Wesley Snipes vs. The IRS: The Battle Continues. Tax Lawyer Rob Wood Explains

Wesley Snipes vs. The IRS: The Battle Continues. Tax Lawyer Rob Wood Explains

Remember Wesley Snipes? The movie star is back in the news in connection with his continuing tax battle with the IRS. You may remember that he was convicted in 2008 of misdemeanor failure to file tax returns, dodging the bullet on felony charges, and he ended up with a three-year prison term. Snipes’s latest tax problem relates to his offer in compromise to settle his old tax bills. The tax court has ruled against him. What now? Tax lawyer Rob Wood tells the story and provides some suggestions for anyone who is having struggles with the IRS. He wrote about the Snipes case in a recent Forbes article, "Wesley Snipes Loses $23.5 Million Tax Case, Offers IRS Tiny 4% Compromise."

 Rob Wood

Rob Wood

Wood says Snipes is still fighting with the IRS after serving a three-year prison term. Snipes still hasn’t paid the past due taxes. His latest loss was in a civil suit involving the IRS and an offer to compromise the amount due. Lawyers for Snipe submitted financial information to the effect that Snipes doesn’t have the means to pay the full amount due. The IRS said “no” to the offer to pay 4% of the amount due. In responding to such a request, the IRS looks at a taxpayer’s assets on hand and prospects to assess the likelihood that a tax debt can ever be paid in full. In this case, the IRS decided that Snipes could pay more than his offer, and the U.S. Tax Court agreed.

Wood points out several things worth noting. First, of course, is that the IRS has a lot of discretion in dealing with offers in compromise. If a taxpayer, like Snipes, is in a profession where large salaries are commonplace, the IRS is not likely to conclude that the taxpayer will never have the means to pay off a tax debt. Wood also notes that a lot of the issues in the Snipes case have to do with procedural matters and claims that the IRS was unreasonable. The Tax Court ruled against Snipes on all these claims. Wood suggests that fighting over the technicalities of procedural matters may not have been a helpful approach in this case.

As to takeaways for the average taxpayer, Wood offers these suggestions: First off, be careful who you rely upon as a tax adviser. “If something sounds too good to be true, it is.” Snipes needed to get some better tax advice when he started down the path of trying to avoid paying taxes on his earnings. If you do get into a situation where you are dealing with the IRS, it’s very important to proceed carefully. Don’t lie to them. Don’t make commitments you don’t follow through on. If they ask for financial information, provide it when it is due. If you are working with advisers, make sure you are getting good advice.

Robert W. Wood is the Managing Partner of Wood LLP, San Francisco. Often listed among the best tax lawyers in America, Wood has broad experience in corporate, partnership and individual tax matters. Concerning the tax treatment of litigation settlements and judgments, he is perhaps the preeminent tax lawyer in the United States. He is also an authority on merger and acquisition tax matters, tax opinions, offshore account and entity disclosures, and many types of tax controversies. The Legal Broadcast Network is a featured network of Sequence Media Group.

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