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IRS seizes Lindsay Lohan accounts

By Kay Bell · Bankrate.com
Tuesday, December 4, 2012
Posted: 1 pm ET

If you watched "Liz and Dick" and thought things couldn't get any worse for Lindsay Lohan, you were wrong.

Just a week after Lohan endured mostly bad reviews for her television movie portrayal of Elizabeth Taylor, the Internal Revenue Service reportedly has filed liens against Lohan and seized her bank accounts in an effort to collect the almost $234,000 that she allegedly owes Uncle Sam.

And this comes after New York City police arrested the troubled actress for allegedly hitting a woman at a Big Apple nightclub and Los Angeles officials charged her with allegedly lying to police about a car accident on the West Coast.

Lohan's tax troubles are in connection with 2009 and 2010 taxes the IRS contends she didn't adequately pay.

Charlie Sheen, who's had troubles of his own -- though as far as we know, not with the IRS -- apparently gave Lohan, with whom he shared scenes in the upcoming "Scary Movie 5" theatrical release, $100,000 to help her with her taxes.

It's not clear if she used the money to pay down her overdue federal taxes. But even if she did, the IRS apparently has decided it's had enough.

The path to IRS liens, seizures

Such severe tax actions always get a lot of attention when a celebrity is involved, but lots of ordinary folks can find themselves in serious enough tax trouble that they face IRS wrath.

In some cases, taxpayers bring the IRS ire on themselves. The tax agency doesn't automatically go from unpaid taxes to liens and seizures. It has a process during which a taxpayer has the chance to make things right.

You file your taxes. You don't pay the correct amount due. The IRS sends you a bill. You ignore it. You get another dunning notice from Uncle Sam. You ignore it, too.

The IRS sends your case to its collections division. If you continue to ignore communications from collections personnel, that's when you're looking at possible liens and asset seizure.

So don't end up like Lindsay.

Avoiding extreme IRS actions

If you owe and can't pay, contact the IRS. There are options, such as installment agreements or offers in compromise.

The IRS also has a Fresh Start program, which it's beefed up during the recession, to help folks who are facing more bills than just those from the IRS. Under Fresh Start, unemployed folks facing tax bills could get extra penalty-free time to pay what they owe. The IRS also has made it easier for such folks to set up payment plans.

The bottom line is to be proactive when you owe taxes. Find a tax adviser who specializes in unpaid tax bill situations. Contact the IRS and find out what your options are. Then set up a system to get out of tax trouble.

That way you'll avoid going down the same rocky tax road that Lindsay Lohan is traveling.

Want the latest news on taxes, tax reform prospects, filing deadlines, Internal Revenue Service alerts and tax-saving tips? Subscribe to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter @taxtweet.

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