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

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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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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April 12 2012 at 9:07 PM Report abuse rate up rate down Reply

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.


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

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

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

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

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

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