Personal Finance > Taxes
Tax troubles of the rich and famous
Willie Nelson isn't the only star to have sung the IRS blues. Other celebrities get in trouble, too.
February 20, 2003: 11:31 AM EST
By Leslie Haggin Geary, CNN/Money Staff Writer

NEW YORK (CNN/Money) It's tax time again, and there's a part of you that would like to keep your money to yourself. But how far would you go?

As it turns out, most of us pay our tab. But there are always those who push the limits of what's legal. At last count, the gap between what individuals owe in taxes and what they actually paid ran $278 billion, according to the Internal Revenue Service.

Understandably, the IRS is keen on tracking cheats down. Last year, roughly one in 174 filers were audited.

Prevention seems to be the most effective way for the IRS to get its money. The best tactic? Setting examples of celebrities who run afoul of tax laws. After all, the IRS thinking seems to be, if the rich and powerful can get busted, so can you. That said, here's a list of some of the more infamous tax cheats:

Willie Nelson

The country crooner recently appeared in a commercial for H&R Block that aired during the Super Bowl. In it, Nelson makes a shaving cream commercial to pay for his accountant's "mistake" in missed taxes. The moral: Get good tax advice. Nelson should know. The IRS once fined him a whopping $32 million after he got caught up in a bogus tax shelter. Nelson settled the case for roughly $16 million. Like some taxpayers, he didn't quite have the cash on hand to pay the tab. To raise money, he released an album entitled, "The IRS Tapes Who'll Buy My Memories?"

Leona Helmsley

The "Queen of Mean" found little public support when she was convicted of tax evasion back on April 15, 1992. After claiming some $2.6 million worth of phony business expenses, Helmsley (along with her late husband Harry) was found guilty of tax fraud and spent four years in prison. Her defense suffered immeasurably when a witness testified that Helmsley had boasted: "We don't pay taxes. Only the little people pay taxes." That infamous quote lives on, having found its way into several anthologies of quotations.

Dennis Kozlowski

The former Tyco CEO found himself in serious hot water in June 2002 when New York State District Attorney Robert Morgenthau indicted him for tax evasion. It seems that Kozlowski went on a shopping spree, buying some $13 million worth of paintings by Renoir, Monet and other artists to grace his Manhattan apartment. In order to avoid state and local sales taxes, however, Kozlowski allegedly made arrangements so it would appear that the art had been shipped out of state to Tyco's offices in Exeter, N.H. (In actuality, the galleries sent empty boxes to New Hampshire.) Kozlowski stepped down after the indictment.

Andrew Mellon

Kozlowski shares his penchant for fine art and tax trouble with another well-known tycoon -- Andrew Mellon. When he was Secretary of the Treasury in 1930, Mellon spent a cool $7 million on paintings he bought from the Hermitage Museum in Leningrad, Soviet Union. Like Kozlowski, Mellon didn't really want to pay taxes (roughly $700,000) on the art, so he tried to deny he bought the paintings at all. To make matters worse, even though he didn't 'fess up and initially pay the sales tax, Mellon deducted the cost of the art purchase as a charitable deduction from his 1931 income tax return. Happy ending: Today, the art is part of the permanent collection at the National Gallery in Washington, D.C., which Mellon helped finance.

Heidi Fleiss

The Hollywood madam's story titillated the public, which was eager to know which high-flying celebs used her services. In fact, Fleiss ran one of the most successful escort services in the business, sending high-priced girls to clients from Los Angeles to Kuwait. She tooled around in expensive cars, made millions, and apparently failed to report the ill-gotten income to the folks at the IRS. In 1997, Fleiss was convicted for pandering, tax evasion and money laundering and sent to prison. When she got out, Fleiss wrote about it all in her memoir, Pandering.

Martha Stewart

Forget her ImClone scandal. The doyenne of all things tasteful found herself in a heap of trouble in 2002 when a New York judge found that Stewart lacked "credible testimony" in her effort to avoid paying some $220,000 in New York state taxes. Stewart maintained she didn't owe the state any money since she hardly spent time in New York. But a judge disagreed, noting that one of Stewart's own books states that Stewart keeps a summer pad in East Hampton, N.Y. The upshot? Stewart was ordered to pay the back taxes plus fines.

Darryl Strawberry

No stranger to brushes with the law, the famed baseball slugger was indicted on tax evasion charges for failing to report hundreds of thousands of dollars he received by selling his autograph at baseball card signing events. Strawberry made a deal, pleaded guilty to one count of tax evasion, and was ordered to pay back $350,000 in back taxes. Strawberry also was sentenced to six months of house arrest, though he was permitted to leave to play ball.

Joseph Nunan

Who's Joe Nunan? Forgotten today, this former IRS commissioner made headlines in 1952, when he himself was busted for evading taxes. It turned out that Nunan had won a $1,800 bet that Harry Truman would win the Presidential election but failed to report his winnings to the IRS.

Nunan and the others make up just a few on the list of high-flying tax cheats. For more, click here. And let their fate be a lesson to you.  Top of page

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