The United States Tax Court has upheld a ruling by the Internal Revenue Service (IRS) turning down Koko Taylor’s offer in compromise, and allowing the IRS to proceed with a tax levy against all of her property and income. It also upheld the tax lien filed against her. Koko Taylor is a well known blues singer sometimes called the “Queen of the Blues.” The Tax Court opinion by Judge Paige Marvel details Koko’s rise from a poor orphan to a successful professional recording artist with a performing career spanning some 50 years.
Koko Taylor fell behind on her obligations to the IRS, and incurred tax debt of about $300,000 as of September 2006. To make a very long story short Koko’s tax lawyers filed for a collection due process (CDP) hearing with the IRS, and submitted three different offers in compromise including an effective tax administration offer in compromise. In the last offer in compromise, Koko’s tax attorneys proposed that she pay $125,000 and 50% of her annual net income should it exceed $125,00 per year.
The IRS rejected her offer in compromise, and the Tax Court agreed with the rejection of the offer in compromise. Let’s keep in mind that Koko Taylor was 80 years old, and her only substantial asset was her home valued at around $240,000—after taking into account its so-called “quick sale value.” She also was an insulin dependent diabetic, and had two heart attacks as well as high blood pressure. The IRS called these conditions “not uncommon for someone her age.” The IRS further determined that Taylor could pay her taxes in full without economic hardship even though that meant she would have to sell her home, continue to perform into her 80s, and live on a budget of $3,300 per month. Part of Koko’s tax problems were no doubt exacerbated by her continuing failure to stay current on her estimated tax payments which allowed the IRS and the Tax Court to rule against her on technical grounds. Nevertheless, the case represents a graphic demonstration that the so-called kinder and gentler IRS is not currently in evidence, and illustrates the difficulties of obtaining an offer in compromise. It is these difficulties which require a tax expert to navigate these treacherous waters.
If you have tax problems, and you are considering an offer in compromise or an installment payment agreement, or another alternative to your tax problems call the tax lawyers at Brager Tax Law Group, A P.C.