The tax troubles of celebrities are often fodder for gossip columns. Are these stories relevant to most Americans? Often, the answer is no. But in a few cases, there are lessons to be learned from how certain celebrities settled debts with the Internal Revenue Service.
One such celebrity is county music legend Willie Nelson, whose troubles began in earnest 25 years ago this month. In November 1990, Nelson's ranch was raided by the government and nearly all of his assets were seized due to a $16.7 million tax debt he owed. His guitar "Trigger" had been removed by his daughter in anticipation of the raid.
According to the History Channel's website, Nelson had invested his money in a tax shelter during the early 1980s - a shelter that the IRS later deemed to be illegal. Although Willie was a very successful musician, he could not come close to paying what he owed right away, even though his attorneys negotiated an offer in compromise with the IRS to settle the debt for $6 million. Mr. Nelson was apparently too financially generous with others and spent too freely on his own.
Within a year of his assets being seized, Willie Nelson was able to work out a creative payment plan with the IRS. The plan involved a revenue-sharing agreement with the agency and the release of a fundraising album called "The IRS Tapes: Who'll Buy My Memories?" Although the album was not a huge moneymaker, Nelson was able to pay off the remainder of his negotiated debt by 1993.
Nelson's previous generosity eventually came back to him when a fan purchased his Texas ranch at a government auction. The highest bidder had entered the auction at the request of farmers thankful for Nelson's involvement in "Farm Aid" chartable concerts. When all was said and done, Willie got to keep his guitar and his home.
These are certainly not typical results for individuals trying to negotiate with the IRS. But it is important to note that if you have a strong legal advocate on your side, the IRS may be willing to negotiate. Commenting on Willie Nelson's settlement, an IRS spokeswoman said: "We try to work with taxpayers. And if we have to come up with some creative payment plan, that’s what we’re going to do, because it’s in everyone’s best interest."