Some would say celebrities have it all – luxurious lifestyles, dream jobs, garages the size of airplane hangars. They bask in the public spotlight, keeping one eye on their vesper martini and the other on keen watch for Paparazzi.
Here’s something else many of them have: financial dilemmas. With big money comes big responsibility not to owe big tax bills. Quite a few of them forgot that mantra.
With bloated incomes from different sources that vary wildly from year to year, the magazine cover models and the A-list stars brew up a recipe for a cauldron of IRS tax troubles.
2012 saw a number of celebrities added to a growing list of IRS delinquents. For those of you who think the IRS only pursues the little fish, here is a quick rundown, in no particular order, of the fighting marlins caught in the tax net.
Lionel Richie experienced what might be considered a cruel April Fools joke, except it was April 2, not the first, and it wasn’t a joke. That day, as superstar Lionel Richie was performing a song from his new album on The Ellen DeGeneres Show, the IRS was filing a $1.1 million lien on the singer for unpaid 2010 income tax.
“I was recently made aware of the situation by my new team and it is being handled immediately,” he said in a statement.
In early December, we read about a celebrity who is a regular visitor to all things unlawful: Lindsay Lohan. With two tax liens and a balance of $234,000, the IRS seized her bank accounts in an attempt to settle her tax debt.
The New York Post quoted a source that said “Lindsay is freaking out” and that the actress is “doing what she always does, which is to say it’s not her fault and point the finger at someone else in her team. She says she didn’t know anything about it… she’s broke and it’s not her fault.”
According to TMZ, Pamela Anderson owes $371,514.65 to the IRS and State of California. This isn’t Anderson’s first run-in with the IRS. In 2010, she had a tax lien filed against her for $1.7 million in unpaid taxes.
Tax returns from 2008 through 2010 were the subject of an IRS audit on Rihanna, who was quick to blame her former accountants. Court papers filed by the singer, whose real name is Robyn Fenty, claim the IRS audit was the “direct result” of mishaps by the Berdon accounting firm, which allegedly “failed entirely to file tax returns in certain instances.”
The Osbourne family has been all over reality TV, and family members have owed taxes to the feds or the state at some point. Daughter Kelly Osbourne had a 2010 tax lien for $34,000. Trumping that was a tax debt for parents Ozzy and Sharon, who had an IRS tax lien placed against them in the amount of $1.7 million.
After his release from prison, a reformed Plaxico Burress made good on his tax debt. The Pittsburgh Steelers wide receiver reportedly paid off an IRS tax lien for $98,064.76.
Burress is best known in celebrity circles for pleading guilty in 2009 to a weapons charge after he accidentally shot himself in the leg at a New York City nightclub. The Glock pistol he was carrying in his waistband slid down his leg and, while trying to retrieve it, he unintentionally shot himself. He should learn to tighten his belt.
There are a number of reasons why celebrities and sport stars seem to be mired in IRS muck.
Some simply do not pay what they owe. Richard Hatch of Survivor fame led the way with this. Wesley Snipes was accused of tax evasion and landed a prison term for his $17 million tax bill, while Nicolas Cage owed a seven-figure amount to the IRS.
Part of what got Snipes in so much hot water was his refusal to file tax returns. It is illegal not to file returns; it is not a crime to owe tax. Snipes was found guilty of three counts of failing to file tax returns. The Blade trilogy star involved himself in popular de-taxing schemes, claiming taxes are unconstitutional.
Some celebrities also need to understand exactly what is considered taxable income. According to dailyfinance.com, AccountingWEB recently took a look at some of the great swag that celebrities received at the Academy Awards. Sponsors handed out goody bags which were not your typical fare. Jewelry and other gifts tagged these packages with a value of $75,000 each. Taxable? Yes!
At times, taxpayers claim reliance on a third party as their excuse. Rihanna and Lohan fall into this category. Martin Scorsese and Al Pacino both blamed convicted adviser Kenneth Starr for their tax problems.
Nevertheless, the IRS cannot hold a third party responsible for your own tax debt. You sign the return, and whether your income is middle class American or celebrity superstar status, you and only you bear final responsibility for everything that is on that 1040.
The top 20 of 2010 – Celebrities who owe the IRS
Don’t be duped by frivolous tax arguments, warns IRS
Rapper Flavor Flav in trouble with the IRS to the tune of 1 million