While he can afford the sum, Paulson's tax bill comes after a decline in the AuM of his business that was once the toast of Wall Street.

US hedge fund tycoon John Paulson made headlines by famously betting against the US sub-prime mortgage market, earning a fortune in the process. But he’s now facing a $1.0 billion tax bill, adding to a run of poor results, reports say.

By April 17, Paulson must make federal and state tax payments of about $1 billion, on top of about $500 million in taxes he paid late last year, the Wall Street Journal said, citing unnamed sources. This figure is larger than the maximum amount the Internal Revenue Service will allow any single taxpayer to pay with a single check.

A decade ago, Paulson correctly shorted sub-prime mortgages, earning about $15 billion of profits for his funds and approximately $4 billion for himself. The WSJ report said he deferred the bulk of the taxes on these profits, using a tax provision available at the time to hedge-fund managers, but now he has to pay up.

While he will be able to pay the sum, a run of bad results and client exits means Paulson has been selling assets to pay the IRS bill. He has also cut costs, including some senior layoffs, the report said.

Today, Paulson oversees less than $9.0 billion of assets, down from $38 billion at his peak seven years ago, the report added.