Celebrity Deductions 2003

Taking Advantage

One thing about the kinds of taxes our rulers use to take money from people is how much control people have over whether or not to pay them. Some are close to voluntary, such as the luxury and gas guzzler taxes. A person can easily decide simply not to buy those things. Other things are not so easily avoided. Nicotine addicts have been popular targets for tax hungry rulers who are literally exploiting the addiction by tacking several dollars of taxes on each pack of cancer sticks.

Another target of money-hungry rulers seems to be nursing home residents. About two years ago, I discussed efforts here in Arkansas to levy a $5.25 per day per bed tax on those people. According to this story, the rulers in Pennsylvania are considering the same kind of thing, $5.00 per bed per person.

Am I wrong in thinking that this kind of exploitation of people at their most vulnerable state is disgusting, or is it just a matter of the ends justifying the means? Governments need money and however they get it is fine and bringing morality into the discussion is just out of place. Is that how people see this? If so, where does it stop? Will we see huge taxes levied on organ transplant patients? Pay it or die.

KMK

Six Ways To Keep IRS At Bay

Some good pointers.  I could add several more, such as:

   File tax returns later – earlier filed returns are more likely to be selected for audit

   Over-document out of the ordinary items – attach plenty of documentation to avoid having to go through an audit.

  Avoid electronic filing – unable to explain things in the limiting format required by e-filing.

  Use a Professional Tax Preparer – While this may sound self-serving, it is a fact that amateurs make many times more mistakes than pros; so IRS reviews self-prepared returns more closely. 

Use a C corp to smooth out income and prevent yourself from going into the higher target upper income levels.  Small corps are also audited much less frequently than 1040s or large corps.

KMK

Corp Tax Deadlines

I must not have been clear in my earlier post about the due date of corporate income tax returns because a lot of people are worrying about theirs being due this Monday.  The due date is March 17 only for those corporations with a fiscal year ending December 31.  This is the case for all S corporations.

However, those C corps who have taken my advice to use a different tax year will have a different due date.  It will be 2.5 months after the end of the fiscal year.  For example, a corp with a fiscal year ending September 30 will have a deadline for filing the tax return (1120) or extension (7004) by December 15.  The extension moves the deadline to six months later.    

KMK

QuickBooks Tips

I am trying my best to help everyone use QuickBooks most efficiently.  I have posted some new tips on my website, along with another more detailed explanation of why QuickBooks is a necessity for everyone, whether or not they run a business.

  Using Classes

  Setting Up Accounts

  Everyone Needs To Use QuickBooks 

Lower Tax Rates = Higher Revenue

Those who continue to lie about the effects of the Reagan tax cuts are not to be trusted. 

Will They Or Won’t They?

It’s very hard to tell if Bush has what it takes to get his tax cut package through.  Some members of his own party are already jumping ship.

On the other hand, there still some in his administration supporting the idea.

KMK

IRS News

IRS has done a nice job in the past few months in improving its dissemination of news releases, both through emails and on their website.  You can sign up for the email version, which I have noticed arrive a day or two before they are posted on the website.

Some interesting recent news releases from IRS:

The interest rate they charge on late tax payments is reviewed and modified every quarter to stay in line with the markets.  For the second quarter of 2003 (April through June), it will remain at 5.0%.  This is also what they pay on refunds for amended returns.  I have seen some people actually sit on filing 1040Xs in order to accrue more interest from IRS than they would be able to earn in a savings account.  Be careful that you don’t wait too long and submit the refund request after the three year statute of limitations has expired.  IRS interest rates are compounded daily, which does make the effective APR (Annual Percentage Rate) a little higher than 5.0%.  It is not, as I have heard some people claim, 5.0% interest per day.  That would work out to about 1,825% APR, which is more in line with what the Sopranos and H&R Block charge.  This notice also only applies to interest and is completely separate from the various penalties IRS charges.

IRS is beefing up their educational programs to get kids started right on the road to being willing and obedient taxpayers.  The Understanding Taxes program looks interesting and seems like a very good idea.  It even includes a new type of the VITA (Volunteer Income Tax Assistance) program, which is how I first learned about preparing tax returns, back in 1975.  In fact, that hands-on experience was 100 times more educational than the textbook courses in taxation I was taking at the same time.

KMK

If It Looks Like A Duck…

One trick politicians love to use is to break out the euphemism thesaurus and refer to government charges as anything but the dreaded “T” word so they can claim not to have raised taxes.  Bill Clinton called them “investments.” The governor of Alaska is calling them “user fees,” including the snatching of $100 from every employee’s first paycheck, allegedly for schools.   

KMK