Please enjoy the latest edition of our Newsletter!
APRIL/MAY 2020 VOLUME 4, ISSUE 4
T O P H ’ S TAX RESOLUT ION T I M E S
513-342-4000 513TAX.COM
Don’t Spend a Dollar to Save a Quarter
Tax season is in full swing. We’ve been hard at work for the past few months helping clients get things squared away for the dreaded day: Tax Day, April 15. As I sit down with clients to talk about their tax situation, they often come to me with questions about how they can save on their taxes. They might have a big tax bill coming and want to get it down before the deadline. Unfortunately, I see many people who are using the wrong strategies to try to get their tax liability down or to eliminate it completely.
You also have to consider the type of retirement accounts you’re putting money into. Are they tax-deferred like a traditional IRA or 401(k) or do you pay tax upfront, as you do with Roth IRAs? These are just more potential costs to think about in addition to what you may or may not be saving on your current income tax bill. If you’re self-employed, you might think about how you can use that $10,000 to invest in yourself and your business. Does that $10,000 make more sense in your retirement accounts? Or can you get more out of it today by investing in advertising, equipment, staff, etc.?
I hear questions like “Should I contribute to my retirement accounts?” or “Should I buy a car?”Many of the questions often involve major expenses. Many people think that buying a car or other large item for their business will help them save big on their taxes. The reality of the situation is very different. The problem stems from misinformation about how tax deductions (aka “writing it off”) work. While investing in your retirement is always a good thing, when you put money into your retirement account with the intention of lowering your tax liability, the end result might not be what you expect. I had one client who wanted to put $10,000 into their retirement accounts. They thought by doing that, they would lower their tax liability by $10,000. In reality, they might only be lowering their tax liability by $2,500, meaning they still owe $7,500 in taxes. But there’s more to it than that. This $10,000 is now locked away in retirement accounts. If you’re putting that money into something like an IRA, you can’t touch it until you’re 59 1/2 or you’ll face penalties and be out more money.
Here’s another example. I spoke with a client who wanted to buy a car so they could write it off through her business. If they were looking at a $10,000 used car, they might see a tax saving of $2,500. In the end, they would have to spend $10,000 to buy the car to see the $2,500 write-off savings at a later date. They would still be out a net $7,500. Plus, they have to come up with the cash to pay their taxes (since the $10,000 is now locked in the car). And with a car, you also have to factor in the cost of maintenance, upkeep, and fuel. Suddenly, that tax write-off doesn’t seemworth it. It really pays to look at your tax situation and potential deductions carefully. You don’t want to end up spending a dollar to save a quarter when it simply doesn’t make sense. If you find yourself in this situation and you have questions, don’t hesitate to ask. We’re here to help you navigate this often confusing maze of taxes, deductions, and IRS rules.
–Toph Sheldon
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WHEN THE IRS COMES KNOCKIN’ ... LET US ANSWER THE DOOR!
2 Self-Employed Professionals Find Major Tax Relief
The clients’ name and personal details in this story have been changed to protect the identity of those involved. However, the tax results are 100% factual.
‘Start With Why’ And Better Business Will Follow “There are only two ways to influence human behavior: You can manipulate it, or you can inspire it.” –Simon Sinek It can often be hard to clearly articulate what you do for a living. That means it can be difficult to explain your vision to potential clients and customers, which then makes it harder to convince them to purchase your product or services. In “Start With Why,” author Simon Sinek illustrates the importance of explaining to others why you do the business you do rather than explaining what you do or how you do it. Sinek argues that when people start figuring out the “why” in what they do, it inspires action from others in a way that discussing the “what” can’t. Talking about the “why” engages emotions; analyzing the “what” is purely logical. When you try to sell something to people based on “what,” you rely on specific manipulations like price and product details. But if you help people understand why you do what you do by revealing the real purpose and intention behind your reasons, you build a sense of trust. This trust leads to loyalty, and loyalty means that person comes back to do business with you and also refers your business to others. This is how businesses grow! • Look backward at the original motivation for starting your business. What specific problem were you trying to solve, and why was it important to you to solve it? • Look outward by asking those around you why they spend time with you or why a customer buys from you. You can learn why people are drawn to you and your business this way. • Look inward by identifying a bigger vision you wish to contribute to. What do you believe in? What really matters to you? “Start With Why” teaches readers how to go about discovering their “why,” then instructs them on how to effectively use that information to help their business. It also helps them unleash their business’s vast potential that has remained untapped until now. Figuring out your “why” is a process of discovery, not invention. In order to discover it, you can turn to three key strategies.
Tax Resolution Story No. 1: Aaron Smart is self-employed. He first called me in September 2016. At the time, he owed the IRS $80,000. He had recently moved to Ohio from New York City to escape the high cost of living, but, as we all know, the IRS will follow you wherever you go. As Aaron settled down in Ohio, the IRS was breathing down his neck. He called me and said he had to do something about it. I looked at his situation and came up with a plan. First, Aaron needed to get current on his taxes, so I started with his 2016 returns to get the ball rolling. With that taken care of, I filed an offer with the IRS in November 2017. The initial offer was to settle the entire $80,000 debt for $100. The IRS took a full year to decide what it wanted to do before countering with this response: No deal. I appealed and the IRS took another year to decide its next move. The appeal department came back with their response: “We’ll settle for $16,000.” I took this to Aaron — $16,000 was a far cry from the original $80,000. Aaron said, “Let’s do it.” In December 2019, the paperwork was finalized, and Aaron happily walked out of his debt paying only a fraction of what the IRS originally wanted! Tax Resolution Story No. 2: Julie Owens, another self-employed professional, came to me in January 2019 with a tax lien of $17,000 filed against her. I went to work looking through her account and past tax returns. Something wasn’t adding up. It turned out that several of Julie’s previous tax returns had been prepared incorrectly. I suggested they go back and redo all the incorrect returns rather than try to settle with the IRS. It made more sense as a good first step. In the end, I amended three years of tax returns and refiled with the IRS.
The end result? The IRS approved the new returns, and it turned out that Julie only owed $646! It goes to show what kind of difference it makes when you work with someone who knows taxes inside and out.
–Toph Sheldon
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Taking a Breath After Tax Season
Every April, I try to schedule time for the kids and me to go to New York and visit my mom for a week or so. My mom always loves to see the kids, and it also gives Toph some quiet time to really focus as tax season comes to an end leading up to April 15.
correct the paperwork they need by the filing deadline, or they’re just not in a good place to deal with filing in April. Everyone’s circumstances are different. Of course, once April 15 comes and goes, Toph can breathe a sigh of relief, at least for a little while. Sometimes, he’ll take a few days for himself to decompress and get out of the office. If he can, he’ll get in some golf. If you’ve kept up with the newsletter, you know Toph loves his golf, and it’s a great way for him to refocus after several busy months. We also try to get in some family activities, like hiking. Toph likes to catch up on kid time, which can be on the shorter side during tax season. But once it’s over, the kids take front and center. No matter what we end up doing after Tax Day, however, the name of the game will be rejuvenation.
This year will probably be a little different because baby No. 4 arrives just before then, so I’m not sure if I’ll stay home longer or head out with four kids. As we put this newsletter together, a few details are up in the air, so we’ll see.
What isn’t up in the air is the filing deadline. We all know it’s coming, but it always gets here faster than we expect. It can catch some people off guard, which means they might have to file for extensions.
Filing for an extension isn’t necessarily a bad thing. For most of Toph’s clients, it makes sense to file for an extension. They may not have all
– Ashley Sheldon
Easy Deviled Eggs
TAKE A BREAK
While the kids hunt for Easter eggs in the yard, whip up this easy deviled egg recipe for a hearty snack that’s sure to satisfy any craving.
Ingredients
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1/2 cup mayonnaise
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Salt, paprika, garlic powder, and pepper, to taste
2 tbsp milk
1 tsp dried parsley flakes
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12 large eggs, hard-boiled
1/2 tsp dill weed
Fresh parsley, minced, and paprika for garnish
1/2 tsp fresh chives, minced 1/2 tsp ground mustard
Directions
4.
Mix mashed yolks with mayonnaise mixture. Spoon or pipe the mixture back into the egg whites. Garnish with fresh parsley and paprika. Refrigerate before serving.
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In a large bowl, combine mayonnaise, milk, parsley flakes, dill, chives, mustard, salt, paprika, garlic powder, and pepper. Mix well and set aside. Cut eggs lengthwise and remove yolks carefully to preserve egg whites.
5.
2.
Solution on Page 4
6.
3.
In a small bowl, mash yolks.
Inspired by TasteOfHome.com.
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Published by The Newsletter Pro • www.newsletterpro.com
Cincinnati Tax Resolution Powered by Toph Sheldon 9200 Montgomery Rd., Ste. 7B Cincinnati, OH 45242
PRST STD US POSTAGE PAID BOISE, ID PERMIT 411
513-342-4000 513TAX.COM
INSIDE 1
Would You Spend a Dollar to Save a Quarter?
2
The Most Important Question You Can Ask
Errors on Your Tax Return Aren’t Forever
3
Tax Season Comes to an End!
Easy Deviled Eggs
4
Hollywood’s Leading Man of Tax Fraud
Toph’s Tax Nightmares
No Blade Can Cut Through Wesley Snipes’ Tax Fraud
When people think of celebrity tax scandals, Wesley Snipes is one of the first names that comes tomind. We’ve mentioned him a time or two in the newsletter, but his trouble with the IRS runs deep. In 2006, Snipes, along with two others, were charged with“conspiring to defraud the United States.”Snipes was also charged with six counts of“willfully failing to file federal income tax returns by their filing dates”as well as filing false tax returns. Snipes received a total of eight charges. Snipes hadn’t filed tax returns between 1999 and 2004. During those years, he earned a reported $38 million that he didn’t pay federal income tax on. There was evidence that he simply decided not to pay. It wasn’t a case of hiring a bad accounting team, which is a common thread among famous individuals. When Snipes’case went to trial, his legal teammade an“861 argument.”This is a reference to Section 861 of the Internal Revenue Code that lists some of the sources of taxable income. Snipes argued his income was not taxable because the source of income wasn’t defined in Section 861. This argument is generally used by tax protesters, often to no avail because the argument is a stretch at best. Snipes’defense wanted to portray him as a“tax avoider” and not a tax evader. The courts didn’t play along.
Snipes was charged on three of the eight counts, and those three charges were misdemeanor counts of failure to file tax returns. He was acquitted on the felony count of conspiracy and filing false claims with the U.S. government. He was sentenced to three years in prison and was hit with a $17 million tax bill. In the end, he spent two years in prison and served the remainder under house arrest and had to repay his back taxes. Since then, Snipes has become a case study in tax fraud. His case was far more complex than what we can write about here— it’s almost a story worthy of its ownmovie.
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WHEN THE IRS COMES KNOCKIN’ ... LET US ANSWER THE DOOR!
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