Celebrity Federal Tax Lien: Nelly

The Internal Revenue Service, in August, filed a Federal Tax Lien against rap star Nelly for the 2013 tax year in the amount of $2,412,283.

According to a Washington Post Article in September, the rappers fans rushed to his aid:

The suggestion first came from SPIN, which did the math: In a best case scenario, using an estimated Spotify royalty payout per stream, Nelly fans would need to stream “Hot In Herre” at least 287,176,547 times to pay off the reported lien.

Celebrity Federal Tax Lien: Rick Ross Owes IRS $5.7 Million

The IRS recently filed a Federal Tax Lien against rapper Rick Ross in the amount of $5.7 million for the tax years 2012-2014, according to TMZ.  Billboard.com reports that Ross blames an “incorrect filing” by a “prior accountant” for the tax liability.

The rapper’s reps shared the below statement, “I’ve been fortunate enough to experience financial success on a large scale through both my music career and my many business ventures. With this type of financial success comes financial responsibility. As artists we are blessed to be able to make money, but on the same note, are held accountable for our federal tax obligations just like everyone else. I am fully aware of my current dealings with the IRS. This issue arose from an incorrect filing by a prior accountant for the 2012 tax year.”

He added, “My new team of accountants have corrected the prior filing, and as anyone who has dealt with the IRS understands, it is a process. We have already satisfied a large portion of these issues and I can assure you that we are working very closely with the IRS to bring a full resolution shortly and will continue moving forward in a positive direction.”

Pursuant to the above statements we can likely deduce that Ross’ accountants have filed amended returns – as he alleges faulty filings – and that his team is attempting to reach a formal agreement with the IRS to resolve the liability.

Hulk Hogan Settles $140 Million Gawker Verdict for $31 Million – IRS to Collect

Hulk Hogan recently settled his suit with Gawker for $31 million after four years of litigation.  Hogan brought the invasion of privacy suit over Gawker’s posting of a Hogan sex tape.  While a $31 million settlement seems like nice deal for Hogan, we cannot forget the legal fees and taxes owed to the IRS.

Attorney fees are often a surprising tax trap for many plaintiffs.  When a plaintiff uses a contingency Attorney, the settlement to is treated as 100% income to the plaintiff for tax purposes.  Some settlements are nontaxable (most personal injury cases) – involving physical injury.  However, in a case such as Hogan where there was no recovery for physical injury damages, the settlement is treated as taxable income to the plaintiff.

5 Tips to Avoid IRS Tax Scams

Recently scammers have been focusing on taxpayers.  They find them as the low lying fruit and susceptible to deception.  The reason being is that taxpayers often fear the IRS.  The Treasure Inspector General for Tax Administration has received notice of over 736,000 attempts to scam taxpayers since October 2013.  This has allegedly resulted into nearly 5,000 victims losing more than $23 million.

The most effective weapon against a scammer is knowledge.  Below are five tips to help avoiding scammers:

(1)    The IRS will never reach out to anyone via email.  If you receive an email from someone claiming to be from the IRS, do not reply to the message, open any attachments or click any links. Forward the email as-is to the IRS at phishing@irs.gov.

(2)    The IRS will rarely contact anyone by phone.  Many scammers are contacting taxpayers claiming to be IRS officials.  It’s important to know that a call will not be the first form of contact for the IRS.  First, the IRS will send you a letter or bill outlining any action you need to take.  A call will rarely follow.  Scammers often alter the caller ID to make it look like the IRS or another agency is calling.  If you receive a phone call from the IRS, take down the individual’s name and badge number, then call the IRS back at 800-829-1040 to determine if the IRS has a legitimate reason to contact you.

(3)    The IRS will not demand immediate payment. The IRS will not demand “urgent” payment or apply excessive pressure for any outstanding payments. For example, some scammers threaten to arrest, deport or revoke your license if a payment is not made immediately. If you owe tax, the IRS gives you the right to question or appeal the amount you owe. Phone threats are not how they enforce the tax code.

(4)    The IRS does not require you to pay a certain way. The IRS will not ask for credit or debit card numbers over the phone. Normally, scammers try to persuade the victim into sending cash, usually through a prepaid debit card or wire transfer.

(5)    The IRS does not ask for detailed personal information. This includes requests for PIN numbers and passwords or access information for credit cards, banks or other financial accounts.

Your IRS Questions Answered Here…

Question: I have a huge tax amount owing, the IRS is harassing me and I need help.  I got a quote from another company at a much lower price.  Why should I go with you?

Answer:  If someone quoted you a much lower fee, think about this: do you think an experienced tax attorney worth their “salt” would work for peanuts? – Especially given the fact that IRS Representation is a highly valued skill set.  You usually get what you pay for in this world we live in today. This is your financial life and the stakes are very high. If you needed heart surgery, would you shop around for the least expensive surgeon or would you get the very best you can find? The same holds true for dealing with the Internal Revenue Service. Having IRS problems can ruin all aspects of your life, your marriage, relationships with your children and family members, your employment, ability to buy a house, a car, money for retirement or even have a bank account.  You want the best possible person for the job, not the cheapest.

Your IRS debt doubles every 6-8 years due to the daily compounding effect of interest and penalties and the IRS has at least 10 years to collect from you to so hand this off to the lowest bidder in town is probably not a wise decision.  You’ll have peace of mind and sleep better at night knowing that we’re working hard on your case to get you the lowest possible settlement with the IRS!

IRS Has 10 Year Statute To Collect

Generally speaking, the IRS has 10 years to collect on an unpaid tax liability.  After this period, the tax liability is wiped from your account transcripts.  This 10 year Statute of Limitations is often referred to as the “Collection Statute End Date” or CSED.

The IRS does not go out of its way to let taxpayers know about CSED’s because there would be a broad incentive to put off collection as long as possible.  However, the closer your liability gets to the CSED, the more the IRS will pursue collection actions.

The 10-year period is supposed to begin when the tax was assessed. However, there are frequently disputes on that timing between tax debtors and the IRS.  Additionally, there are several instances which can toll (pause) the statute of limitations which include:

  • Filing bankruptcy
  • Filing an Offer in Compromise
  • Filing appeals
  • Filing lawsuit against IRS
  • Being out of the country for at least 6 months
  • Signing waiver to extend the CSED
  • Military deferments.

 

IRS Notices for Late Filing

If you have not filed an income tax return for at least one year, the IRS may issue a letter inquiring about the omission.

If you haven’t filed the tax return for a number of years, the IRS may prepare a “Substitute For Return” (SFR) using third-party information — such as your Form W-2 (wages) and Form 1099 (interest, dividends, rents, royalties, and similar compensation) to prepare the return for you.  SFR’s never do you any justice and it is almost always worth going back and preparing the return. The SFR will not take into account any deductions or expenses of which you may have been entitled to elect or receive.

If you do not respond to non-filing inquiries and they prep an SFR, you will received a Notice of Deficiency CP3219N with a proposal of your tax assessment. This gives you 90 days to either file your overdue tax return or file a petition in Tax Court. If you do nothing, the IRS will proceed with the proposed tax assessment, which will trigger the collection process.

If an affected taxpayer allows enough time to pass without addressing these notices, it is very possible that the IRS will end up collecting far more than the taxpayer legally owed had he/she filed a correct tax return. Furthermore, if you are due a tax refund, you must file within 3 years of the return due date in order to receive your money.

Keep in mind, the statute of limitations involved may vary depending on certain factors, such as whether or not the taxpayer has filed a timely request for an extension of time to file (there is rarely an extension of time allowed to pay), when the IRS last credited a payment to the taxpayer’s account, and other conditions. So it is important to file a timely tax return each year, and/or file a tax extension request if you need more time to prepare your return.

Contact our Attorneys if the IRS prepared an SFR on your behalf to see whether we may be able to help you.

Local IRS Office Locations

If you are seeking face-to-face tax help, the IRS has Taxpayer Assistance Centers (TACs) located across the country. Note that TACs are closed on federal holidays and generally operate on a first-come, first-served basis. Visit “Contact Your Local Office” on the IRS website to find the addresses and phone numbers of TACs in your state.