How To Avoid An Audit Based On Discrimination By The IRS

IRS pick pockets your moneyIt should come as NO surprise to long time Financial Samurai readers that the IRS admitted to targeting conservative groups since Obama became President. The government already discriminates against those who make over a certain amount by charging higher taxes even though they already pay for the majority of all taxes. Meanwhile, the deductions and credits you get for things such as education and children get eliminated if you make over an absurdly low amount. Conducting body cavity searches to shake more tax dollars out of Republicans is business as usual.

Make no mistake that if a Republican was President, liberal groups would also be targeted by the IRS. Everybody naturally discriminates against everybody. Sometimes the discrimination is overt and evil, other times the discrimination is covertly done out of convenience until discovered as is the case with the IRS.

The bottom line is that people have a strong proclivity to take care of their own, no matter what. In this article I’d like to discuss ways in which people can significantly reduce their chances of getting audited by the most powerful organization in America.

THREE EFFECTIVE STRATEGIES TO AVOID AN IRS AUDIT

“Why Work If We’ve Got Obama?” Said My Rich Friend….

A retired man overlooking the fog over the Golden Gate Bridge.

Jaabir, one of the poorest richest friends I know, decided to take a vacation from not working by driving down to Indian Wells, California to watch the BNP Tennis Open last month. The tennis tournament is considered “The Mecca” for tennis fans everywhere given the terrific turnout of the world’s top pros and the intimate setting.

Before Jaabir left for the seven hour drive south, he urged me to go down with him for a week. I wanted to go, but I couldn’t because I had an interview lined up with a promising new company. I also wanted to be on standby just in case I got word from another potential employer. In other words, I was a dog on a leash. Woof.

To make myself feel better for not going, I started pressuring him to stay so he could do his duty as team captain by recruiting more ringers to help us defend our city championship. Why should he have all the fun right? I learned this strategy from so many who try and bring folks down if they can’t succeed themselves.

As usual, Jaabir brushed off my wishes because he’s free. “Sam, don’t worry! I’ve got everything under control. You are rich, why not live it up a little? Why do you not come with me to Indian Wells? Why work if we’ve got Obama, babay!?

Hmm, what the hell Jaabir! America ain’t no welfare country!” I retorted. But then I got to thinking about my own situation. Maybe Jaabir is right. Even though I was smarting for not being able to join Jaabir to tennis Mecca, I decided to write this post as a way to better understand his viewpoint.

WILL OBAMA SET US ALL FREE?

Cyprus Reminds The World To Diversify Our Assets And Never Trust The Government

Funny Bathroom SignImagine diligently saving $100,000 over 10 years only to wake up the next day to see $93,250 in your account. Now imagine having to fork over $99,000 of your $1,000,000 nest egg right before you plan to retire. The Cyprus president has basically negotiated a 6.75% tax on all deposits under €100,000 and a 9.9% tax above this amount in order to receive bailout money from the EU!

There are so many things wrong with this scenario:

* Trust of the government is now completely broken.

* The government is asking savers to foot the bill instead of spenders.

* The policy promotes moral hazard as any reasonable person will simply spend everything they have and wait to get bailed out by more fiscally responsible citizens.

* The media will capture images of bank run frenzies, causing more panic to spread to anybody who has access to a TV or internet connection.

* Citizens of weak EU countries like Portugal, Italy, and Greece may start withdrawing cash further hurting their economies.

* Equity risk premium rises causing a sell-off in stock markets overall which dampens returns, earnings, and corporate enthusiasm for spending and hiring.

HOW THE CYPRUS BANK RUN IS RELEVANT TO YOU

The Solution To Social Security Problems: Die Young & Stay Single

Presidio Golf Course In RetirementImagine working for 40 years, each year paying Social Security taxes and dying at the age of 62 with no spouse to bequeath. The Government is going to secretly laugh at you because they now get to keep the hundreds of thousands of dollars you paid into the system for free, baby!

Meanwhile, if you get married the Government will make sure to tax you at a higher rate (marriage penalty tax) to ensure they get more of your money and perhaps even deter you from getting married so they can pay out less in Social Security benefits. Makes you think, doesn’t it?

Why else do you think the income threshold for a 35% income tax rate stays at $400,000 and jumps to only $450,000 for a married couple instead of $800,000? Not sticking to the $200,000/$250,000 income threshold for tax increases helps thousands of people living in expensive areas survive. Ironically, the $200,000/$250,000 income threshold was more fair since $50,000 divided by $200,000 = 25%. Now, $50,000 divided by $400,000 is just 12.5%. The Government is sexist and wants one spouse to just stay at home or make less money if they get married. Absurd!

The maximum taxable earnings amount for Social Security (OASDI) taxes is roughly $113,700. There is no limitation on taxable earnings for Medicare’s Hospital Insurance (HI) taxes.

The Social Security tax for 2013 reverts back to its normal rates. The tax rate for 2013 is:

  • Employee-portion: 6.2% of wage earnings, up to the maximum wage base of $113,700;
  • Employer-portion: 6.2% of wage earnings, up to the maximum wage base of $113,700;
  • Self-employed persons: 12.4% of net self-employment income, up to $113,700.

For 2011-2012, the employee-portion of the Social Security tax was reduced from 6.2% to 4.2%. Self-employed persons also received the same reduction from 12.4% to 10.4%.

WHAT ARE YOU GOING TO DO ABOUT BEING SHORTCHANGED?

Financial Moves To Make Before And After The Fiscal Cliff

fiscal-cliff-santoriniI never thought we’d go over the fiscal cliff, but it turns out the chances are now over 50% after Boehner’s Plan B can’t even get enough Republican support. Raising the absurdly low income threshold for tax increases from $250,000 per couple to $1 million per couple sounds like a fantastic compromise.

Nobody making over $1 million will ever publicly complain about their taxes going up unless they want to face the mob. Those making less than $1 million a year will get their moral victory of sticking it to the real rich, who are the millionaires and billionaires of America, not the couple making $350,000 living in San Francisco with two kids. They are well to do, but they aren’t rich when it costs $1.5 million for a starter home!

Since Obama proposed a $400,000 income level before taxes will go up, and Republicans can’t even agree on a $1 million income level until taxes go up, it’ll come to no surprise if a deal doesn’t happen before year end. I was really hoping for something in between $400,000 and $1 million so they could move on with the real issue, which is overspending! It’s baffling why the government can’t take steps to spend within its means.

It doesn’t sit well with me that our politicians went home for the holidays with such a huge issue still unresolved. We pay their salaries and huge pensions! I still have some hope for at least a “Fiscal Patch,” but just in case, here are some things to consider.

FINANCIAL MOVES TO MAKE BEFORE THE FISCAL CLIFF