Musicians, actors and sports stars sometimes make news when they run into issues with the Internal Revenue Service. On this blog, we have discussed tax liens filed against celebrities, such as Lionel Richie, Sinbad and Lindsey Vonn.
Reportedly, former NFL player Kordell Stewart is the most recent celebrity to face a serious tax lien. Allegedly, he failed to pay his state tax bill and owed the State of Georgia $8,532 in unpaid taxes from 2012. With interest and penalties, the outstanding balance climbed to more than $13,000.
If he fails to pay the taxes owed, he could lose his home or money in bank accounts. The government placed a levy on his assets, which allows the government to seize possessions and sell them to recover the money owed.
This case illustrates how quickly interest and penalties can increase a tax balance owed. It also raises the question: How do you deal with a tax lien?
The IRS website explains that a federal tax lien protects the government’s interest in your property (i.e. real estate, a car or savings/checking accounts) when you fail to pay a tax debt.
First, the agency sends a letter that lists the balance owed. Then if you do not pay the debt by a certain date, the IRS files a Notice of Federal Tax Lien. In effect, this operates as a hold on your property. If you were trying to sell a home, you would have to deal with the lien prior to closing.
The quickest way to deal with the lien is to pay the tax debt within 30 days. Several other avenues exist, such as discharge, subordination and withdrawal. These require a taxpayer to file for relief and may help in limited circumstances.
Each case is unique. A tax attorney can assist in resolving a lien before the government seizes your assets.
Source: The Urban Daily, "Former NFL Player Kordell Stewart Hit With Tax Lien," Jonathan Hailey, July 18, 2014.