Actor Terrence Howard Hit With A Judgment For More Than $900,000 In Back Taxes While Claiming It Is Immoral To Tax Descendants Of Slaves

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Terrence Howard (Photo by Frazer Harrison/Getty Images)

On February 22, 2024, actor Terrence Howard was issued a default judgment making him liable for federal back taxes. Howard, who received an Oscar nomination for Best Actor for his role in “Hustle and Flow,” has been in numerous films and television shows since the 1990s.

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The initial complaint against Howard was filed on December 19, 2022, but the motion for default judgment was not filed until September 22, 2023. The judgment states Howard is liable for a total of $903,114.72 consisting of tax, penalties, and interest. The lion’s share of the tax bill are for the years 2010 and 2011.

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Howard left a voicemail with the lead prosecutor, Maria Elizabeth Ruwe, claiming it is “immoral” for the United States to charge taxes to the descendants of slaves:

“Four hundred years of forced labor and never receiving any compensation for it. Now you have the gall to try and prosecute and charge taxes to the descendants of a broken people that you are responsible for causing the breakage… In truth, the entire United States should, by default, become the property of the descendants of slaves. But since you do not have the ability [or] the courage to do it, let’s try this in court … We’re gonna bring you down.”

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Generally, the IRS has 10 years from the date the tax is assessed to collect from the taxpayer. In most cases, income tax is assessed when the tax return is filed. Since most of Howard’s taxes came from 2010 and 2011, the question does arise as to whether the bill should have been written off as a matter of law.

It is rare for the Department of Justice to file a civil lawsuit to collect back taxes, even if the back taxes are in danger of being uncollectable in the near future. But if they do, it will be a nightmare for the taxpayer. The taxpayer will incur legal costs in the lawsuit and, if the assessed tax is legitimate, the IRS will likely to win. In addition, a civil judgment will override the IRS’s 10-year statutory limit to collect. Since judgments can be renewed, the IRS can potentially collect for decades.

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Howard seems to have had a long history of tax issues. In 2019, it was reported that he was being investigated for criminal tax evasion. The Philadelphia Inquirer reported that California’s income tax agency hit Howard with a state tax lien for $144,000. And tax liens totaling nearly $639,000 were filed against his property in Plymouth Meeting, Pennsylvania, in 2005 and 2006.

The Justice Department’s decision to sue was likely due to the impending collection deadline for the years 2010 and 2011, Howard’s celebrity status, the appearance that he is doing well in his acting career, his history with tax noncompliance, and the likelihood of getting the money in the future.

As for Howard’s claim about the immorality of taxing descendant of slaves, the IRS considers these reparation arguments to be frivolous. The IRS specifically states that there is no “Black Tax Credit” or other reparation-related income deductions. Making frivolous tax claims can result in civil and criminal penalties, including fines and even imprisonment.

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It is unlikely that Howard will be punished for his statements as they seem more like a rant made in frustration than a legal argument. And his case history doesn’t indicate that he made reparation arguments to the IRS in the past. But if he keeps it up, eventually the IRS will take more aggressive action.

In addition to his Oscar nomination, Howard is known for playing the ruthless CEO Lucious Lyon on the television series “Empire.” At one point, his character was being pursued by the Justice Department. Hopefully, Howard will exercise caution when dealing with the IRS because he really doesn’t want to see their ruthless side.

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Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at [email protected]. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

Topics

Internal Revenue Service (IRS), Steven Chung, Tax Law, Terrence Howard