Boxing champion Floyd “Money” Mayweather enters the ring with a tax lien of over $7.3 million from the IRS. Juke your own tax knockout

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1996 Olympic bronze medalist Floyd “Money” Mayweather Jr. built one of the most lucrative careers in sports history, reportedly earning more than $1 billion over the course of his boxing career (1). Now the retired champion faces questions about his taxes.

According to a recent filing published by Business Insider (2), the IRS has placed a $7.3 million federal tax lien on Mayweather for unpaid taxes related to the 2018 and 2023 tax years.

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The lien, filed in Las Vegas, where Mayweather owns real estate, allows the federal government to claim a share of certain assets until outstanding tax debts are paid. A lawyer for Mayweather declined to comment on the filing.

It’s not the first time (3) that the undefeated boxer has found himself in a dispute with the IRS.

U.S. Tax Court Judge Emin Toro ordered (4) that Mayweather must pay approximately $5.5 million in back taxes in 2023 and another $1.1 million in penalties related to his 2017 taxes. Mayweather also previously reached a settlement with the IRS over approximately $22.2 million in taxes related to 2015.

Here’s how it breaks down and what you can learn about your own tax situation from Mayweather’s sparring match with the government.

What is a federal tax lien?

Tax liens are legal claims against your property or assets if you neglect or fail to pay your tax debts. The lien is intended to protect the government’s interest in your property (real estate, valuables, and financial assets).

A federal tax lien is one of the IRS’s most powerful collection tools. If a taxpayer fails to pay a tax debt after receiving a notice and demand for payment, the government files the lien publicly, meaning it is kept as a public record.

In Mayweather’s case, the lien is recorded with the Clark County Recorder’s Office (5).

A lien does not necessarily mean that the IRS will immediately seize assets. However, it can make borrowing, refinancing, property sales, and other financial transactions difficult until the debt is paid off.

In most cases, tax liens are avoidable through timely filing and communication, payment plans, and proactive tax planning (6). However, there are also cases in which liens are registered incorrectly or unjustified.

In these situations, homeowners may challenge a lien in court for four main reasons: improper filing procedures or missed deadlines, fraudulent claims or false information, excessive amounts in excess of what is actually owed, and work never completed or improperly performed (7).

Read more: Millionaires under 43 only hold 25% of their wealth in stocks. This is actually where their money goes

Don’t forget about tax-advantaged investment accounts

The most important lesson for investors is to pay attention to your taxes, whether on real estate or in your investment accounts. If you want to grow your wealth, reducing your tax burden is an important piece of the puzzle.

NYU Stern School of Business Professor Scott Galloway – often known as Prof. G – perhaps said it best in an episode of Diary of a CEO Podcast (8).

“If you’re trying to build wealth, you have an obligation to pay as little tax as possible,” Galloway said, adding the sensible caveat of doing so “legally.”

One of the easiest ways for investors to reduce unnecessary taxes is to take full advantage of tax-advantaged retirement accounts before relying solely on taxable brokerage accounts.

Traditional IRAs allow eligible investors to defer taxes until retirement, while Roth IRAs can allow tax-free qualified withdrawals. Investors looking to diversify beyond traditional stocks and bonds can also consider self-directed gold IRAs.

Physical gold has traditionally been viewed as a portfolio diversifier during times of inflation, market volatility and geopolitical uncertainty.

Additionally, holding precious metals in a Goldco Gold IRA can provide the same tax benefits such as: B. tax-deferred growth and potentially tax-deductible contributions. You can also avoid the 28% bulk tax rate on gold (9) when you purchase through one of these accounts.

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Additionally, the company will reward up to 10% of qualifying purchases with free silver.

If you’re curious about whether this is the right investment to diversify your portfolio, download your free Gold and Silver Information Guide today.

While gold should not replace a diversified portfolio, it is part of a broader long-term investment strategy and can help soften the blow of a major market shift.

Real estate can diversify more than your portfolio

Stocks and gold are not the only ways to build and protect your wealth over the long term. Real estate has long been a popular asset among wealthy investors because it provides another source of income that is not always closely tied to daily stock market performance.

Depending on how investments are structured, real estate may also provide tax benefits (10) through depreciation, deductible expenses, and other provisions of the tax code. The 1031 exchange can be particularly important to your bottom line.

You can also take advantage of these tax advantages by investing in shares in homes or rental properties through Arrival.

Backed by world-class investors, including Jeff Bezos, Arrivald allows you to invest in shares of rental properties, creating a passive income stream without the extra work that comes with being a landlord. There are no 3 a.m. maintenance calls about broken pipes here.

To get started, simply browse through the selection of vetted properties, each selected for their potential value appreciation and income generation. Once you choose a property, you can start investing from as little as $100 and potentially earn monthly dividends.

Multifamily offerings for large portfolios

But rental housing is just one potential real estate opportunity. There are many other industries you can venture into, especially if you have the capital.

Accredited investors can now take advantage of this opportunity through platforms such as Lightstone DIRECT, which gives accredited investors access to single-property, multifamily and industrial deals.

Lightstone DIRECT’s direct-to-investor model ensures a high level of alignment between individual investors and a vertically integrated, institutional owner-operator – a sophisticated and optimized option for individual investors looking to diversify into private market real estate.

With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets that Lightstone pursues with its own capital, with the minimum investment starting at $100,000.

Don’t let yourself fall into the tax trap

Many investors don’t think about taxes until they prepare their annual returns. Financial professionals generally think much longer.

As investment portfolios grow, taxes can become increasingly complicated. Capital gains, dividends, pensions, rental income and business income can create additional planning opportunities – and potential pitfalls.

Instead of reacting after a large tax bill arrives, many wealthy households work with financial advisors throughout the year to develop strategies that balance investment growth with tax efficiency.

If you have a portfolio of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this type of planning.

Simply answer a few questions about your savings, retirement plan, and overall investment portfolio.

From there, WiserAdvisor reviews its network to match you – for free – with up to three vetted, reputable advisors tailored to your specific needs.

You can then arrange non-binding consultations with your matches to find out who is the best fit for your long-term goals.

WiserAdvisor is a matching service and does not provide direct financial advice. All matching advisors are third parties and specific financial results cannot be guaranteed.

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