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Some Tax Humor Legal Tax Angles: How to Save Taxes Without Going to Jail The following are a collection of some of the tongue-in-cheek observations about the U.S. system of taxation by Vern Jacobs It seems there is something fundamentally wrong when so many experts are so profitably employed at protecting our sovereign citizens from our civil servants. Economists are fond of saying that tax accountants and tax lawyers don't perform any kind of productive function for the economy. If the economists would agree that we should eliminate the income tax and the estate tax, then I’ll find some "productive" way to make a living. Meanwhile, every dollar that my clients and readers don't send to the bottomless pit in Washington, DC is a dollar better used. We could solve our energy problem if we could just find a way to harness all the energy that's spent in filling out tax forms. Just when I think I'm sitting in the lap of luxury, Uncle Sam stands up with his hand out. The only people I've ever met who would like to pay more taxes are those who aren't making any money. The taxes you pay may be part of the price we bear to live in a civilized society, as it states on the top of the U.S. Treasury Department building in Washington, D.C. The taxes I pay are the plunder of an avaricious mob. I like the bumper sticker that said, “Born free. Taxed to Death” Do you think we could get rid of the income tax by getting the F.D.A. to declare that it's a cancerous growth? The only thing that you can be sure about the weather or the tax laws is that they will change.
Our founding fathers didn't know how good they had it. If they thought taxation without representation was bad, they would be appalled to see how much worse it can be with it. Most of the major religions of the world that ask their members to tithe only ask for 10% of their member's income. If God only needs 10%, why does the government need 50%? Politicians are philanthropists who want to give your money to other people. Some of our politicians have the strange notion that we can use the tax laws to solve every sort of social problem. They haven't discovered that you can't bribe someone to be honest. With high tax rates, tax loopholes are essential. Do you think your elected representatives are too dumb to leave themselves without some loopholes to play with? The only effective way to eliminate tax loopholes is to eliminate politicians. When the government moves money from one pocket to another, there is usually a carrying charge. Those with the least votes will pay the most taxes. A lot of our tax loopholes are created as tax incentives to solve social or economic problems that were caused by government. Other politicians have discovered that tax incentives are an effective way to get people to do things that are otherwise economically stupid. Using the tax laws to stimulate the economy does create a lot of jobs for tax accountants and tax lawyers. The folks in Congress can't seem to understand that when they try to stimulate the economy with succulent tax morsels, they have to let someone get a little fat. Simultaneous efforts to stimulate the economy with tax incentives while trying to close up tax loopholes is like heating water in a tea kettle to make it boil and putting a cork in the spout to shut off the whistle. During the past few years, the U.S. Congress has discovered a form of perpetual motion. They call it “tax reform”. A tax reformer is someone who tries to cut his own taxes by eliminating other peoples' loopholes. Every time the Congress passes a new bill to simplify the the tax laws, I get a big increase in my consulting business. Everyone is pushing and pulling on the tax system to use it to manipulate other people to do what they ought to. Even the politicians know that corporations don't pay taxes. The taxes are paid by the consumers who buy the products produced by the corporations. But the politicians do know that corporations don't vote. The tax laws do strange things to our social values. It used to be that the tax law favored married couples and rich people had to get married in order to save taxes. Then the single people started raising a fuss, so the Congress changed the law. Now it's cheaper to for two working people to stay single and just live together. With a little bit of foresight, Congress could have called that bit of wisdom, “The Common Law Subsidy Act.” The real problem with the tax system is that we all want to eliminate other peoples' loopholes without giving up any of our own tax incentives. Those who say the rich people should be glad to pay half their income for taxes obviously aren't rich. A lot of politicians say they want a simple tax law. But the problem with a simple law is that it's democratic. It hurts everyone - including the politicians. Taxes are the opiate of the politicians. If we really want to simplify the tax law, we should start by making the Congress tax a five year vacation. If the tax laws were too complicated for Einstein to figure out, what hope is there for the rest of us? There are a lot of politicians who say they want to simplify the tax laws, but every time they try, they just create more jobs for tax advisors. The criminal laws provide far greater protection for our liberty than the tax laws do for our property. But if the government can take away all of your property, do we really have any liberty?
The good news for taxpayers is that the smartest tax experts don't work for the IRS. They were smart enough to realize that taxpayers will pay more to keep their money than the government will pay to collect it. The modern day “hired gun” wears an eyeshade and carries a calculator in their pocket. Only the rich can afford to hire a tax expert. A middle class taxpayer is too poor to hire a tax expert and too rich for the sympathy of the tax reformers. Poor people don't need tax experts because the most effective way to avoid taxes is to stop having any income. Hiring a tax expert isn't always a help. If you give the same problem to three tax experts, you are likely to get at least six different answers. It's almost as hard to find a dependable tax advisor as it to find a trustworthy auto mechanic. The best tax saving ideas often come from the hard pressed taxpayer rather than from their highly paid tax experts. There are two kinds of tax advisors. Those who are part of the problem and those who are part of the solution. The public isn't really aware that tax practitioners are a lot like preachers. They all interpret their "bible" a little differently from each other. A tax expert is someone who learns more and more about less and less until they eventually learn everything there is to know about .... nothing. A tax generalist is someone who learns less and less about more and more until they eventually know absolutely nothing about everything. Then they become financial planners. Someone once said that most tax accountants are former actuaries who lost their sense of humor. A long time ago, I discovered that I couldn't make a living as stand up comic, so I went to the opposite extreme and became a tax accountant. A few years ago, I kept trying to find some funny stories about taxes and tried them out on my wife, who never laughed. One day, she said, “Vernon. Taxes aren't funny. .... And neither are you”. Standing up in front of a group of people and trying to explain the tax law is a good way to become a social outcast. But listening to someone talk about taxes is almost as interesting as watching television commercials about personal hygiene. If you think it's hard to listen to someone explaining the tax law, you should try reading it sometime. Reading the Internal Revenue Code is better than Sominex by two to one. Even tax professionals have a hard time reading the tax law. Sometimes it's hard to tell if a tax advisor is asleep until you catch them when they are awake. The comic book character “Sad Sack” was a former “Pollyanna” who spent too much time reading tax publications.
The IRS has done an outstanding job of terrorizing the U.S. taxpayers into voluntarily paying their taxes. No one has ever experienced sheer terror like the taxpayer who received a past due notice from the IRS computer with their social security number in the box marked, “Past Due”. Have you seen the bumper sticker that says, “Abolish organized crime. Eliminate the IRS.” The tax laws giveth, and the regulations taketh away. When Congress writes the tax laws, they often leave it to the IRS to “fill in the details’ with specific instructions. That's like asking a hungry lion to protect the sheep from the wolves. Sometimes it seems as if the IRS is trying to protect the public from the wanton generosity of the Congress. The IRS has found a way to get blood from a turnip. They call it a “taxpayer compliance measurement audit”. An IRS agent contacted a preacher to verify a parishioner's church contributions and asked, “Did Mr. Smith give $6,000 to your church?” The father said, “He will, son. He will”. Wouldn't it be nice if you could own a large share of every business in the country, with no work or investment - just like the IRS? One out of about 200 taxpayers is audited each year. Could that have anything to do with the nearly equal number of heart attacks each year? For those who have ever lived on a farm, it's appropriate that the IRS changed their name from the Internal Revenue Bureau to the Internal Revenue Service. After all, what they do to taxpayers is a lot like like what the bulls do when they are "servicing" the herd. Some people don't know the difference between tax avoidance and tax evasion. It's really very simple. The difference is about $10,000 and five years in jail. The IRS seems to believe that everything you own is borrowed - from them. Savings up deductions in case you might be audited is like letting a shark nibble on your arm in the hope that it will get full and go away. Ignorance of the law is an excuse from criminal charges. If you are ever confronted by an IRS special agent, the safest thing to say is, “No kidding? I didn't know that.”
The poor mans’ tax shelter is sometimes called tax evasion. Only a fool will cheat on his taxes when there are so many legal loopholes available. The more complicated the tax laws, the more tax loopholes there will be. A tax loophole is something someone else is doing to save taxes. There are three kinds of taxpayers. Those who know how to save taxes, those who just wish they could save taxes and those who still don't know it's possible to save taxes. What the seller calls a capital gain, the buyer calls inflation. A lot of people like to discover new loopholes when they are preparing their tax return. That's what I call the “river dredging” method of tax planning. Trying to save taxes after the year is over is like trying to put toothpaste back in the tube. A lot more deductions have been lost for a lack of courage than for a lack of knowledge. Taxpayers have a lot in common with turtles. We both have to stick our neck out to get ahead. Those who attempt to reduce their taxes may not always succeed, but those don't will not. Those who are convinced they can't legally reduce their taxes will usually be right. Timid taxpayers always give the benefit of the doubt to the IRS. The aggressive taxpayer follows the rule, “When in doubt, deduct it”. Have you heard of the “audit lottery”? It's a game where 99.5% of the people are winners. If the IRS pulls your number, you lose. Everyone else is a winner. A few years ago, a lot of taxpayers invested in tax shelters to save taxes. The biggest problem with most tax shelters is that they leaked. Why is it that those who are only concerned about how big their tax loss will be are surprised when their tax loss investment turns into a real loss? To the best of my knowledge, these are original quotations, or substantial modifications of well known quotes. I apologize if I may have inadvertently duplicated a quotation by someone else. Vern Jacobs Copyright, 2003 |
Books and Services by Vern Jacobs
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