UK tithing exploit


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56 minutes ago, Vort said:

Which is why:

PAYING ONE YEAR OF TITHING PER YEAR VS. TWO YEARS OF TITHING EVERY SECOND YEAR
(Vastly simplified for illustrative purposes)

What I meant by "simplistic" was about the fact that they aren't even using any other deductions.  Once you are able to have enough total deductions to go into another tax bracket, I don't see many scenarios where this scheme would help.

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2 hours ago, Vort said:

Don't ever feel guilty for "using the tax system" to minimize your tax burden.

@mordorbund nailed it.  I'm constantly amazed at the vast numbers of people with the gut-reflex negative reaction to jumping through hoops to pay less tax. 

Then I remind myself the left has waged class warfare for decades, with calls of "rich people using loopholes to not pay their fair share", and it makes sense.     Folks assume you fill out the form, and the result is "your fair share".  They'll write up any form of advantageous tax planning as a rich trick to get out of "your fair share".

Pro tip: The there's absolutely nothing fair about the tax code.  It is a massive amalgamation of laws written by politicians seeking votes.  It's a self-contradictory and ever-growing pile of welfare and punitive punishment on various classes of people.  You know what happens when you have a rare or unique situation that isn't covered in tax code?  The IRS will sue itself, in IRS tax court, in order to get the "correct" answer.  

"Fair" and "US taxes" have very little to do with each other.  

Edited by NeuroTypical
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2 hours ago, NeuroTypical said:

"Fair" and "US taxes" have very little to do with each other.  

FIFY.

The truth is that anyone who takes the time to learn the code and execute it to their advantage will always be able to get ahead.  This will be true no matter what the rules are.

Quote

For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath.

 People think this is about gospel knowledge and blessings from heaven.  It is actually an eternal principle regarding anything.

If you have any trait, it (the trait) will tend to feed itself.  This is true of good traits as well as bad traits.

The way out of that spiraling pattern of bad traits is the Gospel of Jesus Christ.

Edited by Carborendum
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On 10/10/2024 at 5:52 AM, Carborendum said:

So, it is because their total deductions in one year are less than the itemized deductions in one year.  That's pretty simple.  But, unfortunately, it's pretty simplistic.

They need to look at itemizing more deductions than just tithing alone. *

  • What about their home mortgage interest? 
  • Rental expenses? (mortgage, insurance, cleaning, yard care,Air B&B fees, maintenance, etc.)
  • They go to the property once in a while. That's business mileage.  If they go by their property just to glance at it (which is considered a property inspection) on their way home from work, they can consider that a site visit and deduct mileage.  
  • They go out to eat and talk about the rental for 2.3 seconds, then forget about it the rest of the evening.  That's a business dinner.  They can deduct a percentage of the meal cost and the miles to drive to and from the restaurant (...err... meeting location).
  • They have a desk with a computer from which they check the mortgage balance and check Air B&B.  The computer and desk are business expenses, as is their internet bill. 
  • And they now have a home office from which they can deduct more based on square footage.

Truly, there are ALL SORTS of things you can deduct once you have a business. And if that total can be higher than the standard deduction every year, it would be better to do it year by year because of tax brackets. 

I've been doing this since I first started a business in 2002. Not a single year have I had fewer deductions than the standard deduction.

No, this is not a cheat.  It is built into the IRS system on purpose for the little guy.  If you're just starting a business, it is best if you start from home because of all the tax advantages you get.  Kamala's promotion of a $50k deduction doesn't even change anything.  You'd still have to itemize. And guess, what?  As long as it is a valid expense (which is pretty lenient) there is no limit.

*NOTE: I am not a CPA.  I'm just a business owner who has had many conversations with various CPAs over the years to go over what I can and cannot deduct. 

Me to a new CPA I hired: "I know that I'd *like* to deduct everything.  And whatever I can do to reduce that tax liability within the law is what I'd like to do.  I don't know how to do that legally.  YOU do.  That's why I pay you.  So, tell me everything I can do to reduce that and I'll do it."

These are items to count at your own risk. 

These are popular items that some people try to claim as business expenses.  Even with receipts it can be questionable, depending on how deep the investigator wishes to go.  It will then depend on investigator roulette.  Some will let it pass, others will absolutely nail you to the wall for doing these things.

Why?

Because, yes, technically it is cheating. 

Talking 2.3 seconds about a rental during a 15 minute lunch (much less an hour long dinner) is extremely questionable.  That's more of a passing comment than a business dinner or lunch.  If you are doing it with a customer for a business proceeding, then you can deduct it.  If it's a customer and for business (as in, you are having it FOR business rather than just going off for lunch with business associates)  you can have deductions. 

Depending on what else you use the computer for, and how much time you use it in comparison to what else you use it for, can also be something that they'll nail you to the wall for.  You can only deduct the amount of time you use that computer for how much of the time you use it for business.  If you use it 10% of the time for your business, and 90% of the time for watching movies, playing games, doing homework, etc...then you can only deduct 10% of that from your taxes. 

As you should not just accept my word for it (and I am NOT a CPA either)...here are some relevant articles relating to what I just said.

Consolidated appropriations act of 2021

An easier to understand explanation of meal deductions

Intuit's easier to understand explanation of computer deductions

Intuit's easier to explain work related devices deductions

Hopefully your CPA has an insurance shield (or whatever they call it...liability...etc) in case such things get investigated.  This gives the customer the assurance that the CPA knows what they are talking about and won't throw you under the bus if they are incorrect.  Normally it's somewhere in the range of 5K to 10K, depending on what type of taxes you are talking about. 

I think some of those items are going to depend heavily on the roll of the dice on what type of auditor you get and the investigator assigned to the case.  How stringent they are and how deep they go into your business dealings beyond just the receipts. 

Edited by JohnsonJones
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Somewhere between Carb's and JJ's take, is where the IRS stands.  A few notes: 

- The ability of the IRS to audit returns tends to be quite low.  Dems want to fund a billion auditors, Republicans want to neuter the IRS.  Since hiring/training/deploying auditors takes several years, the result is you have an almost zero chance of being audited, unless you have at least multiple millions of taxable wealth. 

- That said, the IRS does everything it can to run automated checks and flags that will trigger automated rejections or demands for documentation.  Not really an audit, you can't call it an investigation.  The IRS can refuse to complete a return, and then start charging interest and applying penalties because you don't have a completed return.  

- Painting a well-documented and reasonable sounding tax profile is an art and a science.  People openly engaged in fraud can be good at it and never get touched.  Totally honest people can be bad at it and get in years of expensive painful trouble.  

So, if you have a small business, here are some of the flags: 

- Low to zero profit, or losses, across years.  Nothing says "this is a fake business I use for a tax dodge" than zero profit or a loss.   That's a flag to get a human auditor taking a personal look. 
- The IRS looks at what you're claiming for lunches and computers and furniture and whatnot, and if they're what some algorithm considers "reasonable", then there's no flag.  The algorithm always changes, and I don't think any human actually fully knows what it does.  But if your deductions are higher than other similar sized businesses, that's a flag.
- Deducting residential space.  This is a deduction you have to fight for, not something you just fill out the form and everything is fine.  The IRS figures everyone is guilty unless they can do some hefty documenting and proving.  Again, this isn't an audit/investigate thing, this is more like "your tax return is on hold until you provide additional documentation" followed by "we lost your documentation, here are your penalties and fines that will continue until you prove your case or amend your return."

(I'm not a CPA either, but I did do a year at the tax desk of one of the national chains, and they trained the crap out of me on this stuff.)

Edited by NeuroTypical
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48 minutes ago, NeuroTypical said:

Somewhere between Carb's and JJ's take, is where the IRS stands.  A few notes: 

- The ability of the IRS to audit returns tends to be quite low.  Dems want to fund a billion auditors, Republicans want to neuter the IRS.  Since hiring/training/deploying auditors takes several years, the result is you have an almost zero chance of being audited, unless you have at least multiple millions of taxable wealth. 

- That said, the IRS does everything it can to run automated checks and flags that will trigger automated rejections or demands for documentation.  Not really an audit, you can't call it an investigation.  The IRS can refuse to complete a return, and then start charging interest and applying penalties because you don't have a completed return.  

- Painting a well-documented and reasonable sounding tax profile is an art and a science.  People openly engaged in fraud can be good at it and never get touched.  Totally honest people can be bad at it and get in years of expensive painful trouble.  

So, if you have a small business, here are some of the flags: 

- Low to zero profit, or losses, across years.  Nothing says "this is a fake business I use for a tax dodge" than zero profit or a loss.   That's a flag to get a human auditor taking a personal look. 
- The IRS looks at what you're claiming for lunches and computers and furniture and whatnot, and if they're what some algorithm considers "reasonable", then there's no flag.  The algorithm always changes, and I don't think any human actually fully knows what it does.  But if your deductions are higher than other similar sized businesses, that's a flag.
- Deducting residential space.  This is a deduction you have to fight for, not something you just fill out the form and everything is fine.  The IRS figures everyone is guilty unless they can do some hefty documenting and proving.  Again, this isn't an audit/investigate thing, this is more like "your tax return is on hold until you provide additional documentation" followed by "we lost your documentation, here are your penalties and fines that will continue until you prove your case or amend your return."

(I'm not a CPA either, but I did do a year at the tax desk of one of the national chains, and they trained the crap out of me on this stuff.)

https://en.wikipedia.org/wiki/The_Producers_(1967_film)

The entire premise of the original 1967 version of "The Producers" is a naive accountant telling a corrupt Broadway producer that the IRS rarely bothers with the financial records of shows that fail, leading to the pair devising a scheme in which they intend to put on a show that will be so awful as to fail after only a single evening; the way they see it, if they oversell stake in the show they can skip town with gobs of money before the IRS or anyone else catches up to them. 

In this case, the director they hire and the lead actor take it upon themselves to rework the show into an absolute satire, and so it becomes a smash hit. The producer & accountant get greedy, keep running the show, and wind up getting audited as a result of how big a hit it is... whereupon the IRS auditors discover that they oversold stake in the show and promptly arrest them for fraud. 

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36 minutes ago, Carborendum said:

So, we have three non-CPAs who have varying opinions, and a movie plot that sounds really cool.

Consider the value of each of these posts as the price you paid for it.

Well, a few months ago there was a video game called "Dustborn" that... 

Let's just say a few of us are suspicious as to whether or not it was a real life "The Producers" due to how much money the developers took from various sources (including grants from two different governments), how very obviously calculated the game was to infuriate & offend 90% of humanity, and how utterly the game failed. 

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32 minutes ago, Carborendum said:

So, we have three non-CPAs who have varying opinions, and a movie plot that sounds really cool.

Consider the value of each of these posts as the price you paid for it.

That's a good way to sum it up, but one last thought:  I remember when I heard someone sum up HIPPA compliance from a business perspective.  Sometimes, they said, the only way to know if you're HIPPA compliant, is you get sued for not being compliant, and you are not fined or not found guilty.   There is a little light between HIPPA and taxes, but I'm thinking not as much as people might think.  

I will never confuse taxes for some sort of moral obligation.  "Fair share" is a fiction sold by politicians seeking votes.   We covenant to be honest in all our dealings with our fellow men.  We are subject to laws and rulers and governments, etc.  We should never cheat or embezzle or attempt to defraud.  We are commanded to render unto Caesar what is Caesars. 

But when it comes to taxes, I care much about the letter of the law, and not so much about the spirit.  The IRS tax code is soulless and has no spirit.  

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23 hours ago, Carborendum said:

I'd love to hear this.  Please provide an example of how paying early interest payments would benefit the overall financial position.

The amount paid in interest remains the same so only the principle is paid for the upcoming year - in essence this is a wash.   Pending on your tax bracket and your income (assuming one earned 2+ million) could be a difference between 40 to 50 thousand.  More than double that if combined with enough other deductions.

Despite the political calls to the contrary – there are deliberate loopholes granted to the wealthy.  Often these loopholes are tied to hidden kickbacks and payoffs for politicians and their cronies.  The point is that governments are all corrupt to some level and the main engine of corruption is wealth (money).  The wealthy will always be incentivized to support political corruption.   This means that with some effort and help from a specialist there are incentives for those with financial leverage to reduce their tax burden.

It is my personal belief that the middle class of this nation carries an overly burdensome income tax liability and that the funds are wasted.   Currently the best tax deductions for the middle class are available through the operation of small businesses especially those run from one’s home.  It is best that these businesses are profitable (required to show a profit every 5th year as a minimum). 

The best advantage of a small business in one’s home is that you can hire your children (the more children the better - note to @mikbone).  This is better than a tax deduction because it is a tax credit that can be subtracted from your earnings.  But there are qualifications and limits. 

The main thing that a middle-class citizen needs to learn is that your government is not your friend and if, for any reason you are audited, you need to have an independent (and professional) witness to monitor all connections with the IRS (including phone calls).  The one and only one thing the government is unwilling to destroy are money making businesses.  Even the avid socialists’ governments have learned not to harm their cash cows.

 

The Traveler

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50 minutes ago, Traveler said:

The amount paid in interest remains the same so only the principle is paid for the upcoming year - in essence this is a wash.   Pending on your tax bracket and your income (assuming one earned 2+ million) could be a difference between 40 to 50 thousand.  More than double that if combined with enough other deductions.

The highest tax bracket is currently 37%.  So, to get a benefit of $40k (from this interest pre-payment) the pre-payment would have to be greater than $100k in interest for the next year.  Now, I believed you were pretty well off.  But why on earth would you have a mortgage so high that you're paying over $100k in interest alone for a given calendar year?

And even if you do, are the people we're talking about that wealthy?

To be clear: I had also said that it cannot make sense in an overall financial sense if you're still 10 years or more from payoff date.  The same money could have been used to simply pay down principle.  And that would have given you much more return on investment over the course of several years.

You can do the math.  Try it with a mortgage with 6% interest and $2Million principal balance vs the small amount every two years that you get back from the IRS.

50 minutes ago, Traveler said:

It is my personal belief that the middle class of this nation carries an overly burdensome income tax liability...

The top 1% pay about 25% of all the income taxes collected by the IRS each year.

The top 10% pay about 75% of all the income taxes collected by the IRS each year.

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and that the funds are wasted.

No one will disagree with that statement.

50 minutes ago, Traveler said:

Currently the best tax deductions for the middle class are available through the operation of small businesses especially those run from one’s home.  It is best that these businesses are profitable (required to show a profit every 5th year as a minimum). 

This is what I've been describing.  It's how I got out of the middle class.

50 minutes ago, Traveler said:

The best advantage of a small business in one’s home is that you can hire your children (the more children the better - note to @mikbone).  This is better than a tax deduction because it is a tax credit that can be subtracted from your earnings.  But there are qualifications and limits. 

I did this for several years.  But as of a couple of years ago, they put a wrench in the works.  My CPA had to bring the sad news to me.

50 minutes ago, Traveler said:

The main thing that a middle-class citizen needs to learn is that your government is not your friend and if, for any reason you are audited, you need to have an independent (and professional) witness to monitor all connections with the IRS (including phone calls).  The one and only one thing the government is unwilling to destroy are money making businesses.  Even the avid socialists’ governments have learned not to harm their cash cows.

They are now willing to destroy money making businesses due to the woke mind virus.  That is more important than money nowadays.

Edited by Carborendum
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1 hour ago, Traveler said:

Despite the political calls to the contrary – there are deliberate loopholes granted to the wealthy.

I always must chuckle at statements like this.

Who are "the wealthy" and how do you define "loophole"?  The answer will say a lot about someone's moral take on taxes.

 

 

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18 hours ago, Carborendum said:

So, we have three non-CPAs who have varying opinions, and a movie plot that sounds really cool.

Consider the value of each of these posts as the price you paid for it.

Probably the one that provides the references to actual laws and interpretations thereof.  I'd say that's probably FAR more reliable than someone just saying to trust them because of...no evidence whatsoever backing up their statement. 

But...discount the law as you wish...it doesn't change the law...just whether you are following the law or not. 

As @NeuroTypical says, audit's can be a gamble.  There are not enough individuals in the IRS to truly cover it all.  That still doesn't change whether one is following or not following the law. 

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I'm not giving advice here, just sharing an opinion based on personal experience and a little research.  It's applicable to the shrinking number of people who itemize instead of take the standard deduction:

The IRS says you can deduct 14 cents per mile driven in service of charitable organizations.

So, if you perform a calling on Sunday or during the week, (and here's my opinion,) you might want to consider deducting mileage for your trip to and from church. 

The IRS clarifies:

image.thumb.png.7664f479206022633e4dd7daf95103d7.png

 

You a primary teacher or a bishop or something?  Point by point: 
- Did anyone pay you for mileage?
- Was your travel so you could go teach primary or do bishop things?
- Was your calling the only reason you travelled to church?
- Do you think the 4th bullet point fits?

The first 2 seem to apply for all callings.  The last 2 are sort of iffy.   A YM advisor showing up on youth night to do YM activities probably wouldn't be there otherwise, and they had no other family there.   

One might opine that if you're only going to church because of your calling, you got problems that should be resolved.  But that judgment is only righteously pointed at onesself, not someone else.  

 

Edited by NeuroTypical
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