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Personally I just get more angry at the tax prep companies that promise "the biggest refund" and all the ways that people are convinced that preparing taxes is hard and there are lots of super secret magical loopholes to get you more money back, or less owed. I mean, shy of rich people moving money off shore somehow, or...whatever...things I don't really know about that people use as tax havens... For the huge, huge majority of us, it's a reasonably simple equation and there is only one correct answer at the end. And there isn't much benefit to paying someone else to prepare your taxes, you're ultimately responsible for them being correct. I was in a class in college with a man who had worked for decades for H&R Block, and he'd done so with no formal education. They are not selling you the services of highly qualified people there.
The only justification to pay someone else is sheer impatience, or if saving the time it would take you is truly worth outsourcing the task to someone else. An unwillingness to sit down and go through it yourself, for whatever reason. Or knowing that you have the reading comprehension skills of a gerbil, perhaps? lol It's not sorcery.
The real challenge, if you've got some flexibility and certain circumstances, is in tax PLANNING...which is a whole different animal.
I agree with you. But I think there is some...massaging....that is done. I remember years ago I worked with a woman and when they did their taxes, they owed a bunch. They took it to a different accountant and he either reduced the amount they owed by a lot or they got money back. I learned then that a lot of people take some liberties with taxes. I think many people who own small businesses were doing this. They would write off anything and everything they could. I think the cracked down some on this but I bet $$ it still goes on a lot.
We got audited a couple years ago and it was triggered by a data base check. A financial institution reported some income directly to the IRS and we had accidentally left it out when we filed. Once this trigger happened, "someone" looked into things in more detail. We never talked to anyone in person, it was all by letter.
Our data point is that you need to consider the IRS using artificial intelligence and data bases to easily and inexpensively do a huge amount of auditing. If you get audited, I doubt it will be "random", more likely some very smart artificial intelligence picked out out for a closer look.
I don't know that I'd call it an "audit" but one year they asked me for proof of the child care costs I claimed on my return. Which I had, and sent to them, and that was that. Easy.
Which brings me to this:
Quote:
Originally Posted by Grlzrl
I agree with you. But I think there is some...massaging....that is done. I remember years ago I worked with a woman and when they did their taxes, they owed a bunch. They took it to a different accountant and he either reduced the amount they owed by a lot or they got money back. I learned then that a lot of people take some liberties with taxes. I think many people who own small businesses were doing this. They would write off anything and everything they could. I think the cracked down some on this but I bet $$ it still goes on a lot.
"massaging."
No, the thing is, either you know about all the things that count and how they count, or you take the time to look it up and ask the right questions and find the right answers. Plain and simple, if you can PROVE something, and it falls within the letter of the IRS code that you can take that benefit, then you do it. If you cannot prove it, or it's not certain, or it's not allowable in the tax code, and you sneak it in there because you think you're being slick, you are breaking the law.
And all I can say is...I wouldn't.
The way the tax code is structured, they usually phrase things like, "If this, or that, then the greater of the thing" and it's going to give you the most benefit. There are worksheets to walk you though processes.
Quote:
Originally Posted by JONOV
Yes and no. If it's just you and you work one job, or you're married and both work, that's fair enough.
But you don't need to be incredibly rich to have a complicated tax situation. If you own a rental property or your own business it can get complicated and cumbersome quickly. There may only be one answer but the equation becomes much longer and more complicated.
You don't say?
I had to handle a St. Clair vs The United States tax situation once. That's where a veteran gets a big disability severance and it is taxed and reported as taxable income, though it isn't supposed to be, and the DoD refuses to issue a corrected W-2, so one must first file as though it IS taxable income, then file amended returns (we had one federal and two state that year) including a pile of documentation with every page noted "ST CLAIR VS US" at the top.
I'm a data nerd and an accounting nerd though (an analyst, somewhere between data science and accounting and auditing) and I actually enjoy analyzing tax data in spreadsheets for fun. I don't fancy myself to be any more intelligent than anyone else, just probably a lot more patient.
<snipped>. I believe that they can garnish your pay, as well, though I never saw anyone have that happen I'm sure it can. <snipped>
Yes, it can. I have a story about that.
By the time I threw my ex out (alkie, gambler, same old same old), we were pretty deep in debt, and of course it was all going to fall on me because I was employed. One of those debts was money we owed the IRS, probably from playing with too many exemptions to get bigger paychecks.
The IRS started its routine of sending letters. First the nice one politely reminding you that you owe them money. It was about three thousand or thereabouts, IIRC. Then another a few months later and so forth.
I'd done this before, and I knew that if you just reach out to the IRS, they will be happy to make a payment plan. But I didn't have the money to squeeze out of my budget yet, so I was putting them off as long as possible, and I waited too long.
I got a letter saying they were putting a garnishment on on my wages. By law, all they had to leave me was $75 a week. I got paid biweekly so that would mean that my check every other week would be $150 for about three month. Meanwhile, it cost me a couple hundred a month just to commute to work.
I figured I'd just call the number on the letter and say oopsie, sorry, let's make a payment plan. However, the nice lady at the other end informed me that it was too late for that. Once they contact your employer, they can't take it back unless you pay in full.
She did tell me, though, that I could fill out a piece of paper saying taking the full amount would create a hardship and then they would be able to leave more money in my paycheck. It would just take longer to pay back the debt. She faxed me the paper, I faxed it back signed, she faxed back the approval and told me to give it to my payroll department. Very helpful. I thanked her profusely. I put the paper into an interoffice envelope, and on my way out of the office that day, I stopped on the floor where the payroll department was and left it on the appropriate person's desk.
That was around 4:30 on the 10th of September, 2001, and I worked in the World Trade Center.
Miraculously, our paychecks were directed-deposited in our accounts that Friday, despite everything. But the garnishment order had never gone in. I did not hear from the IRS until about a year later, when the cycle started again. I got the polite letter informing me that I owed $3000 or whatever. By then, I was in better shape, at least financially, so I immediately contacted them and said I would like to set up a payment plan.
One of those odd little side stories connected to a much larger one.
They ALWAYS get caught, and get a stiff prison sentence, why are there people that think they can get away with it? I mean heck, in our current system Tax Evasion is treated far worse than rape, murder and genocide, so just how stupid does one have to be to do it?
The number one reason from my perspective is that tax preparers/tax accountants tend to offer options that will help you get more of your hard earned money back from Uncle Sam by finding one loop hole or another that is not really legal but if you pretend on paper to have xyz, then you can pull the wool over the govt's eyes and get away with it. Being that they work with tax laws for all or most of the year, tax accountant know all the loop holes and they offer them to their clients. The more money you make, the more they want to help you hold on to your money. I've been offered a loop hole or two numerous times over the past decade. I've turned them all down every time even though it means that I walk away from a few grand over the past few years. Nevertheless, I have to live with myself so I (reluctantly) turn it down. Other people do not care about getting over on the govt - they can do and still live with themselves. They take every opportunity to beat the system. It feels good and once they do it the first time, there's no going back. They continue until they're caught many years later. It's a slippery slope that eventually catches us with them at the tune of hundreds of thousands or even million dollars are more owed to the government. I've seen this happen with people on every social economic level.
If you don't want to pay tax than become poor, homeless or go on welfare.
You think you can find some way to cheat the system.
I view it differently. A very wealthy man can well afford to hire the best tax consultants money can buy, to get his tax load down as low as possible, sometimes to near zero!
In my eyes, that's tax evasion of the worst kind!
In the 1950's, when the tax on the rich was 90%, how many rich people came even near to paying it?
Ronald Reagan was under that tax system in the 1950's and he managed to buy a nice home in Pacific Palisades and a ranch in the San Fernando valley. Question is, how much money did he spend on a tax consultant to get him to evade paying taxes?
I don't know that I'd call it an "audit" but one year they asked me for proof of the child care costs I claimed on my return. Which I had, and sent to them, and that was that. Easy.
Which brings me to this:
"massaging."
No, the thing is, either you know about all the things that count and how they count, or you take the time to look it up and ask the right questions and find the right answers. Plain and simple, if you can PROVE something, and it falls within the letter of the IRS code that you can take that benefit, then you do it. If you cannot prove it, or it's not certain, or it's not allowable in the tax code, and you sneak it in there because you think you're being slick, you are breaking the law.
And all I can say is...I wouldn't.
The way the tax code is structured, they usually phrase things like, "If this, or that, then the greater of the thing" and it's going to give you the most benefit. There are worksheets to walk you though processes.
You don't say?
I had to handle a St. Clair vs The United States tax situation once. That's where a veteran gets a big disability severance and it is taxed and reported as taxable income, though it isn't supposed to be, and the DoD refuses to issue a corrected W-2, so one must first file as though it IS taxable income, then file amended returns (we had one federal and two state that year) including a pile of documentation with every page noted "ST CLAIR VS US" at the top.
I'm a data nerd and an accounting nerd though (an analyst, somewhere between data science and accounting and auditing) and I actually enjoy analyzing tax data in spreadsheets for fun. I don't fancy myself to be any more intelligent than anyone else, just probably a lot more patient.
My brother is like that. I get frustrated and pay someone. Just one of those things like paying for a lawn service or paying for XYZ car repair or maintenance or household handyman work. Some things I'm down to tackle and some things I'm not. Never woulda thought I'm handy with the plumbing in my house either but I've replaced a ton of piping and plumbing fixtures in my house.
The number one reason from my perspective is that tax preparers/tax accountants tend to offer options that will help you get more of your hard earned money back from Uncle Sam by finding one loop hole or another that is not really legal but if you pretend on paper to have xyz, then you can pull the wool over the govt's eyes and get away with it. Being that they work with tax laws for all or most of the year, tax accountant know all the loop holes and they offer them to their clients. The more money you make, the more they want to help you hold on to your money. I've been offered a loop hole or two numerous times over the past decade. I've turned them all down every time even though it means that I walk away from a few grand over the past few years. Nevertheless, I have to live with myself so I (reluctantly) turn it down. Other people do not care about getting over on the govt - they can do and still live with themselves. They take every opportunity to beat the system. It feels good and once they do it the first time, there's no going back. They continue until they're caught many years later. It's a slippery slope that eventually catches us with them at the tune of hundreds of thousands or even million dollars are more owed to the government. I've seen this happen with people on every social economic level.
THIS! This is what I'm talking about. No, no, no. If any tax professional is offering to get you "loop holes" by claiming things you don't really have and pulling the wool over the eyes of the IRS... What the heck kind of sketchy people are you talking to??? Just aagh! Not just the professional ethics of it, but being funny with your accounting, just...I can't. I'm serious, the reaction I have to reading stuff like that is the same as an English major reading txt-speak. Or a microbiologist watching a restaurant worker go back to work from the bathroom without washing their hands.
No.
Either it is legal and allowable and you can prove it, so you claim it, as you should... Or it's not, and you should not.
Period.
You can make conscious decisions in how you LIVE that will change those factors when it's time to file. Making donations, keeping receipts, tracking business expenses, timing your buying and selling of investments...all of that is perfectly legal and totally allowed. But just making up BS to trick the tax man? NO. And any professional tax preparer who tries to say otherwise should not have their job!
The numbers either work or they do not, it is a math equation, and there is only ONE correct answer at the end of it. If you're leaving money on the table that you are legally allowed to claim, that you've got documentation of and is covered by the rules and the code (which is VERY specific) then you're being silly.
Quote:
Originally Posted by JONOV
My brother is like that. I get frustrated and pay someone. Just one of those things like paying for a lawn service or paying for XYZ car repair or maintenance or household handyman work. Some things I'm down to tackle and some things I'm not. Never woulda thought I'm handy with the plumbing in my house either but I've replaced a ton of piping and plumbing fixtures in my house.
And there's nothing really wrong with that. If you are sensible about it, you're paying X person for Y service to save Z time and effort of your own. I don't change my own oil! I pay someone to do that. Same thing.
So long as you're not buying this "Oooh, super secret loopholes of the rich and famous!" nonsense... I know that they often can and do structure business dealings, moving money around to try and fiddle their losses and gains on the books and all. But again, that falls into actually planning the things you do all year round, to how it will affect your taxes later. Some of it's legal and some is not, when it's not, they do tend to get caught. There was a story about a company called Prium in Seattle where they did a lot of shady stuff. This kind of thing tends to impact more than just taxes, though. Other kinds of fraud are usually part of the picture, and it will eventually blow up in their faces.
Why do so many people think they can get away with Tax Evasion? ... so just how stupid does one have to be to do it?
In addition to stupidity and laziness, which have already been discussed here, also simple greed. Such people are pathological and do not care about the consequences.
I have lived in high tax European countries, and in comparison the US is a tax haven. While in some European countries evasion is a matter of survival, in the US I would not even think of it.
After the European experience, I could not fathom why people would evade taxes in the US, so I chalk it up to greed as the main factor, especially in the case of people with high incomes and wealth.
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Accountant who does your taxes
