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Celebrity Tax Blunders: What You Can Learn from How Fame Mishandles Fortune

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Nicholas CageWe all wish we could follow in the successful footsteps of our favorite celebrities. But sometimes, you can learn from their mistakes as well.

For whatever reason, celebrities often end up crossing paths with the IRS. You might assume that most of the problems stars have with the tax man don't really apply to average everyday folks. But though the dollar amounts might be smaller, many ordinary people get snared by the same traps that catch Hollywood's best and brightest.

Let's take a look at some common mistakes and what you can do to avoid them.

Click through our Celebrity Tax Lessons here:



For more smart tax moves:

If Motley Fool contributor Dan Caplinger ever becomes a celebrity, he'll do his best to avoid those tax mishaps. You can follow him on Twitter here.


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What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

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Elvia

Type your comment hereIf you are wondering how you can earn 250$ a day... Stop wondering and visit this website
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April 12 2012 at 9:07 PM Report abuse rate up rate down Reply
njcorrections05

Honestly they can simply settle an IRSS tax debt without spending thousands on those guys form TV, pennie son the dollar? bull S. those guys practices are bing looked into by the IRS.

here's a link that has all the forms you need to settle an IRS tax debt. I did it no BS owed 9900.00 settled for 2200.00 did not all by myself.

http://www.barnesandnoble.com/w/irs-diy-tax-debt-settlement-stevenson/1109296729?ean=2940013998841

April 12 2012 at 4:49 PM Report abuse rate up rate down Reply
mfg75123

I would rather see a list of
Politician tax blunders
Wouldn't you like to see if any one is telling us to pay more
at the same time they are being tax frauds?
I think this is more important to know than a celebrity tax blunder

April 12 2012 at 3:01 PM Report abuse rate up rate down Reply
cpo1514

what did I learn... Hollywood types back Obama.... figures.... most end up like the Obama Green Energy.... Bankrupt....

April 09 2012 at 10:22 AM Report abuse +2 rate up rate down Reply
Augusts

And you know,
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April 08 2012 at 11:43 PM Report abuse rate up rate down Reply
Augusts

Be smarter than a celebrity." Come on, you've got to be kidding. My dog is smarter than the average celebrity. I've never met anyone dumber than a celebrity.
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April 08 2012 at 11:43 PM Report abuse rate up rate down Reply
Justin Mars

Forget paying taxes. He belongs in jail for some of the horrible movies he has made the last few years. What happened to this guy? Don't forget that he was abusive and was caught with cocaine. The averae Joe would be doing 1 to 10 years. He probably only spent the weekend in jail for those offenses.

April 07 2012 at 6:09 AM Report abuse +1 rate up rate down Reply
Peter & Fred

Just doesnt make sense at all...if we the hard working average American and we owed even a dime...the IRS would be on our backs and not let up....
I guess if your famous the goverment forgives or turns their back .
Shame shame shame

April 06 2012 at 11:52 PM Report abuse +1 rate up rate down Reply
AnnZ

I got screwed by the IRS, and the Statute of Limitations ran out after 10 years. I didn't even know!!!!! They actually sent me MY CHECK BACK!!!!!!

April 06 2012 at 11:36 PM Report abuse rate up rate down Reply
Alycia and John

As long as the IRS gets their money for free. who taxes them?

April 06 2012 at 11:19 PM Report abuse rate up rate down Reply