Actor Travolta to Pay $607,400 in Back Taxes

Actor John Travolta has agreed to pay $607,400 in back taxes to settle an Internal Revenue Service dispute dating back more than five years, according to court records.

Under a two-page settlement filed recently in U.S. Tax Court in Alexandria, Va., Travolta will pay more than half the $1.1 million in back taxes and penalties sought by the IRS for the years 1993 through 1995.

Travolta agreed to pay only back taxes, not any penalties, records show. The amounts are $150,547 for 1993, $248,096 for 1994 and $208,757 for 1995.

Neither IRS officials nor Travolta’s tax lawyer, James M.A. Murphy, would comment on the settlement.

The dispute stemmed from $2.27 million in unspecified losses Travolta claimed from 1993 to 1995 for a company called ATLO Inc., according to court records. ATLO is a so-called S corporation, a common device wealthy people use to gain tax breaks by having earnings and losses flow through the companies.

The IRS had said that Travolta’s losses, which lowered his taxable income, were improper, but court filings don’t explain why. The agency had argued that his taxable income should have been $2.2 million in both 1993 and 1994, and $4.7 million in 1995. Records also show that he claimed an additional $50,000 in unspecified itemized deductions in 1994 and 1995 that the IRS also disputed.

It’s rare for high-profile tax disputes to become public because most are settled in early stages. Travolta’s dispute surfaced last year because he filed an appeal in Tax Court.

As one of Hollywood’s highest-paid stars, Travolta should have no problem writing the check. The tax dispute took place just as his career was taking off again thanks to the 1994 film “Pulp Fiction.”

That film was followed by hits “Get Shorty,” “Broken Arrow” and “Face/Off,” which helped boost his fee to $20 million per movie.