Earlier this month, archaeologists digging in Egypt unearthed a 2,000-year-old black granite sarcophagus 16 feet below the surface. Pretty cool, right? But then they announced they were going to open it. What a terrible idea! Have they never seen The Mummy? When the lid came off, they found three skeletons rotting in some dirty water that had probably leaked in from a nearby sewage trench. But that doesn't necessarily mean an ancient undead presence didn't manage to escape, too. It's not like they could actually see it!
Egyptologists aren't the only ones facing an ancient spirit that refuses to die. The tax world has one, too, though not as evil. We're talking about the eternal promise of the tax you can file on a postcard. (Yes, we know, this is a really lame transition to a tax column. Hey, you try finding topics to make taxes entertaining 52 weeks a year!)
Back in 1972, the IRS released a Form 1040A that would fit on both sides of a postcard. There were 27 lines, plus the usual spaces for names, addresses, social security numbers, and signatures. Unfortunately, you couldn't use it if you ran your own business, or made more than $200 in interest or dividends, or itemized deductions. On the bright side, you could take a credit of $12.50 for political contributions ($25 for joint filers), which seems downright quaint in today's era of seven-figure gifts and dark money PACs.
Politicians since then have paid lip service to the idea of a postcard-sized form, even as they've made the actual preparation harder. Last year's Tax Cuts and Jobs Act added several new twists for business owners. But these days, everything has to be sold as "simplification." So IRS officials gamely pledged to play along. And last month, they trotted out a draft of a single form designed to replace the current 1040-EZ (14 lines), 1040A (51 lines) and 1040 (79 lines).
The new form is two half-sized pages, so it could theoretically fit on a postcard (if you didn't need room for a stamp). But calling it a "return" may be fake news. If you have more than two kids, you'll need to add another page to list them. If you report income from a business or real estate, you'll need to attach Schedule 1. If you itemize, you'll need to attach Schedule A. If you owe "other taxes" like AMT, you'll need to attach Schedule 4. Pretty soon that so-called postcard starts to look a bit like a phone book!
While we're at it, let's add another dose of cold reality to the whole "postcard" plan. Who wants their mailman gossiping about how much they make? How do you attach a check to the postcard if you owe? And hasn't the whole idea of "electronic filing" rendered the size of the paper form pretty much irrelevant?
The push for postcard taxes, along with the push for a so-called "flat tax," are steps towards a bigger goal to eliminate the IRS entirely. But here's some more uncomfortable reality. Even if we did have a postcard-sized flat-tax form we'd still need someone in Washington to administer it. We'd still need collections officers to chase down the people who don't pay it. And we'd still need tax cops to catch the people who cheat on it. Much as we love to hate the IRS, it's not going anywhere soon.
Here's something even scarier than unleashing an ancient mummy's curse: wasting money on taxes you don't have to pay! Fortunately, you don't need to dig 16 feet down to discover the solution. All you need is a plan. So call us when you're ready to stop running from the undead beast, and see how much you can save!
When Congress raises the hood on the tax code, they're usually working to raise money to pay for government. But sometimes they're more interested in nudging us to behave in ways they can't legislate directly. Take the mortgage interest deduction, for example, which "cost" the Treasury $69.7 billion in 2013. That deduction encourages millions of Americans to spend billions of dollars buying homes, building homes, renovating money pits, and keeping their homes looking spiffy — all of which returns billions more through our overall economy.
Last week, the House Ways and Means Committee passed another one of those "we-know-we-can't-make-you-do-this-but-we-can-still-give-you-a-tax-break-for-it" laws. The Personal Health Investment Today ("PHIT") Act would let you take medical deductions for general fitness expenses: gym memberships, exercise classes and personal trainers, sports and fitness equipment, and even pay-to-play school sports fees and race registration fees. (That's right, your local Thanksgiving "Turkey Trot" 10k will be deductible!) The bill caps the new deduction at $500 for individuals and $1,000 for joint filers.
Here's the catch. Everyone knows that medical and dental expenses are "deductible." But look a little closer and you'll see that code section 213 lets you deduct them only if you itemize, which leaves about 90% of Americans sitting on the bench. And even if you itemize, you can only deduct the amount of expenses over 7.5% of your adjusted gross income. So, on its face, the new deduction won't mean much.
It turns out, however, that millions of Americans who can't itemize can still benefit from tax-advantaged flexible spending accounts, medical expense reimbursement plans, and health savings accounts. The bill lets you reimburse PHIT expenses from those accounts.
The Congressional Budget Office estimates the bill would (cost the Treasury) save taxpayers $3.5 billion over the next decade. That's enough to get special interests interested. The Wall Street Journal reports that "Fitbit, Inc., the American Heart Association and the American Sports and Fitness Association have all lobbied for the bill." And Planet Fitness stock climbed more than 4% the day the bill passed.
Of course it wouldn't be a tax law without a few, ah, provisos, and a couple of quid pro quos. Sorry, golfers . . . hitting the links doesn't count as "exercise." Same for hunting, sailing, and horseback riding. And couch potatoes need not apply . . . "qualified sports and fitness expenses" won't include instructional videos, books, or similar materials.
You'd think a bill attacking America's expanding waistline would be universally popular. Even potato chip companies can back a law designed to work off calories after they're eaten. But not everyone is enthusiastic. Leonard Burnham, a former Clinton administration tax official and (apparently) a world-class buzzkill, told the Journal that the benefit would mostly go to high-income families that are already buying gym memberships anyway, and "Every principle of tax policy is violated by this."
Fortunately for the rest of us, you don't need to be taking advantage of good policy to save money on taxes. You just need a trainer and a plan. So find some time between trips to the gym to call us, and put your tax bill on an exercise plan!
Americans love a champion, and every year, sports fans get to see new champions crowned. We've got a World Series, a Super Bowl, and NBA finals that drag on for months. We've got the Kentucky Derby, the Indianapolis 500, and the Nathan's Famous National Hot Dog Eating Contest. And every even-numbered year, the Olympics bring us more exotic champions in curling, synchronized swimming, and dancing horses.
But there's one event that mobilizes the rest of the world in a frenzy of competition: soccer's World Cup. A billion people watched France defeat Argentina, 4-3, in a perfectly ordinary first-round-of-finals game. And more than three billion will watch the final match on July 15th in Moscow's Luzhniki Stadium. That's almost half the population of the globe.
Tax collectors across the world will join their countrymen to cheer their countries' teams. But they'll have another reason to watch. It seems the folks in the soccer world don't like paying taxes any more than the rest of us. And there are nearly enough tax cheats in the sport to fill out an entire bracket's worth!
In 2011, IRS investigators used tax charges to "flip" Chuck Blazer, a member of soccer's international governing body, into wearing a wire to help indict 14 corrupt officials on charges of racketeering, wire fraud, and money laundering. Blazer, a 450-pound Falstaffian figure, lived large on his share of those bribes, keeping two apartments at Trump Tower: an $18,000/month three-bedroom for himself and a $6,000/month one-bedroom next door for his cats.
IRS Criminal Investigation head Richard Weber couldn't resist some obvious puns after the eventual arrests, announcing "This is the World Cup of fraud, and today we are issuing FIFA a red card," he said. But really, the jokes just write themselves. How about "Corrupt soccer officials couldn't keep hands off the cash"? Or maybe, "Prosecutors score GOOOOOOOAAAAAAALLLLLLLL against corruption"?
In 2013, Spanish authorities accused superstar striker Lionel Messi of using companies in Belize, Uruguay, and Switzerland to evade €4.1 million in tax on endorsement earnings. Messi, an Argentinean who plays professionally for Barcelona, said he wasn't involved in the details. (Like a player faking injury for a ref, he said "I just played football," and claimed he signed whatever his father put in front of him.) Nevertheless, he made a €5.3 million "corrective payment" equal to the tax plus interest to settle the charges.
But prosecutors insisted on penalty kicks, and in 2016, a court found Messi and his father guilty on three counts of fraud. (Clearly not Messi-ing around, right?) The court imposed a 21-month prison sentence (which was automatically suspended under Spanish law) and fined the pair another €3.1 million.
Not to be outdone, Messi's arch-rival Cristiano Ronaldo, who plays professionally for Real Madrid, just announced he would pay Spain €18.7 million to settle tax charges centered on his endorsements. Now, fans who bicker over who's the better player can start bickering over who's the better tax evader.
What kind of football do you prefer, the kind with headshots or the kind with helmets? Either way, we're sure you'd rather follow your favorite team than spend time looking for missed opportunities on your taxes. That's where our team comes in! So call for a plan, and see where in the world you can go with your savings!
A generation ago, "serious" filmmakers flocking to Hollywood set their sights on movies, not television. Visionary directors like Martin Scorsese and Francis Ford Coppola redefined their craft with a new generation of challenging, personal films. By contrast, television was a vast wasteland dominated by lightweight comedies like Happy Days and sappy, feel-good dramas like The Waltons.
In 1999, HBO's The Sopranos started luring wannabe auteurs to TV. Today, movie theaters are dominated by CGI-generated superheros and endless sequels, while cable networks and streaming video services churn out too many quality programs for anyone but a professional critic to watch. When fan favorites like Netflix's Stranger Things or Amazon's Bosch drop a new season, millions of Americans take a timeout from their ordinary lives to spend whole weekends binge-watching, staring bug-eyed at their screens like so many popcorn-munching zombies.
Naturally, the renaissance of "quality television" has attracted the tax collector's eye, too. So this week's story begins, like any good story, deep in the bowels of the Chicago Department of Finance in the heart of the city's downtown "Loop."
The revenue-starved Windy City imposes a 9% amusement tax on professional sports, theatrical performances, movie screenings, and even the architecture tours cruising the Chicago river. In 2015, officials declared that it includes "not only charges paid for the privilege to witness, view or participate in amusements in person but also charges paid for the privilege to witness, view or participate in amusements that are delivered electronically." That ruling extended the tax to streaming video, music, and gaming services like Netflix, Spotify and Xbox Live.
Now, one of the reasons those streaming services are so popular is because they're so cheap. Netflix's basic streaming plan, which gives you standard definition video on one screen at a time, sets you back a whopping $6.99/month. The premium plan, which immerses you in Ultra-HD video nirvana on up to four screens, is still just $13.99. Even the most-addicted fans won't get mugged for more than $1.26/month in tax. (And when tax collectors see gold in $1.26, you know you're living in tough times.)
But those penny-ante amounts didn't stop a group of fans backed by a public-interest law firm from challenging the tax in Cook County Circuit Court. They argued that extending it to streaming services violates the Internet Freedom Act and federal and state constitutions.
In May, the judge brought Season One of the series to a dramatic close with a cliffhanger episode, "Opinion and Order." Do tax collectors really have the authority to nickel-and-dime our "Netflix and chill"? Or are they just another bunch of bureaucrats with boundary issues? Sadly for fans, he ruled for the city and upheld the tax. But plaintiffs have already announced plans for an appeal, which means a second series should be dropping sometime soon.
We're pretty sure your least-favorite episode of any series is "The One Where You Pay Too Much Tax." The good news is, we can help you fast-forward through it. Just call us for a plan to pay less. See how much you can save. And get ready to click "thumbs up" on our service!
Learn about the 5 Things You Forgot About That Are Costing You Money
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.