Hope for your financial life and beyond

Is the Bible Really Clear About Paying Taxes?

“Render therefore to Caesar the things that are Caesar’s, and to God the things that are God’s.” – Matthew 22:21

taxes in the bibleLike you, my tax paperwork is due to be filed by April 15th. There is no doubt that doing the tax return is no fun to fill out every year. It has become a much easier task though since my wife became a CPA.

Talking about taxes sets our blood to a boil. We despise the fact that we work so hard only to see so much money taken from each paycheck. “Isn’t there a way to avoid it?” we ask.

That question should raise alarm bells for everyone. While certain maneuvers with money are legal, many others are not. If we are not careful, that question can lead us down a path of handling our money in a way that we might regret one day.

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8 Questions to Ask When Setting Up A Family Inheritance

It’s hard enough to deal with the topic of our own death let alone what will happen to our possessions once we pass away. Setting up a family inheritance can get complex and technical. That’s why most people don’t deal with it.

family inheritanceThe aftermath of what we do could lead to a potential mess as this 2012 article from Fox News demonstrates:

“Heirs of a wealthy New York art dealer were left a $65 million sculpture [named “Canyon”]…The bequest comes with a $29 million tax bill, but since the piece includes a stuffed eagle, it can’t be sold…federal law makes it a crime to possess, transport, sell or otherwise convey a bald eagle, whether it is alive or, as in this case, stuffed…The venerable auction house Christie’s placed the value of “Canyon” at zero. The IRS initially put it at $15 million, then jumped the figure to $65 million…”

Most of us will never deal with numbers that large. But it’s no wonder we get confused with our heirs, the courts and the IRS all to think about. It all seems like a big tangled mess.

So what should we do?

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Should I Do My Own Taxes? Here is How to Know

Each year starting sometime in January, we begin to think about that special season coming up. No, it’s not the spring season or baseball season. It’s tax season. And with that season comes the usual question, Should I do my own taxes or not?

should i do my own taxesAt some level we feel like consulting a tax professional would be a good step. Maybe they could save us money because they know something we don’t. I mean, who really wants to pay the government more than they have to?

On the other hand, hiring a tax professional takes money. A good accountant or CPA could cost hundreds of dollars. We wouldn’t want to pay for their services if we really didn’t need it.

So it leaves us wondering, “Does my situation require professional help? Should I do my own taxes instead of bringing in someone who will cost a lot of money?”

The answer may surprise you, especially for those of you who know I’m married to a CPA.

Should I Do My Own Taxes?

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The U.S. Federal Budget Breakdown For Your Tax Money in 2016 – Infographic

With the first primary elections just a few short months away, it’s been interesting to hear the would-be presidential candidates take on taxes. Some are proposing to tax the rich at a higher rate to fund the federal budget while others highlight the virtues of cutting taxes on the middle class. Once again it appears the “take-more-money-from-the-people” or “give-money-back-to-the-people” debate will be a central theme in the 2016 presidential race.

monopoly luxury taxGenerally speaking, we like to keep the money for which we work so hard. Nobody in my circle of friends is saying of a tax increase, “Sure, I’d be happy to…take another 5% out of my paycheck to fund the government. I don’t mind.” Know anyone who thinks that way? I don’t.

Regardless on how you feel about taxes, they do allow our government to function. It’s every American’s responsibility to pay taxes into the government’s budget. If you don’t well, let’s just say there could be some serious consequences (i.e. big fines and/or potential jail time). After several years now of living with a CPA in the house, I’ve come to appreciate (#fear) the tenacity with which the IRS takes its job.

Have you ever wondered where your tax dollars really go though? How does the government use your tax dollars in the federal budget? The people at Community Tax have researched that question and put their findings into the following infographic.

2016 U.S. Federal Budget Breakdown

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How to Avoid Worrying About These IRS Audit Red Flags

We are smack in the middle of tax season again as everyone is trying to meet the April 15th deadline. Many dread the prospect of an IRS audit so getting all the information correctly coded on the tax forms is of course a high priority. No one wants to worry about the IRS knocking on their door (which I don’t think they initially do, opting instead for the conventional letter in the mail).

time to conduct an auditThe unfortunate reality is that there is no silver bullet to avoiding an IRS audit. The IRS can choose to investigate and audit anyone they please at any time. Even low-income earners can be subject to an audit if the IRS becomes suspicious.

What would make them suspicious? Well there are a variety of factors, red flags if you will, that can make an IRS agent question a tax return. Some of them can’t even be avoided. But what can be avoided with all of them is the worry. If you are handling things correctly there is no need to worry about any of these situations.

Common Red Flags That Might Trigger an IRS Audit

While this is not an all-inclusive list, these represent common issues that might pop up as a red flag to the IRS:

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Back to School Savings I Don’t Care About

Back to school shopping at TargetI don’t know the schedule in your neck of the woods but in five short days my kids go back to school. Oddly enough, for the most part they are looking forward to it. In a way so am I as it will mark the first time that I will be home alone as a stay at home dad. It’s going to be eerily quiet around the house but I’m anticipating that will benefit my writing.

Of course back to school means shopping. Ugh! That dreaded time when you realize the kids have grown two inches over the summer and the school pants that fit in May are now riding up their shins. And of course, the mile long supply list the school sent with all it’s specialty items has your mind spinning. What in the world is “Mod Podge” and where can I buy it?

Helping Consumers Save on Back to School

Some retail stores do a great job this time of year revamping and organizing their floor space to make it easier on the back to school shopper. Our two destinations – Target and Office Depot – had school specific zones where we could easily shop and pick up our items. And naturally they got the word out through advertisements on how we could save on back to school items at their store. Amazon does a great job of this as well, offering specials discounts on school items and free shipping for college students if you purchase items on their site.

Local and state governments also get involved to help consumers save a little bit of money during the back to school season.

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How to Save Money and Cut Taxes by Hiring Your Kids

The following post is by Kim Fourman. Please note that this article is intended to discuss general tax topics. Consult your own tax advisor regarding your specific circumstances.

hiring your kids

Boy at a weaving station – circa 1908

One of the most overlooked ways for small business owners to save on taxes is by hiring your kids in the business.  Here’s how it works:

Consider What Work Can be Done

The first thing to consider when hiring your kids is the work that your child can do. Their work must be age appropriate and must be legitimate work for your business.

For example, having your child do household chores would not count as working for your business, but picking up trash and cleaning up the yard at your rental property would. The IRS has accepted employment by a child as young as seven. You do not run afoul of any federal child labor laws when you employ your own children, but make sure to check with your state department of labor.

You Must Do the Paperwork

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Getting An Electric Car For Free Through Tax Credits

Welcome to a Q & A tax session at Luke1428. Today we are discussing how to fund the purchase of an electric car with tax credits. Some states offer tax credits as incentives for many transactions, including purchasing or leasing an electric car.

To answer your tax credit questions I’ve pulled in none other than Mrs. Luke 1428, who just happens to be a CPA. So here we go.

Electric Car

The Nissan Leaf – source of a nice little state tax credit

Q: What are tax credits and how can I use them?

A: Great question. First, I’d like to make sure that we’re clear on the difference between a tax credit and a tax deduction. As an example, let’s assume you have $50,000 of taxable income, and your tax rate is 10%. Let’s compare the difference between a $1,000 tax credit and a $1,000 tax deduction.

A tax deduction lowers your taxable income. Without any deductions, your tax would be 10% of $50,000, which is $5,000. So, a $1,000 tax deduction lowers your taxable income to $49,000. Then we apply the 10% tax rate and come up with a tax of $4,900.

Tax Deduction Savings: $100.

Now, instead of the tax deduction, let’s try a tax credit.

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