Sharpton: Some are Concerned that He's Not a Going Concern

The Reverend Al Sharpton has always been one of those controversial figures that people either love or hate.  If you’re in the “hate him” camp, then you probably list his sketchy personal finances as one of your reasons.  And if you’re in the “love him” camp, then you probably find a way to overlook it.  But even Sharpton supporters are having a hard time grappling with this as he gains national prominence.

You can say I’m not a great administrator, . . . you can’t say that I’m not committed.

~ Rev. Al Sharpton

Arguably his biggest problems are his tax debtsHe owes something like $4.5 million in federal and state income taxes.  Also included in that figure are payroll taxes owed by his non-profit organization, National Action Network, which, according to his accountant, would not be able to stay afloat if it were actually meeting its payroll tax obligations.  From the IRS perspective, a company in this financial shape is “not a going concern.”

Sharpton has stated publicly that he is paying down what is owed, but if the tax balances are not shrinking, it normally means that the payments are too small or the taxpayer is incurring new balances year after year.  Understandably, the IRS frowns upon the so-called pyramiding of tax liabilities.  And understandably, even Sharpton supporters frown upon first class flights, large salaries, and private school tuition which wouldn’t even be an issue if he were on the up-and-up with the IRS.

Granted it is impossible to find a public figure these days without some skeletons and baggage, but Sharpton’s message of equality would carry so much more strength if he would get his finances in order.  In his current financial state, he inadvertently sends the message that he is above the law and doesn’t need to pay taxes like everyone else.

Tax debt case is the next frontier for free speech regulation

According to recent news reports, across the pond in Europe, the European Union’s highest court has ruled that people have the right to be forgotten, even on the internet. The case at issue stems from a tax debt once allegedly owed by Attorney Costeja González who wanted the world to forget an article published by La Vanguardia about tax collection efforts taken against him. The tax enforcement efforts included the seizure of his home and resulted in a 1998 Spanish news blurb that was 36 words long specifying that his home was being repossessed to pay off debts. His legal efforts to obtain anonymity have resulted in infamy.

Proof that a tax debt will follow you, the news blurb at issue was a google search result when completing a google search for Mr. González. Apparently microfiche no longer exists in Europe and google lost its battle that search results containing links to the article regarding Mr. González’s tax problems violated his right to privacy and that people have the right to be forgotten. Hopefully the floodgates have not been opened too far to extend to a complete shutdown of the internet. If it does, I’m not shocked to learn that a taxing authority was to blame.  

Tax Day is Around the Corner; Are You Prepared?

Happy Tax Day! Come Monday April 15, 2013, your tax returns are due. Have you prepared? While many people filed their tax returns well before the April 15 deadline because they gave the government an interest free loan and are due a refund; many other people delay filing their tax return or never file a tax return. These people dread Tax Day because they know that they’re going to owe a tax debt once they actually do file their tax return. So they believe it’s better to not even file. This is not the correct approach.

If you are in the group of people who procrastinate filing their return or do not file your tax returns in fear of a tax debt, given the present Internal Revenue Service (IRS) collection regulations, this needs to be the year you fix your tax problem. If you have a filing requirement, you need to either file a tax return or an extension to file by April 15. Simply ignoring your filing requirement will likely cost you more money in the long-run as failure to file monetary penalties are severe.

Eventually, the IRS is likely to catch up with your shenanigans. If you had sufficient income requiring you to file a tax return, such income was likely reported to the IRS. Once your income is reported, even if you don’t file a tax return, the IRS may eventually file a return on your behalf by using the reported income and minimum deductions to assess a liability against you.  Even if your income isn’t reported, taxing entities have been known to use other means to estimate your income to assess a liability against you.

You’re legally allowed to file an extension to file, so use it if you’re not ready to file your tax return. This is a simple procedure. Many taxpayers fail to file a timely tax return. Or, alternatively, they elect to pay undue taxes by claiming the standard deduction simply for the purpose of meeting the tax day deadline because they don’t think they have the time to itemize and calculate the deductions and credits they are entitled to claim. While an extension to file is not an extension to pay, filing an extension and properly preparing your tax return will likely save you money.  You must file your extension by April 15. If needed, filing an extension will generally allow you until October 15, 2013, to properly prepare your tax return.

So you filed your tax return or you are about to file your tax return, and you owe a non-disputed tax debt… what do you do now? Can you pay the debt? If you can afford to pay the debt owed, paying the debt is usually the least costly option after penalties and interest are factored into the equation. But if you’re like most people who end up owing a tax debt, you likely were not expecting to owe a tax debt and it’s simply another debt you cannot afford to pay.

If this is the case, there is one thing to keep in mind: the IRS is not your friend when you owe a tax debt, they are like any other creditor, they need as much money from you as they can get, as quickly as they can get it. Even with the public relations blitz over the past couple years of a kinder, gentler IRS, keep this in mind as your financial situation needs to control the final resolution of the tax debt. Too often I hear from people owing tax debts who agreed to some outrageous payment plan because the IRS required such payment based on their liability owed and disregarded their actual financial situation.

Therefore, it’s important to know your financial limitations. If you truly cannot pay your tax debt, there are options available to you. However, you need to have an organized and systemic presentation of your circumstances to get the appropriate resolution to your tax headache. While the IRS will likely pressure you to pay your debt in full within 90 – 120 days or make payments including penalties and interest over the next five to six years, there are other options available which include petitioning for non-payment of the debt, to settling the debt for less than the amount owed. The point is that there are options available to you and the key is to file your return, and then address the debt within your financial limits, do not ignore it. And, if you need professional assistance, call the tax relief attorneys at Montgomery & Wetenkamp toll free at (800) 454-7043 for your free consultation. We can help you resolve your tax debt.

Is This The Year You Should Itemize Your Deductions on Your IRS Tax Return

It’s now February, and tax day is just around the corner … but far enough away to allow you time to explore your options and minimize your tax exposure. While preparing your tax return the goal is always to legally minimize your tax debt and hopefully increase your tax refund. At its simplest, your tax debt is determined by your taxable income after deductible expenses.

Focusing on the deductible expenses side of the tax equation, according to the Internal Revenue Service (IRS), most taxpayers claim the standard deduction. Is this the year that you should itemize your deductions? My most common response to legal questions is apt; it depends. The analysis requires a determination of which is greater, the standard deduction or itemized allowable deductions?

What is the Standard Deduction?

The standard deduction is a preset amount that reduces the amount of income on which you are taxed. The standard deduction amount depends on your filing status, whether you are 65 or older, or blind, and whether an exemption can be claimed for you by another taxpayer. The standard deduction is generally adjusted annually based on inflation.

The standard deduction amounts for tax year 2012 are $5,950 for single filers and married couples filing separately, $8,700 for head of household filers, and $11,900 for married couples filing jointly and qualifying widow(er). If you are 65 or older, or legally blind you may receive an increased deduction per qualifying status. The additional standard deduction amounts for tax year 2012 are $1,450 for taxpayers who file single or head of household, and $1,150 for those filing married filing jointly, married filing separately, or qualifying widow(er).

Should You Itemize Your Deductions?

Now the hard part: is the standard deduction amount greater than the amount that may be claimed if you were to itemize your allowed expenses? If the standard deduction is greater, use the standard deduction. Determining what expenses you had throughout the year that may be itemized and deducted, is usually difficult because you need to maintain accurate records and the list of the various allowed deductions are exhaustive and riddled with exceptions, exemptions and limitations. Once you have a grasp of the type of deductions that may be claimed, you may find that your actual expenses, when itemized, far exceed the standard deduction provided by the government. This is why it truly pays to prepare your tax return early and not procrastinate so you have time to accurately determine the expenses you may itemize.

The types of expenses that may be itemized are typically a social economic incentivizing type of expenses. Generally, and subject to many exceptions and limitations, expenses paid for or associated with medical care, mortgage interest, student loan interest, taxes, education, charity, job search, relocation, earning income, and investments, may at times be itemized and could potentially reduce your taxes. Once tallied and accounted for, if the total amount spent on the qualified deductions, subject to the applicable exceptions and limitations, are more than your standard deduction, this may be the tax year you save on your taxes by itemizing your deductions; so don’t procrastinate and do your homework … or file an extension.

It's Tax Season (Sort of)

So with the Super Bowl over, and pitchers and catchers reporting next week, these are the signs that tax season is in full swing, right? Wrong; depending on your situation. You still may not be able to file your 2012 tax return and get your refund, or resolve your tax debt.  Based on the last-minute shenanigans in Washington D.C. to avoid falling of the fiscal cliff, the Internal Revenue Service (IRS) is still preparing their systems to accept the remaining tax forms affected by the American Taxpayer Relief Act (ATRA) enacted by Congress on January 2, 2013.

The Internal Revenue Service announced today that taxpayers will be able to start filing two major tax forms next week covering education credits and depreciation. Beginning Sunday, February 10, 2013, the IRS will start processing tax returns that contain Form 4562, Depreciation and Amortization. Then, on Thursday, February 14, 2013, the IRS plans to start processing Form 8863, Education Credits. With these updates, almost all taxpayers may start filing their tax returns for 2012. These forms affected the largest groups of taxpayers who weren’t able to file following the abbreviated January 30, 2013, opening of the 2013 tax season.

However, more updates are still required to accommodate all taxpayers and tax forms. The remaining forms affected by the January 2013 legislation are anticipated to be accepted during the first week of March 2013.  A specific date will be announced later by the IRS. So, don’t delay, if you can help it, to get your taxes completed.


I Guess You Don’t Get to be The Most Successful R&B Artist of the Past 25 Years by Paying Your Taxes

photo via

Most celebrity tax debt stories are pretty boring.  They’re boring because we have no details.  Usually we are limited to the information in the notice of federal tax lien (FTL), which includes little more than the years and the dollar amounts that are owed.  It’s not until after the tax debt is made public that juicier details begin to emerge.  Sometimes in the aftermath the celebrity taxpayer makes comments publicly about the tax debt, and we learn something about why/how the celebrity got into trouble.

Of course, most of the time if there is any public comment, it is something that has been carefully written by the star’s attorney; something like what R. Kelly’s spokesperson said:

R. Kelly is in the process of working everything out with the government and is confident that all his obligations will be satisfied.

Most of the time we are left to read between the lines and make our own (unreasonable) assumptions.  One of the assumptions I have made on ocassion is that the reason why celebrities incur big tax debts is they are on a downward spiral in popularity, marketability, . . . star power.  They have a hard time accepting this and modifying their lifestyle accordingly.

Oh, did I mention that R. Kelly owes about $4.8 million in back taxes?  It’s true; except my theory falls apart in this case because R. Kelly seems to be doing fine career-wise.  It’s impossible to tell for sure how he is doing financially, but his star power seems to be intact and he is keeping busy.  Maybe the “most successful R&B artist of the last 25 years” just has other priorities besides the IRS.

Idaho Legislator Owes $500k to IRS

photo via

Here’s one that TMZ missed.  Not enough star power.

Idaho legislator Phil Hart is not giving politicians a very good name.  He is a tax protestor (one of those eccentric believers in unfettered freedom to do what they please which often includes taking the position that the federal income tax is unconstitutional).  Many tax protestors believe that payment of income tax is optional, and Phil Hart has definitely exercised the option to NOT pay.  Now his federal and state tax debt stretches back to the mid 1990s.

Hart’s tax problems have been public for some time now, but new details emerged when he filed bankruptcy last month.  The bankruptcy filings reveal that his total debt is over $600,000 and over $500,000 of that represents money owed for delinquent federal income taxes.

We also learn that (according to Mr. Hart) 100% of his income was subject to wage garnishment during the past seven years.  I wonder if this is accurate because the IRS isn’t supposed to take 100% of w-2 income.  Maybe the feds were taking their share, then the state was taking the rest.

And finally, we see that Rep. Hart was basically hiding assets to steer clear of the IRS.  He put his property into a sham trust to try to keep it out of the hands of the government.  But the Dept of Justice sees right through this; the IRS will undoubtedly get at least some of what is owed from the sale of this property.  See full story here.

Obama Staffers are Human: They Owe $834k in Back Taxes

The IRS released data showing the tax debt statistics of federal employees, and it has created just a little buzz. I realize that most of the stories circulating around the web these past few days carry the more impressive headline of “3.4 billion owed,” but that includes ALL federal employees, even retirees. There are a lot of federal employees around the nation. I think it is more impressive to focus on those closer to the president.

36 of the approximate 1,800 Obama staffers owe a combined $834,000, which equates to roughly 2% of all executive office employees. Of course this wouldn’t be nearly as big a deal if President Obama had not been focusing so much on tax equality and the need to fix the tax code so that everybody is required to pay their fair share. Many news sources are seeing this as an opportunity to find flaws with Obama and his administration.

However, for me, more than anything, this story is a reminder of how pervasive tax problems are in this country. Literally anyone can find themselves in a situation where they cannot afford to pay what they owe when they owe it. It is not uncommon for ordinary folks to incur a little tax debt at some point in their lives, and factors like race, gender, economic status, and education do not accurately predict who will owe. If an employee of the US Senate can owe back taxes (and according to the report, 217 of them do), then you could owe too.

Avoid Calling the IRS in December

December is by far the worst time to try to communicate with the IRS about your tax debt.

The Second-Stringers

I have not noticed that the telephone wait times are much different in December. Perhaps there are more IRS representatives taking vacation in December, but many practitioners and taxpayers do the same — so increased phone traffic is not normally an issue. The IRS does a fairly good job replacing the vacationers, but I have usually found the quality of their replacements to be lacking.  If you call the IRS in December (especially late December) then there is a good chance you will be dealing with a new, inexperienced IRS agent (a “second-stringer”). Of course, a tax relief attorney will know how to use that inexperience to the taxpayer’s advantage.

IRS Computer Maintenance

The IRS information technology staff takes advantage of the holidays to do routine maintenance on IRS computer systems. And they like to get a jump on things. So, if they tell you that everything is going to be shut down on Friday in observance of Christmas, then chances are they will be up and down all day on Wednesday and completely offline by early afternoon on Thursday.

If you get through to a representative who tells you their computers have been up and down, then it might be best to put off the call for another day if possible. The problem is that you will get partway through your call and everything the representative did will be lost when the computer goes down, and you’ll have to start over again.

If you have a tax issue that can’t wait until after the holidays, it is best to enlist the help of a qualified and experienced tax professional.

Does the IRS View Marion Barry as a “Special Circumstance”?

Former D.C. mayor, Marion Barry, is in the news today because of a lien that the IRS filed against him in connection with a measly $3,200 in unpaid 2010 taxes.

Remember back in February of this year when the IRS announced it was going to provide taxpayers with special tax relief during these trying financial times? The IRS dubbed it the “Fresh Start” initiative. Remember when I blogged in June about the uncertainties of the program and how the IRS still had not clarified some major points? Remember what I said about the new lien filing procedures; how the lien filing threshold was reduced from $10,000 to $5,000 in most cases? According to the IRS website:

The Fresh Start changes increase the IRS lien filing threshold from $5,000 to $10,000. Liens may still be filed on amounts less than $10,000 when circumstances warrant. (emphasis added)


So, why did the IRS file a lien if the balance is under $5,000? Well, it appears that Barry’s 2010 liability is only the tip of the iceberg. He still owes for prior years, for which he is on an installment agreement in good standing, according to Barry’s official statement. It appears that the IRS will be looking at the overall balance in determining whether to file a lien, even under Fresh Start. At least that’s one possible explanation. The other possibility is that the IRS would have filed a lien on Barry even if $3,200 were all he owed . . . because circumstances warrant it. Let’s face it, he’s a public figure sitting on a Finance Committee in D.C, in charge of public funds, and he has a colorful history of corruption and tax delinquencies. If that isn’t a special circumstance, then I don’t know what is.