Oct 10th 2012
By Teresa Ambord
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"I was Al Capone," Beanie Sigel told his audience on RapFix Live back in August. "You can't get me on this, you gonna get me on that, can't get me on that, so you know the Al Capone story - taxes."
A few weeks later, the thirty-eight-year-old rapper (real name Dwight Grant) reported to prison to begin serving two years for tax evasion. Sigel is no stranger to brushes with the law. Gun and drug possession charges kept him behind bars during part of the time he was also battling tax troubles. His criminal record may have speeded up his tax evasion conviction, which helps explain why he considers himself a current-day Al Capone.
Here's the backstory.
Sigel was served with papers back in 2010 stating that he hadn't filed tax returns or paid taxes between the years 2003 to 2005. But he had received1099s from numerous sources, including ASCAP, Hitco Music Publishing, State Property Licensing, Sony BMG, UMG Recordings, Warner, and Tommy Hilfiger. He also received W-2 income from 20th Century Fox, WB Television, Universal City Studios, and others. The 1099s filed with the IRS as well as court documents and facts used in his case, bear some discrepancies.
The 1099s he received were as follows:
- $250,000 for 2003
- $138,000 for 2004
- $465,000 for 2005
Although court documents used in his conviction show lesser amounts:
- $87,000 in 2003
- $145,000 in 2004
- $394,000 in 2005
The case against Sigel focused on his income from 2003 to 2005, but court documents show that he paid no taxes, nor filed tax returns since 1999 when his career as a rapper began.
Why didn't he file returns and pay taxes? That's a question many people ask about celebrities and other artists, most of whom have much healthier incomes than the rest of us.
Chuck Creekmur, CEO and cofounder of AllHipHop.com said this:
"I don't fully know Beanie's rationale for filing taxes or filing as sporadically as he did, but I think that people are truly ignorant to a process as simple as filing taxes. Especially from a background with a cash type of lifestyle. Plus, Beanie is just infamously street. It's hard as an adult to fathom somebody that's making money - which Beanie was making, a couple million at that time - to not file any taxes."
Tax and bankruptcy attorney Nicole Clarke found it less of a mystery. In her New Jersey practice, she deals primarily with clients who are paid mostly through 1099s. Many of her past clients have been artists and hip hop moguls.
"I think what it comes down to is that it's a problem with people who are 1099'd," she explained. "When you're a W-2 employee, your employer withholds taxes and you either pay a small portion or get a refund when you file your taxes. When you're a 1099 employee, you get paid everything up front, and it's up to you to either pay quarterly or put money aside to pay in April.
"With a lot of people, once you've got the money in your hand, it's hard to do. Especially in times like these where people are living hand-to-mouth. And even for people that seemingly make good money like Beanie Sigel, it's still a bigger hand to a bigger mouth."
She pointed out that Sigel could have avoided a two-year prison sentence by simply filing his returns. "Tax evasion is not filing your tax returns. If you simply can't pay, you can't go to jail. There's not debtor's prison in our country."
Making matters worse were Sigel's existing criminal record, complete with jail time, and his refusal to allow the IRS to inspect his home.
Clarke added that Sigel's case is unfortunate because it didn't have to end with a prison sentence. He was succeeding as an entertainer, but neglecting standard business practices. After he's released, said Clarke, he'll still have to pay those taxes plus penalties and interest.
"Bottom line is, they'll catch you," Clarke told reporters. "Everybody's gotta pay Uncle Sam at the end of the day."
Sigel's major successes include certified gold album The Truth, and later, singles like Rock the Mic and Feel It in the Air.