Dionne Warwick, the Grammy-winning singer whose voice graced the airwaves in the 1960s, has filed for personal bankruptcy. According to court documents, the singer has assets totaling about $25,500. Her liabilities total a whopping $10.7 million.
The trouble started with a business manager who mismanaged the business. According to court documents, the singer was the victim of gross financial mismanagement during the late 1980s and into the 1990s. Her manager’s conduct resulted in $1 million or so in state and federal tax bills.
Generally, the Internal Revenue Service and state revenue departments will work with taxpayers to develop repayment plans. In some circumstances, taxpayers have gotten breaks on penalties and interest, too. Warwick did not. Apparently both the state and the IRS rejected several proposals, and while negotiations were going nowhere the debt kept going up. Penalties and interest just piled on over time, until the total due passed the $10 million mark.
According to her bankruptcy counselor, Warwick has been making payments. To date, she has paid $1.3 million toward clearing up the $1 million bill. Unfortunately, those payments were not applied to the principal; they were applied to the penalty and interest portions of the debt. Adding to the confusion is the fact that the IRS misplaced Warwick’s file for a couple of years.
Personal bankruptcy does not discharge every tax debt, but it will take care of tax debt that is more than three years old. Because this debt dates from 2009, Warwick could not discharge it in bankruptcy before this year.
Her bankruptcy counselor told the press that he believes the bankruptcy will proceed and Warwick will come out OK in the end.
Warwick is 70-years-old and has a full concert tour scheduled for 2013.
Sources:
Reuters, “Singer Dionne Warwick files for bankruptcy,” David Bailey, March 26, 2013
Huffington Post, “Dionne Warwick Bankrupt: Singer Owes $10 Million In Taxes,” March 26, 2013