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Learning from celebrity tax mishaps: part two

In our last post we talked about tax troubles faced by celebrities. Specifically, Wesley Snipes and MMA fighter Nick Diaz have both garnered headlines in recent years. Snipes was sentenced to three years in prison for failing to file returns in 2008. And Diaz mentioned at a press conference that he has never paid taxes, leaving some to speculate whether he may face charges of failure to file or tax evasion.

One more recent case involves someone who is not technically a celebrity, but still in the public eye. The former Chief of Police of a major east coast city was indicted for conspiracy and willful failure to file tax returns. According to the federal indictment, he failed to file returns for the years 2008 through 2011.

He may have elected not to file returns because he allegedly diverted about $70,000 from his police department and withdrew more than $31,000 for his own gain. Of course he is proven innocent until he is proven otherwise but, even if he is found guilty, he will fare better than he would have if he had filed false returns to conceal his alleged actions.

This case highlights the difference between failure to file returns and filing false returns. Even if it is a willful act designed to defraud the Internal Revenue Service, failing to file returns results in less serious charges than filing false returns. Filing falsely is a felony while failing to file a return is a misdemeanor.

Source: Forbes, "IRS Problems That Land Even Jailers in Jail," Robert Wood, March 29, 2013

To learn more about handling tax litigation and audits, please visit our website.

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