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Self-Sabotage: The Biggest Risk Once You Have Money

Having money can change you, and not always in good ways. The risk is greatest for those who start out poor. For those lucky people, they have an additional challenge before them. If they fail they go all the way back into the swamp. 

Money doesn’t make you a better person; it makes the kind of person you are more pronounced. If you are a kind and generous person, money will tend to make you more kind and generous. And if you are a a-hole, money will make you a much larger one. 

Today I will share with you three stories: two personal and the other from a client. My hope is that you, kind readers, will learn from these lessons rather experience them personally.

I work hard sharing ideas on building wealth and lowering taxes. These are worthy goals that make the world a better place. What I don’t talk about often is the risks people face once they make it. There is no greater thrill than to watch someone born in poverty finding their way to an abundant life. All too often this is the moment they destroy their lives. Usually it is temporary; sometimes not. These lessons can help you avoid the same fate.

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Minimize Taxes on Day Trading Profits

The risks associated with day trading extend beyond the actual investment. Before the trade is placed consideration needs to be given to the tax implications. 

Profits and losses for day traders can be taxed under the rules for an investor, trader, mark-to-market trader or dealer. There are pros and cons to each method.

Facts and circumstances prevail. Yet, the rules are not always clear. 

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The Two Biggest Risks of Owning Bitcoin and Other Cryptocurrencies

The excitement of bitcoin and other cryptocurrencies has risen to the height of the casino run. The house holds the odds, but for the moment, the card gods are looking kindly upon the gambler.

Some say the run has just begun. As I write, bitcoin is north of $50,000 with at least one large investor feeling bitcoin is going to somewhere around $500,000 per bitcoin! Mark Cuban was not interested in plastic wristbands that promised more energy (a scam), but has no problem with owning cryptocurrency. Interesting. 

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Why Cheating on Your Taxes Costs More

This past week an old story was refreshed for me. A tax office that handles mostly simple tax returns for a very low price and gets paid mostly cash might not be claiming all that income. A previous employee of that firm informed me over $300,000 in cash was kept in a safe in the money cage. 

The final response (and I was thinking the same thing) was, “And I’m sure all that cash was reported.

Cheating on your taxes is as American as apple pie, but a whole lot dumber. If this other tax firm really has that much cash on hand and does not report all their income they lose a lot more than most people expect. 

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What should Tax Preparation Cost?

How much are you really paying for tax preparation?

What if I told you there was a hidden fee in your tax preparation bill. This hidden fee costs you serious money every time you file your taxes. This hidden fee shows up even when you prepare your own tax return. And it is totally avoidable. They sneak the fee in because you never see it and therefore never complain about it.

The hidden fee is hard to identify. It doesn’t show up as a line item on your accountant’s invoice or the online software payment page. Yet the fee digs hard into your wealth.

This same hidden fee looks different when you prepare your own tax return than from a professionally prepared return. The best way to expose this usurious fee is to handle it separately from how it is applied to DIY tax preparation and professionally prepared return.

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Bill Gates, Elon Musk and Books for Success

The books the most successful people alive today recommend might surprise you. Elon Musk mentions The Lord of the Rings and Douglas Adams’s Hitchhikers Guide to the Galaxy more than once when listing must-read books. 

These books might seem like strange choices, but when you think about it these and similar books start the engine of creative thinking. The technology Tesla uses to manufacture electric vehicles is not new technology. Some of the technology used is 18th century knowledge, even more from the 19th century and early 20th Century. The magic of Elon Musk is applying this knowledge in novel ways. Remember, electric cars came before the internal combustion engine (ICE). The ICE won until Musk built electric vehicles with existing technology that really worked. Then he revolutionized batteries.

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Deduct Work Expenses When Working From Home

The timing could not have been worse for remote workers. The Tax Cuts and Jobs Act of 2017 nixed the deduction for work from home expenses and other unreimbursed employee business expenses. 

Prior to the TCJA it wasn’t the best deduction in the world either. You had to itemize to get the deduction and it was combined with several other deductions and then reduced by 2% of your adjusted gross income. But it was at least available and with some planning could provide modest tax relief.

Self-employed people can still deduct these expenses on their or Schedule C. Same for farmers (Schedule F) and income property owners (Schedule E). 

For employees, the deduction is now gone, unless you know the rules. With proper planning you can benefit by working from home, getting a tax benefit for work related expenses. The home office, the pro-rata share of utilities, insurance, property taxes and/or rent and mortgage interest can get tax-free treatment. Same for office supplies and equipment. And don’t forget business travel expenses.

Working from home has plenty of benefits: no office politics, no fighting traffic and every day is casual day. The downside is you have expenses at home that can’t be deducted on your tax return. We are going to fix that right now.

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