Nicolas Cage cuts a deal with the IRS
Filed under: Extracurriculars, Tax
Recent news that celebrity Nicolas Cage (real name Nicolas Coppola) cut a deal with the Internal Revenue Service to pay $666,000 plus interest has taxpayers scratching their heads. The IRS initially determined that Cage improperly deducted $3.3 million in personal expenses from 2002 to 2004. The laundry list of things deducted by Cage included limo rides, meals, gifts, and travel in his jet. The result: $1.8 million in taxes and penalties plus interest, although some experts say the real figure was about $1 million. The issue is finally settled, and the $666,000 settlement includes $99,000 for an accuracy related penalty, but no penalties related to fraud.
Do you think this is a case of a taxpayer successfully challenging assertions made by the IRS or an example of a wealthy taxpayer getting a better deal than the average American could? It's difficult to say without knowing the details of the case, but I will say this: Often the IRS makes huge assessments against taxpayers to "persuade" them to respond to contentious issues. This could be a case in which the IRS slapped a big number onto Cage in the hope of "encouraging" him to cooperate in sorting out the issues.
Do you think that Cage purposely deducted things he knew weren't really deductible in order to cheat the tax man? I wouldn't necessarily say that's the case either. Taxpayers often choose to deduct items that fall into a "gray area," in which certain items may or may not be deductible depending on how the IRS interprets the tax code and the actual expenses. The taxpayer hopes that the IRS doesn't audit his return, or that if he is audited, the issues are decided in his favor. So rolling the dice on some deductions isn't all that uncommon, and that may be what Cage and his accountant did in his case.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
Recent Posts
- The best and worst of the online shopping cashback sites (11/19/2008)
- If nobody shops, nobody eats (11/19/2008)
- Craigslist hooks up dope users, dealers (11/19/2008)
- Boomers worry retirement won't be what they had hoped (11/19/2008)
- Black Friday roundup is back, Best Buy, Target, Staples and more (11/19/2008)
Reader Comments (Page 1 of 10)
9-11-2008 @ 9:50AM
greg said...
If we had the FairTax in place ALL these issues would be mute. It takes an accounting genius to help Mr. Cage avoid taxes and it takes IRS agents forever to do due diligence and then prosecute at OUR expense. Wake up America institute the Fair Tax and EVERYONE..including illegals would pay their FAIR share. As for the issue at hand I believe Mr. Cage did the best he could to NOT pay taxes and the IRS team did the best they could to get their piece. DRAW.
Reply
9-11-2008 @ 2:40PM
MG said...
Our govenment is too full of itself to ever consider simple effective solutions like a nationals sales tax, investing the money paid to social securty instead of spending it the day it comes in, investing in alternative energy, actually testing drugs instead of rubber stamping approval, allowing Americans to seek other sources cheaper medical drugs, enforcing our laws instead of creating more uninforceable laws, etc.
Get congress and the president out of managing the country and turn it over to the Government Accounting Services Organization and have them hire a country manager.
9-11-2008 @ 3:31PM
MyKisa said...
If only more knew what we know!!!!!
9-11-2008 @ 4:40PM
Karen said...
Greg, just a little fyi, for future posting... the term is "moot point", not mute. Helps you get your point across a little better when you use the terminology correctly. Have a great day!
9-11-2008 @ 7:44PM
Patrick Mooney said...
The FAIR TAX is hogwash.
If you read Pete Hendrickson's book, Cracking the Code, The Fascinating Truth about Taxation in America, you will finally be able to deal with the IRS on your own terms.
And the people will be happy, with great multitude's rejoicing.
9-11-2008 @ 7:49PM
bn said...
hurray for you! why oh why can't people understand that EVEN THE ILLEGALS would be paying their fair share of taxes with a national sales tax???? why oh WHY do people not understand that ANY kind of income tax is unconstitutional? wouldn't it be grand to see the IRS just disintegrate? they'd actually have to find something better to do than (stopping here cos big brother watches us!)
9-11-2008 @ 9:51PM
FES said...
I WILL CAMPAIGN AND VOTE FOR THE FIRST CANIDATE THAT DOES AWAY WITH INCOME TAX AND IMPLEMENTS A FEDERAL SALES TAX. IF YOU CAN AFFORD TO BUY YOU PAY AND IF YOU CAN'T YOU DONT. VERY SIMPLE. NO THOUSAND PAGE CODE TO DECIPHER AND NO NEED FOR THOUSANDS OF IRS AGENTS.
9-12-2008 @ 12:10AM
Amy said...
Greg, I agree. I'm all for the fair tax act. That is one of the many reasons I support Governor Huckabee. http://www.huckpac.com and http://www.fairtax.org
9-12-2008 @ 5:33PM
Leann said...
ok so u r saying that if cage can make a deal with the irs and only pay 660,000 to the irs for stupid stuff that he did in the first place .. then why didn't snap make the same deal with the irs instead of having to 3 yrs in prison for back payment on taxes
9-11-2008 @ 10:07AM
mike said...
It's "moot"...not mute.
But I agree. The Fair Tax would solve so many problems in this fine country, but so much money and power flow through the IRS that it will never come to pass. It's like trying to convince a devout Christian that their man-god martyr is a fraud and should be disavowed.
Reply
9-11-2008 @ 4:18PM
sonny said...
Your god Satan's philosophy is "Do what thou wilt?"
Christ put up with much more than your snide comments:
People like you and I actually crucified Him. The only difference
between you and I is that I know it, regret it, and have asked for
forgiveness and have been granted such. Your choice, Satan
or Christ. Eternity is a long time. You better get it right.
9-11-2008 @ 4:21PM
Lucas said...
Excuse me? How does enacting the Fair Tax Act equate in any way with claiming there is no God? A bit of a reach wouldn't you say? By the way, why even use God in your weak argument, unless you think that it would somehow bolster your opinion if you don't even believe he exists? Try a bit harder to actually think of something to say the next time you feel the need to hear your self prattle.
9-11-2008 @ 4:33PM
chris said...
It's like trying to convince a devout Christian that their man-god martyr is a fraud and should be disavowed
If I live to be 200 years old, I will NEVER understand how who I or anybody else chooses to worship has a bearing on somebody elses life. And I don't care if you're Muslim, Jewish, atheist or agnostic. As long as you aren't harming somebody else, that's fine with me. Even if you tried to "convert" me, if I say "no thanks" and you respect that, that's fine to. That's one of the reasons the world is going down the toilet. Disrespect. Not ALL Christians are "judgemental". Just like not ALL atheists are "self-absorbed know-it-alls". Gimme a break!
9-11-2008 @ 6:23PM
SCARLETT said...
THE MAN GOD IS A FRAUD? WOW! YOU REALLY TOOT YOUR OWN HORN, IT SOUNDS TO ME YOU ARE THE FRAUD HERE! IDIOT! ARE YOU JEWISH? I AM A CHRISTIAN JEW, WHEN MY FAMILY INCLUDING MY GRANDFATHER LEARN THE TRUTH ABOUT THE MAN GOD, HE EMBRACED HIM AND SO DID WE ALL. QUIT JUDGING, YOU SOUND IGNORANT!
9-11-2008 @ 10:44AM
Texas Bubba said...
Mr. Cage and millions of American should read "The April Game" written by a former IRS agent and published by Playboy Press, about 40 years ago. Some things never change. It's a game that people play...the odds of getting audited have decreased for several years. Oh, and the IRS accounts receivable total is in the billions$$$. If Mr. Cage doesn't educate himself about the tax laws/regulations or have a competent tax professional prepare his return than he gets what he deserves. A national sales tax is the only true fair tax. Everyone, legal to illegal residents pays a portion, not just a few.
Reply
9-12-2008 @ 1:31PM
Kathleen Hennessey said...
The IRS have "made an example" of a celebrity, and they are actually wrong according to tax law. As an entertainment executive and someone in the public eye, Mr. Cage has every right to deduct the cost of limousine rides for several reasons: (1) security, (2) ability to include others in the vehicle for business meetings, (3) ability to work and attend to other matters such as grooming (ever tried to shave or write a letter in a taxi?) during transit, and (4) to make sure he gets where he is going on time. As a retired executive, I have travelled by limo with many other executives on several continents. Limos are often necessary. So are business-related meals.
It is Mr. Cage's tax accountants and attorneys, not Mr. Cage, who should be castigated for their failure to vigorously defend their client's legitimate tax deductions. He should sue them for negligence.
10-02-2008 @ 2:27PM
Shirley said...
I agree totally with this poster's comments. I'm just a little fish in the sea but the IRS keeps auditing us and coming up with money we still owe them and I don't get a break -- why does Cage? My little $10,000 would be a pittance for him! We need the National Sales Tax!!!!
9-11-2008 @ 2:12PM
iraplowman said...
I would like to see a Fair Tax Act if it would actually work.
Reply
9-11-2008 @ 2:13PM
Joseph said...
Dealing with the IRS is a nightmare as you never get the same answer twice nor do you ever get to speak to the same agent twice. When they make an error even when you can substantiate it it takes forever to make it right.
Pray that you never have to deal with them.
Reply
9-11-2008 @ 3:59PM
Rich said...
The IRS admits that 50% of all answers given by phone are wrong and they feel that is acceptable. If you get the name and number of the person giving you the wrong answer, you are still responsible for getting a right answer and to pay the correct amount owed.