Financial Health & Personal Money Management

[misombra]

thanks g-scorp!

i have a question....

how can i make the irs disappear?

[GrkScorp]

thanks g-scorp!

i have a question....

how can i make the irs disappear?

:yawn: oh wow.. goodmorning everyone.. let me first pick up the bags under my eyes.. ugh.. lol

ok.. well.. you can't make the IRS disappear... lol..

They're always going to be there, but you can make them be more tolerable..

I mean, I can give you great tax (avoiding) advice, [how to plan transactions, so you don't have to get stuck with the tax during Apr.15th], but I don't really give out tax (evasion) advice, [how to cheat].

Although, one of the benefits to studying Accounting is that ALL your Professors will always point out theoretical flaws or loopholes; in the name of academia. (Example: If Sally works for her boss, notice all the deductions she's limited to; but imagine if she were to form an S-Corporation which is a flow-through tax entity, all of a sudden, the S-Corporation has ordinary business expenses, so Sally can make the same exact income from her boss, but for as long as the S-Corporation is receiving it first, and then paying it out to Sally; notice how Sally ends up having a much lower taxable income on her individual tax return at the end of the year... cough cough... hint hint.. class!!!).

Now, I mean.. it's fine in the classroom, because you're a Professor, so it's in the name of Academia/Education.. lol..

Kind of like that old joke:

- Time of death, 10:14pm
- Dr. Gray look! I'm feeling up on her boob!
- Dr. House! We are men of Science! The proper term is Breast!


So, if there's any particular issue, (besides paying taxes to begin with), i'll be glad to help out.

[misombra]

i'm self-employed subcontractor, and i don't want to give all my money to the government.

is all my income taxed regardless of how much i make, or do they start charging after you hit a certain point?

i would rather give my money to npr or knme than to the government.

[GrkScorp]

i'm self-employed subcontractor, and i don't want to give all my money to the government.

is all my income taxed regardless of how much i make, or do they start charging after you hit a certain point?

i would rather give my money to npr or knme than to the government.

Well.. lol.. not ALL your income is taxed. I'm sure you or your accountant take advantage of your Personal Exemption, and at least your Standard Deduction. Now, if you have kids, and you're married, things are getting better already!

Having kids means more Exemptions. Being married & filing jointly means better marginal rates (wider income tax ranges), and a larger Standard Deduction. I mean, if you can itemize, that's great, for as long as your honest, because Itemized Expenses raise a red flag to the IRS and increase your chances of being Audited. (But the one thing that really gets the IRS pissed are Home Offices. So don't do it.. lol).

I mean, when you have Deductions, Exclusions, Exemptions, that income is basically not being taxed; AND because it's not going into Taxable Income, it's effectively lowering your Marginal Tax Rate (or Average Tax Rate, if you want to look at it as a whole). Then, there's the whole world of Credits. Credits are not really your best friend unless you're thinking about your Estate, but Credits do help lower your Tax Bill, dollar-for-dollar. $1 Credit saves you $1 in Taxes. And if you have kids, start putting them to use! (lol..i'm just kidding, but seriously, Education & Child Care Credits can really add up during tax time).

If you're self-employed, you are already take advantage of many deductions and exclusions that are not available to the regular tax-payer. However, It's NEVER a bad idea to incorporate, (S-Corporation). The corporation itself pays no taxes, instead all Net Income is transfered onto you, onto a seperate form you attach to your personal income taxes.

The benefit, all the things that are normally business expenses which you are not able to deduct, are now deductable (if you think about it), since they never go into your income to begin with, you don't have to pay taxes on them! Tell me a particular issue you're having.. i'll be able to help you out more.. Anyway.. have to run.. later!

[misombra]

But the one thing that really gets the IRS pissed are Home Offices

why? that's what i have. a home office.

[GrkScorp]

But the one thing that really gets the IRS pissed are Home Offices

why? that's what i have. a home office.

Everytime you sent in your tax returns, they are received by the IRS, but get sent to a staff person for transcription. The staff member inputs the information onto a computer form, and stores it. Now, to cut costs for the IRS, you can submitt your tax return electronically; but at the end of the day, both are saved and stored onto their computer systems.

Why? Well, they run multi-variable regressions on fraudulent tax returns and try to find a relationship amung ratios and certain key items. For instance, (When your Gross Income is low relative to your charitable deductions, when your Gross Income is low relative to your capital losses, When your Itemized deductions are high in proportion to your Adjusted Gross Income, When you include such items in your return like "Home Office Deductions", etc.) Tax Returns with these Items have a significantly increased risk of tax fraud, and the IRS computer systems assign a (RED FLAG).

Out of all tax returns assigned a RED FLAG, the computer system randomly selects aproximately (1.7%) of these tax returns to be Audited. Out of the 1.7% which are selected, more than 13% fail to comply with the Internal Revenue Code, and only less than 2% are cases of serious tax fraud.

Now, once you know how the IRS system works, (to optimize fraud & non-compliance detection, and to minimize Audit costs), you can see which items are better left out of your tax return if you have (questionable) amounts in your tax return. If you're an honest person, it really doesn't matter what you put in there, but Compliance Audits by the IRS will eat up 3-months of your time!

[Tiay]

wow, that was really thorough thanks!