Willie Nelson's tax woes -- The country singer is virtually penniless after dealing with the IRS

The old Willie Nelson song ”Who Will Buy My Memories?” has painful new meaning now that the IRS is preparing to auction off most of Nelson’s worldly goods in mid-December to satisfy what it says is a $16.7 million tax debt. Without warning, the government seized Nelson’s bank accounts and padlocked his real estate holdings in six states on Nov. 9, evicting a band in mid-song from his studio in Spicewood, Tex., so agents could inventory the building’s contents. Nelson and his family members, including his estranged wife, Connie, say the seizures have left them virtually penniless. His six-member band of nearly 20 years has been dissolved, his tour buses have been recalled by a Florida leasing company, and all his CBS Records royalties are going into federal coffers.

Nelson’s tax woes date from the late 1970s and early ’80s, when the singer made it big for the first time. The government claims that Nelson owes $6.5 million in taxes for 1978 to 1982, plus $10.2 million in interest and penalties. Willie blames his troubles on a former business manager who, he says, failed to pay his taxes as he should have, and on the accounting firm of Price Waterhouse, which he says invested his earnings in tax shelters that were later struck down by the government. Nelson filed a $65 million lawsuit against Price Waterhouse last August, and he claims the IRS had said it would wait for payment until the lawsuit was settled. Now, says Nelson, ”It’s gotten really weird.” He adds that his lawyer asked the IRS why it had reneged on its agreement to wait for payment, and an agent responded, ”We changed our mind.” (IRS spokesperson Cynthia Viviola refused to comment on the alleged agreement and on the amounts Nelson actually paid in taxes from ’78 to ’82.)

A rescue effort by friends and fans began as soon as the news broke. In Austin, club owner James White started a ”Where There’s a Willie, There’s a Way” fund, placing gallon jugs on his bar and in grocery stores for contributions. Local and national acts are staging a two-day ”Willie Weekend” benefit show on Dec. 1 and 2 at Austin’s Broken Spoke nightclub. Merle Haggard has offered to record an album with Willie and donate the profits. And Austin barber Jim Hattaway, who has never met Nelson, opened a ”Willie Aid” trust account; all donations will go to the IRS.

”It’s really nice that they want to do something,” says Nelson, currently holed up in a mortgaged house in Maui with his longtime girlfriend Annie D’Angelo and their two sons, Luke and Jake. ”This whole thing is damn near forcing me to declare bankruptcy.” He plans to play a few dates solo to put food on the table. ”I’ve got a date Dec. 2, to see what they do,” he says. ”I didn’t want to take the chance of getting everybody in the band together and booking a tour and then finding those IRS guys in our face every night.”

”We’re safe here for a while,” says Nelson, ”unless the lienholders call in the debt (on the house). I’m starting all over again. It’s kind of liberating — just me and my acoustic guitar.”