“Joe the Plumber” meets reality!!

TO MY FRIENDS

Heard the “JOE THE PLUMBER ” story?  Here are a few rambling thoughts:

The Toledo Blade reports that “Mr. Wurzelbacher (a/k/a “Joe the Plumber” ) said he works under [his employer’s] license, but according to Ohio building regulations, he must maintain his own license to do plumbing work.  He is also not registered to operate as a plumber in Ohio- which means he’s not a plumber.”
But some say, who cares?

Money writer Matt Bandyk over at U.S. News and World Report says license-schmisence.
“It’s not clear to me how it’s deceptive to call yourself a plumber when you do plumbing work for a licensed plumbing company, even if you are not the owner of said company,” he writes.  “Maybe that’s not good enough for the plumber’s union to consider you a plumber, but for 95 percent of people, that job description sounds like ‘plumber.'”
However, JOE THE PLUMBER is about to purchase a small business that nets more than $250,000/year – the magic number at which Obama will increase taxes –

Joe asked Obama why after working hard for so many years he should be taxed?
TAXHITMAN COMMENTARY:

A FEW QUESTIONS FOR Joe –

You think your gonna buy an existing business and suddenly pay no taxes?  or encounter no problems?

Your now a “small business owner” and your on “Easy street”?
If this guy = “JOE THE PLUMBER” _ thinks that he will make A hug”net” in the small business he is buying, he has a whole wake-up call to reality.

Most of the time the seller’s reported “net” — even after adding back to cash flow all of the “PERKS” the owner pays himself from the business coffers– (e.g. auto expenses, travel and entertainment [incl. “escort services”], salary to his trophy wife for “cooking the books”, etc.  ) —   the cash flow is a complete “moving target” for the buyer of the business.

EXAMPLE, this guy is in for a few business expenses called “START-UP” costs:

TYPE              /         AMOUNT

accounting fees   /   $300-1,000)
legal fees –       /      unlimited (sorry!)
license fees — /        UNKNOWN
(Yes Joe, your gonna need your own license or you will be unable to sue anyone for not paying your exorbitant PLUMBING bill [at least under Michigan Law].
franchise fees /       VARIES if it is a franchise
Deposits on New rental location TO PARK the TRUCKS (unless Joe lives next to Fred Sanford)

Guess what? these EXPENSES are considered “START-UP” costs and not deductible in full — yep, they are what is called capitalized and amortized over 5 years —

Joe has to deduct his new “start-up” business costs over a five year period.

While I admit very few accountants understand this, nor do they care to figure it out. I DO!

NOTE: the IRS made it easy and NO LONGER REQUIRES A “WRITTEN ELECTION” TO AMORTIZE the start-up expenses TO BE ATTACHED TO THE RETURN (this new rule was recently released for 2008 tax returns).

WHO CARES?

Your right — too technical for most folks — TAX SIMPLIFICATION IS A MUST  – yea right!!

Now to the next point – FINANCING THE PURCHASE OF THE NEW BUSINESS.

Since Joe is already delinquent on back taxes  I am sure he will be unable to go to a bank and obtain a loan to purchase the business SINCE HIS CREDIT SCORE HAS BEEN SHOT BY THE IRS DEBT.
NOT from a bank in these tight credit times.

Seller financed? — meaning the seller will finance the sale of his business?

In Toledo? A commercial or residential plumbing  contracting business is controlled by a predominantly unionized workforce, THEREFORE, GUESS WHO THE SELLER IS or CONNECTED TO?

Can anyone sing the theme from the “SOPRANOS”?  .

THE BIG ISSUE:  HIRING HIS OWN EMPLOYEES

Now Joe the Plumber gets to the fun part of starting his own business: Hiring employees.

He can go to the following website of the IRS for help:

http://www.irs.gov/businesses/small/article/0,,id=98164,00.html

Now, remember the three biggest lies we hear every week in our lives?

1) I love you

2) The check is in the mail (get used to this one Joe as a small business owner you will hear it a lot!); and

3) Hi, I am from the government and I am here to help you.

Guess the IRS website will not be of much help.

If all of this is too much for you “skilled labor” types  — use the following link to play the new “Joe the Plumber” game on Comedy Central:.

http://blog.indecision2008.com/2008/10/17/joe-the-plumber-the-game/

HAVE FUN WITH IT AND WATCH THE pundits make a fool of the real “JOE THE PLUMBER” .  except for Fox news, which is holding him up as the “poster boy” for an overtaxed and over regulated business man\\

Boo Hoo.

As Bruce Willis in the first “Die Hard” movie screamed “WELCOME TO THE PARTY, PAL!!!

Sincerely,

THE TAX HITMAN — keep the complexities coming as my profession heats up for a new tax season — Jan 1, 2009 to April 15, 2009. and after BO wins the following tax season will be even more complicated – mark my words.

CIIRCULAR 230 DISCLOSURE: Any tax advice in this e-mail, including attachments, may not be used to avoid penalties or promote any tax related matter.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s