Granted, this is probably because I had different things to worry about when it passed, but I didn’t think about how the Tax Cuts and Jobs Act would affect tax fraud. A recent article from Accounting Today, though, takes a look at how some proponents claimed that it would have this effect.
Spoiler alert: there is not a whole lot of optimism among tax professionals that that will be the outcome.
On one hand, it is easy to see how people felt that less fraud would be a positive outcome. The setup of the new plan is that more people will be taking fewer deductions, and that seems like it would provide fewer places for people to cheat.
On the other hand, as some interviewed in the article allude to, it just means that people will probably look for other places to pad their numbers. What this seems to come down to is that the rules are different, but it is not as if people are any more thrilled with paying taxes.
And illegal actions aside, people should look for places where they can use the new rules to their advantage. Contrary to what some say, it is not as if taxes have suddenly become simple. The rules are complex and those with the proper knowledge will find ways to use it to their advantage. This isn’t fraud, and even should be encouraged, but the mindsets are similar – getting the most that you can returned to you.
Also mentioned in the article is the funding of the IRS, something that tax reform did not really handle. The agency has been receiving less funding for years and now has to implement a large number of new rules. It is easy to see how this could lead to more things slipping through the cracks. This is never something one should count on, though.
As a personal note, I am sure the new rules will also lead to new mistakes. I only call them mistakes because not everyone is going to know how to work within the new rules and it will lead to honest errors. The IRS won’t simply overlook these, though.
No one likes to pay taxes, and only a very simple system would present a situation where people could not try to turn things to their advantage and also know they’re doing everything correctly. The complicated system isn’t going away, though, so just be sure you operate in a legal way with the proper support. That is just good practice no matter the rules and what we always strive to provide.
Another good practice to mention now is thinking of disaster plans. I know I spoke of this last week, but with the destruction from Hurricane Florence that followed, I thought it would do well to mention it again. Especially after I read this article about how many businesses don’t have a disaster plan, never mind individuals.
Again, this is something that is not fun, but something is worth spending the time to do.
As I also mentioned last week, the IRS does offer some relief for those affected by natural disasters, and this has happened for those affected by the latest storm. For those who want the official data on it, please click here.
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Occasionally my job is just to remind you of things you may have heard before, things that that the IRS wants to make sure you remember. A lot of these things are usually dictated by the calendar.
So to start, estimated tax payments can be due for many on Monday, September 17. This is something that may need to be spoken about more as an increasing number of people earn their living in non-traditional ways. You see, taxes are supposed to be paid as you earn money. This isn’t a big deal if you have a W2 job, for that money is being taken out of your paycheck each time you are paid.
If you do not earn a large portion of your money in such a way, though, and expect to owe taxes at the end of the year, the IRS really wants you checking in with it four times a years and making estimated payments toward that tax bill. If you do not do that, you could face penalties when you next file your tax return.
If this is something you want to check in on and see if you should be making such payments, don’t hesitate to contact us.
The calendar is also telling us that it is hurricane season again, and as images from the news remind of the potential disaster of these events, it is also worth a reminder that you want to take some actions to protect your finances from acts of nature.
So first, think about where your key documents are kept. If you have something that would be difficult to replace if lost, it should be protected. A safe that can guard against most disasters may be more affordable than you think, and what it pays back in peace of mind could even more valuable. And this should not only be physical documents, think about where the digital information is kept, and ensure that it is not in only one location.
Second, documenting the valuables in your home could help you recoup their value if you ever have an insurance claim. This is even easier than getting a safe now that almost everyone carries a phone with a camera in their pocket all the time. A series of photos of your valuables can help support any claims you have to make.
Lastly, when large disasters do strike, there is often some deadline leniency given by the IRS when it comes to making payments or filing forms. This is only small solace, but it is something to remember and be thankful for when you are dealing with larger, more pressing life issues.
Overall, all of these little bits come down to being proactive and not procrastinating. Those are lessons that are always worth remembering no matter the subject or date. So as always, if there is anything that you have been wanting to do with your finances, be it personal or business, let us know. We would love to help, and if we cannot, we can at least point you in the right direction.
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I feel like this blog is either going to be shouted into the void or have you shaking your head because I have said these things already and you are sick of hearing them. I’m going to say them one more time, though, in the hopes that maybe it can catch someone new before going off into that void.
Simply put – next time you file your taxes, the rules are going to be different, and you should check your withholding now to know where you will stand when it comes time to file.
I am saying this based on a recent article from accountingtoday.com, where many in the tax industry speak to their concern that not enough people are doing this and some could be in for a surprise when they see their return.
I think part of this may come from politics. If someone is in favor of the basic changes that were made, they may expect positive ramifications. And with the increases in the standard deduction, this is a reasonable expectation.
But do you have children? Were you previously taking a mortgage interest deduction? Are you counting on charitable contributions still having an impact? That increased deduction is going to be a simple positive for many, but it decreases or negates the impact of other deductions. There are also other changes in the law that affect other areas of your return so that the standard deduction’s impact is lessened.
As I have also said before, tax law is complicated, and it remains complicated even under the new system. A full reporting doesn’t really fit on a postcard (and yes, I’ve said that before, too), so it’s not something that you can hope to figure out without a deep look.
So why not take that deep look? You have four months still to put yourself in a good position and know what to expect come filing time. That is time you can make work for you, but time that is continually dwindling.
A final note from this article that I want to highlight is one interviewee’s statement on how people think the rich have some secrets they use within the tax system, when really they just are better prepared and paying more attention throughout the year. This is so true that it deserves notice.
Do you want to make it feel like you aren’t paying that much in taxes? Plan throughout the year, so that you’ll know what the bill is going to be. And when you know that, you can have the proper money either taken out of your paycheck or made in quarterly payments so that the burden feels manageable.
So from here on out, I’m going to try to not mention this anymore. I have said it’s worth checking up on these things, now you can see an article where many others say the same thing, and we’re months after the passage of the Tax Cuts and Jobs Act, so you have had time to take action.
Consider this then my ‘I told you so,’ if you decide not to do a tax checkup now, so that I don’t have to say it in a few months.
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Much of what I’m been writing over the summer has felt pretty positive as I have focused more on general business concepts that can make one both happy and profitable – and who doesn’t feel positive about those things? Maybe this positivity means I have been enjoying the season, or maybe there was just a need to get out of the tax morass it felt like we were in for more than half a year as tax reform was hammered out and then we worked on hammering out its ramifications.
I think it is now impossible to keep these two things separate, though.
I know I am not giving any breaking news updates here, as I am sure that most reading this know that both Paul Manafort and Michael Cohen have been found guilty of various crimes. I will not regurgitate the stories here, but suffice to say that both situations are an entangled mess of politics and finance. I will also not take any political stand or guess what this could mean for any politician’s future, but it is now indisputable that people close to the current president were involved in financial dealings that were not on the up and up.
And have we not talked this summer about how, if you have not been taking a fully honest look at your financial numbers, there is only so much you can do with them until they catch up to you? Move things around for a time and all can still look good, but they’re not actually good.
These situations also show that keeping an eye on the culture and vision of your business is necessary. The stories show that somewhere along the way, people lost their way. After all, when ostrich jackets and porn stars play large roles, things have gotten messy. And messy is clearly not leading to any positive outcomes for anyone.
I also always write about how there are no secret ways to find financial loopholes or secret rules that the rich get to live by. Everyone should take advantage of all they are allowed within the law, but the key is to stay within the law. If you have to get real creative, chances are you are falling out of that realm.
Now at the same time, we also are hearing encomiums about former Senator John McCain following his passing. Those tales come from the opposite end of the spectrum, as he was a man who seems to have been almost universally respected. There is a lesson in there about living one’s life with honor, With honor, even if you disagree with someone, you will still earn their respect.
So let these little political reminders reinforce some of those points we have discussed in the past couple of months. After all, examples can come from both ends, the good and the bad. Pick the right people to emulate, push yourself in that direction, and you will not have to worry about things catching up to you in the long run – no matter who you are, who you know, or what position you hold.
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Word is that Amazon is in the considering buying Landmark Theaters. This leads one to wonder if there is anything that company doesn’t want to do.
Over the summer, I have written a good deal about business theories that can lead to success. When looking for such lessons, it is always good to look at those that have had success and currently there are not many companies in a tier with Amazon when it comes to growing and thriving.
It’s a little humbling/disheartening to think it is possible people could read this who do not realize that Amazon began as an online bookseller before it was an adjective preceding Prime, Music, Video, Kindle and Alexa. One could have a long talk about whether this is a good or bad thing, but Amazon even sold books so well that it precipitated the demise of bookstores both big and small. One cannot, however, debate how good the company was at what it did.
The first lesson there then is that even if you want to work within a long-established industry, make what you do new and different than what everyone else does. If you do that, you ensure there is still room for you. I mean, I can’t imagine that 25 years ago there were many people who would have predicted that a giant business empire could begin by selling books. The space to do that, however, clearly did exist.
If Amazon only ever sold books, though, it may have remained successful, even to a high degree, but it would not be the company it is today. That higher level of success came from not being idle. So Amazon went from changing how we bought books to changing how we read books and was at the forefront of delivering e-readers.
The second lesson here then is to not be afraid to change. If you only ever do one thing, you will get left behind. Just ask those bookstores that no longer exist.
And as you keep having more success in more areas, you can keep trying to have more success in other areas. Who would have thought such a company would then be revolutionary with new shipping policies, then go off and create award-winning entertainment, too. Now, Amazon could be trying to change brick-and-mortar grocery stores by removing checkouts, and who knows what their movie theaters would look like.
So at the start, businesses should have a vision for what they want to do, and remain committed to doing it very well and different than everyone else. That gives people a reason to keep returning to you. Doing it really well in the right way can then sure you’re profitable enough to give you the means to do new things.
Knowing what you’re doing well and where you’re succeeding helps you put your efforts in the right places and continue growing. So think both small and big, but do it mindfully so that you can keep track of what’s working and what’s not. We love nothing more than seeing our clients grow and prosper, so if you need help tracking just how well you are doing, let us know and we will help you get to where to you want to be.
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