Don't Mess With Taxes

Nicolas Cage, the Oscar-winning actor most recently recognized for his "National Treasure" action movies featuring federal institutions, is now battling a real government agency: the IRS.

Tax officials contend that Cage used a company he owns to wrongly write off $3.3 million in personal expenses. In response, Cage has filed a Tax Court petition contesting the IRS judgment.

At issue is $814,000 the IRS says Cage owes personally and $988,000 the feds say is owed by his Saturn Productions. Then, as always, there are the additional interest and penalty charges for the tax period in dispute, 2002 through 2004.

The IRS says the star's L.A.-based production company wrongly wrote off limos, meals, gifts, travel and Cage's Gulfstream 1159A turbojet. Plus, it argues that Cage personally owes taxes on the perks as part of his salary and "constructive dividends."

In an e-mail to Forbes, Cage's business manager said the expenses were proper as "customary in the entertainment industry" and were partly based on the actor's "security needs."

A growing tax A-list: A search of Internet Movie Database found just a couple of times that Cage and another recent IRS target, Wesley Snipes, worked together. One was the VH1 special entitled "Hollywood Secrets Revealed -- Scenes They Don't Want You to See."

Their IRS "collaboration" is just as unintentional as that television program pairing, but maybe it is time for Nick and Wesley, or at least their people, to do lunch. That way Cage and/or his attorneys could ask Snipes et al for some tax and legal tips.

In the meantime, let's go ahead and add Cage to our list of celebrity tax scofflaws.

Business tax breaks: While I definitely don't want a dispute with the IRS, I certainly wouldn't mind being successful enough to worry about claiming a private jet as a business expenses.

For now, though, I just have to content myself with writing off more mundane self-employment costs.

They include the usual suspects:

• Office supplies
• Office equipment
• Business mileage (in my 2000 Chevy Cavalier)
• Professional fees and dues
• Work-related magazine and online subscriptions

A more complete list is available in this NFIB article. H&R Block offers its own list here.

Work.com offers this How-to Guide on business deductions. And you also should check out this Nolo.com story on the IRS' "necessary and ordinary" standard for claiming business expenses; that's what apparently tripped up Cage.