IRS: Snipes owed taxes on $38 million

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ORLANDO, Fla.- Wesley Snipes paid no federal taxes on $37.9 million in income from 1999 to 2004, even after the Internal Revenue Service told him in 2002 that he was under criminal investigation, according to documents filed ahead of Snipes' tax fraud trial.

The trial was set to begin on Monday in U.S. District Court in Ocala, Florida, 80 miles northwest of Orlando and the celebrity enclave of Isleworth, where prosecutors say Snipes lived at the time of the suspected fraud.

Snipes, 45, was charged in a 2006 indictment along with a known tax protester and a former accountant whom the U.S. Justice Department said had been barred by a federal court from preparing other people's tax returns.

The tax fraud occurred at a time when Snipes was signing movie deals worth more than $10 million each for "Blade II" and "Blade: Trinity," according to the prosecution's summary.

During the six years he failed to file income tax returns or pay taxes, Snipes also tried to get fraudulent refunds from the IRS totaling $11.3 million for taxes he paid in 1996 and 1997, according to a timeline prepared by the prosecution.

Snipes on three occasions sent the U.S. Treasury what prosecutors called a "fictitious bill of exchange" totaling $14 million along with IRS payment vouchers, and at other times sent notices and a letter challenging the IRS' authority to criminally investigate.

In response, the IRS warned Snipes that his refund claims and correspondence were frivolous. He was dropped by his long-time tax adviser who first warned Snipes in a telephone call that he must pay taxes, according to the government timeline.

Prosecutors say that Snipes in 2000 joined a group called American Rights Litigators headed by Eddie Ray Kahn, a tax protester with convictions dating back to 1985, and paid Kahn a consulting fee of $2,000.

Kahn and former accountant Daniel P. Rosile are co-defendants with Snipes in next week's trial.
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