By the time spring break ends, tax season hits. At least March Madness, the NCAA basketball tournament, gives some of us a respite. The Mercer Bears beat Duke insuring no winners of Quicken Loans’ $1 billion prize for a perfect bracket. To enter the contest Quicken Loans required some seemingly innocent personal data. Using information you provided, Quicken Loans could be in the early stages of a genius marketing campaign. Hello random calls and computer pop-ups.
No one will win the jackpot this year or ever. You have a better chance of finding a parking place outside the Red Bar and seeing a familiar face at Publix during tourist season. Statistics geeks peg the odds at nine quintillion to one. To protect themselves, Quicken Loans bought insurance from a Berkshire Hathaway subsidiary specializing in odd-chance events. If by chance you get to the semi-finals with a perfect bracket intact, expect a call from Berkshire’s CEO, Warren Buffett. Expect an offer you can’t refuse. Buffett told ESPN he would offer $100 million to anyone with a perfect bracket before the Final Four. It wouldn’t take that much. $10-$20 million guaranteed would be enough especially for the ones who want to stay married.
Some financial planning tips stick out. Insure adequately and appropriately. Everyone self-insures to some extent, make sure you are comfortable with your level. Remember many jackpot winners unfortunately end up broke. If you entered the Quicken Loans March Madness pool, you gave Quicken Loans valuable personal data but got zilch. It’s a great bet and you are on the wrong side.
Audit Warning Signs
Tax Season is upon us and foolish scams abound. My wife, the recovering accountant, would go back to bartending before going back to tax returns. Go to any bar on 30A and some genius will mention the illegality of the Internal Revenue Code or some other goofy idea. I am not defending the Internal Revenue Service, but those arguments lose every time in Tax Court. Clients touting ding-a-ling tax strategies drove her away. “My buddy said …”
Starting around $200,000 the chance of an audit increases. As income rises, so does the chance of an audit. An unintended consequence of an undermanned IRS forces them to look for targets of opportunity. Alternatively be grateful, like the sign at Hibiscus, that the IRS has been chronically underfunded for years.
Most people don’t itemize their deductions. If itemized deductions are out of whack with income the chance of an audit increases. Claim all deduction just substantiate them. Follow the specific guidelines around charitable deductions. Don’t claim charitable deductions if you don’t have paperwork and receipts for documentation in hand or stored electronically. If you are audited it is too late to scrounge up the information.
To deduct rental losses you have to meet the IRS definition of a real estate professional. Generally speaking, you have to spend 750 hours annually materially participating in real property and rentals. Plus more than half of personal services annually must be in real property and rental real estate. Vacation homes, depending on rental history, may have to allocate expenses between personal and rental use.
Buz Livingston, CFP has a Blue Mountain Beach based fee-only, hourly financial planning and investment management firm. For more information, visit www.livingstonfinancial.net or visit the office at 2050 Scenic 30A, M1-Unit 230, Redfish Village.