During the period from 2010 through 2015, SIMMONS earned over $2.3 million, but SIMMONS did not file personal income tax returns during that time period.  Instead, he orchestrated a scheme to evade payment of his outstanding tax liabilities, largely by maintaining a cash lifestyle, avoiding the use of a personal bank account, and using the bank accounts of nominees, including his business managers, to pay personal expenses.  For example, SIMMONS received hundreds of thousands of dollars of royalty income from his music recordings.  SIMMONS caused that income to be deposited into the bank accounts of his managers, who then disbursed it to him in cash or used it to pay his personal expenses.  SIMMONS also participated in the “Celebrity Couples Therapy” television show in 2011 and 2012 and was paid $125,000 for his participation.  When taxes were withheld from the check for the first installment of that fee by the producer, SIMMONS refused to tape the remainder of the television show until the check was reissued without withholding taxes.

SIMMONS took other steps to conceal his income from the IRS and others, including by filing a false affidavit in U.S. Bankruptcy Court that listed his income as “unknown” for 2011 and 2012, and as $10,000 for 2013.  In fact, SIMMONS received hundreds of thousands of dollars of income in each of those years.

Essentially, the DOJ is alleging cash, nominee accounts, and the demanding of no tax withholdings as its so-called “affirmative acts.” I previously discussed a typical non-filer/evasion case in a prior post here.  This case isn’t quite the same because celebrities, whether actors or recording artists, do things differently by nature.  They protect themselves from the general public by allowing their managers to do everything.  They use cash to avoid having their personal financial data compromised.  They use nominees by nature, since they have “stage names” and performance names.  The refusal to have withholdings may stand out, but there has to be a question of whether it was DMX who made that request or one of his managers.  It seems odd for DMX to handle that himself.

By itself, non-filing has many potential criminal and civil repercussions.  But the government will need more: they need to show that DMX was aware of the non-filing and that he was aware of the filing responsibility and not under some misconception about it.  Without such, the DOJ may not even prove a misdemeanor.  For evasion, the DOJ needs affirmative acts showing intent to evade by DMX himself.  It will be interesting to see if the IRS and DOJ can prove it.

–Daniel W. Layton, the author of this post, is a former IRS trial attorney and former Federal prosecutor who was tasked with handling criminal tax prosecutions and civil litigation including tax refund suits, lien enforcement and foreclosures. As a tax attorney in private practice in Newport Beach, he uses his knowledge of IRS procedures and rules to keep the IRS in check and protect his clients’ rights. He may be contacted at (949) 301-9829.