It’s only fair, right? We working stiffs (or retired… hey, you’ve earned it) need to pay our taxes in full on time. The same rules apply to celebrities. The Internal Revenue Service doesn’t care who you are. If you owe back taxes, they will come knocking to collect.

Charlie Sheen’s Back Taxes

On April 30, the Blast reported that Charlie Sheen owed nearly $5 million in back taxes for the 2015 tax year. According to the documents, a tax lien was filed on Sheen’s property for $4,967,376.31 on February 18. Ouch!

Nothing happens in a vacuum. This is the same year that his HIV diagnosis became public. A flurry of lawsuits followed, filed by sexual partners claiming they were kept in the dark about his status, according to Page Six.

Sheen was once the highest-paid actor on network television; however, his income took a nosedive in 2011 when he left Two and a Half Men TV series.

He also has had two high-profile divorces that have cost him dearly. The monthly amount paid to his two ex-spouses may have dropped to a mere $25K from $55K, according to TMZ. That’s still a lot of money!

Earlier this year, he put his house up for sale for nearly ten million dollars. Hopefully, that will take care of the IRS debt.

Now, as for 2016 and 2017… we don’t know about that.

So what is a tax lien anyway?

A federal tax lien is a claim by the government against your property. It is filed when you do not pay a tax debt after the IRS sends a notice explaining how much you owe.

If you owe, generally, more than $10,000, the IRS can file a tax lien.

It is posted against your Social Security number, reduces your credit score, and attaches to everything you owe now and in the future until the debt is paid off.

When you apply for a bank loan or prepare to sell your house, you may find out that there is a tax lien. That is, of course, if you missed the IRS notices in the mail.

Obviously, the tax lien can limit your ability to get credit.  If you have business property or accounts receivable, the tax lien is attached to it. Even if you file for bankruptcy, the tax lien can continue.

Finally, if you have a tax lien on your home, you must pay that before you can sell or refinance it. If you have equity in your home, the sales proceeds at the time of closing can go toward paying that tax lien.

How do you avoid a lien?

If you haven’t paid your taxes when you file your return, you’ll receive a notice from the IRS. This notice is the start of the collection process. This first notice will tell you what you owe the IRS.

This is when you need to act.

You can seek advice from a qualified tax professional such as an Enrolled Agent.

You need to do it now.

Why? Because if you do owe, the tax, penalties, and interest have been accruing since the date it was due. And they continue to add up as time goes on.

If you’re not able to pay the entire balance right away, you do have options. Your tax professional can walk through those with you.

Lindsay Lohan’s Back Taxes

In late December 2017, it was reported that Lindsay Lohan had back tax troubles. She reportedly owed more than $100,000 for 2010, 2014, and 2015 tax years, and the IRS had put liens in place.  The actress stated that she believed one of her managers mishandled funds and vowed to investigate.

Previously, in 2012, it was reported that she owed over $200,000 for the 2009 and 2010 tax years. It got so bad that the IRS seized her accounts. Ironically, Charlie Sheen came to her rescue with a check for $100,000, as reported by Fox News. Lindsay eventually paid the debt at the end of 2012, according to an IRS certificate that TMZ posted on their website.

The IRS can seize accounts?

The short answer is yes, the IRS can seize accounts… or any other property you have.

That’s called a levy.

It’s the next step after placing a lien on your property. The lien secures the government’s claim on your property. With a levy, the IRS takes your property to satisfy your tax debt.

The government can seize your property if you fail to make arrangements to settle your tax debt. They may also use any future tax refund to offset your debt.

What can they seize?

The IRS can seize your wages, your Social Security benefits, your bank accounts, and retirement income. They can seize your car or even your home. Any property you have can be seized by the IRS.

How are you supposed to live if all of your income goes to the IRS?

“Generally, federal law provides that any [wage] garnishment can be no more than 25% of your disposable income, or the amount that your income exceeds 30 times the feral minimum wage, whichever is less,” explains Jeffrey Schneider in his book, Now What? I Got a Notice from the IRS. Help! “The amount you can keep corresponds to the number of exemptions you claim for tax purposes.”

That doesn’t mean it’s enough to live on, however. Schneider gives the example of a single person getting paid weekly with five exemptions. In that case, he or she can only keep $511.54. A married person filing jointly with two exemptions would only be allowed to keep $1,733.33. Yikes!

Once again, you don’t have to let things get to this point. If you’ve received a notice of an outstanding tax debt, take action now. Tax professionals can assess your situation and help you decide the best course to take. They can even speak with the IRS on your behalf.

Robert DeNiro’s Back Taxes

In 2015, The Smoking Gun reported that Robert DeNiro owed $6.4 million to the IRS for back taxes for the 2013 tax year.

The IRS sent notice after notice – to the wrong address – and ultimately filed a lien.

In DeNiro’s case, he was able to whip out a checkbook and take care of it the minute he learned of it.

That’s great for Robert DeNiro, right? Well, for us regular folk, we may not be able to settle our tax debt right away.  As mentioned previously, you do have options.

Consulting with a tax professional can help you determine the best course of action. Each individual situation is unique and deserves a thorough evaluation.

Oh, and do yourself a favor. Put in a forwarding of address order with the post office, so you receive notices mailed to your previous residence.

So what is the lesson in all this?

If you have back taxes, or even if you think you might, it pays to address them right away.

The minute you are delinquent on your taxes, interest and penalties start to add up. There’s no reason to add to your woes. Don’t let it get to the point where the IRS is putting a lien against you or even seizing your property through a levy.

The first step is finding out where you are.

Contact a trusted tax professional such as an Enrolled Agent or EA. An EA is the only federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of Treasury to represent taxpayers before all levels of the IRS.
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Jeffrey Schneider, EA, CTRS, NTPI Fellow, has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax & Accounting Services as well as the Enrolled Agent and Certified Tax Resolution Specialist for SFS Tax Problem Solutions.
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Now What? I Got A Tax Notice From The IRS. Help! Defining and deconstructing the scary and confusing letters that land in your mailbox. Jeff defines and deconstructs the scary and confusing letters in a fashion that mixes attention to detail with humor and an intricate clarification of what is what in the world of the IRS.

The book is available in paperback and ebook on https://Amazon.com
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For more on SFS Tax Problem Solutions, visit: http://sfstaxproblemsolutions.com/
For more on SFS Tax & Accounting Services, visit http://sfstaxacct.com/
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