2:34pm

Tue April 17, 2012
Planet Money

Pay Your Taxes: A Cautionary Tale

Originally published on Tue April 17, 2012 4:15 pm

When IRS agents raided the house of rapper Young Buck, they seized all his things: his white leather dining chairs, his watches, his craps table, his tattoo kit. Even his refrigerator. The Nashville artist, who was once part of 50 Cent's G-Unit, owed hundreds of thousands of dollars in back taxes.

His lawyer, Robin Mitchell Joyce, said he thought Young Buck's taxes were being handled by his business manager. They weren't.

I went to another business manager to see what might have gone awry-- Horace Madison, who manages music moguls like Lil Wayne. "This is not a hip hop thing," he points out. "This is a music industry thing."

Musicians, unlike most people, don't get a regular paycheck, with taxes withheld for them. "Most entertainers and musicians receive their money on a gross level, with no taxes taken out."

Big stars can earn more than a million dollars in a couple of months. But they have a lot of expenses — lights, stage, tour bus, entourage.

And after expenses, of course, there's taxes. Every quarter. Madison says that if you made a half a million dollars in 3 months, "You need to make an estimated tax payment of $200,000."

On top of that, if you're an entertainer, what qualifies as a business expense can seem really murky. Your whole lifestyle is not tax deductible.

Madison has tried to deduct watches, arguing that it's a necessary business expense for his client to have a certain look. The CPAs at his company threw it back.

The IRS loaned Young Buck his refrigerator back, along with a few other things. But most of his stuff is still stored in an undisclosed location. His music catalog is up for sale on May 14. Even the rights to the name "Young Buck" might be sold.

Many musicians have been in his situation. After Willie Nelson's home was raided by the IRS 20 years ago, Nelson made an album called "The IRS tapes." He paid back some of the debt that way.

For More: Listen to our playlist of musicians who didn't pay their taxes.

NPR researchers JoElla Straley and Barbie Keiser contributed to this report.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

AUDIE CORNISH, HOST:

Back to today and everyone else's tax deadline. For those Americans feeling inclined to take a chance and just not pay, NPR's Zoe Chace, of our Planet Money team, has this cautionary tale.

(SOUNDBITE OF MUSIC)

ZOE CHACE, BYLINE: Some musicians like to brag they have a lot of nice stuff.

(SOUNDBITE OF SONG, "SHORTY WANNA RIDE")

YOUNG BUCK: (Singing) Shorty want to ride with me, ride with me.

CHACE: This is Young Buck, and he did have nice stuff, like nice wheels on his car.

(SOUNDBITE OF SONG, "SHORTY WANNA RIDE")

BUCK: (Singing) I could show you I'm a rider, the 600 coupe with the old-school wires, Giovanni rims, with Pirellis on the tires.

CHACE: Young Buck used to be a part of G-Unit, the very successful label founded by rapper 50 Cent. As part of that group, he sold millions of records. He's from Nashville. And in his dining room he had eight white leather dining chairs. In his bedroom he had some blue cufflinks, some skull chains; in the basement a poster of "Scarface," a craps table, a tattoo kit. What do all these things have in common? Ask the Internal Revenue Service.

BRANDON GEE: I think the common denominator for all of them is they're things that the IRS believed could have been easily liquidated.

CHACE: Brandon Gee reported on Young Buck's situation for The Tennessean newspaper. He says one Saturday morning, IRS agents showed up at Young Buck's house. He owed six figures in back taxes.

GEE: It's very methodical. As things are being boxed up and taken out, they're being inventoried on a list.

CHACE: And then stored nearby at Young Buck's expense. His lawyer, Robin Mitchell Joyce, told me he thought his taxes were being handled by his business manager. They weren't.

ROBIN MITCHELL JOYCE: Is it just a hip-hop problem? No. It's an entertainment, a music industry problem.

CHACE: Horace Madison is the business manager for stars like Lil Wayne.

(SOUNDBITE OF SONG, "I'M ILLI")

LIL WAYNE: (Singing) I'm a millionaire. I'm a young money millionaire, tougher than Nigerian hair. My criteria...

HORACE MADISON: I wish my clients bought 35 or even 50 thousand dollar cars. That's what they spend on watches.

CHACE: I asked Madison about Young Buck's situation. Why would someone who makes a ton of money get behind on their taxes?

MADISON: Most entertainers and musicians, they receive their money on a gross level with no taxes taken out of.

CHACE: Even athletes, Horace Madison says, they're paid a salary. Musicians aren't. And big entertainers make big money - 25,000, 50,000, 100,000 dollars a show, sometimes much more. In a couple of months, you're a millionaire, right? Nope. Madison says about half of what big stars earn goes to pay people that work with them, not to mention the lights, the sound, the tour buses. And then...

MADISON: On that half a million dollars, you need to make an estimated tax payment of $200,000.

CHACE: Quarterly. That's no joke. And on top of that, if you're an entertainer, what's a business expense can seem really murky.

MADISON: You're living this lifestyle where you're spending money that you think is tax deductible, and no, it's not.

CHACE: Madison has tried to deduct the watches, saying it's a necessary business expense for his client to have a certain look. The CPAs at his company threw it back. The IRS loaned Young Buck his refrigerator back and a few other things. But most of his stuff is still stored in an undisclosed location. His music catalogue is up for sale May 14th. Even his moniker, Young Buck, that might be sold too. There could be a new Young Buck running around. Willie Nelson, he had the same kind of problem.

(SOUNDBITE OF SONG, "WHO'LL BUY MY MEMORIES")

WILLIE NELSON: (Singing) Who'll buy my memories of things that used to be?

CHACE: So he released an album to pay back the IRS. He called it "The IRS Tapes." Zoe Chace, NPR News. Transcript provided by NPR, Copyright NPR.

Related program: