April 11, 2014

Our attraction to the wealth, success and fame of celebrities is only eclipsed by our obsession with their downfalls. There is even a term for it: celebrity syndrome, which was — quite fittingly — coined by Oprah Winfrey, America’s favorite pop-psychologist. The Germans have an actual word for the pleasure derived from the misfortune of others: schadenfreude, which literally translates into English as harm-joy.

Our latest fix of schadenfraude comes in the form of singer and actor Courtney Love, who last Tuesday was on the wrong end of a $320k tax lien from the Internal Revenue Service.

Courtney Love is the widow of Nirvana lead-singer Kurt Cobain. She was also the lead-singer for her own rock band, Hole, and starred in several movies, such as “The People vs. Larry Flynt.” Last Tuesday, Love was hit with a $319,749 for unpaid taxes during 2012. This is not the first time Love receives bad news from the IRS. Love also had a lien of $324,335 filed against her in 2009 for unpaid taxes from 2007, which she has since paid off.

Maybe she should read our article on how to remove a tax lien.

We don’t know why Love has had trouble paying her tax bills. Previously, Love has blamed her financial woes on bad accountants and dishonest managers. For instance, she has repeatedly claimed that up to $250 million were lost from Nirvana’s earnings while her husband was still alive.

Tragically, according to an interview Love gave to Vanity Fair in 2011, financial difficulties were a big factor in her husband’s suicide. The Vanity Fair article quoted as saying, “We could never find our money! … Do you think Kurt would have killed himself if he had known he had $54 million?”

Love’s income comes from royalties and investments from Cobain’s estate and her acting and singing career. For people who have never earned $324,335 in a year, it can be hard to understand how someone can make enough money to owe $320k in taxes and still not have enough cash to pay her dues to Uncle Sam. However, it shouldn’t be a surprise. Being a talented artist, or being married to one for that matter, does not shield you from impulsive spending, financial illiteracy, plain bad decisions, or dishonest advisers. Anyone can mismanage his or her money, regardless of income level.

The only positive aspect of celebrity syndrome is that as we rubberneck on the financial woes of others we may stare long enough to learn how to avoid making the same mistakes. In the case of wealthy celebrities like Courtney Love there are two reminders worth considering.

First, it’s not how much you make that matters, but how you make do with what you have.

Second, it’s true you should always pay yourself first, but whatever you do, don’t forget to pay the IRS.

This brings us back to Love’s $320k tax lien. What is a tax lien? Is it the same as a tax levy? Does Courtney’s $320k tax lien mean the IRS can seize her home or car?

The short answer is no. Just because Love has a tax lien against her doesn’t mean the IRS has the right to seize her assets to pay off her tax debt. Although that may come later, if she doesn’t pay her taxes soon. A tax lien is a claim the IRS places on your assets. It stops you from selling your assets until you first pay the IRS. It’s similar to having a mortgage on your home; you can’t sell your home without first paying the mortgage.

Photo: Wikimedia Commons