Here's a story that might make your own tax procrastination feel a little less stressful. Claud from Orlando, Florida, recently called into The Ramsey Show with an admission that made the hosts do a double take: he hasn't filed federal taxes since 2016. Not 2023. Not 2020. Two thousand sixteen.
And this isn't some guy scraping by with a side hustle. Claud owns 27 rental properties and pulls in up to $15,000 a month. Yet somehow, he's both sitting on a real estate empire and feeling perpetually broke.
How Do You Own $4 Million In Real Estate And Skip Taxes?
Claud's portfolio is almost entirely paid off. He bought most of these properties during the foreclosure crisis in the late 2000s, snapping up homes for as little as $5,000 each. Today, he estimates the whole portfolio is worth around $4 million. The only debt he carries is $165,000 in private financing on one house.
So what's the problem? Well, nearly a decade of unfiled tax returns, for starters. "I haven't paid my IRS in several years," Claud confessed. "I guess I'm just ignorant."
Co-host George Kamel wasn't having it. "No, you're not. Ignorant people don't own 27 rentals."
Claud explained that most of his rental income comes in cash from low-income tenants. He hasn't heard a peep from the IRS. "Nobody's knocked on your door yet? You haven't gotten anything in the mail?" Kamel asked, sounding genuinely surprised. "No, sir," Claud replied.
But silence doesn't mean forgiveness. With monthly income ranging between $10,000 and $15,000 over nearly ten years, Claud could be looking at a tax bill well into six figures. When asked if he had the money to pay it, he admitted he had no idea what the total would even be.
Caesar Wants His Cut
Kamel didn't mince words. "You should report every dime you make. Give to Caesar what is Caesar's," he said.
The hosts told Claud to stop dodging the problem and meet with a tax professional or enrolled agent immediately. "If it's $500,000, I'm not even going to get on a payment plan," Kamel said. "I'm going to liquidate enough properties that I knock this out."
Here's where things get even more puzzling. Despite owning millions in real estate and bringing in a healthy monthly cash flow, Claud says he feels broke. "If I got a few thousand bucks left over at the end of the month, I'm doing good," he told them.
Kamel was blunt. "I'm just confused. For a guy who doesn't pay taxes and makes 15 grand a month, you shouldn't be this broke."
Claud's explanation? Years of deferred maintenance are catching up with him. He admitted that early on, he "just shoved people in them, doing the minimum." Now that tenants are moving out, he's having to spend big on repairs. Oh, and he also had a secretary who was embezzling money. That probably didn't help.
The Bill Is Coming, One Way Or Another
Kamel told him the only path forward is to simplify everything. "Right now, you've just been ignoring it, and it's just compounded and compounded. Neglecting the problem is not going to make it go away, especially when it's the IRS."
Co-host Jade Warshaw added, "You need somebody to help you with the books on this and help you to understand what it is that you're doing."
To make matters worse, Claud hasn't depreciated any of his properties over the years. That means he's missed out on potential tax deductions, and when he eventually sells, he could face even steeper capital gains taxes.
The advice from Kamel and Warshaw was clear: get professional help, report all income going forward, and be prepared to sell some properties if that's what it takes to settle up. Because the alternative, they warned, could be much worse than a big check to the IRS.
