On This Day: Willie Nelson Settles Massive Long-Standing Debt with IRS in 1993

by Chris Haney
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28 years ago to the day, country legend Willie Nelson famously settled his enormous outstanding debt with the Internal Revenue Service.

On Feb. 2, 1993, the country icon came to an agreement with the IRS on how he’d pay his debts. In 1990, the federal agency initially hit Nelson with a $32 million back taxes bill. In fact, on Nov. 9 of 1990, federal agents seized many of Nelson’s assets and properties in six different states.

According to Rolling Stone, the IRS seized the musician’s gold and platinum records, boxes of master tapes, touring equipment, his Texas ranch, and even his clothes. Nelson knew the agency could possibly seize his belongings.

Therefore, he wisely had his daughter, Lana, send his beloved guitar “Trigger” to his home in Maui, Hawaii so federal agents wouldn’t sell it. Additionally, Nelson stopped playing concerts temporarily because he was afraid the door receipts from his shows would also be seized.

The federal agency said that Nelson’s income had allegedly been hidden in tax shelters. However, the country artist blamed his financial advisors who he said mismanaged his earnings and gave him bad advice. In fact, Nelson fired his accountants and filed a lawsuit against them.

Yet the IRS wanted their money, and weren’t interested in any excuses. Following the seizure of Nelson’s assets, the agency reduced his debt to $16.7 million, which included a hefty $10.2 million in interest and penalties. The singer wasn’t able to pay up immediately, but did negotiate with the IRS after coming up with a clever repayment plan.

Willie Nelson Gets Creative, Records New Album to Pay off Debt

Facing mountainous debt issues, Willie Nelson turned to his music to help him repay the IRS. The country musician decided to create a bare-bones acoustic record to raise money that would go towards his debt.

Nelson chose to record a stripped-down album for two reasons. The IRS shut down his own recording studio, and therefore he needed to keep recording costs to a minimum. The country singer recorded acoustic renditions of some of his songs, which resulted in 1991’s The IRS Tapes: Who’ll Buy My Memories.

The new album could not be bought in stores or record shops. Nelson exclusively offered The IRS Tapes by mail order through a series of TV infomercials that tugged at viewer’s heartstrings. One commercial for the album has Nelson’s friend Kris Kristofferson presenting the record to viewers. Another infomercial for the album is brutally honest about the album and its purpose.

“Willie Nelson: He’s been there for those who’ve needed him,” says the commercial’s narrator. “And he’s helped thousands of people across this land. Now, Willie needs your help – and he’s reaching out the best way he can: through his music. With your purchase of Willie’s IRS Tapes, you not only get the satisfaction of helping one of America’s greatest treasures, you also receive 25 unique songs recorded by Willie through the years.”

At the time, fans could buy the 25-song double album for $19.95 plus a $4 shipping and handling charge. When speaking to the New York Times in 1991, he said he always wanted to record an album with just him and his guitar. He called the material some of “the best stuff I got.”

“It’s no overproduced album with millions of dollars of studio costs,” Nelson explained . “But I think it’s the best stuff I got. I’ve always wanted to put out an album with me and my guitar doing my original songs. And my fans like it because it sounds like it’s just me in my living room singing.”

The Musician Pays off His Debts in Full by 1995

Out of the proceeds from The IRS Tapes: Who’ll Buy My Memories, Willie Nelson received $6 per album sold. $3 of his cut went directly to the IRS, and another $1 helped pay for the lawsuit brought against his ex-accountants.

IRS spokeswoman Valerie Thornton spoke to the New York Times about Nelson’s creative repayment plan. She said the deal benefited all involved parties.

“We try to work with taxpayers, not just Mr. Nelson,” Thornton said. “And if we have to come up with some creative payment plan, that’s what we’re going to do, because it’s in everyone’s best interest.”

Finally, after years of working to reduce his debts, Nelson settled up with the IRS after paying the last of his planned payments. Nelson paid off the final $3 million installment in early 1995, paying $9 million out of pocket in total. He settled his debt for around 28 cents on the dollar.

Furthermore, the Washington Post reported that Nelson had a stroke of good luck during his financial crisis. The country legend’s friends bought many of Nelson’s seized assets for cheap and held onto them to return to the singer. In addition, an appreciative fan bought his Texas ranch and returned it to Nelson as a thank you for his involvement in Farm Aid.

Nelson’s massive IRS debt would weigh on the mind of most. Yet the country singer says the ordeal was a mental breeze. He also appreciated the federal agency collaborating with him to fix the problem.

“Mentally, it was a breeze,” he told Rolling Stone in 1995. “They didn’t bother me, they didn’t come out and confiscate anything other than that first day, and they didn’t show up at every gig and demand money. I appreciated that. And we teamed up and put out a record.”

Nelson’s outfit on The IRS Tapes album cover encapsulates the laid-back demeanor that helped the singer through his financial issues. Upon closer inspection, Nelson is wearing a black cowboy hat, a jacket, and a t-shirt underneath that eloquently states, “Shit Happens.”

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