from beauty and fashion companies.

For all we know, she may have been audited anyway.  There are many different factors (or “red flags”) that are considered when selecting cases for an IRS audit, but one of the biggest factors has to be an extremely high income.

Still, Gisele doesn’t think too highly of Forbes.  She says “[t]here should be a magazine to quantify knowledge, understanding and love for people: that is power.”  Not a bad idea for a magazine, and she better get on that quick before the government figures out a way to tax knowledge, understanding, and love too.

Singer Lauryn Hill is Going to Prison for Tax Crimes

Looks like our girl Lauryn Hill is going to spend some time in prison for her tax crimes.  She pleaded guilty last year to failing to pay taxes on about $2.3 million during a 5-year period.

Here’s a breakdown of what tax fraud got her.  She’ll have to:

  1. Pay what she owes to the IRS ($1,006,517)
  2. Pay a $60,000 fine
  3. Three months in federal prison
  4. Three month house arrest with electronic monitoring
  5. One year of supervised release

Hill says she recently cut a deal with Sony, but I wonder how the creative juices are going to flow staring at the inside of a prison cell for 3 months and then being stuck inside for another 3 months.  She will probably be allowed to work while serving her home confinement term, but may be given a curfew and restriction on travel.

I hope Hill does release new music and I hope she makes a lot of money so she can pay her tax debt.  Based on the public comments I have seen, she does not appear to harbor any bitterness or anger against the government.  But with any luck, maybe we’ll hear tax themes and undertones in her new music.  That would be nice.

I Guess You Don’t Get to be The Most Successful R&B Artist of the Past 25 Years by Paying Your Taxes

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Most celebrity tax debt stories are pretty boring.  They’re boring because we have no details.  Usually we are limited to the information in the notice of federal tax lien (FTL), which includes little more than the years and the dollar amounts that are owed.  It’s not until after the tax debt is made public that juicier details begin to emerge.  Sometimes in the aftermath the celebrity taxpayer makes comments publicly about the tax debt, and we learn something about why/how the celebrity got into trouble.

Of course, most of the time if there is any public comment, it is something that has been carefully written by the star’s attorney; something like what R. Kelly’s spokesperson said:

R. Kelly is in the process of working everything out with the government and is confident that all his obligations will be satisfied.

Most of the time we are left to read between the lines and make our own (unreasonable) assumptions.  One of the assumptions I have made on ocassion is that the reason why celebrities incur big tax debts is they are on a downward spiral in popularity, marketability, . . . star power.  They have a hard time accepting this and modifying their lifestyle accordingly.

Oh, did I mention that R. Kelly owes about $4.8 million in back taxes?  It’s true; except my theory falls apart in this case because R. Kelly seems to be doing fine career-wise.  It’s impossible to tell for sure how he is doing financially, but his star power seems to be intact and he is keeping busy.  Maybe the “most successful R&B artist of the last 25 years” just has other priorities besides the IRS.

"The Misprosecution of Lauryn Hill"

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Taxpayers often call us in a panic because they have received a threatening letter from the IRS and they are one step away from a wage garnishment or a bank levy.  Our clients come from a variety of experiences and backgrounds, but they all have one thing in common: they owe the IRS and can’t pay what they owe.  And many, if not most of our clients, also have missing tax returns.

What are the typical repercussions for failing to file a tax return?  The IRS will send notices asking the taxpayer to file, maybe assign a Revenue Officer to secure the return, possibly file a Substitute for Return, assess a failure to file penalty, etc.  As for criminal prosecution, I’d say it is pretty uncommon.  In fact, failing to file on its own is not criminal; there must be some additional affirmative act to elevate the misconduct to a felony.

I was surprised to hear about Lauryn Hill’s tax troubles today.  She has been charged with failing to file her 2005, 2006, and 2007 tax returns. None of the reports say what the “extra something” was in Hill’s case. My best guess for now is that she simply fits the profile of people they like to prosecute as a public spectacle (i.e., a downward trending musician with an extra large tax bill) and the IRS isn’t about to let her get away with it.

TMZ Founder's Death

I often post stories of celebrity tax failures.  I believe the IRS prosecutes high profile and celebrity tax cases to make them an example to the rest of the world and to deter would-be tax crooks.  And I consider it my little good deed, perhaps my civic duty, to pass the news along to others in the blogosphere.  Plus, who doesn’t love a little dirt?

One thing I’ve noticed as I have sought out celebrity tax debt articles is that 99% of these stories are first told by TMZ.  Its almost as if the TMZ people have some special IRS hotline — some privileged connection — with the nation’s tax collector.  I mention this today because I learned of the untimely death of TMZ’s founder, Jim Paratore.  He died of a heart attack yesterday at age 58.

TMZ celebrity tax debt stories are not a good source for in-depth analysis.  And sometimes they even get the technical details wrong (I have seen them confuse the concept of “lien” vs. “levy”).  But TMZ is fast.  I hope they can continue to be first on the scene of these types of cases, even without the founder around.


If you’ve ever stumbled upon the TMZ website, you know how they love to expose celebrity tax problems.  If I didn’t know better, I’d say they have some secret relationship with the IRS.  I mean, what a huge benefit to the IRS to have these cases all over the internet where people can see them.

A quick perusal of the TMZ website reveals the tax issues (past and present) of the following celebs:

  1. Christie Brinkley
  2. Bow Wow
  3. Chris Tucker
  4. Sandra Oh
  5. Al Pacino
  6. The Osbournes
  7. Nicolaus Cage
  8. Val Kilmer
  9. Toni Braxton

The list goes on and on.  My apologies if this blog is starting to look TMZ-ish, but celebrities just can’t stay out of tax trouble.  As their fame (and income) start to slide, they find themselves overextended and tax bills often go unpaid. Besides, I do think it is constructive to call out the celebs, especially if it gets us to ponder our own spending habits and live more frugally.

Beanie Sigel Needs Tax Relief

The Philadelphia rapper pleaded guilty this week to failing to file federal income tax returns for 2003, 2004 and 2005. The IRS believes that Sigel failed to pay nearly $350,000 in federal income taxes over that time period on more than $1 million in income. This is just the latest in his fairly long history of legal troubles. He beat an attempted murder charge for which he was tried twice. And he pleaded guilty to gun and drug charges back in 2004. Apparently Sigel was earning money while in prison, and failing to report that income. Sentencing is set for November 18th and he could face up to three more years prison time for his tax issues. Click here for the complete story and some interesting background information on the career of Beanie Sigel.

Have you noticed that the celebrities who find themselves in hot water with the IRS are usually those aging stars whose careers seem to be going downhill? It’s no coincidence. Something similar tends to happen with business owners whose businesses are suffering. Income drops, but they tend to hold out hope that things will improve.  And by “hold out hope” I mean that they do not change their standard of living or their celebrity lifestyle.