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Lindsay Lohan Tax Problem Common Among Celebrities

By Jo Piazza

any celebrities work on Of course, Lohan is also not the But the biggest celebrity tax projects that give them only celebrity scofflaw out there. In offender of recent years was Wesley Mmillion-dollar paychecks, fact, stories about famous folk Snipes, who was actually sentenced so why can't they all hire good avoiding their taxes and getting into to three years in prison for failing to accountants? That's what many trouble seem to hit the news all too pay over $17 million in taxes. He people were often. started serving his sentence in wondering this Other celebrities who have had December 2010. week when recent run-ins with the IRS include One reason for all the taxation they learned rapper Method Man, who was trouble for these celebrities? They Lindsay Lohan arrested for failing to pay $33,000 in often work as independent is the latest back taxes in 2009, and "Pan Am" contractors and it can sometimes be celebrity to run into some tricky to keep track of IRS trouble. The (celebrity's) business manager every income stream Lohan reportedly coming their way. received notice from the should develop tax strategies that will save "Celebrities are IRS that she owes almost the celebrity the most money (and) contract brands, not $94,000 in unpaid income ...they should be setting aside monies employees," said Joshua taxes from 2009. to pay those taxes as a part of S. Barger, vice president According to TMZ, the of tax services for actress was unaware of their budgeting." Foundation Financial the issue until recently. Group. (Barger has no

Hopefully Lohan will — Howard S. Krant, Managing Partner connection to Lohan's Adeptus Partners, LLC take some of her recent financial situation.) "Since Playboy paycheck to make they have higher things right with Uncle Sam and actress Christina Ricci, who was hit earnings, they may also have a remember to file her taxes properly with a federal income tax lien of greater risk of audit and additional this year by the April 15 deadline. nearly $180,000 on her 2008 taxable events as well as additional But let's remember that the often- earnings. "Baywatch" babe Pamela income and properties." beleaguered actress doesn't exactly Anderson owed nearly half a million In some cases, a celebrity acts have too many role models to look dollars to the IRS in 2010 and actor as a self-employed contractor for up to these days; her father, Michael Nicholas Cage was reported to owe different companies and they then Lohan, owed the government over more than $6 million to the IRS at receive a 1099 tax form -- and they $12,000 in unpaid taxes in 2010. the end of 2009. are supposed to be making quarterly estimated tax payments to the IRS. "Typically, their business managers manager should develop tax If a celebrity -- or anyone, for that get paid on a percentage of the strategies that will save the celebrity matter -- doesn't comply with IRS celebrity's gross income. And, unless the most money -- but more guidelines, they could be subject to they are paying attention, they often importantly, they should be setting penalties and interest. don't care whether the celebrity aside monies to pay those taxes as a And even though their taxes spends every penny he or she makes part of their budgeting." may be more complicated than the and they do not put aside some of Taxes, like death, really are a typical W9 form that employees of that celebrity's money to pay taxes, great equalizer -- they are the one of other professions often receive, nor do they develop a tax plan to the few things celebrities can't easily celebrities can often be negligent save the celebrity the most money." wriggle their way out of by signing a when it comes to handling their It seems the key to fixing their few autographs or making a call to financial accounts. Busy stars often finances is for a celebrity to hire a their lawyers. expect others -- like their assistants good business manager. That job "Ultimately, celebrities, just like or managers -- to worry about should ideally go to someone outside everyone else, are responsible for making sure their affairs are in of a star's inner circle -- not their their financial condition and for order. father, their best friend or husband, keeping up with the Tax Man," says "Celebrities get into tax trouble as is often the case. Nick Rizzi, founder and CEO of Smart because all of their economic "A celebrity's business manager Tax. "Unfortunately, if celebrities are situations are handled by a business should probably be paid an hourly in tax trouble because of errors, manager (who is usually an fee -- not a percentage of gross there is no easier way than just accountant) and the celebs pay no income," Krant says. "The business taking on the mistakes head-on and attention to the details. Costs, like manager should be budgeting out being made accountable." taxes, usually do not interest them," and monitoring all of the celebrity's explains New York CPA Howard S. expenses (and taxes are an expense, Krant of Adeptus Partners, LLC. like insurance). The business