Another repeat from last year, but with a better morale than before. Here’s what I wrote last year:
Let’s thank Michael Graham of Queens, New York for coming up with this gem. Mr. Graham decided to file phony tax returns with the IRS. He used consecutive social security numbers on his tax returns.
He did get one tax refund through the system and collected $900. However, the other 1,799 returns were caught by the IRS and he didn’t get the $1.6 million he attempted to collect. He did find his way to court, though….
I strongly suggest that you do not try anything like this. The IRS and state tax agencies do have systems in place to catch bozos who attempt crimes like this. Instead of trying to bilk the system, ask your tax preparer about legitimate deductions that are available for you to take. The regular IRA allows you to deduct $4000 ($5000 if you’re 50 or older) from your income (if you’re eligible). You have until April 15th to make your contributions.
And if you’re self-employed, you may be able to contribute to a SEP IRA. You have until your return is timely filed, including extensions, to contribute to a SEP IRA. You can contribute 25% of your net income up to a maximum of $45,000 to a SEP. This is one tax deduction that’s available until October 15th if you file an extension.
Amazingly, some who are wealthy scoff at taking this deduction. Both Democratic presidential candidates, Hillary Clinton and Barack Obama, had significant self-employment income over the past few years and put none of it in a SEP IRA. Given their tax brackets, they would save somewhere between $15,000 and $30,000 in taxes and have some savings for retirement. If you’re self-employed consider that the government is literally going to pay one-third of your retirement plan if you contribute to a SEP (depending, of course, on your tax bracket). This is a deduction you should absolutely discuss with your tax professional.
Phony tax returns will likely lead you to a stint at ClubFed (where Mr. Graham went). We recommend the IRA or SEP IRA over ClubFed….
Tags: BozoTaxTips