In the mid 90’s, Roxie Gentzel was a tax preparer for H&R Block. She eventually came to work for The Stewardship Group as our company bookkeeper & staff accountant. Together with senior management, Roxie discussed her involvement in preparing taxes for our clients and somewhere in the 2002-03 time frame, The Stewardship Group began offering tax preparation services. We completed a total of 35 returns that inaugural year. Our tax service has grown multiple times larger and keeps us very busy through April 15th and really, year round as there are always tax issues with which our clients are dealing. This is certainly the condition of the over-regulated, bureaucratically heavy society in which we live.
When our clients pick up their returns, they have opportunity to review their tax forms to ensure accuracy, completeness, and maximum utilization of allowed deductions. Many times the conversation turns to strategy and discussing ways to make the most of the tax code to minimize taxation. This is a good thing to do and one which has been held up by the courts. For instance, Judge Learned Hand in the case, Commissioner vs. Newman, in 1947 stated: “Over and over again, courts have said there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions.”
You don’t hear that sentiment much any longer. It was Bill Clinton who said, “There's a lot of evidence you can sell people on tax increases if they think it's an investment.” Taxes are not investments, but forced exactions! Don’t be fooled. It breaks our hearts to inform a young, industrious lady that her efforts cleaning houses is now costing her roughly 17% of her income due to self-employment and personal income tax combined. Who’s better able to invest that money? The young woman who has used her hard earnings to go on mission trips to underprivileged countries or our over bloated government? I think you know the answer.
From the taxfoundation.org website: Americans collectively spent more on taxes in 2017 than on food, clothing, and housing combined! The Foundation has coined a term: Tax Freedom Day. This is the day when, as a whole, we will have earned enough money to pay our total tax bill for the entire year. This takes into account Federal, State, and Local taxes. For Pennsylvanians, 2018’s Tax Freedom Day is April 23rd (113 days into the year), if we add Federal borrowing, which represents future taxes owed, the date moves to May 7th!
Still feel like you’re living in the land of the free? This is why tax planning is now more important than ever. Can you shave a day or two off your labors for the government by proper planning? I suspect so. There is nothing wrong in doing that. While we are admonished by the Master Carpenter from Galilee to “Give unto Caesar what is Caesar’s”, we would add, “and not one penny more!” (We think He would also agree with that).
This same sentiment was expressed by Justice Louis D Brandeis, US Supreme Court Justice, 1916-1939 when he stated:
“I live in Alexandria, Virginia. Near the Supreme Court chamber is a toll bridge across the Potomac. When in a rush, I pay the dollar toll and get home early. However, I usually drive outside the downtown section of the city and cross the Potomac on a free bridge.
If I went over the toll bridge and through the barrier without paying the toll, I would be committing tax evasion. If, however, I drive the extra mile and drive outside the city of Washington to the free bridge, I am using a legitimate logical and suitable method of tax avoidance.
For my tax evasion, I should be punished. For my tax avoidance, I should be commended. The tragedy of life today is that so few people know that the free bridge even exists.”
Each of us needs to learn what free bridges are available for us to use when it comes to our own personal tax situations. Certainly, taxation has become much more burdensome on us today than they were when these judges were in office. Yet their admonitions ring down through the years to us today. Let us encourage you to seek the advice of a professional to discuss any personal situations that you have which may lend themselves to proper tax avoidance. For example, the purchase of a personal residence can be very rewarding. In addition to providing you with a place to call your own, when you sell it, you do not pay tax on the profit you make up to $250,000 (single) $500,000 (married filing jointly) after living in it for two out of the previous five years. There are some minor restrictions on this allowance (which you can discuss with your tax professional), however, for the industrious young person or couple, finding a fixer upper that can be flipped in two to three years, then repeating the same process can allow for quite an accumulation of tax free capital. Worth looking into if that free bridge appeals to you.
In addition, we encourage you to make the 15th of every month a mini tax day where you pull together any documents you received during the previous month which will impact your tax return. It will make the year end process a lot easier on you as well as on your preparer.
It’s been quite a few years since we ventured into the tax preparation business here at The Stewardship Group. Roxie Genzel has gone on to be with The LORD, and in her blessed memory, and with the same view of service as when it was first established, our tax department works hard to help our clients be better stewards of the assets with which they have been blessed.