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Old tax issues send Dionne Warwick into bankruptcy

A publicist for Grammy Award winning singer Dionne Warwick announced earlier this month that the acclaimed singer is broke. Warwick filed for personal bankruptcy protection in her home state March 21. Her publicist says that the singer's financial troubles date back to the 1980s and 1990s, when the publicist says "negligent and gross financial mismanagement" of the singer's accounts occurred leading to massive tax liabilities and other debts, according to Reuters. The publicist attributes the financial problems to a former business manager who was fired several years ago, according to the Huffington Post.

The singer reportedly suffered massive tax liabilities at one point in California and with the Internal Revenue Service. Her publicist says that Warwick paid most of her back taxes, but interest payments on the taxes remain. Warwick reportedly spent a great deal of effort trying to negotiate payment plans, but ran into a wall in those negotiations, resulting in continued interest and penalties.

Sources say that Warwick continues to make $20,950 each month, but her monthly expenses total $20,940 a month, leaving only $10 after paying expenses. The singer reportedly has paid $1.3 million toward her tax lien that amounted to $1 million in 2009, but is currently in debt to the tune of $10 million.

Ohio readers may be aware that many income tax liabilities are not dischargeable under the bankruptcy code, but if specified circumstances are satisfied, a person's income tax liability may be dischargeable. Generally, the income tax debt must be more than three years old at the time of filing for bankruptcy. But, the rules are complex. A person must have filed the tax return related to old tax debt at least two years before seeking bankruptcy protection and the tax must have been assessed at least 240 days prior to bankruptcy. Issues of tax fraud or tax evasion would negate a tax debt discharge.

In Dionne Warwick's case, her publicist says that she does not anticipate problems in seeking a discharge of her debts, including the tax debt, which is more than three years old.

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