The Adventures of the Amazing Ron and Tax guy: Clueless American!
The holiday season is here once again and two very hard working super heroes are busy with the task at hand. As another year comes to a close, our financial super heroes are engaged with tax planning for their clients.
Tax guy: my goodness Amazing Ron, I am grateful for the opportunity to serve those Americans that are up to speed with their financial matters.
Amazing Ron: Right you are Tax Guy. It is indeed a privilege. My hope is that more and more people, not just in America, become more involved in financial, business, and tax matters.
Just then, the phone rings. JC Minyon (Tax guy) answers the phone. It is Innocent Spouse and she is quite excited (as women are apt to get). She is frantic that her husband, Clueless American, is making a big financial mistake. Clueless owns a small business that he started at the beginning of the year. He has done zero financial and tax planning and Innocent Spouse is afraid of what consequences might face them.
Innocent Spouse: Oh help us mighty Tax guy! I am afraid that our financial and tax situation will be out of control!
Tax guy: Fear not dear lady. Do try to calm yourself as the Amazing Ron and I are on the way to look over your situation.
Tax guy changes into his blue uniform, red cape, with a white TG posted upon his chest, He flies to the rescue of our financially distressed couple. The Amazing Ron is clad dapperly (as always) in his black tuxedo with red bowtie and cumber bun. The Amazing Ron takes to his stretch limousine driven by Bob.
Tax guy: (crashing through the window) I am here Innocent Spouse, Where is Clueless American?
Innocent Spouse: He is looking for his numbers oh great financial warrior.
Amazing Ron: (cool and collected entering calmly through the front door) Fear not dear lady, we will be able to provide you with practical advice you can put in motion immediately.
Clueless American: Oh great financial heroes! I am grateful for your attention to our situation. Innocent Spouse does get quite excited over many situations.
Amazing Ron: (in a chastising tone) I am sure this is true inattentive citizen. In this case however, she is right to raise concern. It is the duty of every American Citizen to understand at least the basics regarding financial matters. It is each American’s duty to ask questions when they are in need of help.
Tax guy: Well said Amazing. You are indeed a leader for all (Begins looking through the information that Clueless American has turned over).
Innocent Spouse: Oh thank you Amazing Ron. I will forever be in your debt.
Amazing Ron: (to Tax guy) what have you found oh loyal side kick and knower of all tax laws?
Tax guy: Clueless American’s business has netted $30,000 in profit for the year. He has not made any estimated tax payments He will owe both income tax and self-employment tax on this number unless… unless he purchases equipment before the year end.
Amazing Ron: (to Clueless American) how about this then? Is there a need for purchasing equipment?
Clueless American: Yes, I do in fact need some equipment and have already secured financing to make the purchase. The equipment will cost $35,000. Should I purchase it this year? I am expecting larger profits next year and will be in more need of deductions.
Tax guy: Based on the circumstances, it does make sense to put the equipment in service during the current year. Under Internal Revenue Code 179, a taxpayer can expense up to $250,000 of fixed assets placed in service during 2008 (returning to $125,000 after 2008). The 179 expense deduction can not be taken if there is a loss and it can not create a loss.
Amazing Ron: (to Innocent Spouse) to you have income dear lady?
Innocent Spouse: Yes, I have W-2 wages from my employer.
Tax guy: Excellent question Amazing Ron! We can then take 179 against the $30,000 in profit from Clueless American’s business, and can use Innocent Spouse’s income thus allowing us to take the entire equipment purchase into expense.
Amazing Ron: That’s right Tax guy. Not only will we eliminate the exposure to income tax from the business activity of Clueless, but we will eliminate the exposure to self-employment tax and even create an additional deduction against Innocent Spouse’s income. For the following year, when income is expected to be higher, Clueless American can implement a retirement plan best suited to meet the needs of his business. This will require keeping a watchful eye on the business and making plans through out the year.
Tax guy: We will not be able to eliminate all of the income for state purposes as Clueless’ state decouples from the federal provisions for 179 expensing. The difference will be immaterial and Clueless could make an estimated tax payment to the state by year end, in order to get a federal deduction. This is true because Clueless American and Innocent Spouse are not in the alternative minimum tax.
Amazing Ron: That’s right Tax guy. I am glad you are on my team.
Innocent Spouse: Thank you both for the excellent advice. You really saved us this time!
Clueless American: I will never ignore my financial situation again. I will do what ever I can to educate myself and I will indeed stay informed regarding my business’ activities.
Tax guy hugs Innocent Souse and Clueless American. He then flies back through the broken window reminding the couple they might be eligible to claim the broken window as a casualty and theft loss on their itemized deductions form.
Amazing Ron bows gracefully from the waste and exits gracefully to the front door and into his stretch limo.
Amazing Ron: (to Bob) another Clueless American is saved from a financial plight. Let us away to the office to ready ourselves for the next battle.
Ron Piner, CPA
Host of “Better Business”
Saturday Mornings at 10ET
On WBIS AM 1190
- Related Videos
- Related Articles
- Ask / Related Q&A
- Options For Filing And Reporting Small Business Taxes
- Tax Planning for Small Businesses
- Tax Planning for Small Businesses
- Small Business Tax Tips: What Does It Take To Pay Zero Taxes?
- What to Expect From Small Business Payroll Taxes
- Small Business Tax Tips
- America's War on Small Business
- Biggest Mistakes Small Businesses Make When Faced with Delinquent Payroll Taxes and IRS Penalties
ZERO TAX INBOUND INVESTMENT INTO ISRAELI OPERATING COMAPNY
By: Adi Mantel, Adv. | 03/01/2010Investing into Israeli operating company by foreigners became very attractive following amendment no. 169 to the Israeli income ordinance, according to which foreigners are tax exempt from capital gains when selling shares of an Israeli company even if they are not residents of a country with whom Israel has a tax treaty as was only one of the conditions before the amendment.
Internal Revenue Service Tax Deductions
By: Tom Peters | 03/01/2010Do you use the standard deduction that the IRS provides, knowing full well you can claim additional deductions? The most important action you must do when claiming deductions is to keep all of your receipts.
Internal Revenue Service Levy
By: Tom Peters | 02/01/2010An IRS levy is one of the last steps the IRS will undertake to recoup unpaid taxes and the interest and penalties for those unpaid taxes. The best plan of action you can do is that when you are faced with an IRS levy engage an attorney.
Alternative Minimum Tax Planning Ideas...Year-End AMT Planning Wrap-Up - Part 2
By: George Bauernfeind | 01/01/2010The AMT items that were talked about in Part 1 of this wrap-up generally were the bigger ones that can, depending on a taxpayer’s situation, present immediate year-end Alternative Minimum Tax savings opportunities. But the other items that were discussed in this 10-week series also are important in making sure the least amount of AMT is paid. Here is a brief recap of these other items, with references to the amtblog.com articles in which each appeared.
Alternative Minimum Tax Planning Ideas...Investment - Private Activity Bonds
By: George Bauernfeind | 01/01/2010Municipal bonds, or "muni bonds" as they are commonly referred to, offer favorable tax treatment in that the interest earned on them is not subject to tax. This tax-free yield can make them an attractive investment. If an investor is not careful, however, the AMT can apply to make certain muni bonds fully taxable. Unfortunately, many taxpayers discover this only after making the investment.
Filing your Own Taxes, Preparations and Considerations Part Two
By: Kasan Groupe | 31/12/2009This is a follow up to Filing your Taxes, Preparations and Considerations Part One. Yes, finally! That time of the year is finally here when you can save a little bit of your wages and tuck the rest in a piggy bank. You can raise your glass and jump on your kids’ bunk beds in glee, It’s Tax Season! But have you ever considered filed your own? If not, there are many options to consider. It may or may not be the best route for you.
Filing your Own Taxes, Preparations and Considerations Part One
By: Kasan Groupe | 31/12/2009Yes, finally! That time of the year is finally here when you can save a little bit of your wages and tuck the rest in a piggy bank. You can raise your glass and jump on your kids’ bunk beds in glee, It’s Tax Season! But have you ever considered filed your own? If not, there are many options to consider. It may or may not be the best route for you.
How to Get Tax Help with Your Offshore Bank Account if You Missed the FBAR Amnesty Deadline for IRS Voluntary Disclosure
By: Brian Compton | 31/12/2009FBAR tax penalties can amount to as much as 200-300% of the asset value of the offshore account. If you have an offshore account and missed the IRS's Foreign Bank and Financial Accounts (FBAR) amnesty deadline on October 15th, it’s not too late to have your FBAR tax attorney or tax resolution specialist draft a voluntary disclosure to mount your offshore account tax evasion defense.
The Adventures of the Amazing Ron and Taxguy-clueless American!
By: Ron Piner, CPA | 14/01/2009 | TaxesIf you are in need of financial assistance or tax advice, do not hesitate to call our financial super heroes. The Amazing Ron and Tax guy are devoted to all who seek help with a varitey of financial topics.
Tax Guy Talks: I'll Start With the Children
By: Ron Piner, CPA | 22/11/2008 | TaxesRead this article my friends and understand what has happened to our economy. When something like this happens, it helps to get back to the basics of life and a free market system. By reading this article, your children will gain a basic understandign of what is wrong with our wonderful and great country.
Tax Planning 2008: Welcome to My Show!
By: Ron Piner, CPA | 20/11/2008 | TaxesIt's not too late to engage in some tax planning for 2008. Find out what you can do to save on income tax and improve your financial situation. Remember, you can do whatever you want, by my way is better.
What if You Did it Like This? Tax Planning for Your Corporation
By: Ron Piner, CPA | 14/11/2008 | Small BusinessIt is now tax planning season business owners. This article explains the importance of income tax planning for the current year and coupling it with an overall estate tax plan. Please read carefully, ponder, discuss, and ask lots of questions.
Am I the Only One?
By: Ron Piner, CPA | 08/11/2008 | PoliticsThis article represents my true thoughts regarding the recent Presidential Election. I can fix the problems of this country, just read and find out.
My Guide to Buying and Selling Businesses
By: Ron Piner, CPA | 04/06/2008 | Small BusinessBuying and selling businesses promotes careful thinking and planning. Findout what I think about when advising clients as to the purchase or sale of a closely held business. Remember, you can do whatever you want, but my way is better.
Tax Planning at Its Best
By: Ron Piner, CPA | 29/07/2007 | TaxesDinner out doesn't mean that a tax specialist is off duty. Find out how first rate tax planning can be obtained even while having a night out on the town.
Tax Deductions the First Time Home Buyer Can Expect
By: Ron Piner, CPA | 09/07/2007 | TaxesOwning a new home can provide for significant income tax benefits. Find out when to settle on a new home in order to maximize tax benefits. Laern how to get these tax benefits today.