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The Tax Prophet Newsletter   Issue #79 November, 2009

REDUCE TAXES!
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In This Issue:
Introduction
Tax Lien
Appeal
Tax Penalty
Conclusion
Govenator's Tax Lien

Introduction

In May, IRS slapped California Governor Arnold Schwarzenegger with a $79,000 tax lien for failing to pay penalties assessed against him during 2004 and 2005.

Note: In October, IRS filed a lien against another politician, Oakland Mayor Ron Dellums, for $240,000 in delinquent income taxes during 2006 and 2007.

Tax Lien
An IRS tax lien attaches to all assets and usually ruins one's credit score, since no rational lender will extend credit when the government has a blanket claim against all assets owned by a taxpayer. IRS may then levy (forcibly collect) and sell the assets to pay tax debts without first suing in court


Appeal
Once IRS files a tax lien, a taxpayer receives notice of appeal rights. If a taxpayer files an appeal within 30 days, IRS generally suspends collection until the process is completed.

Evidently Schwarzenegger disregarded the appeal process, resulting in the tax lien.


Tax Penalty
Schwarzenegger was assessed penalties under IRC Sec. 6721, failure to file information returns (typically W-2 or Form 1099), a $50 penalty for each delinquency. Judging by the size of the fine, the failure must have involved thousands of employees or independent contractors.

He probably was listed as the "responsible person" for several major business or investment ventures.


Conclusion
While the Govenator's spin-doctors claim that the tax lien did not involve income taxes, he must have ignored the series of escalating IRS warnings that preceded the filing.

Perhaps, Schwarzenegger was not legally responsible, but he should have appealed. Then, IRS would have to establish that he was indeed responsible. Instead, he chose to blow-off IRS, which is often a bad idea.



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All contents copyright © 2009 Robert L. Sommers, attorney-at-law. All rights reserved. This newsletter provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet ® is a registered trademark of Robert L. Sommers.