Updated insider information by Chellie Campbell, author of “The Wealthy Spirit: Daily Affirmations for Financial Stress Reduction”
“There’s only one thing worse than paying income tax; and that’s not paying it!”—Anonymous
I am not a CPA, nor an enrolled agent. I don’t prepare tax returns, so I am not going to give you specific tax advice. This is just the general news I think everyone needs to know:
- Get professional advice. Pay the money. I never had a tax preparer that didn’t save me more money on my taxes than his or her fee cost me. In The Millionaire Next Door, authors Stanley and Danko outline many areas where the typical millionaire saves money, buying second-hand cars, resoling their shoes, etc. “But they are not nearly as price-sensitive when it comes to purchasing investment advice and services, accounting services, tax advice, legal services, medical and dental care for themselves and family members, educational products and homes.” They state that the affluent account for only about 1 percent of the U.S. households, but they pay 25 percent of the tax on personal income. Taxes are the largest expense they have, and they want the best advice they can get on how to reduce that burden. The tax preparer’s fee is even tax-deductible.
- Declare all your income and pay the tax on it. Millions of people work at home, have small side businesses, receive extra cash from sources outside their regular work, etc. Sometimes they don’t declare all the income, figuring that no one will ever know about it. But you know. You might fool the IRS, but you cannot fool yourself. And if you know you are doing something dishonest or illegal, which this is, it is going to cost you. It will cost you in stress, in lost sleep, in embarrassment trying to remember what lie you told. Somewhere, somehow, the money you thought you saved or got away with, will be taken from you. Directly or indirectly. Pay what you owe on what you earned. Sleep with a clear conscience. More than what you paid out will come back to you.
- Take all the legitimate tax deductions you can. The tax code allows you to take many deductions, exemptions, and credits because it recognizes that it cost you some money to make the money you earned. A small business person spends a lot of money on advertising, supplies, cost of goods sold, equipment, repairs, membership dues, travel, parking, postage, fliers, promotion, insurance, continuing education, etc. There are many, many legitimate costs related to earning income that are tax-deductible. If you’re using the golden phone to send out ships in order to get business, the phone charges are tax-deductible, too. Take every deduction to which you are entitled. Pay what you owe, but don’t pay more than you owe.
- Celebrate your payment as a gift. You’ve got to pay for the government anyway, so you might as well do it happily. Choose the line items in your national budget that you approve of, and decide that’s where your money is going. My taxes help pay for library books, the space program, the Small Business Administration, the national parks, and people on welfare who really need help. Where do your tax dollars go?
- P.S. It’s highly likely that this book is tax-deductible for you. Check with your advisor!
Today’s Affirmation: “I happily pay my fair share to help my government run efficiently and effectively.”
Straight flush over straight flush is a jackpot!!
I was among 4 tables of players in the Big O game at the Bicycle Casino Sunday night. The “Bad Beat Jackpot” had swelled to over $32,000 during the past four months and everyone wanted to win it. (This jackpot is when a superior hand like 4-of-a-kind or straight flush gets beat by a better hand. The odds are something like a million to one, but it happens.)
Suddenly, a hand developed that had possibilities: I had the 10-Jack of diamonds and the flop was 3-8-9 with the 8-9 both diamonds. So I had an open-ended straight flush draw! I thought, “Ok, if the queen of diamonds comes, I have a straight flush, but there wouldn’t be a possibility of someone else having a straight flush so no jackpot. So I need the 7 of diamonds because someone could have the 5-6 of diamonds for the bottom straight flush.”
There was a round of betting, then the dealer put the next community card on the board.
Seven of Diamonds!!!
The man in seat one bet, a couple of people called, and I raised. The man in seat one gave me a long, speculative look, then re-raised. Oh, be still my heart! I just called because I didn’t want anyone to fold at that point.
The last card was dealt – a meaningless 6 of spades. Seat one bet, a couple of people called, I raised, Seat One re-raised all in and I called, hoping we had that jackpot!
The man in Seat One said, “I sure hope you can beat me” and I said, “For sure I can beat you – I have the Jack-high straight flush!” He looked at my hand and showed his 5-6 of diamonds for the bottom straight flush and everyone at the table started clapping and yelling and high-fiving each other!
Because the “Bad Beat Jackpot” splits the money between all the players at the table. The person who had the bad beat gets 50%, the person that beat them gets 25% and the rest of the table splits the rest. This Jackpot was $32k so the man in Seat One with the low straight flush got $16,000, I got $8,000 and table share for the other players at the table got $1,600. Everybody happy!!