Let's dive into the fascinating and rather long-running saga of Wesley Snipes and his tax troubles with the IRS. It's a case that offers some important lessons about tax obligations and the consequences of not fulfilling them.
The Long Road of Wesley Snipes' Tax Battle with the IRS
The journey of Wesley Snipes with the IRS is a complex one, spanning over a decade and involving millions of dollars in alleged unpaid taxes, court battles, and even a prison sentence. It's a prime example of how serious tax issues can become, even for high-profile individuals.
Step 1: Understanding the Genesis of the Problem (Engage! Have you ever wondered how someone earning millions could get into such deep tax trouble?)
It all began with accusations that Wesley Snipes, like many others, fell prey to "tax protestor" theories. From 1999 to 2001, and potentially up to 2004, Snipes failed to file his federal income tax returns. This was despite earning substantial income, reportedly $37 million between 1999 and 2004. He was allegedly advised by individuals who propagated the idea that domestic income of U.S. citizens was not taxable under certain interpretations of the tax code (the "861 argument"). This advice proved to be disastrous.
- ***The "861 Argument"***: This was a key component of the defense that Snipes and his advisors used. It's a tax protestor theory that misinterprets Section 861 of the Internal Revenue Code to argue that only foreign-sourced income is taxable for U.S. citizens. Courts have consistently rejected this argument, stating that all income, regardless of source, is taxable for U.S. citizens.
Step 2: The Initial Charges and Conviction
In October 2006, Snipes, along with his financial advisor Douglas P. Rosile and anti-tax advocate Eddie Ray Kahn, were charged with conspiracy to defraud the United States and knowingly making or aiding in false claims against the U.S. government. Snipes was also charged with willfully failing to file timely federal income tax returns.
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- The Felony vs. Misdemeanor Distinction: In February 2008, a jury found Snipes not guilty of the felony charges of conspiracy and filing false claims. This was a partial victory for Snipes. However, he was found guilty on three misdemeanor counts of willfully failing to file federal income tax returns for the years 1999, 2000, and 2001. His co-defendants were convicted on the more serious felony charges.
Step 3: Sentencing and Incarceration
In April 2008, Snipes was sentenced to the maximum allowable term of three years in prison for the three misdemeanor counts. His appeals were unsuccessful, and he eventually reported to federal prison in December 2010. He served approximately 28 months and was released in April 2013, with a period of house arrest concluding in July 2013.
- The Irony of His Advisors' Sentences: Notably, Snipes' co-defendants, Douglas P. Rosile and Eddie Ray Kahn, received much longer prison sentences (four and a half years and ten years, respectively) for their roles in the conspiracy. This highlights that while Snipes was held responsible for his actions, the individuals who allegedly advised him on these faulty tax theories faced even steeper consequences.
Step 4: The Continuing Civil Tax Battle and the $23.5 Million Bill
Even after serving his prison sentence, Snipes' tax troubles with the IRS were far from over. The criminal conviction addressed the failure to file, but the underlying tax debt remained.
- The Initial Claim: In August 2013, shortly after his release, the IRS filed a Notice of Federal Tax Lien (NFTL) against Snipes' property for outstanding taxes for the years 2001 to 2006. The total liability at this point was approximately $23.5 million.
Step 5: The Offer in Compromise (OIC) and Its Rejection
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Facing this massive tax bill, Snipes attempted to resolve it through an Offer in Compromise (OIC). An OIC allows a taxpayer to settle their tax debt for a lower amount than what is owed, usually when there is doubt about the IRS's ability to collect the full amount.
- Snipes' Offer: Snipes initially offered a cash settlement of $850,000, which was less than 4% of the total $23.5 million liability. He argued that he did not possess the assets to pay a higher amount and that paying more would cause him "economic hardship."
- ***IRS's Determination of Reasonable Collection Potential (RCP)***: The IRS investigated Snipes' financial situation to determine his "reasonable collection potential" (RCP), which is the amount they believe they could realistically collect. This investigation revealed that Snipes' RCP was much higher than his offer. At one point, the IRS determined his RCP to be around $17 million.
- The IRS Counter-Offer: After further consideration, the IRS lowered its determination of Snipes' RCP to approximately $9.5 million. This essentially became the amount the IRS was willing to accept as a settlement.
- Snipes' Refusal and Subsequent Court Battle: Despite the IRS lowering its figure, Snipes stuck to his original offer of around $842,061. He argued that the IRS abused its discretion in rejecting his offer and refusing to consider his "economic hardship." The case went back to Tax Court.
Step 6: The Final Ruling and the $9.5 Million Order
In November 2018, the United States Tax Court ruled against Wesley Snipes. Judge Kathleen Kerrigan determined that Snipes and his representation failed to provide sufficient proof of his assets and current financial situation to support his low offer.
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- The Final Payment Order: The court upheld the IRS's decision, essentially ordering Wesley Snipes to pay an adjusted amount of $9.5 million to the IRS. This was the amount the IRS had previously determined as his reasonable collection potential.
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| How Much Did Wesley Snipes Have To Pay Irs |
In Summary: How Much Did Wesley Snipes Have to Pay the IRS?
While his original tax liability was stated as $23.5 million, after years of legal battles, prison time, and rejected settlement offers, Wesley Snipes was ultimately ordered to pay $9.5 million to the IRS. This amount was the IRS's determined "reasonable collection potential" after their assessment of his assets and financial situation.
Related FAQ Questions
Here are 10 quick FAQs related to Wesley Snipes' tax case:
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How to avoid tax problems like Wesley Snipes?
The best way to avoid tax problems is to file your taxes accurately and on time, seek professional and reputable tax advice, and ensure you understand your tax obligations.
How to file taxes correctly?
To file taxes correctly, gather all your income and expense documents, choose the appropriate tax forms, use tax software or a qualified tax professional, and submit your return by the deadline.
How to deal with an IRS audit?
If you face an IRS audit, respond promptly to all communications, provide all requested documentation, consider hiring a tax professional to represent you, and be truthful and cooperative.
How to make an Offer in Compromise (OIC) to the IRS?
To make an OIC, you must complete IRS Form 656, provide detailed financial information, and demonstrate that you cannot pay your full tax liability. The IRS will review your assets, income, and expenses to determine your reasonable collection potential.
How to appeal an IRS decision?
You can appeal an IRS decision through the IRS Appeals process, which offers an independent review of your case. You may also be able to petition the U.S. Tax Court.
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How to find a reputable tax advisor?
Look for Certified Public Accountants (CPAs), Enrolled Agents (EAs), or tax attorneys. Check their credentials and ensure they have a good reputation and experience with your specific tax needs.
How to understand tax protestor arguments?
Tax protestor arguments, like the "861 argument," are generally baseless and have been repeatedly rejected by courts. They often lead to severe penalties, including fines and imprisonment.
How to pay a large tax debt to the IRS?
Options for paying a large tax debt include installment agreements, Offers in Compromise (if you qualify), or securing a loan. It's crucial to communicate with the IRS to establish a payment plan.
How to get tax help if you can't afford it?
The IRS offers programs like Low Income Taxpayer Clinics (LITCs) that provide free or low-cost assistance to eligible individuals with tax disputes.
How to check your tax account with the IRS?
You can check your tax account information, including balances and payment history, by creating an account on the IRS website using their "IRS Online Account" tool.
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