August 2017 JD Supra
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Much has been published concerning Floyd Mayweather’s Federal Tax Liens in the amount of $22.2 Million and an unpaid 2010 IRS debt of $7.2 Million. The released on 7/21/17 that a $3.3 million federal lien has been released by the IRS – due to it being paid in full. In total, Mayweather owes approximately $29.4 Million to the IRS.  The IRS collection process begins when IRS does not receive full and timely payment from a Taxpayer after it issues a collection notice.  A Federal Tax Lien comes into play when IRS makes a tax assessment against a Taxpayer, sends a bill to the Taxpayer and the Taxpayer neglects or refuses to pay the bill.

On August 27, 2017, an unprecedented sports event will take place for boxing and mixed martial arts fans worldwide: Floyd Mayweather versus Connor McGregor (mixed martial arts and UFC featherweight champion).  The fight will be held under boxing rules with no leg kicks or takedowns, which are allowed in the UFC. The purse is estimated to be over

$200 Million.

Is it really about boxing versus mixed martial arts? Or is it about a Federal Tax Lien prompting Mayweather to come out of retirement?  Is it driven by Taxes (as opposed to the Combat disciplines) for Mayweather?

If a Taxpayer is not able to pay the amount due because payment would prevent the Taxpayer from meeting basic living expenses, a Taxpayer can request a collection delay until the Taxpayer is able to pay. Even if the collection process is delayed, IRS will continue charging all the applicable tax, penalties and interest until the Tax debt is paid in full.

Moreover, IRS may file a Notice of Federal Tax Lien.

A Federal Tax Lien is a legal claim against a Taxpayer’s property to secure the payment of federal taxes, penalties and interest. The lien perfects the government’s interest in all of the Taxpayer’s property, including real estate, personal property and financial assets.  It also alerts other creditors that the government has a legal right to a taxpayer’s property interests.

Mayweather has petitioned the US Tax Court in Washington, D.C. for a temporary reprieve until the purse from the fight materializes. It seems that Mayweather has requested a Collection Due Process hearing pending the purse disbursement of the MacGregor fight on August 27, 2017.  This may be an effective strategy.  Could what is usually perceived to be a Taxpayer disadvantage regarding petitions to the US Tax Court – an estimated wait time of 6 months – work to Mayweather’s advantage?

The IRS Collection Process is outlined in IRS Publication 594. Although the IRS can attempt to collect a Taxpayer’s taxes

for up to 10 years from the date that they are assessed, the time to collect may be suspended if:

  • There is IRS consideration of an Installment Agreement or Offer in compromise
  • Taxpayer lives outside the U.S. continuously for at least 6 months
  • Tax periods are in bankruptcy with an automatic stay
  • There is a request for Innocent Spouse Relief
  • Taxpayer requests a Collection Due Process hearing. Under Collection Due process, collection will be suspended from the date of the Taxpayer’s request until a Notice of Determination is issued or the Tax Court’s decision is final.

What has not been addressed so far is that the IRS can notify the State Department regarding Taxpayers that are certified as owing a seriously delinquent tax debt. According to IRS: “seriously delinquent tax debt means an unpaid, legally enforceable federal tax debt of an individual totaling more than $50,000 (including penalties and interest) for which a Notice of Federal Tax lien has been filed and all administrative remedies under IRC § 6320 have lapsed or been exhausted, or a levy has been issued”. The US State Department will not issue or renew, and could revoke a Passport after being notified of a seriously delinquent tax debt.

When all is said and done, IRS could hold the ultimate card: Mayweather’s passport, and as a result, his liberty to travel outside the U.S. And yes, the expectation is that there will be IRS Revenue Agents at the much anticipated event in Las Vegas, Nevada as this professional boxing bout is a regulated and sanctioned sports event.