[author: Sylvia Hsieh]
Grammy-winning hip hop artist, former Fugees phenom, and dare we say musical genius Lauryn Hill made a not-so-genius move by failing to file income tax returns for three years.
Maybe “L Boogie,” the “rapper-slash-actress/more powerful than two Cleopatras,” singer, songwriter, and social critic, who now prefers the moniker Ms. Hill, forgot to file, or was too busy (she does have a brood of seven kids with Rohan Marley), or the dog ate her 1040.
Whatever the excuse, doesn’t matter – they rarely hold up in court, tax law experts say.
According to the criminal charges, filed on June 7 in federal court in New Jersey, Hill did not file taxes for the years 2005, 2006 and 2007 on a total of about $1.8 million in income, mostly from royalties, during the three years.
Hill responded on Tumblr, saying that during the period she didn’t file taxes, she had been forced to go underground in order to keep “herself and her family safe, healthy and free from danger.”
After rocketing to success with the hip-hop band The Fugees in the mid-90s, followed by her solo album “The Miseducation of Lauryn Hill,” which garnered five Grammies, the New Jersey native dropped out of sight, virtually stopped performing and led a suburban life raising her family in South Orange, N.J.
She has spoken out about exploitation in the music industry and also wrote on Tumblr that “I did whatever needed to be done in order to insulate my family from the climate of hostility, false entitlement, manipulation, racial prejudice, sexism and ageism that I was surrounded by.”
She added that she “did not deliberately abandon her responsibilities” and “my intention has always been to get this situation rectified.”
“When I was working consistently…, I filed and paid my taxes. This only stopped when it was necessary to withdraw from society, in order to guarantee the safety and well-being of myself and my family. … Obviously, the danger I faced was not accepted as reasonable grounds for deferring my tax payments, as authorities, who despite being told all of this, still chose to pursue action against me, as opposed to finding an alternative solution,” Hill wrote.
Hill’s reasons – call it the “sanity defense” – are not likely to convince the IRS, though.
According to tax attorney Burton J. Haynes, she has already essentially admitted the elements of the crime, which include being required to file and willfully failing to do so.
The IRS is sending a message to ordinary taxpayers with the indictment.
“Taking down somebody famous and visible is a wonderful thing because the IRS can get more publicity from charging one person than charging 20,000 people like you and me,” said Haynes.
Is It Ever OK Not to File?
Say you’re not a successful recording artist with millions of dollars pouring in for licensing and royalty fees. Say, also, that you haven’t filed taxes for the past several years for whatever reason.
Will you go to jail? In most cases, no, says Haynes.
The IRS has had a longstanding policy of being lenient with taxpayers who voluntarily come forward and admit they haven’t filed taxes.
But – and this is a big but – you must come forward before investigators come knocking on your door.
“You’ve got to get to the IRS before they get to you…. Once agents show up with gold badges and ‘38s under their coats, it’s off to the races,” said Haynes, who used to carry said badge and gun as a former IRS Special Agent before turning to private law practice, specializing in tax controversies.
As it appears in Ms. Hill’s case, the IRS already began its investigation before she admitted to not filing.
Often taxpayers don’t have enough money to pay the taxes they owe, especially with fees, interest and penalties, but that should not stop them from coming out of the dark, says Haynes.
“You can go on a payment plan, make an Offer in Compromise and settle for less than you owe, or you can even discharge them if you go into bankruptcy” in some circumstances, Haynes said.
Plea Likely, and Prison, Too
Taxpayers often assume failing to file taxes is a victimless crime that a simple fine, fees and monetary penalties can make go away.
Wrong again. The enforcement policy of the Department of Justice is to seek prison time for taxpayers guilty of not filing taxes.
“Many people are surprised by that. If you’re a drug dealer, you know you’re a criminal. But if April 15 comes around and you’re so busy with other things that you decide you’re going to file next week or next month, you don’t picture yourself as a criminal,” said Haynes.
Because a valid defense is so rare, most criminal cases end with a guilty plea, which Haynes expects to see in Hill’s case.
The length of a prison sentence depends on how much tax is owed. In Hill’s case, each of the three counts separately carries a fine of up to $100,000 and a maximum of one year in prison.
Even though the charges are misdemeanors, expect jail time for the eight-time Grammy winner, Haynes said.
He calculated that, assuming a tax rate of 30 percent on $1.8 million in income, Hill owes about $540,000 in taxes. (Another reason it’s a bad idea not to file is you don’t get to factor deductions, credits or business expenses into your taxes owed.)
According to the Department of Justice’s Criminal Tax Manual, unpaid taxes of $400,000 to $1 million correspond to a prison sentence of 33 to 41 months.
The prison guidelines are recommended, not mandatory, and a judge can also consider factors like a clean criminal history and family responsibilities, Haynes noted.
Another reason most people cop a plea is that admitting guilt gets you a reduction in sentencing compared to a guilty verdict at trial. For example, if Hill pleads guilty, she could face a sentencing range of 24 to 30 months instead of 33 to 41 months, assuming the tax liability above, Haynes said.
“You pay a heavy price for exercising your constitutional right. [An increased prison sentence] is a danger that causes many, many people to forgo their right to a jury trial [and plead guilty]. Should it be that way? No. Is it? Yes,” said Haynes.
Hill is scheduled to appear in court on June 29.
*Federal prosecutors have charged five-time Grammy winner Lauryn` Hill with willfully failing to file income tax returns with the IRS. Authorities say Hill earned more than $1.6 million during the three years that she failed to file returns. Prosecutors say her primary source of income is royalties from the recording and film industries. The 37-year-old South Orange, N.J., resident is scheduled to appear before a federal magistrate on June 29. (AP Photo/Spencer Weiner, file)