Claud from Orlando, Florida, called into “The Ramsey Show” with a confession: he hasn't filed his federal taxes since 2016. Despite owning 27 rental properties and reportedly bringing in up to $15,000 a month, Claud is struggling with cash flow and facing a looming financial mess.
A $4 Million Portfolio, But No Paper Trail
Claud said his properties are all paid off, aside from a house he bought using $165,000 in private financing. He’s been making money through low-income rentals, many of which he purchased during the foreclosure crisis in the late 2000s for as little as $5,000. Today, he estimates his real estate portfolio is worth around $4 million.
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But there’s a problem. Claud admitted, “I haven’t paid my IRS in several years,” adding, “I guess I’m just ignorant.” Co-host George Kamel shot back, “No, you’re not. Ignorant people don’t own 27 rentals.”
Claud’s last tax filing was nearly a decade ago. He said most of his rental income is in cash, and he hasn’t heard a word from the IRS. “Nobody’s knocked on your door yet? You haven’t gotten anything in the mail?” Kamel asked. “No, sir,” Claud replied.
He estimated he makes anywhere between $10,000 and $15,000 a month, depending on how many of his units are rented. That income, stacked over 10 years, could result in a tax bill well into six figures. When asked if he had the money to pay it, Claud admitted, “I don’t have any idea what it would be.”
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Time To Pay Caesar
Kamel reminded Claud of his legal obligations. “You should report every dime you make. Give to Caesar what is Caesar’s,” he said.
The hosts told him to stop ignoring 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.”
Despite the size of his real estate holdings, Claud said 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 frank. “I’m just confused," he said. "For a guy who doesn’t pay taxes and makes 15 grand a month, you shouldn’t be this broke.”
The problem, Claud explained, is that many of his properties are in disrepair because he originally “just shoved people in them, doing the minimum.” Now that tenants are moving out, he’s spending heavily on deferred maintenance. He also revealed he had a secretary who was embezzling money.
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Kamel told him he needs to simplify his life. “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.”
Despite everything, Claud hasn’t depreciated any of his properties, which could further complicate his tax situation and result in even higher capital gains taxes when he sells.
The advice from Kamel and Warshaw was to get professional help, report all income, and sell some properties if needed. Otherwise, the next call Claud makes might be from behind bars.
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