Floyd "Money" Mayweather certainly lives up to his nickname – the undefeated boxer is expected to cash in as much as $350 million for his recent win against Irish UFC fighter Conor McGregor.
There is also no doubt that the IRS was watching the 10-round Las Vegas match. The federal government is still awaiting payment on Mayweather’s 2015 tax bill, and hit the fighter with a hefty IRS tax lien this past July. It looks like Mayweather now has the cash to pay his debt.
Tax evasion or investment strategy?
Since 2004, Mayweather has had several tax liens filed against him. Numerous commentators have been trying to determine whether this is indicative of the fighter’s disdain for meeting his tax obligations, inability to pay his tax debts, or – as his tax attorney has argued - is part of an overall investment strategy.
This past July, Mayweather – who has earned an estimated $700 million during his career – filed a petition in tax court requesting a short-term installment agreement of less than three months to pay the $22,238,255 he owes as a result of a $250,000 million payout for his 2015 win against Manny Pacquiao. Mayweather’s tax lawyer has stated that "Money" does not have the cash to satisfy his debt immediately, and that the delay in payment is part of an overall investment strategy to retain investments with earnings that exceed IRS late- and underpayment penalties. With an upcoming fight that promised to pay off his outstanding tax bill – and more — it made sense for Mayweather to retain illiquid assets and wait a short time before satisfying the debt.
The cost of delay
With few exceptions, the penalty for failure to pay your taxes by the April 15th deadline is 0.5% of the amount owed for each month (or part thereof) in which the tax remains unpaid, up to a maximum of 25% of the tax bill. 26 U.S. Code § 6651(a)(2). This increases to 1% per month if the tax bill remains unpaid 10 days after the IRS issues a Notice of Intent to Levy. 26 U.S. Code § 6651(d)(1). In addition, there are penalties for failure to make estimated payments during the tax year. Not to mention interest on the delinquent balance.
The importance of tax planning
Unless you have a team of advisors and an investment plan that makes it worthwhile to incur these tax penalties, it is best to put aside a portion of any windfall earnings you make during the year for the IRS. The tax attorneys and accountants at Moskowitz, LLP has delivered top quality tax planning advice to tens of thousands of U.S. taxpayers. Contact our San Francisco offices today.
Tax evasion carries severe penalties, even in cases in which no one else has been defrauded.
From 2005 through 2011, Semere Tsehaye owned more than 20 Instant Tax Service (ITS) franchises in Illinois, Kansas and Missouri, under the names A&S Tax Service LLC and ERI Enterprises LLC.
In 2010 and 2011, Tsehaye evaded $581,264 in taxes by generating fraudulent financial summaries for A&S and ERI. He provided these summaries to his tax preparer, who in turn used them to prepare Tsehaye’s federal income tax returns. The 2010 summary understated his gross receipts by $547,895, and the 2011 summary understated his gross receipts by roughly $1.03 million.
Charges and sentence
Tsehaye was charged and convicted of two counts of tax evasion. The case was investigated by special agents of the Internal Revenue Service Criminal Investigations Division.
On January 23, 2017, Tsehaye was sentenced to 27 months imprisonment and three years of supervised release. He was also ordered to pay $298,178 restitution to the IRS.
Although in this case Tsehaye’s crimes related only to his own tax returns and not to those of his clients, the fact that Tsehaye was a tax preparer – who was clearly aware of what he was doing and who consciously tried to cheat the system – clearly had a strong effect on his sentence.
Note that many tax return preparers who are convicted of tax evasion not only face greater penalties but are often barred from ever working as a tax professional again.
California criminal tax defense attorneys
The criminal defense attorneys at Moskowitz, LLP assist individuals and companies with a wide variety of financial criminal matters, including but not limited to those relating to tax crimes, bank secrecy act violations, currency crimes, and tax preparer defense. If you are being investigated for a tax or other financial crime, call our San Francisco office without delay.