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Wesley Snipes was charged on six counts of failing to file his income tax returns from 1999 to 2004, and each charge could result in him getting a one year prison sentence if found guilty. In addition, after Snipes filed tax returns for 1996 and 1997 and paid $12 million in taxes, he amended his returns stating that his income should have been zero and therefore, entitled to a refund.
The IRS refunded the tax amount to Wesley Snipes but then decided to take a closer look at his amended returns. After determining that it could not have been possible for Snipes to have zero income, they notified him to repay the $12 million, which Snipes refused stating that many of his last movies went straight to the video so he had no money.
Wesley Snipes used assistance of tax preparer Douglas Rosile Sr. and Eddie Kahn, founder of American Rights Litigators, to use Section 861 Argument. This argument has been used by many tax payers unsuccessfully where they claim that just income earned in foreign shores is subject to federal income tax. Snipes using this argument amended his tax returns to show his taxable income as zero.
In January 2008, Wesley Snipes was found not guilty of federal tax fraud and conspiracy charges. However, he was convicted on three misdemeanor counts of failing to file and pay his tax returns. Because of this conviction, he could be sentence to three years which must look better than 16 years when he was indicted.
The IRS can still sue Wesley Snipes in civil court for back taxes for the years (1999 to 2004) he did not file his returns. The IRS claims that Snipes earned a whopping $38 million during that period. However, Snipes attorney said after the end of the trial that his client was ready to taxes for all the years he did not file his returns.
No date has been set for Wesley Snipes sentencing and his bond has been reduced from $1 million to $250,000. Both Kahn and Rosile have convicted of tax fraud.
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