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INTERNAL REVENUE - Why these celebrities got in hot water with the IRS - and how much they had to pay
Key Findings:
- Tax attorney explains five celebrity tax audits that revealed celebrities owed millions to the government
- How Lil Wayne, John Travolta, and Nicolas Cage, among others, fell afoul of the IRS
- Tax attorney explains the story behind the biggest tax fraud case in US history
Filing taxes can be confusing, and is often the most frustrating chore the average American has to do for the year.
“With all the different income streams and investments celebrities have, filing their taxes is even more confusing,” says Dawn Delia, a Federal Tax Attorney at Delia Law. “This confusion - and, in some cases, mismanagement by their accountants - has often led to celebrities falling afoul of the US tax system and owing millions to the Internal Revenue Service (IRS).”
Lil Wayne - $14 Million
Lil Wayne, the Grammy-winning artist known for hits like "Go DJ," battled with the IRS over substantial tax issues that began accumulating in 2002. Wayne faced multiple tax liens, culminating in a $14 million tax debt by 2019.
He finally settled with the IRS thanks to financial assistance from his friends, particularly rapper Jay-Z, who played a significant role in helping him resolve his tax issues. “Wayne publicly acknowledged how much Jay-Z's support meant to him, calling him ‘a real friend’ at a concert in Chicago,” says Ms. Delia.
Nicolas Cage - $6 Million
Nicolas Cage, renowned for his roles in major Hollywood blockbusters, encountered severe financial turbulence in 2009 due to a $6 million lien from the IRS for unpaid taxes from 2006. Additional liens for unpaid property taxes compounded his financial woes. Cage attributed these financial missteps to mismanagement by his team and subsequently sued his financial manager for fraud and negligence.
By 2022, after taking on a series of arguably subpar movie roles to help pay back what he owed and moving to Nevada where there’s no state income tax, Cage announced he had cleared his tax debt and expressed a desire to be more selective with future projects.
Chuck Berry - $765,000
Chuck Berry, a pivotal figure in rock and roll history, faced legal troubles in 1979 when he was convicted of tax evasion. Accused of failing to pay $110,000 in taxes from his 1973 earnings (a figure equal to nearly $765,000 today), Berry's practice of demanding cash payments for performances had raised suspicions with the IRS.
As it turns out, they were right; Berry pleaded guilty and served 120 days in federal prison. This was followed by four years of probation and 1,000 hours of community service, which he fulfilled through benefit concerts.
Lindsay Lohan - Over $100,000
Famous for her roles as a child actress in films like The Parent Trap and Mean Girls, Lindsay Lohan has faced significant financial challenges throughout her career. In 2017, a tax lien revealed that Lohan owed the IRS $100,710 for unpaid taxes from 2010, 2014, and 2015. This came after previous issues in 2012 when the IRS placed a lien on her 2010 earnings, and problems from 2009 when she failed to file her tax returns.
“Her financial troubles became part of the media firestorm surrounding the star as she navigated various other personal issues, casting a shadow on her once-bright career,” says Ms. Delia.
John Travolta - $1.1 million
In 2000, John Travolta, a star known for his iconic roles in films like Pulp Fiction and Saturday Night Fever, resolved a tax dispute with the IRS regarding improperly reported losses from 1993 to 1995.
Initially facing a bill of $1.1 million, Travolta negotiated a settlement that involved paying $607,400 to cover back taxes and penalties. “This smooth resolution allowed him to continue his career without the looming shadow of tax issues,” Ms. Delia says.
Dawn Delia from Delia Law commented:
“The biggest case of tax fraud in U.S. history was perpetuated by someone most people probably haven’t heard of,” says Ms. Delia. “Paul Daugerdas, a former attorney, was convicted for orchestrating an elaborate tax shelter scheme in 2013, for which he was sentenced to 15 years in prison. His fraudulent scheme generated over $7 billion in fictitious losses, which enabled his ultra-wealthy clients to significantly reduce their tax liabilities, ultimately costing the IRS around $1.6 billion in lost revenue.
“Daugerdas made an estimated $95 million during the 20-year scheme. In addition to serving his prison sentence, he was ordered to pay over $370 million to the IRS and forfeit assets totaling almost $165 million. Eight other co-conspirators were convicted in connection with the scheme, though Daugerdas has always been regarded as the ringleader.”
Disclaimer: All information in this article has been prepared for informational purposes only and does not constitute legal advice.
