So that if you have a Corporation, Partnership and
LLC all of these we're going to touch on all of these at some point in some
show during the course over the next few weeks. Now back to a little bit more
about who I am as Marcelino Dodge and why I'm doing this show and why I am
doing this show. One is the fact that I just love taxes. Frankly. I've been
doing it income taxes, since the 2000 tax season.
It's been a great time I like solving problems for
people, I like looking for the answer, I like looking for that tax deduction.
In order to become an enrolled agent back when I took the test with the IRS
initially in 2005, it's been altered since then. But at that time now, it was
four tests, four different types of tests that the IRS administered at that
time. And they were all written tests that you went to in this case.
I went up to Denver, and spent two days in Denver, a
morning and an afternoon over two days taking these tests on various tax
objects, from individual to business, to ethics to just general tax law, and so
on. And they were pretty cumbersome at the time anyway, got through those and
passed the background checks that the IRS does. So I had the privilege of being
an enrolled agent since the spring of 2006.
And since that time, I've taken a lot of continuing
education courses, I take many, many hours, probably about 40 to 50 hours a
year, in education credits, just to keep up with all the changes that happen.
And especially after the Tax Cuts and Jobs Act in 2017. That was a busy season
going into that next tax season. So certainly, we covered a lot and we continue
to do so. Now something interesting that I find with me is the fact that when
it comes to most tax people that going to do taxes, that's like the first thing
they do when they come out of college.
Well, frankly, for me, that is not the case. In
fact, I was in other businesses for several years, after I got out of college.
And after I got out of college, graduating with a bachelor's degree of no things,
Radio and TV, it was a Mass Communications Major I had. But I ended up doing
taxes, which is great. I've been very happy in what I do. But also in that
time, actually, before I got into taxes, I was also I had also gotten into the
investment business. I'm doing investment advisory work.
I'm also Life Insurance Licensed as well. So I can
speak authoritatively in those subjects as well. And I'm going to work those
subjects in with this business, of taxes. And with this show, because of being
together of having a unique mix of the tax background, of the life insurance,
and annuity background of the investment background to be able to work and see
how all those will work in harmony, especially when we come in and look at
things like IRAs and other plans when we look at how strategies ones can come
together to help them to save money on their taxes now and even in retirement.
How you can save money, planning ahead for
retirement? So indeed, these are some wonderful things to keep in mind. And as
I mentioned at the outset of the show, this the main focus of this show is
income taxes. Now, one thing we got to keep in mind, though, and even in the in
the show, it talks about Tax Answers Advisors, the word “tax”, it's a three
letter word. But I have never seen a word that has so much misunderstanding
behind it. Because when you say the word tax, there is any number of actual
taxes you could be talking about.
Yes, I focus in on income tax, that is my main line
of business that I do. Now, there are other taxes that we pay that often people
don't, don't realize that fall into that and one is sales taxes. Now, I'm not
going to really get into sales taxes in this show. And the one reason is, is
because of the 1000s of jurisdictions that exist in this country when it comes
to sales taxes, because not only do each state has its own sales tax, all 50
states, then you got counties, then you got municipalities, all of them have
their own version, or own rules in regards to sales tax and they have their own
percentage rates.
So in general, we're not going to talk much about
sales taxes except in the term of income tax of where their deductibility comes
in. Another area that we're going to touch on a little bit, but we're not going
to get too much into payroll taxes. But that's also that can also be another
topic that kind of relates more to income taxes, then what actually sales taxes
do what we're concerned about with payroll taxes, and we'll probably touch on a
little bit then because where it falls in with income taxes is the fact that
many employers over the years have tried to get out of paying their payroll
taxes.
Now what is of course, Payroll Taxes? Well, that is
what the employer contributes on behalf of the employee for their social
security, for their Medicare. And then oftentimes, and then depending on the
state, there could be unemployment taxes that they pay for, for this state.
Also, there's some federal unemployment tax, which is very, very small amount
compared to what you paid in most states. But the key thing to keep in mind
with payroll taxes, many employers, they play a game with that.
And that's not a good game to play. And sometimes
what they do, and many times they do is that they pay people as an independent
contractor, so that they don't withhold taxes for the people. And also so that
the person ends up paying all of their own taxes, they're own both Social
Security and Medicare taxes. Now, that is a very dangerous game, see, where
most employers fail to realize those that they think I don't want to pay these
taxes?
Well, first of all, what they got to remember is
that when it comes to payroll taxes, is that you're better off treating that
person as an employee when they are an actual employee. And the reason is, is
because if the IRS catches you, not compensating this employee properly, the
penalties they can charge are outrageous. Now, another point with that is the
fact that if you give them a 1099 as an employer, and they are really an
employee, if the person that you're having an independent contractor, but
they're really an employee, but they got a 1099.
If that person goes to a tax preparer, like me, who
then says, What's going on with this? And, and really, the, the tax preparer
really looks at it closely, and says, gets all the details from the individual.
What kind of job did you do and get learned does really, really does the
homework that a tax preparer should do in the matter. The tax preparer could
look over the IRS guidelines as far as employee classification, which is a big,
big matter with the IRS is improper employee classification.
The tax preparer like myself could look over the
circumstances and go, you know, Mr. client, you are not an independent
contractor. Why did you get a 1099? They say, well, that's just how they paid
me, which is true. It's just how they paid them. Well, I want to inform you and
advise you that because based on the circumstances you described, and based on
IRS guidelines, you are actually an employee. Now, here is your options.
And this is something that I that, sadly, I have
noticed is not done a lot in the tax industry is Alex, that they're not
explained to them. This is how, this is what you can do. As my client, these
are the options you have. I tried to explain all of the options to my clients.
And in this particular case, the option I explained to them is the fact that
this is the form we can file. This is how we file the form. And this is what
the repercussions are of filing this form. Now, usually they because there was
no withholding on the tax or withholding on it.
They end up paying some tax because they did that
Social Security, Medicare wasn't initially withheld from their check. So then
they end up paying that in but yet instead of having to pay the other half, we
put in all the employer information. And then the employer is contacted by the
IRS saying okay, what's going on here because in addition to sending that
information in, we also send in another form that says, here's all the details
of what this employee what this person did in working for this answering such
question is, who controlled the activity, who scheduled the hours, who set the
rate of pay?
And there's a whole list of questions you go through
on that form. And so what we want to do is go through that. And then as I tell
a lot of people the fact that you fill out this form, the IRS will take care of
it and I don't know how many instances I've done over the years where I have
completed the forms in this matter and the IRS has taken care of it. So payroll
taxes are a very important thing. Another show are probably touch on it more in
in more detail.
But that is one of simply stated, that is one of my
pet peeves when it comes to payroll taxes is that employers need to not shy
away from them, but they need to actually pay him because in reality, the
employer is really protecting themself by doing that, because the potential
risks that an employer is taking by not doing that properly, are just
outrageous is not a good thing. So please, I urge all employers to make sure
you a whole, you do proper payroll tax withholding.
And then another type of tax, that we're not really
going to, again, touch on very much in here, but it is one that may come up.
Now, some said, some cities, some larger cities, in particular, have their own
local income tax that's held out of a check, we're not going to really talk
much about those because those rules vary so much from municipality, to
municipality from one side of the country to the other, those are, those are
particular to the to the rules. And the same thing is true even with states.
Now, of course, I could talk about the state that
I'm in Colorado, because I'm, I've been here I've done taxes for Colorado for a
lot of years, and maybe even touch a little bit on some other states. But in
general, if you're in a state that, that I'm not too familiar with, then I'm
not going to comment on because I don't know that much about that state. But
there's always ways to find out. But anyway, we're going to not shy away. And
then the same thing comes like with local taxes.
I mean, we think about other local taxes, that one's
paid course I mentioned about the local sales taxes, you got local property
taxes, you got local excise taxes, you got other taxes that all fall in there,
we're not really going to go into those type of taxes, because once again,
those fit into an area that are more specific to a certain area, or certain
part of the country. So we're gonna mainly just sit here and we're going to look
at the federal income tax code in a way that is just what it is, what the code
is, what it actually says, not what you hear people in any anywhere say, but
what the code actually says from a very objective standpoint.
And so
that anybody who wants to and do it, right, can do it right. And certainly,
that's where we're going to focus on and we're going to touch a little bit more
when we come back on how we're going to talk about some tax planning, so that
we can pay the lowest income tax that is entirely possible.
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