Or you could start your own business and not be dependent on anyone else to take care of your future.
Posted by taxguru on February 18, 2003
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Posted by taxguru on February 18, 2003
New Treasury Secretary Hits the Road to Promote Tax Cut Plan
A definite improvement over his predecessor, who felt it was more important to spend his time traveling around the world with an Irish rock star giving away US taxpayer money.
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Posted by taxguru on February 18, 2003
And why is it that Little Tommy Daschole and his fellow travelers in the DemonRat party are fighting Bush on all three fronts?
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Posted by taxguru on February 16, 2003
Retirement Funds
One of the many arguments against relying too much on the Social Security Ponzi scheme is the fact that, despite what many people may believe, there is no such thing as a trust fund holding the money you have been paying in all of your working lives. Again, anyone who claims that there is such an account is either a liar, an idiot or both, and not to be trusted.
When a person passes away, there is no money or account to pass on to one’s heirs, other than a measly monthly payment for some surviving spouses, until they die. This very real rip-off definitely earns the SS system the right to be called the Death Tax For The Other 98% of Americans (other than the evil rich top 2% who have to pay estate tax).
While my game plan has always been to help clients legally avoid paying anything into the SSA Ponzi scheme and use that $10,000 to $20,000 per year in savings to better invest for their own futures, Bush’s idea to allow some privately controlled investing of money that would normally go to those corrupt rascals in DC is a step in the right direction. In fact, sticking that money under your mattress would yield a better rate of return than sending it in to DC for most people.
KMK
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Posted by taxguru on February 15, 2003
Non-Resident State Taxes
I’ve written a lot on establishing a tax home in a low-tax or no-tax state, such as Texas, Florida, Nevada or Washington. While that kind of step exempts most kinds of investment income from state income taxes, it doesn’t necessarily eliminate state taxes on income that was earned within a taxable state from services rendered or from property located inside that state. Rent income earned from a property located in a taxable state has to be reported on a tax return with that state, regardless of where the owner lives.
Likewise, when property inside a taxable state is sold, a tax return has to be filed reporting the resulting profit, loss or tax deferred exchange that was done. For example, we have helped hundreds of people dispose of high gain real estate located in the PRC and reinvest the proceeds into new properties in low or tax free states. All of the tax on the profits from the PRC properties is deferred and rolled over into the replacement property. If those people ever sell the replacement property and don’t do a 1031 exchange, they will technically have to report the previously deferred gain to the PRC and pay the tax on that. However, there is an element of the honor system in this because if the property is located in another state, the California Franchise Tax Board will literally be out of the loop in terms of knowing anything about the sale, unlike the situation for sales of California property.
Compensation for personal services is a little trickier and depends on how your employer reports it. As this article in the Wall Street Journal discusses, many states have what they call a “Jock Tax” to get their share of income tax from highly paid athletes and entertainers who perform inside the state. Their income for the year has to be prorated between the various states in which they performed and they have to file income tax returns for all of those that have income taxes. While many athletes and entertainers have established Florida as their official tax home, they are still keeping their tax preparers quite busy preparing tax returns for each of the states in which they earned income.
There are tricks that can be used to disguise where the income was actually earned. A good creative and aggressive tax advisor can help set those up.
KMK
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Posted by taxguru on February 14, 2003
IRS Response To Tax Protestors
IRS has updated their response to many of the bogus arguments used by tax protestors. You can even download a more detailed 36 page pdf document covering these points. It pretty well speaks for itself and is consistent with what I have been saying forever, that the arguments are complete garbage and anyone who tries to use them to avoid filing tax returns will get a well deserved stay in the Fed’s gray bar hotel.
KMK
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Posted by taxguru on February 14, 2003
With friends like him…
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Posted by taxguru on February 14, 2003
1099 Discrepancies
A common situation when setting up a new corporation is discrepancies with 1099s by customers. They are required to be submitted to IRS for unincorporated payees, but no 1099 reporting is required for payments to corporations. What often happens is a customer includes payments that were made to one’s corporation or deposited into the corp’s bank account under the person’s unincorporated ID number. While it would be best to have them correct the 1099, that isn’t always possible and in fact is not even a big deal.
Some people think this means they have to pay the much higher personal and self employment taxes on this erroneously reported income. Not true. As I mentioned earlier, the amount of income you pay tax on is not dependent on the 1099s. I have had this situation hundreds of times with clients and have worked out a simple way to avoid any IRS problems. To avoid a nasty-gram from IRS when they match up 1099s with 1040s, it’s essential to report gross receipts at least as high as the amounts reported as income to you personally on 1099s. Then, in either the Cost of Goods Sold or Other Expenses section of the Schedule C, include an entry for “Income Deposited Into Corporate Account and Reported On Its 1120” to back out that income and avoid double taxation of it. I usually include another attached statement explaining about the newly formed corporation (giving its FEIN) and how erroneous 1099s are being handled. IRS has never had a problem with my reporting these in this manner.
As I have mentioned on several occasions, this kind of additional self defense info is one of the reasons I refuse to accept electronic filing of income tax returns. There is no place to explain such discrepancies in that format.
KMK
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