Did Wesley Snipes Really Get a Raw Deal?

It's become an interesting debate among some people: Does Wesley Snipes really deserve up to three years in jail for three tax evasion related misdemeanors?

Perhaps the questions come because Snipes' sentence hit papers as news dropped that three New York police officers were acquitted for a 50-shot killing of a man on his wedding day, who happened to be black. But there's a decided racial tint to some protests about Snipes, who the government says still owes about $20-million in fines and back taxes.

But when you look at who else has been in the IRS cross hairs, the picture gets muddier.

Willie Nelson got to hold auctions and charity concerts to pay off a $16-million IRS debt, which he had negotiated down from $32-million. He eventually only repaid about $12-million.

But Leona Helmsley spent 18 months in prison and got a $7-million fine for actively trying to avoid paying taxes in 1989. Pete Rose spent five months in jail in 1990 for filing false returns, but when the IRS concluded he owed more than $970,000 from 1997 to 2002, he didn't get jail time.

Chuck Berry served 120 in 1973 for failing to report $200,000 in income; in 1995, Darryl Strawberry was convicted of owing $450,000 in back taxes and singer Marc Anthony (Mr. Jennifer Lopez, to some of you) wound up owing $2.5-million after he was found guilty of failing to file tax returns for $15-million.

So it seems obvious that the IRS is both ruthless and unpredictable. Hope you filed your tax returns on time...

Comments

[Daniel N Erasmus]

BLOG Comment Posted by Daniel N Erasmus of www.dnerasmus.com

Wesley Snipes' position is typical of a targeted high profile taxpayer who did not pay proper attention to basic tax risk management strategies. These include:

1. proactively reviewing particularly any aggressive or alternate position taken on the payment or non payment of tax based on a specific set of facts;
2. strategizing around what may happen if the IRS pursues a transaction and what defenses could be raised - which would obviously have been the case with a high profile person like Wesley Snipes - including obtaining legal opinions to support the position taken after careful consideration of all the facts;
3. ensuring effective communication between the different advisors and the taxpayer to make sure all facts and changing facts are considered and reconsidered to ensure the taxpayer is not breaking the law.

A strategy may have included obtaining an injunction against the IRS in compelling the taxpayer to submit tax returns in the first place (although difficult to execute), and in that way bringing the dispute to the court sooner than later, so that it does not appear as if the taxpayer is taking the law into his own hands, like many of the tax protestors appear to do. The civil outcome may have been no different, but Mr Snipes may have escaped the criminal penalty imposed on him.

The lesson here is acting on aggressive advice or direction without building the proper team around you, and managing the risks going forward carefully, will cause much more exposure than in the case of dealing with these issues proactively.

Taxpayers, particularly businesses and public company taxpayers, must look at the annual IRS Databook to see what trends are developing. Criminal prosecutions and penalties are on the rise - by 10% on 2006 figures, and more corporate taxpayers are being audited, although the overall percentage is still around 1% of corporate taxpayers. Then there is the additional statistic that if you are a Nevada corporation there is a 150% greater chance of being audited.

All these factors should be considered in any tax risk management strategy, a never ending process.

[Lyn]

Snipes got a very lenient sentence because he's a black celebrity. He should have gotten at least 8-10 years because he absolutely WAS part of a conspiracy to evade taxes. He's not some idealist or tax protester; Snipes got greedy and got caught. I'm glad he will have to do some real time in a real federal prison, and I'm glad he'll be considered a convicted felon for the rest of his life.

[Dawn]

I agree with Lyn. While there may not be an actual law which requires the payment of income taxes, we all expect things from our government and as such the money has to come from somewhere. Taxes don't thrill anyone, but for someone who has enjoyed all the priveledges of being a rich man in this country to believe he owes this country nothing in return is just selfish and greedy. Unfortunately the fact that he will now carry the label of convicted felon will not damage his career nor will it cost him anything once he is released. The opposite is actually going to prove to be the case. Sad but true.