Wesley Snipes must know a little how Carmen Basilio felt.

Basilio, the “Upstate Onion Farmer” from Canastota, N.Y., was a world champion boxer in both the Welterweight and Middleweight divisions during the 1950s. Unfortunately, he was knocked down repeatedly in one match that he was sure to lose. When asked afterward why he kept getting up despite having no chance, he reportedly said “I don’t want to start any bad habits.”

Snipes continues to getting knocked down by the IRS. Rather than give up, he too keeps getting back in the ring. In his latest skirmish with the service, the Tax Court held that the IRS did not abuse its discretion by refusing to accept his offer in compromise.

Snipes’ problems began with federal tax liabilities of $23.5 million from 2001-2006. This was partially a result of his failure to file tax returns. The IRS assessed those liabilities, and filed a notice of federal tax lien. It then issued a notice and demand for payment of the liabilities. 

The Proceedings

When Snipes did not pay, the IRS issued a notice of the filing. Snipes requested a collection due process hearing and stated that he wanted a collection alternative – an offer in compromise or “currently not collectible” status – and wanted the notice of federal tax lien withdrawn.

Snipes did not challenge his underlying tax liabilities. He made a cash offer of $842,061, less than 4 percent of the total underlying liability. The IRS issued a notice of determination rejecting his OIC and sustaining the notice of federal tax lien. Snipes filed a petition with the Tax Court.

Snipes contended during both CDP proceedings that his financial adviser, W. Johnson, had taken out loans and disposed of assets and income on his behalf, diverting the funds without his knowledge or benefit. He provided affidavits from Johnson of his misconduct and misuse of his assets and income, but did not provide any definitive documentation showing the dissipation or diversion of his assets or income.

Snipes requested that the IRS conduct a transferee investigation of Johnson, and that they accept his offer with the condition of proving Johnson’s transferee liability. The settlement officer requested permission from her manager to conduct an expedited transferee investigation, but the manager explained that the CDP hearing could not be held open for a transferee investigation, nor could the IRS accept an OIC with conditions imposed on it.

One of Many Verdicts

Following a review of Snipe’s case, the settlement officer an effort to compromise for settlement purposes. She reduced Snipes’ “reasonable collection potential” to $9,581,027. Snipes maintained his original OIC of $842,061. The settlement officer concluded that it was not in the best interest of the government to accept the OIC. She issued Snipes a supplemental notice sustaining the notice of federal tax lien, and again rejecting Snipes’ OIC.

The Tax Court noted that the validity of Snipes’ underlying tax liabilities was not at issue. The court concluded that the settlement officer properly based her determination on the required factors. They determined that she did not abuse her discretion in determining that acceptance of the OIC was not in the best interests of the United States.

The Tax Court held that in light of Snipes’ failure to provide bona fide documentation to prove his assets and financial condition, as well as the disparity in his offer versus his RCP as determined by the IRS, the settlement officer did not abuse her discretion in her rejection of Snipes’ offer, refusing to conduct an expedited transferee investigation, or sustaining the filing of the notice. 

“The court was unable to determine whether or not he still owned the property. On a smaller scale, this is what happens all the time,” Davidoff noted. “And it’s not the end of the line for him.

What Happens Next: The Cycle

Now it will go back to Collections, and start all over again. In the meantime he has delayed the IRS, and the statute of limitations has been extended for five years. My guess is that he’s paid more than $100,000 to do this, but he has all the rights that any other taxpayer has in Collections. If they think some of his assets got transferred to Johnson, they might try to seize some of those assets.”

“It sounds like he has a lot of illiquid assets or assets that he can’t account for. If he’s correct in the valuation of his assets, then that’s all they can take – they can’t take more than he has,” Davidoff mentioned.

Don’t Be Afraid to Ask for Help

If you have issues with tax liabilities, contact your tax professional immediately. Enrolled Agents like Jeffrey Schneider EA, CTRS, NTPIF are licensed to practice throughout the United States and can help resolve your tax issues.

Article found at Accounting Today.

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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 Problem Solutions as well as an Enrolled Agent and a Certified Tax Resolution Specialist.
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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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