Professional boxer Floyd “Money” Mayweather has reportedly resolved his tax bill of more than $22 million owed to the IRS, paid from his winnings from the August 26 bout with Conor McGregor, The Blast reports. However, the strategy he and his attorney used to deal with the levy threatened by the IRS is worth analyzing to see what we can learn.
According to ESPN, Mayweather filed a petition claiming his holdings were “illiquid,” so he offered payments to the IRS until he received payment for his fight from McGregor the following month.
Don Williamson, a professor of accounting at American University, suggests that this strategy was actually a stalling tactic because the court would not be able to send a judge to Nevada to address the petition before the fight took place. In other words, Mayweather and his attorney were banking on the slow movement of the IRS to buy time. However, the move was risky because the IRS could theoretically have frozen the purse from the fight pending the court hearing.
Apparently, the gamble paid off in this case.
Deferring Tax Debt to Make Money?
Mayweather’s attorney, Jeffrey Morse, offered Fighthype.com an even bolder assessment of Mayweather’s strategy: “Floyd’s a savvy investor,” he told the website. “If he is investing money and getting a rate of return that far exceeds what he has to pay the IRS in interest, then any smart business person is going to take advantage of that deferral. So Floyd’s looking at this and saying this is a better business decision to just defer my taxes until it’s the best time for me to pay it. So we’ve taken advantage of that. We filed the petition for the whole purpose of allowing Floyd to continue to earn the money that he’s earning on his large investments.”
Smarter Strategies for Larger Tax Bills
Both of the tactics described above came with some risk to Mayweather for two reasons:
1) The IRS doesn’t always act the way we predict; and
2) Mayweather had prior issues with the IRS, which might have made the IRS less inclined to work with him.
That said, here are a few smarter strategies we might use for tax bills exceeding $100,000:
Offer in Compromise (OIC): An enrolled agent negotiates with the IRS to settle the debt for less than you owe.
Installment Agreement: This strategy takes a little more effort for debts exceeding $25,000.00, but negotiating payments is better than gambling on how you think the IRS will respond.
Applying for “Currently Not Collectible” status: In certain circumstances, debtors may convince the IRS that they are currently unable to pay, and so the account is removed from active collections for a period of time.
Regardless of the size of your tax bills, you’re more likely to work out an effective payment strategy with the IRS by working with an experienced tax attorney. To learn more, call our offices at 720-398-6088 today.