1 00:00:00,160 --> 00:00:04,000 Speaker 1: Every tax season and anytime any big tax story comes up. 2 00:00:04,280 --> 00:00:08,000 Speaker 1: Guy we always talk to is Stephen Moskwitz, Moscuit's LLP 3 00:00:08,560 --> 00:00:11,520 Speaker 1: tax attorney. Stephen, Welcome back to the Armstrong and Getty Show. 4 00:00:13,800 --> 00:00:17,200 Speaker 2: I always so enjoyed doing your show. And one of 5 00:00:17,200 --> 00:00:19,319 Speaker 2: the thing you want to talk about this year is 6 00:00:19,360 --> 00:00:23,680 Speaker 2: that the government has gotten so into our lives. However, 7 00:00:25,239 --> 00:00:27,920 Speaker 2: they're actually paying us to do some of the things 8 00:00:28,160 --> 00:00:31,120 Speaker 2: they want us to do. For example, how would you 9 00:00:31,240 --> 00:00:34,479 Speaker 2: like it if the irs lessened the price of a 10 00:00:34,520 --> 00:00:36,960 Speaker 2: car you're going to buy by seventy five hundred bucks? 11 00:00:38,520 --> 00:00:39,600 Speaker 3: So how is that occurring? 12 00:00:41,159 --> 00:00:45,440 Speaker 2: That's the electric vehicle credit. So and also let's talk 13 00:00:45,479 --> 00:00:49,040 Speaker 2: about the difference between a credit and deduction. If you 14 00:00:49,080 --> 00:00:51,280 Speaker 2: have one hundred dollars deduction and you're in the thirty 15 00:00:51,320 --> 00:00:55,040 Speaker 2: percent tax bracket, you save thirty dollars in taxes. But 16 00:00:55,120 --> 00:00:57,720 Speaker 2: if it's a credit and you have one hundred dollars credit, 17 00:00:57,760 --> 00:01:00,440 Speaker 2: you save one hundred dollars in taxes. 18 00:01:00,840 --> 00:01:03,600 Speaker 1: That's a good distinction, and I think people like you're right. 19 00:01:03,640 --> 00:01:06,000 Speaker 1: I think people blur those two together regularly. 20 00:01:06,840 --> 00:01:09,920 Speaker 2: It's a big deal, and it doesn't matter what your 21 00:01:09,920 --> 00:01:12,800 Speaker 2: tax bracket is In my example, you save one hundred bucks. 22 00:01:13,360 --> 00:01:17,480 Speaker 2: So here for getting an electric vehicle, you can save 23 00:01:17,560 --> 00:01:20,760 Speaker 2: up to seventy five hundred dollars. Now they sweeten it 24 00:01:20,840 --> 00:01:23,520 Speaker 2: some more because normally most things in taxes you file 25 00:01:23,560 --> 00:01:25,080 Speaker 2: a form like if we're going to file this form 26 00:01:25,080 --> 00:01:27,720 Speaker 2: will be form eighty nine to thirty six. But guess what. 27 00:01:28,440 --> 00:01:31,559 Speaker 2: You have an option when you're in the car dealership, 28 00:01:31,680 --> 00:01:34,360 Speaker 2: you say, you know, instead of my filing form eighty 29 00:01:34,400 --> 00:01:38,640 Speaker 2: nine to thirty six, I'll give the credit to you. 30 00:01:38,640 --> 00:01:41,880 Speaker 2: You give me the seventy five hundred bucks right now, 31 00:01:41,920 --> 00:01:44,440 Speaker 2: I'm going to drive out with that seventy five hundred 32 00:01:44,440 --> 00:01:45,920 Speaker 2: dollars saving. I mean that's a big deal. 33 00:01:47,440 --> 00:01:49,440 Speaker 3: Heck yeah yeah. 34 00:01:49,480 --> 00:01:52,280 Speaker 2: And other things too. Then the government has gotten into 35 00:01:52,440 --> 00:01:57,160 Speaker 2: the energy efficiency. They're giving this a credit for that's 36 00:01:57,200 --> 00:02:03,800 Speaker 2: what they call energy efficient home improvements like installing new doors, windows, skylights, insulation, 37 00:02:04,560 --> 00:02:09,120 Speaker 2: heat pumps, and a lot of other things. And water 38 00:02:09,200 --> 00:02:14,120 Speaker 2: heaters upgrade to electrical systems and this is terrific. Then 39 00:02:14,160 --> 00:02:18,799 Speaker 2: they go on and they give another credit for residential 40 00:02:18,840 --> 00:02:22,679 Speaker 2: clean energy credit. Again, these are things that you're improving 41 00:02:22,760 --> 00:02:26,840 Speaker 2: your house. For example, maybe you're doing solar or geo 42 00:02:26,919 --> 00:02:30,960 Speaker 2: thermal heat pump, home battery storage, fuel sell all these 43 00:02:31,000 --> 00:02:35,200 Speaker 2: things they're giving them money away. And what about your kitchen. 44 00:02:35,720 --> 00:02:39,079 Speaker 2: Guess what they're giving you credits for your kitchen too, 45 00:02:39,200 --> 00:02:42,440 Speaker 2: like an electric stove or cook top, range or oven. 46 00:02:43,080 --> 00:02:46,000 Speaker 2: And the bottom line is it doesn't stop there because 47 00:02:46,520 --> 00:02:50,079 Speaker 2: they also go ahead and they're even giving you credits 48 00:02:50,120 --> 00:02:55,240 Speaker 2: for savings. There's a savings credit where you go ahead 49 00:02:55,440 --> 00:02:58,960 Speaker 2: and if you put some money into your retirement account, 50 00:02:59,240 --> 00:03:02,520 Speaker 2: they'll give you credit for that too. So the bottom 51 00:03:02,560 --> 00:03:05,560 Speaker 2: line is, I know the government is just into so 52 00:03:05,720 --> 00:03:09,519 Speaker 2: into our lives, but here is something they're really doing 53 00:03:09,560 --> 00:03:11,280 Speaker 2: for us. And these are things you'd want to do anyway. 54 00:03:12,000 --> 00:03:14,960 Speaker 2: And you might wonder why is the government given all 55 00:03:14,960 --> 00:03:20,160 Speaker 2: these credits? Because in democracy, the government still can't order 56 00:03:20,280 --> 00:03:23,480 Speaker 2: us to do something they want, like they right vehicles 57 00:03:23,480 --> 00:03:26,200 Speaker 2: and homes more efficient, but they can pay us to 58 00:03:26,240 --> 00:03:30,760 Speaker 2: do it and it's very very effective. So the bottom liners, 59 00:03:30,800 --> 00:03:32,240 Speaker 2: there're just so much there. 60 00:03:32,480 --> 00:03:34,680 Speaker 1: So here's the question, Steve, And I know I think 61 00:03:34,680 --> 00:03:36,040 Speaker 1: a lot of people have and I don't know if 62 00:03:36,000 --> 00:03:38,480 Speaker 1: it's this year or next year, whatever, the change in 63 00:03:38,560 --> 00:03:42,040 Speaker 1: the amount of money where like if I'm paying babysitters, 64 00:03:42,040 --> 00:03:45,400 Speaker 1: a bunch of money, or gardeners or whatever. The ten 65 00:03:45,480 --> 00:03:47,320 Speaker 1: ninety nine all this stuff where a lot of us 66 00:03:47,320 --> 00:03:50,040 Speaker 1: have just been paying cash and not worried about it. 67 00:03:50,040 --> 00:03:51,840 Speaker 3: What all changed with the laws on that? 68 00:03:53,000 --> 00:03:55,120 Speaker 2: They keep changing that. And the idea of a ten 69 00:03:55,200 --> 00:03:59,600 Speaker 2: ninety nine is these are payments that you make in business. 70 00:04:00,200 --> 00:04:02,520 Speaker 2: So the bottom line is, if you're not sure, the 71 00:04:02,560 --> 00:04:05,840 Speaker 2: answer is really easy, just file it. Because there's no 72 00:04:06,000 --> 00:04:08,760 Speaker 2: penalty for filing something you're not required to. That's the 73 00:04:08,760 --> 00:04:11,680 Speaker 2: way around that. However, whoever does your taxes should know 74 00:04:11,720 --> 00:04:13,400 Speaker 2: that and be able to tell you. But that's the 75 00:04:13,440 --> 00:04:14,760 Speaker 2: deal with that. And the other thing you have to 76 00:04:14,760 --> 00:04:18,839 Speaker 2: watch out for is is this person And here's the 77 00:04:18,880 --> 00:04:23,039 Speaker 2: big deal about what you're talking about. Is that person 78 00:04:23,440 --> 00:04:27,359 Speaker 2: truly an inpendent contractor so you don't have to withhold 79 00:04:27,520 --> 00:04:30,520 Speaker 2: payroll taxes, you don't have to match those security taxes, 80 00:04:31,000 --> 00:04:33,039 Speaker 2: you don't have to have the worker's comp and all that. 81 00:04:33,360 --> 00:04:37,440 Speaker 2: Or is that person your employee, in which case you 82 00:04:37,480 --> 00:04:39,359 Speaker 2: have to do all those things. And if you don't, 83 00:04:39,880 --> 00:04:41,680 Speaker 2: you can get in a lot of trouble. So that's 84 00:04:41,680 --> 00:04:44,400 Speaker 2: another thing you have to watch out for. Is it 85 00:04:44,480 --> 00:04:47,720 Speaker 2: truly an dependent contractor or is an employee. That's a 86 00:04:47,720 --> 00:04:48,960 Speaker 2: big one you have to watch out for. 87 00:04:49,240 --> 00:04:52,400 Speaker 1: So what makes a center or a gardener or whoever 88 00:04:52,440 --> 00:04:56,440 Speaker 1: you're paying cross the line into being your employee. Is 89 00:04:56,440 --> 00:04:58,120 Speaker 1: it the amount of money or is there more to 90 00:04:58,120 --> 00:04:58,599 Speaker 1: it than that. 91 00:04:59,320 --> 00:05:02,480 Speaker 2: There's a lot more to it. Usually it's a lot more. 92 00:05:02,560 --> 00:05:06,360 Speaker 2: How much control do you exercise? So for example, if 93 00:05:06,400 --> 00:05:09,960 Speaker 2: you say come to my home at eight thirty Monday 94 00:05:10,080 --> 00:05:12,920 Speaker 2: through Friday, you have an hour for lunch at noontime, 95 00:05:13,400 --> 00:05:15,560 Speaker 2: end up pretty much working for you. That's an employee. 96 00:05:16,920 --> 00:05:21,760 Speaker 2: The independent contractor is somebody they have their own business, 97 00:05:21,920 --> 00:05:24,480 Speaker 2: they have their own employees, they have their own assets, 98 00:05:25,120 --> 00:05:30,760 Speaker 2: and sometimes there's a close line. For example, the IRS 99 00:05:31,360 --> 00:05:35,600 Speaker 2: has a twenty question forum where they help you determine 100 00:05:36,160 --> 00:05:39,919 Speaker 2: is that paye really an independent contractor or the employee? 101 00:05:39,960 --> 00:05:42,240 Speaker 2: So if you're thinking about it, that's another resource where 102 00:05:42,240 --> 00:05:43,640 Speaker 2: you take a look at those twenty questions. 103 00:05:43,920 --> 00:05:46,520 Speaker 1: Who gets audited? Like who would get caught in this 104 00:05:46,560 --> 00:05:48,880 Speaker 1: sort of stuff? Is it mostly rich people to get 105 00:05:48,920 --> 00:05:51,360 Speaker 1: audited or are they audit Who gets audited? 106 00:05:53,279 --> 00:05:56,760 Speaker 2: That's a great question, and the government is very clear 107 00:05:57,080 --> 00:06:02,120 Speaker 2: that everybody can be audited. Statistics one who can be 108 00:06:02,200 --> 00:06:06,840 Speaker 2: audited or with the real answer, The higher your income, 109 00:06:07,560 --> 00:06:10,839 Speaker 2: the more likely you are to be audited. That's one thing. 110 00:06:11,200 --> 00:06:14,960 Speaker 2: Another thing is there's something called PIF Discriminate Income function. 111 00:06:15,760 --> 00:06:19,280 Speaker 2: That's where all of our tax returns go through a 112 00:06:19,320 --> 00:06:24,640 Speaker 2: computer and they check sixty six different factors and this 113 00:06:24,720 --> 00:06:27,640 Speaker 2: gives you what's called an audit score for audit potential. 114 00:06:28,279 --> 00:06:30,520 Speaker 2: The higher your point, the more likely you are to 115 00:06:30,520 --> 00:06:36,560 Speaker 2: be audited. One factor is your percentage deductions against your income. 116 00:06:36,960 --> 00:06:40,960 Speaker 2: Another factor is certain categories like do you have a 117 00:06:41,000 --> 00:06:44,679 Speaker 2: small business loss, did you take a home office deduction? 118 00:06:44,720 --> 00:06:47,040 Speaker 2: Doesn't mean you can't, They just there are factors they're 119 00:06:47,160 --> 00:06:50,000 Speaker 2: interested in, and also the total amount of your income, 120 00:06:50,360 --> 00:06:53,120 Speaker 2: the total amount of you aductions. Another thing that they do, 121 00:06:53,160 --> 00:06:55,080 Speaker 2: and this is published every year in the Wall Street Journal, 122 00:06:55,600 --> 00:07:00,680 Speaker 2: is they compare your deductions to the national average. There's many, 123 00:07:00,680 --> 00:07:03,400 Speaker 2: many factors. Other factors is how to do in previous audits. 124 00:07:03,880 --> 00:07:05,760 Speaker 2: If you owe money in a previous audit, they're more 125 00:07:05,800 --> 00:07:08,320 Speaker 2: likely to audit you again thinking that you've done something 126 00:07:08,360 --> 00:07:11,920 Speaker 2: wrong again. The bottom line is everybody has a chance 127 00:07:11,960 --> 00:07:14,840 Speaker 2: of being audited. And something I've always believed is that 128 00:07:14,840 --> 00:07:17,640 Speaker 2: you should take everything to which you're legally entitled, no 129 00:07:17,800 --> 00:07:21,080 Speaker 2: more and no less. And in reality, most people cheat 130 00:07:21,160 --> 00:07:25,440 Speaker 2: on their taxes. They cheat themselves by not taking everything 131 00:07:25,440 --> 00:07:28,520 Speaker 2: to which they're legally entitled and missing out because they're 132 00:07:28,600 --> 00:07:30,480 Speaker 2: so afraid of an audit. And the way I say 133 00:07:30,520 --> 00:07:33,000 Speaker 2: that is, you wouldn't stop driving your car because at 134 00:07:33,000 --> 00:07:35,040 Speaker 2: some point a police officer is going to pull you over. 135 00:07:35,040 --> 00:07:38,240 Speaker 2: One see your driver's license. Okay, here's a license. There's 136 00:07:38,280 --> 00:07:41,080 Speaker 2: no problem. And that's what I would say. Make sure 137 00:07:41,080 --> 00:07:43,360 Speaker 2: you're entiled to something and then go ahead and do 138 00:07:43,400 --> 00:07:44,200 Speaker 2: it and save the money. 139 00:07:44,240 --> 00:07:46,360 Speaker 1: Yeah, I'm sure you're right, And I mean you're been 140 00:07:46,360 --> 00:07:48,000 Speaker 1: in this business your whole life, you know it. But 141 00:07:48,320 --> 00:07:51,040 Speaker 1: I'm sure you're right. There way more people that aren't 142 00:07:51,360 --> 00:07:56,120 Speaker 1: taking advantage of various things than are taking unfair advantage. 143 00:07:56,320 --> 00:07:59,400 Speaker 2: Oh absolutely, way, way way more. And so often you 144 00:07:59,400 --> 00:08:01,400 Speaker 2: here something I don't want to do that I might 145 00:08:01,440 --> 00:08:03,360 Speaker 2: get order to. I'll go back to the car. Example, 146 00:08:03,360 --> 00:08:04,920 Speaker 2: that's why so well, I don't want to drive to 147 00:08:04,960 --> 00:08:07,440 Speaker 2: the grocery store because a police officer might stop me. No, 148 00:08:07,760 --> 00:08:10,400 Speaker 2: take everything to which you're legally entitled, no more and 149 00:08:10,480 --> 00:08:13,040 Speaker 2: the less. And there's so many good things that spell 150 00:08:13,080 --> 00:08:15,080 Speaker 2: out if you're entitled to something or not. And the 151 00:08:15,160 --> 00:08:18,240 Speaker 2: government is given us so many benefits. I know everybody 152 00:08:18,880 --> 00:08:22,600 Speaker 2: complains about the taxes, but I'm into the good part 153 00:08:22,640 --> 00:08:25,120 Speaker 2: of it, where there's so many benefits. And you take 154 00:08:25,120 --> 00:08:28,480 Speaker 2: a look at the big companies, the Fortune five hundred, 155 00:08:28,560 --> 00:08:30,920 Speaker 2: they're making billions and they pay little or no taxes. 156 00:08:31,320 --> 00:08:34,040 Speaker 2: Wealthy people have an army of people like me. They 157 00:08:34,080 --> 00:08:36,280 Speaker 2: take everything that the law provides. They just don't what 158 00:08:36,320 --> 00:08:39,720 Speaker 2: the law provides, and they're paying so much taxes. It's 159 00:08:39,800 --> 00:08:41,920 Speaker 2: like when I talk to a new client, I say, so, 160 00:08:42,520 --> 00:08:45,120 Speaker 2: do you think you make more or less than Apple computer? 161 00:08:45,160 --> 00:08:47,000 Speaker 2: And we all laugh and they admit they're making less 162 00:08:47,000 --> 00:08:49,120 Speaker 2: than Apple computer. But I say, guess what, you're paying 163 00:08:49,160 --> 00:08:52,000 Speaker 2: more taxes than they are. You have to utilize the 164 00:08:52,080 --> 00:08:53,360 Speaker 2: tax law. That's what it's there for. 165 00:08:53,559 --> 00:08:56,080 Speaker 3: How many pages of tax law are there now? 166 00:08:57,400 --> 00:08:59,320 Speaker 2: Oh? It goes on forever. And it's not just the 167 00:08:59,320 --> 00:09:03,880 Speaker 2: pages of law. Every day courts are interpreting the tax law. 168 00:09:04,280 --> 00:09:07,040 Speaker 2: So the congress people and their infinite wisdom make a 169 00:09:07,120 --> 00:09:11,000 Speaker 2: law and say you can deduct X, and then the 170 00:09:11,000 --> 00:09:15,200 Speaker 2: courts determined, well what is X? And so many times, 171 00:09:15,400 --> 00:09:17,679 Speaker 2: and you say this all the time in tax court 172 00:09:18,000 --> 00:09:23,559 Speaker 2: that the judges of equal rank have totally different ideas 173 00:09:23,679 --> 00:09:27,040 Speaker 2: of what X is and in real life in the trenches. 174 00:09:27,440 --> 00:09:30,040 Speaker 2: That's why the IRS settles so many cases, although most 175 00:09:30,040 --> 00:09:33,679 Speaker 2: cases settle anyway, is that it's called the hazards of 176 00:09:33,760 --> 00:09:36,679 Speaker 2: litigation where there's so many cases say yes, you can 177 00:09:36,720 --> 00:09:39,280 Speaker 2: do that, so many cases say no, you can't. So 178 00:09:39,360 --> 00:09:40,920 Speaker 2: you take a percentage and you'll go home. 179 00:09:41,520 --> 00:09:43,840 Speaker 3: When when should someone call you? 180 00:09:43,880 --> 00:09:46,320 Speaker 1: Like if you get a well, the if I'm in 181 00:09:46,320 --> 00:09:48,080 Speaker 1: trouble with the IRS, will they send me a letter 182 00:09:48,200 --> 00:09:50,080 Speaker 1: where they call me? How will I even find out? 183 00:09:50,120 --> 00:09:51,520 Speaker 1: And then what's the first thing I should do? 184 00:09:53,000 --> 00:09:56,640 Speaker 2: In civil case? Normally they'll send you a letter, And 185 00:09:56,679 --> 00:09:59,480 Speaker 2: the first thing you should do is go ahead and 186 00:09:59,480 --> 00:10:04,840 Speaker 2: get profess because an audit is like a heavyweight boxing match. 187 00:10:04,920 --> 00:10:07,679 Speaker 2: Nobody but another heavyweight better climb in that ring. On 188 00:10:07,720 --> 00:10:11,840 Speaker 2: the criminal side, normally they send two agents with gold 189 00:10:11,880 --> 00:10:14,160 Speaker 2: badges and guns that knock on your door. You have 190 00:10:14,200 --> 00:10:16,439 Speaker 2: the right to remain silent. You should exercise that. 191 00:10:17,559 --> 00:10:20,240 Speaker 1: But as you've been saying from your years we've been 192 00:10:20,280 --> 00:10:23,439 Speaker 1: talking to you, don't throw away those letters from the IRS. 193 00:10:23,640 --> 00:10:26,000 Speaker 3: And hope it will go away. 194 00:10:26,679 --> 00:10:29,920 Speaker 2: As a practical matter. Over the years, it's amazing how 195 00:10:29,960 --> 00:10:33,360 Speaker 2: many people would walk into my office literally with a 196 00:10:33,400 --> 00:10:37,200 Speaker 2: stack of unopened the envelopes and say I couldn't bear 197 00:10:37,280 --> 00:10:40,559 Speaker 2: to open them. I have to literally open the letter 198 00:10:40,840 --> 00:10:42,679 Speaker 2: and the office and tell a client what was going on. 199 00:10:42,720 --> 00:10:45,280 Speaker 2: And here's one of the bad parts about that. You 200 00:10:45,360 --> 00:10:49,080 Speaker 2: have so many rights. For example, there's something let's say 201 00:10:49,120 --> 00:10:51,160 Speaker 2: you have some taxes and you can't pay it. One 202 00:10:51,200 --> 00:10:53,160 Speaker 2: of the rights you have is a very powerful right. 203 00:10:53,160 --> 00:10:56,360 Speaker 2: It's called the collection do process hearing. And what happens 204 00:10:56,360 --> 00:10:58,920 Speaker 2: with that is that if you disagree with the guy 205 00:10:58,920 --> 00:11:01,920 Speaker 2: who's trying to collect from you, you can go right 206 00:11:01,960 --> 00:11:06,160 Speaker 2: over his head to have this special hearing. The IRS 207 00:11:06,200 --> 00:11:09,079 Speaker 2: can't collect from you pending that you have the right 208 00:11:09,120 --> 00:11:13,280 Speaker 2: to go to tax court if the hearing officer abuses 209 00:11:13,280 --> 00:11:16,560 Speaker 2: his discretion. You have so many rights. It's a great thing. 210 00:11:16,720 --> 00:11:20,600 Speaker 2: But you only have thirty days from the date of 211 00:11:20,640 --> 00:11:23,920 Speaker 2: the letter to exercises. What a crying shane. If you 212 00:11:24,000 --> 00:11:28,040 Speaker 2: have an absolute, really really really helpful right and you 213 00:11:28,240 --> 00:11:30,560 Speaker 2: waive it, you throw it out because you didn't open 214 00:11:30,559 --> 00:11:33,480 Speaker 2: an envelope. Open the envelope and if you can't bear though, 215 00:11:33,520 --> 00:11:36,160 Speaker 2: if the psychological thing, and if you can't bear to 216 00:11:36,200 --> 00:11:39,680 Speaker 2: open the envelope the day you get it, call somebody 217 00:11:40,040 --> 00:11:42,120 Speaker 2: and let him or her open the envelope for you. 218 00:11:42,200 --> 00:11:43,520 Speaker 2: We we've done it for lots of clients. 219 00:11:43,520 --> 00:11:45,559 Speaker 1: Hey, we're out of time, but that is a good 220 00:11:45,760 --> 00:11:47,600 Speaker 1: note to leave on. In one frale, you get the 221 00:11:47,640 --> 00:11:50,520 Speaker 1: letter from the irs, open it, deal with it right away, 222 00:11:50,520 --> 00:11:53,680 Speaker 1: because it's only to your advantage. And if, and again, 223 00:11:53,679 --> 00:11:56,000 Speaker 1: if you can't open it, take it to Stephen or 224 00:11:56,000 --> 00:11:59,840 Speaker 1: someone like Stephen Moscow. It's lop dot COM's website. Thank you, Steven, 225 00:11:59,840 --> 00:12:01,440 Speaker 1: and another big tax log. 226 00:12:01,480 --> 00:12:03,360 Speaker 3: It's passed. We'll talk to you to figure out what 227 00:12:03,360 --> 00:12:03,640 Speaker 3: it means. 228 00:12:03,640 --> 00:12:05,200 Speaker 2: Thanks so much. I had a great time as well, 229 00:12:05,480 --> 00:12:09,120 Speaker 2: you bet, Thank you Armstrong and Getty.