Big-league baseball players like the ones who just wrapped up the World Series enjoy careers that last 5.9 years on average, and with 162 games per year, they enjoy lots of chances to be heroes. But eventually, even the best of them hang up their cleats and join the rest of us in the real world. The lucky ones find high-profile gigs running car dealerships or calling games from the broadcast booth. But every once in a while, a former player manages to makes headlines where you'd least expect them — like working as an accountant!
Ben Hendrickson started out looking like he'd become one of the greats. In 2004, the promising right-hander went 11-3 for the International League Indianapolis Indians and won league MVP honors. Then he got his start in the big leagues. Wearing #40, he pitched 11 games for the Milwaukee Brewers, finishing 1-10 with a 7.41 ERA. (If you're not familiar with baseball stats, those numbers are no bueno.) Milwaukee sent him down to their Nashville farm team and eventually traded him away. But Hendrickson never made it back to "the show," and his bright light faded away.
Fast forward to 2018. Hendrickson is working as an accountant for Floors Northwest in Fridley, Minnesota, just north of Minneapolis. Like all too many Americans, he's working paycheck to paycheck and not getting ahead. How can he throw some heat and escape the grind? Hey, here's an idea! Baseball runners who want to advance to the next base don't have to wait for the batter to hit the ball . . . they can just take off running and steal it! So, if Hendrickson wants more money so badly, why not just steal it from the company?
Last week, Anoka County District Court charged Hendrickson with four counts of "theft by swindle," totaling about $250,000. That's a refreshingly blunt description for the charges against Hendrickson, which can mean trading him away for up to 20 years in a place with no organized baseball whatsoever.
Here's how the Minneapolis Star-Tribune described the criminal mastermind's evil plan:
"While working for Floors Northwest in Fridley, where Hendrickson worked for several years until he left his job last year, he would alter the amount of cash received to make it look like less was collected from sales staff. Hendrickson deposited the lower amount and kept the rest. Nearly $160,000 of the money he stole was taken in the final two years of his employment. He also allegedly shifted $10,000 of the company's money to a personal health care account that paid his medical bills."
Hendrickson admits he stole the money . . . but says he thought he took between $50,000 and $75,000. Which begs the question, just how bad an accountant do you have to be to not count how much you stole? After failing at baseball and bookkeeping, Hendrickson may find that a few years in the metalworking field (specifically, stamping license plates for 11 cents/hour) may be just the vocational training he needs!
We all understand wanting to get ahead. Fortunately, there's an easy way to do it, without risking a trip to the pokey. Call us for a tax plan, and see how many dollars we can advance into your pocket. We think of your average tax rate as your financial "earned run average," and we do everything legal to keep it as low as possible. So call us to take a swing, and watch us bring the heat!
Legend holds that in 1494, an Italian friar named Luca Pacioli was sitting under an apple tree when an apple bounced off his head. In a flash of insight, he invented the "double-entry bookkeeping" system where each entry has a corresponding and opposite entry to a different account. Those entries, called debits and credits, help accountants avoid headaches — if the debits and credits don't balance, there's a mistake somewhere. (Some of you may be thinking that was Sir Isaac Newton with the apple inventing gravity, but this is our story and we're sticking to it.)
Double-entry bookkeeping has ruled accounting for over 500 years. We see it everywhere today, including in our tax code. Revenue flows in, balanced by expenses flowing out. Anything left over eventually winds up in the "taxable income" account.
Sometimes, with taxes, that balance breaks down, and many of those disconnects spell opportunity. Real estate investors, for example, can depreciate the price of their properties over time. (We can help you with "cost segregation" strategies to do it even faster.) In the IRS's ideal world, you'll repay those breaks by "recapturing" them as income when you sell. But with tax-free exchanges, stepped-up basis, and other strategies to avoid that reckoning, most of those depreciation deductions never get recaptured at all.
Now it's Halloween: America's second-favorite, and second-priciest, holiday. The National Retail Federation reports we dropped $9.1 billion on the spooky season last year, including $2.7 billion on candy. (Fun fact: Halloween candy is cheapest exactly four days before the 31st.) How does all that fit into Luca Pacioli's neat little boxes? Well, it gets scary the minute the greedy little trick-or-treater on the other side of your door goes running down your sidewalk with their loot!
Here's the disconnect. The candy company sells sweets to a retailer. That's a taxable transaction. The retailer sells them to you. That's another taxable transaction. But then you just give it to the little goblins, pirates, and princesses on your porch. No deduction for you, no income for them, no 1099s for the IRS. (Ugh. Can you imagine the 1099s?) That removes everything from the IRS's world of debits and credits. Seriously, if the IRS taxed kids on their Halloween candy, they could collect millions of dollars to cover free dental care for everyone.
It's all very ironic because, as any parent knows, Halloween is an exercise in managing the waste of assets. Your kids come home with bulging bags of candy and dreams of sugar highs lasting until Thanksgiving. But pretty soon the good stuff is gone. No more Kit-Kats or Snickers! They're left with a couple of "fun-size" Milky Ways, some of those Jolly Ranchers nobody really likes, and a few stale candy corns. At that point, you "charge off the goodwill" by throwing out the dregs while they're at school and hoping the kids don't even notice.
Today, your average accountant or tax professional focuses their effort on making sure the debits match the credits. But we don't just stop there. We take the time to look for those tax "disconnects" that can rescue thousands in taxes. There's nothing scary about it at all. So call us when you're ready to pay less. You'll think the savings are pretty sweet!
Life is full of ups and downs, and sometimes the downs can be so low that it doesn't feel like there's ever going to be an up again. How many people have dreamed of faking their own death and disappearing under a new identity, never to return to their problems again? It's called "pseudocide," and it's popular enough that novelists have a field day writing thrillers about it. John Grisham pulls some variation of that stunt in half a dozen books, and J.K Rowling, Tom Clancy, and Gillian Flynn (Gone Girl) have all joined him in that theme.
Faking your death doesn't always work. In sixteenth-century Verona, a young nobleman named Romeo tried it with a deathlike potion, and we all know what happened to him. But that doesn't keep the occasional scammer from trying. Most famously, rock-and-roll legend Elvis Presley faked his death, and supported himself by entering Elvis impersonator contests. (He always laughed when he didn't win.) And if you have really valuable information on a really bad guy, the witness protection program will even establish your new identity for you!
There's no law that says you can't fake your death to go ride off into the sunset. But we got to wondering . . . what would our friends at the IRS think about that plan?
Let's start with your life insurance benefits. Code Section 101 says gross income doesn't include amounts your beneficiaries receive "if such amounts are paid by reason of the death of the insured." We're splitting hairs here, but wouldn't they still owe the tax if you aren't really dead? Or would they be safe because the insurance company paid them by reason of your death, even if you're not? (You can be sure that somewhere in America, there's an underemployed lawyer ready to bill by the hour to answer that question!)
Next, let's look at estate tax. Assuming your gross estate is over $11.18 million, and the rest of the world really believes you're dead, at some point your executor will file a return and pay 40% of the taxable amount above that threshold. What's for the IRS to complain about? But come on, folks. While it's true that money can't buy happiness, it can solve a lot of the problems that cause unhappiness. So how many people with $11.18 million are really going to fake their own death in the first place?
(While we're on the topic of estate taxes, it's worth mentioning that the current threshold means that the IRS gets only a couple thousand returns per year now anyway. As recently as 1997, when the threshold was just $600,000, they got 90,000 of them. That's one perk of working in the trusts and estates field: just because the client dies doesn't mean you have to stop billing them.)
Finally, let's talk about anything you make after you pull your David Copperfield act. You'll earn it under a new name and social security number . . . but as long as you've set up your new identity properly, the IRS should be happy getting their usual share. Of course, there's that whole "identity fraud" problem. But hey, nobody said this would be easy!
Look, if life throws you a beanball, we understand the temptation to start fresh. But you will wind up crossing the line into fraud at some point. So if you're having a really bad day, can we suggest an easier (and perfectly legal) alternative? Come to us for a plan to pay less tax, and see if we can give you more reasons to enjoy the life you already have.
Streaming TV services like Netflix have changed how we watch television, dropping an entire season of a series at once for us to binge on. They've even breathed new life into "quality television," a phrase that used to provoke laughs from that insufferably smug type of person who used to brag that they didn't even own what we all used to call the "idiot box."
Netflix has mined TV gold from all sorts of settings. Orange is the New Black explores life inside a women's prison. Stranger Things is a love letter to classic 1980s sci-fi/horror films. And Bojack Horseman takes us inside the world of a half-man, half-horse, has-been TV star who drinks too much. It was only a matter of time before we'd see inside the upside-down world where the IRS unleashes investigators to chase business owners for . . . wait for it . . . paying their taxes.
Ozark introduces us to Marty Byrde, a frugal Chicago-area financial advisor and family man who drives a 10-year-old Honda and resists moving his firm to flashy new downtown offices. (Prudent, right?) One night, he takes an emergency meeting with his partner, where we discover his real business is laundering cash for a Mexican drug cartel. Then Marty learns his associates have stolen millions (spoiler alert: bad move) and watches the boss's sicarios slaughter them and nonchalantly stuff their bodies in barrels.
Marty, played by the always-slightly-oily Jason Bateman, survives by promising to repay what his partners stole and launder another $500 million. He moves his family to Missouri's Lake of the Ozarks, meets a colorful cast of local characters, and searches for businesses he can use to ply his trade. Meanwhile, investigators have found the bodies from the massacre and connected them to the partner who split town. Adventure and hilarity ensue for 20 episodes, and just like that, your entire weekend is gone.
As for the IRS, they don't get all judge-y about how you make your money. They just want their slice of the pie. (Pie is delicious.) But they do get judge-y when you try to pass off cherry pie as apple. That's a real problem for drug cartels. Their business generates cash, and lots of it. They can't just take suitcases full of Benjamins to the bank without raising red flags. They need to turn that dirty cash into legitimate funds they can use to buy things like jet planes, islands, and tigers on a gold leash.
That's where financial alchemists like Marty earn their keep. They find legit businesses (like a struggling restaurant and a skeevy "gentlemen's club") to hide behind. They run the cash through the legit business's books and deposit it in the legit business's bank. They even pay tax on it. Presto, no more narcodollars! It may not be the kind of business they teach in fancy MBA programs. There aren't any glitzy national conferences, or PR-minded professional associations with continuing education and ethics requirements. But hey, it's a living. (Until suddenly one day it's not.)
IRS agents who target Marty and his ilk are experts in following the money. They partner with agencies like the FBI and DEA to stop crooks from hiding their loot, even when "hiding" means paying taxes on it like anyone else.
Sadly, we can't help if you get mixed up with a Mexican cartel. But we can help you stop wasting money on taxes you don't have to pay. So call us when you're ready for a plan, and have fun binging on the savings!
Fall is officially here, and that means whiskey season is back. Most drinkers probably don't think much about taxes when they visit their favorite bar or spirits shop. Liquor levies are generally based on volume, not price, so you pay the same amount of tax on a $4 fifth of Olde Ocelot as the swells pay for their $269 Pappy Van Winkle. But did you know that whiskey played a central role in our country's first tax protest, which took place around this same season 224 years ago?
Turn the dial on the Wayback Machine to 1791. The fledgling U.S. government was struggling to pay off $79 million in Revolutionary War debt. (Today that wouldn't cover a single F-35, let alone win independence from the greatest empire on earth.) Congress had already hiked tariffs as high as Treasury Secretary Alexander Hamilton felt they could go, so they were forced to tax domestic products. Americans loved liquor, in part because alcoholic drinks didn't spread disease (and also because it dulled the pain). So, naturally, Congress slapped a tax on it.
In western Pennsylvania, many farmers distilled their surplus grain into whiskey. Some even used it in lieu of currency. So naturally, none of them exactly raised a toast to the new tax. Out there on the edge of civilization, it sounded a lot like "taxation without representation," and we all know what happened the last time that was a rallying cry. Resistance began immediately, with area gangs tarring and feathering local tax collectors. By 1794, organized militias were battling federal marshals delivering subpoenas and warrants to distillers not paying the tax.
On September 25, 1794, President Washington federalized 12,950 troops (including future explorer Meriwether Lewis) to put down the rebellion. Then he rode out from the capital to lead the troops himself. Apparently his desk job running the country wasn't exciting enough! Fun fact: it was the only time a sitting U.S. president led forces in the field until President Thomas Whitmore (played by Bill Pullman) led a force of plucky jet fighters in a desperate sortie against alien invaders in the 1996 popcorn epic, Independence Day. (Don't bother with the 2016 sequel.)
Washington and his 12,950 troops proved to be maybe 12,900 more than the rebels could handle, and they fled before firing a single shot. Two of their leaders were convicted of treason and sentenced to hang, but Washington pardoned them. (No word on whether they made "dark-money" contributions to the President's PAC.) Opponents kept fighting the tax at the ballot box, helping Thomas Jefferson defeat John Adams in 1800 and repealing the tax. Still, historians agree that Washington's success in quelling the rebellion helped establish the legitimacy of the new federal government.
Today, of course, leading troops is an entirely different matter. If the president wants to target, say, terrorists in Yemen, he gives the word to the Joint Chiefs, who pass word down the ranks to an Air Force officer manning a joystick connected to a drone halfway around the world. The whole thing is about as antiseptic as visiting the dentist, at least on our side of the drone. Can you even imagine Barack Obama or Donald Trump saddling up a mighty steed, raising a sword, and leading a colonnade of troops into battle? We'll wait while you finish laughing. (Now that we mention it, maybe Dubya would have enjoyed that?)
Today, of course, there's an easier way to pay less tax. You don't have to assemble a militia or challenge government forces. You just need a plan. So call us when you're ready to save, and raise a toast to progress!
Fall is Planning Season
John Leidy, EA
DIY Books Coach
It was the third day of the very first income tax course when I realized that it will become my mission to help people understand their taxes better to be able to make better decisions and STOP wasting money on taxes they should not have to pay.