Ouch! Taxes: What to do?

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[quote author="WINEX" date=1231851567][quote author="No_Such_Reality" date=1231850268][quote author="awgee" date=1231771343]There is a world of difference between tax avoidance and tax evasion. One is legal and the other is illegal.</blockquote>


Incorporating in an offshore tax haven is legal to avoid the taxes is technically legal.



Is it an amoral dodging when the reality is the incorporated lives here, works here and otherwise really is established here but is using the technically legal structure to avoid?</blockquote>


A corporation is a separate legal entity, so what does your place of residence have to do with anything?</blockquote>


In many instances, the only difference is the corporate structure. The tax liability differences can be profound.
 
[quote author="No_Such_Reality" date=1231854600][quote author="WINEX" date=1231851567][quote author="No_Such_Reality" date=1231850268][quote author="awgee" date=1231771343]There is a world of difference between tax avoidance and tax evasion. One is legal and the other is illegal.</blockquote>


Incorporating in an offshore tax haven is legal to avoid the taxes is technically legal.



Is it an amoral dodging when the reality is the incorporated lives here, works here and otherwise really is established here but is using the technically legal structure to avoid?</blockquote>


A corporation is a separate legal entity, so what does your place of residence have to do with anything?</blockquote>


In many instances, the only difference is the corporate structure. The tax liability differences can be profound.</blockquote>


Yes, I realize that. And there are people who abuse the benefits. John Edwards (former Democrat Senator and VP candidate) was a one person corporation back when he was a trial lawyer. He paid himself a nominal salary through his corporation and gave the rest of the money he earned to himself through dividends. Not only is the tax rate significantly lower, but medicare and social security taxes don't apply to dividend income.
 
[quote author="irvine_home_owner" date=1231816384]I dunno... if you're making just shy of $300k a year, I think you can afford to hire a tax accountant to help you legally reduce your taxes.



Trying to get free advice from a forum full of strangers seems a bit of a stretch... and I know from experience that the Internet is full of false assumptions and misinterpretations.



There are probably some people here who wish they had a job... much less have a 6-figure salary.</blockquote>


Exactly.

You get what you pay for.

A well versed tax attorney and CPA are a must.

If you?re in that income/wealth category then you already have them on your team.

Pay for professional counsel, that's how it works at the higher end.
 
<u>Death and Taxes</u>

Author Uknown



Tax his cow, tax his goat; tax his pants, tax his coat.



Tax his crops, tax his work; tax his tie, tax his shirt.



Tax his chew, tax his mule; teach him taxes are the rule.



Tax his oil, tax his gas; tax his notes, tax his cash.



If he hollers, tax him more; tax him 'til he's good and sore.



Tax his coffin, tax his grave; tax the sod in which he lays;



Put these words upon his tomb:



"Taxes drove me to my doom."



After he's gone he can't relax; they'll still go after inheritance tax.
 
[quote author="SoCal78" date=1232430849]<u>Death and Taxes</u>

Author Uknown



Tax his cow, tax his goat; tax his pants, tax his coat.



Tax his crops, tax his work; tax his tie, tax his shirt.



Tax his chew, tax his mule; teach him taxes are the rule.



Tax his oil, tax his gas; tax his notes, tax his cash.



If he hollers, tax him more; tax him 'til he's good and sore.



Tax his coffin, tax his grave; tax the sod in which he lays;



Put these words upon his tomb:



"Taxes drove me to my doom."



After he's gone he can't relax; they'll still go after inheritance tax.</blockquote>


Only on the portion of his/her estate that is over $2M and the talk of reform is to bump that up to only the amount over $5M. Sorry, but I don't think society benefits from having an elite class of inherited wealth accumulate tax free. In fact, the inheritance tax came about at a time when a smal handful of wealthy families were controlling a majority of America. The truly wealthy and their heirs don't pay crap... talk to the people making $250K from wages and you'll see who is actually paying taxes in this country.
 
[quote author="tenmagnet" date=1231896401][quote author="irvine_home_owner" date=1231816384]I dunno... if you're making just shy of $300k a year, I think you can afford to hire a tax accountant to help you legally reduce your taxes.



Trying to get free advice from a forum full of strangers seems a bit of a stretch... and I know from experience that the Internet is full of false assumptions and misinterpretations.



There are probably some people here who wish they had a job... much less have a 6-figure salary.</blockquote>


Exactly.

You get what you pay for.

A well versed tax attorney and CPA are a must.

If you?re in that income/wealth category then you already have them on your team.

Pay for professional counsel, that's how it works at the higher end.</blockquote>
I'm there as a single income. I've been paying for good advice since I made 1/3 of what I make now. The education in tax policy and money saved is worth every penny.
 
This is what i've done....



1. Maximized 401k

2. Maximized 529b

3. Maximized IRA

4. Purchased rental properties

5. Developed several charities/Grants/Schlorships



Hire one heck of a kick ass tax person! She's the best!



good luck

-bix
 
[quote author="Boston2theBay" date=1232496711][quote author="tenmagnet" date=1231896401][quote author="irvine_home_owner" date=1231816384]I dunno... if you're making just shy of $300k a year, I think you can afford to hire a tax accountant to help you legally reduce your taxes.



Trying to get free advice from a forum full of strangers seems a bit of a stretch... and I know from experience that the Internet is full of false assumptions and misinterpretations.



There are probably some people here who wish they had a job... much less have a 6-figure salary.</blockquote>


Exactly.

You get what you pay for.

A well versed tax attorney and CPA are a must.

If you?re in that income/wealth category then you already have them on your team.

Pay for professional counsel, that's how it works at the higher end.</blockquote>
I'm there as a single income. I've been paying for good advice since I made 1/3 of what I make now. The education in tax policy and money saved is worth every penny.</blockquote>




Eventually, the team you?ve assembled will assist in transferring that wealth to your family in non-taxable ways.

Just like the Kennedy?s and so many others have.
 
Tenmagnet, I think you're overestimating how "wealthy" a $300k household income is by suggesting the hiring of tax counsel, a CPA, etc. That's a steep expense to incur even at $300k.



If you and your wife are W2 earners, there's not too much you can do. What you can do, can easily be learned reading any number of books on the topic.
 
Its been a while since I've been on the site. After reading through the post I find it funny to see the reaction of some. Thanks for all the replies either way. The last one by Perspective is truly the most accurate of them all. I have made and been making my living through hard work. No I don't want to hide my income, but I am tired of getting my clocked cleaned. As far as getting a "Team" together, I don't think you really know what 300k buys these days (if you save any of it, but thats another story). I do have an accountant, was just educating myself with what others are doing as I do with everything.



Thanks
 
Have to disagree with tenmagnet and others suggesting that the pros can help. I think internet research including posting in forums is part of due diligence before shelling out $1000s on the so called pros. My wife and I have no kids and are W2 earners and fall in the same category as OP. From all the research I have done, there isnt any other deduction I can take and unless I read something that tells me a pro can help, it doesnt make sense to just hire one. For those that do work with pros, please post what a W2 earner can expect. Obviously if they can help save me more than they cost, its an easy decision but most cant do anything for me.



Also, I might have been missing out on something obvious so what are other W2 earners doing for 2009 to minimize their tax burden?
 
Tax-shelter? I think I need to marry a broke chick and turn the marriage penalty into a marriage bonus. Perhaps a part-time cashier.



Total Wine ought to be good hunting grounds...
 
My wife and I are in a similar situation to the OP. We do own a home in TX, but it is practically paid for and we hardly beat the standard deduction with the $3800 of interest and $9k of real estate taxes we paid in 08.



We did spend a little more that $40k last year in airline tickets and apartment rental in OC in 08. This can be deducted as a business expense for one year, but we lose it after that.



09 is going to be awful in taxes. We plan on selling our home this spring and renting in Irvine. Maxing out the 401k doesn?t help, nor do our IRAs. Our federal tax bill is north of <em>big number here</em> in 08. Why don?t I feel wealthy?



I would love to hear ideas on how to reduce our tax burden. I have spoken with two CPAs and both offered little over what is readily available on TaxCut.
 
[quote author="effenheimer" date=1234087458]<em>"Why don?t I feel wealthy?"</em>



Do you live like you're broke?</blockquote>


Between work, commuting, flying, stressing over housing, we don?t live at all. We are in a unique situation in which both of our dissimilar careers and skill sets are in high demand. It isn?t going to last at this level. Frugality is the rule today, especially when contemplating a future life and home in OC.
 
Awesome! I live the lifestyle of someone making half my income and frankly I'm getting sick of it. It's always comforting when someone shares my misery. :red:
 
Getting back to the goal of reducing taxes in 2009, what are some ideas for W2 earners? USCtrojanman listed some good ones. Any other ideas?



1. Maximize 401k contributions

2. Charitable contributions

3. Buy a primary residence

4. Buy a rental property

5. Have some kids

6. Make less money



I already do 1 and 2...6 is happening by itself with my health care premiums going up and my company saying no pay raises this year. I have been on this blog since it started so number 3 is going to take a bit more time. I like 4 and have seen some condos that look like they are profitable as rentals. And finally, wife and I are working on number 5 :)



I have thought of starting a business on the side and imagine the first year will be full of expenses and very little revenue and definitely no profit. I believe I should be able to deduct the expenses against my W2 income but not sure. If so, that could be number 7: Start a business
 
Judge Learned Hand wrote, "... there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible" in 1947. You have the right to minimize your taxes by all legal methods.
 
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