Sharpton: Some are Concerned that He's Not a Going Concern

The Reverend Al Sharpton has always been one of those controversial figures that people either love or hate.  If you’re in the “hate him” camp, then you probably list his sketchy personal finances as one of your reasons.  And if you’re in the “love him” camp, then you probably find a way to overlook it.  But even Sharpton supporters are having a hard time grappling with this as he gains national prominence.

You can say I’m not a great administrator, . . . you can’t say that I’m not committed.

~ Rev. Al Sharpton

Arguably his biggest problems are his tax debtsHe owes something like $4.5 million in federal and state income taxes.  Also included in that figure are payroll taxes owed by his non-profit organization, National Action Network, which, according to his accountant, would not be able to stay afloat if it were actually meeting its payroll tax obligations.  From the IRS perspective, a company in this financial shape is “not a going concern.”

Sharpton has stated publicly that he is paying down what is owed, but if the tax balances are not shrinking, it normally means that the payments are too small or the taxpayer is incurring new balances year after year.  Understandably, the IRS frowns upon the so-called pyramiding of tax liabilities.  And understandably, even Sharpton supporters frown upon first class flights, large salaries, and private school tuition which wouldn’t even be an issue if he were on the up-and-up with the IRS.

Granted it is impossible to find a public figure these days without some skeletons and baggage, but Sharpton’s message of equality would carry so much more strength if he would get his finances in order.  In his current financial state, he inadvertently sends the message that he is above the law and doesn’t need to pay taxes like everyone else.

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.

Introducing the tax evasion beanie baby

This week, the creator of the Beanie Baby toy phenomenon, Ty Warner, was charged with tax evasion. The charges allege that Warner committed tax crimes on his 2002 tax return by failing to report $3.2 million in income on a secret Swiss bank account that held as much as $93.6 million in assets. The federal government alleges that Warner falsely reported his 2002 income as $49.1 million, omitting money he made on his UBS account. He amended his 2002 return in 2007, yet it is alleged that he again understated his tax by $885,300.  In 2009, Warner tried to avoid prosecution by taking advantage of the Internal Revenue Service (IRS) amnesty program known as the Offshore Voluntary Disclosure Program. According to Warner’s tax attorney, the IRS denied amnesty to Warner.

Warner is expected to plead guilty as part of a plea agreement and will pay a civil penalty of $53.6 million for failing to file a required Report of Foreign Bank and Financial Accounts (FBAR). Warner is not the first UBS client to be prosecuted for tax crimes. Since 2009, the United States has prosecuted approximately 70 taxpayers, 30 bankers, lawyers and advisers in a crackdown on offshore tax evasion. I wonder if this is the time to sell those Beanie Babies I have in the attic.

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.

IRS Records Prove AROD is a Bad Guy in Boston

According to a recent Boston Globe review of Internal Revenue Service (IRS) filings New York Yankee Alex Rodriguez is a bad guy. A Boston news source depicting a Yankee as a bad guy is hardly surprising. What interests me, as a tax attorney, is that the basis for hatred for Rodriguez this time is not baseball related; it is based on IRS records. According to the Boston Globe, nonprofit organizations are generally expected to donate 65 to 75 percent of their revenues to their designated charitable causes. The remainder of their revenues are supposed to be used to pay their necessary expenses and reasonable salaries of nonprofit employees. This was not the case for Rodriguez’s non-profit organization, according to the Globe.

In 2006, Rodriguez hosted a charity poker tournament that helped the A-Rod Family Foundation raise $403,862 for charity. How nice! However, according to IRS reports, barely 1 percent of the money raised were actually paid to charity. Specifically, only $5,000 was paid to Jay-Z’s Shawn Carter Scholarship Fund and only $90 was paid to a Little League baseball team in Miami; how charitable. The not for profit organization subsequently stopped submitting financial reports to the IRS, and was then stripped of its tax-exempt status. Again, AROD is a bad guy … no shocker … just surprised the revelation was tax based.

Wesley Snipes Released from Prison

Perhaps one of the most high-profile celebrity tax crime stories of our time is coming to a conclusion.  Wesley Snipes was released from prison last week after serving about 28 months behid bars in Pennsylvania.  He will now be on house arrest until July 19th under the careful watch of the New York Community Corrections Office.

It is no surprise that TMZ was the first to report the conclusion of Snipes’ prison term.  TMZ follows celebrity tax problems like nobody’s business.  Even the LA Times cited TMZ as its source for this bit of news.

Celebrity tax problems are common, but most of them surface once the IRS files a Notice of Federal Tax Lien (FTL).  A tax lien is a public record that puts creditors on notice that the IRS has an interest in a taxpayer’s property as security against the past due tax debt.  A FTL is considered a “passive collection tool,” and in no way does it implicate the taxpayer criminally.  What made the Snipes case somewhat unique is that he was prosecuted criminally and he actually served time in prison.

Nick Diaz' Tax Confession

MMA fighter Nick Diaz needs to just keep his mouth shut on so many different levels.

Most of the time it is his barely inteligible taunting and trash-talking of his opponents (which he hasn’t always been able to back up in the octagon) that tarnishes his reputation.  But his most recent “foot-in-mouth” incident has to do with his taxes of all things.  In the press conference following his loss to UFC welterweight champion, Georges St-Pierre, on Saturday, Diaz said “I’ve never paid taxes in my life and I’ll probably go to jail.”

Diaz said that he didn’t want to make excuses, but I think that’s exactly what he’s doing bringing up his tax problems in such a setting.  It was completely out of context.  The message he is trying to send is that his personal life is such a mess that it’s impacting his performance during fights.  His manager, Cesar Gracie, said that Diaz misspoke and that he’s paid over $100,000 in taxes over the past two years.  But I’m not sure which version of reality is more disturbing, that he didn’t pay and his manager is trying to cover for him, or that he did pay but has such a loose grip on his personal obligations that he didn’t know about it or didn’t remember paying it.

Tax attorney and Forbes contributor, Robert Wood, pointed out that there are a few different levels of culpability when it comes to tax crimes, and at this point we aren’t sure which (if any) describes the situation of Nick Diaz.  Here is a very basic outline from most egregious to least egregious:

  1. Filing a false tax return
  2. Failing to file a tax return
  3. Filing an accurate return, but failing to pay the tax due

I’m less sympathetic when it comes to celebrity tax problems (and the IRS feels the same)because it’s usually a “can pay, but won’t” scenario as opposed to the ordinary Joe who simply can’t pay.

Nobody should be surprized if it turns out that Diaz hasn’t filed.  If he can’t take personal responsibility for getting himself to important events on time (or at all) then he certainly isn’t responsible enough to manage his finances.  Diaz desperately needs to hire a tax accountant, and possibly a tax attorney.

Fat Joe Owes the IRS Big Time

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Our most recent celebrity tax problem story features hip hop artist Fat Joe, best known for his 2001 hit “What’s Luv” which sampled Tina Turner’s “What’s Love Got to do With It.” No doubt Mr. Joe was at the top of his game back in 2001 and his stardom has been fading ever since. I only bring this up because he fits a familiar pattern: celebrities who get in trouble with the IRS tend to be those whose popularity (and earning power) is on a downward trend. Most of the time it has to do with the difficulty of adjusting one’s lifestyle to match the changes in income. Celebrities (just like anybody) have a hard time with this.

Fat Joe does not have a typical tax relief case. He’s being accused of a tax crime: failure to file returns for years 2007-2010. Right now he is a free man after posting $250,000 bail, but who knows if his tax attorney will be able to keep him out of jail. If you’re familiar with this blog, then you know where Fat Joe went wrong; he violated the cardinal rule: “Always file your taxes every year, even if you know you’re going to owe and can’t pay it.”

Kookie or Not, You Still Have to Pay Your Taxes

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In his Twitter profile, Stephen Baldwin describes himself as “an actor, author, Jesus Freak, Radio Talk Show Host, and the kookiest of the Baldwin brothers.”  Stephen, also the youngest of the Baldwin brothers, was arrested in New York yesterday for failing to address his tax problem properly.  Ok, that’s a nice way to put it.  He is being charged with failure to file (and pay) his 2008-2010 New York state tax returns.

The state of New York is without question trying to drive home a bold message here. You can’t live in NY and take advantage of the its public benefits (especially in this economic climate) and expect everyone else to pay the bills.  I am not familiar with the New York state taxing authority, but it is uncommon for the IRS to take such a heavy-handed approach with similarly-situated taxpayers.  However, the cardinal rule is that you should always file your taxes, even if you know you can’t pay.

If the Kook portion of Baldwin’s persona is responsible for getting him into this criminal tax debt debacle, then maybe the Jesus Freak will be able to set him free.  Yesterday he found time to address his followers in a somewhat penitent tweet:

Thnx4all the prayers, Been trying2 work this out4some time! Want2correct this&of course pay what I owe! Difficult situation. God is good.

The Danes and the Swizz

Denmark has officially repealed its so-called “fat tax” after being on the books for only one year.  Also, the Danish tax ministry has announced that it no longer plans to move forward with a sugar tax.  In the final analysis, butter, ice-cream, and pastries are just too good to allow some pesky tax to modify a whole country’s eating habits.  Some believe that Denmark would have had more success had it been more focused in its efforts to improve public health through taxation of targeted foods.  However, if the failed soda tax in some parts of the United States is any indication, a tax on specific foods might not be popular either.

In other news…

Kasseem Dean, a.k.a. Swizz Beatz, may or may not owe millions of dollars in back taxes.  Many media sources have him owing the state of New York $100,000 (an amount that Dean suggests is equivalent to the cost of a flight from Los Angeles to New York — I assume he’s not prone to flying coach). Those same sources report that he is also burdened with a $2.6 million IRS tax problem. But Dean, in a barrage of double negatives vehemently denies he owes any taxes.  Celebrity tax issues are usually publicized after the IRS files a tax lien and in that regard are, at least in part, based on fact.  Most likely what Dean means is he is disputing the assessment, which he has every right to do.