Episode 319: Why a Hitman Needs a Tax Plan

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Everyone engaged in an income-generating activity needs a tax plan, even if those income-generating activities are criminal in nature. To be clear, we aren’t interested in furthering criminal activity, but hiding income from the IRS means taking a major risk – for every taxpayer.

To illustrate this point, consider the case of Al Capone.

How Tax Evasion Charges Brought Down Al Capone

Al Capone was one of history’s most notorious gangsters. His criminal enterprise was active in Chicago for years during the early 20th century – an enterprise that included murder. Capone’s activities were no secret, but he never committed the crimes himself, instead delegating them to underlings. This made it impossible for authorities to pin any of the crimes on him personally, as he always had a rock-solid alibi.

But Capone made a mistake that would eventually topple his empire – he refused to accurately report his income to the government.

Murder was impossible to prove, but it was easy for IRS agents to prove that Capone’s income and account activity did not match his tax reports. Eventually, this led to Capone’s arrest and charges of tax evasion, which he was convicted of. The legendary mob boss, a man always one step ahead of the Chicago police, was sentenced to 11 years in federal prison.

If only he had planned and filed his taxes properly, Capone may have avoided prosecution until the end of his criminal career.

That’s why we say that everyone, no matter their occupation, should focus on accurate tax reporting and planning with a knowledgeable tax attorney.

What’s the Difference Between a Tax Plan and Just Filing Taxes?

Capone didn’t report and file his taxes properly – a process known as tax preparation. That made tax evasion charges much easier to prove.

We recommend taking tax preparation seriously, of course, but your situation may call for a long-range plan that goes beyond mere reporting filing. What you need are tax planning services.

What’s the difference between a tax plan and tax preparation?

• Tax preparation services – During tax preparation, your tax professional will identify the right tax forms for your situation and ensure they are filed accurately and on time. If you’re unsure about tax forms, deductions, credits, or any other tax fundamentals, these services can maximize your savings.
• Tax planning services – Tax planning is a forward-looking service that accounts for your future tax goals and decisions. For example, if you’re starting a business soon, tax planning may involve picking the right tax structure, setting up business accounts, and scheduling income/expenses. Tax planning is also appropriate for individuals with income-generating assets. As such, there’s a lot of overlap with estate and tax planning services.

You can think of tax preparation as ensuring ongoing compliance, while tax planning is more about maximizing your tax savings.

Three Reasons to Invest in Tax Planning Services

Tax planning services are an investment, because like all investments, they’re expected to provide a return. Here’s how a tax plan does that:

• Tax planning ensures ongoing compliance – Tax preparation is meant for on-the-spot compliance, through proper filing and reporting. Tax planning establishes long-term compliance controls that, if consistently observed, will ensure you remain compliant year over year.
• Tax planning optimizes your savings and liabilities – The goal of tax planning is to position clients in the most advantageous way possible, relative to existing tax laws. As such, tax planning can be extremely complex and requires an expert reading of the tax code. Tax planning professionals leverage their knowledge in this area to maximize deductions and credits, while minimizing their client’s taxable income. To do so, tax planners typically recommend (and support) strategies that develop over many months or years. These strategies may involve highly complex transactions that must be executed properly.If tax plans aren’t developed ahead of time, you’re likely leaving money on the table. At the least, you’ll spend a lot of time making tax-related adjustments in real time.

   

• Tax planning takes your unique situation into account – There are numerous tax planning strategies, but only some of them will apply to your situation. You may own a business, or you may have inherited an income-generating trust or estate. You may be interested in acquiring real estate. You may be self-employed with a home office. You may earn income trading securities or other assets. Whatever your situation, there is a tax planning approach that makes the most sense for you. When working with a professional tax planner, they will quickly ascertain how to deliver maximum results for your tax situation. In this way, expert tax planners create customized strategies for their clients.

 Tax Planning Services Can Help Every Taxpayer – Even Mob Bosses

Chances are, you aren’t running an organized criminal outfit, but if you earn taxable income, you have one thing in common with Capone and other criminal masterminds – you need a tax plan and proper tax preparation. CPAs and tax attorneys are the experts in this area, with deep knowledge of tax laws and how to apply them. This means a trusted tax planner can customize tax minimization strategies to fit

By Harold "Hap" May, P.C. on February 2, 2024   /   The Legal Play Podcast   /   Leave a comment