WEBVTT - Tax Confusion Made Clear! Stephen Moskowitz talks to Armstrong & Getty 0:00:00.720 --> 0:00:06.080 Because four hours simply enough. This is armstrong and getty 0:00:06.160 --> 0:00:13.760 extra large. I was just thinking, is we're about to 0:00:13.760 --> 0:00:17.759 talk to a tax expert. How upsetting it must be 0:00:17.840 --> 0:00:23.119 to him these stories about tax payers all across America 0:00:23.160 --> 0:00:26.280 feeling like their taxes went up because their refund is smaller, 0:00:26.920 --> 0:00:29.840 even though their taxes actually went down. Yeah. We've known 0:00:30.080 --> 0:00:33.400 Stephen Moskowitz for years in a variety of capacities, uh, 0:00:33.640 --> 0:00:35.599 personal and professional and the rest of it. And I'll 0:00:35.640 --> 0:00:38.919 tell you something about Stephen is he feels about taxes 0:00:38.960 --> 0:00:41.920 like shirtless guy in the stands feels about football. He 0:00:42.080 --> 0:00:44.839 is so into it. Uh, that makes it fun to 0:00:44.880 --> 0:00:47.239 talk about the changes in tax going a lot more. 0:00:47.240 --> 0:00:51.080 Steve Moskowitz joins the Steve, how are you, sir? I'm great, 0:00:51.200 --> 0:00:53.000 really happy to be a guest on your show. And 0:00:53.000 --> 0:00:56.200 you know how excited I get when we talk about taxes. Absolutely, 0:00:56.800 --> 0:01:00.800 I really do. We could start there people who feel 0:01:00.840 --> 0:01:03.000 like their taxes have gone up because the refunds have 0:01:03.080 --> 0:01:06.480 gone down under the new law. Are you frustrated reading 0:01:06.520 --> 0:01:09.360 those news stories? Yeah, you have to take a look 0:01:09.360 --> 0:01:12.280 at the totality. Now, some people's taxes really did go 0:01:12.440 --> 0:01:14.960 up because with this new tax law. There really were 0:01:15.040 --> 0:01:17.640 winners and losers, but an awful lot of people don't 0:01:17.680 --> 0:01:21.560 realize when they get something in every paycheck that at 0:01:21.640 --> 0:01:25.440 some point you pay for it. And theoretically, with the 0:01:25.560 --> 0:01:28.400 time value of money, you're better to get the money 0:01:28.440 --> 0:01:31.640 as soon as you can invest it. But what happens 0:01:31.640 --> 0:01:33.520 in real life. A lot of people just spend it 0:01:33.840 --> 0:01:36.120 and when they got the refund, it's like the old 0:01:36.200 --> 0:01:38.280 Christmas clubs that had a chunk of money and they 0:01:38.280 --> 0:01:40.560 could do something with, you know, buy something or go 0:01:40.600 --> 0:01:43.720 on a trip. That's that's what they're missing right right. 0:01:43.840 --> 0:01:47.280 So let's talk about the changes in the tax code recently. Well, 0:01:47.280 --> 0:01:49.560 what's the headline, do you what has had the most 0:01:49.640 --> 0:01:59.920 effect positive and negative on people? Oh? By far they 0:02:00.120 --> 0:02:03.920 through where if you qualify, you only pay tax on 0:02:04.920 --> 0:02:07.880 of your business profit. That's the biggest one out of 0:02:07.920 --> 0:02:11.600 all this. This really really helped business people. Doesn't do 0:02:11.639 --> 0:02:14.080 a thing for employees. But if you're in business and 0:02:14.240 --> 0:02:18.560 you qualify, who wouldn't want to pay tax on of 0:02:18.639 --> 0:02:23.280 the profit instead of and qualifying real estate? What do 0:02:23.280 --> 0:02:28.080 you mean qualifying? Can you pay tax and only of 0:02:28.120 --> 0:02:31.760 your real estate profit? Yes, if the real estate is 0:02:31.800 --> 0:02:35.360 a business, know if it's an investment. So what's the 0:02:35.400 --> 0:02:38.480 difference between a real estate business and investment is a 0:02:38.560 --> 0:02:42.280 laundry list of rules and essentially how much time you 0:02:42.320 --> 0:02:44.720 spend with it, what you're doing with it, how many 0:02:44.760 --> 0:02:47.360 properties you're managing. And then the government came along with 0:02:47.400 --> 0:02:50.600 something called the aggregation of rules, and without going into 0:02:50.639 --> 0:02:53.200 all the technicalities, you know these things have limitations on it. 0:02:53.720 --> 0:02:56.320 One of the ways to get around the limitations is 0:02:56.360 --> 0:03:00.680 you have the choice of putting property together. Where properties, 0:03:00.680 --> 0:03:03.880 say would qualify with businesses some belt but if you 0:03:03.880 --> 0:03:06.919 put them together and you qualify for that, you get 0:03:06.919 --> 0:03:10.440 the benefit of on the profit for all of them. 0:03:10.440 --> 0:03:13.480 So there's so much here, Oh my god, And it's 0:03:13.520 --> 0:03:16.480 mind bogglingly complex and honestly, and I don't mean to 0:03:16.520 --> 0:03:19.160 put you out of work, but the fact that it's 0:03:19.320 --> 0:03:23.880 this confusing and complicated, it's just it's a sin to me. 0:03:23.919 --> 0:03:26.680 It's un American, it really is. And I mean, you know, 0:03:26.720 --> 0:03:30.160 there's there's the big joke. Every time there's a tax 0:03:30.200 --> 0:03:33.600 simplification acts, and they've been tax simplification acts since I've 0:03:33.639 --> 0:03:35.839 been in practice for over thirty years. The big joke 0:03:36.000 --> 0:03:40.120 is it's the tax People's Full Employment Act, where it 0:03:40.200 --> 0:03:43.560 just gets more and more complicated and mis exception and that, 0:03:44.120 --> 0:03:46.680 and most people really do need to rely on somebody 0:03:46.720 --> 0:03:49.960 because if not, you can leave so much on the table. 0:03:50.040 --> 0:03:53.600 And there's all kinds of changes, like the college plans. 0:03:54.200 --> 0:03:59.920 Now you can use them for kindergarten through high school. 0:04:00.320 --> 0:04:02.640 You just be able to do that, so you can 0:04:02.640 --> 0:04:04.720 put an extra ten grand in that. And you know 0:04:04.720 --> 0:04:06.800 a lot of people were putting money away for their 0:04:06.880 --> 0:04:10.480 kids for college and under the old rules of plans, 0:04:10.760 --> 0:04:12.400 you have to use them for that. Now, I mean, 0:04:12.440 --> 0:04:14.440 you know you have an extra ten grand from kindergarten 0:04:15.120 --> 0:04:18.159 through high school. That's nice. There's all kinds of things. 0:04:18.200 --> 0:04:21.039 They're interesting. I asked you this every time we have 0:04:21.080 --> 0:04:23.080 you on, just to make a point. When you started 0:04:23.120 --> 0:04:25.520 doing taxes, how many pages were there in the tax 0:04:25.560 --> 0:04:27.600 code with all the regulations and what is it now? 0:04:28.880 --> 0:04:33.719 It was so much simpler. And it's it's funny that 0:04:34.160 --> 0:04:38.320 very question was posed to us. When I was a student, 0:04:38.360 --> 0:04:40.200 we had the professor came in and he said, when 0:04:40.240 --> 0:04:43.560 he started in taccess, he put his hands up in 0:04:43.560 --> 0:04:45.520 the air and said this was the rules. He said, 0:04:45.520 --> 0:04:49.080 now I can't spread my hands wide enough, and it's 0:04:49.120 --> 0:04:51.560 becomes infinite, because not only do you have the converse 0:04:51.600 --> 0:04:55.680 people in their infinite wisdom making rules, you also have 0:04:55.920 --> 0:04:59.239 the courts interpreting them. So you have a really good 0:04:59.240 --> 0:05:04.599 one where you know that the mortgage interest dropped from 0:05:04.800 --> 0:05:07.160 interest on a million dollars to three cores a million 0:05:07.400 --> 0:05:12.640 for any houses that were purchased after the law became effective. 0:05:13.000 --> 0:05:14.919 So you have to watch out. There's a lot of people. 0:05:15.080 --> 0:05:17.160 If you already had the house, you can still go 0:05:17.200 --> 0:05:19.599 ahead and the duck the mortgage on the million the 0:05:19.640 --> 0:05:21.880 new ones three cors of a million. But then a 0:05:21.960 --> 0:05:24.960 case came out, and this applies to a lot of people. 0:05:25.000 --> 0:05:30.839 The vast case where boyfriend and girlfriend bought a house together, 0:05:31.440 --> 0:05:35.039 they each took the deduction. Here says no, no, no, 0:05:35.360 --> 0:05:38.680 the limitation is per house. The task would said, no, 0:05:38.920 --> 0:05:42.560 it's per person. And that's a very common situation, especially 0:05:42.600 --> 0:05:45.039 here in the Bay Area, where say a gentleman and 0:05:45.080 --> 0:05:47.360 his girlfriend or or any people buy the house together, 0:05:47.800 --> 0:05:51.240 they each get the mortgage of seven fifties. So that 0:05:51.240 --> 0:05:53.719 would mean that if a boyfriend and girlfriend bought the house, 0:05:53.720 --> 0:05:55.840 they could duck the interest on a million and a 0:05:55.880 --> 0:06:00.440 half mortgage instead of just better off not being married 0:06:00.480 --> 0:06:03.920 and just living together in that situation. Absolutely, And also 0:06:03.960 --> 0:06:06.640 there's other areas tax law where that's the check case 0:06:06.680 --> 0:06:08.920 as well. Wow, you shouldn't need a tax expert to 0:06:08.960 --> 0:06:10.760 buy a house. Stephen moscow Witz is with us, and 0:06:10.800 --> 0:06:14.120 we shouldn't discourage people getting married. No, I wouldn't think so. 0:06:14.120 --> 0:06:16.280 So Stephen, what's going to get me audited? These days? 0:06:18.640 --> 0:06:22.800 You know, anything can get you audited, But you should 0:06:22.839 --> 0:06:25.599 take everything to which you're legally entitled, no more, no 0:06:25.720 --> 0:06:27.520 lesson if you get audited. So what it's like if 0:06:27.520 --> 0:06:29.640 a police officer stopped you when you're driving, if you 0:06:29.640 --> 0:06:33.320 wouldn't stop driving. But there's a lot of things. For example, 0:06:33.400 --> 0:06:37.000 as your income goes up, if you make more than 0:06:37.000 --> 0:06:41.160 a million dollars, you're chances of being audited are one 0:06:41.320 --> 0:06:43.440 in eleven. If you go to the other end of 0:06:43.440 --> 0:06:46.320 the scale, your chances of being audited or one in 0:06:46.360 --> 0:06:50.360 two seventy six. Yeah, we're making here in our job, 0:06:51.120 --> 0:06:55.159 so let's see that's eleven years. Calculate that pretty much. Volunteer, 0:06:55.200 --> 0:06:59.360 congratulations on the raises, Thank you? Is that just because 0:06:59.400 --> 0:07:02.640 they think are people making more money, are more likely 0:07:02.680 --> 0:07:05.040 to cheat, or just because the taxes get more complicated 0:07:05.080 --> 0:07:07.640 and there's there's more likelihood that you may stay cheating. 0:07:07.680 --> 0:07:10.000 But it gets more complicated, and then you have the 0:07:10.040 --> 0:07:13.600 opportunities to do all types of things. You know, for example, 0:07:14.120 --> 0:07:16.840 there's all kinds of fancy things you can do. Suppose, 0:07:16.880 --> 0:07:20.360 for example, you say, you know somebody say living alone, 0:07:20.440 --> 0:07:23.480 and they say, when I go to my reward, I 0:07:23.480 --> 0:07:26.320 would like the charity of my choice to have my house. Well, 0:07:26.320 --> 0:07:29.720 that's nice, but there's no tax benefit to that. But 0:07:30.360 --> 0:07:33.400 if you set it up while you're alive and you 0:07:33.440 --> 0:07:36.200 live in the house the rest of your life, but 0:07:36.360 --> 0:07:38.960 when you do die, the house goes to the charity, 0:07:39.240 --> 0:07:41.440 you get a tax deduction now, and that can be 0:07:41.480 --> 0:07:43.920 a big tax deduction, and all kinds of fancy things 0:07:43.960 --> 0:07:47.200 you can do. Same way with selling property. Suppose you're 0:07:47.200 --> 0:07:49.280 gonna sell the property and you said, well, right, I'm 0:07:49.280 --> 0:07:51.480 going to sell the property and then I'm going to 0:07:51.560 --> 0:07:54.520 take the money and invest it in stock market, get tax, 0:07:54.600 --> 0:07:58.280 the capital gains tax. But if you say, well, I'll 0:07:58.360 --> 0:08:01.840 give the property to the charity and then you take 0:08:01.840 --> 0:08:04.240 a stream of income back from them because they sell 0:08:04.320 --> 0:08:07.160 the property and there's no tax on them. Your lifetime 0:08:07.160 --> 0:08:09.120 stream of income is gonna be greater than if you 0:08:09.160 --> 0:08:12.160 saw that. There's there's a of things like that. Why 0:08:12.200 --> 0:08:14.440 can I can give it to a charity, but they'll 0:08:14.440 --> 0:08:18.640 give me a stream of income in return. Yes, and 0:08:18.800 --> 0:08:22.160 those are commonly done. And what happened is that charity 0:08:22.160 --> 0:08:25.320 gets a little something. But the big deal here is 0:08:25.400 --> 0:08:28.320 when charity sells the property, there's no capital games tax. 0:08:28.320 --> 0:08:30.960 If you sell the capital games tax, there's more to 0:08:31.040 --> 0:08:33.439 invest in the stock market. And the bottom line, the 0:08:33.520 --> 0:08:36.160 charity gets more, you get more, the I R S 0:08:36.200 --> 0:08:38.080 gets less, and that's a good thing. Another thing, I 0:08:38.080 --> 0:08:39.839 know it drives you crazy, just because we've talked to 0:08:39.840 --> 0:08:43.080 you for years, this idea that in kind of you know, 0:08:43.160 --> 0:08:46.120 pop culture that you know the week of April fifteenth 0:08:46.240 --> 0:08:48.600 is tax season, and there's all these stories about taxes 0:08:48.600 --> 0:08:52.240 and everything. The tax seasons year round. It sure is 0:08:52.280 --> 0:08:54.400 because an awful lot of people go on extension, so 0:08:54.440 --> 0:08:58.320 that means we have until October fifteenth. But it's the 0:08:58.440 --> 0:09:01.439 planning because so many things, so many things you need 0:09:01.480 --> 0:09:03.720 to do before the year end. Not everything like some 0:09:03.800 --> 0:09:05.640 of the pensions, you can still do in the next year, 0:09:05.960 --> 0:09:08.240 but there's so many things that you have to sit up. 0:09:08.240 --> 0:09:12.040 So tax is really a year round idea. Not it's 0:09:12.080 --> 0:09:13.880 like going to the doctor. You don't just care about 0:09:13.880 --> 0:09:16.280 your health the day you go for your annual physically, 0:09:16.280 --> 0:09:17.839 that's a good one. Would be like if I eat 0:09:17.880 --> 0:09:20.160 an apple and go run and go jog before I 0:09:20.200 --> 0:09:25.760 go to the doctor's cigarettes a day, right, exactly. H 0:09:25.800 --> 0:09:29.760 Steven Moscowitz as a tax attorney's the senior partner at Moscow. 0:09:29.840 --> 0:09:32.439 It's l l p uh Steven Will. We got to 0:09:32.480 --> 0:09:35.720 do it again soon. Uh. It's you know, just to 0:09:35.800 --> 0:09:41.000 remind ourselves as voters how insane the tax code is. 0:09:41.280 --> 0:09:43.920 But then as taxpayers, you point out there are some 0:09:44.000 --> 0:09:45.959 things a lot of people aren't doing that we probably 0:09:45.960 --> 0:09:48.679 should be. So it's always great to talk. Thanks the 0:09:48.760 --> 0:09:51.160 pleasures mind, Thanks for inviting me, right, thanks, Yeah, I 0:09:51.200 --> 0:09:53.320 tell you that's the funniest thing about Steve. He will 0:09:53.400 --> 0:09:58.520 stand there and talk about tax with fire in his eyes. Yeah, 0:09:58.559 --> 0:10:01.720 for as long as you want to talk about and 0:10:01.720 --> 0:10:04.920 and he's also you know, I hate to characterize him, 0:10:04.960 --> 0:10:10.520 but he's a real lover of liberty and American principles. 0:10:10.920 --> 0:10:14.120 And he's no great fan of the tax code and 0:10:14.160 --> 0:10:16.480 how complicated isn't what it does to people. So he's 0:10:16.520 --> 0:10:19.839 got this enthusiasm for making sure that people don't give 0:10:19.880 --> 0:10:23.120 the money grubbers of the government more than a dime 0:10:23.160 --> 0:10:25.719 more than they should. And it's so damn interesting, frustrating 0:10:25.760 --> 0:10:28.040 and scary to find out that a lot of cases 0:10:28.040 --> 0:10:30.240 that he's fought, where you know, he's represented people in 0:10:30.280 --> 0:10:32.920 a in a in a court of law, this judge 0:10:32.920 --> 0:10:35.160 will go this way, this judge will go that way. Right, 0:10:35.200 --> 0:10:37.040 I mean, you just you need to know the judge. 0:10:37.400 --> 0:10:41.520 You literally have tax laws where there have been twenty 0:10:41.559 --> 0:10:46.320 one decisions on whether this is legal or not yes 0:10:46.480 --> 0:10:49.280 and ten no. You would think on something like tax 0:10:49.280 --> 0:10:51.600 should be completely black and white and it's not just 0:10:51.640 --> 0:10:54.160 like everything else, right, And so you go into an 0:10:54.160 --> 0:10:56.000 audit and the auditor will say to you, the government 0:10:56.040 --> 0:10:59.520 auditor will say, oh no, no, no, Jones versus Mississippi 0:10:59.520 --> 0:11:02.520 says is completely illegal. They don't tell you that there 0:11:02.520 --> 0:11:04.719 are a dozen cases that say it's fine. Right, you 0:11:04.760 --> 0:11:06.840 talk about un American. To me, the most non American 0:11:06.880 --> 0:11:09.520 thing is that my own government, who I'm paying for, 0:11:09.880 --> 0:11:13.360 if they audit me and they and I make a mistake, 0:11:13.600 --> 0:11:15.600 They could point it out, but they won't know. It's 0:11:15.600 --> 0:11:18.360 a prosecutor prosecutor to get as much as they can, 0:11:18.480 --> 0:11:20.120 not to be fair, not to come up with the 0:11:20.160 --> 0:11:22.800 fair amount they're trying. If they can screw me, they will. 0:11:22.880 --> 0:11:26.680 It's like, which is amazing To sum it up, baby 0:11:28.640 --> 0:11:34.480 through that's a way to cut through the clutter. Now 0:11:34.520 --> 0:11:37.440 I'm fired up. You are listening to the arms Strong 0:11:37.559 --> 0:11:38.320 and Getty Show.