Roger Stone has a history of underpaying taxes owed to the IRS. That alone does not make him unique. Fortunately for him and many others, the Internal Revenue Code provides a detailed mechanism for making periodic payments. These are called installment agreements which include interest on unpaid amounts and may also include penalties.
Tax debts of under $10,000 qualify almost automatically for installment agreements. Liabilities above that amount usually require an agreement with the IRS that takes into account your income and other assets. When listing your assets for purposes of this kind of agreement, your statements about the property you own are done under oath. Lying about your assets or their value is sufficient to void the agreement and to make the entire amount due immediately. Where appropriate, the IRS may file a lien on your property until the tax liability is resolved.
Generally, all goes well so long as the taxpayers make the monthly payments. Miss one payment, however, and the entire agreement can be voided. That is what happened in the Roger Stone case. Complicating matters for Stone is that he was apparently not truthful about all of his assets. Through the use of what the IRS referred to as a shell company, he was able to hide some of his income and use that money bucket to support what was called a “lavish lifestyle.”
The IRS filed suit against Stone yesterday to recoup the $2 million he owes. As always, the filing of a complaint does not necessarily mean the IRS will win. But Stone has a number of serious issues here. First, the default on the installment agreement, meaning that more than $2 million is immediately due the IRS. Second, the failure to pay income tax on the amount sheltered in the sham company. Third, the fraud he committed by lying about his assets at the time he entered into the installment agreements. Fourth, the fact that this is a civil action by the IRS, meaning that the pardon he was granted by Trump does not relieve him of liability.
Stone immediately responded in the calm and measured manner with which we are all familiar. He called it: “another steaming pile of horseshit from corrupt prosecutors apoplectic about my pardon.” He may be better served by outlining a more defensible position.
Should the IRS be successful, Stone could lose everything, including real estate that he had improperly funneled into his wife’s name. Further, if the IRS fraud allegations are proven, bankruptcy will not protect him.
One possible way out is for one of Stone’s rich friends to pay the amount he owes. Even if these friends are kind and generous souls, it is extremely unlikely that they will bail him out. The reason is the rules about making a gift. Gift recipients almost never owe taxes on the amounts they receive. So far so good.
However, the maker of the gift is limited to a tax-free gift of $15,000 to any individual in any one year (subject to exceptions that include the payment of tuition). Gifts above that amount require the giver to file my favorite tax form, Form 709, the gift tax return. No actual taxes are due at the time the form is filed, but the amount of the gift reduces amount that is exempt from death taxes, currently a little more than $11.5 million per individual. This means that if I made a $2 million gift to Roger Stone to pay his taxes, I would lose a $2 million exemption on my personal estate taxes. Not. Gonna. Happen.
Perhaps Stone’s reference to horseshit is well timed. He is fairly deep in it right now.
A side note since we’re talking about taxes. Occasionally you will see a television ad about “offer and compromise,” where the IRS will settle your debt for a small percentage of what you owe. Although the ads imply that most people qualify, only a tiny percentage of cases do.