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You can't touch this, IRS? Well, maybe with a tax lien

Celebrities have their share of tax trouble.

Normally we do not pay much attention to the peccadilloes of the popular in this blog. Our focus is on bread-and-butter tax law topics such as IRS collections, offshore compliance issues and so on.

Sometimes, however, an issue faced by a famous person can help illuminate one of those bread-and-butter topics. And so, this week, we will discuss the tax lien filed by the IRS against the rap singer known as MC Hammer.

Hammer, now 51, shot to fame in the late 1980s. His first album with Capitol Records went double platinum (two million copies sold). And his song "U Can't Touch This," from his second album, became very widely known.

But of course success in the music business can be fleeting. After a while, Hammer lost some of his popularity to other rappers such as Ice Cube and Snoop Dogg. He eventually had to file for bankruptcy protection after finding himself deeply in debt.

Hammer resurfaced in the late 1990s and branched out into Gospel music. He also turned to social media, seeking a following on Twitter.

Indeed, he even tried to engage with his nearly 3.3 million Twitter followers by tweeting about his tax debt with the IRS. At one point, he even tweeted he had paid the IRS more than $5 million to resolve the debt.

Recent news reports, however, indicate that the IRS has filed a tax lien against Hammer in an effort to collect nearly $800,000 in unpaid taxes dating back to 1996 and 1997.

The wider issue here, beyond Hammer's case, is how issues of back taxes can linger on. The general rule of a three-year "look back" period for assessing a tax deficiency has several exceptions. It isn't necessarily true that, after three years, someone could safely say to the IRS, "U Can't Touch This."

Source: Forbes, "IRS To Rapper: It's Hammertime!" Kelly Phillips-Erb, Dec. 8, 2013

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