Look Before You Leap

I guess I really shoudn’t be surprised at the number of stupid people in this country. However, it never ceases to amaze me how often people will set their businesses up as an LLC or an S corporation without the foggiest idea of what the heck they are doing. Practically every single day on the tax question boards on such sites as AskMe.com, someone is bragging that s/he has an LLC or an S corp and wants to know how the taxes are handled. They are shocked to learn for the first time about some of the pitfalls inherent in the format they selected. I can’t resist saying something as direct as “this should have been reviewed before you chose that format. It’s a bit late to think about the tax consequences now.”

For those of you who have the good sense to research the tax aspects of different business formats before starting out, check out this comparison. There is no such thing as a one size fits all; but I’ve lost track of the number of occasions I have heard of where a business owner cut his/her own throat by using an LLC or S-corp instead of a C corp.

This is another reason why I distrust the IRS & media claims of the “tax gap” in this country. Rather than underpaying taxes, most people are overpaying because of idiotic moves like this.

KMK

It Was Priced Too Low

For several months, we had been offering our unique 285 acre ranch for a price of $399,950. It would easily be worth well over a few million dollars back in our old stomping grounds of the S. F. Bay Area; but this is just Arkansas, so we adjusted accordingly.

A few months ago, some property close by sold for a per acre price that made our price seem ridiculously low. The final straw in our debate regarding the proper price came earlier this week from an IRS auditor, who was here working on a case. She also owns some farm property in Arkansas and has reviewed other local properties and informed Sherry that we were asking far too little.

So, we have bumped up the price to $449,995, which is still much lower than similar properties are selling for. Perhaps, if we don’t sell at this price, we’ll raise it again in a few months, and again later, until we hit that magic number. There are obviously some potential buyers who suspect that there must be something seriously wrong with a property this large if we are only asking this much.

Interestingly, the same auditor also told Sherry that some CPAs & tax attorneys in Fayetteville, with much less expereince than I have, are charging $500 per hour. While my current rate of $195 per hour is much lower than what I used to charge back in California, I was under the impression that it was very high for Arkansas. We’ll have to check this out after Tax Season.

KMK

Beware of Tax Protestor Schemes

If it sounds too good to be true, it probably is.�

IRS has finally started doing what I have been advocating for decades; speaking out against the various tax protestor scams that have been sucking in gullible people.� This is a welcome change from the Service’s former approach, ignoring the promoters of the schemes and saying nothing.� This silence was used by the promoters to signify that IRS had no problems with their ideas.

I don’t want to repeat information that is easily accessible elsewhere, so here’s a good place to start if you are curious about a tax protestor program.�It’s the IRS Criminal Investigation Tax Fraud Alerts.

Another good resource is this page with IRS Small Business News Alerts.

KMK