Martha Stewart’s arrest for insider trading and subsequent prison sentence was by far one of the most shocking celebrity scandals of the 2000s. The legendary host, author, entrepreneur, and homemaking expert graciously accepted her punishment, serving five months in prison, followed by an additional five months of home confinement and two years of probation.
However, many fans may be surprised to learn that this was not the first time Martha Stewart caught the attention of federal authorities. In fact, Stewart was charged with tax fraud almost a decade before her notorious arrest, a case which has largely been swept under the rug. Despite owing a significant amount of unpaid taxes, Stewart managed to come out of her tax fraud case relatively unscathed and would later go on to build an even more sizable fortune for herself.
Here’s how it all started:
Why Was Stewart Investigated?
Back in 1994, Martha Stewart was just beginning to blaze her trail in the homemaking space. Her magazine, Martha Stewart Living, launched in 1990 and would grow to become one of the most beloved women’s publications of the early 90s. Alongside it, Stewart debuted her first TV show by the same name, which the audience instantly fell in love with.
Although she was relatively new to the public eye, Stewart has been a successful stockbroker and businesswoman for over a decade. So, it should come as no surprise that she owed several properties, including a New York estate where she claims to have spent only a small portion of her time. This estate would soon become the subject of an IRS probe after documents revealed that the entrepreneur hadn’t paid taxes on the property for several years.
In Stewart’s own words, she believed she had a very good reason for failing to pay taxes on the property: She hardly lived there.
While other high-profile figures often blame their accountants and other outside factors for their tax crimes, Stewart was bold in her assertion that not using the home as her primary residence should make it exempt from paying the property taxes. As you can imagine, the IRS did not take this suggestion lightly and ordered her to pay the remaining taxes owed on the property, as well as additional fines and penalties
Did The Punishment Fit The Crime?
In total, Martha Stewart paid more than $220,000 for her tax evasion scandal, although many financial experts claim she could have been punished much more severely. Given the nature of the case and the fact that Stewart willfully avoided paying the property’s taxes, she could have faced jail time for her negligence. Instead, she let off relatively easily, which would clearly not be the case just a few years later.
Setting The Stage For Insider Trading
Now, even though the tax evasion and insider trading cases are technically unrelated, many have wondered if the lack of punishment from her earlier brush with authorities could have impacted the way Stewart handled her high-profile arrest in 2001. When being questioned by federal investigators about her relationship with ImClone Systems, she claimed that she had arranged a deal that automatically sold her stocks if they fell below $60.
However, it would soon come to light that no such deal existed.
Instead, Stewart was charged with lying to investigators and engaging in insider trading after she suspiciously dumped all of her stocks from the company just days before it was announced that the experimental drug had not been approved by the FDA. The rest, as they say, is history.
What To Do If You Owe The IRS Money
If there is a moral to this story, it’s this: Do NOT avoid paying your taxes, no matter who you are. And if you do find out that you’re in debt to the IRS, you’re not alone. Thousands of Americans owe the IRS far more than what they realize each year, resulting in mass amounts of tax debt that can threaten their financial security and derail their life.
Thankfully, there are plenty of resources available to help you clear your IRS tax debt and avoid a more serious issue later down the line, as long as you follow these three steps:
Don’t Panic!
Let’s face it: no one wants to deal with the IRS. It can be a frightening and daunting experience, especially if you don’t know where to start. Even so, there’s no reason to panic if the IRS informs you that you owe tax debt. In most cases, these debts can be reduced or eliminated, regardless of your circumstances.
Know Your Rights
Second, it’s crucial to know your rights when you’re dealing with the IRS. Many taxpayers are unaware of the protections that are in place for them until it’s too late, causing them to fall victim to predatory tax schemes. Instead, consult with an advisor who understands what you’re going through. With the right support, you can better advocate for yourself and avoid an uphill battle with the government.
Find A Relief Program
Finally, there are many relief options available for Americans facing tax debt. Along with tax assistance and payment plans, other programs give taxpayers the freedom to eliminate their debt completely. IRS Fresh Start is a leading provider of these initiatives, giving people just like you the power to wipe the slate clean and dissolve their outstanding debts.
In most cases, people who qualify for the IRS Fresh Start initiative are experiencing:
- Extreme financial hardship due to tax debt.
- Physical or mental impairments that prevent them from paying taxes.
- Loss of employment or other financial opportunities that make paying off debt impossible.
