The taxman cometh on April 17, but not everyone is having nightmares about W-2 form–wielding taxmen descending on their bank accounts. There are calm ones amongst us.
They are known as accountants.
And, oh, the stories they can tell. That’s why Brooklyn Paper reporter Dana Rubinstein called up her accountant, former Brooklynite Jonathan Gassman, who has been in the tax business for 21 years.
Q: How you doing this tax season, John?
A: The freaks come out at night. All the nuts are calling at the last minute. I have, like, 50 emails in my inbox. Why do they wait until the last minute?
Q: Why do they wait until the last minute?
A: People are scared. People hate doing taxes. Do you like going to a dentist? It’s a pain. It’s something they have to do. ... [They say] “I just don’t like dealing with money. It scares me.”
Q: Do you like dealing with money?
A: I love dealing with money. It’s all about helping people.
Q: So what’s the dumbest question you have ever been asked (that didn’t come from me)?
A: I don’t think there’s ever a dumb question. But we had a client last year, a senior executive from a very well-known advertising agency, who hadn’t filed taxes in three years. The government told him he owed more than a million dollars. And you know what, by the time we were done with him, he was getting refunds.
Q: How often do people really get audited?
A: There are three reasons people get audited: One, your tax return sticks out like a sore thumb, like you’re claiming 15 children. Boy, that’s a lot of kids to have. Or if you’re giving more than 50 percent of your income to charity. Next, I call it “eeny meeny miney mo.” Audits are sometimes just a random sample of the population. Nothing you could do to hide from that. Reason number three: the whistle-blower syndrome. You see this with a lot with disgruntled employees. The bookkeeper who leaves and says, “I know you cheat on your taxes.” Or ex-spouses who send a letter to the government and say, “I know my husband has offshore bank accounts, or unreported income.” By the way, if you do that, the government will pay you up to 10 percent of what they collect.
Q: What’s the craziest audit you’ve ever taken part in?
A: We had a client that had an audit and they tried to deduct everything. Oh, a gold Rolex watch, a fur coat. They said that the fur coat was a rug for the office. And the Rolex watch was a clock for the office. They got away with it. We used to have people try to deduct the cost of their children’s college.
Q: Any last minute tips for those who’ve waited until the 11th hour?
A: If you don’t have the money to pay, file your return anyway. They will hit you with even bigger penalties for not filing on time. You can work out a payment arrangement, or a schedule. I just had an attorney who makes $600,000, yet doesn’t have a pot to pee in. He spends it all. He hasn’t paid a dime in taxes in two years, And the government is after him. But you know what? He filed his return on time.
Q: Give me some more tips, Jonathan.
A: I’m talking to a self-employed client this morning, and she owes money, and she’s bent out of shape. I can’t bump up her expenses anymore. She said, “What else you have up your sleeve, Jonathan?” I had her open an SEP [retirement account]. A self-employed person has until the filing deadline to fund a retirement plan. You can put 20 percent of your net income into it. So, she will be able to put away about $14,000, which will wipe out the entire tax bill she would have had. She’ll owe nothing.
Q: Not bad. What else?
A: Are you paying me for this advice? Anyway, if you’re eligible to contribute to an IRA, you should definitely do it, even if it’s non-deductible! In 2010, you can convert your traditional non-deductible IRA to a Roth IRA. You’ll pay tax on that conversion, but then it will grow tax free! Let’s assume for the moment that someone puts $4,000 into a non-deductible IRA and when they retire there’s $40,000 in the IRA. If they take the entire $40,000 out, it tax free. This is huge. And so many people are just unaware of it.
Q: Do you think Americans are overtaxed?
A: Absolutely, positively not. Foreign tax rates are significantly higher. … But I will say that if you live in Brooklyn, you’re paying the highest rates of taxes, because you have the federal tax, Social Security tax, New York State tax, New York City tax. That’s a lot of tax. Then you add the sales tax, the gasoline tax, the cigarette tax. So if you break it down, we are taxed very heavily. But not as heavily as foreigners.
©2007 Community News Group
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