Nelly Hit With Millions in IRS Tax Liens

Oct 31, 2016 | Blog

Rapper Nelly holding an awardIt looks as though rap star Nelly is now joining the ranks of celebrities dealing with IRS tax problems. The award-winning musician was recently slammed with a massive $2,412,283 federal tax lien for the year 2013.

Cornell Haynes, Jr., aka Nelly, is a Grammy award winning performer who first made his debut into show business in 2000 with his blockbuster album, Country Grammar. To date, the album is by far his most successful project, and recently earned diamond certification by the Recording Industry Association of America (RIAA). In fact, Country Grammar is only the eighth album in hip-hop history to be awarded with this honor, which denotes more than 10 million copies sold. In 2013, the St. Louis rapper released his seventh studio album, and also tried his luck with television, including a stint on BET’s Real Husbands of Hollywood and his own show, entitled Nellyville.

With all of his success, Nelly would likely not qualify for an offer in compromise, but he should at least be able to start paying off what he owes to the IRS. Unfortunately, he was also handed a tax lien of almost $150,000 from the Missouri Department of Revenue, bringing his total debt above $2.5 million.

In situations like Nelly’s where a tax lien is filed, the IRS must first evaluate your liability and then send you a bill for what you owe. If the total balance is not paid in full, the IRS can then file a Notice of Federal Tax Lien, which is used to protect the government’s interest in your property. Essentially, this notifies creditors that the government has a legal right to nearly everything you own, including real estate and personal possessions. In turn, this affects your ability to get credit and if you sell any of your assets you will most likely be required to give any profits to the IRS.

Of course, the IRS will release the lien once you completely pay off all of your back taxes and any additional interest and penalties. In certain situations, the IRS may also work with you under the Fresh Start Program in order to release the lien more quickly. This is especially true if you’ve demonstrated compliance while on a payment plan, but as a tax attorney in San Jose I must remind you that the IRS is not required to do so. Additionally, don’t make the mistake of assuming that filing for bankruptcy will bail you out of tax obligations—in many cases a federal tax lien still applies.

As a tax attorney in San Jose, I’ve also seen many people confuse a tax lien with a tax levy, but there’s a key difference between the two. A lien is basically just a hold on your assets, but a levy means that the IRS and federal government is actually taking action to settle your tax debt by seizing your property. Especially due to the size of Nelly’s tax lien, if he doesn’t pay down his debts his assets could very well be seized. Fortunately, sources close to the rapper confirm that he is already working with tax authorities to resolve the issues.