Richard Hatch, the winner of the inaugural season of the hit show Survivor is on the hook for a $3.3 million tax bill.
In 2006, Hatch was convicted on charges of tax evasion and fraud. He was found guilty of filing false personal income tax returns for the years 2000 and 2001 and a false corporate income tax return for the year 2001 for an S corporation he created. In total, Hatch failed to report about $1.4 million in income, including $1.04 million from his Survivor prize money, $321,000 in payments for radio appearances, $27,000 of unreported rental income and $11,500 in charitable donations misappropriated for personal use. His current tax bill is now at $3.3 million, reflecting interest and penalties owed on the initial liabilities.
Hatch tried to argue that because the show was filmed in Malaysia, which didn’t have a bilateral income tax treaty with the United States at the time, CBS or the show’s production company should have paid the taxes to Malaysia. The Internal Revenue Service prevailed on their charges, and Hatch served 51 months in prison but was still required to file amended tax returns.
The government sued in 2022 to recover the unpaid tax liabilities and to enforce a federal tax lien on a Rhode Island property owned by Hatch’s sister to pay off part of the bill. The government argued that their tax liens on two of Hatch’s residential properties should be enforced because the properties were fraudulently transferred by quitclaim deed to Hatch’s sister to avoid collection efforts.
Hatch argued that he’s been trying to cooperate with the IRS and resolve any alleged tax liabilities. He also accused the judge and the government of bias and trying to make an example of a controversial person in the public eye.
In last week’s decision, the court ruled in favor of the government on both charges.
What Went Wrong?
Hatch serves as a good example of the consequences of tax evasion and failure to report, says Malia Haskins, J.D., CEPA, VP of estate planning at national RIA firm Nepsis. She adds "when Hatch became the winner of the first season of Survivor, no one likely envisioned that 24 years later he would be found liable to the IRS for more than three times his winnings from the show. The Hatch case is an extreme example of how awry things can go if a U.S. citizen fails to report all income as required. Had Richard sought proper tax advice, he would likely have avoided criminal prosecution and wouldn’t be facing a tax obligation that exceeds three times the amount of income he failed to report.”
As to why Hatch’s argument failed, Haskins explained that per the 26 U.S. Tax Code, Section 911, a U.S. citizen or a resident alien is required to file income tax returns in the United States, reporting worldwide income to the IRS no matter where they live.
“Income tax laws can be complex, especially when dealing with income earned from a foreign country," Haskins said. "Some countries have treaties with the United States that mitigate or avoid double taxation on income earned in one country, but that’s reportable in another.”
It appears that Hatch might have decided he was above the system, which didn’t end well for him.
