There are plenty of reasons you may need a tax extension this year which, in general, the government will accept unless there’s an extraordinary circumstance. However, there are a few important things to keep in mind if you’re going to take that route. After weighing some of the pros and cons, there are things you need to know should you choose to file for a tax extension this year.
So, maybe you didn’t pay Uncle Sam enough in 2018 and now you have a gnarly bill. Maybe you started a business and did not pay any taxes all year. Paying your taxes will not feel great, but your bill is probably way less than Walter Anderson’s. Walter decided he did not like the idea of paying taxes, so he hid most of his earnings in off shore banks. We are not talking about a couple of thousand dollars here or there. We are talking about hundreds of millions.
Walter the Entrepreneur
Walter Anderson made his money as an executive in telecommunications. He invested in telecommunications companies that later sold earning him a huge profit. He became famous when he invested in a private space venture that aimed to refurbish the Mir space station which was an old Russian space craft. His group’s plan was to send people to the space station for “vacation”. Some say he started the privatization of space travel or at least the idea of it. He was one of the original supporters of the International Space University which is a multidisciplinary program focused on the study of space at MIT.
Federal Tax Evasion Charges
In 1998, Walter was managing companies with a total revenue of around $500 million. He made just under $130 million. In 1999, he made just under $240 million. How much income did he report to the IRS? $67,939 and he paid $435 in income tax. Due to the absurdly large sum of money Walter was making, the IRS took notice. On February 26, 2005, he was arrested at the airport returning from a trip to London. Officials spent the previous year investigating Walter’s income and found out that he was hiding money in the British Virgin Islands and Panama. He did this using aliases, tax havens, and shell companies.
He almost got out of having to pay $100 million to $175 million dollars of the owed taxes because the Federal government left a typo in their contract. The court imposed a $23 million fine and told the Feds they must sue in civil court. Well they did, and the total bill ended up being $247,482,114. Whenever you are feeling down about your tax bill, think about Walter’s and you will no doubt feel better!
If you run into tax issues and are unsure what your options are, you need assistance. The IRS is not an agency you want coming after you. For over 15 years, Elias Dsouza has been working with people just like you to manage their tax burden. Contact Elias today for a free consultation.
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.
Tax season can be stressful. However, many people look forward to a tax return. Some people even depend on it (not recommended). Tax software can only get you so far, you have to know how to save money for yourself. Deductions and subtractions are a great way to offset some of your taxable income.
A charitable donation does not have to be huge to make a difference during tax season. When you donate to a charity such as the Salvation Army or Goodwill, make sure you get a voucher and save it with your tax records. Also, this deduction is not limited to donating physical items. If you do charitable work, you can deduct items and consumables bought and used. You can also deduct mileage (14 cents per mile) for using your personal vehicle. Did you incur any toll costs? Deduct it!
State Taxes Paid in the Previous Year
If you are like me, you have owed the money to the state a time or two. Did you know you can deduct that on your taxes the following year? You may also be surprised to know that you can deduct income tax withheld by the state in the previous year. It should be noted that the new tax law limits your deduction to $10,000 per year and this amount includes state income tax withheld, sales tax, and property tax.
Jury Duty Pay Given to Employer
More and more often, employers offer their workers paid jury duty. However, they demand that the employee turnover the money they receive from the government for participating. The money you receive for jury duty from the government is taxed as income before you give it to your employer and is treated like taxable income. Because of this, you are allowed to deduct the amount you give to your employer on your taxes.
Notable Deductions That Are No Longer Available in 2018
All good things must come to an end. Some more notable deductions that are being… well… deducted are:
- Deductions pertaining to employee expenses which are unreimbursed;
- Moving expense deductions;
- Alimony deductions;
- Personal exemptions (an exemption that allows taxpayers to subtract $4050 from their personal income for each dependent).
It is up to you to make sure you are getting the biggest tax return possible, but taxes can be confusing. If you need help because you owe the IRS, contact Elias Dsouza of Dsouza and Strachan Lawgroup. Elias has the knowledge and expertise to help you navigate these complex issues.