The ‘Godfather of Tax Policy’ explains his beef (pepperoni, sausage, meatball) with his fellow Godfather’s tax plan.
The ‘Godfather of Tax Policy’ explains his beef (pepperoni, sausage, meatball) with his fellow Godfather’s tax plan.
RELATED: I'm starting to think that ol' Grover is purposely spelling the Oracle's surname incorrectly. […]
There is plenty of tax advice floating around this time of year but the problem, as you may expect, is that not all of it is useful for everyone. Sure, you can throw read every piece of advice out there but some of that advice is worth ignoring or at the very least, investigating further so you can find out for yourself if it will actually benefit you.
We asked Mike Callahan, tax director at Spicer Jeffries LLP in Greenwood Village, CO, to pay us another visit, this time with ideas or strategies that he thought were overrated so that you can sort out some of the noise.
• Buying a car for the “write-off” – Mike told us that deductions related to depreciation on cars are extremely limited. He said, “If you need a new car, fine. But don’t expect a huge tax benefit.”
• Maxing out your mortgage – According to Mike, borrowing as much as possible to purchase a home because of the interest deduction is not worth it. “If your combined federal and state tax rate is 30%. 70% of your interest payments are going out the door.”
• Check your W-4 – Withholding a lot of taxes during the year so you can get a big refund is not the way to go. Mike puts it this way, “You just gave Uncle Sam an interest free loan. Adjust your withholding so you come close to breaking-even at tax time.”
• Running up a credit card on deductible expenses before year-end – This one should be a face-slap moment but, “Using a credit card to prepay expenses before year-end if you can’t afford to pay the balance when the bill comes next month.”
• Don’t sock money in an IRA away if you need it now – Mike said that saving money doesn’t do much good if you plan to withdrawal it later, “[Don’t] contribute to an IRA when you need the money. You’ll end-up withdrawing the funds andsubjecting yourself to a 10% penalty,” and more taxes. And by “need” Mike isn’t referring to your Range Rover payment. Good choices people.
More tax advice:
Six Small Business Tax Strategies for the Entire Year
Tax Day Countdown: Five Tax Planning Ideas for Individuals
Not everyone agrees with tax hit man Grover Norquist’s ideas. While GGN would like nothing better than to see every federal and state levy banished to the darkness, there are a number of people who don’t share this view. A certain group of these people are from the more affluent corners of society and they’ve organized themselves as the “Patriotic Millionaires” in order to make the case that they are sick and tired of being able to afford competent CPAs to legally reduce their tax burden to an unfair amount. Grover, being the big softie that he is, realizes (not from personal experience, mind you) that the burden of not paying your fair of taxes is a heavy one. And because he’s upstanding patriot himself, he went to the Hill yesterday to meet with these troubled folks to help alleviate their pain:
“If you think the federal government can spend your money better than you can, then by all means” pay more in taxes than you owe, said Grover Norquist, of Americans for Tax Reform, a group that has gotten almost all congressional Republicans to pledge to vote against tax hikes. The IRS should have a little line on the form where people can donate money to the government, he suggested, “just like the tip line on a restaurant receipt.”
Tipping! Millionaires know how to do that, don’t they? I mean with all the servants and eating at fancy restaurants and whatnot, this should be an easy way for the wealthy to ease their low tax guilt. But despite all his suggestions and support, some did not receive the message all too well:
One of the millionaires suggested that if Norquist wanted low taxes and less government, “Renounce your American citizenship and move to Somalia where they don’t collect any tax.”
Well! If that’s the thanks Grover gets, don’t expect him to be so forthcoming with the advice next time.
With supercommittee silent, millionaires and others eagerly jump in with their own advice [WaPo]