Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

There's nothing new about high-profile tax evaders

- by Alan Duvall 

Published in Dayton Daily News   October 1, 2006 

GUILTY.  Entrepreneur Walter Anderson recently pleaded guilty to tax evasion of over $200 million federal income amounting to a shortfall of $100 million taxes – the largest criminal tax fraud in U.S. history, according to reports. 

GUILTY.  British drug maker GlaxoSmithKline agreed to settle a $3.4 billion tax settlement with the IRS, an amount claimed to be the biggest settlement in history.     

GUILTY.  R&B singer Ron Isley and Survivor winner Richard Hatch were sentenced to jail terms for tax fraud.  On the corporate front, former Tyco CEO Dennis Kozlowski pled guilty to sales and income tax evasion owing millions to federal and state coffers.  Also sentenced to jail for corporate fraud charges, his wife rubbed salt in his wounds by filing for divorce. 

Is this a recent trend in high profile tax cases?  Hardly. 

Al Capone was famously dethroned by tax fraud counts when all other legal attempts to criminally nail him failed.  Reds baseball legend Pete Rose and country singer Willie Nelson have likewise suffered tax evasion convictions. 

Even former President Richard Nixon and his Vice President Spiro Agnew pled guilty to tax evasion charges committed while in office.  President Nixon may never have been audited were it not for publicity stirred up by the Watergate fiasco. 

It is reported the IRS hauled in a record $47 billion unpaid taxes through audits in fiscal 2005.  But the agency has a large hole to fill considering it is estimated taxpayers underreported tax bills by $345 billion in 2001 alone. 

In fiscal 2005 the IRS audited about 1 in 63 wealthy individuals (incomes over $100,000), a rate nearly double 2001 figures.  Plans are to increase audits of this bourgeoisie taxpayer class dramatically in future years.  By comparison, only 1 in 130 total individuals were similarly audited in fiscal 2005. 

To trumpet this focused concern on the financially blessed, the IRS just announced a settlement with the Motion Picture Academy regarding taxation of gift bags to celebrities.  Recipients must report these goodie bags as income.  Gift bags, given to nominees, presenters and other celebrities at the Academy Awards, are often worth more than $100,000. George Clooney personally avoided adverse tax consequences by donating his bag to charity, according to reports.

But the wealthy may enjoy some solace from the recent attorney staff layoffs in the IRS estate tax audit division.  Recent estate tax cuts have limited audits to the upper echelons of financially elite decedents and thus the need for nearly 400 high profile legal auditors.   

Misery certainly loves company. 

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.