Snipes Contests ‘Arbitrary' $17.5 Million Tax Notice

For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

Nov. 10 — Actor Wesley Snipes, who served more than two years in prison for failure to file tax returns, is fighting a nearly $17.5 million collection determination for tax years 2001-06, asking the U.S. Tax Court to let him enter the IRS's Fresh Start program.

According to the Nov. 5 petition, the “issuance of the notices of determination flows from an abuse of discretion,” and the Internal Revenue Service based its denial of an $842,000 offer in compromise from Snipes, as well as subsequent “unreasonable collection potential determinations,” on long-lost assets.

The IRS sent Snipes a notice of final tax lien in August 2013, determining a total liability of nearly $24 million for 1999 to 2006.

Snipes, who was found guilty in 2008 on three misdemeanor counts of failing to file federal income tax returns, contested the liability. In February, the IRS responded to Snipes with a Form 14561, Income and Expense/Asset Equity Calculation Table, that determined a reasonable collection potential of approximately $6.4 million.

In March, on the day of a scheduled conference call between Snipes' representation and the IRS, the Service sent a revised Form 14561, calculating a reasonable collection potential at more than $18 million.

Snipes disputed the amount, and after an IRS audit, a new notice of determination was sent to Snipes in October reflecting a collection amount of about $17.5 million.

Current Work Cited

In denying the offer in compromise, the IRS cited Snipes' involvement in the upcoming film “Chiraq,” as well as NBC's “The Player.”

According to Snipes' petition, “Petitioner is trying to put his life back together after being led astray by unscrupulous advisors, and he desperately needs the fresh start which Respondent's ‘Fresh Start Initiative' offers.”

Snipes also argued that the reasonable collection amount calculated by the IRS was “inaccurate” and “arbitrary.”

“No matter how well intended, arbitrary determinations of ‘reasonable collection potential' known to be inaccurate constitute per se abuses of discretion,” the petition said.

Snipes requested the trial be held in Atlanta.

David D. Aughtry of Chamberlain, Hrdlicka, White, Williams & Aughtry represents Snipes.

Request Daily Tax Report