The Redskins have two more urgent offensive issues than settling Grossman versus Beck versus the next great white quarterback hope from the draft. First, the offensive line can't consistently run or pass block. Second, the offense suffers from a chronic case of knucklehead syndrome. Two members of the offense, Trent Williams (tackle) and Fred Davis (tight end), have been suspended for the rest of the season for failing at least one drug test, they knew in advance was coming. Mike Shanahan needs to tell these two knuckleheads what the manager of the trading department told Charlie Sheen's character in the original Wall Street movie. “Somebody's gonna pay for this and it ain't gonna be me.”
One of these guys has to go to maintain even a joking sense of discipline. My choice is Fred Davis. Offensive tackles are hard to find. Tight ends are almost as easily available as day laborers in Herndon, Virginia. You can find one at any Seven Eleven.
December is the silly season for tax planning. We will have at least one hundred meetings aimed at minimizing taxes while there is still time in the year to make changes. I strongly believe in tax planning. The most important reason is that I don't like getting yelled at during tax season. Yes, it truly is all about me. Every March and April, I have five or six really brutal conversations with clients who owe far more in taxes than they expected. Before we really focused on bringing people in for tax planning, I used to feel really bad about these conversations. Now, I approach these conversations with a clear conscience, since I know we offered the opportunity for every client to know exactly where he stands tax wise while there was still time to make changes. Here is how these conversations now unfold.
Client: “Frank, I really didn't expect to owe ten grand this year.”
Here's the thing about expectations. To have an expectation, you have to have an idea what you are expecting, so that you can compare that to reality. Here is how I would like to reply.
Frank: “And how did you come up with what you were expecting? Tarot cards? Ouija board? Mike Shanahan? Here is how you might have come to your expectation. You might have accepted one of our half dozen offers for a tax planning meeting.”
Of course, I don't really say that. I sugar coat it a little. The subject of tax expectations is a good place to start a discussion about tax planning in general. The first step in tax planning is to develop a set of objectives. Some people just want to know they won't have to write big checks on April 15th. Some people want the opportunity to actually change their eventual balance due or refund. One way or the other, we have to discuss objectives at the start.
One of my least favorite types of client is the business owner who insists on paying zero taxes. To pay zero taxes, you have to have zero taxable income. That should seem obvious. Your income can't exceed your deductions like mortgage interest, real estate taxes, and all your other itemized deductions. For wage earners,this is typically unlikely. For business owners, however, a bad year can result in very little income. I don't have a problem with that situation.
I have a problem with the business owners who do every thing possible, and some impossible things, to manipulate their income. For example, they want to hold all of the customer checks they receive for the entire month of December under the mistaken impression that they aren't income if they aren't deposited until January. You might find this hard to believe, but the IRS already knows this trick and how to look for it in an audit. However, I have a problem with this sort of tactic not just because it is wrong. The tactic isn't even in the business owner's best interests. Here is a typical conversation that occurs a month or so after we have completed the income tax return for the prior year.
Client: “Frank, the bank wants financial information. I need you to make me look good.”
Frank: “It's not my job to make you look good. That's your job. Remember how you insisted on paying nothing? That means your profit and loss statement looks like hell. Good luck with the bank.”
Imagine that?! Showing zero profit isn't good for bank relations. From this, you can conclude that tax planning is a balancing act. You are getting some benefit in exchange for giving up something else. It is a classic trade off situation. Lowering your taxes makes getting a bank loan less likely. What is your objective – paying less in taxes or getting a bank loan? That's your decision as a business owner. I can help you go in either direction, but I can't set your objectives.
In my next installment, I will cover basic tax planning techniques and some common mistakes. People can be amazingly creative in torturing themselves.
Thanks for reading! Please check out the real, authentic S&K web site http://www.skcpas.com.
Frank
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