6 celebrities gone bankrupt
Willie Nelson and the taxman
Claiming to owe the Internal Revenue Service $16.7 million, country singer Willie Nelson declared bankruptcy in 1990. The IRS seized his bank accounts and his real estate. To raise money for back taxes, Nelson released the album, "The IRS Tapes: Who'll Buy My Memories?" Eventually, he paid back the IRS in 1993.
"Paying taxes should be your No. 1 priority," says David Miles, who represents taxpayers before the IRS in Broomfield, Colo. "No companies have the power of enforcement that the IRS does, and they will get their money."
The worst thing you can do is not file your income tax return, Miles says. The IRS gets very upset when it doesn't know what's happening, so communication is imperative. As soon as you know you owe taxes, contact the IRS -- first in writing, then by phone at (800) 829-1040 -- and request a strategy on how to repay the debt. That might be paying the IRS in installments or settling for less if the taxpayer can demonstrate he wouldn't be able to pay off the debt over time.
If you owe back taxes, it's a good idea to hire a qualified professional to help you. But even with professional help, you need to remain a part of the process.