Toph CPA - July 2020

Toph CPA - July 2020

JULY/AUGUST 2020 VOLUME 4, ISSUE 7

T O P H ’ S TAX RESOLUT ION T I M E S

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SHOULD YOU PAY THE IRS EARLY OR WAIT? A Matter of Timing

You never know what life is going to throw at you, whether it’s a pandemic, an illness, or job loss.

When you owe money to the IRS, there are times when it might make sense to hold on to your money until the due date. You may have the money ready to go, but should anything come up between now and when your taxes are due, having “extra” money on hand can be a lifesaver.

Once the IRS has your money, they are not going to refund it unless you have a valid reason.

Let’s say you do have money ready to go to the IRS. What should you do with it? First and foremost, you should set it aside. Assume that everything is going according to plan and that you will pay the IRS that amount. Keep it in a separate account; you want to have access to it in the event of an emergency, but you don’t want to keep it close enough that you spend it on anything else. To put it into context, I had a client who owed about $100,000 before the pandemic. He wanted to get it taken care of and not worry about it. As a result, he paid his tax bill in February rather than waiting for the April 15 due date — which eventually became the July 15 due date. Then the pandemic happened. His cash flow dried up, and he had little money left to pay the bills that started to arrive during the pandemic. While there were assistance programs available, he found himself in a very tough situation. Hindsight is 20/20, as they say. This story is a cautionary tale for everyone who may find themselves in a similar situation. Keeping your money in your hands is almost like an insurance policy. You have that money if your income shrinks, your cash flow dries up, your spouse gets sick, and so on. That said, in the event that you need to use those funds for an emergency, there are steps you can take to find a solution to the situation. For example, you may be able to negotiate with the IRS if you experience hardship and are unable to pay by the deadline.

For some people who find themselves in a hardship or emergency situation, it may make more sense to negotiate with the IRS later, rather than trying to pay in the immediate future. Your hardship is likely more important than paying the IRS on time. No matter the situation, however, you should not avoid paying the IRS. It’s all about timing and having a strategy in place. If you don’t have a reason to pay the IRS early, then keep your money until the deadline. But once the deadline arrives, make sure you pay as you had planned.

–Toph Sheldon

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Should You Take Money From Your Retirement Before You Retire? Tax Faux Pas

Traditionally, when an individual takes money out of their retirement accounts before they are eligible, they get hit with steep penalties and taxes. However, in recent months, this has changed. In response to the COVID-19 crisis, Congress enacted legislation to temporarily remove these taxations and penalties from retirement accounts. Right now, individual taxpayers can take up to $100,000 out of their retirement accounts without worrying about any taxes or penalties. However, there is one thing to keep in mind: The money must be repaid within three years. For most people who take advantage of this, it’s like taking a tax-free loan from your future self. There is a potential disadvantage in taking money out of your retirement accounts. Once it’s out of the account, it’s no longer working for you. Any benefit you would have gotten from it being invested simply isn’t there. In the short term, it might not be a big deal, but in the long term, as markets recover, you could be losing out on gains you would have access to once you retire. The rules have also been relaxed for employer-sponsored retirement plans, such as 401(k)s. Normally, you cannot touch your 401(k) money until you separate from that employer, unless you want to be subject to a huge penalty. Now, if your employer has relaxed the rules, then you can access that money without those major fees and penalties. Being able to take money out of your retirement accounts without penalties gives people a lot of flexibility, especially if their income has taken a hit due to the pandemic. Some people have taken this money and used it to pay off their mortgage. This frees up money that would have otherwise gone to their monthly mortgage payments and gives them the full security of owning their home outright. They will still have to deal with repaying money to their retirement accounts, but the short-term security can be worth it for some people. Every situation is different. If you have other sources of money, then it may make more sense to use that before going after your retirement money. For most people, taking retirement money before eligibility might be the best strategy. Talk to both your financial advisor and CPA to determine your best next steps.

Selling Remotely? Don’t Lose Your Personality! 5 Tricks to Enhance Your Charisma on Video Odds are if you’re a successful salesperson, you’ve cultivated a “sales personality” crucial to closing your deals. However, if you’re used to working face to face, it can be a challenge to translate your charismatic persona to the screen when you need to sell remotely. Video calls are a step in the right direction because they reveal body language and facial expressions, but they’re still not ideal. To make sure your charisma pops, try these handy tricks: 1. Secure a top-quality connection. Nothing kills the mood on a video call faster than a disintegrating picture or crackling audio. That’s why it’s crucial to test your mic, speakers, camera, and platform thoroughly before you use them with clients. If they can’t hear or see you, your personality doesn’t stand a chance. 2. Set your stage. Every sale is a performance. Is there an uncluttered, calming backdrop behind you? Are you the right distance from the audience (the camera)? Does your costume fit the part? When all of these things are done right, your personality will take center stage without unnecessary or annoying distractions. 3. Exaggerate like an actor. According to Psychology Today, posture, gestures, and facial expressions are key to communicating well over video. That means you need to be focused and constantly aware of them. Amp up your positive reactions, like eye contact with the camera, affirmative nods, and leaning in to listen, and tone down your gestures to avoid smacking a crucial piece of tech. 4. Ask questions and listen actively. A key part of a great sales persona is showing genuine interest in others according to Inc. magazine. When you can’t read the mood of a room, asking questions and listening closely will help you gauge the temperature. A subtle head tilt and hum of acknowledgment will help you come across as more empathetic and inquisitive. 5. Master the mute button. If your neighbor starts the lawnmower or your dog starts barking, it pays to be quick on the mute button. Having fewer distractions means your charisma is more likely to shine. With these strategies in your back pocket, your sales mojo will continue flowing, even from a distance. Good luck and happy videoconferencing!

–Toph Sheldon

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It’s Important to Have Things to Look Forward To

Sometimes, it feels that the past few months have been one long, weird staycation. We’ve been at home with the kids, and we’ve done everything in the book to keep them occupied. We’ve done a lot of hiking, neighborhood walks, and family activities. But as things slowly return to somewhat normal, we hope to start doing other activities we haven’t been able to do for months, like visiting the zoo. I also want to visit my family in New York. The kids have been asking to see family and friends, and we may finally be able to start doing that. I certainly miss taking the kids to the playground and going on play dates so they can get rid of all their energy before we return home.

But I’ve had the kids talk about what they want to do in the coming months. We’ve made it a fun activity. I had them cut up pieces of paper, and then our oldest, Mac, wrote down the things they all wanted to do. Or at least, what the three oldest — Mac, Rex, and Roz — wanted to do. Baby Tess keeps her wants pretty simple.

After they wrote down all their ideas, we put them into a big bucket. Every few days or so, we’ll pick something out of the bucket and do it, if we can. I’m sure we’ll be working our way through the bucket for some time.

As things progressively get closer to something resembling normal, we’re looking forward to going back to the library and the gym. We’re looking forward to getting together with friends and family. We’re looking forward to getting back into our routines. Fingers crossed!

The kids have also been asking to go to the pool. In summer, going to the pool is just about the perfect activity for kids, but this year, public pools are going to be very different. Some pools might not even open this year, which means we’ll have to get creative. It might mean taking a family vacation and staying somewhere with a pool. It’s still hard to say how things will play out.

– Ashley Sheldon

Spicy Salmon Cucumber Bites

TAKE A BREAK

There’s nothing quite like a refreshing treat on a warm summer’s day. Mix up this cool appetizer for your new favorite snack.

Ingredients

• • • • • • • • •

1/4 cup paleo mayonnaise 1/4 tsp smoked paprika 1/4 tsp Tabasco, or to taste 1/2 lb salmon, cooked 1 tbsp minced shallots 1 tbsp chopped chives Salt and pepper, to taste

1 English cucumber, peeled 4 cherry tomatoes, quartered for garnish

Directions

1. In a small bowl, mix together mayonnaise, paprika, and Tabasco. 2. Flake the salmon into large bite-size pieces. 3. Add the salmon, shallots, chives, salt, and pepper to the Tabasco mixture and combine. 4. Cut the cucumber into 3/4-inch slices. 5. Using a melon-baller, scoop out the center of each cucumber slice but leave the bottom fully intact so the filling doesn’t fall through. 6. Divide the salmon mixture and put dollops into each cucumber slice. 7. Garnish with cherry tomato.

Solution on Page 4

Inspired by NomNomPaleo.com

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Cincinnati Tax Resolution Powered by Toph Sheldon 9200 Montgomery Rd., Ste. 7B Cincinnati, OH 45242

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INSIDE 1

Should You Pay the IRS Early or Wait?

2

5 Secrets to Selling on Video

Is It a Mistake to Take Money From Your Retirement Accounts Before Retirement?

3

It’s Important to Have Things to Look Forward To

Spicy Salmon Cucumber Bites

4

The IRS Goes After the Beanie Babies Creator

Toph’s Tax Nightmares

Beanie Babies, Offshore Accounts, and Tax Evasion, Oh My!

In the 1990s, one man had a huge impact on pop culture — or rather, his products had a huge impact on pop culture. Today, most people don’t know his name, but they still remember what he created: Beanie Babies. H. Ty Warner first developed Beanie Babies in the ‘80s, but it wasn’t until the mid-90s that Beanie Babies really took off. In fact, they became one of the defining toys of the decade. At one point, there were countless price guides and websites for devoted adult collectors. But, as with every fad, the madness died down. You can still find Beanie Babies today, but they’re a different product and don’t have the following they once had.

But the account was discovered, and the IRS was not happy. He owed the federal government big, so the IRS charged him with tax evasion. They wanted to sentence Warner to prison, but his lawyers had an ace up their sleeve. They used the Olenicoff defense. The Olenicoff defense is named after Igor Olenicoff, a California- based real estate developer and billionaire. Like Warner, Olenicoff had secret offshore accounts that held hundreds of millions of dollars. But when the accounts were discovered, the real estate developer did not receive prison time. Instead he was sentenced for tax evasion and received two years’ probation, community service, and a fine. Warner’s lawyers used Olenicoff’s treatment of his case to their advantage, and they successfully reduced Warner’s sentence to just two years of probation and community service. He also paid fines and back taxes totaling $53 million. Of course, there was more to the story than a useful defense. It also helped that Warner has a philanthropic background. Over the years, he had donated millions of dollars (and countless toys) to various organizations. While Warner may have been a villain in the eyes of the IRS, he had been a hero to many others.

Back when Beanie Babies were flying off store shelves, Warner became a very wealthy man. As it turned out, in 1996, Warner began funneling money to a secret offshore bank account with the intention of avoiding taxes on his newfound wealth. At one point in time, the account held $107 million.

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WHEN THE IRS COMES KNOCKIN’ ... LET US ANSWER THE DOOR!