IRS Tax Controversy: Even Death Can’t Stop The IRS!
We have written quite a bit in this space about the extreme measures the IRS will take to extract every last penny from taxpayers who owe the government money. A recent Forbes article reminds us just how far the IRS will go when pursuing a taxpayer:
The Internal Revenue Service says it made a mistake in valuing Michael Jackson’s estate. Nope, the IRS hasn’t abandoned its much discussed claim for $702 million in extra taxes and penalties—a bill Jackson’s estate is fighting in U.S. Tax Court. Instead, the tax agency is upping its demand by $29 million to nearly $731 million.
In a previously unreported court filing, the government says that IRS auditors originally thought the King of Pop owned only 50% of certain master recordings at his death in June 2009, when he really owned 100% of them. That 100% interest was worth $91 million by the IRS’ figuring, compared to the $11 million reported on the Jackson estate tax return.
The change brings the IRS’ valuation of Jackson’s estate and lifetime taxable gifts up to $1.178 billion, compared to the $7 million the estate reported. The IRS now wants a total of $525.6 million in tax and $205.1 million in gross valuation misstatement and negligence penalties. (Any interest owed will be on top of that.)
This story is instructive on several levels. First, it’s a reminder that a taxpayer can’t escape IRS pursuit just by passing away. For all we know, IRS Revenue Officers have the ability to pursue us into the afterlife as well.
Second, it’s a reminder that the IRS doesn’t care who you are… if they think you owe the government money, they’re coming after you. It doesn’t matter if you’re the King of Pop or a hardworking small business owner… nobody is safe.
And it’s a demonstration of how quickly an IRS dispute can spiral out of control. While the numbers in the Jackson controversy are much higher than the typical dispute, the process is the same: once the IRS latches on to a mistake, they keep digging. Your tax bill skyrockets, and penalties and interest pile on as well. It’s a frightening cycle for any taxpayer unlucky enough to be pulled in.
If you’re facing an IRS dispute, the good news is that we can help. Please contact us today to learn more!