Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • May 18

    It’s true; there are certain people for whom this article won’t apply. There are those of you who are perfectly fine paying the amount of tax you pay every year, thank you very much.

    However, since you are a regular reader of Taxing Times, you are probably in the second group: those who would love to pay less in taxes THIS year. (If not, then just move on to the next article.)

    There are two things which you must understand:

    Absolute Tax Law #1: Our tax system is not fair. Yes indeed, the Mitt Romneys, Warren Buffets, Barack Obamas, and Rick Santorums of our country operate under a vastly different system than most “regular’ taxpayers. This is NOT because they are wealthy and politically connected – though they most certainly are – and the sooner you quit complaining about those who seem to be wealthy and connected… and make the decision to join their ranks, the sooner you will pay less in taxes too.

    Because all of these men, and others like them, understand the second law…

    Absolute Tax Law #2: A tax return is a report, NOT a strategy. Yes, we’re pretty good at coming behind with our magic brushes and cleaning up the messes made by many of our clients. But there is a better way…

    It’s called tax planning, and it’s basically comprised of three parts:

    1. Strategic review. Assess the current situation, and identify short, mid and long-term strategies to lessen your taxes and grow your wealth.
    2. Implementation. This can be a little tricky (especially if you do it yourself), because there are bound to be accounting and local regulatory questions which arise. We recommend you stay with your same team who developed the tax strategy so they make sure you’re doing what you need to do.
    3. Proper compliance. There are plenty of folks out there who will claim to be able to give you “the secrets to paying less taxes!” But are they willing to put their name on the dotted line and defend it? If not, run as fast as you can from these charlatans. They are dangerous to you. They may just be blowhards, or they may lead you down a path to a fraudulent return.

    But the main thing to understand is that in order to really get your tax situation improved you must plan ahead.

    Otherwise, you’re just cleaning up a mess when filing your tax returns.

    Caveat: There isn’t a magic wand we can use to help everyone save on taxes. Sometimes, if your goal is  to save taxes, then you must complicate your tax life by investing. Investing in your own business or in the businesses of others. Sometimes, the path to building wealth involves paying more taxes for a time. Building wealth should be your real goal, not just cutting your taxes.

  • May 4

    While you can’t go totally paperless, there is a good chance you can dramatically down-size your pile. Now is a great time to reduce your paperwork. However, there is always that question, “What can I throw away and what do I need to keep?”

    There is no need to keep all those scraps of papers, receipts, and paper copies of documents. You can scan them. Once scanned a great way to organize them is filing them electronically according to years. Many banks even offer free online access to bank statements and credit card statements. You can download the statements right to the year it belongs and you have it.

    How long should you keep your tax return? Seven years is usually sufficient. Typically the biggest audit risk is the first three years after a return is due or filed, whichever is later. Whether you scan or want to keep the paper copy that is up to you. It is important to shred documents and not just put them in the garbage.

    Some information you need to keep longer. It is recommended that you keep tax forms relating to retirement accounts until those accounts are empty. These are form 8606, which helps you calculate your tax basis for future retirement plan withdrawals; form 5498, which shows individual retirement account contributions; and form 1099-R, which shows IRA withdrawals. It is also suggested to keep W-2’s, in some form, until you start drawing social security.

    Make sure you keep good backups. If you have hard copies, make sure you have backups in a different location, houses burn and flood. If you like the idea of keeping things electronically, keep a backup in a different location, computers spontaneously combust from time to time too. Either way, it is imperative that if asked, you are able to reproduce important documents.