What You Don’t Want to Learn From Wesley Snipes About Your Taxes
– and –
12 Simple Rules to Make Life Better Starting Today

April 15th arrives in a couple of months. Don’t bother reminding Wesley Snipes. He thinks he doesn’t have to pay income tax.

If you didn’t know, Snipes is a Hollywood actor. Someone convinced him he doesn’t have to pay his income taxes. We’ve seen the argument: income taxes on corporations are legal; income taxes on individuals aren’t. You could even say it’s a debatable point – at least among friends. But I wouldn’t debate the IRS.

Unfortunately for Mr. Snipes, that’s just what he’s done. He even wants a refund of all the taxes he paid in the past. The government’s reaction to Mr. Snipes: They want his scalp – back taxes, penalties, maybe even prison. (Click here for more on taxes: Why waiting for April 15th may be too late to save money on your 2007 taxes.)

While Mr. Snipes was arguably treating the impossible as possible, the New York Giants were doing the same – only with much better results. We all watched or read the story of their surprising drive to the Super Bowl. Remember the overwhelming odds against beating the invincible New England Patriots? Then came the Giants’ dramatic, “impossible” victory on February 3rd.

Most of us aren’t looking to do the impossible, much less teach the IRS a lesson. We live our lives in “ordinary” time. We wake up each morning to “another day.”

Don’t get me wrong. We’ve all got those moments when we reach for the brass ring. If you’re the champion of a great cause, get out there and make a difference. Or maybe you’ve got a dream lurking deep inside your brain – the one about living the life of the travel writer visiting far-flung, exotic places and getting paid to do it. Go for it.

But just as we don’t eat gourmet meals three times a day, these “gourmet moments” don’t occupy all our waking hours. For the most part, we live in those normal, relatively uneventful minutes and hours that fill each day. If you sleep 8 hours, you’ve got 16 hours a day of this ordinary time. Live an average lifetime of 80 years and you’ve got somewhere north of 467,000 of those hours to fill up.

So what are you going to do with all that time? I mean besides climbing to the top of the corporate ladder, starting the next Microsoft, or saving the world’s rainforests.

Let’s start with tomorrow morning. You know, when the alarm goes off and you’re facing the next 16 hours.

Warning: Keep your eyes on the road and your hands on the wheel

You wouldn’t think of driving without following those basic rules of the road. So how about trying these “Rules to Live By”* for all that “ordinary time” we face every day:

1. Be cheerful.

2. Praise good work and encourage others.

3. If you don’t know how to do something, ask.

4. If you start something, finish it.

5. If you open something, close it.

6. If you turn it on, turn it off.

7. If you break it, fix it (or find someone who can).

8. If you borrow or move something, return it.

9. If you make a mess, clean it up (immediately).

10. You can disagree without being disagreeable.

11. Do your best.

12. Mind your own business.

What do you think? My wife posted them in our home. #9 has special meaning for us. (We’ve got all boys, so perhaps you’ll understand why.) My own favorite is #12.

You may be surprised how often you find one of these rules broken. But – here’s the good part – they’re pretty easy to fix. You may even find some of your folks are pretty good at one or two of them.

Why not try this: Print and post somewhere for all to see. Life may just get a little better.

Rick

P.S. – If you know someone whose life, financial or otherwise, could be better, feel free to forward this email. Or they can always call me at 914-761-3237.

*The Waiter and Waitress and Waitstaff Training Handbook, p. 241

Why Waiting for April 15th May Be Too Late
to Save Money on Your 2007 Taxes

We’ll start seeing lots of tax advice and tax-saving tips around this time of year. The irony is it’s probably too late to do much about your 2007 tax bill. For the most part, the question of whether you’ll get a refund or have to write a big check is a done deal.

Which is it for you: refund check or write a check? If you’re one of those rare people who actually practices “Tax Planning,” you know the answer. Even better you’ll know you’ve done all you can to save on taxes.

If you haven’t done any real tax planning, you’ve probably let money slip through your fingers into the sharp-toothed open jaws of those IRS sharks swimming around you, ready to chomp.

So what exactly is tax planning? Here’s a simple definition: Considering the tax implications of individual or business decisions throughout the year, usually with the goal of minimizing the tax liability. (from InvestorWords.com)

Notice it says “throughout the year” not after the year is over.

Tax planning means looking ahead. Doing your 2007 taxes now and filing them by April 15th is looking behind. Isn’t that what most of us do when we do our taxes? Look behind?

Maybe your story’s a bit like mine used to be. Sometime around the end of January, beginning of February, you get your W-2 from your employer and all your 1099’s from the bank and your investment accounts. If you’re reasonably organized, you’ve got a file with the rest of your tax stuff saved up from last year – receipts, slips of paper with notes on them, whatever. Now you’re ready to do your taxes.

So you call your accountant (or maybe you do them yourself), cross your fingers and hope for a refund – the bigger the better. If there’s no refund, or, worse, you owe money, you might even get mad at the accountant. Why can’t he “find” more deductions? (As if it’s the accountant’s fault that you owe taxes.)

After some back and forth, you’re ready to file with the IRS (unless you’re like Wesley Snipes – if you missed it, see our February Letter). If you’ve joined the 21st Century, you file electronically. This way you avoid the photocopying, going to the post office, waiting on line, sending it certified mail, and all that other fun stuff we used to do.

None of this is tax planning. Your tax planning for 2007 took place last year. You were done tax planning for 2007 on December 31, 2007. Right now you’re working with 2008.

“But wait,” you say, “doesn’t my accountant find these deductions that lower my taxes every year. Isn’t that tax planning?”

Sure, your accountant might find a deduction here and there that you might have missed on your own. (Turbo-tax will come up with them too.) But, again, you’re looking back. Your accountant is recording history. You’re working with what’s already done. (If your accountant “makes things up” to “find” deductions that lower your taxes, think about switching to someone else. One good rule in life is “Don’t mess with the IRS.”)

Is tax planning a lot of work? Does it cost a lot? Not if you consider what you’re already doing.

Americans will shell out $325 billion this year in federal tax compliance costs, according to the Tax Foundation, a non-partisan tax research group in Washington.

As for work, the National Taxpayer’s Union points out that instructions for filing Form 1040, the federal tax form, number 143 pages. That’s three times the number in 1985, the year before taxes were “simplified.”

If you need more than the basic form, the IRS has 195 different tax forms with more than1,000 pages of related publications and instructions.

According to the IRS’s own estimates, households and businesses spent a combined 6.6 billionhours last year filling out tax forms.

Here’s the point. You’re already spending time and money to get your taxes done. There’s a good to excellent chance you’re not saving as much on taxes as someone who really practices tax planning. When something costs a little more, but you save a whole heck-of-a-lot more, the money’s worth it, right?

Here are a couple of reasonably informative websites where you can get some specifics on tax planning (These will help you with your 2008 taxes. Remember, we’re looking forward now, not backward):

http://www.360financialliteracy.org/Financial+Topics/Tax+Planning/
http://www.finance.cch.com/text/c60s00d010.asp

At Lighthouse, tax planning is just one part of our comprehensive wealth management process. If you want to learn more, give me a call at 914-761-3237, or you can email me at: