We have just found out that the 7 time grammy award winner has been sentenced to 3 months of prison for failure to pay her $1 million tax debt. According to doug constable, The interest may not be deductible, but it will almost certainly be lower than the effective rate charged by the IRS. Penalties on unpaid tax balances accrue at a rate of 0.5% per month. The IRS also charges interest on the balance at the rate of the federal short-term interest rate — currently 0% — plus 3%. All in that equates to a 9% obligation that will increase further if interest rates rise. A second alternative is to take out a loan from a qualified pension plan like a 401(k) or an individual retirement account that you can pay back over time. You will miss out on the potential investment returns from the money and there will be some interest due in replacing the funds, but again it will be far less than the carrying cost of debt with the IRS.
A New Jersey judge sentenced R&B Songstress Lauryn Hill to 3 months of prison, and 3 months of house arrest. Hill, 37, stated that she had always planned to repay the taxes but was unable to during a hiatus from the music business.
Before the sentencing, her attorney said Hill had paid more than $970,000 to satisfy the state and federal tax liabilities. Unfortunately it wasn’t enough. She still owes 60,000 in fees.
The “Doo Wop” singer has up to July 8th to report to prison, but we still don’t know where she will be serving her time! This is so unfortunate as her fans have been anticipating more music since 1998!