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How to Account for IRS?

July 16, 2015

How to Account for IRS?

Complicated code works for wealthy who have resources to avoid paying levies.

THE IRS and its 91,000 employees cost American taxpayers $11 billion a year and billions more in unnecessary legal and accounting costs. The complicated code penalizes small-business owners and the middle class while giving an unfair advantage to the wealthy.

I am in the top 1 percent of earners in the United States and I am telling you the IRS tax code is written to benefit only the wealthy and hurts everyone else. Consider: Apple Inc., headquartered in Silicon Valley, has a small office in Reno, Nev., and is incorporated in Ireland in order to avoid millions of taxes to California and billions to the United States.

My sister, a small-business owner, doesn’t know how to set up a company in Ireland or Bermuda or run her accounting through Reno. Even if she did, she couldn’t afford to create the structure or defend it when the IRS bullies challenge her.

The IRS tax code is complicated to benefit the wealthy and penalize the many. What small-business owner is going to read 73,954 pages, respond to summons, threats and challenges by IRS bullies? The federal government recently raised taxes on top earners from 35 percent to 39.6 percent (a 13 percent increase) and Gov. Jerry Brown raised the state income tax from 10.3 to 13.3 percent (a 29 percent increase). If a person earned $1 million of additional income, that person would pay more than half – $530,000 – in state and federal taxes, and then would pay property, payroll, health care and Social Security taxes.

I am not asking you to feel sorry for me. I am telling you the wealthy are the only ones with the money and freedom to avoid paying these increases, leaving you to pay the way. The wealthy are the ones who will spend the $50,000-$75,000 to save paying $400,000 in taxes.

Not enough to convince you to write your congressman and demand the IRS be abolished? How about the recent revelations about how the IRS wasted millions of your dollars on conventions, dressing up like Mr. Spock?

Did you know that the IRS employees who attended those lavish conventions failed to file W-2 forms claiming income benefits? If you did that, you could be fined, prosecuted and jailed for tax evasion. Last year, when Brown raised taxes in California, I did what many Californians don’t have the money or courage to do – I moved. I sold the house, closed the offices, packed up the kids, relocated the employees and moved my family, businesses and investments to the sparkling beaches of Miami.

Not long after our move (and not long after I became publicly critical of rising tax rates), I started receiving demand letters from my friends at the IRS asking me to a meeting in Long Beach. I hired counsel and told them I was happy to visit Long Beach, but that they had to fly me, my wife, kids and nanny out. They refused, so I refused.

Then they started burying me with requests and summons demanding I provide copies for every business account, LLC and personal account since 2005.

“So what?” you say. “You have money, you should be grateful to pay more – you are an arrogant elitist and you should pay more.” But that is my point – the wealthy can afford to defend themselves when most cannot. I can afford to move the kids and relocate but most of my friends cannot. This is why it is so important that the tax code be simplified and the IRS abolished as the current code only benefits the wealthy.

Friends in Los Angeles ask me, “Isn’t Miami humid?” Yeah, it’s terrible two months of the year. But somehow I’m kept cool by the 13.3 percent of my income that I don’t have to pay to California. The money we saved just by leaving Los Angeles allowed us to triple our staff and double our office space, with money left over to make the largest private acquisition of multi-family real estate in the state. Eighty percent of my staff followed me; consider that just one family moving from Los Angeles will cost the city millions in lost income, employee and property taxes. Not to mention what my family and employees spent with L.A. businesses.

I might buy a jet before the end of the year just to further take advantage of special write-offs buried deep in the code called Double Bonus Depreciation.I don’t even want a jet, but why not? After all, the write-offs afforded the wealthy mean it would cost me almost nothing.

Write your congressman and demand that we abolish the IRS and simplify the tax code to level the playing field.