DARRIN T. MISH: Good morning this is your IRS solution attorney, Darrin T Mish, I am joined by my co-host Katrina Madewell. How are you doing Katrina? Click here to watch or read more information on IRS Back Taxes.
KATRINA MADEWELL: That’s me, I am doing great. Good Morning!
DARRIN T. MISH: Good Morning, it’s really nice outside it’s nice to see the sun shining, the birds are chirpin’– Chirping, the bees are uh whatever bees do. Buzzing, right?
KATRINA MADEWELL: I’m gonna have to like pep you up because you are in like a lull this morning and I can hear it in your voice there and I’m not ready to kick him, should I kick back?
DARRIN T. MISH: (laughs)
KATRINA MADEWELL: Should I tickle him? Let’s call Heather and ask her what the magic thing is to pep up the IRS attorney.
PAT: I think he is a little quiet this morning
KATRINA MADEWELL: Yea, he gets like that, I gotta pep him up.
DARRIN T. MISH: Yea, I..I go and get you some coffee
KATRINA MADEWELL: You remind me of my husband in some respect, like he gets this little funky moves and I’m like “WAKE UP, What’s the matter with you”.
DARRIN T. MISH: (laughs) I need some uh.. some coffee, some diet coke, something like that.
KATRINA MADEWELL: But we do have a great show lined up for you this morning. And so uh… Darrin’s team has put together 8 strategies to help you save taxes in 2016, isn’t that fantastic.
PAT: That’s a good idea, now how am I going to be able to listen and write all this down if I am going to get your coffee. Did you want two sugars and cream?
DARRIN T. MISH: You’ll just have to listen to it on the podcast
KATRINA MADEWELL: It’s our podcast Pat, yup.
DARRIN T. MISH: The good news is, I actually have a bonus uh.. strategy too because although my team did put together 8 strategies, as I was reviewing it, I thought of a 9th, so I don’t know if we are gonna have time today, so we are gonna have to buzz through this.
KATRINA MADEWELL: Yea, we will. If you have questions towards the end of the show, we will take your call live, we are live in the studio today 888-404-1010, I’m sure you have that number saved in your phone, but if you don’t its 888-404-1010 and you will be registered to win a FPU Scholarship.
DARRIN T. MISH: What’s FPU?
KATRINA MADEWELL: So FPU stands for…
DARRIN T. MISH: Sounds like Florida power.
KATRINA MADEWELL: Financial Peace University, so Dave Ramsey moved over to the station a little while back and uh they were syndicating the afternoon show in the mornings and so a lot of people listen to 1010 and are big Dave Ramsey fans, as am I, and I’m on the list although I’m not supposed to say the list, but you know, that list.
DARRIN T. MISH: Yea, he’s great
KATRINA MADEWELL: And uh… so Financial Peace University is kinda like this total money makeover, he has a book called that, but he’s like he’s the money guy, number 3 nationwide radio.
DARRIN T. MISH: Ok, well that sounds great and a scholarship to that sounds like a good thing.
KATRINA MADEWELL: it is a great… it’s a great course
DARRIN T. MISH: Do I get entered to win that? Potentially? Probably not.
KATRINA MADEWELL: You have to call into my show tomorrow.
DARRIN T. MISH: (laughs)
KATRINA MADEWELL: But it is great, we host it our office a couple times a year, most churches have it, you can sign up for it you know on his site, but anyway.
DARRIN T. MISH: I’ll have to check that out.
KATRINA MADEWELL: Back to the nine strategies to help you save taxes in 2016.
DARRIN T. MISH: The first strategy is actually pretty common sense, right? It’s like make sure you file your taxes earlier, at least on time, so the filing dead line, we’ve talked about this before on the show. The filing deadline this year is a little bit later than normal, it’s the Monday after April 15th this year, unless you are up in New England and then it’s the Tuesday. I think that’s the 18th or 19th this year, but just make sure you file your taxes early, so if you are gonna file with a tax repair, odds are they are gonna file those things electronically, and so just make sure that you get emails, some kind of electronic confirmation from your tax repair, and that will be you know that will suffice in case you had to prove that it wasn’t filed late
KATRINA MADEWELL: Usually the ones that are late, we shouldn’t tell them that they have a couple extra days, right? Just make that a surprise?
DARRIN T. MISH: Yea just try to get it done by April 15th that’s always a great idea, and if you got a refund coming obviously get it filed on time.
KATRINA MADEWELL: So when you say early and on time like April 15th we talked about that extension through, what is it? October 15th?
DARRIN T. MISH: Correct.
KATRINA MADEWELL: Ok, so is there a penalty if you file late or is that just automatically give me the give ya if you need extend your filing date.
DARRIN T. MISH: To best my recollection that penalty for filing late if you have a balance due is $500, so you gonna want to make sure to file an extension if you know you can’t your taxes done on time, and in theory your supposed to pay your taxes on time even if you file late, so you’re supposed to have your estimated tax payments paid in by April 15th. I don’t think a lot of people get that done, but I have a little story about filing your taxes early or on time and being able to prove it. If you are gonna file a paper return I think the best advice is to go ahead and send that thing certified mail by the postal service. One time I filed right on the 15th, and I got a letter back about a month later that said you are being penalized because you filed late et cetera, et cetera., and I kinda knew better, but I called the IRS and I said “well I didn’t file late I filed on time, and the lady said “well did you have one of those little green you know slips from the post office proving you mailed it on time?” I said as a matter of fact I did so…
KATRINA MADEWELL: Wait, what do you mean the green slip thing you mailed it on time? What are you talking about?
DARRIN T. MISH: When you…
KATRINA MADEWELL: Because I’m thinking like the people in line at the post office to drop it in the box at midnight.
DARRIN T. MISH: Ok, so when you… when you mail something certified mail from the postal service it comes out and there is a green receipt that gets round you know canceled at the.. at the…
KATRINA MADEWELL: I’m thinking physically dropping in the box.
DARRIN T. MISH: And so, I mailed that in the IRS to prove that I mailed the… the return on the time. That saved me $500, and since the certified mailing cost right around $5, I figured that saved me 100 years of certified mailing expenses.
PAT: But the question is, did you certify that when you mailed that in?
DARRIN T. MISH: I did, in fact cost me another $5
KATRINA MADEWELL: So in this day and age, could you like hold the envelope up next to the clock in your car with the post office in the background take a picture and drop it in the account?
DARRIN T. MISH: That’s not gonna fly
KATRINA MADEWELL: You love my creative thinking, come on it’s fun.
DARRIN T. MISH: There is also something you can get this called a proof of mailing. I think it’s about 75 cents or a buck or something like that, but certified it’s like type the tried and true.
KATRINA MADEWELL: Does the airport post office stay open late like inside?
DARRIN T. MISH: Yea, they’re open either til midnight or 24 hours a day. I know they used to be open 24 hours a day out at the airport, and I think because there is a giant mail sorting facility right there at the airport
KATRINA MADEWELL: Yes
DARRIN T. MISH: Which makes lots of sense, right? Cause since a lot of that mail is going on the airplanes. So they’re open quite later, nice folks over there too. So the second option would be when you’re getting ready to do your taxes for 2015 try to remember all the big expenses that you incurred as well as the smaller ones. Take a look at last year’s tax returns so that you can you know try to start to get organized. I mean that’s the biggest thing I see that people do is they… they leave sometimes they leave big deductions out because they are just not thinking about it, it’s not on top of mind, and they are not organized.
KATRINA MADEWELL: Well you’re trying to remember stuff you know from a year back, I mean one of the things that I do I use Shoeboxed so I get this magic blue envelope that comes in the mail, literally stuffed all the receipts in there, my process now is give it to the book keeper because we talked about my super late filing my QuickBooks crashed, so the book keeper gets it she does all her magic and then she sends it off, but I.. I like took it out of my hands because I just realized like I’m not that personality, it’s not my highest and best use.
DARRIN T. MISH: Yea, I don’t think its most business owners and entrepreneur’s highest best use either as trying to keep their tax stuff organized
KATRINA MADEWELL: And for what I pay to the book keeper, I mean she probably make sure that I’ll miss those deductions so she’s worth every penny I pay.
DARRIN T. MISH: Yea and she’s deductible as well
KATRINA MADEWELL: Yea, she is deductible, she is deductible.
DARRIN T. MISH: Shoeboxed.com is kinda of neat service that you just reference is shoeboxed.com
KATRINA MADEWELL: Yea
DARRIN T. MISH: And basically when there not a sponsored but I mean it’s a great service and basically what they do
KATRINA MADEWELL: There some kid, like a 15 year old kid created that company. Did you know that?
DARRIN T. MISH: That’s a pretty simple concept, right?
KATRINA MADEWELL: Think how awesome it is
DARRIN T. MISH: You stick your receipts into an envelope and you mail them to them and they scan them
KATRINA MADEWELL: Digitize them
DARRIN T. MISH: Digitize them and basically organize them somewhat and send them back to you.
KATRINA MADEWELL: Charitable deductions, that’s on the list, let’s talk about that because I remember I did a show on Tampa Home Talk and we talked about some of those things in Charitable deductions and so we have this conversation about ok you go and you drop all the stuff at the salvation army or Metropolitan ministries or wherever you’re donating, and they give you a blank receipt most of the times, so then you are trying to figure out, how do I do that? and so the advice that I got from a CPA you can chime in on this, was to physically list out all the items and then try to figure out what they are resell them for by looking on salvationarmy.com or whatever, and then physically taking pictures of them, that what he suggested I would’ve never thought of that.
DARRIN T. MISH: Yea, and you know in our defense those particular charitable donations are really hard to defend, you need very good records, you need very receipts and it does make me laugh to when I drop something off at Salvation Army or whatever and they give you the blank receipt, kinda like the taxi driver gives you a blank receipt after you get out of a cab. Yea, you need to… they need to be outlined, they need to be you know very detailed and you need to have some fair market values on there, and I think a lot of people lose out on the fair market value because if you’ve given up, I don’t know, an old shirt or something, and the fair market value is probably higher than your thinking it is.
KATRINA MADEWELL: Could be, so since you represent people also in IRS audits, like audit defense. What are some of the things that you see people take deductions on that they probably shouldn’t of, and maybe they thought it was a common deduction? Is there anything that pops into your head?
DARRIN T. MISH: Yea, the number one probably the most abused and most audited, well there is a couple actually, and home office deductions get audits quite a lot.
KATRINA MADEWELL: It’s like a red flag trigger.
DARRIN T. MISH: Yea, I mean people just go, there’s that saying “pigs get fat and hogs get slaughtered” I mean in that home offices when a lot of taxpayers just turn into hogs, they start seeing it and they go crazy, and they claim way more than they should. The other one is unreimbursed employee business expenses. Now think about this, how many people who work for a paycheck…
KATRINA MADEWELL: your W2 employee
DARRIN T. MISH: Your W2 employee, and then you have expenses that are unreimbursed by your employer. Now teachers are a really good example they are just really nice people and they spend a lot of money on supplies for kids and stuff like that. They’re a separate category.
KATRINA MADEWELL: Everybody knows they got deductions that aren’t reimbursed.
DARRIN T. MISH: Yea, that’s a separate category, but how many, you know how many other employees actually have unreimbursed employee business expenses. I mean how many employees are expected to drive for their job when they don’t get reimbursed. So I see this
KATRINA MADEWELL: Gosh that was loud Pat, you’re supposed to tone that down a little bit.
PAT: It catches me sometimes
KATRINA MADEWELL: So you’re an employee, what’s some of your deductions you’re sliding in there. You got any?
PAT: An employee?
KATRINA MADEWELL: Are you an employee?
PAT: I’m an employee, but I don’t have any deductions
KATRINA MADEWELL: So you’re not putting any in there.
PAT: What deductions do I have?
DARRIN T. MISH: That’s right, most employees don’t have unreimbursed employee business expenses so…
PAT: I like uh… car reimbursement as far as I drive
KATRINA MADEWELL: Darrin got me so scared of office at home, I don’t even take it even though I have home office and a real office, I’m like no that’s gotta be a red flag even though I have both, well you are listening to the IRS Solution Attorney Show and since the music is like talking over me that means we have to take break, so we will back in just a minute to continue our 9 strategies to help you save taxes in 2016. Back in a minute.
KATRINA MADEWELL: Welcome back! You’re listening to the IRS solution attorney show and I am your co-host with Mr….
DARRIN T. MISH: Darrin T. Mish the IRS solution attorney
KATRINA MADEWELL: With a deep voice
DARRIN T. MISH: Absolutely, before the… at the break we were talking about unreimbursed employee business expenses and during the break, you and I off air here we’re talking about an example that came into the office just a couple days ago
KATRINA MADEWELL: and before you jump into that in case someone is popping in the other car, the things we’re talking about right now are the nine strategies to help you save taxes in 2016.
DARRIN T. MISH: Absolutely
KATRINA MADEWELL: and the last thing was the employee unreimbursed expenses for a wage earner employee people
DARRIN T. MISH: right, right so if you’re a wage earner and you get a W2 you have taxes withheld you’re actually an employee of someone else. One of the most common audit traps that I see is claiming the unreimbursed employee business expenses on schedule a as an itemized deduction. There is a gentlemen that came in he and his wife came in and they were adjusted gross income, so their total income combined was about $115,000, and he prepared his own taxes using our favorite software program and he wondered why he was being audited because that is why they had come in and see me and I looked at their return and I was like “well there’s $42,000 here in unreimbursed employee business expenses, that’s probably the problem right there” so that is what he had done he had claimed all of their commuting miles, that’s a real common red flag as well that commuting to work is tax deductible, boy do I wish that was the case, but it’s not.
KATRINA MADEWELL: and it’s not really a case, the mileage is meant for people like me. That physically drive to properties, that physically drive to meet customers, and places other than my office.
DARRIN T. MISH: Right, absolutely
KATRINA MADEWELL: To physically go see a property we’re going to list
DARRIN T. MISH: So we can go over the commuting rules real quick, so if you do drive for, if you’re an independent contractor or something and you drive for you know for your business. I would say the commuting is from your home to your office is commuting, not deductible, and then any trip you make from your office to an outside site, for example if you’re showing a house, now that’s certainly deductible, and then if you…actually the rule is if you leave that house and then that you just shown, and then you drive straight home, that’s also not commuting. So that’s deductible as well. It’s just the trip from your home to your primary place of business, that is commuting, and that’s not deductible and that is one of the things that this couple had done, they also had written off a lot of business clause and things like that, they weren’t uniforms, typically the rule is you know if you wear a uniform with the business name embroidered on it or what I like to think of is the mechanic in his name tag says Bud with the blue shirt, then that’s obviously a uniform, and that’s obviously deductible, but for example lawyers always want to deduct their suits and their ties and their shirts and stuff like that again… totally wish that was the case.
KATRINA MADEWELL: I think it should be, it’s not, but I do think it should be.
DARRIN T. MISH: Well, ok. So we need to elect some people smart people up in congress and pass the lawyer fancy suit tax exemption.
KATRINA MADEWELL: Well there is a lot of people that kinda have to dress up, like you know, you can’t show up in shorts and flip flops.
DARRIN T. MISH: I agree, well you can (at Key West)
KATRINA MADEWELL: I mean you could, but depend on your clientele and what your job is.
DARRIN T. MISH: It would be real confident, right?
KATRINA MADEWELL: So the third thing we see is tax documents organized, getting those things in order.
DARRIN T. MISH: Yea you know, it doesn’t have to be real complicated, so the W2’s and 1099’s and 1098’s and now the 1095’s, which is for house savings accounts, or the medical insurance. Those things all come throughout, you know, January and February, right? I have a real simple system, I just have a place right on my desk, they just kinda get put into this one slot, and they are all there ready for me when it’s time to get the tax referred to you attorney
KATRINA MADEWELL: That’s funny, I do that too. I stick like vacation paperwork, travel paperwork, anything like that goes there.
DARRIN T. MISH: The one thing you could do to take this one step further, as you get them, you could scan them, and then you could put them some place like dropbox or google ads free, or google drive, you know one of these free data storage services and that would be a good place to have it, so you can send that over electronically to your tax provider.
KATRINA MADEWELL: So the fourth thing is maximizing your retirement account, that’s a good one, and you get extra time for that.
DARRIN T. MISH: Yea, you know, you wanna go ahead and maximize your contributions your 401k or 403b, those things you have at the office, you know for your employer, and you want to go ahead and maximize those matching contributions too, right? I mean if they are going ahead and double that money, I’ve never been in that situation because I’ve been self-employed forever, but you definitely want to make sure that you take advantage of those things and you do have until the tax filing dead line to make those contributions for the prior year. So you gonna want to make sure you want to do that.
KATRINA MADEWELL: I know that Dave recommends Roth IRA’S, which pay the taxes now, but don’t get taxed on the growth later.
DARRIN T. MISH: I totally agree, if you are under the income limits for the Roth IRA, then you should definitely should do that. It’s not going to save you any money on your taxes today, so it’s not instant gratification, but I will tell you if you are past 65 and you’re taking those withdrawals out of that Roth, you’re going to be one happy camper that you don’t have to pay taxes because you did when you were young.
KATRINA MADEWELL: And hopefully they don’t change the rules on us. That’s what I worry about.
DARRIN T. MISH: I don’t think that’s that realistic, you’ll have a lot of people really up in arms.
KATRINA MADEWELL: I think so too. Aren’t 4 and 5 kinda like interchangeable maximizing your retirement account and maximizing your IRA?
DARRIN T. MISH: Well, you know your IRA is a little bit different then your retirement account in the 401k kinda scenario, so if you have a traditional IRA or if you don’t have a traditional IRA then you are going ahead and want to open one so you can at least contribute up to $55,000 if you are under 50 years old and $65,000 if you are over 50 years old, and that keeps that money from being taxable. Of course you have to taxes on it later when you make those withdrawals, but for most people I would assume they are going to be in a lower tax bracket after retirement, so you can make sense depending on how you see things going in your future and what your retirement plans really are.
KATRINA MADEWELL: So this is number 6 on our list, but I have a feeling it should’ve been at the top, make your estimated tax payments, we talk about that on almost every show.
DARRIN T. MISH: I feel like I talk about estimated tax payments just about all day, everyday. Estimated tax payments
KATRINA MADEWELL: Heather would probably say you do that in your sleep, right?
DARRIN T. MISH: Heather is my wife, for those of you who are listening…
KATRINA MADEWELL: Yea, we both have our own spouses, we got that question before.
DARRIN T. MISH: Yea, we are not married
KATRINA MADEWELL: Are you married, do you work together, are you partners? No. We’re not partners, we don’t work together, well sort, but not… indirectly work together I guess is a better way to say it.
DARRIN T. MISH: Partners on the show, for sure.
KATRINA MADEWELL: Partners on the show and we have our own spouses.
DARRIN T. MISH: So estimated tax payments are those things that independent contractors, self-employed people are supposed to be making, and you make those payments on what we call 1040ES, and you can download that from the IRS at IRS.gov. You know my favorite probably myth in the tax world is that ES payments have to be made quarterly, well they do have to be made quarterly at minimum, but I typically suggest that people make those estimated tax payments more frequently than quarterly. Because as human beings we don’t budget quarterly, we don’t budget on a 90 day cycle, we tend to budget, if we budget at all, on a week schedule or a month schedule, but certainly not a 90 day cycle.
KATRINA MADEWELL: You know that if you are ever somebody has been in this position and you’ve owed the IRS money, and I have, I wish I’d met you at that time, if you are smart you learn very quickly, and so for me I don’t even take money unless I make a tax payment.
DARRIN T. MISH: Absolutely, and that’s a lesson that was hard learned, right?
KATRINA MADEWELL: So whether that’s want for me is once a month, for some people it might be once a week, for other agents it might be whenever they get a commission check.
DARRIN T. MISH: Right, so you’re probably doing more than one closing a month, so you can go ahead and budget that monthly, but some agents are doing one every couple months or one every month and a half or three months or something like that, so I would suggest that they take those estimated tax payments out at the closing table, and they can still feel rich for that day, right? Their just a little bit less rich because they paid tax man in advanced, I think it’s a really good idea, and it’s a way keep from creating these problems that I’ve dedicated my entire professional life to solving.
KATRINA MADEWELL: If you’re already in there, Darrin can help you, his number is 888-Get-Mish, so don’t feel bad, but if you are not in that place today shows’ for you. Because we are going to try to help you keep from getting there.
DARRIN T. MISH: Absolutely.
KATRINA MADEWELL: So number 7 is lower your taxable income. That’s a good one!
DARRIN T. MISH: Yea, try and get that taxable income as low as you can, so if you had moving expenses for a job, you want to go ahead and deduct those, if you want… if you had tuition or fees for education, deductions you want to make sure you get those. If you have the educator expense deduction, that we kinda talked about a minute ago, you want to make you get those, you want to make sure that if you bought health insurance in the health insurance marketplace, the Obamacare thing, and you received a premium tax credit, you might be able to get a bigger premium tax credit when you file your taxes, if your taxable income is actually lower than you had anticipated when you applied for the Obama care. Does that make sense? So if you think… when you sign up in the marketplace for the Obamacare insurance, then you had to estimate what your income was going to be, and they give you kinda credit off your health insurance for what you estimated what your income was going to be. If you are in the situation where your income came in lower than that, then you are even bigger reduction on tax credit.
KATRINA MADEWELL: Because they give you… not a supplement… Oh my gosh I can’t spit the word out…
DARRIN T. MISH: It’s a… yea they reduce the tax… subsidy. You were close. Supplement… subsidy, same thing.
KATRINA MADEWELL: It’s not working, I need more coffee. So what… and this is like the magic question nobody can answer, but isn’t there certain thresholds where your tax bracket actually changes, right?
DARRIN T. MISH: For sure… for sure
KATRINA MADEWELL: So, that might be something to be self-conscious of, especially if you’re self-employed you might not want to take that last extra distribution because it may throw you into different tax brackets.
DARRIN T. MISH: Yea, that would be if you in LLC, if you’re a corporation then you might not want to take that last distribution, but then the corporations likely going to have to pay some tax. So that is a little bit about our pay grade today to be discussed on the radio.
KATRINA MADEWELL: Yea, CP planner certainly helped a lot with that, you’re listening to the IRS Solution Attorney Show, we are live in the studio today at 888-404-1010, we are talking about 9 strategies to help save taxes this year in 2016, and we love to answer your question to 888-404-1010 if you call in you will be registered to win FPU Scholarship from money talk 1010. Thanks for joining us this morning, we will be back in just a moment moving on to number 8. Back in a minute.
KATRINA MADEWELL: Welcome back! You are listening to the IRS Solution Attorney Show with Mr. Darrin T. Mish and I’m your co-host Katrina Madewell, I’m just here to make it fun, to make sure that he doesn’t show up as the boring attorney on the show. Today we are talking about 9 strategies to help you save taxes in 2016. I love to razz Darrin, I’ll keep it fun.
DARRIN T. MISH: So number 8, this is not that obvious, check your W4. The W4 is that form when you are an employee, you send to human resources or personal that tells them how many tax exemptions, so how much money you should have withheld from your paycheck.
KATRINA MADEWELL: Does anybody ever look at that thing though again once they get hired?
DARRIN T. MISH: Not often enough. So if you have a new baby, you are going to want to make sure that you change your W4, you want to probably add a number, if you have a baby who is not quite so small anymore, is moving off to college and is going to be claiming themselves on their tax return. You are going to want to take them off, so you know you want to make sure that you adjust your withholdings on that W4, if you owed last year, for example.
KATRINA MADEWELL: So, do they fill a new one out?
DARRIN T. MISH: Yea, you can fill one out, I don’t think it’s as often as you like, but you can fill those things out more than once for sure, and you can get that form at irs.gov as well. It’s about a 9 page form, the instructions are about 9 pages, and the form itself is one third of one page.
KATRINA MADEWELL: Does anybody ever read that stuff?
DARRIN T. MISH: I don’t think so. I always tell people that it’s the single best way to fall asleep at night is trying to read the instructions for the W4.
KATRINA MADEWELL: No, I think reading mortgage documents would do it.
DARRIN T. MISH: The tax code.
KATRINA MADEWELL: Yea… yea you got me for sure, the tax code… yea all bazillion pages of it.
DARRIN T. MISH: So the 9th and bonus strategy that I was thinking about this morning was a health savings account. Health savings account are really really cool. I’ve had one for well over a decade, and what a health savings account is you get a high deductible insurance policy, kinda like what you get on the Obamacare exchanges, but they’re actually better. So for my family, I believed our deductible is around $7500, but our monthly premium for a family of 4 is only $400 a month. That’s really, really reasonable in my world at least, $400 a month for a family of 4. I wish it was less, but it’s not, and then…
KATRINA MADEWELL: You’re lucky it didn’t get more after Obamacare
DARRIN T. MISH: Yea, it actually did go up a little bit, but not that bad, and this is through human… mine is. So lots of these big companies actually offer these things, but the best and the coolest thing that offers tax advantages is you can put up to, I believe, $6,750 pretax, untaxed money into your health savings account, and then you can use those for your medical care and your medical expenses, so.
KATRINA MADEWELL: Well we have teenage kids, so last year we maxed it out. Because our oldest daughter was getting braces.
DARRIN T. MISH: So you have one as well. Ok, so you can pay for, I’m not going to issue an opinion about braces, but you can
KATRINA MADEWELL: But the truth is, I didn’t understand what it was for the longest time or even how it worked. But I imagine the person listening their probably thinking the same thing, HSA Health Savings Account, what is that?
DARRIN T. MISH: I really actually think that this is the solution, the real solution to all of our health care problems is because when you actually have a say in how expensive things are, how much things are going to cost with regarding your family’s healthcare. When you care what they cost, then what you do is you naturally you decide not to have a procedure or a test done. I’ve done that, or you shop, or you ask a doctor what things cost. You’d be amazed, doctors, if they are going to get paid cash today, or you know use your HSA debit card today, and they’ll cut the price often by as much as 60-70%. Because they don’t have to pay their billing clerks for a year to collect that money from the insurance company, so we use ours for
KATRINA MADEWELL: Plus a bird in a hand is worth two in the bush. Right? I mean today versus potentially chasing money tomorrow.
DARRIN T. MISH: Absolutely, so we use it for co-pays, out-of-pocket prescription costs, you can actually use them for over-the-counter medications now although I think that’s a bit aggressive, might be a little hard to prove.
KATRINA MADEWELL: What I found is that you talk about over-the-counter stuff, a lot of times, for example me and my son both have sinus stuff, so the Aleve D really helps, but I try to go swipe my HSA card and it won’t work. Like some things they take and somethings they don’t, like they decline it or take it off or say this is your balance due. For whatever they’re not covering, and then, but the doctor writes a prescription for it, like the pediatrician did, basically they literally take it out of the box and fill it like a prescription as well.
DARRIN T. MISH: Yea, the other thing is make sure you shop your prescription medication costs. I am absolutely astounded every time someone in the family gets prescribed something, we have a list about somewhere between 4 and 8 pharmacy’s that we call, we call Walmart, we call publics, we call Sam’s Club, Walgreens, you know CVS, and the prices are all over the place, you might have a quote of $200 a month from one pharmacy and it might be $20 at another pharmacy, so you are going want to make sure that shop that stuff.
KATRINA MADEWELL: I’ve never even thought about that, like that’s significant.
DARRIN T. MISH: Yea, and I’m not exaggerating there, we really have seen those and for some of the most commonly prescribed things, I mean for some of these stores have them for $4 or free, I think Public’s has them the antibiotics are for free.
KATRINA MADEWELL: I know that I get migraines, so you know the prescription stuff can get very expensive, at least the stuff that works.
DARRIN T. MISH: Yea, absolutely, so the Health Savings Account is not something that you could probably use to plan for 2015 now, because you kinda had that already have that in place, but it would be a really good idea to investigate those, if you are in a situation that you are self-employed, or have to provide your own health insurance. I would really encourage people to check out those Health Savings Accounts, I think it really is the solution to the health care crisis in this country, is make people care what it costs. When you have full coverage and it’s provided by your company or something, and you go to the doctor, you don’t really care what it costs.
KATRINA MADEWELL: Well some of that stuff that’s kinda Greek too, like I think when you look at it and even for somebody like me, it’s overwhelming, like I don’t know anything about that space, and it’s probably how most people feel when I walk into real estate transaction, right? They don’t know anything about that space or yours, the IRS space it’s overwhelming.
DARRIN T. MISH: Absolutely, so you just want to make sure, you know, check it out and shop it around and see if you can save some money on your health care and your taxes.
KATRINA MADEWELL: I think there is a job, just for that, like to search that stuff, it’s a company in the making. We are live in the studio today, and we went through our 9 things to save you money on your taxes in 2016, and we’re gonna open it up to some calls from listeners at 888-404-1010, 888-404-1010 and we also get questions at twitter @Darrin_Mish and then on your Facebook page, The IRS Solution Attorney Show, do I have that right? IRS Solution Attorney Show? Is that your Facebook page?
DARRIN T. MISH: No, the Facebook page is just Darrin T. Mish
KATRINA MADEWELL: Darrin T. Mish, Darrin Mish?
DARRIN T. MISH: Right.
KATRINA MADEWELL: Anyway we get questions and so we got from Stacy, she wanted to know where can I buy your Ebook, The 7 Secrets the IRS doesn’t want you to know about.
DARRIN T. MISH: Certainly I want you to buy it, you can go to amazon.com, I believe it’s on until there and you can buy in hard copy or eBook there on amazon.com, but there’s a little secret. You can actually get it for free by visiting my website getIRShelp.com. You got to scroll all the way down to the bottom, you just enter your email address and we will send it out to you.
KATRINA MADEWELL: Or, if you call the show Pat George can take your information and we will get you one in the mail too.
DARRIN T. MISH: Absolutely
KATRINA MADEWELL: So another question we got from Carl is when is the dead line for sending out the 1099s to contractors and is there a penalty for being late on them? That’s a good one, that’s right on time.
DARRIN T. MISH: The deadline for sending out the 1099’s is January 31st, there’s lots of 1099’s that get sent out late, so there are definitely are penalties.
KATRINA MADEWELL: To who? Your employer?
DARRIN T. MISH: Yea, we had that question within the last couple weeks, where someone said ” I didn’t get 1099 I was supposed to do, what should I do? Should I leave it off, the question was should I double it up or put it on next year, something crazy like that” now you actually should have records of what issuer of 1099 actually paid you, so don’t really need that 1099 to file your returns, but if you don’t have those records then you can probably call that issuer and ask them to issue a 1099. There are penalties, they range from anywhere 30 bucks for being a month late to $250 a month.
KATRINA MADEWELL: So I have to laugh because you know, one of your colleagues the in the attorney space Jim, so that he’s gonna be on my show tomorrow, Tampa Home Talk, talking about how to seal and expunge criminal records, and we were talking about…. I lost my train of thought. I can’t stand it when I do that, they have to write everything down, does that mean I’m getting old?
DARRIN T. MISH: Were we going to talk about ol’ Plaxico Burress, and his criminal problems?
KATRINA MADEWELL: No, I had something that was right on time, it was a question. Oh! I know what I was going to say, so Jim says yesterday, when I talked to him, he said “You know, I could go to a party and it could be all attorney’s or some attorneys, and Darrin will be the only one in the room, that nobody wants to talk to, nobody will act like they know him, That’s what I was going to say, so I was going to say he had a tax question or problem, you know don’t have to be Charlie or pat or Katrina, you could just call him and be sally or joe, and ask your generic tax question or IRS question. 888-404-1010.
DARRIN T. MISH: Despite Jim’s assertion, I just had a lawyer in my office as a client yesterday, I represent lots and lots of lawyers, or actually
KATRINA MADEWELL: And realtors
DARRIN T. MISH: Disproportionately represented in my practice, is having tax problems.
KATRINA MADEWELL: I think that’s funny, like when he was telling me the story, I was picturing this is my head, of all these attorneys’ hanging out at a cocktail party, and Darrin is standing over there by himself because nobody wants to talk to him.
DARRIN T. MISH: Nobody wants to admit that they are already on my client list, that’s what he was actually getting at, so I do represent lots of lawyers, lots of doctors, lots of people you would think wouldn’t find themselves in tax problems, and that is one of the really interesting things I think about my practice area is that it really straddles all areas, all socioeconomic breakdowns, so everyone from the people making $20,000 a year to…
KATRINA MADEWELL: And the ball players making several million.
DARRIN T. MISH: Yea, you know, former NFL, NHL, NBA, Major league baseball players, come in after their careers are over, it’s not uncommon for them to run into tax problems.
KATRINA MADEWELL: Now how can that be, when they aren’t getting paid anymore? What kind of stuff do you see?
DARRIN T. MISH: Well, one of the things is, they tend to go into their own businesses, or they have some type of self-employment type income.
KATRINA MADEWELL: Ahh we’re looping back to this .
DARRIN T. MISH: It’s so they don’t make estimated tax payments, because they use to have managers, and people, you know agents and stuff. That did everything. Literally did everything for them. They try, or what I’ve seen is they have become accustomed to the very high in lifestyle, and their income is not matching that high in lifestyle, and so there are some things that they have to learn to do themselves that is kinda a new thing for them.
KATRINA MADEWELL: What kind of businesses do they go into? What do you see? Is there some common denominator there?
DARRIN T. MISH: I see construction is quite popular, business, preferably, related to construction, so that’s a real common thing. Probably because it’s manly.
KATRINA MADEWELL: You know they can’t exactly be teaching ballet. There was one NFL player that took ballet, can’t remember who that was.
DARRIN T. MISH: I’m sure! It does wonders for balance, and strengthen, I mean those ballet…
KATRINA MADEWELL: Sometimes they have to get on their toes to make those catches.
DARRIN T. MISH: Those male ballet dancers, not to take anything away from the female ballet dancers, but you can really see the muscles and what not, it’s not what we stereotypically think of particularly masculine.
KATRINA MADEWELL: So, Plaxico Burress, he gets 5 years probation for tax evasion, in the news
DARRIN T. MISH: Yea, actually this was on a state case up in New Jersey, and apparently he filed, he made a million dollar income in 2013, which I guess is kinda low, he is a former ball player at this point in time.
KATRINA MADEWELL: Awww Plaxico is going to have to wait until after the break. You’re listening to the IRS Solution Attorney Show, much better pat, thank you very much, he’s not even listening to me. He’s talking to Charlie back there, but you’re listening to Money Talk 1010, I’m your co-host Katrina Madewell, you got Darrin T. Mish, main man on the mic answering your IRS questions. We’ll be back in just a minute, you can call us. We love to talk to you this morning. 888-404-1010, 888-404-1010. Back in a minute.
KATRINA MADEWELL: Welcome back, you’re listening to the IRS Solution Attorney Show with Mr. Darrin T. Mish and I’m your co-host Katrina Madewell. Welcome back.
DARRIN T. MISH: Welcome back. So we were talking about Plaxico Burress, and his little troubles with the state of New Jersey, before the break, and apparently what happen is Plaxico filed his tax returns for 2013 and he allegedly made an electronic transfer to pay…
KATRINA MADEWELL: Sorry I’m laughing, allegedly is such an attorney word. I just have to laugh.
DARRIN T. MISH: You have to say that safer defamation, so he allegedly paid $46,000 by electronic wire transfer and it didn’t go through, so we use to call that as a balanced check. So the electronic wire transfer bounced, and the state of New Jersey tried to contact Mr. Burress to get him to pay those taxes and they were without success, so they decided to…
KATRINA MADEWELL: They should’ve called his agent
DARRIN T. MISH: Well, so they decided to, well the agent is probably not getting paid that much anymore, right? Because he is a former player, this point in time, so they decided to charge him with tax evasion and ultimately he was placed on 5 years probation, he was given.. you know he has to pay back, I believe $56,000 in back taxes and penalties and whatnot, but Plaxico, other than catching the game winning touchdown in the super bowl, was also famous for accidentally shooting himself in a leg with a handgun he should not have had at in Manhattan.
KATRINA MADEWELL: Oh yea, I forgot about that
DARRIN T. MISH: So, yet another story of a former athlete whose life is sorta spiraling downhill at this point. I hope it works out for him, I mean there’s really no reason for him to let, unless he didn’t have the money, let the taxes slide that far. Even if he didn’t have the money, if he had kinda communicated with the state and worked out some kind of plan, I’m quite positive he wouldn’t have been criminally charged.
KATRINA MADEWELL: But we’ve talked about this before on the show, they like to make an example out of the people in the spotlight, so they think that “Oh if they’ll come after that person with money, then they are going to come after me.”
DARRIN T. MISH: Absolutely, the taxing authorities, there’s so many people that owe taxes out there in our population that there is no way the taxing authorities like the IRS or the state of New Jersey, in this case, can actually prosecute everybody, so they have to go ahead and go after the high profile people like Plaxico Burress, or doctors or lawyers and things like that, so that they, it makes the news so they get some pop, so that people on radio shows like this, talk about it. So more people file and pay their taxes on time.
KATRINA MADEWELL: So there was also a North Carolina judge that made the government actually pay legal fees to a store owner whose $107,000 was seized by the IRS.
DARRIN T. MISH: Yea, what happened in this case, it was actually a restaurant that accepted cash only, and there is a law that says that if you make deposits of $10,000 or more in currency, the bank issues something called CTR, Cash Transaction Report, or currency transaction report to the federal government. Now there’s nothing in of itself as far as I know, illegal depositing $10,000 or more in cash, but there is something illegal about structuring, which is what the government calls this, where you structure your affairs such that you always make cash deposits that are just a little bit shy of $10,000. So in this case what happened is the government actually…
KATRINA MADEWELL: They have people that watch that stuff too, and they have people for a job.
DARRIN T. MISH: Well, what happens at the banks, when they see large cash deposits being made, and they start to get suspicious and they think they have a duty to report this to the government. But in this case what had happened was this restaurant only took cash, and the government accused them of structuring and kept their $33,000 for over a year and a half. Well this upset the restaurant owner, greatly I’m sure, I can tell you right now that if you took $33,000 out of my business it would make very unhappy days at the Mish household, so they went ahead a sued the government and the government ultimately had to repay their legal fees in an amount $107,700. So the little guy won in that case, I wished it happened more often.
KATRINA MADEWELL: I was joking before another show, and I’m like so if I transfer like $9,998 to different bank accounts, you think it would irritate them?
DARRIN T. MISH: Yea, you might actually get, somebody might accuse you of structuring.
KATRINA MADEWELL: And that’s the crazy part, like it would be my own money, I could just do it to play games and see who’s following me, but it would be more troubling for…
DARRIN T. MISH: It could end up being pretty expensive game you’re playing there.
KATRINA MADEWELL: You can laugh at me, Pat it’s fine, I wouldn’t really do it. It’s a good thought in theory, it’s that little devil on my shoulder that pops up and tells me to do it.
DARRIN T. MISH: She talks about it, so it’s about that time for the IRS train wreck of the week, so in this segment this is where I talk about cases that came into the office, they came as a train wreck and they always leave much better off. In this case it was really, it’s one of my favorite stories actually. This was a case where there was a husband and a wife, they lived down in southwest Florida, and they racked up quite a hefty tax bill over the years, and it ended up being $191,363.19 actually to be exacted.
KATRINA MADEWELL: Wow, 19 cents.
DARRIN T. MISH: And this occurred over a period, over a decade or so. They were self-employed at one point in time, but this point, by the time they came to me, they were retired and one of them was actually terminally ill with cancer, and IRS was really hassling them, they levied their social security accounts, it was there basically making life more miserable. Yea, it was rough and they were in dire straits and so in this particular case, what I did is I went ahead and, I did something that is atypical of me, I submitted an extremely low offer, and I did because I was just irritated at the government and I wanted to stop the levy, and I wanted to see if I could get it done. So what I did, was offer $50, now there are people at the IRS who would be…
KATRINA MADEWELL: How much was that tax bill again, Darrin?
DARRIN T. MISH: It was over $191,000, but I offered $50 just because I was irritated at the situation, and I wanted to see what the IRS would do, and so what happened is after about, it was between 6 months and a year the IRS came back and they said “Well you know, there’s one little problem with this case, I can recommend this case for acceptance for $50 but you know there’s one liability that’s separate, so in other words one of the spouses was only on one tax year, and it was another significant amount of money” and so they made me offer another $20. So we ended up settling the $191,000 case for a grand total of $70. Now that is not typical, that is not normal, but it is in fact
KATRINA MADEWELL: But these are the cool stories to talk about, this is the fun stuff.
DARRIN T. MISH: It did in fact happen, and I’m pretty proud of that one, and it really changed their life, and it helped make sure that the end of life for the one spouse that had terminal cancer was a lot better, you know for them, so their last remaining days were happier.
KATRINA MADEWELL: So in that scenario, let’s just imagine that person didn’t call or talked to you, and then the one spouse passes and there’s life insurance and they get it, how does that play into the ‘I owe the IRS money’?
DARRIN T. MISH: Well, if it was a joint liability then the IRS would certainly be entitled to the proceeds of the life insurance, and in aggressive cases they might even levy the proceeds from the life insurance
KATRINA MADEWELL: So swoop in and take it out of the bank account?
DARRIN T. MISH: Yea well they can issue a levy notice to the issuer to the life insurance company and say “Hey, pay us instead of paying them”
KATRINA MADEWELL: So intercepting the money?
DARRIN T. MISH: Yea, so it could’ve made a real big difference in their case and, but I was really just more proud of just making sure that the last days of that person’s life, they didn’t have to worry about the IRS, it happens quite a bit when people come in and…
KATRINA MADEWELL: You’re killing me, you’re killing me.
DARRIN T. MISH: They come in and they have some kind of terminal illness like that, but they also have a tax problem, and I like to tell them “Hey let’s worry about making the last part of your life the best part of your life and let me worry about the IRS”
KATRINA MADEWELL: Hey, Darrin’s like these traditional attorneys, he really does have a heart. He’s like a big teddy bear, he cares.
DARRIN T. MISH: Contrary to public opinion.
KATRINA MADEWELL: That’s right, you know not all attorneys are the same. You are listening to the IRS Solution Attorney, I’m your co-host Katrina Madewell don’t miss my show tomorrow with Darrin’s buddy Jim Souza, talking about expunging criminal records.
DARRIN T. MISH: Yea, it’s going to be a great show. I’m going to tune in for sure.
KATRINA MADEWELL: We’re up this week, see you all later! Have a great day.