In a step toward protecting Americans from fraud, the federal government passed the Economic Growth, Regulatory Relief, and Consumer Protection Act. It is absurdly easy for people such as hackers, thieves, and even relatives to open accounts in your name, but this can change if you are diligent. The new law, enacted in July of 2018 allows you to freeze your credit so no one can open a new account without your explicit permission.
Starting a business is a great idea in so many ways. Giving yourself the freedom to work whenever and wherever you want is priceless (figuratively speaking). Especially in the beginning, it essential to give yourself and your business the best chance to survive financially. An important piece of the puzzle? Tax breaks. There are tons of deductions and subtractions which were created specifically for small businesses. Do not miss out on these breaks when filing your 2018 tax return.
Simplified Employee Pension (SEP-IRA)
One of the biggest mistakes new business owners make is forgetting to create a retirement account. Giving up employer contributions to a retirement account is a big hit for some people. If you have not already done so, you must consider starting a SEP-IRA because:
- You need to save money for retirement, and you do not want the money to be stagnant. Make it work for you utilizing the stock market.
- The money you contribute is pre-tax and you can contribute up to 25% of your net income. The maximum contribution is $49,000. Keep in mind that the max one person can contribute to a traditional 401k is $18,500 for people under 50.
- You can decide what to contribute at the end of the year. If your business did well, contribute more and vice versa. This flexibility is key for many business owners.
Of the over 2,000 billionaires in the world, 82 have a residence in New York City. One57 (aka “The Billionaire’s Building”) is a tower near Central Park. The identities of the residence of One57 are held secret, but two individuals were revealed because they stopped paying their mortgage. Billionaires have bills too!
Foreclosure #1 – Mr. LLC
Mr. LLC is named as such because he shielded his identity behind an LLC when he bought a 3,466 square foot condo in One57. Mr. LLC paid $21.4 million in 2015 for the property. Apparently, things did not go according to plan. Mr. LLC had rough couple of years and ended up with a lien on the property for $20.9 million plus fees and taxes. The owner put the property on the market for $22.5 million, but it remains on the market over 500 days later.
Foreclosure #2 – Nigerian Oil Tycoon
Kolawole Aluko bought a 6,240 square feet apartment on the 56th floor of One57 in 2015. He paid $50.9 million and $35.3 million of that was borrowed. He also put up his 213-foot yacht, Galactic Star, as collateral. The terms of the agreement stated that Mr. Aluko had to pay off the balance by the end of 2017. The problem? No one knows where the oil tycoon is. Many believe he is living on his yacht. Why? In 2016, Mr. Aluko was suspected of stealing money from the Nigerian government. In addition, he is thought to have made much of his money in international money laundering schemes.
Just for Fun
The most expensive residential apartment purchase in New York City history took place in One57. In 2014, for $100.5 million, Michel Dell, Founder and CEO of Dell Technologies, bought a penthouse. That penthouse is just under 11,000 square feet and has 6 bedrooms and 6 bathrooms. Unlike the two afore mentioned billionaires, Mr. Dell is paying his mortgage.
Sometimes paying your mortgage is impossible. Circumstances beyond your control can put you in a terrible position. You might be fielding calls and letters from creditors and those communications can feel intrusive and threatening. If you want the communication to stop, you need help. Elias Dsouza of Dsouza and Strachan Lawgroup Group has the skills and experience to get you out of creditor’s crosshairs and back on track. Contact Elias for a free consultation.
Tax season is stressful for everyone. You never know when you are going to get that awful letter in the mail that informs you that you are being audited. Preparation is important. You should spend the whole year as if you expect to be audited. Unfortunately, regardless of preparation, some people are more likely to get audited.
The audit selection process is not completely random. If you are an employee that makes the bulk of their income from cash, you are at a higher risk of being audited. Professions such as wait staff, bartenders, or anyone else who earns tips should keep careful records.
Small Business Owners
Small business owners are also more likely to be audited. It is important to keep all records for any deductions and credits you claim. Some tax professionals also suggest that you claim income earned from side-jobs as “other income” on your return instead of filing on Schedule C. This may help keep you off the radar as a Schedule C tends to be an audit magnet.
People Claiming Home Office Deductions
A home office deduction really comes in handy. If you work from home and are self-employed at least part-time, you are allowed to dedicate a room in your house to office space. The deduction amount is determined by the percentage of square footage your office occupies compared to the total square footage of your home. For example, if your home is 2,000 square feet and your office is 400 square feet, you can deduct 20% of your utilities, internet, home phone, and mortgage interest payments (just to name a few) as home office expenses. The IRS does love to audit people who claim this deduction so be honest and be careful!
Those Who Claim $0 and Those Who Claim Over $10 Million in Adjusted Gross Income
According to an article on time.com, in 2014, individuals claiming $0 in adjusted gross income were audited at a rate of 5.26%. That same year, those claiming over $10 million were audited at a rate of 16.22%. To offer some perspective, people earning between $50,000 and $100,000 had a 0.5% chance of being audited.
If you are one of the unfortunate souls that gets “randomly” selected to be audited by the IRS, do not panic. If you have proof to back up your deductions, you have nothing to worry about. In any case, if you are being audited, you should enlist the services of an experienced tax attorney in Florida. Elias Dsouza of Dsouza and Strachan Lawgroup Group has the skills and experience you need to work through your tax issues.