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Tax Relief Lessons Learned from Celebrity Tax Woes
We've seen celebrities like Reggie Bush, Paul Hogan and Wesley Snipes make headlines for evading their tax obligations. While the media spotlights celebrity tax evasion stories, it's not just the rich and famous who end up targeted by the IRS. It's a common misconception that the IRS only goes after the big fish. But the truth is, the IRS is just as enthusiastic about going after the average folks – taxpayers like you or your neighbor. So it's important to read past the headlines and learn from these stories of celebrity tax woes to help you get the tax relief you need from back taxes and severe IRS penalties.
Recently, we have seen how serious the IRS is about collecting back taxes and penalizing those who have inadvertently or deliberately evaded their tax payments. The truth is, no one is safe from the IRS's grasp - not even A-list celebrities like Wesley Snipes, Paul Hogan, Reggie Bush and many others. These celebrities have faced some severe IRS charges and penalties for evading large sums of tax payments.
We know that bad things happen to good people—that's life! We also know that tax problems can result from a number of causes. However, one of the worst mistakes a taxpayer can make is to underestimate the power and reach of the IRS.
It has been a common misconception that the IRS "only goes after the big fish." But the truth is that the Internal Revenue Service will just as gladly audit you or your next-door neighbor as they will a celebrity. So it's important to read past the headlines and learn from these stories of celebrity tax woes to help you get the tax relief you need from back taxes and severe IRS penalties.
Tax Relief Lessons Learned from Celebrity Tax Woes #1: Ignorance of the law will end up costing you. Brazilian racecar driver and "Dancing with the Stars" contestant Helio Castroneves may have legions of adoring international fans, but chances are they don't work for the IRS.
Castroneves got caught taking income from a Dutch annuity account that he hadn't reported to Uncle Sam. His lawyers claimed that the misunderstanding was due to Castroneves unfamiliarity with the U.S. tax code, but the IRS didn't buy it and accused him of trying to hide the money and avoid paying the back taxes due on it. Castroneves ended up paying Internal Revenue $5 million on $15 million of unreported income.
I know from negotiating cases with the IRS day in and day out on behalf of taxpayers that the standard is the same for all Americans and ignorance of the law is no excuse. So don't let your IRS problems end up cost you more in the long run.
Tax Relief Lessons Learned from Celebrity Tax Woes #2: You can run, but you can't hide. In summer 2009, the five-year long battle between Australian "Crocodile Dundee" actor Paul Hogan and the Australian Taxation Office came to a head. It is a complex story, but the bottom line is, the ATO believes they are owed back taxes on $39 million AUD of Hogan's income, which would come to about $14 million USD plus penalties. Hogan claims to have been living and paying taxes in the U.S. during the period in question, and resents the ATO's attempt at double-dipping. In 2008, while living in California, he publicly taunted in the press that the ATO should try to "Come and get me, you miserable bastards."
Last summer Hogan's 101-year old mother died and he quietly slipped back into the country for her funeral. Unfortunately, Australian authorities caught up with him and refused to let him return home to Los Angeles. They eventually relented after a storm of negative publicity. This prompted Hogan to utter a historical first, "The IRS are gentlemen compared to our lot."
Don't mistake your chances of getting caught by your state or federal taxing authority. If you owe back taxes or have unfiled tax returns, the best thing to do is to be proactive about resolving your tax problems.
Tax Relief Lessons Learned from Celebrity Tax Woes #3: Waiting to get tax help can ruin your financial future. The Detroit News recently reported that Jose Canseco owed more than $320,000 in back taxes to the IRS, and that Internal Revenue had filed several liens against him:
IRS tax liens are a popular method that the IRS uses to collect unpaid back taxes. If a lien is filed against you, the IRS can freeze your personal property, assets and prohibit you from purchasing cars and additional homes. Liens are also public record and can hurt your credit report. So don't put yourself, your home of business in a vulnerable position! If you owe back taxes and fear you may have a tax lien placed against you, seek professional tax help now. It is best to resolve your tax debt now rather than wait until it escalates and the government takes action against you!
Tax Relief Lessons Learned from Celebrity Tax Woes #4: Don't ignore your tax problems because they're not going to go away.
The reason behind the bad math is unclear, but Geithner did the right thing. He manned-up, publicly admitted (in front of Congress, no less) his mistake and settled his back taxes immediately.
Tax Relief Lessons Learned from Celebrity Tax Woes #5: IRS interest and penalties can add up quick. As a superstar football player at the University of Southern California, 2005 Heisman Trophy winner Reggie Bush was the best of the best. He enjoyed praise, admiration and gifts. It was the gifts that got him in trouble.
The year after Bush left USC, the National Collegiate Athletic Association launched an investigation into allegations that Bush had improperly received $300,000 in luxury gifts from a sports agent over the course of his college career. Long story short, the NCAA slapped USC with several painful revocations and sanctions and stripped them of 30 football scholarships for new students who had nothing at all to do with the scandal.
Bush had to give back his Heisman Trophy, and he may be on the hook to the IRS for as much as $200,000 in back taxes, penalties and interest on the estimated $300,000 worth gifts he allegedly received. His case is still pending.
Tax Relief Lessons Learned from Celebrity Tax Woes #6: No matter how much you owe, the IRS is poised to do whatever it takes to collect every penny. Just because you're an attorney, doesn't mean you're a tax attorney and can outfox the IRS. Last spring, celebrity lawyer Mickey Sherman (he unsuccessfully represented Kennedy cousin Michael Skakel in his murder trial) pled guilty to not paying $400,000 in taxes.
Sherman paid those taxes, but allegedly still owes more than $1 million in penalties, interest and for back taxes in other years. While it may be difficult for many taxpayers to directly relate to owing the IRS millions of dollars in back taxes, the IRS has become increasingly aggressive in pursuing tax cheats – both big and small. And both individuals and businesses are at a big disadvantage if they try to face the IRS alone. They need expert representation or they risk the IRS managing their cash flow via financially debilitating levies. An experienced tax attorney or Certified Tax Resolution Specialist will also make sure you get the optimum tax settlement you deserve without paying the IRS a penny more than you have to.
Tax Relief Lessons Learned from Celebrity Tax Woes #7: Avoid IRS problems by talking advantage of the legal tax benefits that you're entitled to. Last summer sportscasters all over America scratched their heads and wondered why LeBron James had decided to take his prodigious basketball talent to Miami. They should have asked an accountant or tax attorney.
Florida has no income tax. As a resident of The Sunshine State, James will save millions in completely legal unpaid taxes on his five-year, $96 million contract. An Ohio University economist by the name of Richard Vedder projected how much money James would have paid in state and local taxes in the other regions that were actively courting him.
Sounds like James made a smart move.
There's a lot to be learned from these stories. If you think you might have a problem with the IRS, be smart and get professional tax help as soon as possible. An experienced tax attorney or Certified Tax Resolution Specialist can help you significantly reduce IRS penalties as well as avoid debilitating IRS collection tactics, such as wage garnishments. Expert and credible tax relief firms can help you understand your rights as a taxpayer while ensuring that you are not obligating yourself to pay a penny more than you have to.
Don't wait for IRS to come after you, we can help you resolve your IRS problems before it's too late. For more information on achieving a tax resolution for your IRS problems, visit www.taxresolution.com for a free tax relief consultation or call 888-851-5894.
Michael Rozbruch is one of the nation's leading tax experts. A Certified Tax Resolution Specialist (CTRS), licensed CPA and the founder of Tax Resolution Services. He helps individuals and small businesses solve their IRS problems and is dedicated to educating the public on tax planning and other strategies for managing their personal and business finances.
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