Color of Money: Wesley Snipes and tax day

Michelle Singletary
Columnist April 11, 2013

Actor Wesley Snipes, jailed because he didn’t pay his taxes, has been released from prison -- just two weeks before tax day.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.” View Archive

Snipes, whose films include the “Blade” trilogy and “White Men Can’t Jump,” left federal prison after serving a three-year sentence for failing to file tax returns from 1994 to 2000, reported the Associated Press.

“Snipes belonged to a group that challenged the government’s right to collect taxes,” AP said.

Forbes.com reported that during the actor’s trial, “the government alleged Snipes earned at least $13.8 million in income for the years in question, on which he owed $2.7 million in back taxes.”

Snipes began serving his term in 2010.

So, let that be a lesson to you. Get those tax returns done, and pay your taxes on time.

May the Odds Be Ever in Your Favor

There are two things many people particularly loathe about the Internal Revenue Service.

One: Having to pay the IRS.

Two: Getting a tax audit notice.

But, really, your chances of getting audited are pretty low.

“The vast majority (99%, in fact) of individual income tax returns skate safely past the IRS audit machine,” Kevin McCormally of Kiplinger Magazine writes in an in-depth report about tax audits.

“Better news: The 1-in-100 chance of being called on the carpet really overstates the severity of the situation. Fully 70% of all audits are handled by mail, not by mano a mano combat with an IRS agent,” the article says. “And, if your return doesn’t include income from a business, rental real estate or a farm, or employee business expense write-offs, the basic 1-in-100 chance of being challenged jumps to 1-in-250.”

Still, the odds might not be in your favor if what you put on your return doesn’t add up. You should know that the IRS will be doing its thing -- “plugging data from more than 140 million tax returns into a computer that scrutinizes the numbers every which way and ponders how the picture you paint of your financial life jibes with what it knows about other taxpayers,” writes McCormally.

But what if your tax return gets audited? Here are some of the things you should do or not do, McCormally writes:

-- Stay calm. If you haven’t done anything wrong, there’s no reason to worry.

-- Check your information. Before meeting with the IRS official, make sure you have the documents to back up any deductions or credits. However, if you don’t have written documentation, prepare an oral explanation.

-- Deal or no deal. Don’t be pressured into settling an issue just to bring the audit to an end, McCormally says. “Remember that the auditor doesn’t have the final say. Often, in fact, auditors make mistakes that cost taxpayers money. If you disagree with a finding, tell the auditor so and restate your position. He or she may be willing to compromise to close the case promptly.”

If you are concerned about your return getting some extra scrutiny from the IRS, use Kiplinger’s audit calculator to determine your risk.

Color of Money Question of the Week

Got any tax-time tales? Here’s your chance to vent about your tax experiences or share any tax horror stories you’ve experienced. Send your stories to colorofmoney@washpost.com. Be sure to include your full name, city and state. Put “May the odds be ever in your favor” in the subject line.

Let’s Talk Money

I’m back. Let’s talk live. Join me today at noon ET. I’ll be available to answer your financial questions.

If you can’t join me live, you can send your questions in early.

Can I deduct that?

Every day until D-Day, April 15, members of the American Institute of Certified Public Accountants have agreed to answer tax questions from USA Today readers. (I should have thought of that. Got to remember for next year.)

Anyway, we are all in this together, so I’m happy to point you to USA Today. You can submit your questions to taxadvice@usatoday.com.

Here’s a reader question answered by Clare Levison, a CPA in Blacksburg, Va.

“Our son is a freshman attending an out- of-state university. We are paying tuition, travel expenses, car expenses including insurance, books, dorm and meal fees and travel expenses for trips back and forth during holidays and other visits home. Tuition amounted to $25,000 for the fall 2012 semester, and with the additional expenses we easily spent $30,000 per semester for the 2012/2013 year. Can we claim the costs besides tuition as deductions on our taxes for 2012?”

Great question. It’s one that will interest me next year, since my daughter starts college in the fall.

Click here for Levison’s answer.

Family Financial Fights

“Celebrity Apprentice” star Omarosa Manigult may have a legal fight over the will of her late fiance Michael Clarke Duncan.

TMZ is reporting that Judy Duncan, Duncan’s sister, has hired a lawyer to investigate the circumstances surrounding the change to her brother’s will. The sister believes Manigult “unduly influenced Duncan to rewrite his will months before he died,” TMZ reported.

But it’s not like she’s getting nothing. Duncan apparently left his sister $100,000.

Has a loved one’s will divided your family? If so, tell me about the situation. Maybe I can help or at least send a cautionary tell to others. Send your stories to colorofmoney@washpost.com.

Please include your full name, city and state. Be sure to put “Family Financial Fights” in the subject line. I only need your personal information if I have additional questions. Because of the sensitivity of the situation, your personal details won’t be disclosed.

Weight-watching

CVS employees who are enrolled in the company’s new health insurance plan are required to undergo several tests, including having their blood sugar, blood pressure and cholesterol checked. The new policy also requires employees to have doctors measure their body mass and weight. If the wellness screening isn’t completed by May 1, workers will be required to pay a monthly $50 fee.

Last week’s Color of Money Question: “Would you share your medical history, including your weight, to save money?”

“Not only would I be willing to share health information, I would appreciate a discount in my premium for exceeding healthy lifestyle standards for age, sex, etc,” said CV Smith of Silver Spring, Md. “Similarly, I would support an increase in premiums and an additional fee for those who fail to disclose unhealthy information and/or choose to ignore health care conditions that can be managed or improved.”

Maryellen Kahn of Columbus thinks the mandatory health screening is a great idea. “People must take responsibility for their own health. Using an increase in premium to help them make that choice is a good idea. It improves health care costs for all of us. Of course, disease and accidents can happen no matter what, but why should I pay the same premium as someone who does not at least try to take responsibility for their own health.”

“Policies such as this do not mandate that anyone take any action, but provide an incentive for people to take personal responsibility to improve their health,” said Tad Kolke of Chicago.

You are welcome to e-mail comments and questions to colorofmoney@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Follow me on Twitter at @SingletaryM, or connect with me on Facebook at www.facebook.com/MichelleSingletary.com.

Tia Lewis contributed to this report.

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