A Texas Man Racked Up $26M in Late Tax Penalties
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What headline story introduces this Money Briefing?
Here's your Money Briefing. I'm J.R. Whalen at The Wall Street Journal in New York. Want to hear the story of a Texas man who's racked up $26 million in delinquent tax penalties? Then stick around. We'll have his story in a moment. First, these money and market stories you should know. A report from the National Association of Manufacturers says that manufacturing companies will need to fill 4.5 million positions over the next decade, but they face a massive skills gap in the way. More specifically, jobs have become more technical in nature than in past decades. The report says the most job openings within the manufacturing sector are in transportation equipment, and that's followed by chemicals, computer, and electronic products, and machinery as well.
And while skills like engineering and software development are in high demand in manufacturing, other sectors are looking for candidates with those skills as well, making the competition for workers all the more fierce. And McDonald's is streamlining its late-night menu, effective April 30th, in an effort to speed up customer service. But that means a few of your Mickey D's favorites won't be available for any late-night cravings, like the Filet-O-Fish, artisan grilled chicken sandwiches, and premium salads. But after midnight, you'll still be able to order things like a Big Mac, Quarter Pounder burgers, Chicken McNuggets, fries, Happy Meals, and selections from the all-day breakfast.
If you let April 15th come and go and don't pay your taxes for, say, a year, you can expect some letters from the IRS and interest to be applied to what you owe. Well, what if you don't pay the taxes for a decade and you run up, oh, let's say $26 million in a tax bill? Well, a Texas man has done just that, and Wall Street Journal tax reporter Laura Saunders is here with his story.
What quick market and business headlines are covered before the main story?
So, Laura, first of all, is he in jail?
No, he's not in jail. This was never a criminal prosecution. It's not like Al Capone or various other things where you plead guilty. This is a civil case, and it shows what kind of trouble people can get into when they blow off the IRS and just don't file a return.
So his name is Larry Kobelka, lives in Texas, and he has worked in the past as a farmer, a harvester, as you say in your story, and he's worked with farm equipment also.
Yes, exactly.
He didn't pay his taxes in the 1990s or 2000s. He has a whole list of excuses for why he didn't pay.
Yes. People that don't file often have excuses. And he said, well, he thought his then-wife was filing the returns and that the IRS was wrong and that they didn't give him the right proper notice and that they attributed bank accounts and income to him that weren't really his and so forth. And he also thought that one of the attorneys in his case was crooked and deceitful.
Okay. Yeah. And it's not as if his earnings and assets translated to $26 million in taxes. A lot of that was interest and penalties that had piled up.
Two-thirds of it is interest and penalties. I mean, one of the lessons of this story is if you blow off the IRS, all of a sudden these amounts start to mushroom. Two of the biggest penalties, there are some others, are failure to file and failure to pay. Both of these, each of these, turns into 25% of the unpaid amount over time. Wow. It doesn't start out that way, but it gets that way pretty fast in one case. And those go on and on, and interest is applied to those penalties as well.
Yeah, IRS debts, they tend to grow faster than other debts because of the compounding interest. It's at 6%.
Right now it's at 6%. It changes, you know, it resets quarterly, so it can go up or down. But a criminal tax attorney I talked to, he said he often recommends that if you have IRS debt, that you try to borrow the money from someplace else because tax debt compounds faster because of all the interest on the penalties and things like that, and it's compounded daily. And the other thing is that the IRS is a super creditor, which can just reach into your bank account and take money or garnish your wages or whatever.
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