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“The Situation” Has Been Sentenced for His Situation with the IRS

In December 2009, The Jersey Shore, a pop culture phenomenon, was launched. While the original Jersey Shore is now off the air, it seems all of its stars are still making headlines today for one reason or another. Ronnie Ortiz-Margo is a new dad and feuding publicly with his ex-wife on social media. Vinny Guadagnino has taken television promotion to a new level as the self-proclaimed “Keto Guido.”

Paul DelVecchio is a bigtime DJ and travels the country under the name DJ Pauly D. Both Jennifer Farley and Nicole “Snooki” Polizzi have rode the reality TV show wave with various spinoffs. Sammi Giancola has her own clothing line. That leaves Mike “The Situation” Sorrentino who has been making headlines for all the wrong reasons. Mike and his brother/manager Marc pled guilty to tax fraud and tax evasion back in January and were sentenced today in federal court.
Let us take a trip down memory lane to get a more clear idea of how the Sorrentino brothers ended up in this bad situation.

2009 – 2012: The Jersey Shore takes the world by storm and “The Situation” rises to reality show stardom. Mike rides the wave and capitalizes on any opportunity he can, appearing on Dancing With the Stars, The Roast of Donald Trump, Celebrity Big Brother, and many other reality-based television shows. In January 2010 the brothers form MPS Entertainment, LLC (“MPS”) to exploit the Situation’s celebrity status. In November 2010, Michael also forms Situation Nation, Inc. (“SitNat”) for his businesses.

2014: In March, Mike opens a Boca Tanning Club in Middletown, New Jersey, a franchise for which he had been a celebrity endorser. In July, Mike and Marc open a second location of the franchise in Manalapan, New Jersey. During this time, there are various reports of the two tanning salons bouncing payroll checks.

In September of the same year, Mike and Marc are accused of not properly paying taxes on $8.9 million of income and formally indicted on charges of filing false tax returns and conspiracy to commit fraud. The government alleges the brothers grossly underreported their business income and claimed business deductions for payments made to buy luxury cars, high end-clothing and personal grooming items. The government accuses the brothers of using MPS and SitNat to perpetrate its fraud.

2015: In December the Situation’s former accountant pleads guilty to filing fraudulent income tax returns for the brothers.

2017: In April, Mike and Marc are indicted on additional charges for tax evasion, conspiracy, structuring funds to evade currency-transaction reports (making deposits under $10,000 to avoid reporting requirements) and falsifying records to obstruct a grand jury investigation.

2018: In January, Mike pleads guilty to one count of tax evasion as part of a plea bargain with prosecutors. Marc pleads guilty to one count of aiding the preparation of a false tax return.

October 5, 2018: Mike “The Situation” was sentenced to eight months in prison in federal court, his brother Marc was sentenced to twenty-four months and must pay a $75,000 fine.

Lessons Learned

There are several lessons to be learned from the Sorrentinos’s experience. Let’s consider a few of them. First, grossly understating income or attempting to write off lavish personal expenses may land you in hot water especially if you are a high profile taxpayer. Second, financial institutions are required to file Currency Transaction Reports for currency transactions, including deposits, exceeding $10,000. If you structure cash deposits to evade these filing requirements you will likely be prosecuted. Thirdly, bouncing payroll checks could lead to scrutiny from the IRS and other taxing authorities.

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