Taxes are funny!

Today’s post is a guest article from Matt Robinson. He is a tax accountant who has been helping taxpayers with major IRS tax debt problems for over 11 years now. His firm specializes in tax debt settlement and resolution. Seeing that taxes are generally a boring subject, I asked Matt if he thought he could bring a little smile to my readers this morning. Here’s what he came up with…

Putting A Smile to the Dreaded Tax Season: 10 Humorous Tax Stories

Nobody looks forward to April 15th, other than the majority of tax professionals who earn a living because of complicated tax codes. With that said, there are quite a few funny stories that I have read or encountered that should put a smile on your face.

1. Here is a great recent news story: Aaaron Zeff is the owner of Harv’s Metro Car Wash in Sacramento, California. Last month, two IRS agents showed up at his place of business requesting payment for back taxes. Aaron’s onsite manager was surprised. He was surprised not only because two IRS agents showed up at the Car Wash, but because they said the business owed 4 cents from the year 2006. The total tax bill with penalties and interest totaled $202.35. Yes, penalties can destroy your life if you fail to pay your taxes, especially if you do not file. In reality, did the IRS really need to send two IRS agents to collect $202.35?

2. Here is another recent news story: Diana Peffer, of Omaha, Nebraska received a letter from the IRS this year. When she went to open the letter, it said she owed a total of 4 cents in back taxes from the year 2007. It probably was an automated letter created by the IRS computer system because no one in their right mind would spend $5 dollars to get three cents back. Do you think she should send the IRS a 4 cent check so that they could send her a 1 cent refund? You make the call.

3. This news story is from this year as well. Genevieve Motola of New York gets a $5,700 tax bill from New York State. She’s 82 years old and it is unclear why she would receive such a large bill. It turns out the bill was from 20 years ago when she closed her store G&P Ceramics, Inc. Wow, hopefully this is not a sign that New York is about to go bankrupt, is it?

4. Although not as recent, this story needs mentioning. Cynthia Hess, AKA, “Chesty Love” of Indiana, was an exotic dancer who tried to deduct her $2,088 breast implants. The IRS rejected her claim and she sued the IRS in U.S. Tax Court. She won the case actually. She was able to prove, that the breast implants that left her with a size 56FF, allowed her to make money than she otherwise would have. No comment.

5. One of my friends, who is a CPA, always has a couple good stories for me. Tara, from New York, NY is an exotic dancer. She goes to see my friend  to file her 2009 taxes, but could not find her W-2. In this case, you would use Form 4852 to estimate your earnings and withholdings. She says she is not sure what she made but it is “definitely” between $7,000 and $10,000 for all of 2009. Yeah, and I am “definitely” going to be the next billionaire.

6. Sara P, of Orlando, FL  (a single, recently divorced, mother with two-children) attempted to file her taxes for her first time. Her ex-husband had always filed her taxes before so this was something new for her. She went to see my friend for help and as my friend tried to eFile her Federal tax return, he got it kicked back because there was a problem with the birthday for one of her sons. She insists that he does not know what he is doing and the birthday is correct. Anyway, she called my friend back a few days later and tells him she had remembered the wrong birthday for years. Really?

7. This is one crazy story. In 2008, William Magdalin of New York City, made regular deposits at his local sperm bank. After he made quite a bit of money, he tried to offset his earnings by taking a tax deduction for his “efforts.” He took it all the way to the US First Circuit Court of Appeals. Yes, he lost.

8. This is clever. A doctor tells a man with emphysema to exercise more. Therefore, he installs a swimming pool and tries to deduct the cost of the swimming pool. Surprisingly, the IRS agrees to the deduction because it was for medical purposes. The IRS allowed the man to take the deduction (which was really only the difference between his total cost and the value the pool added to the property).

9. Pet Food is Tax Deductible …Sometimes. A couple owned a junkyard and fed a bunch of stray cats. The couple argued that the cats were used to ward off snakes and rats that were living in the junkyard. The couple took the case to court and won! The IRS agreed that the cats kept the property safer for customers. Interesting.

10. This is a great story to end with. William Halby, a lawyer from New York, last year lost a tax deduction case in U.S. Tax Court. He tried to deduct $100,000 in expenses for prostitutes and pornography he paid for from 2004 to 2005. He argued his deductions were medical expenses and were justified as part of “sex therapy” because he was depressed and alone. The court ruled in favor of his deduction. No, I am kidding. The U.S. Court denied the deductions because not only is prostitution illegal but because no doctor would recommend such a thing.

– HAHAHA. Gotta love them taxes right? Thanks Matt for providing some, rather interesting, tax stories! Anyone out there have any random tax deduction stories they have heard through the grapevine?

Tis the season

Ho ho ho, ’tis the season. Tax season that is. I am far from a tax genius. In fact, I know almost nothing about the tax code. I don’t think anyone can call themselves a tax expert, considering the tax code itself is pretty darn convoluted. According to NPR, the US tax code is 67,204 pages. Assuming the average person can read one page per minute (which would be pretty tough with all the legal jargon included in the tax code), it would take a little over 46 days of consecutive reading to get from front to back. Do you think anyone has actually read the whole document? And if someone has, do you think they actually retained all they read? I think not my friends.

Every year I’ve earned an income, I have received a tax return between $200 to $1000. That wasn’t the case in 2009. I’m looking at a tax liability of $60 this go around. As a result, I’ve totally slacked off and am yet to file.

People often treat their tax return like a bonus. While many use their return money to pay down debt, add to savings, etc, others treat this as “blow” money and use it for clothing, flat screen TVs, or buying a year supply of tampons (maybe not so much that last one). What people tend to forget is that this tax return is not a bonus, but in fact a loan they made to the government (usually unintentionally) that they are finally getting reimbursed for. When’s the last time you loaned a “friend” a couple thousand dollars for a year at 0% interest? Probably never, so why do you do it for Uncle Sam?

If you know you are getting a return, it’s generally in your best interest to file as soon as you can. That way you get your money sooner, and have loaned it to the government for less time.

My goal for 2009 was to owe, or at least get back, as close to $0 as possible. As I mentioned earlier, this year I’ll be paying $60 to Uncle Sam. I love that I owe the IRS! That means I was able to get my hands on all my hard earned money as soon as I made it. I didn’t give the Fed one cent more than I needed, and I am okay with that.

Since I owe $60, I have not been in a big rush to cut a check to the IRS, but now that the deadline is only two weeks away, I guess it’s time to pay the tax man. I am going to try and follow the same plan for 2010, but getting hitched is gonna throw off my tax game and I’m not really sure what to expect. Usually marriage works to the tax payers advantage though, so I’m not too worried.

I personally think everyone should try and receive as small of a tax return as possible. Who really wants to loan the Fed free money? If nothing else, I guess it at least forces some people to unknowingly save a small part of their annual income, and I’ll never bash someone who saves. Just pinky promise me you wont go blow that return on something you can’t afford, okay? Thanks.

Now on to the questions…

Do you usually file your taxes ASAP, or wait until the last minute?

Do you end up getting a return each year, or do you typically owe?

Have you ever intentionally manipulated your W-4 to try and increase/decrease your tax return?

What is it about the return, that causes so many people to be okay with loaning the gov free money?

Anyone want to loan me interest free money for a year? I’ll be sure to pay you back 🙂

Professional athletes are overpaid

I was riding in the car with a friend a while back when they said something along the lines of “Professional athletes are overpaid.” While I don’t necessarily disagree with that statement (Alex Rodriguez), I can’t share the same sentiment. Yes, they may make more money in one game, than some Americans will make in their entire lives, but can ya really blame ’em?

The odds for Joe Blow becoming a professional athelete are slim…. 22,000 to 1 to be exact. That works out to about a 0.0045% chance. Did you know you have better odds at getting two hole in ones and bowling a perfect 300? You also have a better chance at marrying a millionaire, being murdered (let’s hope that doesn’t happen), being audited by the IRS, or developing hemorrhoids. Basically, becoming  a professional athlete is tough.

I thought this conversation was about athletes salaries, not about how difficult it is to become one?

Oh don’t you worry, it is about salaries. Professional athletes are the best of the best. Can you think of a position where the “best in the business” don’t make a boat load of money? Look at the creators of the fortune 500 largest companies….guess what? All of them are millionaires. As a matter of fact, they make a whole bunch more than even the highest paid athletes. Should we say actors salaries should be capped? How about scientists, computer developers, and real estate developers too?

People get all pissy when they hear Kobe is making $17 million a year, but no one seemed to care when three 20-something guys created YouTube, to later sell it to Google for $1.65 billion. Does Kobe make a lot of money? Heck yea, he does, but what right to I have to restrict his pay?

Ya see, professional athletes get paid what they’re worth. If they make a big salary, they are probably drawing in a large fan base. In virtually all private sector positions, the higher your skill level the higher your pay will also be. Instead of being bitter that A-Rod signed a $250 million contract, go fine tune your skills and move yourself up the corporate ladder.

What do you think peeps? Are professional athletes overpaid? Should there be pay-caps? I totally think limiting players salary, would be anti-capitilism. Do you disagree?