If you're a fan of Willie Nelson, just hearing his name is probably enough to summon some of his favorite tunes into your mind. And given that he's recorded over 60 studio albums throughout his career, you've got a lot of tunes to pick from. If you're not a Willie Nelson fan chances are good that you still know a song or two of his... but you might be more familiar with what happened when the IRS came knocking at his door.
How does someone with such a long and successful music career, which made him quite wealthy, end up losing almost everything to Uncle Sam? Well, like all crazy stories, it started back in the 1980s according to Forbes.
The Story of Willie Nelson's Tax Woes
Willie Nelson has been making music since the 1950s, so by the time 1984 rolled around he was already pretty rich and famous. However, that was the year the IRS became Willie fans and began looking over his taxes to make sure everything was in order, and there were no problems when he was on the road again.
Unfortunately, they found a problem. And a pretty big one, at that.
What happened was that Willie had been claiming a large deduction for a tax shelter. Not all that unusual for someone rich and famous to do. However, the deduction in question was attached to something the IRS did not consider a valid option. As such, our buddy was assessed for underpaying his taxes for many years, as well as interest and penalties. While his taxes were $6 million, all of the fees, interest, and back taxes came out to an additional $10 million. That's not a small bill, even for someone recognized as one of the greatest country music stars of his era would cry a whiskey river. And things only got worse as the bills and interest mounted, creating an impressive mountain of debt.
By the year 1990, Willie wasn't making significant headway to paying down his debts. As such, the IRS seized his property and assets. All his homes, his valuables, his gold and platinum records; in fact, the legend goes that they took everything from him except his trusty guitar Trigger. An auction was held for Nelson's property (some of which he bought back with the help of fans and fundraisers), but at the end of the day it barely made a dent in his looming debts.
That was when Willie came up with an unusual idea. He would cut a new album, and in the contract would be a profit share with the IRS. The record, The IRS Tapes: Who'll Buy My Memories?, was an unusual plan... and while it sold well, it didn't sell well enough to pay off Willie's debt all on its own. However, the record did buy Willie time to finish suing the firm that had led him astray in the first place, finish some new pieces, and generally get enough projects done that he was able to close the book, like a gravedigger, on what he owed Uncle Sam.
What We Should All Learn From This
The first lesson we should take away from Willie's experience is that it's funny how time slips away and to always understand what your tax pro tells you. However, the second lesson we should learn is that the IRS is often willing to work with you if you have a solution for squaring away what you owe the government. So don't be afraid to propose something if you find yourself in trouble. That way you don't need to worry about them just for the moment. The worst they can tell you is no, and they might just decide to cut an album with you. Finally, proper tax planning will help keep you from getting under the double eagle with the IRS.