Archives for December 2009

Nicolas Cage and $6.2 Million in IRS Tax Debts: Bad Judgment and Corrupt Management

When it comes to paying his income taxes, Nicolas Cage seems to be in one huge mess after another. Less than a year ago, Cage celebrated what he called a “win” in a tax battle with the Internal Revenue Service.   The IRS was demanding $1.8 million in back taxes, penalties, and interest, and the actor ended up paying about $660,000.  Then again, with Peter Stephan and the Tax Resolution Institute on his side and the proper tax resolution strategies, Cage it is likely that he could have gotten a much lower settlement.

However, none of the above seems to matter all that much today because, less than a year later, Cage finds himself in even bigger trouble with the IRS. Having failed to cover the tax bills for two big movie checks, Nicolas Cage had an IRS lien filed against him for over $6.2 million dollars. Even for a super wealthy movie star, such a humungous tax bill is a lot to swallow.

A cartoon image of Nicolas Cage caught in the eye of the IRS tax storm.

In 2007, Cage starred in two movies,  “Ghost Rider” and “Grindhouse” and was paid a total of $24 million. The IRS claims the actor failed to pay taxes on that hefty amount of personal income. On July 14, 2009, IRS Revenue Agents filed a tax lien against him in the New Orleans District Court in Louisiana, for $6,257,005. East West Bank also filed a breach-of-contract complaint in Los Angeles Superior Court that claims Cage had failed to repay a $2 million loan that was extended this past August.
Nicolas Cage is desperate to sell his homes in New Orleans and in Hollywood to raise the cash to pay the tax bill. In April, Cage waved farewell to his Bavarian castle, selling it to his German advisor, lawyer Konrad Wilfurth. Cage also recently sold his New York City apartment that had been listed at $9.75 million for a substantially lower price.

In a lawsuit filed Oct. 16 in Los Angeles, Cage claims that his longtime business manager, Samuel J. Levin, “lined his pockets with several million dollars in business management fees while sending Cage down a path toward financial ruin.” In the past, the IRS accused Cage of writing off  $3.3 million in personal expenses as business deductions. During the dispute, the same Samuel J. Levin told reporters that such expenses like hair care, make-up, clothing, manicurists, personal trainers, and bodyguards were “customary” in the entertainment industry.

In the new lawsuit filed against Levin, Cage says he “relied on Levin to handle his financial affairs to ensure that he and his family would have a financially secure future built on the foundation of the substantial monies Cage earned through years of hard work. He is now forced to sell major assets and investments at a significant loss and is faced with huge tax liabilities because of Levin’s incompetence, misrepresentations and recklessness,” the lawsuit alleges.

Once again, relying on corrupt and sycophantic management, a Hollywood star like Nicolas Cage finds himself in extreme trouble with the IRS. Again! If Nicolas Cage had relied on Peter Stephan for business management, he would never have had such a problem. If he had come to the Tax Resolution Institute after the IRS tax lien was filed, Peter Stephan could have negotiated an Offer in Compromise that could have done away with the penalties and the interest accumulated. Avoiding the bad publicity, Nicolas Cage could have settled his IRS tax debt for a fraction of the actual cost.

A Gift of A Holiday Tax Breather from TRI: No New IRS Liens or Levies from December 22 to January 2

Since the holiday season is a time when everyone should be able to celebrate with family without the fear of an IRS Tax Lien or Levy, Peter Stephan and the Tax Resolution Institute present a gift of important tax relief information. From December 22 to January 2, there is an unwritten rule that no new IRS Tax Liens or Levies are filed or acted upon during this holiday period. Although they are the largest collection agency in the world, the IRS respects the family spirit of the Christmas season every year.

A Gift of Temporary IRS Tax Relief from the Tax Resolution Institute

A Gift of Temporary IRS Tax Relief from the Tax Resolution Institute

If you owe a back tax bill and have been receiving notices and warnings from the IRS, you can take a breather for a moment and plan your course of future action. Peter Stephan and the Tax Resolution Institute have acknowledged expertise and extensive experience with tax collection issues, helping taxpayers with huge back tax liabilities find tax resolution. The goal of tax resolution is to protect the future security and financial freedom of you and your family. This gift of a holiday breather is the perfect time to take action and reach out for professional help like what is offered by the Tax Resolution Institute.

Even with the knowledge of this holiday breather, a majority of delinquent taxpayers, even with the devastating consequences of an IRS Lien and Levy waiting for them around the next bend, will remain stuck in a state of procrastination and do nothing. Once you have received a Notice of Intent to Levy from the IRS, you have 21 days to act before all financial accounts levied are frozen.

IRS Notice of Levy - 21 Days To Act Before Accounts Are Frozen

IRS Notice of Levy - 21 Days To Act Before Accounts Are Frozen

If you have already received a tax levy, this gift of the holiday lull by the IRS is the perfect time to take constructive action. An IRS Levy has to be addressed by professionals before a taxpayer enters into a dire situation where future financial freedom can be lost. It is a privilege for Peter Stephan and the Tax Resolution Institute to let you know about the unwritten: No New IRS Tax Liens or Levies are filed From December 22 to January 2.

The California Tax Evasion of Sinbad

When you think of the name Sinbad, the first thing that might pop in your head back in the day was the classic adventure film, The Seven Voyages of Sinbad. Today, the first thing that should pop in your head, particularly if you live in California and are experiencing the supply side pain of the state’s extreme budget crisis, is the Number One Celebrity State Tax Evasion of Sinbad. Indeed, no celebrity owes more taxes to the state of California than the well-known comedian. With a delinquent tax bill of $2,522,424.10 according to a public report made by the California Franchise Tax Board, Sinbad easily makes the top ten of the biggest tax debtors in California.

With huge tax problems, is Sinbad the Comedian calling his manager?

With huge tax problems, is Sinbad the Comedian calling his manager?

Listed as Sinbad Adkins from Oak Park, Illinois, the comedian, seen most recently starring in the Christmas comedy, Jingle All the Way, could have avoided a mountain of penalties, interest and bad publicity if he had consulted with Peter Stephan and the Tax Experts at the Tax Resolution Institute. In a past case detailed in the Success Stories section of the Tax Resolution Institute website, Peter Stephan helped an entrepreneur settle a past tax bill of over one million dollars with California for an incredibly reasonable $15,000. With a noted expertise at and extensive experience of negotiating both Offers in Compromise and Installment Agreements with the California Franchise Tax Board, Peter Stephan could have delivered easy and straight forward tax resolution and remedied Sinbad’s tax crisis.

The California Franchise Tax Board filed the tax lien against Sinbad Adkins on September 17, 20001, and the celebrity comedian has been under a dark cloud of scandal ever since. His representatives and advisors refuse to comment on the story, but clearly they are not helping Sinbad find a solution to his huge tax problem. If they were helping him, they would have brought Peter Stephan into the mix long before the tax lien was ever filed and the state tax debt made part of the public record.

If you have California state tax problems, whether in the context of personal income taxes or your company payroll taxes, please do not sit on your hands and stall until the situation gets out of control. By contacting the Tax Resolution Institute and laying your case on the table, you can find freedom from your tax problems, ensuring your future reputation and financial security. For Sinbad, the foolishness of joining O. J. Simpson on the list of the worst celebrity tax debtors in California has permanently tarnished his name and placed his personal finances under the microscope.

Is there any reason to allow your back tax debt to result in such a serious disruption in your life? The obvious answer is “NO!” so please avoid any more unnecessary damage and take the right action today. By contacting the Tax Resolution Institute, you are taking the first step on the road to freedom from your tax burden. After all, as Sinbad learned the hard way, a bad tax problem will never just magically go away.

If Treasury Secretary Tim Geithner Survived an IRS Bill for Back Taxes, There can be a Solution for You!

If Barack Obama’s Treasury Secretary had serious tax problems, any American clearly can make the same mistakes and encounter the similar problems with the IRS.  While he worked for the International Monetary Fund between 2001 and 2004, Treasury Secretary Tim Geithner failed to pay Social Security and Medicare taxes. As an American citizen working for the IMF, Mr. Geithner was technically considered self-employed. As a result, like any self-employed worker in the United States, he was required to pay Social Security and Medicare taxes for himself as both an employer and an employee.

When the entire tax bill was taken into account, including penalties and some additional infractions, Tim Geithner paid over $40,000 dollars in back taxes. If you owe back taxes to the IRS due to such an error, you should call Peter Stephan and the Tax Resolution Institute to find tax relief before the bad publicity and a possible tax lien damage your reputation and ultimately your financial future. Unlike Tim Geithner who had to pay all the penalties and interest due to his high profile position, you can have an Offer in Compromise negotiated with the IRS for you by the Tax Resolution Institute for a fraction of your tax bill.

Treasury Secretary Timothy Geithner Owed $40,000 in Back Taxes

Treasury Secretary Tim Geithner Owed $40,000 in Back Taxes

Tim Geithner took responsibility for what he called “careless” and “avoidable” mistakes while insisting they were unintentional. Tim Geithner further explained, “I did not believe I was avoiding my liability,” and that he had worked in government his entire life and “would never put myself in the position where I was deliberately not meeting my obligation as a taxpayer.” If Geithner had consulted with Peter Stephan and the Tax Experts at the Tax Resolution Institute, his problems could have been avoided.

In 2006, the IRS audited Geithner’s 2003 and 2004 taxes and concluded he owed taxes and interest totaling $17,230, according to documents released by the Senate Finance Committee. Back in 2008, the Obama transition team discovered that Geithner, their then nominee for Treasury Secretary, had failed to pay the same taxes for 2001 and 2002. The amount owed: $25,970. In addition, according to the amended tax returns he subsequently filed, Geithner paid $4,334 in additional taxes, and $1,232 in interest for additional infractions. The additional tax errors by Tim Geithner were typical oversights and mistakes and included the following: an early-withdrawal penalty from a retirement plan, an improper small-business deduction, a charitable-contribution deduction for ineligible items, and the expensing of utility costs that went for personal use.

Despite these revelations, President Obama supported his nominee. Obama press secretary Robert Gibbs defended Obama’s choice for Treasury Secretary when he stated at the time, “The president-elect chose Tim Geithner to be his Treasury secretary because he’s the right person to help lead our economic recovery during these challenging times. He made a common mistake on his taxes.”  Tim Geithner was still confirmed as Secretary of the Treasury, and he has been spearheading the fight against the recession. In fact, with a respected history of government work, Geithner even retained the support of key republicans: Senator Orrin Hatch, a conservative Republican from Utah said at the time, “I still support him. He’s a very competent guy.”

What is essential to understand is that tax problems happen to people across the board in American society, including the prominent, the respected and the famous. If Treasury Secretary Tim Geithner can be forgiven and allowed to serve in such a high-profile position after a serious tax crisis, the same result can happen for you. However, without taking action right away, you only make the problem worse and place your future financial security in real danger. If you have a tax problem and need tax relief, please contact Peter Stephan and the Tax Resolution Institute for reliable and proven help. If you need tax resolution services, feel free to call the Tax Resolution Institute at 800-401-5926 or fill out our  tax resolution form.

IRS Tax Lien For Nearly $80,000 Filed Against California Governor Arnold Schwarzenegger

Public Records uncovered by the celebrity gossip web site TMZ revealed that the Internal Revenue Service has filed a federal tax lien against former film star and current Governor of California Arnold Schwarzenegger for nearly $80,000. On May 11, 2009, the IRS filed the tax lien at the Los Angeles County recorder’s office for $79,064, according to a record in an electronic database. Although the record does not indicate what property the lien was placed on, it lists the debtor as Arnold Schwarzenegger with the governor’s home address in Brentwood. A federal tax lien would be attached not only to Schwarzenegger’s home, but all of the governor’s properties, according to the IRS. If Governor Schwarzenegger had included Peter Stephan and the Tax Resolution Institute in his stable of advisors, such a tax crisis would never have happened in the first place.

The IRS Tax Lien Filed Against California Governor Arnold Schwarzenegger

The IRS Tax Lien Filed Against California Governor Arnold Schwarzenegger

The tax lien document says Schwarzenegger owes $39,047 from 2004 and $40,016 from 2005. In addition, the document lists a section of the IRS code that suggests the debt may be penalties for a failure to report certain business transactions. In full damage control mode, Governor Schwarzenegger’s spokesman, Aaron McLear, declared in a statement that the “governor has paid his taxes in full and on time. No one, including the IRS, has notified the governor of any issues whatsoever with his taxes. We are contacting the IRS to determine if the document in question, which appears to be a penalty for missing info and not for unpaid taxes, is legitimate and if there is any discrepancy to resolve.”

An IRS spokesman, Dean Patterson, stated that the agency would never comment on individual tax cases. An official IRS primer on the collection process explains that the agency sends out several warnings to anyone with a delinquent tax liability before it files an official tax lien. Tax liens provide the government with a legal claim to a delinquent taxpayer’s property as security against a tax debt. According to a code on Arnold Schwarzenegger’s lien — 6721 — there were problems with so-called “information returns” submitted by the governor. Businesses and individuals are required to file such returns to document any payments made to employees or vendors over a calendar year. Two examples of such business-oriented returns are W-2s and 1099s

Since Arnold Schwarzenegger officially is listed as an agent or officer in more than a dozen businesses and nonprofit entities, it is difficult to determine the business origin of the tax lien without more information. In addition, many of the businesses and nonprofit entities are now defunct and no longer in operation. According to state records, these companies range from a production company to a publishing concern.

As a well-known celebrity and public figure, Governor Schwarzenegger’s business concerns are more complicated and intricate than the typical successful businessman. No matter what the origin of Arnold Schwarzenegger’s tax crisis, Peter Stephan could quickly resolve the problem and end the bad publicity. When a taxpayer is also a public figure, it is even more important for the i’s to be dotted and the t’s to be crossed. In such a case, the number one focus of the Tax Resolution Institute is to resolve the tax crisis as quickly as possible without a public tax lien ever having been filed.

The 45 Day Rule: Essential Business Payroll Tax Lien Information for Borrowers and Lenders

The United States Congress instituted the 45 Day Rule in 1966 to correct a problem experienced by commercial lenders who suddenly found themselves losing their loan collateral when being set against a federal tax lien. The most basic principle employed in the adjudication of the priority of liens is “first in time is the first in right.” When the IRS makes an assessment for unpaid payroll taxes against a business, a statutory lien arises in favor of the federal government. The lien attaches to all property or rights to property belonging to the business. This lien is called a “silent” lien because it comes into existence without notice to the world. The lien, however, does not necessarily entitle the IRS to priority against most other secured parties unless the IRS files a notice of a federal tax lien.

The 45 Day Rule

Once the IRS has filed an official notice of a federal tax lien against a business, both the business and the creditors of the business are placed in financial jeopardy. This is the 45 day rule. If you find your company in such a situation and the 45 days are passing, your future viability is being placed in serious crisis. If such a tax lien has been placed on your business and you are in a revolving loan agreement with an asset based lender such as a bank or a factor based on your assets or accounts receivable, please contact Peter Stephan and the Tax Resolution Institute before your cash flow evaporates and your business is closed down.

Balancing Accounts Receivables and Payroll Taxes

Balancing Accounts Receivables and Payroll Taxes

The 45 day rule gives the IRS special rights against lenders that secured themselves with their customers’ collateral. The rule, which appears in Section 6323(d) of the Internal Revenue Code, (26 U.S.C.) states as follows:

Even though notice of a lien imposed by section 6321 has been filed, such liens shall not be valid with respect to a security interest which came into existence after the tax lien filing by reason of disbursements made before the 46th day after the date of tax lien filing, or (if earlier) before the person making such disbursements had actual notice or knowledge of tax lien filing, but only if such security interest (1) is in property (A) subject, at the time of tax lien filing, to the lien imposed by section 6321, and (B) covered by the terms of a written agreement entered into before tax lien filing, and (2) is protected under local law against a judgment lien arising, as of the time of tax lien filing, out of an unsecured obligation.

Translated, the 45 day rule states that a lender, whose collateral can be identified only after the federal tax lien filing, receives a priority of first position subject to the following four restrictions:

1.   The security agreement must predate the tax lien filing.

2.   The holder of the interest may make disbursements no more than 45 days after the tax lien filing.

3.   The collateral securing those disbursements must be acquired within those 45 days.

4.   At the time of the disbursement, the holder cannot have “actual knowledge or notice” of the tax lien filing (this term is discussed later).

Despite the basic principle of the 45 day rule, a federal tax lien by the IRS has always enjoyed certain advantages when it comes to deciding first position. For instance, courts have long held that to be first in time, the nonfederal lien must first be “choate,” that is, the identity of the lien and the property subject to the lien are reasonably determinable.

The first-in-time rule created a hardship for commercial lenders and factors in particular. After all, commercial lenders have loans and collateral that change daily. For this reason, in the Federal Tax Lien Act of 1966, Congress changed the law to give commercial lenders a limited priority in certain contests involving federal tax liens. However, the priority Congress granted to commercial lenders in the form of the 45-Day Rule is far from absolute.

If we take a closer look at the key provisions of the 45 Day Rule, there are a number of requirements that must be met. To prevail against the IRS, the lender must confirm beyond any question and the bar is set quite high in these cases:

a)  The date that the notice of the federal tax lien was filed.

b)  A written security agreement was entered into before that date.

c)   The collateral at issue relates to the subject agreement and to loans made under the agreement.

d)  The bank disbursed the loan no more then 45 days after the tax lien filing.

e)  The customer has acquired the collateral and can identify the collateral inside the 45-day window.

f)     The lender did not have actual notice or knowledge of the tax lien filing when it made the disbursements.

g)  Under local law, the security interest would trump a hypothetical unsecured judgment lien arising as of the tax lien filing date.

Let us take a step back from the direct examination of the 45-Day Rule and the Internal revenue Code in regards to Payroll Taxes. To begin with, let us explain why a business would choose to enter into a Factoring relationship.  For many companies, there are periods in the business cycle where cash flow becomes hard to manage and you look for alternatives. A workable alternative that many consider is an Accounts Receivable Financing Program or an Asset Based Financing program, commonly referred to as Asset-Based Lending or Factoring.

If your company is in financial difficulty, these types of revolving loans can sometimes accelerate the problem, but they can often help a company out of a bad situation. If you have identified the problem and have a plan in place to fix the problem within a specified period of time, accelerating cash flow can be a direct benefit that ends the crisis. It is essential to realize that such a loan agreement places your company in direct jeopardy if you fail to properly cover your payroll taxes or pay them on time.

Unpaid payroll taxes drain a company of capital.

Unpaid payroll taxes drain a company of capital.

Overall, the asset based lending industry has acquired an image that is far from ideal. Business owners assume that asset based loans are not as good as unsecured loans. In truth, asset based lending is used with all size companies and can allow an asset-rich corporation to receive financing when you have not met standard credit requirements. You do not always pay a higher rate of interest.

True asset based or “Equity based” lending is easier to obtain for borrowers who do not conform to typical lending standards. You may have no, little or terrible credit. You may have little income to support the payments, and may need to rely on the loan itself to pay back the lender until the property is either sold, refinanced, or your income resumes.

An important part of the decision to take such a loan is to compare the cost of the program to the benefit that the business will receive. It may help our business in the short-term, but if it costs more than increases profit, it is a bad solution. It is best to have a fixed, up-front cost structure that you can budget into your pricing and to know that no additional fees can be added to your cost.

In reality, with the pressure on and payroll taxes around the corner, how much time does a program like this save you and your company. If you spend large amounts of time tracking everything to manage the program and to comply with regulations, you may find yourself again losing money.

Asset based lenders typically limit the loans to a 50 or 65 loan to value ratio or “LTV“. For example: If the appraisal is valued at $1,000,000.00 a lender might lend between $500,000.00 and $650,000.00. In the event of a default resulting in a foreclosure, the first lien position lender is entitled to repayment first, out of the proceeds of the sale.

You generate accounts receivable by selling goods or services to your customers on credit. If a cash squeeze develops, you may extend credit to your customers and sell your accounts receivable to a factor. A factor is a specialized financial intermediary who purchases accounts receivable at a discount. Factoring is a technique used to manage your accounts receivable and provide financing.

Under the lending (often called “factoring”) agreement, you sell or assign your accounts receivable to the factor in exchange for a cash advance. The factor typically charges interest on the advance plus a commission, not mention several service fees along the way. If you are a lender in the position of the factor and your borrower has failed to pay their payroll taxes, your collateral could be in real jeopardy. When it comes to the Trust Fund Recovery Penalty and the enforcing the strictures of the 45-Day Rule, the IRS Collection Officers are orthodox and inflexible.

According to the IRS Code, IRS Collection Officers only invalidate a tax lien against the security interests of a lender that satisfy traditional choatness doctrine within 45 days after the filing of a tax lien. This 45-Day Rule is not a parity rule as it provides for “sudden death” of a security interest that is not acquired within stated period. This “sudden death” potential is essential for lenders to understand in light of a borrower failing to pay their payroll taxes and a tax lien against the company being filed by the IRS.

To avoid the “sudden death” outcome, a factor’s (or lender’s) security interest in the business owner’s (or taxpayer’s) “accounts receivable” must meet federal standards of choatness within 45 days after the filing of the tax lien to have priority over the tax lien. In other words, the security interest must have been “acquired” by the factor (or lender) within that period. In contrast, a security interest in account receivables cannot be acquired until the accounts receivable comes into existence. As a result, the IRS deems such a security interest incomplete.

Security interest arising within 45 days after a federal tax lien is filed takes priority under three specific conditions:

I.   If your security interest stems from a written agreement entered into before the federal tax lien was filed and it qualifies as a “commercial transactions financing agreement”.

II.   If your underlying loans were made pursuant to a written agreement within 45 days of the filing of the tax lien or prior to receiving the notice of the tax lien’s being filed.

III.   The agreement covers “qualified property” which was acquired by the taxpayer within 45 days of the filing of the tax lien, and local law gives the security interest holder priority over a judgment lien by an unsecured creditor as of the time the federal lien was filed.

The Internal Revenue Service considers security interest obligation, which arises from optional advance made during the 45-day period without actual notice or knowledge of existence of federal tax lien protected. However, it is essential for the lender to understand that such knowledge must be categorically proved which can be challenging to say the least.

If you are a lender and your borrower has failed to properly cover the payroll taxes of their business and the trust fund recovery penalty has come into play, the collateral your loans are based on could be in real jeopardy. Please contact Peter Stephan and the Tax Resolution Institute to make sure that you are covered before the 45-Day Rule comes into effect.