27) Fun with Taxes! (AKA Constructing a Tax Return)

C

onstructing a Tax Return is an interesting exercise.

It is a customized financial exercise that feels good to finish, making it an emotional one as well.  It’s a moral exercise, and it’s an intellectual one.  It's also an insightful snapshot of a period in your life.

            Some of us enjoy putting the pieces together to get view of the picture of your life, just like constructing a jigsaw puzzle on a lazy summer night.

            Taxes provide for public services, and the redistribution of wealth (from those that have, to those considered to have not).

            Congress initially creates the tax laws, and on behalf of the federal government, the Internal Revenue Service (IRS) implements the law.

            The law is complicated, it’s fascinating, it’s frustrating, and it’s full of minutiae, detail and mathematical formulae.  It‘s open to interpretation by taxpayers and practitioners, and can be challenged in different federal courts, although the Treasury Department and the IRS provide guidance.

            A Return, like a house, is constructed from the bottom, up.  Bottom pages feed information up to middle pages, and middle pages, eventually to the top two pages of some version of the Form 1040.

            The system is also complicated and there are many 'tests' a Return must pass to make sure you can do certain things (e.g. deduction amounts, deductible retirement plan contributions, minimum taxes, i.e. the Alternative Minimum Tax, etc.).

            Records must be kept to support your claims, in case a tax authority ever asks for proof - after all, the US Tax System, is a voluntary system and an honor system - one that many people selfishly abuse.

            There are generally two sets of rules of which to be aware: those that trigger the need to file a Return (e.g. electronic or paper), and those that govern the settlement of accounts (i.e. money).

            Generally, a single person must file when their income is $9,500 or more (unless they're filing to get a refund, are due credits, or are self-employed, or have capital gains/losses).

            The average American Taxpayer pays about a third of their income to federal, state & local income taxes.  Therefore, tax planning is one of the best investments you can make.  Few stocks and investments can consistently earn you 34%.

            Good tax planning involves:

ü  Good record keeping

ü  Engaging a qualified tax/financial professional who can patiently and clearly explain things, identify issues & solutions, and integrate taxes with your other financial planning

ü  Education

ü  Solid tax preparation

ü  Smart tax planning

            Former Associate Supreme Court Justice George Sutherland said, "The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted."

            Who's your Trusted Family Advisor©?

26) What Financial Planning Has Done for Me

As a Professional:

Ø  Allowed me to make a living

Ø  Allowed me to do something I like

Ø  Allowed me to help others and make a difference in their lives

Ø  Allowed me to be around other educated, honorable, balanced, successful professionals

Ø  Allowed me to be an entrepreneur

Ø  Allowed me to build/maintain self-confidence, self-esteem, and self-respect

Ø  Taught me professional & business skills

Ø  Allowed me to be my own boss

Ø  Allowed me to make my own schedule

Ø  Allowed me to work from remote locations for extended periods (in a bathing suit)

Ø  Allowed me to practice what I learned in business school

Ø  Allowed me to be creative

Ø  Allowed me to choose my clients and co-workers

Ø  Allowed me to 'fire' clients who misbehave

Ø  Taught me to delegate

As a Consumer:

ü  Teaches me about goals & objectives

ü  Helps me to assess my personal values

ü  Teaches me life skills

ü  Helps me to be healthy (e.g. mental, physical, nutrition, etc.)

ü  Helps me to be balanced (e.g. body-mind & spirit, work/play, eat/exercise, rest/sleep, live for today/plan for tomorrow)

ü  Allows me self respect and self-confidence

ü  Allows me to construct, prepare and file my taxes

ü  Allows me to manage my investments effectively

ü  Allows me to manage my insurances effectively

ü  Allows me to manage my credit effectively

ü  Allows me to protect my assets

ü  Allows me a feeling of security in light of the unknown

ü  Allows me to get married

ü  Allows me to, financially, easily get divorced

ü  Helps me to achieve/attain more of what I want out of life by planning & managing my finances effectively, and time well

ü  Helps me manage my budget

ü  Helps me to ask for help

ü  Taught me to integrate different parts of my life

ü  Allows me to maintain my body

ü  Allows me to maintain my sanity and keep my existence in perspective

ü  Allows me to maintain my sense of humor

ü  Allows me to maintain my home

ü  Allows me to maintain my 1978 Firebird w/Cragers and a working 8-Track

ü  Allows me to travel/live in other places on a budget

ü  Allows me to socialize with good friends and family

ü  Allows me to take advantage of New York on a budget (e.g. culture, food)

ü  Allows me to achieve life goals

ü  Allows me to pursue diverse interests

ü  Allows me to find peace, joy, contentment & happiness

ü  Allows me to help others

ü  Allows me to enjoy my life

What’s financial planning done for you?

25) The Golden Rule

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ultiple Choice (each correct answer is worth either a bar of fictitious latinum or your soul’s salvation (fictitious?):  The Golden Rule States:

A)  Do unto others, as you would have them do unto you.

B)  The one with the gold makes the rules.

C)  Both A) & B)

D)  None of the Above

            Where did you learn the Golden Rule?

            Do you practice the Golden Rule?

            Animal Farm's Golden Rule says that some people are more equal than others.  The practice of our economic and tax systems agree.  Does that mean that both Communism and Capitalism are corrupt?  Are people corrupt?  Are people simply human?

            That’s why we're seeing the masses rise up for freedom and fairness: Occupy Wall St., Middle East government-toppling, etc.

            But who ever said life would be fair?!

            Actually, our parents, our children's stories, and our school teachers taught us about right & wrong, good & bad, and fair & unfair.  However, I guess, that doesn’t make it so.

            That's where we learned to play nice, be nice, polite, say thank you, and share.  We learned about fairness and doing good for others, and treating them the way we wish to be treated.  We learned it wasn't if you win or lose, but you how you play the game.

            However, we know that that isn’t true for everyone.  There are plenty of business people and sports figures out there, who must win.  Derek Jeeter, the New York Yankees’ Captain has said so on TV.  Many people look up to them as heroes.  It isn’t just competitiveness; some must win at any cost.  Some people cheat, whether in business or marriage.  Some go further and actually believe in revenge (e.g. Donald Trump has said so on TV).

So what happened?  Life?  Observation?  Society?  Darwinism?  Anthropology?  Human nature?  Greed?  Lust for power?  Lust?  Capitalism?  Survival of the fittest?

Does crime actually pay?!  Aside from legalities, what are we supposed to think and exhibit about moral values?

            Do we give the next person a hand up, or do we climb over them on the corporate ladder?

            Are we not evolving?  Are we evolving at a snail's pace?

            You can get help for navigating the economic and tax systems, and focusing your moral values, and be golden, from a Certified Financial Planner.  They are some of the most honorable, ethical individuals that exist.  Certified Financial Planners can bring wealth measured not just in dollars, but also in human terms such as security, loyalty, trust, and the ability to sleep well at night.  (You already know about the bulls, the bears, the hogs and the SWANs, or you must read the prior blogs).

            Financial Planners and Personal Business Managers: that's what the rich and famous do.  Why not you?