Offer in Compromise—and How it did not Apply for Actor Wesley Snipes

Feb 14, 2019, 11:35:00 AM

wesleysnipesActor Wesley Snipes has a long-running history of tax controversy with the IRS.  In November, 2018, Mr. Snipes was handed another defeat when an IRS decision to reject his offer-in-compromise was upheld by the United States Tax Court.

 

Since approximately 2000, Mr. Snipes has been engaged in battle with the IRS.  Relying on theories generally described as “frivolous tax arguments,” Mr. Snipes found himself in very warm water with the IRS.  As a result of his failure to file tax returns between 2001 and 2006, Mr. Snipes was sentenced to three years in prison plus a multi-million dollar fine.

 

Released from prison in 2013, Mr. Snipes received a Notice of Federal Lien of $23.5 million for money owed that Mr. Snipes did not pay during his tax protest.  In response, Mr. Snipes forwarded an “offer-in-compromise” to the IRS.

 

Just like it sounds, offers-in-compromise (OIC) are sums of money offered to the IRS in a good-faith attempt to settle tax liabilities. When a taxpayer offers a compromise sum, the IRS then undertakes an investigation to determine the true payment ability of the taxpayer, their assets, income, and expenses.  After this investigation, the IRS found that the reasonable collection potential (RCP) of Mr. Snipes might be in the vicinity of $17 million.  Mr. Snipes offered $842,061.00.

 

Offers-in-compromise are an important tool for taxpayers.  An offer initiates a process by which the IRS and the taxpayer may negotiate a meaningful settlement to an overwhelming tax debt.  In order to reach a settlement offer, it is critical for the taxpayer to be forthright and transparent in reporting their current financial picture and ability to pay. 

 

Unfortunately for Mr. Snipes, he did not work with the IRS to evaluate his financial condition or present adequate background to support his claimed ability to pay.  Rather than work with the IRS to provide information to justify lowered adjustment of the RCP, Mr. Snipes took the matter back to court, alleging the IRS overstepped its bounds.

 

After further consideration, in 2016, the IRS lowered the RCP to approximately $9 million, an amount to which Mr. Snipes objected again.  In its November 2018 decision, the Tax Court rejected Mr. Snipe’s argument, leaving him on the line for at least another $9 million, if not the entire $23.5 million.

 

Tax lawyers are often called upon to help clients prepare an offer-in-compromise for the IRS, and to navigate the offer through the investigative and resolution process.  An OIC can prove a powerful means to discharge a tax liability and potentially avoid future allegations or the consequences of conviction for a tax crime.

 

Speak with an experienced tax attorney for skilled counsel on an offer-in-compromise

When you are involved in tax litigation or another tax issue, reach out to Robert J. Fedor, Esq., LLC for a confidential consultation. With offices in Cleveland, Ohio, and Chicago, Illinois, we deliver aggressive legal representation to clients across the country.  Contact us or call 800.579.0997 today.

 

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