Montell Jordan’s bankruptcy filing is a reminder that lawyers need to be overseen by other attorneys.
In his 2019 interview on the “Karen Hunter Show” on XM Radio, the former singer-turned-pastor reflected on his decision to file for Chapter 7 bankruptcy in 2004 and spoke about how the process began. The story recently resurfaced on Instagram.
The “This Is How We Do It” singer tells the host that the actual amount owed in back taxes was only a couple of thousand dollars rather than millions. Jordan claims the IRS seized the opportunity to collect once the debt ballooned due to daily interest.
This Is How Jordan Owed The IRS
For the singer, who had to sell the publishing rights to his music to pay off his debts, he described that he only had $2 in his bank account, with the only meal available to him being a Happy Meal.
When explaining how his debt ballooned, he referenced Wesley Snipes and his IRS problems. Snipes, who was convicted of three misdemeanor counts in 2008 for failing to file tax returns from 1999 to 2001, reportedly owed $7 million in unpaid taxes. Snipes paid off 2002 debt of $1,497,645 was eventually paid off, but was later found to have owed the IRS approximately $23.5 million, according to Forbes.
“It was Uncle Sam; he came to get that. IRS bankruptcy, all that type of stuff,” Jordan said of his IRS debt before seemingly misunderstanding the Snipes case. He added, “Wesley Snipes did not owe the IRS $20 million. Wesley Snipes might’ve owed the government $20,000, and what happens is because of the way the laws are set up, and interest, if you owe somebody money, they just don’t say anything and allow it to lapse, and interest accrues at 11 percent a day.”
Jordan continued, “So if you imagine you did a movie for $20 million, the taxes on that $20 million were supposed to be $2 million or $3 million. If something happens and you don’t pay those taxes on time, once it lapses and it goes over at 11 percent a day on $2 million, that’s $220,000 every single day, and three years later they come back and say, ‘Oh, he owes us $30 million.’”
Jordan’s frustration with unpaid taxes is understandable, as interest and penalties can cause debts to accumulate to a lot of money. However, his claim of an 11 percent daily charge from the IRS is incorrect. And he never expained how his own debt ballooned or why he failed to realize he had an IRS debt. Jordan did try to put the blame on the people who were on his payroll, saying he wished he had “lawyers watching his lawyers.”
Still, his claims about IRS interest rates were inaccurate.
According to the Internal Revenue Service, since the quarter beginning July 1, 2024, interest rates have remained the same. The rate for individuals for both overpayments and underpayments will be 8 percent per year, compounded daily. Specifically, the rates are as follows: 8 percent for overpayments (payments made in excess of the amount owed), 7 percent for corporations, 5.5 percent for the portion of a corporate overpayment exceeding $10,000, 8 percent for underpayments (taxes owed but not fully paid), and 10 percent for large corporate underpayments.
Jordan’s Chapter 7 bankruptcy, widely covered in the media, was a humbling experience that came before his shift from R&B to Christian gospel music.
He claims his financial obligations went from $11,000 to $1.7 million because of interest and penalties, as Jordan explained on Vlad TV.
He continued to face challenges until resolving them by 2011, when he turned his focus to ministry and gospel music, as reported by U Gospel.
Ultimately, Jordan claimed by 2012 he had paid off his IRS debts.
