I just completed another class for my CFP (Certified Financial Planning) certificate. The wonderful world of income tax planning. After purchasing the 600 page Income Tax Planning book and the 8 mini books from Kaplan one fact was confirmed. People should hire a competent accountant!
Did I learn anything else? Yes, I spent 10 weeks looking at tax forms and trying to figure out the consequences of a person’s actions. Example here’s Bob’ and all of his financials now figure out his total income. What is the amount of Robert’s AGI? (Adjusted gross income), allowable itemized deductions. Oh by the way he owns a company and he’s using LIFO. Now calculate his deductible business expenses for federal income tax purposes. Hey did we tell you he sold some property in Question 8 above, for a net return of $140,000, how much Section 1250 recapture would he have? And all of this happened in the first two weeks. But nothing opened my eyes like the section on tax penalties. Question #2 in review - describe the calculations you would use to determine the following penalties. Yikes, can we discuss this? It seems the answer is no.
This lead to a discussion on high profile tax cases and Wesley Snipes came up. In 2008, Snipes was convicted of three misdemeanor counts of failing to file tax returns and received a 3 years prison term; And that’s after he was acquitted of felony tax fraud and conspiracy. Interesting enough the IRS may not have been after him but his accountant and advisor Eddie Ray Kahn and Douglas P. Rosile. Eddie Kahn is an American tax protester and founder of the group American Rights Litigators. Douglas P. Rosile is an accountant who believes Americans are not required to pay income taxes unless they work for foreign-owned companies. Both men were convicted of tax fraud and conspiracy, and both got longer prison terms than Wesley Snipes. According to Wikipedia Khan has a tentative release date of 2026. Forbes did some really nice articles on the subject one titled.
I know you’re saying this is interesting, but how does this impact me. Here’s my two cents, although Mr. Snipes made millions of dollars he went to a guy who reportedly charged $100 per amended tax return. Now does that make sense to you? Yet every year people hand over their taxes to their relatives, co-workers, or a friend of a friend. We’ve all heard the phase “I know a guy”.
Although I sat through 10 weeks of tax planning, own resource material, and have figured out the IRS website I’m not qualified to do taxes and know all the complexities. A good accountant does more than your taxes. They can help you through the “what if” questions you have as you grow financially. Handling money has consequences. There’s a difference between tax avoidance and tax evasion, your account makes sure you’re on the correct side of that equation. Don’t wait until you have 10million to find an accountant. It’s too late at that point. You need to start building your financial team now and an accountant is a major player. Don’t be like Wesley Snipes and pay some dude $100.00 and you’re worth millions.
Wishing you the best in all you do.