With all of the money that celebrities make, shouldn’t they be able to pay their taxes without issues? And yet, we hear countless tales of celebrity tax woes. We asked a panel of professionals to explain why. Here’s what they had to say:
Alistair Bambridge is a partner at Bambridge Accountants New York, a firm of enrolled agents and accountants specializing in two distinct areas – tax and accountancy advice for the creative industries and expat tax services for citizens living abroad.
Celebrities have erratic pay cycles. They may have years where they have massive contracts and then very little income the next year. That frequently leads to tax issues, as they think they can use money from next year and have difficulty budgeting or saving.
Chantay Bridges is a realtor, author, speaker and philanthropist who has received commendations from the White House and state and local councilpersons. She has worked in various capacities with VIPs, including Oprah Winfrey, Julia Roberts, Tyler Perry, Sandra Bullock, Jennifer Hudson, Halle Berry, Cameron Diaz, Denzel Washington and others. Website: Los Angeles Real Estate Now.
Old adage: Anyone who does not know how to count their own money, can lose it.
Often times celebrities tend to hire outsiders, outside people, firms, individuals, CPAs, financial planners, etc., to handle their taxes. In essence, they have to trust what they are doing and communicate with them. Due to their busy, hectic lifestyles, very few make reviewing items line by line a priority. Thus, at times you have creative tax filing, etc. going on, and by the time it’s discovered, they are in trouble. How did they not notice certain things? They aren’t tax professionals; therefore, they may not understand P&L, deductions on bank statements, etc., and they are led astray.
Many celebrities have been targets of people who just want to get something from them and who are not out for their best interest. They seek to fatten their own wallets regardless of the harm it may cause the other person. These people typically don’t care that [the celebrity] could end up with massive tax problems; they see them as wealthy and have little or no compassion for them at all. Their advice leads to issue upon issue upon issue because it was bad from the very beginning.
If you don’t see what’s going on, you can’t keep up with it
If you have no idea of what’s happening behind the scenes, you can’t alter, stop or curtail it. Many [celebrities] only deal with taxes annually, when they have to, in between doing many other things. They are distracted and don’t always see or know the full picture, until later when they receive a notice in the mail, discovering that they are being audited or billed for some [large] amount. It’s then that they take a closer look, but by that time, they are in a world of trouble.
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Our minds are here to keep us safe, and they keep us safe by keeping us in familiar circumstances. For most celebrities, being rich is unfamiliar and therefore unsafe. This creates a poverty identity, which then creates the belief that “money is unavailable” so they hoard money, mismanage it, or spend it recklessly.
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