Keep Your Money From the Taxman… Without Going to Jail

Two million dollars is enough money to make most people act a little crazy...

In 1999, Wesley Snipes was at the height of his acting career. He had appeared in a string of successful films dating back 10 years, and he had just starred in the blockbuster superhero movie Blade.

Over the next five years, Snipes would rake in about $38 million as an actor.

And then he would go to jail.

You see, Snipes' 1999 tax bill from the IRS came to around $2 million. He was desperate to hold on to his money, and he was open to suggestions.

That's when a friend introduced Snipes to the aptly named Eddie Ray Kahn, who was the "overseer" of a tax-dodge operation called the Guiding Light of God Ministries. Pay Kahn $25, and he'd send you a "bill of exchange" that you could use to pay your taxes. Of course, they were worthless. But their face value totaled more than $1 billion.

The group also denied the government had the right to charge income taxes. It based its theory on nonsensical interpretations of U.S. law.

For instance, one statute gives the government power to levy taxes on "compensation for services." Tax deniers, including Snipes and Kahn, argue that this phrase doesn't include wages as a type of taxable income. The government disagrees.

Another section of the tax code states that foreign sources of income are taxable. Tax deniers argue that means that only foreign income is taxable. That hasn't held up in court.

Some people claim to be sovereign individuals not subject to U.S. law. Snipes declared himself a "non-resident alien" despite being born in Orlando.

Eventually, the feds cracked down on the Guiding Light of God scheme... and charged Kahn and Snipes (along with one other man) with a range of tax-fraud charges.

Snipes himself was acquitted of the most serious criminal charges. Instead, the jury decided he was the victim of bad advice and placed the blame on Kahn. Kahn was sentenced to 10 years in prison and served four.

But Snipes did serve three years for tax problems unrelated to the case with Kahn. For instance, in prior years he sent bogus checks for $14 million, altered tax returns to the IRS, and filed a false refund request for $7 million.

Let's be clear... There's a reason people joke that taxes are as inevitable as death.

You have to pay them, period. But... that doesn't mean you have to fork over every dollar without trying to save some for yourself. The aptly named federal judge Learned Hand famously summarized this idea in a 1947 dissenting opinion:

Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

We feel the same way. We have a personal obsession with cutting taxes and keeping our own money in our pockets.

But tax issues are always tricky. The best strategies and loopholes vary depending on your personal financial situation. It's hard to publish advice that applies to everyone. There's no one-tax-trick-fits-all.

In a recent issue of Retirement Millionaire, I gave readers a road map to get started. Rather than a complex, technical treatise on IRS regulations, I shared the starting points for the top tax tricks that may apply to you.

If you're not already a Retirement Millionaire subscriber, you can get started today, right here. (If you're a subscriber, you can read our tax tips here.)

QI like what you write about taking vitamin C, but I prefer to get mine through eating oranges. If I felt a cold coming on, how many oranges would I need to eat each day? – J.K.

A: I take at least 1,000 milligrams of vitamin C almost daily during the cold winter months. When I feel a cold coming on, I bump up my intake to 3,000 to 4,000 milligrams a day for a couple of days to knock out the virus. A vitamin C supplement is one of the few supplements that isn't a scam.

If you want to get the same about of vitamin C without supplements, you're going to need to eat a lot. As I mentioned on Tuesday, you can get vitamin C through foods like citrus fruits, peppers, and broccoli. It's not enough to fight off a cold, but it's a good way to bump up your immune system.

A large orange contains about 100 mg of vitamin C, which means you'd need to eat 30 to 40 oranges to equal my vitamin C blitz. I love oranges, but not that much.

Q: First, go 49ers! Second, if the Super Bowl isn't a good indicator, what about the election? Should I be worried about who wins and what it'll do to my portfolio? – T.R.

A: Throughout history, elections haven't meant much to investors.

According to the brokerage firm LPL Financial, from 1950 to 2017, the S&P 500 generated a 15.9% return under a Democratic president with a split Congress and a 15.7% return under a Republican president with a split Congress.

Market volatility often spikes in the days leading up to an election. After it's over, there's a sigh of relief no matter the outcome because the uncertainty is gone.

I advise investors against getting too worked up about these types of so-called indicators or making huge portfolio moves based on a single prediction.

I prefer looking at real indicators like consumer debt, unemployment, and manufacturing to get a read on the economy and where the markets are heading.

But, as I've said before, I don't like making predictions. I prefer to pack my portfolio with stocks that will help me sleep well at night and let everyone else do all the worrying.

Q: I love your health suggestions. What do you know about the antioxidants in blackberries? – J.K.

A: Blackberries are an excellent source of antioxidants. Like blueberries, blackberries get their power from anthocyanins. These molecules are a type of antioxidant. They're responsible for fighting "free radicals" – molecules that damage healthy cells. Antioxidants fight these cell-damaging molecules.

Blackberries also help lower cholesterol and fight cancer. And they improve your immune system because they're packed with vitamin C. Their high amounts of potassium and salicylate (an ingredient in aspirin) may help protect you from high blood pressure.

Please keep sending your questions, comments, and suggestions to us... [email protected].

What We're Reading...

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
January 24, 2020