Despite a helping hand from Charlie Sheen last month, Lindsay Lohan has apparently not yet settled her tax bills. According to the gossip site TMZ (which – hold your fire – has been accurate to date in its account of this story), the IRS has now seized Lohan’s bank accounts for failure to pay her balance due. Lohan’s tax bill for the years 2009 and 2010 was nearly a quarter million dollars (reports have surfaced that there are also balances due for 2011).
While this feels salacious, there’s a lesson to be learned: don’t ignore the IRS. This is something that I tell my clients all of the time.
There’s no shame in owing taxes – it happens. Just ask Treasury Secretary Timothy Geithner or Glenn Beck or Sharon Osbourne or Beanie Sigel. The reasons can vary from simple mistakes to additional liability at audit to willful evasion. But no matter the reason, at the end of the day, the IRS just wants to get paid.
If you’re willing to work with the IRS to pay them, life is a whole lot easier. I’ve never had a client have bank accounts seized or wages garnished while working with IRS to resolve a tax matter. Ever. Why would they? The IRS has zero incentive to make your life miserable if they genuinely believe that they will get their money – even if will take awhile.
Seizures (sometimes referred to as levies) generally come after a string of requests and correspondences from IRS have been ignored. Liens, however, are another story: the IRS will, as a matter of course, generally file a protective lien even if you’re paying in order to protect their interests. A lien doesn’t mean that you’re not cooperating and it doesn’t mean that your failure to pay is willful (though it certainly can mean those things), it simply means that you have a tax liability that has not yet been resolved.
But levies? Wage garnishments? Unless there’s something bigger going on (like potential fraud), the IRS doesn’t generally resort to those unless they are concerned that they’re not getting paid.
How do you avoid levies and garnishments? Awhile back, I blogged “my best tax advice ever” in four easy pieces:
Of those, “open your mail” is the advice I point to the most. Don’t try to walk away from IRS. They will always catch up.
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