How You Should Talk So the IRS will Listen

If you have to deal directly with an IRS agent, either because of an audit or a back tax debt, then here are a few rules to consider (via WSJ.com).

Rule 1: Don't ignore the tax man. The IRS "has an automated collections system," says John Barrie, a tax lawyer and partner at Bryan Cave LLP. "They will start issuing notices. Each notice gets a little more harsh." Soon enough, the IRS may place a levy on your wages or bank account.

Rule 2: You need to communicate with the IRS, but that doesn't mean telling them everything. Taxpayers often get defensive -- and chatty.

Rule 3: Treat the agent as an equal and maintain emotional control. You want this person to be on your side.

Rule 4: Don't arrive ready to write a check. And don't respond to an IRS letter by dropping a check in the mail. The IRS may be wrong. But once you agree on a payment plan, stick to it.

More at WJS.com...

Tax Beatdown Continues for Alicia Keys Husband

From DET news.com:

A giant tax bill makes a pretty poor baby shower gift, but that's what the IRS and New York gave singer Alicia Keys's husband, record-producer Swizz Beatz, who owes more than $2.6 million in delinquent taxes, records show.

Beatz, 32, and Keys welcomed a baby son in mid-October. Days later, the state of New York slapped yet another tax lien on Beatz, real name Kasseem Dean. Not to be outdone, the IRS sent its regards this week.

What's owed:

• The IRS filed a $283,562 lien against Swizz Beatz on Monday with the New York City Register.
• The state of New York filed a $134,738 tax warrant against him and his ex-wife, R&B singer Mashonda on Oct. 23. The warrant is filed with the New York County Clerk.
• The IRS filed a $652,727 lien against Swizz Beatz, real name Kasseem Dean, on June 3 with the Rockland County (N.Y.) Clerk. According to the lien, which you can see here, he owes income taxes from 2008.
• The state of New York filed a $162,300 tax warrant against Dean and his ex-wife Feb. 4, 2009, with the New York County Clerk.
• The IRS filed a $556,986 lien against Dean and his ex-wife on Aug. 18, 2008, in Rockland County. They owe 2007 income taxes, according to this public record.
• The IRS filed an $842,645 lien against Dean and his ex-wife March 4, 2008, with the Somerset County (N.J.) Clerk. According to this lien, they owe income taxes from 2006.

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IRS Files $63G Tax Lien Against Naomi Campbell

Supermodel Naomi Cambell is the latest celebrity to get in to trouble with the IRS. Cambell recently had a $63,000 lien filed against her for unpaid taxes. She was already in the headlines for a testimony in the trial of warlord Charles Taylor.

FoxNews.com reports:

Naomi Campbell might wish she'd kept one of those "blood diamonds" from Liberian warlord Charles Taylor to pay her taxes.

According to tax watchdog Robert Snell, the IRS filed a $63,487 lien against her last month with the New York City Register's office for taxes assessed in 2009.

Her flack in London didn't get back to us for comment.

Campbell was forced to testify recently at Taylor's war crimes trial at The Hague about receiving some "dirty-looking stones" one night in 1997 when she was a guest in South Africa of Nelson Mandela.

Read more here

Questions for the Tax Lady: August 9th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: What is the maximum value of the American opportunity tax credit?

You can claim the credit for up to $2,500 of qualifying tuition and related expenses. However, it can only be claimed for the first four years worth of post-secondary education.

Question #2: How do I remove a tax lien against my property?

A tax lien will lasts until your debt is paid off or otherwise satisfied.

The IRS will issue a Release of the Notice of Federal Tax Lien under the following criteria:

• Within thirty days after a taxpayer satisfies his or her tax liabilities (including interest and penalties) by paying the debt or having it adjusted.
• The taxpayer must pay all fees that a state or other jurisdiction charges to file and release the IRS tax lien. The fees are added to the total amount owed.

In a nutshell, you must resolve your liability before a tax lien will be removed. Click here to learn more about the tax debt resolution services offered by my law firm.

IRS Hits Wyclef With $2.1 Million In Tax Liens

Shortly after discussing his plans to run for president in Haiti, Wyclef Jean was hit with a federal tax lien. The musician reportedly owes the IRS over $2.1 million in unpaid taxes. Check out the following story on Wyclef’s tax problems courtesy of The Smoking Gun.com:

In May, the IRS filed a $724,332 tax lien against Jean. Last July, the agency filed a $599,167 lien against the performer. And a $792,269 lien was lodged against Jean in July 2007. The liens cover taxes due on Jean’s individual 1040 returns for 2006, 2007 and 2008.

In 1998, Jean--whose given name is Nel Wyclef Jean--purchased a $1.85 million home at 8 Cameron Road in Saddle River, [New Jersey] where he lives with his wife Claudinette and their family. The three IRS liens were filed against Nel W. Jean at the Cameron Road address.

Other records show that Jean, 37, has previously been the subject of two smaller tax liens filed against him by the State of New Jersey and the New York State Tax Commission, both of which were eventually satisfied.

Following the Haitian earthquake, TSG reported on Jean’s questionable handling of the finances of his charitable foundation. Along with filing tax returns years late, Jean used his foundation to pay himself and a business partner more than $410,000 for rent, production services, and Jean's appearance at a benefit concert.

IRS Files $1.13M Tax Lien Against Lil Wayne

From WebCPA:

The Internal Revenue Service has filed a tax lien for $1,138,760 against rap singer Lil Wayne, who is currently in jail on weapons charges.

The lien covers taxes owed from 2004, 2005 and 2007. The 27-year-old performer, also known as Weezy but whose real name is Dwayne Michael Carter Jr., has had problems with the IRS in the past. The IRS filed a lien for $977,840 against him in 2008, but he paid the taxes he owed later that year, according to the Detroit News.

Carter was arrested in July 2007 for possessing a .40 caliber pistol and marijuana following a performance at New York’s Beacon Theatre. He pleaded guilty to the weapons charge and is currently serving a one-year sentence on Rikers Island in New York.

Questions for the Tax Lady: May 31st, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: How difficult is it to get a tax ID number for my business?

It is actually a pretty simple process. You just need to complete and file IRS Form SS-4, which can be done electronically at IRS.gov. After you complete the form you will be your EIN (employer identification number) immediately. However, you can also simply apply online at the IRS website.

Question #2: How do I get a tax lien released?

The only way to have a tax lien released is by paying your original tax debt in full or paying your liability through an Offer in Compromise. Upon the occurrence of either of the previously mentioned events, the IRS will release the lien within 30 days. For more information you should visit the IRS’s website.

Aretha Franklin Fails to Pay Tax Bill

It was less than 2 years ago when Aretha Franklin paid off a $190,000 delinquent tax bill, but she has found herself in trouble with Uncle Sam once again. It was reported that the state of Michigan filed a lien against Franklin in the amount of $11,076.

This is the latest in a string of late payments and debt that drew headlines two years ago. Franklin paid off those debts and took her lien-free pipes -- and hat -- to President Obama's inauguration last year.

But Franklin also owes 2009 delinquent taxes of $33,729 on her Bloomfield Hills home, according to the Oakland County Treasurer's Office. If unpaid, she would face foreclosure in 2012.

What's owed

The state of Michigan filed an $11,076 lien against Franklin on March 23 with the Oakland County Register of Deeds. According to the lien, the income taxes were assessed Dec. 11, 2009.

‘Girls Gone Wild’ Founder Sues IRS

After a long battle with the IRS, and pleading guilty to tax fraud, ‘Girls Gone Wild’ producer Joe Francis is now attempting to sue the IRS for illegally freezing his bank accounts. According to WebCPA.com, he asserts that since a judge approved his plea bargain his assets should not have been frozen.

Francis pleaded guilty in October to two misdemeanor counts of filing false tax returns, and in early November U.S. District Judge S. James Otero sentenced him to time served. Francis had been held without bail for nearly a year in the tax case. Under the plea deal, Francis agreed to pay restitution, back taxes and interest totaling $249,705, plus a fine of $10,000.

In addition, he agreed to plead guilty to two misdemeanor counts in exchange for having the charges dropped. Francis claims that his CPA, former Mantra Films CFO Michael Barrett, conspired with two others to embezzle millions of dollars from the company and then contacted the tax authorities in order to win a whistleblower award from the IRS.

However, shortly after the judge accepted his plea deal, the IRS filed a lien for $33,819,087.14 for three years of back taxes, from 2001 to 2003 (see IRS Files $34M Lien Against ‘Girls Gone Wild’ Founder).

Francis claims in his lawsuit that the IRS moved to freeze his assets within three hours after he left the courtroom, according to TMZ.com. He claims that the only circumstances under which assets can be frozen are if the taxpayer is preparing to flee the country, if the taxpayer is attempting to move assets out of the reach of the IRS, or if the taxpayer appears to be going bankrupt.

Former N'Sync Member J.C.Chasez in Tax Trouble

From Examiner.com:

N'Sync was once one of the hottest boy bands around and J.C. Chasez was one-fifth of the members, which also included Justin Timberlake, Joey Fatone, Lance Bass and Chris Kirkpatrick. You would think the guys would've walked away from that deal without a financial worry in the world.

Apparently for J.C. Chasez, that is not the case. The America's Best Dance Crew judge just had a lien filed against him by the state of Mississippi accusing him of owing $206,965 in delinquent taxes.

IRS & State Target Playmate Pam Anderson

From DET News.com:

Pam Anderson - the actress/Playmate/home movie star and ex-wife of Detroit native Kid Rock - owes more than $1.9 million in delinquent taxes, records show.

What's owed:

The IRS filed a $1,700,173 lien against Anderson on Oct. 19 with the Los Angeles County Recorder of Deeds.

The state of California filed a $252,360 lien April 7 in Los Angeles.

Her side:

Neither Anderson not her publicist could be reached for comment.

Schwarzenegger's Office Blames $79,000 Tax Lien on 'Paperwork'

From MercuryNews.com:

Gov. Arnold Schwarzenegger was having a feel-good Thanksgiving week, passing out turkeys in East Los Angeles and giving thanks for "the blessings of freedom and democracy."

But then came the heartburn.

A gossip Web site Friday morning revealed that the IRS filed a federal tax lien against the governor last spring seeking $79,000 — a discovery Schwarzenegger's office blames on "a minor paperwork tracking discrepancy."

A copy of the tax lien, submitted in Los Angeles County, was first posted by TMZ.com. A search of public records databases shows the lien was filed May 11 and that it lists the governor's home address.

The governor's office at first questioned the authenticity of the document and insisted that Schwarzenegger had paid his taxes "in full and on time." Later, after officials spoke with the IRS, they explained there had been a snafu.

"The issue is completely unrelated to the payment of taxes," Schwarzenegger spokesman Aaron McLear said in a statement. "The matter will be resolved and the lien expunged without any penalty assessed upon the governor."

McLear — who said the governor learned of the matter only Friday — wouldn't comment further on the nature of the mix-up or on what kind of taxes the lien involved.

But an IRS primer on the collection process explains that the agency sends out several warnings to anyone who's been billed for overdue

Cage & Diamond: Two More Celebrity Tax Offenders

The IRS must be getting more aggressive in their collection of taxes from celebrities. Last week I made two posts about half a dozen new celebrities who had their tax delinquencies made public, and over the weekend two more offenders were identified.

Nicholas Cage

Cage, who ironically starred in a movie where unpaid taxes was a major part of the plotline (National Treasure: Book of Secrets), reportedly owes the IRS more then $6.2 million in unpaid taxes 2007. The IRS even issued a lien on Cage's $3.55 million haunted mansion in New Orleans.

Dustin Diamond

Saved by the Bell star Dustin Diamond has also been accused of neglecting to pay his taxes. According to gossip site TMZ, Diamond owes $21,015.62 in unpaid taxes to the state of Wisconsin. Apparently a lien was filed against his property, and the courts claim that no settlement has been reached.

Kerry Says $819,848 Tax Lien Is Clerical Error

From the AssociatedPress.com:

The Internal Revenue Service has filed a $819,848 tax lien against Sen. John Kerry's 2004 presidential campaign, but Kerry on Wednesday blamed IRS clerical error for the claim and said his campaign owes no tax penalties.

The Massachusetts Democrat said the IRS mishandled payroll tax forms that he said were correctly filed by his campaign in 2005.

"This is a clerical matter, nothing more, nothing less," said Kerry spokeswoman Whitney Smith.

IRS spokesman Anthony Burke declined comment Wednesday, adding that IRS employees are precluded by law from commenting on tax cases.

The IRS notified the Kerry campaign in January 2008 that it had failed to file certain payroll tax forms for the 2004 tax year.

Smith said the IRS must have lost the payroll forms since the Kerry campaign had previously filed them in 2005. But the Kerry campaign filed them again in 2008 in response to the IRS request, she said.

"The IRS contacted us last year about data they lost from the 2004 campaign," Smith said. "We gladly resubmitted all the forms needed to fill in the gaps, end of story."

Smith said the Kerry camp was surprised to learn the IRS had filed a tax lien based on the disputed W-2 payroll forms.

The IRS filed the lien earlier this year in the District of Columbia, saying it had tried to collect the money previously from the Kerry campaign.

"We have made a demand for payment of this liability, but it remains unpaid," according to the IRS tax lien.

Smith said the Kerry camp has been willing to provide the IRS additional documentation to resolve the matter. Kerry officials have been checking monthly with the IRS asking why the matter has yet to be resolved, but have not gotten an answer, she said.

The Washington Times first reported the tax lien against Kerry's campaign on Wednesday.

Kerry lost to former President George W. Bush in the 2004 race. Paperwork was filed last year with the Federal Election Commission closing down Kerry's 2004 campaign account.

Lien? Levy? What’s the Difference?

The tax world is full of jargon and enough acronyms to make your eyes cross. Its no wonder so many people are confused about the difference between a tax lien and a levy. I thought it might be helpful to explain.

The term “levy” is used to describe a number of collection methods the IRS employs. Levies actually redirect funds to the IRS as a repayment of a debt. Following are a few different types of levies:

• Wage garnishments actually fall under the levy heading. Wage garnishments redirect a portion of your income directly to the IRS. A garnishment continues until either the debt is repaid, expires, or you successfully negotiate a release. Wages can be a paycheck from your employer, federal payments like Social Security, or if you are an independent contractor, accounts receivable.
• Bank levies are one-time events. The IRS freezes assets in an account up to the amount owed plus interest for 21 days then takes those funds to repay your debt. The 21-day period is supposed to allow for resolving account ownership.
• Property seizures constitute the most extreme use of a levy, allowing the IRS to actually take and sell your property. This could be a car, or a boat, even a house. Again, this is not terribly common and usually only used in extreme cases.

A levy is an active form of collections, and a taxpayer must be sufficiently warned before the IRS will undertake any type of levy. Generally, they mail several notices with one final 30-day notice. This 30-day period is your window to take action to resolve the debt, or make an appeal. I recommend taking action as soon as the first notice arrives. Fighting a levy takes time for even the most experienced tax attorney or CPA.

A lien, on the other hand, is a passive form of collections. Tax liens essentially “lock” your property (whether a car, or a home, even artwork and jewelry) so that should you sell it, the IRS gets first crack at the proceeds. I often hear from clients asking, “when can you get my lien released?” And the honest answer is, when the debt is paid or expired. You cannot argue to have a lien removed; tax liens stay in place until the debt is repaid in full or expires. Even if you enter into a tax debt resolution with the IRS, such as an Installment Agreement, the lien stays put. This is a security measure protecting the IRS’s interest. However, a tax lien should not impact your life or finances, provided you don’t sell your property.

City Wants her Cent

From the Sun Chronicle:

A 74-year-old blind woman has been told a lien will be put on her South Attleboro home if she doesn't come up with a penny she owes on an outstanding utility bill.

Eileen Wilbur, of Glenn Street, said she discovered the notice of the potential lien after her daughter, Rose Brederson, came over to read her mail.

"It's so upsetting," Wilbur said. "It sent my blood pressure up so high."

The city sent Wilbur a letter dated Nov. 10 stating that if the 1 cent balance is not paid by Dec. 10, the city will assess a lien of up to $48 on Wilbur's next property tax bill.

"They wasted taxpayer money on the letter," Wilbur said, noting the 42-cent charge for a stamp.

City Collector Debora Marcoccio said the bill was sent out along with more than 2,000 others as the city tries to recoup outstanding balances before resorting to putting liens on property.

A computer automatically printed the letters for any account with a balance remaining, and they were not reviewed by staff before being sent out, Marcoccio said.

"It would be fiscally irresponsible for me to have staff weed through the bills and pull out any below a certain amount," Marcoccio said. " And what would that amount be?"