Pete Rose/Richard Hatch: Pay income tax on all of your income
Two celebrities offer great examples of what can happen when you don't claim key areas of your bread winning.
Pete Rose pleaded guilty in 1990 for not paying taxes on money made from selling memorabilia, signing autographs and betting on horse racing. We know what you're thinking: Who comes out ahead playing the ponies? Apparently, Pete Rose.
Except baseball's Hit King had to serve five months in prison, pay $366,000 and do 1,000 hours of community service.
The other fella is Richard Hatch, otherwise known as "that 'Survivor' guy." He didn't claim his $1 million in winnings. How'd he miss that? Such an oversight makes you want to give him the benefit of the doubt. But the courts haven't, dismissing his claims that CBS agreed to cover the taxes.
Hatch ended up serving three years in prison, but landed in trouble again in December 2010, with the IRS contending he had violated the terms of his release by failing to file federal income tax returns. He ended up serving an additional nine months in prison during 2011.
LeBron James: Moving to new state can mean tax savings
Regarding state tax bills, celebrities can also provide examples of ways to save money. Here's a maneuver that saved one guy anywhere from 5 to 7 percent.
NBA star LeBron James shaved a significant tax burden with his controversial decision to "take his talents" to Florida. The Sunshine State is one of a handful that doesn't have a state income tax. New York, on the other hand, is the highest at more than 10 percent for the wealthiest folks. James saves himself a couple million each year by playing for the Heat instead of the Knicks. And he stays warmer.
Ohio, the state that James' former team, the Cleveland Cavaliers, calls home has a tax rate of about 6 percent for the state's wealthiest residents, so, while Cavs fans may still curse his name for eternity, he's still saving on his taxes while living in South Beach.
Though the tax man will nod with approval, you may face some popular opposition. But if you're sour against people avoiding taxes; don't hate the player, hate the game.