The IRS can impose a number of penalties and interest charges. It can even throw you in jail if you don't file your tax returns. It doesn't matter if you are a big Hollywood star or a country singer, you can get in trouble with the IRS. Here are five celebrities who found themselves on the wrong end of a tax audit.

Willie Nelson
Willie Nelson's long history with the IRS began in 1984 when the agency chose to review his tax returns back to 1972. The extensive audit stretched out for years and the IRS presented him with a bill for more than $6 million in underpaid taxes. He also owed over $10 million in interest and penalties. Nelson's accounting firm had filed for the singer every year, but it had claimed tax shelters that the IRS disallowed. The IRS seized most of Nelson's assets and sold them at auction. Most were purchased by friends and supporters who gave them back to the singer. The settlement was negotiated down further and Nelson ended up paying it off. He later sued Price Waterhouse, now PricewaterhouseCoopers, and settled with the accounting firm for an undisclosed amount.

Wesley Snipes
Wesley Snipes is currently contemplating his actions behind bars. Snipes was charged with felony tax evasion for not filing returns or reporting over $14 million in income earned between 1999 and 2001. He was also charged with filing false information to receive tax refunds. Snipes was connected to a group that contends that federal taxation is illegal and unconstitutional. Although Snipes was acquitted of the felony charges, he was convicted on three misdemeanor counts of failing to file tax returns. He was sentenced to three years in jail.

Annie Leibovitz
Annie Leibovitz, the American photographer famous for capturing celebrity moments, found herself in front of cameras in 2009 when she was at risk of losing all of her assets, including the rights to her photographs, because she could not repay a loan. Part of the need for the loan was a debt to the IRS of $1.4 million plus interest and penalties for not reporting income earned between 2004 and 2007. Leibovitz also struggled to pay the estate taxes on her home and other properties. Leibovitz has since restructured the loan and is no longer at risk of losing her assets.

Sophia Loren
Snipes is not the only celebrity to have to cool his heels in prison. In 1982, Italian actress Sophia Loren was ordered to jail for 30 days for underreporting income in 1970 to the tune of 5 million lira (around $8,000 at the time). She served 17 days of the sentence before being released under a court order. She has had no public tax troubles since that time.

Lauryn Hill
Lauryn Hill, who has won eight Grammy awards in her career, is one of the most recent celebrities to face tax problems. She was charged with three counts of failure to file tax returns because she did not file between 2005 and 2007. She currently owes the IRS $1.5 million plus penalties and interest. Hill faces a maximum one-year sentence on each count and will be sentenced this November. According to Hill, she willingly did not file after she left the music industry so she could protect her children. Hill has said that she will elaborate on her reasoning further at her sentencing hearing.

The Bottom Line
Income taxes are a reality for everyone, including the rich and famous. The IRS, and other tax authorities, can send tax evaders to jail on top of assessing penalties and interest on unpaid taxes. No one escapes the tax man, especially not those who are always in the spotlight.

Related Articles
  1. Retirement

    Why Some Celebs Say 'No Inheritance for My Kids'

    To some of the super rich, inherited wealth is not the ultimate gift, it's a burden. Here's how their children—as well as charities—stand to benefit.
  2. Investing

    Kevin O'Leary Biography

    Kevin O'Leary is a television personality, businessman and investor from Canada. A brash public personality with a net worth of roughly $300 million, he is considered to be the Canada’s answer ...
  3. Entrepreneurship

    7 Top-Earning Child Stars

    These seven top-earning child stars earned millions through different parts of the entertainment industry, including television, film and music.
  4. Entrepreneurship

    8 Top-Earning Country Singers

    These eight country singers have built careers singing about men and women who’ve done them wrong, and they’ve shared their heartache to the tune of millions of dollars.
  5. Taxes

    Countries With The Highest & Lowest Corporate Tax Rates

    The United States is No. 2 in the world for its high corporate tax rate. There are ways around paying it, and many nations with lower rates are worse off.
  6. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  7. Investing

    How Shackling Offshore Banks Will Impact You

    FATCA regulations have cast a wide net on offshore banking activities, and many innocent account holders might get caught in its tangle.
  8. Investing News

    Tax Evasion Plagues Greece

    Contrary to what some may think, Greece’s debt problems are not due to extravagant spending by the government, but to insufficient revenues caused by rampant tax evasion estimated at 20 billion ...
  9. Taxes

    What IRS Form 1023 Is Used For

    To be treated as a tax-exempt organization, start by filling out this form.
  10. Taxes

    Late with Your Taxes? Grab IRS Form 4868

    Fill out this form to get a few more months to file your tax return. But remember, April 15 is still the payment due date if you owe taxes.
  1. Why is the Cayman Islands considered a tax haven?

    The Cayman Islands is one of the most well-known tax havens in the world. Unlike most countries, the Cayman Islands does ... Read Full Answer >>
  2. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>
  3. What is the difference between comprehensive income and gross income?

    Comprehensive income and gross income are similar, but comprehensive income is a specific term used on a company's financial ... Read Full Answer >>
  4. How do I avoid a tax lien on my property?

    The best way to avoid a tax lien on your property is to make sure you pay all your state, municipal and federal taxes in ... Read Full Answer >>
  5. What tax breaks are afforded to a qualifying widow?

    The tax breaks accorded to qualifying widows or widowers include being able to use a tax filing status that allows for a ... Read Full Answer >>
  6. How is income taxed on prorated salary?

    Since yearly income is viewed by the Internal Revenue Service (IRS) as the total amount of income a person has made over ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!