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How To Avoid Paying Taxes!

March 11, 2020 by James E. Heyward CPA

At the beginning of every year, millions of taxpayers begin an annual ritual of financial reporting that we all know as filing income taxes. For most taxpayers, this annual activity is the only time they have looked at their financial picture since last year because of the anxiety and stress that filing causes. I thought about the angst around filings and considered three questions:

  • How many people understand taxes?
  • If people knew more about taxes would that alleviate some of the stress?
  • The answer to "How can I avoid paying taxes?"

A Brief History of Taxes in the US

The 16th amendment of the United States Consitution established the right for Congress to levy taxes on US citizens. In 1913 the amendment was ratified and The Revenue Act of 1913 was passed to create a tax rate of 3% of the amount over $3,000. When the act was passed less than 5% of the population were subject to the tax.

Over the past 100 years, the tax code has exploded along with the rates and number of citizens who pay. As of this writing, the top rate is 37% and over 50% of the population pays income tax.

How Tax Laws are Created?

Tax laws start by being passed in the House of Representatives. Upon passing, the bill is sent to the Senate so changes can be negotiated with the house. When both sides agree, the bill is voted on in the Senate and upon passing the bill will be sent to the President for signature.

Role of the IRS

The Internal Revenue Service is an agency of the Treasury Department. The IRS Commissioner reports to the Treasury Secretary, who is appointed by the President. Many consider the IRS villains and blame them for all tax woes, but the agency exists because of laws passed by Congress and signed by the President.

The function of the IRS is to interpret and enforces tax laws. They take the statutory laws and create the forms and rules necessary to administrate the law.

How taxes are calculated?

Your personal taxes are calculated by taking your total income which consists of:

  • Wages
  • Investment income
  • Business income
  • Retirement
  • Social Security

Your total income is then reduced by adjustments like student loan interest, IRA contributions resulting in adjusted gross income.

The adjusted gross income is reduced by your deductions, you can take the standard deduction or itemize if the total exceeds the standard amount. The result is taxable income; which is multiplied by the applicable tax rate less any applicable tax credits to determine your tax liability.

The tax liability is subtracted from amounts paid in during the year from withholding and estimated payments. The result is either a refund or a balance due.

"How can I lower my taxes!"

The comment that I hear at least once a week, after telling someone I am a CPA. EVERYBODY wants to pay less and receive a huge refund and are willing to do anything to receive "their money back. I have witnessed taxpayers attempt to deduct everything from pet expenses to the renovation of their primary residence to increase their refunds.

When I first began practicing, I really believed there was a magic bullet to make a lot of money and pay little in taxes. I eventually learned that periodic tax planning is the best way to reduce your tax liability and possibly increase a refund.

The Fool-Proof Way!

Tax planning is truly the best way to reduce your tax burden in the long run, but some people don't want to pay the fees associated with planning. Those prospects of mine usually get what I call the fool-proof way of tax planning:

Don't make ANY money and I guarantee you won't pay any taxes.

Filed Under: Individual Tax, Personal Finance Tagged With: estimated taxes, tax planning, tax refund

The Financial Flipside Podcast, Episode 21: Stick To Sports

November 13, 2019 by James E. Heyward CPA

a hand tosses a basketball into the air

 

Today we’re giving you a peek behind the scenes with an episode about one of our favorite pre-show topics: college sports [note: we’re both dyed-in-the-wool Duke fans. What can we say? The idea of your college as “the mother of your soul” definitely holds for us when it comes to sports loyalties]. This is perhaps the best and the worst time for a discussion about the economics of college sports: on the one hand, basketball and football seasons are underway; on the other, things are moving so fast that we had to include an update in this post.

In a move that will likely not surprise you once you’ve listened to the podcast, the NCAA Board of Governors made a unanimous decision to extend the right to receive compensation for the use of their names, images, and likenesses  to all college athletes, an about-face from its earlier promise to contest California’s Fair Pay to Play Act. Of course, the NCAA is still a (non-profit) business, so this decision isn’t necessarily an indication of its newfound “wokeness.” They’re still obsessed with “student-athletes,” recruitment outcomes, and using amateurism as a barrier to further discussions about paying athletes, but the NCAA is at least paying lip service to a desire to move with the tide of history. More importantly, college athletes will get to reap some of the financial benefits of the enormous amount of time, energy, and effort they’ve put into playing the sports of their choosing. We definitely plan to keep an eye on this story as the NCAA rolls out its plan.

 

Now that that’s out of the way, we hope you’ll enjoy listening to this episode as much as we enjoyed recording it. In addition to the fallout from the Fair Pay to Play Act, we discuss revenue sharing, Zion Williamson’s impact on the stock market, the history of NCAA vs. athlete lawsuits, position stacking, and what happens when a city hosts a college sports tournament. Oh, and James pours one out for EA Sports’s NCAA Basketball and Football franchises. There’s also a sports-related update from our Black Capitalism episode.

 

Finally, we’ve got a question and an announcement: Will knowing that players are receiving some compensation change how or whether you watch college sports? How? Why or why not?

 

In addition to sharing your thoughts with us via social media (@financeflipside on Twitter, Facebook, or Instagram), you can keep the conversation going with us and each other  in our new Facebook Group, the Financial Flipside Group Chat. The group is private, but if you head over to our Facebook page and leave us a message or find us by searching for the group name, we’ll gladly let you in. Here’s to more real money talk!

 

Missed an episode? Catch up on our Episodes page or subscribe via Apple Podcasts, Google Play, Spotify, Stitcher, or wherever you get your podcasts. If you like what you hear, leave us a five-star review on iTunes; reviews help more people find the show!

Show notes and bonus content are, as always, below the cut.

[Read more…] about The Financial Flipside Podcast, Episode 21: Stick To Sports

Filed Under: podcast Tagged With: college sports, economics, labor, money, money and society, NCAA, NCAA basketball, NCAA football, nonprofits, sports, student-athletes

The Financial Flipside Podcast, Episode 20: Black Capitalism or, I’m a Business, Man

September 16, 2019 by James E. Heyward CPA

a closeup of an eye from a $100 bill
Photo by Vladislav Reshetnyak from Pexels

 

“Gentrify your own ‘hood before these people do it/Claim eminent domain and have your people move in/ That’s a small glimpse into what Nipsey was doing/ For anybody still confused as to what he was doing /The neighborhood designed to keep us trapped. /They red-lined it so property declines if you live by blacks /They depress the asset then take the property back. /It’s a ruthless but a genius plan, in fact….”-Jay-Z, performing at Webster Hall, NYC on 26 July 2019

We’re starting this post with Jay-Z not just because of his deal with the NFL, in which Roc Nation partners with the league on matters of “entertainment and social justice,”  or because he claimed that we’ve “moved past kneeling” and “…need actionable items.” The lyrics above and the first glimpses of the Roc Nation/NFL partnership (Inspire Change apparel, Roc Nation’s artists having their songs strategically placed during NFL broadcasts, and a Chicago-centric pair of charity donations, including one to a group that posts photos of young black people having their dreadlocks cut as part of the road to a “better” post-gang life on Twitter) are a great jumping off point for a discussion of black capitalism that we’ve been meaning to have for a long time.

This is a long one, and we have a lot of… thoughts, and feelings. So many feelings. Listen in as we talk about Reconstruction, economic anxiety, Booker T. Washington, shadow economies, entrepreneurship, space travel, Kamala Harris’s student loan proposal, self-sufficiency vs. self determination, and much more. Capitalism alone is a complex topic, as is Black people’s relationship with it. Consider this episode as a way of laying the groundwork for discussions that we will likely return to off and on in future episodes.

Show notes and related links are as always, below the cut.  To listen to previous episodes, check out our website, or subscribe on Apple Podcasts, Google Play, Stitcher, Spotify, or wherever you get your podcasts.
[Read more…] about The Financial Flipside Podcast, Episode 20: Black Capitalism or, I’m a Business, Man

Filed Under: podcast Tagged With: Black capitalism, capitalism, economics, entrepreneurship, history, money, money and society, politics

Blog Repost: 7 Signs That Instantly Identify Someone With Bad Leadership Traits

July 10, 2019 by James E. Heyward CPA

The following post was authored by Marcel Schwantes, Founder and Chief Human Officer of Leadership From the Core. It originally appeared on Inc.com

Getty Images

Understanding the traits of bad leadership is your first step

Do you work in a toxic environment under bad leadership? If you do, and you choose to keep your job, there comes a time when you need to hold up the mirror and decide if it’s worth it.

Over the years, I’ve gathered enough evidence to support the case that bad leadership may hurt you, the employee, in several ways, including:

  • Impacting your mental and physical well-being for the worst
  • Seriously diminishing your work productivity
  • Potentially damaging your and your company’s reputation
  • Hurting your career path and the trajectory of your professional goals

Clearly understanding the characteristics of a person exhibiting bad leadership is important. Here are seven to raise your awareness.

1. They ditch face-to-face communication.

In the digital age where communication apps like Slack, email, and texting are utilized for work productivity, bad leaders hide behind their tech and solely manage through digital interactions rather than the preferred human interaction to problem-solve issues that digital mediums of communication can’t effectively resolve. A problem that could have taken two minutes to fix in person now takes two hours or two days as workers try to interpret their managers’ words over a screen.

2. They display charisma (which later backfires).

Some of the most successful leaders in the world are known for their charisma. But charisma clouds people’s evaluations of how leaders actually perform, says Tomas Chamorro-Premuzic, author of Why Do So Many Incompetent Men Become Leaders? (And How to Fix It). The professor of business psychology at University College London and Columbia University points out that charisma, when combined with narcissism and psychopathy, is a lethal combination. Furthermore, research has shown when followers have more information on a leader, the importance of charisma declines.

3. They can’t clearly communicate.

Employees have no idea what is really going on and no one knows the real truth of the current situation or what the future holds. This causes confusion, fear, and anxiety in the minds of workers.

4. They are control freaks.

A person with bad leadership micromanages to the last detail. The situation is overbearing and stifling because he or she wants control over decisions. He or she distrusts the team and doesn’t delegate; there’s no room for group discussion or input because the leadership style is autocratic. In turn, creativity or learning something new is absent under this dictatorship. The motto is: Just take your marching orders and report back.

5. They are never wrong.

Ever work with a manager who’s always right and you’re always wrong? A person with bad leadership skills has a hard time taking blame or ownership for things and will never admit to having made a mistake. He’s more concerned with preserving his reputation and saving face.

6. They are secretive.

Does your boss give you all the information you need? In the literature, this is one of the most predictive traits of people with bad leadership. It is reflective of someone who hoards or withholds information and employees often end up lost and confused.

7. They only look after themselves.

Bad leaders aren’t concerned with driving the company mission or aligning team goals to organizational objectives. It’s about their individual performance and getting that annual bonus. Bad leaders displaying this attitude are playing for the name on the back of the jersey and are only concerned about their accomplishments and how they look to their superiors.

Published on: Jul 10, 2019
Source: Inc.com

Filed Under: entrepreneur, leadership, management

The Financial Flipside Podcast, Episode 19: Housing Things

July 8, 2019 by James E. Heyward CPA

A row of colorful Victorian houses.

As of May 2019, the average price of a new house in the US was $377,200, a price that will buy you, on average, an apartment’s worth of space for every member of your household. Alongside expanding house sizes and the proliferation of luxury condos is a stark reality: the United States, like many other places in the world, is in the throes of a housing crisis. While there is plenty of physical housing to be had, very little of it is affordable , especially when one takes into account that most people’s wages have remained relatively flat. For example, as of June 2019, there is not a single place in the US or Puerto Rico where a minimum wage job would allow a person to afford to rent a two-bedroom apartment.

 

Despite what looks like a bleak housing picture, people, especially in the United States, remain invested in home ownership, even if staying in their homes means stretching their salaries or spending hours commuting each week. Why are Americans obsessed with home ownership?  Does the idea of one’s house as a source of wealth hold up? Is HGTV ruining the way we think about real estate? What are the ways out of our current mess? We take on these questions and more in this episode.

Lots of interesting links below the cut

[Read more…] about The Financial Flipside Podcast, Episode 19: Housing Things

Filed Under: podcast Tagged With: gentrification, home ownership, housing, inequality, money, real estate, society, wealth

Blog Repost: 7 Signs You Need a Virtual Assistant (and How to Hire the Right One)

July 8, 2019 by James E. Heyward CPA

 

Getty Images

Grow

This is a repost of an article by Melanie Curtin, an author and activist whose work has been featured on the Huffington Post , the New York Observer, and the Today Show (Australia). This post originally appeared on inc.com.

7 Signs You Need a Virtual Assistant (and How to Hire the Right One)

Time to get some things OFF your plate.

 

I have two Dropbox accounts. One is associated with my current email and the other with an old one (from a job I had years ago). Apparently that old address is tied to my paid Dropbox account, but I can’t get it to sync with my phone, nor can I log into dropbox.com with it … because since I can no longer access that email address, I can’t do a password reset.

This is the kind of task that drains me. I’ve scoured the Dropbox support site; I’ve emailed them and gotten a rather long and seemingly convoluted response about how to fix this.

This is also a good example of the kind of thing I would absolutely, positively love to hand off to a virtual assistant

Almost every entrepreneur or businessperson I know has considered hiring a virtual assistant (aka VA). But a lot of us haven’t quite taken the plunge, for reasons either financial or because we’re not quite sure exactly what we’d have that person do.

But according to Ardenia Gould, business expert on working remotely, if you’re even considering doing it, you should. “I took the plunge early last year,” said Gould, “and it was the scariest but best business decision I ever made.”

Here are 7 signs you need a virtual assistant:

1. Your business is holding you hostage

You’re vacation-deprived. You need more time off but you’re reluctant to take it. As an entrepreneur, you love the idea of setting your own hours and calling the shots. But if you can never find the time to step away from your business, it’s time to call in reinforcements.

2. Your business needs skills you don’t have

“I needed serious help with business taxes, securing business loans, and taking on a major renovation project so I could host retreats,” said Gould. “I’m not a tax expert, I knew NOTHING about business loans, and I’m certainly not a general contractor.”

The solution? She hired a virtual assistant who had a background in real estate, underwriting, project management and bookkeeping–and she’s never looked back.

3. You wish there were two of you

I run a podcast called Dear Men, on sex, dating, and relationships. I love interviewing guests, but I don’t love sourcing guests, (researching people who would be a good fit), and I hate dealing with scheduling. This means I put that stuff off, which in turn means my editorial calendar is often running behind.

When growing your business (or trying to), it often seems like there aren’t enough hours in the day. This is a good sign that it’s time to get a VA.

4. You spend more time on administrative tasks than the core business itself

It’s hard to add value to the bottom line when huge chunks of your day are spent invoicing, billing, e-mailing, booking, etc. Admin tasks are necessary, but often distract you from adding your highest value by doing what you do best.

Plus, they tend to drain your energy (like me with Dropbox). So not only are you getting less done, but you actually feel worse than when you started.

5. Your business is a hot mess

You’re finding yourself missing deadlines or meetings (or things on your calendar go MIA). You’re not hitting your goals–or maybe you didn’t even have time to set goals because you’ve been so busy putting out fires. There’s no room to be strategic when you’re in a constant state of overwhelm.

6. You’re ready to scale

When it’s time to scale, you typically need three things: systems, cash and people. When it comes to people, you should start with the most critical role that will help you scale. For example, if you’re launching a membership site, you may need a part-time VA to handle sales and conversion. Or you may need someone to handle member support and customer service for new members. Determine your most essential role(s) and start there.

7. You’re big on vision but short on execution

You’re a visionary. You’ve got a ton of great ideas. You’re going to revolutionize the game. But first, you’ve gotta get it done.If you’re great at big-picture thinking but get bogged down in the details (or avoid them altogether), a VA will help you thrive.

When you’re ready to hire, here are a few smart ways to find the right virtual assistant:

  1. Referral from someone you know and trust (that’s how Gould found hers). Just post to LinkedIn and/or Facebook that you’re looking for a good VA and follow the leads

  2. Niche placement agencies like HireMyMom.com, which staffs experienced, highly-qualified work-from-home moms

  3. Freelancer platform Upwork. Conveniently, Upwork itself tracks your VA’s hours, screenshots what your VA is doing, and manages the payment processing, which can streamline things

  4. If you don’t want to spend the time to hire your own VA, you can use Leverage, a company specializing in hiring virtual assistants. This can be pricier but easier

 

According to Gould, hiring her virtual business manager was a life-changing decision. “My sanity–my mental, physical and emotional well being have drastically improved since I lightened my load. I can take real vacations, knowing things are actually being handled in my absence.”

She has also managed to put more money in her pocket, since her VA has tightened up her invoicing so she gets paid sooner (no more chasing down clients for payment). And she estimates that her VA has saved her tens of thousands on taxes, subscription services, canceled flights, late fees and by negotiating excellent rates with vendors on her behalf.

You don’t have to do it all yourself. There are financial, emotional, and spiritual benefits to getting a little help.

Published on: Jul 8, 2019
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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Source: Inc.com

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