April 8, 2024 • 12 mins
Tax season is upon us and there are lots of questions surrounding filing, returns and more.
To answer those questions, tax attorney Steve Moskowitz talks to Jack Armstrong!
You can contact Steve Moskowitz HERE.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Every tax season and anytime any big tax story comes up.
Guy we always talk to is Stephen Moskwitz, Moscuit's LLP
tax attorney. Stephen, Welcome back to the Armstrong and Getty Show.
Speaker 2 (00:13):
I always so enjoyed doing your show. And one of
the thing you want to talk about this year is
that the government has gotten so into our lives. However,
they're actually paying us to do some of the things
they want us to do. For example, how would you
like it if the irs lessened the price of a
(00:34):
car you're going to buy by seventy five hundred bucks?
Speaker 3 (00:38):
So how is that occurring?
Speaker 2 (00:41):
That's the electric vehicle credit. So and also let's talk
about the difference between a credit and deduction. If you
have one hundred dollars deduction and you're in the thirty
percent tax bracket, you save thirty dollars in taxes. But
if it's a credit and you have one hundred dollars credit,
you save one hundred dollars in taxes.
Speaker 1 (01:00):
That's a good distinction, and I think people like you're right.
I think people blur those two together regularly.
Speaker 2 (01:06):
It's a big deal, and it doesn't matter what your
tax bracket is In my example, you save one hundred bucks.
So here for getting an electric vehicle, you can save
up to seventy five hundred dollars. Now they sweeten it
some more because normally most things in taxes you file
a form like if we're going to file this form
will be form eighty nine to thirty six. But guess what.
(01:28):
You have an option when you're in the car dealership,
you say, you know, instead of my filing form eighty
nine to thirty six, I'll give the credit to you.
You give me the seventy five hundred bucks right now,
I'm going to drive out with that seventy five hundred
dollars saving. I mean that's a big deal.
Speaker 3 (01:47):
Heck yeah yeah.
Speaker 2 (01:49):
And other things too. Then the government has gotten into
the energy efficiency. They're giving this a credit for that's
what they call energy efficient home improvements like installing new doors, windows, skylights, insulation,
heat pumps, and a lot of other things. And water
heaters upgrade to electrical systems and this is terrific. Then
(02:14):
they go on and they give another credit for residential
clean energy credit. Again, these are things that you're improving
your house. For example, maybe you're doing solar or geo
thermal heat pump, home battery storage, fuel sell all these
things they're giving them money away. And what about your kitchen.
(02:35):
Guess what they're giving you credits for your kitchen too,
like an electric stove or cook top, range or oven.
And the bottom line is it doesn't stop there because
they also go ahead and they're even giving you credits
for savings. There's a savings credit where you go ahead
and if you put some money into your retirement account,
(02:59):
they'll give you credit for that too. So the bottom
line is, I know the government is just into so
into our lives, but here is something they're really doing
for us. And these are things you'd want to do anyway.
And you might wonder why is the government given all
these credits? Because in democracy, the government still can't order
(03:20):
us to do something they want, like they right vehicles
and homes more efficient, but they can pay us to
do it and it's very very effective. So the bottom liners,
there're just so much there.
Speaker 1 (03:32):
So here's the question, Steve, And I know I think
a lot of people have and I don't know if
it's this year or next year, whatever, the change in
the amount of money where like if I'm paying babysitters,
a bunch of money, or gardeners or whatever. The ten
ninety nine all this stuff where a lot of us
have just been paying cash and not worried about it.
Speaker 3 (03:50):
What all changed with the laws on that?
Speaker 2 (03:53):
They keep changing that. And the idea of a ten
ninety nine is these are payments that you make in business.
So the bottom line is, if you're not sure, the
answer is really easy, just file it. Because there's no
penalty for filing something you're not required to. That's the
way around that. However, whoever does your taxes should know
that and be able to tell you. But that's the
(04:13):
deal with that. And the other thing you have to
watch out for is is this person And here's the
big deal about what you're talking about. Is that person
truly an inpendent contractor so you don't have to withhold
payroll taxes, you don't have to match those security taxes,
you don't have to have the worker's comp and all that.
Or is that person your employee, in which case you
(04:37):
have to do all those things. And if you don't,
you can get in a lot of trouble. So that's
another thing you have to watch out for. Is it
truly an dependent contractor or is an employee. That's a
big one you have to watch out for.
Speaker 1 (04:49):
So what makes a center or a gardener or whoever
you're paying cross the line into being your employee. Is
it the amount of money or is there more to
it than that.
Speaker 2 (04:59):
There's a lot more to it. Usually it's a lot more.
How much control do you exercise? So for example, if
you say come to my home at eight thirty Monday
through Friday, you have an hour for lunch at noontime,
end up pretty much working for you. That's an employee.
The independent contractor is somebody they have their own business,
(05:21):
they have their own employees, they have their own assets,
and sometimes there's a close line. For example, the IRS
has a twenty question forum where they help you determine
is that paye really an independent contractor or the employee?
So if you're thinking about it, that's another resource where
(05:42):
you take a look at those twenty questions.
Speaker 1 (05:43):
Who gets audited? Like who would get caught in this
sort of stuff? Is it mostly rich people to get
audited or are they audit Who gets audited?
Speaker 2 (05:53):
That's a great question, and the government is very clear
that everybody can be audited. Statistics one who can be
audited or with the real answer, The higher your income,
the more likely you are to be audited. That's one thing.
Another thing is there's something called PIF Discriminate Income function.
(06:15):
That's where all of our tax returns go through a
computer and they check sixty six different factors and this
gives you what's called an audit score for audit potential.
The higher your point, the more likely you are to
be audited. One factor is your percentage deductions against your income.
(06:36):
Another factor is certain categories like do you have a
small business loss, did you take a home office deduction?
Doesn't mean you can't, They just there are factors they're
interested in, and also the total amount of your income,
the total amount of you aductions. Another thing that they do,
and this is published every year in the Wall Street Journal,
is they compare your deductions to the national average. There's many,
(07:00):
many factors. Other factors is how to do in previous audits.
If you owe money in a previous audit, they're more
likely to audit you again thinking that you've done something
wrong again. The bottom line is everybody has a chance
of being audited. And something I've always believed is that
you should take everything to which you're legally entitled, no
more and no less. And in reality, most people cheat
(07:21):
on their taxes. They cheat themselves by not taking everything
to which they're legally entitled and missing out because they're
so afraid of an audit. And the way I say
that is, you wouldn't stop driving your car because at
some point a police officer is going to pull you over.
One see your driver's license. Okay, here's a license. There's
no problem. And that's what I would say. Make sure
you're entiled to something and then go ahead and do
(07:43):
it and save the money.
Speaker 1 (07:44):
Yeah, I'm sure you're right, And I mean you're been
in this business your whole life, you know it. But
I'm sure you're right. There way more people that aren't
taking advantage of various things than are taking unfair advantage.
Speaker 2 (07:56):
Oh absolutely, way, way way more. And so often you
here something I don't want to do that I might
get order to. I'll go back to the car. Example,
that's why so well, I don't want to drive to
the grocery store because a police officer might stop me. No,
take everything to which you're legally entitled, no more and
the less. And there's so many good things that spell
out if you're entitled to something or not. And the
government is given us so many benefits. I know everybody
(08:18):
complains about the taxes, but I'm into the good part
of it, where there's so many benefits. And you take
a look at the big companies, the Fortune five hundred,
they're making billions and they pay little or no taxes.
Wealthy people have an army of people like me. They
take everything that the law provides. They just don't what
the law provides, and they're paying so much taxes. It's
(08:39):
like when I talk to a new client, I say, so,
do you think you make more or less than Apple computer?
And we all laugh and they admit they're making less
than Apple computer. But I say, guess what, you're paying
more taxes than they are. You have to utilize the
tax law. That's what it's there for.
Speaker 3 (08:53):
How many pages of tax law are there now?
Speaker 2 (08:57):
Oh? It goes on forever. And it's not just the
pages of law. Every day courts are interpreting the tax law.
So the congress people and their infinite wisdom make a
law and say you can deduct X, and then the
courts determined, well what is X? And so many times,
and you say this all the time in tax court
(09:18):
that the judges of equal rank have totally different ideas
of what X is and in real life in the trenches.
That's why the IRS settles so many cases, although most
cases settle anyway, is that it's called the hazards of
litigation where there's so many cases say yes, you can
do that, so many cases say no, you can't. So
(09:39):
you take a percentage and you'll go home.
Speaker 3 (09:41):
When when should someone call you?
Speaker 1 (09:43):
Like if you get a well, the if I'm in
trouble with the IRS, will they send me a letter
where they call me? How will I even find out?
And then what's the first thing I should do?
Speaker 2 (09:53):
In civil case? Normally they'll send you a letter, And
the first thing you should do is go ahead and
get profess because an audit is like a heavyweight boxing match.
Nobody but another heavyweight better climb in that ring. On
the criminal side, normally they send two agents with gold
badges and guns that knock on your door. You have
(10:14):
the right to remain silent. You should exercise that.
Speaker 1 (10:17):
But as you've been saying from your years we've been
talking to you, don't throw away those letters from the IRS.
Speaker 3 (10:23):
And hope it will go away.
Speaker 2 (10:26):
As a practical matter. Over the years, it's amazing how
many people would walk into my office literally with a
stack of unopened the envelopes and say I couldn't bear
to open them. I have to literally open the letter
and the office and tell a client what was going on.
And here's one of the bad parts about that. You
have so many rights. For example, there's something let's say
(10:49):
you have some taxes and you can't pay it. One
of the rights you have is a very powerful right.
It's called the collection do process hearing. And what happens
with that is that if you disagree with the guy
who's trying to collect from you, you can go right
over his head to have this special hearing. The IRS
can't collect from you pending that you have the right
to go to tax court if the hearing officer abuses
(11:13):
his discretion. You have so many rights. It's a great thing.
But you only have thirty days from the date of
the letter to exercises. What a crying shane. If you
have an absolute, really really really helpful right and you
waive it, you throw it out because you didn't open
an envelope. Open the envelope and if you can't bear though,
(11:33):
if the psychological thing, and if you can't bear to
open the envelope the day you get it, call somebody
and let him or her open the envelope for you.
We we've done it for lots of clients.
Speaker 1 (11:43):
Hey, we're out of time, but that is a good
note to leave on. In one frale, you get the
letter from the irs, open it, deal with it right away,
because it's only to your advantage. And if, and again,
if you can't open it, take it to Stephen or
someone like Stephen Moscow. It's lop dot COM's website. Thank you, Steven,
and another big tax log.
Speaker 3 (12:01):
It's passed. We'll talk to you to figure out what
it means.
Speaker 2 (12:03):
Thanks so much. I had a great time as well,
you bet, Thank you Armstrong and Getty.
Every tax season and anytime any big tax story comes up.
Guy we always talk to is Stephen Moskwitz, Moscuit's LLP
tax attorney. Stephen, Welcome back to the Armstrong and Getty Show.
Speaker 2 (00:13):
I always so enjoyed doing your show. And one of
the thing you want to talk about this year is
that the government has gotten so into our lives. However,
they're actually paying us to do some of the things
they want us to do. For example, how would you
like it if the irs lessened the price of a
(00:34):
car you're going to buy by seventy five hundred bucks?
Speaker 3 (00:38):
So how is that occurring?
Speaker 2 (00:41):
That's the electric vehicle credit. So and also let's talk
about the difference between a credit and deduction. If you
have one hundred dollars deduction and you're in the thirty
percent tax bracket, you save thirty dollars in taxes. But
if it's a credit and you have one hundred dollars credit,
you save one hundred dollars in taxes.
Speaker 1 (01:00):
That's a good distinction, and I think people like you're right.
I think people blur those two together regularly.
Speaker 2 (01:06):
It's a big deal, and it doesn't matter what your
tax bracket is In my example, you save one hundred bucks.
So here for getting an electric vehicle, you can save
up to seventy five hundred dollars. Now they sweeten it
some more because normally most things in taxes you file
a form like if we're going to file this form
will be form eighty nine to thirty six. But guess what.
(01:28):
You have an option when you're in the car dealership,
you say, you know, instead of my filing form eighty
nine to thirty six, I'll give the credit to you.
You give me the seventy five hundred bucks right now,
I'm going to drive out with that seventy five hundred
dollars saving. I mean that's a big deal.
Speaker 3 (01:47):
Heck yeah yeah.
Speaker 2 (01:49):
And other things too. Then the government has gotten into
the energy efficiency. They're giving this a credit for that's
what they call energy efficient home improvements like installing new doors, windows, skylights, insulation,
heat pumps, and a lot of other things. And water
heaters upgrade to electrical systems and this is terrific. Then
(02:14):
they go on and they give another credit for residential
clean energy credit. Again, these are things that you're improving
your house. For example, maybe you're doing solar or geo
thermal heat pump, home battery storage, fuel sell all these
things they're giving them money away. And what about your kitchen.
(02:35):
Guess what they're giving you credits for your kitchen too,
like an electric stove or cook top, range or oven.
And the bottom line is it doesn't stop there because
they also go ahead and they're even giving you credits
for savings. There's a savings credit where you go ahead
and if you put some money into your retirement account,
(02:59):
they'll give you credit for that too. So the bottom
line is, I know the government is just into so
into our lives, but here is something they're really doing
for us. And these are things you'd want to do anyway.
And you might wonder why is the government given all
these credits? Because in democracy, the government still can't order
(03:20):
us to do something they want, like they right vehicles
and homes more efficient, but they can pay us to
do it and it's very very effective. So the bottom liners,
there're just so much there.
Speaker 1 (03:32):
So here's the question, Steve, And I know I think
a lot of people have and I don't know if
it's this year or next year, whatever, the change in
the amount of money where like if I'm paying babysitters,
a bunch of money, or gardeners or whatever. The ten
ninety nine all this stuff where a lot of us
have just been paying cash and not worried about it.
Speaker 3 (03:50):
What all changed with the laws on that?
Speaker 2 (03:53):
They keep changing that. And the idea of a ten
ninety nine is these are payments that you make in business.
So the bottom line is, if you're not sure, the
answer is really easy, just file it. Because there's no
penalty for filing something you're not required to. That's the
way around that. However, whoever does your taxes should know
that and be able to tell you. But that's the
(04:13):
deal with that. And the other thing you have to
watch out for is is this person And here's the
big deal about what you're talking about. Is that person
truly an inpendent contractor so you don't have to withhold
payroll taxes, you don't have to match those security taxes,
you don't have to have the worker's comp and all that.
Or is that person your employee, in which case you
(04:37):
have to do all those things. And if you don't,
you can get in a lot of trouble. So that's
another thing you have to watch out for. Is it
truly an dependent contractor or is an employee. That's a
big one you have to watch out for.
Speaker 1 (04:49):
So what makes a center or a gardener or whoever
you're paying cross the line into being your employee. Is
it the amount of money or is there more to
it than that.
Speaker 2 (04:59):
There's a lot more to it. Usually it's a lot more.
How much control do you exercise? So for example, if
you say come to my home at eight thirty Monday
through Friday, you have an hour for lunch at noontime,
end up pretty much working for you. That's an employee.
The independent contractor is somebody they have their own business,
(05:21):
they have their own employees, they have their own assets,
and sometimes there's a close line. For example, the IRS
has a twenty question forum where they help you determine
is that paye really an independent contractor or the employee?
So if you're thinking about it, that's another resource where
(05:42):
you take a look at those twenty questions.
Speaker 1 (05:43):
Who gets audited? Like who would get caught in this
sort of stuff? Is it mostly rich people to get
audited or are they audit Who gets audited?
Speaker 2 (05:53):
That's a great question, and the government is very clear
that everybody can be audited. Statistics one who can be
audited or with the real answer, The higher your income,
the more likely you are to be audited. That's one thing.
Another thing is there's something called PIF Discriminate Income function.
(06:15):
That's where all of our tax returns go through a
computer and they check sixty six different factors and this
gives you what's called an audit score for audit potential.
The higher your point, the more likely you are to
be audited. One factor is your percentage deductions against your income.
(06:36):
Another factor is certain categories like do you have a
small business loss, did you take a home office deduction?
Doesn't mean you can't, They just there are factors they're
interested in, and also the total amount of your income,
the total amount of you aductions. Another thing that they do,
and this is published every year in the Wall Street Journal,
is they compare your deductions to the national average. There's many,
(07:00):
many factors. Other factors is how to do in previous audits.
If you owe money in a previous audit, they're more
likely to audit you again thinking that you've done something
wrong again. The bottom line is everybody has a chance
of being audited. And something I've always believed is that
you should take everything to which you're legally entitled, no
more and no less. And in reality, most people cheat
(07:21):
on their taxes. They cheat themselves by not taking everything
to which they're legally entitled and missing out because they're
so afraid of an audit. And the way I say
that is, you wouldn't stop driving your car because at
some point a police officer is going to pull you over.
One see your driver's license. Okay, here's a license. There's
no problem. And that's what I would say. Make sure
you're entiled to something and then go ahead and do
(07:43):
it and save the money.
Speaker 1 (07:44):
Yeah, I'm sure you're right, And I mean you're been
in this business your whole life, you know it. But
I'm sure you're right. There way more people that aren't
taking advantage of various things than are taking unfair advantage.
Speaker 2 (07:56):
Oh absolutely, way, way way more. And so often you
here something I don't want to do that I might
get order to. I'll go back to the car. Example,
that's why so well, I don't want to drive to
the grocery store because a police officer might stop me. No,
take everything to which you're legally entitled, no more and
the less. And there's so many good things that spell
out if you're entitled to something or not. And the
government is given us so many benefits. I know everybody
(08:18):
complains about the taxes, but I'm into the good part
of it, where there's so many benefits. And you take
a look at the big companies, the Fortune five hundred,
they're making billions and they pay little or no taxes.
Wealthy people have an army of people like me. They
take everything that the law provides. They just don't what
the law provides, and they're paying so much taxes. It's
(08:39):
like when I talk to a new client, I say, so,
do you think you make more or less than Apple computer?
And we all laugh and they admit they're making less
than Apple computer. But I say, guess what, you're paying
more taxes than they are. You have to utilize the
tax law. That's what it's there for.
Speaker 3 (08:53):
How many pages of tax law are there now?
Speaker 2 (08:57):
Oh? It goes on forever. And it's not just the
pages of law. Every day courts are interpreting the tax law.
So the congress people and their infinite wisdom make a
law and say you can deduct X, and then the
courts determined, well what is X? And so many times,
and you say this all the time in tax court
(09:18):
that the judges of equal rank have totally different ideas
of what X is and in real life in the trenches.
That's why the IRS settles so many cases, although most
cases settle anyway, is that it's called the hazards of
litigation where there's so many cases say yes, you can
do that, so many cases say no, you can't. So
(09:39):
you take a percentage and you'll go home.
Speaker 3 (09:41):
When when should someone call you?
Speaker 1 (09:43):
Like if you get a well, the if I'm in
trouble with the IRS, will they send me a letter
where they call me? How will I even find out?
And then what's the first thing I should do?
Speaker 2 (09:53):
In civil case? Normally they'll send you a letter, And
the first thing you should do is go ahead and
get profess because an audit is like a heavyweight boxing match.
Nobody but another heavyweight better climb in that ring. On
the criminal side, normally they send two agents with gold
badges and guns that knock on your door. You have
(10:14):
the right to remain silent. You should exercise that.
Speaker 1 (10:17):
But as you've been saying from your years we've been
talking to you, don't throw away those letters from the IRS.
Speaker 3 (10:23):
And hope it will go away.
Speaker 2 (10:26):
As a practical matter. Over the years, it's amazing how
many people would walk into my office literally with a
stack of unopened the envelopes and say I couldn't bear
to open them. I have to literally open the letter
and the office and tell a client what was going on.
And here's one of the bad parts about that. You
have so many rights. For example, there's something let's say
(10:49):
you have some taxes and you can't pay it. One
of the rights you have is a very powerful right.
It's called the collection do process hearing. And what happens
with that is that if you disagree with the guy
who's trying to collect from you, you can go right
over his head to have this special hearing. The IRS
can't collect from you pending that you have the right
to go to tax court if the hearing officer abuses
(11:13):
his discretion. You have so many rights. It's a great thing.
But you only have thirty days from the date of
the letter to exercises. What a crying shane. If you
have an absolute, really really really helpful right and you
waive it, you throw it out because you didn't open
an envelope. Open the envelope and if you can't bear though,
(11:33):
if the psychological thing, and if you can't bear to
open the envelope the day you get it, call somebody
and let him or her open the envelope for you.
We we've done it for lots of clients.
Speaker 1 (11:43):
Hey, we're out of time, but that is a good
note to leave on. In one frale, you get the
letter from the irs, open it, deal with it right away,
because it's only to your advantage. And if, and again,
if you can't open it, take it to Stephen or
someone like Stephen Moscow. It's lop dot COM's website. Thank you, Steven,
and another big tax log.
Speaker 3 (12:01):
It's passed. We'll talk to you to figure out what
it means.
Speaker 2 (12:03):
Thanks so much. I had a great time as well,
you bet, Thank you Armstrong and Getty.
Hosts And Creators
Joe Getty
Jack Armstrong
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