For public figures, particularly those involved in politics and political advocacy, tax blunders can be a disruptive thing to endure. For civil rights leader Reverend Al Sharpton, tax troubles recently became a sore subject once again when the New York Times published an article alleging that he currently has $4.5 million of federal and state tax debt. According to Sharpton, though, the report is misleading and, he believes, politically motivated.
Sharpton has reportedly said that the tax errors in question were not fraudulent but only mistaken, and that an agreement had been reached with the IRS to pay off the debt. Sharpton has since been criticized for his reaction to the article, having been unable to clarify the real amount of taxed owed and for a particular statement that demonstrated misunderstanding or lack of knowledge of the penalties levied for failure to pay taxes.
According to the IRS, there are a variety of kinds of penalties for failure to properly pay taxes. The most common among them are penalties for filing tax returns after the deadline, which can result in a fine of up to 25 percent on the unpaid amount. For a large initial amount of taxable income, the interest can significantly increase what is ultimately owed. For paying taxes late, a taxpayer or business can also be penalized different amounts according to the circumstances of the case.
There are other categories of penalties which apply to inaccuracy in paying taxes. Examples of such inaccuracy include substantial understatements of the correct tax, disregard of tax rules, bounced checks and frivolous tax returns. There is also a penalty for cases in which the taxpayer is believed to have committed tax fraud. In such cases, a penalty of 75 percent is added to the tax. In some cases, taxpayers are wrongly targeted for tax fraud when they really should be held accountable for some form of tax negligence.
Those who face the prospect of prosecution for tax fraud should, of course, work closely with an experienced attorney to ensure their rights are protected and that prosecutors are held to their full burden of proof.
Sources: Forbes, “Al Sharpton Denounces Claims He Owes Millions In Taxes To IRS, New York,” Kelly Phillips Erb, Nov. 19, 2014.
CNN, “Al Sharpton rails against report that he owes $4.5 million in unpaid taxes,” Ashley Killough, Nov. 19, 2014.
IRS, “Avoiding Penalties and the Tax Gap,” March 2008.