U.S. bankrupt by 2019-guaranteed!!

U.S. bankrupt by 2019-guaranteed!!

Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes

Now that I have your attention, I'm open for suggestions as to how we avoid the inevitable.

I've been reading and studying up on the financial problems that keep growing here in the U.S. Here is an article that has some scary #'s and conclusions. I keep telling people, we're going to run out of money if we keep spending like drunken soldiers. The social programs are unsustainable. Here is an article with projections you should get familiar with.

http://www.americanthinker.com/2010/05/americas_growing_vulnerability_1.html

I don't care who wrote it, I'm looking at the #'s. At end of 2008. the U.S. debt to GDP was at 40.2%.

" In the four years of the Obama administration, the debt will increase $5.7 trillion (equal to the entire debt incurred by the United States since its inception up to and including 2008). This will result in the country having a debt to GDP ratio of 72% by 2012, a mere two years from now."

We all heard about Greece going under. It was deadmeat if the EU didn't come in and bail their arses out. If U.S. gets to that point , who will bail us out? How close are we to that situation at the current rate of growing our debt? Well, here is the comparison of where we are, where we are headed and possible results or fixes, all in black and white.

"Without significant repeal of the Obama tax and regulatory policies and changes in the entitlement programs and overall reduction in government expenditures, the current spending proposals and impact of the trillions needed for ObamaCare, Social Security, and Medicare and interest payments will result in the debt-to-GDP ratio exceeding 100% by 2019.
Recently the bond ratings of Greece, Portugal, and Spain have been downgraded (Greece to junk bond status). Not only is the entire European Union threatened with collapse because of the excessive debt and budget deficit policies of these countries, but so is the entire world economy. In the case of Greece, the debt-to-GDP ratio is 125%, and the annual budget deficit is 13.6% of the GDP. Greece can no longer borrow money (except at excessively high interest rates) and must turn to the European Union for a bailout in order to pay debts due within the month.
By comparison, the United States, if it remains committed to the Obama agenda, will experience a debt-to-GDP ratio of 104% and an annual budget deficit of 9.7% of GDP by 2019. This nation will become the next Greece."

The above is all pulled from an article listed above. I continue to wonder where all the money is going to come from to handle all the new programs. Econ 101 talked about supply and demand,,,PERIOD. We have removed 1/3 of all wealth with RE and stocks devaluation , causing a reduction of available capital. Yet, the administration continues to spend at unprecedented speed . Does it also seem we are having more catastrophies needing more funds than ever before? Try to keep track of all the Tornados, earthquakes, floods, hurricanes etc. Almost impossible. I'm telling you, we're running out of money. Go to your bank and try to get 100K in cash. They'll most likely have to ORDER it and make you wait a few days for delivery.
Simple econ 101- U.S. is going backwards, and it ain't going to be pretty. Button down the hatches and keep your eyes open. In for a bumpier ride than ever before, imo. I hope I'm wrong, but will plan for the worst. You should also. Rich

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Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
16y

Rich, Although I disagree with you politically, I respect your "bottom line" opinion. Obama is not the cause but a symptom. If you look at all the combined entitlement programs (Social security, medicare, welfare, housing, etc) they are the biggest culprit - 56% of the budget (interestingly, defence is only 23%)
http://en.wikipedia.org/wiki/United_States_federal_budget
...And that before the insurance reform that was just passed.
Now, find me one politician (I don't care right, left up or down) that is willing openly to cut any of those programs...

Now, lets talk about the bottom line. For us, REI who are in the buy-and-hold business, I'd say the following.
If you own a property with adjustable or interest only loan, GET OUT OF IT FAST! If you can refinance it for 8%, 9% or even 10% fix rate, go for it. Inflation is coming and that 10% interest would look like a steal.
If you cannot refinance (DIT,bad credit, etc) Sell it because if you don't, chances are you're going to lose it.
I'd say, you have good 3-4 years to do it.
If you have a property that have a fix rate mortgage - keep it. That mortgage payment will eventually will look like your monthly basic cable payment.
Get out of section 8. You still have time but eventually, when the government runs out of money, guess where they are going to cut first.
In general, I would suggest that everyone here pay attention and follow the news. There will be many signs in the years to come to show whether or not we are heading in that direction. Those signs may not be a headline grabbers, but rather bits and pieces of "bottom of the page" news that will tell the tale.

This just my humble opinion... I could be wrong...

Your thoughts...

See this reply in the discussion

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  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    Boy!! I thought I was pessimistic! Here we go with guns and bullets and losses again.

    Kevin- I still like junk silver and small gold american eagles in 1/10 up to 1/4 oz. Gold was used for barter for 100's if not thousands of years. I do agree on other trade items as I listed above.

    Eddie- looks like a tenuous set of dominos to me- just like the banking industry. Once it starts, can we stop it?

    Kevin- I'll be happy if my tenants just continue paying their posted rent. I don't care if the inflation is running wild. I don't need the rents to live on, and I'll just sell one of my highly inflated properties to keep up.
    You mention 70's-80's. Now, those were the days!! Buy an assumable FHA home for 50K with a couple grand down. Inflation was 15%. My home was soon worth 57.5K and I owed 47.5K! My 2K had grown by 500%. Doing that over and over can really add up. It was a great time and I hope for it again. If you're positioned for it, you should hope for it also, imo. Rich

  • Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    16y

    Two problems with real estate:

    1) You can't move it to someplace better.

    2) It's a big fat target for governments in search of tax increases.

  • Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by NC Mark:
    Two problems with real estate:

    1) You can't move it to someplace better.

    2) It's a big fat target for governments in search of tax increases.


    1) You can... but it would be awfully expensive... :wink:

    2) Yes and no... Here in California despite the grave situation, no one talks about repealing proposition 13... Yet...

  • Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
    16y

    Here is an interesting dichotomy. We are always saying "let the tenant buy the house for us". But after they have bought the house for us, we say refinance it, and here we go again, let the tenant buy the house for us.

    To start out, most investors need to borrow to invest. But let's face it, it does feel good to have 'free and clear' properties. I have 25 properties, 20 are free and clear, 5 have a mortgage. Theoretically, I could be at 80% vacancy and still make my mortgage payments.

    The US will never go bankrupt, but it will go through some massive changes, most of them not good.

  • Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y

    Mike, I couldn't agree with you more. Congratulation on your achievment and even more for your discipline. I know it take a lot of it to fan off the temptation of refinance. I only have six properties (Aside from my principal residency) two are mortgaged and four are free and clear. I am however looking to refinance the free and clear ones so I can buy more properties. I must add that if I did have 20-25, I would hope to have them free and clear...

  • Battle Creek, MI · Member since 2008 · 87 posts · 11 votes
    16y

    Just the fact that you folks are having this discussion is kind of scary...here are several very successful people with radically differing political views agreeing that a crash is imminent.

    What are your thoughts on location regarding future problems? Will there come a day when South Dakota will be a paradise compared to Florida or Ca due to economic and population density issues, or even availability of medical care?

  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    Scott- that is what makes BP so cool. Thanks to Josh for letting us radicals hang around! This is really wierd, but I'm actually a SD resident. I'm "domiciled" there for MANY reasons and have been for 8 years. So, I guess I'm prejudiced. It may be more of a paradise later, but pretty cool right now, imo!

    Mike M- I will disagree with your last paragraph. I'm not sure of that. Please give me one scenario where we'll be able to dig out of the financial hole we're currently in. The only new jobs being created are in govt sector, and especially in the IRS, which will be trying to collect more taxes from fewer people. Our bonds are almost as worthless as Greece bonds. If china stops buying, who else has the desire and money to buy them?
    I've really tried to figure out a way we get out of all the bankrupt programs we already have, and we continue creating more. Tell me how we dig out? Rich-planning for the worst and hopeing for the best.

  • Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y

    Scott. Things go in cycles. Before FL & CA were cold (Economically speaking...) they were hot. Before that, they were not so but because it was colder somewhere else it became hot. I wouldn't count out those places. As to population, people are actually moving out of those states because there are no jobs. Eventually the pendulum will swing the other way.

    Rich, if you open the current issue of INC magazine, you may change your mind. Again, not that I disagree with your prognosis, but the amount of entrepreneurship that is going on is unbelievable. There is an article called "Where great ideas are born". It list the projects that are going almost in every state right now with new innovations and inventions already funded and in progress.

  • Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
    16y

    Rich
    While debt is an issue, one has to look at the entire picture. Most folks have a debt that is 5-10 times their annual income. Making $50,000 a year and having $250,000 in debt (mortgage, car, credit card, etc...) is quite common.

    The total income of the United States in 2010 should be right at $5T. The current debt is around $11.5T. This is why I say a US Bankruptcy is not really imminent. If Obama increases the debt in each of his last 3 years as much as he did his first year, then we can start worrying. But, I am hoping that he won't increase it at such a rapid pace.

    Washington DC needs to make some drastic changes, and the first change is to HELP THE WAGE PAYER. There needs to be incentives for job creators. Reduce Capital Gains Taxes and forever eliminate 'death taxes.' Give tax credits for jobs created. Instead of giving poor folks free money, make them work for it. Change the tax structure so you don't penalize hard workers. Here is a revolutionary idea, reduce taxes on higher wages. For example, if you make $20,000, tax it at 20%, but if you make $30,000, tax it at 15%. I know, a very radical idea, but give folks an incentive to make more money.

    America's work ethic has really gone down in the last 50 years. My grandparents had no problem picking fruit, nuts, vegetables, etc... to make a living. But try and get my kids to do that, good luck.

    Another topic is "moral bankruptcy" vs "financial bankruptcy". But I will save that for a different thread.

  • Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y

    Here is some perspective about the deficit:
    http://zfacts.com/p/318.html

    Mike, I agree with you for the most part, except the "Rich man incentive". The assumption is that all men were created equal and if given the right "push", they will be driven to make more money.
    I disagree. First. All people were not created equal. Some are smarter than others and some are down right dumb. Are we to punish the unfortunate who no matter how much they try, will never make more money?
    Second, people who are usually driven to make money and to advance themselves, will do it anyway - tax incentives or not.
    I also don't think it would be popular and therefor not politically viable regardless of party affiliation.
    I think it's a great idea to pay welfare recipients only for work. However, I bet you the unions will be in the way. Imagine if the government decide to build roads and bridges using unemployed welfare cases? Some unions will be up in arms...

  • Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y
    Originally posted by Eddie Ziv:
    Get out of section 8. You still have time but eventually, when the government runs out of money, guess where they are going to cut first.

    I was just wondering about this very possibility recently. I wonder if they would phase S8 out gradually though, so as not to have riots on their hands.

    I haven't read this whole thread so maybe it's already been brought up, but I'm concerned that states will jack up the property taxes even more to get more revenue.

  • Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y
    Originally posted by Kevin Yeats:

    I am surious about those who feel that precious metals make sense. In a crisis situation, you have to sell the physical metals (gold, silver etc) to someone else for currency or at least trade those pieces of metal for something else. Depending on the depth of the crisis, other items may have higher value and more readily accepted in trade - food, water, water purification systems, tools. My point is that someone has to be on the other side of the transaction and be willing to accept what you offer.

    I think a lot people just view it as a way to make money while gold continues to climb and other types of investments flounder, and then sell once they think it's run is over, or as a hedge. The "crisis scenario" of needing non hybrid seeds, guns and things to barter with probably won't happen.

  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    My gold is not to make a return off of. It is strictly an insurance policy. I've constantly stated to buy junk silver(dimes, quarters and halves minted 1964 and earlier) and 1/10 oz gold. The coins are still actual money and would be easy to trade. Remember that gold and silver were used for trade before the fiat currency. We all hope we won't have to return to barter civilization.
    The removal of section 8 overnight won't happen. Not allowable. Just look at what is going on in Greece. Just ASKING the union workers to take a discount has led to bedlam in the streets. Imagine the chaos that would occur instantly if union workers were asked to reduce wages, unemployment checks or food stamps were stopped, or government employee checks were late.

    Eddie- I don't get your comment. "We are punishing " those that aren't smart enuff to make a lot of money?" That is just ridiculous!
    On that same thought process, I'm being "punished" because I don't get 25 Million a year like A Rod. Ability shouldn't enter into it! I'll never be as pretty as Brad Pitt, but I should STILL make millions per picture. I'm not 7 foot tall or 7 foot wide, but heh, I still should be able to start for the lakers or colts!
    I don't look at the less talented or less intelligent to be treated equally in any society. Our country is one of the few where you even have a chance to succeed in a free way.
    I don't look at the less talented as being "punished" for their shortcomings. I look at the more talented or persistent as being "rewarded" in a free system for their talents or achievements. Rich, 5'6", can't sing, or act, but good brain and passion for working smart.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y
    Originally posted by Mike M:
    Change the tax structure so you don't penalize hard workers. Here is a revolutionary idea, reduce taxes on higher wages. For example, if you make $20,000, tax it at 20%, but if you make $30,000, tax it at 15%. I know, a very radical idea, but give folks an incentive to make more money.


    Mike,

    I agree with everything you wrote in your post except for this particular idea...

    The problem with this (as I see it) is two-fold:

    1. First, while your goal is not to penalize hard workers, I'm not sure this does it. In my experience (which is surely limited), the hardest workers are those people who are trying to tackle two or three jobs, working 14 hours a day, doing manual labor, and generally performing chores that most Americans wouldn't want to do, just to put food on their family's plates.

    I was in the corporate world for a long time, and it's safe to say that my income was well above average for those in this country. And while I certainly worked hard, I wouldn't have traded my cushy office, my big computer monitor, my nice lunch meetings, etc, for the work that a lot of Americans do for a fraction of what I was getting paid.

    Many Americans work twice as hard as I ever did and make a lot less money. To assume that HARD WORK = MORE MONEY just doesn't make sense to me. So, if you really want to reward hard work, I think you need a different measuring tool than the number of dollars earned.

    2. If we implemented this, we run the risk of disincentivizing (is that a word?) people who currently work hard but don't make a lot of money.

    For example, if I was spending 14 hours a day working three jobs to keep my family fed and to keep myself off welfare, and then someone said, "Because you make so little money, we're going to tax you more," I'd probably just say, "Screw it...why should I bother to try to stay off welfare when the state is just trying to screw me anyway."

    Ultimately, I think this type of taxation would send the message that we don't really value those that struggle to do the right thing (take care of their families and stay off welfare)...and if anything, those are the people we should be rewarding the most!

    Again, just my $.02...and I agree with everything else you wrote...

  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    So, how do we make the dole system less desireable and incentivize those to get off the dole and become more responsible for their own way? Don't we all agree that the current govt programs are unsustainable? Something needs to be changed. Rich

  • Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
    16y

    J Scott,

    The next home that you find to buy, rehab & flip will have a twin home across the street. Both are available from a bank at the same price. Both will need about the same amount of work to prepare them for sale.

    You purchase ONE home and someone else purchases the other. Six weeks later, the rehab work is finished and both homes go on the market.

    Since you have already made a lot of income from your efforts earlier in the year, you will be taxed at 50% of the profit that you made.

    For your competitor across the street, this is his first effort at fixing and flipping but since he used the same subs as you did, the work is the same. He is only taxed at a 10% rate of his profit.

    Same circumstances, different results.

    Next month, you find another house you want to buy. What a coincidence, your low-taxed competitor finds one across the street for the same price and in the same condition.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y
    Originally posted by Kevin Yeats:

    ....

    Since you have already made a lot of income from your efforts earlier in the year, you will be taxed at 50% of the profit that you made.

    For your competitor across the street, this is his first effort at fixing and flipping but since he used the same subs as you did, the work is the same. He is only taxed at a 10% rate of his profit.

    Same circumstances, different results.

    ...



    Hi Kevin,

    I completely understand everything you said, but I'm not sure what your point was...

    Based on my last post in this thread, it should be clear that I'm completely alright with the fact that I am paying 50% in taxes while my competitor is paying 10% in taxes.

    In fact, if that's the case, by definition he's not much of a competitor (if he were, he'd be paying 50% as well).

    In addition, my attitude has always been that as long as I'm making a lot of money, I have no problem paying more in taxes. I know a lot of people will look at that statement and think, "You wouldn't think that if you DID make a lot of money," but I can promise you I've been in the highest tax bracket in many occasions, and have paid 6-figures in AMT on more than one occasion, so I believe I have the experience to stand behind that belief.

    The other thing to consider is that higher earners will generally have the resources to hire good accountants who can minimize their tax burdens. So, while in theory I'm in the 50% tax bracket and my competitor is is in the 10% tax bracket, in reality, I'm not paying anywhere near 50%, though my competitor is probably really paying 10%.

    Again, just my opinion of what's good and bad...obviously, others will disagree...

  • Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
    16y

    J Scott,

    You are welcome to send in more taxes than the amount owed.

    My $0.02

  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    JScott- I thought you were MUCH smarter than that. 6 figures in AMT? Maybe time for a new acct, tic. I agree with Kevin. I appreciate you paying lots of taxes. There aren't enuff of you left.. Rich

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y
    Originally posted by Rich Weese:
    JScott- I thought you were MUCH smarter than that. 6 figures in AMT? Maybe time for a new acct, tic.


    Rich -

    I mentioned this same thing in another thread about a year ago, and you made the same exact statement. At the time, I challenged you to explain to me a way to mitigate the AMT impact on salaried employees cashing in large amounts of stock options.

    I suggested that perhaps you should ask your brilliant accountant his advice. I also suggested that if your accountant had a way to do so, I could get him a LOT of business.

    Not surprisingly, after that post, you stopped responding to the thread (because you didn't have a good answer, perhaps?).

    I'm still waiting for your/his response...come on, this is your chance to learn me something new...

    Originally posted by Kevin Yeats:

    You are welcome to send in more taxes than the amount owed.


    Kevin,

    Somehow you are equating my belief that higher earners should be in higher tax brackets to a belief that I want to pay more than what I owe in taxes.

    There are several logical fallacies in your line of reasoning...and therefore I really can't make a logical rebuttal.

    Sorry, that's just the way logic works...

  • Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by Rich Weese:

    Eddie- I don't get your comment. "We are punishing " those that aren't smart enuff to make a lot of money?" That is just ridiculous!
    On that same thought process, I'm being "punished" because I don't get 25 Million a year like A Rod. Ability shouldn't enter into it! I'll never be as pretty as Brad Pitt, but I should STILL make millions per picture. I'm not 7 foot tall or 7 foot wide, but heh, I still should be able to start for the lakers or colts!
    I don't look at the less talented or less intelligent to be treated equally in any society. Our country is one of the few where you even have a chance to succeed in a free way.
    I don't look at the less talented as being "punished" for their shortcomings. I look at the more talented or persistent as being "rewarded" in a free system for their talents or achievements. Rich, 5'6", can't sing, or act, but good brain and passion for working smart.

    Rich, my comment was not about day pay... People who are talented, smart, or beautiful should be able to get paid as much as other people are willing to pay them. My respond was strictly to Mike M's propsed tax structure.

    According to his tax structure people who make less money should pay the most taxes. That was my reference to "punishment". You don't tax people for their inability to make money. Having said that, I don't necessarily think that we should punish those who make more money either.

  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    Eddie- got it. I understand now.

    JScott-I don't recall the previous e-mail. If you were just negative and confrontational, I would've stopped replying.
    Now, to your answer. Cashing in stock options is not the norm on here for most BP members. I don't recall you bringing this up before. However, there are a couple ways to help reduce the amount.
    You're probably already using all of the methods, being the experienced businessman you are.
    Here are some questions for you, and please PM me for privacy, if you desire.
    1.Do you file a schedule C?
    2. As business owner or salaried employee?
    3. Do you maintain a 2nd business for tax deductions?
    4. Are you confident that all your "expenses" are handled as "deductions" on your return? These would be on "C"
    5. Do you ever have losses and strategically take the stock option profits in years when you may offset with losses?
    6. Have you taken advantage of any carryover benefits; gain/loss?
    I'm sure you are probably using all these, and stock option profits are not the norm. Employees are at a disadvantage compared to business owner that has Schedule c benefits. Also, being "in the business" of real estate has extra benefits that are helpful only to them.

    Disclaimer- I'm not an acct and don't pretend to be. However, my acct and I make a very good combo. My first question when I found my acct was, " how much did you pay in income taxes last year? When I found an experienced acct that had the answer I liked, I joined forces. That has worked very well in my life and the 2 audits. Results of first is in the center of my book and results of 2nd audit is here in a Blog or Thread, I believe.
    Sorry about previous non-reply. Rich

  • Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
    16y

    For those that posted in response to my absurd idea, I did state it was "radical." Of course you can't charge a higher tax on a lower income. Even a dumb conservative like me knows that.

    My main point was to get folks to WORK. For those of you who saw the movie "Precious" last year, you saw what a typical welfare family is like. Generation after generation after generation of LAZY PEOPLE. Nothing raises my ire more than folks who work at not working. Next to that is folks who refuse to work for a reduced wage. I was laid off in 2006 and I had accepted a part time job with UPS, working 5 hours a day for $1,500 a month. Luckily, the next day, I got a job offer for more than 3 times that money, BUT, I was willing to take the UPS job just to get back to work of some sort till I could find a better job.

    If times are tough, you take what you can get. Get off that lazy behind of yours and get to work, ever if it is picking strawberries.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y
    Originally posted by Rich Weese:

    Cashing in stock options is not the norm on here for most BP members. I don't recall you bringing this up before. However, there are a couple ways to help reduce the amount.


    Without going into detail that nobody cares about, the basic answer is that yes, there are ways to reduce your tax burden in this situation, and most of them have to do with operating an outside business that generates both revenue and expenses.

    But, as a full-time employee who was working 12-16 hour days for many years (that's how you get those stock options in the first place), there wasn't much time to operate another business that was generating income or expenses.

    The first thing everyone (who doesn't know what they're talking about) will tell you is to set up a shill business that doesn't do much, but generates a good bit of business expenses for the first year or two.

    I know a few people who did that, and almost all of them had their businesses audited. That's because setting up a shill business to generate expenses/losses to offset AMT is very common, and the IRS knows to look at for it.

    Long story short, the accounting firm I used for several years was well known for handling employees from the big tech companies (Google, Microsoft, Yahoo, eBay, etc) who were in the same position I was.

    I'd wager to guess they are one of the top 10 firms in the country handling those kinds of tax issues, and I'd also wager to guess that they probably got my tax burden about as low as it could go without doing anything fishy.

    If you or your accountant know of any ways to do this without the use of business losses, I'm all ears...
  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    JScott,
    This paragraph isn't quite correct.

    The first thing everyone (who doesn't know what they're talking about) will tell you is to set up a shill business that doesn't do much, but generates a good bit of business expenses for the first year or two.

    The object of a 2nd business isn't to "generate business expenses", it is to generate DEDUCTIONS out of expenses you already have. There is nothing wrong with an audit, if you don't do anything wrong. I have several blogs/threads on here about the subject of taxes.

    I'm sure your acct is very good , if you're happy with him. Continued success. Rich

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