We're coming up on the end of the year, so let's see if I can save you some money on your tax bill this year. If you haven't been thinking about it this year, you might be caught saying, what am I gonna do? And today I'm gonna try to help you solve that problem.

Good morning, my name is Joshua Sheets and this is the Radical Personal Finance podcast for today, Wednesday, December 17, 2014. And today, let's dig into some tax planning ideas. As I mentioned on a previous show, this is the time of year that if you pay any attention to the financial websites or if you pay attention to your financial section in your newspaper or if you look at your Facebook newsfeed or whatever, you're likely to get some articles showing up that are gonna be essentially end of the year tax planning ideas.

And that's good, they're useful, and that's what this show today that I'm creating for you is about. But the challenge with doing this kind of planning at the end of the year is that it's way too late. It's way too late to start talking about what you're gonna actually do for 2014.

Good tax planning, frankly, you should be working on good tax planning for 2015 right now and getting started with that. Now I know that's nice to say in theory and in practice it's a completely different world, but that is really important that you do it in advance. Good planning in advance is always gonna be more effective than last minute planning, but doesn't mean that last minute planning isn't helpful.

I do wanna keep this in context and that's why I started with the previous show where I didn't focus on how to save taxes, but rather I just focused on end of the year goal planning. And so that previous show that if you haven't listened to, go back and listen to episode 116, which was the show on how to plan your financial goals for 2015.

You can find that at radicalpersonalfinance.com/116 if you're interested in that show. And the reason that I did that is because really more than anything, the end of the year tax planning articles and things like that are essentially click bait. Where it's how can I get you to click on a tax or click on a button and most people read them and don't do anything with them.

But what I described in episode 116 is something that you can actually do something with. Put this in context. When you see these articles, remember that 43 point, and here's why I started with 116. Remember 43 point three percent of Americans pay zero federal income taxes. Zero. So almost half of our society pays zero federal income taxes.

And many of those who do pay some federal income taxes don't pay all that much. Now that's not a number that accounts for the total tax burden. So it's certainly more than 43, excuse me, certainly less than 43 point three percent who pay zero employment taxes. But it does count for federal income taxes and that's really the only thing that the end of the year counts for is for your federal income taxes.

So the other problem with these end of the year articles and end of the year planning is end of the year planning is really tough because essentially you have to have money. And the way an income tax system works is you're penalized for productivity. So the only way to essentially avoid the taxes is to be less productive, and the end of the year is too late for that.

You should have chosen in advance to be less productive. Or to get rid of your money. And with the way that most Americans conduct their financial lives, there's not a lot of money left at the end of the year to get rid of. So again, that's why I started with the other show.

But for those of you who listen to this show, hopefully you're not in that situation. Hopefully you are in a situation of overflowing with excess money and excess savings. And now you're trying to figure out what do I do? What do I do? So that's what today's show is about.

Here's the basic rule of tax planning. You gotta get rid of your income. So remember, income taxes, you're penalized for making money. As one of my favorite quotes, William Feather once said, "The reward of energy, enterprise, and thrift is taxes." So you gotta get rid of the money. You gotta get rid of the money through one of the three fundamental tax planning strategies.

A timing strategy, a conversion strategy, or a shifting strategy. So with a timing strategy, that's most popular at this time of year where you're gonna try to defer paying the tax towards the future. However, you might also bring it forward. And that's why this is pretty tough is you've gotta figure out what you should do with it.

Most end of the year articles that you read, and including the majority of today's show, are about deferring income. But you've gotta figure out whether it's better for you to defer it or to actually accelerate it and bring it forward. In general, normally we like to postpone paying the tax because you can pay it later with cheaper dollars.

So as inflation makes our dollars cheaper, if you have a tax liability of $10, if you pay it in a later year, you'll be able to pay it with cheaper dollars. So we usually wanna postpone tax so we can pay it later with cheaper dollars. Also, we might be able to more productively use the money than using it to pay taxes.

So remember that any money that you can save on tax is comparable to receiving, in essence, an interest-free loan that you can use today. If you can avoid paying $10,000 in tax, that's 10,000 extra dollars that you can use for your purposes and you're not paying any interest on the money.

So that's really valuable. However, remember that you might actually want to not defer income. You might wanna actually go ahead and bring it forward and pay the taxes today, and there could be many reasons. Your situation might change. You might be in a low-income bracket at the moment and you expect yourself to be in a higher-income bracket down the road.

Well, in that situation, it's better to go ahead and pay the tax now in the lower bracket. Generally, tax rates and brackets could change. So rates on all taxpayers could change. They could go up, they could go down. Also, brackets could change. The brackets could expand, they can contract.

And so you've gotta kind of figure out what you're concerned with and what you're actually doing. So think through it carefully. Before you just go about deferring everything, think through it. But with that said, with that caveat, 'cause that is very important, let's get into some ideas and see if I can give you some tips that might be helping you.

And this is gonna be very useful. At least one of you is probably facing a big bill and you need some last-minute help. So I think I'm gonna try to give you that help. As you're going through today's show, if you hear something, if you hear me talk about something that you don't understand, don't worry about it.

Don't try to grasp every specific detail. If I say something like, make a Section 179 expense election, and you don't know what a Section 179 expense election is, don't worry about it. Just grasp the concept if you can. If not, come on back later and it'll start to make sense when we talk about it at another time.

Or if I talk about cash-basis accounting versus accrual-basis accounting in your business, if you don't understand what that means, don't worry about it. Spend a little time, do a quick web search, and if you can find some information on it, that might help you. But learning financial information is well done in an iterative process.

So by constantly exposing yourself to information that's beyond your current understanding, over time, your understanding will rise. And there's always going to be something you don't understand. There are so many things that I read that I don't understand, and it's always been that way. But over time, when I look back now, I can see that over the past years, my understanding has increased.

And so what confused me five years ago to now is just old hat, I don't even have to think about it. So listen to today's show, but don't worry if I throw you off on a detail or two. Let's start with the easiest, most well-known ways to do some last-minute planning, and then we'll move to some of the more esoteric.

Let's start with retirement accounts. Now, we're all familiar with the concept of deferring income through a retirement account. And the challenge is, however, that most of the retirement accounts that most of us participate in, meaning 401(k)s and 403(b)s, these don't really help you at the end of the year, because you have to actually make your contributions as you go.

So if you arrive here in December, and you've been putting 3% of your income aside into a 401(k) plan, and you recognize that all of a sudden you have a higher bonus payment, and you wanna put an extra $10,000 aside, generally you can't do that, because those accounts have to be funded throughout the year.

So unless you can talk to your HR department, and this is my tip for you, I'm probably a little late in giving this to you, it's December 17th as I record this, so unless you can talk to your HR department and can defer your entire last income and change your election really quickly, defer your entire last paycheck, excuse me, into the account, you're probably not gonna be able to get much excess money into the 401(k) or into your 403(b).

So those aren't really useful. But you can use some other accounts. If you're an individual, you can use an IRA. And the useful thing about the IRA is that you don't have to make your contributions before the end of the year. You can actually make your contributions at any time up until you file your tax return.

So here it is, December 2014. If you file your return in April 2015, you have all the way up until the time that you file your return to make that IRA contribution. So that can be a very useful last minute planning tool for you. Now for those of you who are newbies to the world of finance, let me give you a quick brush up on the difference between your two different types of IRAs.

There is a traditional IRA, and there's a Roth IRA. The traditional IRA permits you to go ahead and deduct the income now, and then later pay the tax. The Roth IRA allows you to pay the tax now and deduct the income later. Now, it's important for you to recognize that if everything is equal, if your income is net now, is equal to your income at retirement, if you're in the same tax bracket and the tax rates are the same now and in retirement, then those two options are mathematically identical.

This is a commonly held misconception that people say, well, one is better than another. No, they're actually identical if your tax rates and tax brackets are the same. Many people, if not most, will be in a lower income tax bracket and thus paying tax at a lower rate in retirement.

That's why, in general, we would usually choose to prefer a traditional IRA instead of a Roth IRA. But that's not always true and you have to look at an individual situation. There are other advantages and disadvantages and I won't go into all of those details right now. In the year 2014, your maximum contribution to those two accounts is you can contribute up to $5,500.

And you can do that if you're married for each, both you and your spouse. Also, if you're older than the age of 50, don't forget that you have an additional $1,000 catch-up contribution that's available to you. So you can contribute to that account as much as $6,500 for you.

And if you have a spouse who is also over 50, you can contribute up to $6,500. Age 50 is the magic date for that catch-up contribution. So don't forget about those catch-up contributions. Many people, when they're making that transition, they're not accustomed to making that extra $1,000 contribution and they forget about that.

Now, I wanna spend just a moment going over the contribution limits. Almost every single person that I've ever met with or worked with is confused by the limits. And even when I was a new financial advisor, I was confused for the first couple of years of practicing and I was the blind leading the blind.

And so I was confused myself. So let me explain to you the contribution limits. And I'll try to do it in a way that makes sense. There are two entirely different sets of contribution limits. And we'll start with the simpler one. We'll start with the Roth IRA contribution limits.

The Roth IRA is simple because it's purely based upon your income. Your ability to contribute to a Roth IRA is exclusively focused on how much your adjusted gross income is. How much is your AGI? That's what governs whether or not you can contribute to a Roth IRA. And those numbers for the year 2014, if you are married filing jointly or a qualified widow or widower, if your income is below $181,000, your AGI is below $181,000, then you can contribute a full contribution to a Roth IRA.

There's a phase out for the next $10,000 of income. And then if you make more than $191,000, you are not permitted to contribute to a Roth IRA. I'm going to ignore primarily the phase outs. If you're on the bracket, if you're on the margin, so if I say $181,000, go and look up the chart and see if you're in the phase out amount, because it's not a, all of these income limits have a certain range and it will get very tedious if I go through each of them.

If you are single, head of household, or married filing separately, and you didn't live with your spouse at any time during the year, then the limit for you is $114,000 of income. So if your AGI is less than $114,000 and you're single, you can contribute to the Roth IRA.

The gotcha is if you are married filing separately and you lived with your spouse at any time during the year, the limit is $10,000. So you can't make more than $10,000 of income. That's the most penalized filing status of all, is if you're married filing separately. There are a bunch of gotchas in the code about that, and this is one of them.

So with the Roth IRA, you need to simply remember what your income is. Single, less than $114,000. Married, $181,000. That's all, that's all you need to know. Now, a traditional IRA has a different set of scenarios, and this different set of scenarios is driven by whether or not you are covered by a retirement plan at work.

That's one of the key distinctions. Your ability to contribute to the Roth is based upon your income. However, your ability to contribute to an IRA does not have to do with your income. Anybody can contribute to a traditional IRA, but your ability to deduct your contribution is governed by how much money you made and whether or not you are covered by an employer plan.

If you are not covered by a retirement plan at work, so if you are just an individual and you only have an IRA, no matter how much money you make, does not matter, you can take a full deduction of your, you can take a full deduction of your contribution up to the contribution limit, up to the $5,500 and then the extra $1,000 of catch up.

If you, this is why people get confused on it because it's hard for me to explain my way through. It's much better in a visual presentation, I think. Let me just forge on though and see if I can do it. If you are covered by a retirement plan at work, then if your income as single is less than $61,000 or if your income as married filing jointly is less than $98,000, then you can go ahead and deduct your contributions to a traditional IRA.

There's also a separate question where if you have a spouse that is covered by a retirement plan. So for example, if you do not have a, if you're not covered by a retirement plan but you have a spouse who is, then you have to work through those numbers as well.

The best resource for this is go to the IRS website and just look at their charts and work your way through the charts and figure out the scenario that applies to you. It's too difficult for me to convey on the show here at the moment. However, remember that the traditional IRA and the Roth IRA, those limits are based upon the, so one is based upon income, the other is based partly upon income but also partly upon employment status and marital status.

So that is a key distinction for you. When you get into IRAs, there is one, there are a few little tricks that you can use. And so the simplest one is you might want to contribute to both types of accounts. The limit on them is the same. So your limit of $5,500, that's the same whether you do a traditional IRA and a Roth IRA.

You can't contribute more than $5,500. But you may, depending on your individual tax return, you may find that you are well-served by making a $2,500 contribution to a traditional IRA and a $3,000 contribution to a Roth IRA. So consider that and consider calculating that that might serve you. If you are over the income limits, then there is something that you should be aware of that's commonly called the backdoor Roth IRA.

And simplistically, let's say that you make a half a million bucks a year. You can contribute $5,000 into a traditional IRA. You're not permitted to deduct the contributions, but assuming that you're covered by an employer plan, but you can go ahead and convert that to a Roth IRA in the following year, and now you are able to have the equivalent of a Roth IRA.

That's useful. I think it's much less useful than it's often talked about simply because when you are making $500,000 a year, the ability to get $5,000 into a tax-sheltered account is much lower on your priority scale. You're much more concerned about the $500,000. But that is one little trick for those of you who can do it.

Couple of the little tricks on IRAs. It is possible if you have expenses within the IRA, and this would be useful, many of you will have never thought about this, but for those of you who are using something like a self-directed IRA, and you're paying your fees for custodianship or commissions or fees in a more transparent manner, then it is possible for you to make a separate payment to the account for the payment of those expenses.

So to pay your custodian fees or your brokerage commissions or any fees, you can make a special payment to the account for those fees, and you will not be deemed as going over the contribution limits. That may be important to some of you, especially if you're pursuing a strategy of some kind that does involve brokerage commissions or fees or higher than normal custodian fees.

Consider that, that can be useful. And so if you have $300 of fees, you can go ahead and make your $5,500 contribution and write a $300 check to pay for the payment of those fees, and that will maximize your usage of the account. I hope that helps you. There are two other types of retirement accounts that are also useful, and the reason why I'm going through these accounts here is because these are the ones that you can use at the end of the year or the following year.

You might consider, if you are self-employed or if you run a business, you might consider establishing what is known either as an HR 10 or a KEO plan, or separately, you might consider establishing a SEP IRA. Now, a KEO plan is a qualified plan that allows you to set up a formula for your business, and you can either do it for your contributions, and you can either do this as a defined benefit plan or as a defined contribution plan.

The benefit to a KEO plan is that it permits you to contribute a much higher dollar amount to the account than an IRA does. So your maximum contributions are limited to 20% of your earned income or $52,000. Basically comes out to, it's 20% of your earned income minus your deduction for half of your self-employment payroll tax.

So it basically comes out to 25% of your net earned income after you take that deduction. So you can get 25% of your net earned income or $52,000 into this account. The KEO plans were very popular for people in the past, for self-employed people, because there was a distinction in the tax law between corporate plans that were established and plans that could be established by self-employed people.

There was a tax law change in 2001, and so now the KEO plans have largely been replaced by the SEP IRA. And I have, in the years of doing planning, I've never seen a KEO plan, I've always seen a SEP IRA. And the reason is that they have the same contribution limits, but the SEP IRA paperwork is much simpler.

The KEO plan requires a full plan document to be written and created. There might be reasons still to do it, but it is more complicated. A KEO plan, if you're going to establish one, it has to be established by December 31. Doesn't have to be funded by December 31, but it has to be established.

So the plan has to be actually put into place by the end of the year. By the way, one of the advantages, and I've never seen one actually do it because of this, but the KEO plan, you could set it up so that you could borrow against it, where you can't borrow against a SEP IRA.

SEP IRA stands for Simplified Employee Pension Account, Simplified Employee Pension Plan. And these were established with a goal of being simplified. So these accounts, I think of them as an accountant's best friend. I've never met a CPA or an accountant who wasn't an expert on SEP IRAs. And the reason is they can be established after the end of the tax year, and they can be funded after the end of the tax year.

So you can go in and sit down with your accountant to prepare your taxes on April 1st or on April 14th, and you can download the standard form from the IRS website, and you can establish your plan, or almost all brokerage companies that you will be working with will have the form available, their standard form that's based on the IRS website.

It's 40, 50 pages, you print it out, you sign it, you write the check, and now you've gone ahead and created up to a $52,000 deduction for the year that you need it. So that can be very, very useful. What I would encourage you to remember is remember that you can have one of these plans in addition to your 401(k) or in addition to your IRA.

So if you, for example, are covered by a 401(k) at work, but you have some outside self-employment income, you can go ahead and you can establish one of these types of plans, and that might help you to avoid some taxes. You'll have to be aware if you have employees that you need to cover your employees as well, depending on how it's structured.

There's all kinds of detailed rules, but that's the simple thing that you need to know at the end of the year. Those might be your outs. So talk with your advisor, talk with your accountant. Finally of the accounts here is, actually one other little trick on IRAs and retirement plans.

Look to see if you might be eligible for a saver's credit. So the saver's credit is an interesting tax credit that you can get if you're eligible for. In order to stimulate low-income earners to save, then you can get a tax credit of 50% of the first $2,000 that you save in a traditional IRA, a Roth IRA, or a 401(k), and that's a direct tax credit.

So remember, credits are always better than deductions. This is a nice tax credit. And that's in addition to the deductions that you save on the taxes by making the contribution. Unfortunately, this is really only available if you have a very low adjusted gross income. To get the full 50% credit, your AGI has to be less than $18,000.

So that's not a huge amount. It's also not available for people who are under the age of 18 or who are full-time students or who are dependents that can be claimed on another person's tax return. But you might be able to get some benefit from that. Check the chart.

The phase-outs of this change, the 50% contribution changes depending whether married, filing jointly, head of household, or single or otherwise. Then there's a 20% credit and a 10% credit. Essentially, if you make over $60,000 married, filing jointly, or over $30,000 for single, then that credit is not available to you.

But if you are down at the lower end of the earned income, check out the Saver's Credit and see if you can qualify for it. If you can qualify for it, even if you can't afford to actually save in a retirement account, you may be able, if you're willing to be aggressive, you may be able to actually use it just purely for the tax credit.

So you can make a contribution, for example, on December 31 of this year into a Roth IRA and then take the distribution out of the Roth IRA in January of next year. And because you're doing that in a Roth IRA, there's no tax that would be due unless you had a gain in the account and then you would owe tax on the gain.

But you could just take that basis right out and you could spend that yourself. So only the income and the gain would be taxed. And you could get a tax credit, again, for as much as 2,000 bucks. So it's a one-time deal, but that might be worth it for you if you find yourself down in that scenario.

You can't afford to necessarily save the money for the long term, but that might help you to get a last-minute tax credit. So consider that. The last retirement account, it's not actually a retirement account, but it fits well into my outline here, is don't forget about the health savings account, the HSA.

If you're covered by a high-deductible health plan for your medical insurance at work or in your business, you can make an HSA contribution into your health savings account any time up until you file your return. Your contribution limits for 2014 are $3,300 for an individual and $6,550 for family coverage.

And then there's an additional $1,000 catch-up contribution for 55 and over. So if you're over 55, that will be useful to you. If you were doing the account in this way, it's not gonna save you on your employment taxes, but it will save you on your income taxes. The way to save the employment tax is that your HSA has to be funded out of your paycheck so that your employer can actually deduct it so that you're not charged those employment taxes each month.

So this won't save you on the 7.65% Medicare and Social Security taxes, but it will save you on your income taxes. So consider the HSA. That can also be a useful way of taking an above-the-line deduction that will be helpful for you. Let's get out of the accounts 'cause those are a little bit dry to work through, but those are the simplest, easiest, in some ways, most straightforward ways to do it.

But look for a way to defer income without using a tax account. So here are some ideas for you. First, just simply consider deferring income. And this one's a little bit tricky if you are an employee. So you can't do this. Let's say that you have, you know you're an employee of a corporation and your employer is gonna pay you a Christmas bonus, but you take the last two weeks of the year off and you do this knowing that the check's gonna be sitting in your mailbox at work and so you just don't go into work and pick it up.

Well, that doesn't do it for you. So you actually have, you have what's called constructive receipt of the income. And so you're gonna be taxed on the income in the year 2014, even though you didn't pick up the check until you went back to work on January, what's it this year, fifth, fourth, something like that.

So that's not gonna help you. Constructive receipt, let me explain real quick. Anytime you're dealing with federal income taxes, then the doctrine of constructive receipt is used to determine when a cash basis taxpayer has received gross income. And you as an individual are always at a cash basis taxpayer.

A taxpayer is subject to tax in the current year if he or she has unrestricted control in determining when items of income will or should be paid. So unlike actual receipt, where you actually have to get the check, constructive receipt does not require physical possession of the item to have income or physical possession of the income to actually count it.

The fact that you could have gone to the office and picked it up means that you received it, you constructively received it even though you didn't actually receive it. So that's not super helpful to defer a Christmas bonus. But you actually can do this technically if you plan ahead.

So let's say that you are aware of a large bonus that you're gonna be receiving. You could enter into a binding agreement with your employer and to defer the bonus that you would receive in December until January. Now you have to actually enter into the agreement before the bonus is constructively received.

So that could work. I've actually never seen it done. I've read about it in textbooks. I've never seen it done myself. But I can see how it could be done. So if you're in some scenario where you know there's a good bonus that you're likely to get and you would prefer because of your own personal plans to receive it in a later year, then that might be a useful technique for you.

Probably too late for this year, but file it away for future years. The more useful way to defer income is for those of you who are business owners or running a business of your own of some kind. And it's very simple if you are a cash basis taxpayer. It's very simple to just simply delay billing your clients until late December.

If you don't send out your invoices until late December, your clients are certainly not gonna get them and spin them around unless they're trying to do their own tax planning. They're certainly not gonna get them and spin them around and send them back to you before the end of the year.

So in that situation, you won't actually receive payment until the following year. And because of that, you're not gonna pay any taxes. Now, remember, I said it a moment ago, but remember, it only works if you're a cash basis taxpayer. If you're an accrual basis taxpayer in your business, you have to report the income when it is earned, not when it is actually received.

So that's the same, by the way, for most of these business deductions. So be careful there. But many of you who are listening, who are running small businesses or self-employed, then you'll be running, who are trying to figure these tax things out for yourself, you're likely to be a cash basis taxpayer.

If you have income from the sale of properties, let's say you're selling something large here at the end of the year, then consider doing an installment sale. And that will allow you to defer some of the income to a different tax year that might be useful for you. If you're selling something in which you have a profit that you're gonna be paying tax on, consider an installment sale.

Also, the big one, however, is consider bringing forward expenses. So consider accelerating your expenses to lower your net income upon which you will be taxed. In business, think through any end of the year transactions that you need to pay. So you might clear out your accounts payable. You might make any, for example, this one for me, is I've been planning out my 2015 conference schedule.

And so what conferences am I gonna go to? And so I could go ahead and make the payments to those conferences, and then that would allow me to go ahead and recognize the expense in this year for the conference that I go to in March or in June, something like that, I can go ahead and recognize that expense.

You might be able to do this with something like your insurance payments. So go ahead and make your insurance payments. One of the most useful ones is things like marketing and advertising expenses. If you're in a business where you know that if you do a certain marketing campaign and you purchase a certain amount of advertising, that it will result in an inflow of orders, then that can be super compelling for you to say, let me go ahead and buy up a bunch of marketing or advertising costs, whether that's mailings or ads or whatever it is, let me go ahead and do that, pay for it in December, and then you'll reap the rewards with the increased sales next year.

And you can do that, especially when you're building a business, you can do that year after year after year. At some point in time, you probably need to get the income out of the business, but that depends on the nature of your own business. Do remember, however, that when you are making expenses and accelerating expenses, that you do need to follow the 12-month rule.

And so there is, for these types of expenses, there are two aspects to the 12-month rule. In general, you can't deduct the full amount of any advance payments that covers more than 12 months out. So let's say, for example, you can't say I'm gonna pay up my insurance premiums for the next three years, and go ahead and make that check today and have that be deductible.

Rather, you can only deduct, if you do that and it's more than 12 months, you can only deduct the benefits that are gonna be received within that tax year. And so you would have to figure it out on a per-rata basis. However, there is also another exception is that the kind of the more specific scenario to that rule, it's not necessarily 12 months from the expense, but whatever expense that you make has to be, it has to be done.

The benefit can't go for longer than 12 months after the right or benefit that you purchased begins, or the end of the next tax year. So end of the tax year, after the tax year in which the payment is paid. So let's say, for example, that could be a way that I could do it.

If I, here I'm on December 15, and if I go ahead and purchase an insurance policy that starts on January 1 and goes to December 31, as long as it's not more than 12 months from today when I go ahead and pay for it, and as long as it doesn't go into the tax year for 2016, then I can go ahead and deduct it.

So be careful with your 12 month expenses. But as long as you follow that, you should be fine as far as making some of those payments and just splitting the tax year. Remember also that we just wanna make sure that you're going based upon your business's tax year, which may or may not be December 31.

That's super useful. And another thought on the business tax expenses is consider also that you can purchase equipment. So in general, equipment purchases aren't usually gonna help you because when you make purchases of durable equipment, then you have to depreciate that expense and you can't just simply take an expense payment now.

Now, remember, however, that you can make an election to expense a certain amount of it. So that's called a section 179 election, and it was pretty good in the years past when it was super high. This year in 2014, it's only $25,000. But remember that you can actually purchase equipment, expense $25,000 worth of it this year, and then go ahead and take your depreciation after that.

So then you go ahead and depreciate it as you are accustomed to doing. And so that may be useful for you with any equipment that you need for business use, any tangible personal property that you're gonna use in business more than 50% of the time, any business vehicles, especially large business vehicles in excess of 6,000 pounds that you can actually do, vehicle that you actually can use the section 179 expense allowances for, research that carefully 'cause that depends on the type of vehicle.

Computers, maybe off-the-shelf software, office furniture, office equipment, those types of things are eligible for that section 179 expense. So if you have an extra $25,000 of profit that you need to wipe out, then if you need to buy some sort of equipment, then you can go ahead and buy it, and that gives you, and if you can expense the $25,000, you can wipe out the profit.

So that might be a useful thing for you. When you're making expenses, remember that it's probably foolhardy to, there's no 100% tax bracket. So you have to spend money in order to take a deduction. It may or may not be good. The only rational reason to do it would be if the money that you're spending, you expect to make more in the future that you'll be able to use.

So don't just spend money for the sake of spending money, but if it improves your business, then that would be a wise course of action. Now, for individuals, and yourself as an individual taxpayer, you may still be able to use the idea of accelerating some of your expenses. So a couple ideas for you.

Consider bunching certain expenses together here at the end of the year if you might be able to take a deduction. The one that is most, is probably the most prevalent, would be something like medical expenses. If you had a lot of medical expenses this year, so for example, last year, my wife and I, we had a lot of medical expenses when we had a baby.

If you had a lot of medical expenses, consider going ahead and adding other medical expenses now and getting them done. So if you were in a year where you had a baby and you had a large out-of-pocket medical expense, then go ahead at the end of the year, if you have the money, go ahead and get your dental expenses, your eye expenses, you know, dental care, eye care, whatever it need, taken care of.

You might pay, go ahead and lump in and pay the annual premium on your long-term care insurance. And so that might allow you to bunch enough medical expenses together to allow you to exceed the 10% of AGI limit on medical expenses to where you can actually deduct some of your medical expenses.

And these would be things that you're gonna have to get done anyway, your dental cleanings, your eye care, your insurance payments. But just by bunching them, instead of having, let's say, $5,000 of expenses in 2014 and $5,000 of expenses in 2015, whereby none of that is deductible, perhaps if you can bunch all $10,000 here in 2014, then all of it will be deducted, excuse me, then the portion that's over the 10% of AGI limit will actually be deductible.

So you can get the itemized deduction for that. That might be useful for you. Also consider accelerating any tax payments that you owe. So real estate taxes, personal property taxes, state and local income taxes, pay them now in order to make sure that you can deduct them now. And so if you pay them next year, then you get to deduct them next year.

But since these are gonna be due anyway, go ahead and bunch them together and pay them now. This can also be useful whether or not you often itemize your deductions or take the standard deduction. In some years, you can, by doing this bunching strategy, in some years, you can bring together enough deductions to where it's in your benefit to itemize.

And then the following year, which is a low year, then you go ahead and take the standard deduction. The next year, you go ahead and itemize. And so you might be near that limit. So consider that as well. If you're gonna do, accelerate your tax payments, be careful if you are concerned with the alternative minimum tax, be careful with your AMT there and run your calculations carefully.

Consider, we all know this one, 'cause this is the time of year that we receive plenty of charitable solicitations. But consider making your charitable contributions and bunch them in the years that you can fully use them based upon the deduction limits for charitable contributions. So sometimes that might be, it's gonna be as simple as going ahead, writing your check before the end of the year.

But then also, if you've made a large charitable commitment maybe, then go ahead and try to use those deductions in years when you're gonna be able to use them fully. So if you've made a certain total amount and you're fulfilling your commitment to a charitable organization over a five-year period, use those deductions in the years where they're most useful for you.

If you are making charitable contributions, be intelligent about how you do it, especially with regard to good tax planning. Don't think only in terms of cash. This is one, depending on the size of the, depending on the nature of your finances, just don't always give something always in cash.

If you have appreciated property that you've held for over 12 months, then you can go ahead and donate, if the charity will accept it, you can donate the appreciated property. And so if you have $10,000 worth of stock that has appreciated from $5,000 and you wanna give $10,000 to the charity, it's probably better for you to give the $10,000 of stock.

You'll get your full deduction for the fair market value of the stock, the $10,000, and that will allow you to avoid paying tax on the gain of the $5,000. The charity receives the stock, they sell it at the fair market value, and then they get their cash, but that gives you a more advantageous charitable contribution than if you were just simply to give the $10,000 of cash upon which you've already paid income tax.

So that could be useful for you, consider that. If you have lost property, then the rule is reversed. With the rule with lost property, let's say that you've purchased stock for $10,000 and it's worth $5,000 and you sell it, or you decided that you're gonna sell it and you don't wanna keep it any longer.

Well, in that situation, what you always wanna do there is you wanna sell it for $5,000, take the $5,000 loss against your tax, and then go ahead and donate the cash to the charity. So make it up and give them the $5,000 out of your savings account. So just be smart about that.

Oftentimes, giving property, if the charity will accept it, might be more helpful to you, especially if it's appreciated property, might be more helpful to you than giving cash, and you can basically get a double use out of it. With regard to timing of these expenses and deductions, remember that you can take deductions for items that you pay by check in the current year, even if you mail the check on New Year's Eve.

As long as there's no reason why, when the business or person or charity receives it on January the 3rd, that they can't cash the check, then you can go ahead and take the deduction this year. If you're doing that, and if it's a sizable amount that you need, make sure, I would get it, what's it called with the post office, where they registered mail or whatever, where they give you the receipt for it, I would do that to make sure you have that date stamp and keep it with your records.

Credit card charges can also be taken this year. So let's say that you go out and you purchase some items in order that you're going to be deducting, and you purchase those items in December. Well, you probably won't receive the credit card bill due until January. So that'll allow you to go ahead and take the deduction in this year, and then pay it next year.

So that can be useful in some situations. The two final sections, that concludes kind of the timing of income and expenses. The other couple of ideas for you are with regard to relationships. And so there are various relationships that are going to affect your tax planning. First is, probably the most not useful, is the marital relationship.

So if you're planning a wedding at the end of the year, or like New Year's Day, my wife and I actually, we got married on New Year's Day. And so if you're planning something like that, calculate your taxes and see when you should actually have the marriage done. Doesn't have to be the same day necessarily as the wedding itself.

So we certainly could have legally gotten married on December 31, and then had our wedding celebration on January 1. And if we were married on December 31, then that would allow us to file as married filing jointly, for that year that we got married. In general, marriage is only gonna diminish your taxes if one spouse works, or earns almost all the income.

If both spouses work and earn relatively good incomes, then marriage is actually gonna boost your taxes. So be a good idea, just calculate it, and see which is more in your interest to do. With regard, the big one though however, is with regard to dependency. And the number of dependents that you can claim for your dependency exemptions.

Most people when they think about dependents actually think purely about kids. And that may be helpful. So most of the time, children are not something that you do last minute tax planning with. Generally they arrive over a period of many months, and you don't have a lot of control over when they come.

If you do have something where for example, you might have a plan C section, this happened to a family member of mine, you have a plan C section, and the safe zone for safe delivery covers the end of last week of December, and the first week of January. You might go ahead and schedule them December 31, so that you can go ahead and take your child credits, and your dependency exemptions.

But that'll apply to maybe, to not many people. The major benefit though that I've thought of for some of you might be if you're caring for other dependents who aren't your kids. And I'm thinking of parents or grandparents that you might be caring for. Now when you get to dependency exemptions, there are a bunch of detailed rules, and some different tests that you need to pass.

So for example, to claim a dependency exemption for a qualifying relative who's not a child, then there's the dependent taxpayer test, the joint return test, the citizenship test, the not a qualifying child test, the member of a household or relationship test, the gross income test, and the support test.

So some tests, and there's some detailed rules that you should focus on, and read through, and talk through with your advisor. But the one I wanna focus on is if you're providing support for your dependent. And support can mean different things. And this might be for kids, or this might be for other relatives as well, or even other non-relatives.

But support would include amounts that are spent for food, shelter, clothing, medical and dental care, education, church contributions, childcare expenses, wedding apparel and receptions, capital items, and similar items. So the key here is that support is measured by what is spent, not what is available. So if you are wanting to claim your child as a dependent, it doesn't really matter if your child earns $10,000, and then saves half of it.

As long as you spend $5,001 on them in support, then you've actually contributed more than one half of their support, and that will allow you to take the dependency exemption. So there are a number of different strategies that can happen here. Because you might, for example, you might make some payments for things that your child needs, or you might support them with a purchase at the year end of a car, a capital item like that, perhaps paying for, again, wedding apparel and receptions, education costs, things like that, going ahead and making those payments.

And however, if you were caring for a parent, then if you're contributing more than half of their support, that might allow you to claim them as a dependent. So for example, let's say that you've been planning to give your mother or your father, if my father or mother were in a nursing home, and I knew they needed something, and I was gonna go ahead and contribute to the cost of that, but then at the end of the year, I wanna go ahead and give her or him some kind of item for their needs, so a large television for their room, for example.

Well, as long as I track that, if I provide more than 50% of their support, then I can go ahead and possibly, as long as I fit the other qualifications, claim them as a dependent. And the key would be actually calculating this for yourself and seeing if your ability to claim them as a dependent is going to be in their best, is in your best interest and in their best interest.

And so there are a number of different ways that you could do this, but it might even be, for some people, it can be worth it to compensate. If, for example, you are going to claim somebody as a dependent and that's going to, and you're in a higher bracket, this is one of those income shifting strategies, kind of partly, is this might allow you, you might reimburse them for some of the tax costs to them and just go ahead and allow them to, so that you can actually claim the expense.

So you want to calculate it out, depending on who's got what bracket and see. And that might, again, for many of you who are caring for parents or grandparents, then that can be a really valuable scenario. And considering that you need to provide that care regardless, then make sure that you do it in a way that's going, where you're gonna allow the tax code to subsidize your expense.

Oh, and I forgot, one of the things, when you're figuring out your dependent's income, remember that you can exclude any type of exempt income. And exempt income would be things like including social security benefits, tax-exempt interest, et cetera. So the key there is your dependent can still, so if my mother or father were in a nursing home, they can, doesn't matter how much social security income they receive, that's a tax, that's exempt for the purpose of calculating the dependency.

The key is how much actually gets paid for their support. And it's based upon the money spent, not the money received. So that's how we pass the support test. So do some research if you think that might apply to you and see if you can work a way into that.

Very briefly on investment tax planning, I don't want to go into details on investment tax planning. I just want to mention one concept. I've seen over the last year, I would say, two years, a lot more interest in the concept of tax loss harvesting for investment planning. And I think this has been primarily due to some of the robo-advisors have made it very easy and efficient to actually harvest your tax losses.

It's not always easy to go through and figure out, well, what can I sell to defer my gains? I just want to emphasize that that's really great and that's valuable and that's useful. I want to emphasize that the flip side to that is you also want to make sure that your harvest sometimes harvest your gains.

And so the key, if you can establish a bookkeeping system that's going to, excuse me, allow you to be detail-oriented enough to actually be able to, if you can establish a bookkeeping system that's going to permit you to do these kinds of calculations in advance, sometimes you might want to go ahead and harvest gains.

And so let's say that you've purchased stock and you currently have a tax basis of $5,000 in the stock and the market value is $10,000. Well, if you have some extra money sitting on your tax return at a relatively low bracket, or at something at a relatively low bracket, you might be in your best interest to go ahead and sell some of the stock and then buy it back in order to increase your gain, excuse me, increase your basis.

And so you want to always essentially calculate both sides. Now, this is easy to say in theory and it's hard to do in practice, at least it's harder to do in practice. But go and calculate it and make sure that you're not just focusing on tax loss harvesting, but that you're actually focusing on tax gain harvesting and essentially over time ratcheting up your basis in your investments, however you can.

And I hope that's helpful to you. Those are the primary ideas that I wanted to share with you. I hope they're helpful. And the key is good tax planning is gonna make a profound difference in your financial picture. The biggest expense that most of us face is tax. And it's a difficult subject to tackle because there's so many aspects of it.

There's so many different kinds of tax. We're just talking today about federal income tax planning. There are so many moving variables. Our tax system is so incredibly complicated that it's very difficult, so daunting for me to figure out how do I teach through this? I mean, I get stretched by it.

How do I teach through this in a way that's actually gonna be helpful? So I hope, again, I hope this has been helpful. Always look and just think about your specific situation because that's the key. This is gonna be doing tax planning for end of the year, planning for a young single dad or single mom with a moderate income and a lot of expenses.

There are certain ideas or tactics that might help, but that's very different than if you're doing tax planning for somebody with a $50 million estate and we're trying to move assets out of the estate. There are a lot of moving parts. So keep absorbing the information and just keep looking at your situation.

Anytime there is an anomaly, for example, a market anomaly, if you have a large major price decline in the value of an asset or a large increase or absurdly low interest rates or absurdly high interest rates, then those are the kinds of things sometimes you can exploit that. So for example, if markets are down, then a couple years ago, that was when, if you were in estate planning, you were constantly busy getting assets out 'cause you wanna get them out when they're at a low valuation so you can get them out when they're basically destroyed in value where they can rise and the money is out of your estate.

So there are a lot of moving parts. I hope that this has been useful and I'd love some feedback, but the key is you gotta just look at your situation. Remember though that we're coming up on 2015 and this is the time to start planning for your 2015 plans.

Focus on goals, focus on income, but don't forget about tax plans as well. You just heard what was actually the original show that I had recorded today. However, you are privileged to get a little bit of a bonus episode here. (laughs) I recorded that show today as I record this now, it is December 17th, 3.20 p.m.

I recorded that show this morning and I had to leave my house and just leave my house for an appointment and I was planning to get the show uploaded here this afternoon. Then I find out all of a sudden through one of my news feeds that the law has changed or is in the process of changing.

And let me clarify what specifically is wrong in the show that I just recorded and then I'm gonna rant a little bit because this is incredibly frustrating. So I find out through an email from one of the services and things that I subscribe to that now as of last night, Tuesday, December 16, 2014, there is a bill that is passed by the Senate and the Senate votes to pass the so-called, what's this called?

HR 5771, Tax Increase Prevention Act of 2014. So it was passed by the Senate last night and as of right now as I record this, it's on its way to the President's desk, I guess, and theoretically he's gonna sign it. So I'm looking at this thing and the big thing that I got wrong was I made a special note in the show that you just heard about the Section 179 ability to expense allowance where for the last few years, that expense allowance had been, you were able to expense as much as $500,000, $500,000 of your upfront equipment costs in a single year and then it was limited to $25,000 for this year.

So then here we are at December 16 when this bill is passed. It's not been signed by the President yet that I know. I'm looking at govtrack.us and it doesn't indicate that it's been signed by the President yet. So here we are sitting here in December and they're about to pass this bill evidently, which is among other things, is going to extend the $500,000 Section 179 upfront expensing limits.

The full title here, to amend the Internal Revenue Code of 1986 to extend certain expiring provisions and make technical corrections and it goes on. So I'm looking at the bill. I'm not gonna go through every section in here, but it goes, I'm looking at all of the things that are expiring and it covers 100% of the Section 179 stuff and that extends that out.

So that's what you need to know is basically that right now in December, if you need to spend a bunch of money now, you can't only just take a $25,000 expense allowance. You can actually maybe, if the President signs this thing, you can go and take a $500,000 expense allowance.

So the first thing you should do is call your accountant and if you need to purchase some equipment or something to knock off a bill this year, this might be a time to do it. So talk to your accountant. I can't give any further advice in that. But this is just, this is so frustrating.

We have a nation that is run by a bunch of clowns and two-year-old clowns that can't, I'm bad at political rants 'cause I've signed off of all the political nonsense. I'm done. I've quit. Just leave me alone and I will, I'm speechless. I can't even do a political rant.

Most of my friends, I'm good at doing political ranting. It's so frustrating, the way that tax policy is done in this country. It's so frustrating. If you look back at it, I mean, it reminds me, if you go back to 2012, when you had at the end of 2012, we're approaching the fiscal cliff, the tax Armageddon, and there was gonna be the biggest overnight increase in taxes in the history of the country.

The actual, I mean, the tax rates would have jumped massively when this was, the Bush tax cuts had expired a couple years earlier, though everything was extended, everything was gonna be forced through. And so the maximum tax, a year ago, the maximum tax on dividends was scheduled to jump from 15% to as much as 43 1/2%.

Four out of five US households would have faced an average of $3,700 more in taxes. It was basically gonna be an $8 trillion tax increase. And what is so frustrating is everybody knew what needed to be done. Everybody knew what was going to be done. Everybody knew, like, it's all known in advance exactly what's gonna happen.

Everyone's gonna talk a big talk. You know, the left and the right, the Democrats are gonna talk a big talk about not raising taxes, and the Republicans are gonna talk a big talk about not raising taxes. In the end, they're all liars, and they do exactly the same thing.

But they have to wait till after the elections. So instead of anybody being able to actually plan on anything and actually run their business with a bit of confidence, if I were advising a business owner, how do you sit here and say, oh, all of a sudden, I told you you had a $25,000 limit on your 179 expense right now, but now you got a $500,000 limit?

How do you plan in this kind of environment? It is utterly, it is, anyway, the world we live in is just ridiculous. You know, when, here I, when you can't even expect, here at December, and I'm already late on a show like this, I'd prepared my outline carefully, I'd researched everything to be very precise, and here I am, here I am trying to give a precise show to help people, and then you've got the Congress clowns move around and the end of December change the rules again.

And you look here and, section 101, extension of deduction for certain expenses of elementary and secondary school teachers. Section 102, extension of exclusion from gross income of discharge of qualified principal residents and debtors. So we gotta pander to the people and extend this stupid thing on, allowing you to go through a short sale.

What does that even do? If that's what it is, what does this do for all the people who, their account advisor, and they were gonna have to pay the tax. When you have debt that's forgiven to you, it's imputed income, it's phantom income, and we've gotta protect the people, and we've gotta give a special deal to everyone in the housing crisis to avoid the tax.

Section 103, extension of parity for employer-provided mass transit and parking benefits. Section 104, extension of mortgage insurance premiums treated as qualified resident's interest. Section 105, extension of deduction of state and local general sales taxes. I mean, it just goes on and on. The business tax extenders, extension of the research credits, 114, Indian employment tax credit, new markets tax credit.

And basically what all these things are is extensions of things that were scheduled to expire. I haven't read the whole bill here, and just looking at the summary. We live in a nation of incompetence, incompetent rulers, and it would be great to get rid of every single one of 'em.

I mean, maybe there's some that are intelligent, but it is absurd. Since I'm, if you want a little fun, I'll indulge myself. I usually don't rant on taxes, but this one has me annoyed, just because, I guess it passed last night, so technically I should have done my research this morning when my outline was already prepared.

But, so I'm gonna pull down one, I've got one of my favorite books here, and this is, I'll read a couple of things from Jeff Schnepper's How to Pay Zero Taxes book. And he updates this, I have the 2015 edition, and he updates this thing every year, and in the front he talks about what happened in each year.

And, I'll just read a few of my favorites from the last few years. And hopefully you'll get a kick out of this, and then I'll be done and be out of here. You would have been impressed. The original show was under 60 minutes, so you would have been impressed with that.

But let's pick a couple of fun ones here. So, from his section on 2012, so after that debacle of the fiscal cliff, according to the Joint Committee on Taxation in March 2012, the prior cost of kicking the can down the road for tax cuts, extenders, estate tax, et cetera, through fiscal year 2012, was $967.7 billion in wasted dollars.

Add to that decreased stability and the inability to properly budget into the future, and you had a framework for economic impotence. Don't blame the IRS. Then Commissioner Doug Shulman warned, if Congress can't act by the end of the year, and even starts to think about retroactive legislation of things like the AMT, which have already expired, you could have a real disaster in the filing season when there's total confusion where some people are filing under one law and others under another.

Congress finally passed the American Taxpayer Relief Act of 2012 to address these issues, and they do it on the day after 2012. It's January 1, 2013. Here are a couple others from 2011. Actually, before I go to 2011, let's look at a couple of the fun ones from 2013.

So the Internal Revenue Service reportedly posted the Social Security number of tens of thousands of people on the internet before taking it down, wherein a whistleblower pointed out the mistakes. Approximately 1.45 million taxpayers who qualified for relief from tax penalties totaling close to $181 million were never told that they could get penalty abatement and never got it.

Here's one of my favorites. The IRS could not provide documentation for $394,430 paid for labor hours. Point that out in your next audit. How about this one? The American Civil Liberties Union released documents showing that the IRS criminal division had been reading taxpayers' emails without a warrant in violation of the Fourth Amendment.

That makes you feel good, doesn't it? And then there were the IRS parties. During one conference, more than $50,000 was spent on receptions, including 28 bottles of wine for 41 guests. Then there was the almost $4,000 spent on giveaway items, including footballs, $418 in kazoos, bathtub toy boats, and other novelty decorations.

IRS credit cards were used to purchase romance novels, steaks, diet pills, and unspecified items from merchants affiliated with online pornography. Your tax money at work. The IRS spent about $50 million on 225 conferences during the three years between fiscal 2010 and 2012. The small business and self-employed division spent $4.1 million alone on a single conference in Anaheim, California.

You should have been there. Speaker fees for presentations such as, quote, "How seemingly random combinations of ideas "can drive radical innovation," close quote, totaled $135,350. One speaker was paid $17,000 to create six paintings. Three were donated to charity, two were given to conference attendees, and the sixth was lost.

Then there were the videos that cost $50,107 to produce. They included a dance video showing IRS employees learning the Cupid Shuffle and a Star Trek parody for which the set alone cost $2,400 and 11 hours of staff work, estimated to cost an additional $3,100. But they did get a one-minute finished video.

We won't even talk about the IRS video parody of Gilligan's Island used to train 1,900 taxpayer-assisted employees in 400 locations nationwide. As Maynard G. Krebs would say, "Work?" In addition to these large expenditures, the IRS spent $15,669 of your money on brief bags with free gifts and trinkets, $6,060 on lanyards and badge holders, $1,524 on engraved travel mugs and clocks, and $90 on sleeves for puzzle pieces.

And then there were the political issues. The supposedly politically independent IRS was found to have targeted conservative groups seeking tax exemption for extra scrutiny. The TIGTA found the, that's a taxpayer, Treasury Inspector General for Tax Administration. The TIGTA found the inappropriate conduct, quote, "inexcusable," and Attorney General Eric Holder, another liar, announced that criminal penalties may be sought in a Justice Department criminal investigation.

Add that to the 24 IRS employees who were indicted for fraudulently obtaining more than $250,000 in government benefits, and you have what some would call a rogue agency out of control. It didn't even go into the Lois Lerned debacle. Bunch of lies. Let me pick out two or three of my other favorites, and then that'll satisfy my desire to express my emotions today.

There's a David Letterman joke that the question is, "What's the difference between Obama's cabinet "and a penitentiary?" And the answer, "One is filled with tax evaders, "blackmailers, and threats to society. "The other is for housing prisoners." It was a David Letterman joke. So a lot of people don't realize why.

I'll read just one of my favorites from 2009. And this is, again, this is Jeff Schnepper's writing here. "I'm beginning to understand now. "The tax code is the holy grail, "the answer to all our social and economic problems. "If we have a problem, it can be solved "through the tax code.

"Need to sell more cars? "Simple, make the sales tax on their purchase deductible, "even for those taking the standard of deduction, "and create a clunker's credit. "But then again, the government does own "General Motors, doesn't it? "Still, I stand by my argument. "Your house went down in value? "Stimulate the real estate market "by making real estate taxes "on a principal resident's deductible.

"Again, even for those taking the standard deduction. "Oil prices getting too high again? "Stimulate green energy alternatives "with credits that reduce your taxes "on a dollar-for-dollar basis. "On June 11, 2009, Representative Carolyn Maloney, "Democrat from New York, "introduced a bill that would give an employer "a 50% tax credit on up to $10,000 "for qualified breastfeeding promotion "and support expenditures.

"Talk about milking the system. "You can't say 2009 was a quiet year tax-wise. "The Internal Revenue Service "released a taxpayer attitude survey "on February 2, 2009, "which found that 89% of Americans "think it unacceptable for people to cheat on their taxes. "The other 11% appear to be headed "for the President's Cabinet.

"President Obama's pick to lead "the Department of Health and Human Services, "former Senate Majority Leader Tom Daschle, "apologized for owing $140,000 "in back taxes and interest. "In 1998, he was quoted as saying, "'Make no mistake, tax cheaters cheat us all, "'and the IRS should enforce our laws to the letter.'" The President's selection for the first Chief Performance Officer for the federal government, Nancy Killefer, failed to pay tax on her household help.

Both had the good graces to withdraw from consideration. And then there was Ron Kirk, nominated to be the U.S. Trade Representative. He forgot to report $37,000 in spending and speaking fees assigned to a charity, but he managed to remember taking a deduction for $7,500 of the donation. And then there was $7,400 in pro basketball tickets without a business purpose.

Cheating on his taxes didn't defer Timothy Geithner from becoming Treasury Secretary. His taxes were found to be underpaid in 2001, 2002, 2004, and 2005. What, nobody looked at 2003? But then again, who better to put in charge of the IRS than someone who requests a ruling on the law and then ignores it?

But he did pay up when caught. Talk, anyway, you get the point. And it's just, it's utterly absurd. There's actually an important quote in here that he lists. And the quote is by former Commissioner of the IRS, Mark Everson. He says, "Frequent changes to the tax code "and rising complexity are perhaps the greatest obstacles "to reducing paperwork burden.

"I am concerned that tax law complexity "may discourage taxpayers and adversely impact "voluntary self-assessment that is at the heart "of our tax system." And the point is, self-reporting and self-assessment of taxes is indeed the heart of the tax system. And it's absurd to have things, I mean, to have things changing like this is absolutely absurd.

We've had over 48 major tax law changes in the last 51 years. Couple of numbers here. 2013 return numbers directly from the IRS. The average taxpayer who files a Form 1040 needs 15 hours. Add a single rental property or a Schedule C for your business and the hours jump to 24.

And that's with about 91% filing with a computer. We spend more than 7.7 billion hours and over $350 billion each year complying with the tax code just to figure out what we owe. That's more hours than are used to build every car, van, truck, and airplane manufactured in America.

And that's just your time. And our government wants your money as well. According to the Tax Foundation, the average taxpayer had to work 111 days until April 21, 2014 in order to earn enough to cover his federal, state, and local tax burden. They call it Tax Freedom Day. I call it Get Out of My Pocket Day.

The Group Americans for Tax Reform includes the cost of regulation. Its cost of government day had us working for the government until July 6, 2014. I don't even know what to say. I don't know when people are gonna wake up and I do my best to try to stay level-headed and not get too fired up about stuff and I don't get on a political bandwagon.

But it's absolutely absurd. It's, the world we live in is absurd. And remember, all of those numbers, and I won't go into it. Things are gonna change as time goes on. And obviously, the key is for us to look at our own situation and figure out what's right for us.

You have to look at yourself. This way, I'm way more sympathetic to the tax protesters than I've ever been. I'm not there yet, but you never know. One of these days, I may join 'em. If I do, I'll go public with it from the beginning and I'll write my letter to the IRS.

Until then, I will try to comply with their law that they changed. This bill they passed last night, 174 pages. So how on earth is any, and that's just one thing. The tax code is over, right now, as it sits right now in 2014, it's over 70,000 pages. Over 70,000 pages and over four million words.

That's the tax code that we have. It's very hard for me to comprehend how just a tiny little bit of intelligence and applied sense can't see that we can figure out a better way to do it other than the debacle that we have. That's it for my show. Little different ending than the previous ending.

I just chopped off the last bit of the other show. So a little bit different than I had planned, but I hope today was helpful to you. I guess I should add another tax tip to all the last minute tax planning and say, well, you could just do what seems like half of, probably, I guess that'd be a little bit silly.

And yes, I'm not indulging. These aren't careful, logical arguments that I'm giving. It's just simply a little bit of emotion. But I guess you could just join some of the officials in government and just simply conveniently forget about half your income for the year. That would probably be pretty good.

In fact, I encourage it. So if it works for them, you ought to take it for yourself. Seems to work well. Thank you guys so much for listening to today's show. If you'd like to get in touch with me, Joshua@radicalpersonalfinance.com, Twitter @radicalpf, Facebook.com/radicalpersonalfinance. Thank you for those of you who have joined the Irregulars program.

Consider joining if you've appreciated the information, if I've helped you save you some money, consider joining the Irregulars. Details are at radicalpersonalfinance.com/membership. Let's go out with one review here. Thank you for those of you who've been leaving me iTunes reviews. One review here from Lane. He says, "You will learn difficult topics "explained with words, examples, guests, "and other methods as required.

"You will learn from this one. "They're not short or always just a certain number "of minutes, but the adjustment is worth the effort." So another one here from, oh, that one was from me. I reviewed my own show. I said, "This show is awesome. "It really helps make financial stuff make sense." Yes, it is my own show, and that's why it's so good.

(laughing) So that was me reviewing my own show. Thank you for leaving reviews on iTunes and on Stitcher. I appreciate it very much, and I wish each and every one of you a lovely day. Go out, and if you're running a business, call your accountant and go spend an extra $475,000 and keep your money yourself.

Forget about trying to keep up with the government. (upbeat music) (upbeat music) Thank you for listening to today's show. This show is intended to provide entertainment, education, and financial enlightenment. Your situation is unique, and I cannot deliver any actionable advice without knowing anything about you. This show is not and is not intended to be any form of financial advice.

Please, develop a team of professional advisors who you find to be caring, competent, and trustworthy, and consult them because they are the ones who can understand your specific needs, your specific goals, and provide specific answers to your questions. Hold them accountable for your results. I've done my absolute best to be clear and accurate in today's show, but I'm one person, and I make mistakes.

If you spot a mistake in something I've said, please come by the show page and comment so we can all learn together. Until tomorrow, thanks for being here.