• DMX Tax Evasion

    Author : White Collar Firm July 14, 2017

    Another celebrity was recently accused of conducting tax fraud – rapper DMX was arrested for a scheme where he allegedly concealed millions of dollars in order to avoid paying over $1.7 million in taxes. The charges indicate that he earned millions in royalties from his songs, but failed to report any of it to the IRS. If he is convicted, he faces up to 44 years in prison on each of the charges.

    Adding to the prosecution’s case is the idea that Mr. Simmons intentionally evaded his tax obligations, using cash only and not even having a personal bank account. According to the prosecutors, he also deposited his royalty checks into other people’s accounts, including his managers, who then gave him cash to pay his bills and personal expenses. Additionally, he is said to have filed a false statement in a U.S. Bankruptcy court under oath, listing an ‘unknown’ level of income for 2011 and 2012, with a reported income of $10,000 for 2013 – when it is widely suspected he received hundreds of thousands of dollars during the same time period.

    This is not the first run-in DMX has had with the law – he’s also been arrested for animal cruelty, drug possession, weapons charges, probation violations, and reckless driving. He has spent time in an Arizona prison as well.

    According to an attorney for DMX – whose legal name is Earl Simmons – he is not guilty by virtue of the fact he had hired others to take care of these issues, and they failed in their duty to him. Unfortunately for Mr. Simmons, that defense is likely to fail. Courts have consistently held that the taxpayer has a duty to read the return and ensure all income is included prior to signing. Therefore, he will remain primarily liable for the fraudulent returns. Of course, if his accountants failed to file or filed the incorrect information, they might be in breach of their fiduciary duty to him, which will be a civil matter to be determined later. The lesson here is, no matter who you hire, when it comes to the IRS, you are the only person that matters.

    One defense that might be properly raised is the ‘good faith defense,’ meaning the government has to show that the defendant acted willfully, thus disproving any claim that what was filed or done was done in good faith. That is because, in filing a false claim, the defendant must do so knowing that it was false, and yet filed it anyway. It is difficult to assert this defense, particularly as it requires proof of a subjective mindset, which is often only achievable through the testimony of the defendant himself. And almost any criminal defense attorney will recommend that their client do not take the stand in his or her defense.

    It should be noted that if Mr. Simmons fraudulently failed to file his return, he faces a much harsher penalty, as this is a felony. Interestingly enough, as seen in the case of Wesley Snipes, mere failure to file the income tax return at all is simply a misdemeanor, which carries with it less harsh punishments. Unfortunately for Mr. Simmons, he took it a step further and lied to the U.S. government and the I.R.S., who do not take such actions lightly.

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