Celebrities are like the rest of us -- they hate paying taxes, too! The difference is that when we mere mortals get caught dodging the IRS, Perez Hilton doesn't blog our names through the mud.
The latest national treasure to fall victim to a public personal-finance shaming is actor Nicolas Cage. According to People magazine (perhaps the most reliable source for fact-checked celebrity gossip), Cage owes the IRS $6 million in unpaid taxes from 2007 and more than $350,000 for back taxes from 2002 to 2004.
Cue $20 million lawsuit
Cage's financial woes are the result of speculative real estate investments and shoddy accounting -- money maladies brought on by his former business manager, Samuel J. Levin, who worked for the actor from 2001 to 2008.
It's so hard to find good help these days. Cage is suing Levin on charges that Levin mismanaged the actor's assets and gouging him for several million dollars in management fees – the standard Hollywood 5% cut of the client's gross earnings.
According to the lawsuit: "He [Cage] is now forced to sell major assets and investments at a significant loss and is faced with huge tax liabilities because of Levin's incompetence, misrepresentations, and recklessness." The biggest boo-boo: failure to file his client's income taxes.
Sure, it's tempting to "tsk-tsk" Cage about failing to keep tabs on the hired help. But even due diligence might not have saved him from financial calamity. According to the Huffington Post, Levin had no disciplinary actions against him in the 25 years he has been a licensed certified public accountant in California.
Of course, neither did Bernie Madoff.
I'll pause here for dramatic effect.
The mother of all celebrity yard sales
Now the star of Leaving Las Vegas (for which he won an Oscar), National Treasure, Con Air, Adaptation, Moonstruck, and my personal favorite, Raising Arizona, is having a celebrity-sized yard sale. Literally.
To drum up cash to pay his tax tab, Cage is offering a real estate free-for-all. Well, not free, exactly, but according to CNN, some of the choice items up for offer include:
- His Bel Air mansion for about $10 million.
- His Las Vegas digs, also for roughly $10 million.
- A $3.55 million mansion in New Orleans' Garden District. Described as "haunted."
- A 24,000-square-foot $12 million mansion in Rhode Island.
An early-bird shopper already snagged one choice item: Cage sold his Bavarian castle -- 28 rooms on 395 wooded acres; needs renovations -- to German lawyer Konrad Wilfurth for $2.5 million.
I wasn't able to get any word on whether Cage's other castle -- Midford Castle in Somerset, England -- is going to be dragged out of the attic on yard-sale day.
Celebrity financial rehab is in session!
Cage has his choice of celebrity financial-support groups. There are those who have been duped by bad advice (Bernie Madoff clients Steven Spielberg, Kevin Bacon, and Kyra Sedgwick), those who are victims of their own excesses (reformed spendaholic Britney Spears and MC Hammer), and those who are survivors of the famed and unfortunate class (Michael Jackson and Anna Nicole Smith, alas, won't be attending those meetings).
I know it's hard to shed many tears for the airbrushed, augmented, and obscenely paid set. So go ahead and bring on the smug comments and unsubstantiated smears -- knock yourself out in the comments section below!
Meanwhile, since this isn't TMZ, I am obliged by my editors to find the "teaching moment" in this salacious story. So here goes:
- Do a background check on the help: Although a background check isn't foolproof, the only way you'll discover any red flags is by looking for them. Here's advice on how to hire a financial pro in the know and get the resources to help you do a credentials cross-check.
- Pay your pro the right way: Conflicts of interest are rampant in the financial field. (I hope that wasn't a spoiler for anyone reading this.) The best compensation structure is one that rewards good advice, not simply account activity. So, for example, look for a fee-only or flat-fee financial advisor, not a broker who gets paid per trade or who earns a commission by selling you insurance or other products.
- Double-check the help's work: Hiring someone does not absolve you of responsibility. (Sorry, Nic!) It's your John Hancock at the bottom of your tax return. Sign on the line, and you'll do the time.
- Finally, don't die before reading this. Seriously. Follow the link.
What do you think of celebrities and their money woes? Tell us all about it with a comment below.
Fool.com writer Dayana Yochim is not related to Francis Ford Coppola. That may be one reason her film career hasn't taken off. The Motley Fool's disclosure policy paid taxes on the treasure it found buried beneath the Black Hills in South Dakota.