Taxes and Investing
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As the tax deadline approaches we will discuss two problems preventing you from filing your taxes: missing or inaccurate tax documents. Some small employers forget to send W-2s preventing you from filing your taxes; other businesses may send incorrect forms. K-1s are even worse. With a K-1 you may not even know what the numbers should be and they always come late in the tax season.
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The tax due date is fast approaching. This year your tax return or extension is due by Monday, April 18th. If all your paperwork has not arrived or you are unable to file your return by April 18th, file an automatic extension with Form 4868. Here are some tips about an extension to file:
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Back in the early 1980s a CPA named Herb Vest had this crazy idea to merge the investment and tax preparation fields. By the 1990s both HD Vest Financial Services and your favorite wealthy accountant’s tax firm were hitting full stride.
My first career choice was not tax preparation or accounting, it was financial services. I fell in love with the stock market crash of 1929 my sophomore year of high school and from that point on wanted to be a stock broker. Tax preparation was a seasonal job I preferred over working all year long, putting the stock broker idea on hold. Besides, I invested most of my income and the library was filled with great books on the stock market and its history.
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I sometimes play a little game with people to prove most tax returns are prepared wrong. Before any tax professionals reading this start writing nasty comments I confess I also make errors on tax returns. I get it. Tax season is more triage than solid tax planning. However, once tax season slows down it is time to put your tax preparer to work saving you money, building your net worth, helping you with early retirement and making your life easier from a financial and investing point of view.
Certain errors on a tax return are understandable. Maybe you did not know the tax law or you forgot to tell your accountant about a certain income or expense. Other errors are unacceptable. These include transposed numbers or forgotten elections. This is sloppy tax work and it drives me insane. Anyone plugging numbers on a tax return must review their own work and reduce the number of issues on the return to zero before sending it to the final reviewer.
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There is an interesting stream of questions hitting my mailbox. My recent suggestion to cut back and retire early has led to one interesting question. I recommended cutting back to a part-time seasonal job and enjoying all the free time. I used tax preparation as a business idea perfect to live the relaxed lifestyle. CPA’s and other tax professionals came out of the woodwork with the same question: How do you get clients?
Getting clients has always been the easy part for me; finding qualified people to help me with the abundance of clients is a different story. What I am sharing today is something I charge a minimum of $3,000 for a personalized plan to increase your clientele. For free I’ll share my business growth story and few example businesses to help you create your own growth plan.
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People serious about early retirement turn to rental real estate to turbo-charge the process. Saving and investing can get you to retirement fast. With real estate you can go from zero to retired in a few years. It does require careful planning to make it work.
There are three steps in successful income property ownership: buying right, management and taxes. Over the years I have seen many people lose money, even go broke, due to rental properties. I have also seen ordinary people make more money than doctors or lawyers with real estate.
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The first week of tax season is in the books as I write this. Most tax seasons bring the same problems with a few notable new ways to mess up a tax return. New employees frequently bring bad habits from previous jobs we work hard to break. A new CPA in my office has reminded…
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There is a lot of confusion among small business owners when deciding on their entity classification and the tax savings involved. It is the first discussion I have with most business clients. It takes time to get pertinent information out so I decided it would be a good idea to write down.
There are five business entity choices, but it really is only three since two are default choices: sole proprietorship, partnership, limited liability company (and its close cousin, the limited liability partnership), regular corporation (also called a C corporation) and the S corporation. You default to a sole proprietorship if you are a one-person business or a partnership when two or more owners are involved.
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