Americans love celebrity drama. Really, everyone does.
From tabloids to the hundreds of the reality shows on the air, people just seem to love learning about the highs and lows of our most high-profile citizen.
While we personally get our kicks from the hottest gossip out of the Department of Treasury, we can’t blame you—there’s just something inherently interesting about the ultra-rich or famous that is inherently interesting! However, we’re not quite as interested in who is dating whom and who did what at which party.
What we’re most interested in is tax scandals. Yes, tax scandals.
Well, okay. It’s not so much that at StopIRSDebt.com we’re interested in tax scandals. It’s that we think tax scandals provide some of the most interesting cases of tax evasion, IRS audits, and tax debt out there.
And there are a lot of lessons we can learn from some of these high-profile tax scandals, which is why we want to dive into some of the biggest tax scandals of 2018. We’ll break down what happened, where things stand in 2019, and what you can learn to ensure you and the IRS have a famously good relationship.
Fun fact: The IRS audits less than 1% of all tax returns.
Not so fun fact: If you earn $200,000 or more, your chances of being audited are about 1 in 80.
The truth is that the more money you make, the more likely you are to be audited. And while many audits simply amount to getting an extra piece of information, many do result in huge tax bills or other revelations that affect some celebrities.
Let’s take a look at the five biggest tax scandals of 2018.
If you’re not familiar with her name, you’re at least familiar with her profession, since Fan Bingbing is arguably China’s most famous actress. And last year, her country accused her of evading millions of dollars in taxes. So what happened?
It was alleged that she and members of her production company had underreported her earnings from her films. And with so many major box office hits under Ms. Fan’s belt over the years, the amount of her unpaid taxes had really grown. Between taxes and penalties, authorities fined her an amount equaling close to $70 million. Because this was her first offense, Ms. Fan wasn’t expected to face criminal charges, as long as the fine was paid. However, not everyone at her production company was so lucky.
The takeaway: It’s always a bad idea to underreport your income. While it’s tempting to think you can effectively hide your income through your business, the IRS will eventually sniff things out. And you don’t want to be staring down a $100,000 bill.
You may remember Mike Sorrentino from Jersey Shore, but the TV personality has recently moved away from the cameras in New Jersey to prison. Here’s what happened.
Back in 2014, Mike and his brother, Marc, were charged with a list of tax-related crimes. The Sorrentino brothers controlled companies that dealt with endorsement deals, and took steps to avoid reporting all of their income—even making cash deposits into bank accounts in totals smaller than $10,000, ensuring the IRS wasn’t notified. In 2018, Mike Sorrentino took a plea deal and was sentenced to eight months in prison, two years of supervised release, and pay over $100,000 in fines.
The takeaway: Taxes have consequences—including jail time. So keep up to speed with your tax returns, and always act in good faith (that means no sneaky sub-$10,000 deposits).
Though it may seem like there’s always some major news coming out of the White House, one huge piece of high-profile tax news struck Jared Kushner, that he likely paid little or no income tax between 2009 and 2016. While this news was controversial, it wasn’t illegal—so what happened?
The Kushner family is a billionaire family known for real estate, and Jared himself has grown his net worth to over $300 million in the past decade. Despite making millions of dollars each year, Kushner employed a tax-minimizing strategy common among real estate investors called “depreciation.” Depreciation refers to the normal wear and tear on a property, which might lower its value over time. Smart real estate investors like the Kushners can write off millions of dollars in depreciation each year, effectively erasing their income.
The takeaway: The rich employ tax strategies that can give the rest of us hints on how to save. Not every strategy works for every situation, but it’s worth exploring the ones that might help you at tax time.
Celebrity scandals can be exciting, but when they involve taxes, there’s almost always an important takeaway. Even the most ethical can start fudging the numbers when millions of dollars are on the table. But just keep your tax returns and business decisions above board, and you’ll make sure you never find yourself on the cover of a tabloid.
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