Tax evasion is often seen as a white-collar crime, with the main targets being high-profile individuals like celebrities. It carries severe consequences for anyone caught. In this day and age with technology being better than ever, it is more than likely individuals will be caught if committing tax crimes. The punishment for evading taxes ranges from hefty fines to jail time. While many think these punishments are reserved for celebrities or high profile criminals, the reality is that the IRS is relentless when it comes to pursuing tax evasion.
In this post, we will take a look at some of the most famous cases in U.S. history related to tax evasion. If you are nervous about the potential of facing jail time or penalties for unpaid taxes, you can check out our guide on tax evasion penalties, which gives details on what to expect if you are under scrutiny from the IRS.
Al Capone
Famous For: American gangster who gained notoriety during the Prohibition Era.
The Story: Al Capone is possibly the most famous tax evasion case in history. In 1929, the famous gangster was brought down in an investigation led by Eliot Ness. Although he committed many crimes, avoiding taxes is what brought it all to an end.
Punishment: In 1931 he was sentenced to 11 years in jail and hit with a failure-to-pay tax fine of $50,000 in addition to the $215,000 in back taxes that he already owed. He moved from prison to prison – including the infamous Alcatraz – until 1939.
Abbott and Costello
Famous For: Comedy duo from the 1940s and 1950s best known for their famous “Who’s on first?” joke as well as their work in radio.
The Story: William “Bud” Abbott and Lou Costello had their own run-in with the IRS in 1956 when they faced tax evasion charges.
Punishment: In order to pay off the extensive back taxes and penalties that they had accrued, the duo was forced to sell off many of their assets, including their homes and even the rights to many of their films.
Chuck Berry
Famous For: A legendary rock and roll music pioneer, as well as a guitarist and singer/songwriter.
The Story: Chuck Berry avoided paying taxes by receiving cash payment for appearances and then failing to report those payments on his income tax returns.
Punishment: A 1979 tax evasion conviction landed him in jail for four months. Additionally, he was required to perform 1,000 hours of free shows as community service.
Martha Stewart
Famous For: Homemaker extraordinaire, media personality, author and magazine publisher.
The Story: People are well aware of Martha Stewart’s jail sentence for insider trading. What they may not be aware of, however, is that she accumulated a tax balance for failing to pay taxes on her East Hampton, NY home. She insisted that she spent very little time there, and so she didn’t think she had to pay taxes on it.
Punishment: Stewart was forced to pay $221,677.82 in back state taxes plus interest to New York tax authorities.
Richard Hatch
Famous For: Winning the first season of Survivor after earning himself the nickname of “the fat naked guy.” His fame grew exponentially when he was caught evading taxes on his million-dollar Survivor winnings.
The Story: Hatch claimed he believed that CBS would pay the taxes. However, CBS presented a contract that clearly stated that any taxes were the winner’s responsibility. Hatch was also found to have evaded taxes on $28,000 in earnings from a rental property that he owned, in addition to income generated from his stint as a Boston radio show co-host.
Punishment: He was convicted in 2006 and given 51 months in prison, with three years of supervised release after that was over.
Nicolas Cage
Famous For: American movie star whose resume includes starring roles in such films as The Rock, Face/Off, Gone in 60 Seconds, National Treasure and Leaving Las Vegas.
The Story: Blaming your tax troubles on your finance manager or accountant will not fly with the IRS, which Nicolas Cage learned in 2009 when the IRS said he owed $6,617,550. Cage said his former financial manager was to blame, but his manager held that it was Cage’s reckless spending that was to blame.
Punishment: In November 2009, Cage was held liable and lost his multimillion-dollar home to the state of Nevada.
Walter Anderson
Famous For: Anderson gained notoriety for being convicted of the largest personal tax evasion case in U.S. history
The Story: Walter Anderson made his fortune investing in telecommunications companies, and hid the earnings to the tune of $365 million in offshore accounts.
Punishment: Anderson plead guilty to the charges. He was sentenced to nine years in prison and fined almost $400 million in penalties and fees on top of the back taxes that he already owed.
No one is immune from tax evasion investigations from the IRS, and that includes celebrities. To ensure your compliance with the law, consult a professional tax adviser today.