Just cried my tears, for two taxable years

Here's a story that will keep us tax nerds amused for a while. The IRS is after music megastar Beyoncé for north of $3 million in back taxes, penalties, and interest for 2018 and 2019. 

The federal revenuers issued their final audit report in January, and that gave Queen Bey until last Tuesday to file her case in U.S. Tax Court, which her L.A. lawyer did on Monday evening. The court filing is a public record, and private publishers often pick such documents up and publish them. One such publisher did so here; I hope it's not behind a paywall for you.

What are they fighting over? From the preliminary court filings, it's hard to glean too much detail. But the big-ticket items appear to be $3.3 million worth of depreciation deductions she took in 2019; roughly $474,000 of deductions for legal and professional services that she took in 2018; "other expenses" of around $761,000 claimed in 2018; and a charitable contribution carryover from a previous year, taken on her 2018 tax return, of about $869,000.

The IRS also socked Ms. Knowles-Carter with a 20 percent penalty for each year: for negligence in both years, and for a substantial understatement of tax in 2019.  That tacks on about $450,000 to the underlying alleged tax deficiency of about $2.25 million. Add interest of something like $375,000 (and counting – the current interest rate on federal tax debts is 7 percent), and JuJu is into the IRS for more than $3 million if she loses in court. And who knows how much California will get if the feds turn out to be right?

It will be interesting to see how far the case goes before it's resolved. To Beyoncé, $3 million is like $500 to you or me. Lawyers are expensive, and the publicity of a trial would likely not be welcome.

I remember when Stevie Nicks was in Tax Court. The estate of Prince was in there too for a while. Cases like these tend to settle before the fun really starts. But you never know, so I'll keep watching the tax news.