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New York City Tax Lawyers

Celebrities can be charged with tax crimes too

There have been many stories recently about how the Internal Revenue Service is losing resources to conduct audits and prosecute tax crimes. While it is true that the IRS may be running lean today, they still have the ability to enforce tax laws. With their resources dwindling, they continue to focus on high-profile criminal cases that will recoup large amounts of money and give the agency news coverage.

Many people think that the IRS won’t catch mistakes or misinformation left on tax documents, but hundreds of people, including many who earn millions of dollars, are still charged with tax crimes every year. One such person caught up in the IRS’ prosecution is New York rapper DMX, who was recently sentenced to one year in prison for tax fraud.

DMX pleaded guilty and was convicted after prosecutors found that he avoided paying nearly $2 million in taxes during the height of his rap career from 2000 to 2005. He avoided taxes by depositing money in bank accounts belonging to other people and using cash exclusively in his transactions.

Why are celebrities at risk for tax crimes?

DMX is not the only New York rapper or musician to be charged with tax crimes in recent years. Ja Rule, Fat Joe and Lauryn Hill have each had their criminal run-ins with the IRS in the past decade. So, why is the IRS more likely to target celebrities?

It’s no secret that most celebrities have a variety of income sources, assets, property and luxury items. Each of these things can play a role in the likelihood of an audit or investigation. The primary factor in all of this is income. The IRS is more likely to target people who make more than $500,000 annually or have recently experienced a significant rise in income because these are the cases they need to recover large sums and earn media attention, as explained above.

What can I do to avoid trouble?

Taxpayers can prevent troubling situations by being transparent and being proactive. Almost every transaction is going to have tax consequences, so it is important to be proactive in understanding the tax consequences of a purchase before making it and paying the obligation afterward.

Celebrities are taxpayers too, and everyone has the opportunity to take advantage of tax planning and audit resources available. Goldburd McCone LLP has helped New York residents with complicated tax situations for 35 years, and we are ready to help with yours too.

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