TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, May 20, 2008

Koko Taylor Asks Tax Court to Force IRS to Accept Her Offer in Compromise

KokoFrom next week's Forbes:  Singing Tax Blues, by Janet Novack & William P. Barrett:

The Grammy-winning blues singer Koko Taylor turns 80 in September. She’s in extremely poor health, likely exacerbated by decades of the kind of raucous hard living ...  Her income has dropped precipitously, her expenses haven’t, and she has little savings or other hard assets besides a house in a Chicago suburb that figures is now worth only $280,000.

Nevertheless, the IRS says Taylor must pay $400,000 in back taxes, penalties and interest. Otherwise, she faces the possibility the G-men will grab most of her income, including royalties and Social Security, and maybe even her home. The feds rejected her offer to take out a reverse mortgage on that house and pay $200,000 plus up to 50% of any future net revenue, moves that would allow her to remain in her residence and live out her remaining time with her second husband. IRS personnel simply can’t believe a singer often called “Queen of the Blues” who still performs and has a fan base can’t ante up more scratch.

All this is detailed in the official record of two lawsuits Taylor filed in U.S. Tax Court to block IRS collection actions. Taylor’s lawyers are asking the court to order the agency to take their current offer. Such a mandate would be a rare rebuke to the IRS

Federal law allows overextended taxpayers to make an “offer in compromise” to settle for less than the full amount the IRS is owed. In 1998 Congress even broadened the grounds for such deals. Now they are permitted to promote “effective tax administration” even when the taxpayer might be able to come up with more cash. Among the factors to be considered: the health of the taxpayer and a diminished future ability to work.

But such compromises must be publicly disclosed. Not keen to be known as a soft touch, the IRS is reluctant to accept them. Last year the IRS sent 4.4 million notices to deadbeats that it might snatch their assets, a count up 650% from 2000. Over the same period the number of accepted compromises fell 63%, to 12,000. National Taxpayer Advocate Nina E. Olson thinks her employer is being too hard-nosed. ...

A ruling by L. Paige Marvel, the judge hearing both cases, could come by year’s end.

The Tax Court docket number is 014765-07L.  (Hat Tip:  Don't Mess With Taxes.)

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Quick! She still has a pulse. Drain her.

Posted by: Robert | May 20, 2008 7:50:04 AM