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If Sir-Tax Could Write Prescription Drug Warnings

by David Lichtenstein, CPA, MST

PROCRASTINATE DRUG: Notifying your accountant at the last minute that you are selling your business, and you just want him/her to “review” the purchase & sale documents, just to make sure that you aren’t missing anything.

Sir-Tax Advice

DRUG WARNING: Engaging in such an activity could result in bank account trauma, wasting of net operating loss deduction carryovers, ordinary income tax rates instead of capital gains rates, or sub-optimal asset value allocations resulting in ordinary income recapture. Ask your accountant if you are fit to sell a business or if you are at all interested in maximizing the amount of money you may walk away with after taxes. Or better yet, inform your accountant when you first start entertaining the idea of selling your business, so that your accountant can provide you with proactive advice on how best to structure and pursue such a sale. Call your accountant immediately if the reading of any financial document lasts longer than four hours.

SINGLEAIR DRUG: Notifying your accountant when you are filling out your annual tax organizer (in January of 2017) that you got married in June of 2016.

DRUG WARNING: Engaging in such an activity could result in an emergency trip back to Las Vegas, significant tax balance due, loss of planning opportunities to minimize tax, obsolete and meaningless tax projections, or inefficiencies in gathering tax information. Ask your accountant if life changing events such as marriage, divorce, childbirth, job loss, promotion, inheritance, purchase or sale of a home, etc. would be situations that may warrant a phone call to your accountant, so that he/she can factor in such circumstances when providing valuable tax planning advice.

BIGMESSERAL DRUG: Investing in 30 oil & gas or rental partnerships during the year without first consulting your accountant.

DRUG WARNING: Engaging in such an activity could result in an irrational fear of paper, a significant and unanticipated increase in tax preparation fees, post-April 15 issuance of tax documents (“K-1’s”) from those investment partnerships, potential passive loss limitations and carryovers, unexpected income recapture when you sell the investment, multiple state tax implications and return filing obligations, or an unexpected realization that your increased tax and tax compliance costs outweigh any marginal increase in your rate of return on your investment. Ask your accountant if there are any potential drawbacks or alternatives to making such investments so that you can make an informed decision as to whether or not the investment makes sense. In the event that the investment still makes sense, you can at least allow your accountant an opportunity to explore ways to potentially minimize any loss of tax benefits or maximize any tax favorable results upon a disposition of the investment.

HELOCSIUM DRUG: Financing the purchase of a second home with a home equity line of credit (HELOC) secured by your primary residence when instead, you could have obtained a comparable mortgage secured by that second home.

DRUG WARNING: Engaging in such an activity could result in discolored shower grout, a potential permanent loss of a mortgage interest deduction (or at the very least an Alternative Minimum Tax liability), a shocking tax bill, a mortgage broker who suddenly won’t return your phone calls, or a very sympathetic accountant who is willing to cry with you. Ask your accountant if you are interested in avoiding a serious tax blunder, and instead, securing a very favorable tax outcome, and thereby helping you to subsidize the cost of your new vacation home (which you will rarely visit, will cause you a lot of stress, and will ultimately drain you of your resources before you decide to sell it at a loss).

Hopefully by now you’ve figured out what I am getting at: CALL YOUR ACCOUNTANT!! Don’t relegate your accountant to a mere “recorder of history”. Your accountant has the potential to be one of your most trusted advisors and save you thousands of dollars (or prevent you from losing thousands of dollars) if given advanced or timely notice of the significant events in your life. And how do you know when a life event is something that should be brought to your accountant’s attention? Just follow one of Sir-Tax’s favorite maxims:

A financial document you should not sign
Without first giving your accountant a chance to opine
Upon a birth, a marriage, a death, or divorce
Call your accountant as a matter of course

Anyway, it’s been real, but I’ve got to get back to my other job: Reducing your taxes and boosting the economy. I can’t promise that I will write every month, but if you keep reading, I’ll keep writing. My goal is to keep you, the taxpayer, informed on tax issues that matter to you, your family, or your business. And if there’s a tax issue out there that you’d like to know more about, or if you have questions about a recent post, feel free to comment on my blog: Sir-Tax, or email me at dlichtenstein@sansiveri.com. I may just pick your issue for my next post.


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