What if Joe Louis Had a Good Tax Adviser?

Small mistakes can cost you big.

That's what famous heavyweight boxing champion Joe Louis found out the hard way.

Louis earned big money boxing during the time of WWII. In fact, he earned over $370,000 in his first two years as a professional boxer. That's equal to over six million dollars in 2015 dollars.

Louis was a stand-up guy and was generous with his money:

• He voluntarily paid back all the welfare payments his stepfather had received during the depression.
• He bought uniforms for some black army officers.
• After the bombing of Pearl Harbor he donated his entire winnings from a fight to the Naval Relief Fund, then the winnings from another fight to the Army Relief Fund, and more.

But something else was going on while Louis was punching his way to prosperity: Uncle Sam was busy raising income tax rates on Americans like Louis. When he first started his boxing career, the top marginal income tax rate was only 24%. By the time he started making serious money the top rate had jumped to 79%.

That's right, Louis had to fork over 79% of his winnings to Uncle Sam. But it only gets worse. During WWII the tax rate jumped to 90%. And, it gets even worse.

The IRS would not let Louis deduct the winnings he donated to the Naval and Army Relief Funds because he endorsed the check in his own name before donating the money. He had receipt of the funds so they became income to him.

Interest and penalties on Louis' IRS debt were so high that he was never able to pay it. He died broke. That's the short version of the story.

William N. Goodman, CPA of Easton Pennsylvania wrote up an eye-opening and very sad account of the IRS's persecution of Joe Louis.

If only Louis had the advice of a good tax adviser his life could have been completely different.

Fair Tax, Flat Tax, Sales Tax, No Tax: What's It Going to Be?

What's in the future for tax return preparers and tax advisors? Is Rand Paul going to do away with the IRS and put us all out of business? Here's what I think about that:

How long have we been hearing about a flat tax now? Or the Fair Tax?

They've never even been seriously considered by Congress. And the idea of getting rid of the IRS is absolutely laughable. Congress and the courts can't even make the IRS cough up emails "lost" after it was admitted they inappropriately targeted conservative nonprofits. The IRS is now hopelessly entangled in monitoring and enforcing our health care and all the new taxes levied on various participants in the Affordable Care Act. Think that's going away? Not if the Supreme Court has any say in the matter.

While wishful thinkers keep dreaming about fairer taxes and "simplification," the tax code just keeps getting longer and more complicated. There is no end in sight.

I like Rand Paul, but his "flat tax" ain't gonna happen.

Think of all the interests involved. Tax lawyers, CPAs, Enrolled Agents, huge tax preparation software and tax law research companies like CCH and Thomson Reuters. Do you think they are just going to roll over and play dead while Congress does away with federal income taxes? Not a chance.

No matter which philosophical or ideological side you take, the reality is that the United States of America is going full-on Socialist. "Immigrants" are pouring over the border by the millions. Here are some facts about our new residents: More than half are on government assistance, and way more than half vote Democrat. And Democrats never met a tax they didn't like. The more uneducated, unemployed immigrants we have, the more taxes the government is going to have to collect to provide for them.

The cost of government is going up, not down. The Congress and the IRS are right now trying to figure out how to raise taxes on citizens. Do you think that money you and your clients have stuffed in a Roth IRA is coming out tax free 25 years from now? (Refer to laughing video above).

I have no doubt that this country will end up with a national sales tax one day. But it will be in addition to the income tax, not in place of the income tax. Taxes are going up!

This country is going to continue to need ever more sophisticated and educated tax professionals to help people pay the lowest taxes possible. And as the government, banks, and nonprofits continue to wage a war on cash, more and more business transactions will be made electronically. This means there will be a high demand for tax professionals that are proficient with all types of electronic transaction based software like Quickbooks, Freshbooks, Bill.com, and PayPal or other third-party payment processing integration, in addition to tax software like ProSeries, Drake, Lacerte and others.

Tax advising is a growing, in-demand profession. Don't let the big talk about tax reform cause you to hesitate. Get on it, if that's what you want to do.