Celebrity Tax Troubles and What They Can Teach us: Part II
In our last post, we began a discussion about high-profile examples of tax trouble. Like the rest of us, celebrities are not immune from tax problems, and in some cases, they may be even worse than issues most of us would be likely to encounter.
Our post today will feature a few more examples of celebrity run-ins with the IRS and what the rest of us can learn from them.
Creative accounting and hiding income could cost you more in the end
It may be tempting to write off personal luxuries as “business expenses,” but don’t expect the IRS to look the other way. And the more money you have and the greater the expenses you try to claim, the more scrutiny you are likely to get from IRS investigators.
Billionaire hotelier Leona Helmsley was indicted for tax evasion in the late 1980s. She ended up paying a $7.1 million fine and spending 18 months in prison. Prosecutors said that she and her husband had made expensive purchases for their personal residences (a marble dance floor and a mahogany card table) and tried to write them off as business expenses.
You can also get into trouble by trying to hide income from the IRS or failing to report income. This includes windfall income like winning the lottery or receiving an inheritance. A man named Richard Hatch, who was the winner of the first season of “Survivor,” apparently never paid taxes on his $1 million prize winnings. He was convicted of tax evasion and served prison time.
Make sure you save enough money to pay the taxes you owe
It may be counterintuitive, but celebrities with the most money also seem to have the hardest time holding onto it. Actor Nicholas Cage was once among the highest paid movie stars in Hollywood. But according to news sources, his spending habits still managed to exceed his means. He is now working to pay off a tax debt of about $14 million.
Most of us will never find ourselves facing problems on the scale of these celebrities, but getting a notice from the IRS or the State of California can still be scary. To give yourself the best chance of resolving your tax issue successfully, you may greatly benefit from the help and guidance of an experienced tax law attorney.
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