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IRS v. Hollywood

,Celebrities often receive special treatment while dining out or staying in hotels. When it comes to dealing with the Internal Revenue Service, however, celebrities are treated with as much scrutiny as everybody else.

There are many examples of celebrity disputes with the powerful tax-collecting agency, the most recent case involves Michael Douglas’ ex-wife Diandra Douglas.

Diandra, who has been divorced from the movie star since 2000, recently had a tax lien filed against her claiming she owes $1,155,394.16 in unpaid taxes

What exactly happens when the IRS files a tax lien? According to New Jersey-based tax attorney Todd Unger, when the IRS files a lien, that means a tax has been assessed, the tax is greater than $10,000.00 and the case is in the IRS Enforcement Unit.

Unger recently commented on Diandra’s current situation.

“The IRS will file the lien in the county courthouse where Ms. Douglas lives or has property to protect its interest in the taxes owed against other creditors,” Unger said. “The Notice of Federal Tax Lien will attach to all property currently owned and property owned in the future.”

Diandra is challenging the tax liability through the courts. According to reports in the media, Diandra is being accused of missing payments on a property that she purchased, remodeled and sold yet donated its air rights to skyline conservancy efforts. The donation was appraised and Diandra took a tax deduction for the donation.

Six years later, that deduction is now under dispute.

Over the past decade, the IRS process for handling tax benefits related to appraised donations has undergone significant changes.

In 2004, the IRS dramatically sharpened its eye on conservation easement contributions and began handing down harsh penalties for improper deductions. According to Unger, a law in 2006 increased the tax benefits of conservation easements but also strengthened the requirements for contributions and further increased penalties for improper valuations.

“If Ms. Douglas’ case is about air rights, which she says it is, then her appraisal on that donation could be significant,” Unger said.

Unfortunately for Diandra, she still needs to pay the tax owed even if she challenges the tax liability through the courts.

“She would have to pay the tax owed, which would release the tax lien and file a claim for refund,” Unger said. “Upon denial of the claim, she could challenge the case in U.S. District Courts or the Court of Federal Claims.”

Diandra is not the only celebrity to encounter tax troubles recently. The list of stars recently found in tax default includes Lauryn Hill, a pop singer recently sentenced to three months in federal prison for failing to pay taxes on millions of dollars worth of income, according to HLNtv. Stephen Baldwin, actor and member of the famous Baldwin family is currently facing prison time if he fails to strike a plea deal on owing $350,000 in taxes. Even movie star Wesley Snipes faced tax evasion charges that put him behind bars for three years.

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