We've all dreamed of winning it big -- whether it's the Powerball lottery or a popular gameshow. But the sudden euphoria that erupts after learning you've won millions of dollars, a new car or a brand new dining room set can quickly turn into a headache went it comes to collecting your prize.
Just ask Andrea Schwartz, who appeared on "The Price Is Right" last year. "It was a nerve-wracking experience, and I've never been more embarrassed watching myself of television," Schwartz told the A.V. Club website.
In the end, she walked away with $1,200, a Mazda 2 subcompact, a pool table, a shuffleboard table and some earrings -- $33,000 worth of prizes in all. But as A.V. Club reports, there was a lot of red tape involved in getting those prizes home.
"You don't just drive off the backlot with the car like I thought the entire time I was growing up," she said. Rather, contestants fill out paperwork that notes that they agree to pay taxes on the prizes they won. Depending on where you live, you may be on the hook for state taxes in addition to federal taxes on the value of the merchandise and any cash you might've won.
To reduce his tax liability, Michael Chen, the owner of Fune Ya Japanese Restaurant in San Francisco, hid cash transaction records in 26 boxes labeled "Seasoned Octopus" in a crawl space under his restaurant and pretended they were never made, according to the IRS.
While he had an encrypted spreadsheet showing total sales of nearly $2 million between 2004 and 2006, he only reported sales of a little over $500,000 on his tax returns. Chen was sentenced to almost three years in prison in January, and he must pay restitution of $459,105.
Lori Wiley-Drones and Edward Drones, of Anchorage, Alaska, adopted a child who had a trust fund of more than $830,000. The child, who was abused by previous foster parents, was granted the trust as the result of a lawsuit claiming the state of Alaska failed to protect him.
The Drones were required to keep the trust completely separate from their own accounts, but they couldn't resist dipping into the money. They allegedly used it to remodel their home, pay credit card bills, buy cars and even splurge on Coach purses and jewelry -- leaving only $15.05 in the child's trust fund.
They also neglected to report the the funds as income on their tax returns, according to the IRS. But they were finally caught, and in March the couple was sentenced to nearly four years in prison and required to pay restitution of $829,417.
Archie Cabello, from Portland, Ore., used his job as an armored truck driver to cash in on a huge pile of cash that he was supposed to protect. Cabello wastransporting $7 million for Oregon Armored Services.
To carry out the scheme, his brother took two bricks of hundred dollar bills totaling $3 million from the back of the truck and drove it to a safe deposit box, while Cabello handcuffed himself to the truck door to make it look like he had been robbed and told a passerby to call the police, according to the IRS.
Cabello allegedly spent $1 million by the time he was caught. The IRS nabbed him for failing to report the stolen funds on his taxes. Even if money is received illegally, it's still considered income so you're required to report it to the IRS. He pleaded guilty to a number of charges, including conspiracy to commit bank larceny, money laundering and filing a fraudulent tax return, and he was sentenced to 20 years in jail.
To get out of paying $220,000 in taxes, James Stuart, from Hartland, Wisc., failed to report $900,000 in income between 2005 to 2007 -- allegedly telling the IRS he didn't have a social security number, he wasn't an American citizen and the IRS didn't have the right to tax him.
But perhaps his most bizarre claim of all was that he had "loaned his consciousness to a trust entity" and therefore couldn't pay taxes, according to the IRS. Stuart was sentenced to nearly three years in prison and fined $6,000.
Monty Ervin, from Montgomery, Ala., allegedly neglected to report more than $9 million in rental income from his property management company and failed to pay $1 million in income tax. To justify the tax evasion, Ervin attempted to renounce his U.S. citizenship multiple times, saying he was a "sovereign citizen" and not subject to the law.
He even allegedly claimed that he was the governor of Alabama in its "original jurisdiction," and the government found that he had buried $350,000 worth of gold coins in his yard. When he was arrested this March, the Justice Department said he was carrying a notebook with coordinates for an island off the coast of Honduras.
Ervin was sentenced to 10 years in prison and is required to pay $1.4 million in restitution to the IRS.