Tax question answered

I had always wondered how Wesley Snipes got off on 3 charges for not filing his tax returns and was guilty on the other 3 charges. Thanks to Taxanswers response, now I know!

I asked,”Didn’t Wesley Snipes get busted for not filling out his tax returns?”

His response:

EnjunJoe –

Yours is an excellent question. The simple answer to your question is “no” but there is much more to the court case.

Snipes was charged with one count of Conspiracy (a felony), one count of Income Tax Fraud (a felony), and six counts of Willful Failure to File (all misdemeanors). He was found innocent of the conspiracy charge and innocent of the fraud charge.

His six counts of Willful Failure to File fell into 2 categories. The older 3 charges involved 3 years where Snipes filed tax returns showing zero income and zero taxes due. Yet he attached at least one Form 1099 to each return without presenting evidence why the Form 1099 showed money that DID NOT constitute “taxable income” as the IRS defines the word. You cannot show a Form 1099 and claim no income at the same time unless you document WHY the “income” shown in the 1099 was not subject to taxation. Let me explain.

A Form W-2 or a Form 1099 is a claim that you made money that is subject to taxation. When you attach either to a Form 1040, you are “claiming” that you made money subject to taxation. By filing the way he did, Snipes was claiming taxable income while claiming no taxable income and no taxes due at the same time. You cannot do that, and Snipes found that out.

Snipes claimed that he believed that he made no taxable income for those years and that was why he had indicated zero income and zero taxes due on that income. The IRS convinced the jury that Snipes broke the law, and he actually did. Snipes did not convince the jury otherwise and it found him guilty as charged.

The most recent 3 Failure to File charges were a different matter. He actually filed no returns for those years. He had learned that to claim on a tax return zero income and zero taxes while attaching a form 1099 that declared income to that same return was illegal. Since he still believed that he made no income that was taxable, he discovered that he was not required to file a return at all for those years. So he filed no return at all for those three years. For those three years that had no return at all, the IRS could not prove it was illegal and it dropped the charges.

In other words, Snipes proved that if you honestly do not believe that you earned taxable income, it is better to not file at all than it is to file a return trying to claim no taxable income.

Snipes is currently out on bail and appealing his conviction of 3 counts of Willful Failure to File.

Thanks for the info!!