Chris Tucker Sheds Assets to Pay Back IRS

Chris Tucker, the actor best known for his work in the Rush Hour series of films, has been selling his properties in Florida to pay back what he owes to the IRS.

Mr. Tucker owes $11.5 million in back taxes (perhaps somewhat less now that he has sold off some assets). Reports indicate that he sold his Florida properties for much less than fair market value, which indicates to me that he was in a big hurry to raise some cash under pressure from the IRS.

We don’t have the complete details, but with a $11.5 million tax bill, certainly the IRS has already threatened to seize his property. Why else would he take less than it’s worth? The dilemma for Mr. Tucker is if he had not sold the property, the IRS would have seize it and auctioned it off to the top bidder. A taxpayer can normally get a much better price in a private sale than what can be fetched in a public IRS auction. But the IRS doesn’t allow the taxpayer to put a property on the market and wait until he gets his asking price. Pressure from the IRS usually forces the seller to accept less — in this case, less than fair market value.

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Law Targets Government Contractors with Tax Debt

A law enacted in 2006 would have required governments at the federal, state, and local levels to withhold 3% of money owed to contractors with even the slightest federal tax debt.  The law is kind of in limbo at this point: it is slated to go into effect in January 2013 but lawmakers, including President Obama, are pushing to get it repealed. And it looks like it is going to be repealed despite data highlighting the widespread non-compliance of government contractors.

Arguments for the law:

  • Businesses should not be awarded lucrative government contracts if they are not going to pay their taxes.
  • It is needed to pay for Bush-era tax reductions.

Arguments against the law:

  • It assumes every government contractor is a tax cheat.
  • It will cripple some small business who simply can’t float the 3%
  • Contractors may pass the costs on to the government.
  • It would be difficult and expensive to administer.
  • Job protection is more important right now.

I have not seen the text of this legislation, but if it would require that government contractors fully pay their tax bill before getting fully paid by the government, then it seems that would also apply to contractors on installment agreements. Some installment agreements last 5 years or longer, so they would have a long time to wait for their remaining 3 percent!

California’s New and Improved “Top 250 List”

Normally “first place” is a position that many aspire to.  Unless you occupy the first spot on California’s Top 250 Delinquent Taxpayers list.

California tax collectors (employees of the Franchise Tax Board) have a reputation for being, how shall we say this, . . . very zealous in their duties.  The FTB stops at nothing to collect overdue taxes, even rivaling the efforts and tactics of the IRS.  One of the ways California encourages tax compliance is by publishing its annual “Top 250 Delinquent Taxpayers” list on its website as a type of public shaming exercise.  Right now the winners are Halsey & Shannon Minor of Los Angeles who owe exactly $14,247,341.09 in personal income taxes.  Apparently nobody in the entire state of California owes more state taxes than they do.

But even if you’re at the bottom of the list, the consequences are the same.  And now, with the passage of AB 1421, it’s more than just the tax bill and the shame. Consequences now include having your drivers license, and possibly professional license, suspended.  Also, the list will be doubled so that it includes the top 500 worst offenders.  The author of the bill, Henry Perea, has strong words for California’s top 500:

Everyone on this list has had a chance to work with the state to resolve their tax issues but have chosen instead to bury their heads in the sand and continue to spend lavishly.

But I wonder how accurate that statement is.  According to the FTB website, the only criteria for inclusion on the list is that the taxpayer owes over $100,000 and falls into the top 250 (now 500).  The oldest tax liens were filed in 1996, but many of them were just filed last year.  At any rate, California has sent a clear message to the wealthiest taxpayers in the elite neighborhoods of LA and San Francisco.  Now they should try to get that message to the masses to make it really effective.