The 1 percent find ways to save on their taxes. Why can't you and I?
A new website called TaxKilla.com says we can, and encourages the 99 percent to follow Mitt Romney's lead.
How would you like to deduct the cost of gas from your taxable income? Or perhaps write-off your new laptop?
TaxKilla says the trick to doing this is understanding the tax code, which of course is complicated. But thanks to the site's founders -- two former Wall Street insiders -- navigating the ins and outs just got a lot easier.
TaxKilla won't tell you how to set up an offshore bank account, or offer instructions for making your work wages look like capital gains, but it does suggest we "remove [ourselves] from the slaughter line of wage earners" by creating a business entity, in order to write off certain costs and make our tax bills cheaper.
"The 1 percent have been doing this for years," Jen Powers, a co-founder of the site, told The Huffington Post. "We're not reinventing the wheel."
Powers and her ex-husband Fred Buddemeyer, who both worked on Wall Street in '80s, founded TaxKilla as their way to take part in the Occupy Wall Street movement. They figured the best way to do that was to help others turn a passion into a cash-saving mechanism.
With a name fit for a hip-hop song, TaxKilla gives examples of what types of activities can qualify as a business entity:
Say for example that you like to travel frequently. If you blog about your journeys and add an advertising network to your blog you now have a travel business. Its deductible expenses are a share of your travel costs, your computer, your internet connection, your camera, etc.
Could any hobby, like travel blogging, qualify? Well, no. You'll have to convince the IRS you're actually in it for the money. If your "hobby" is profitable three out of five years, the IRS will consider it a business. But the IRS will get suspicious if your entity is only taking losses.
Once you do establish a business entity -- according to the TaxKilla website that should take about two days -- fill out a Schedule C tax form and deduct work-related expenses like computers, cars and business lunches from your income.
Mitt Romney’s Schedule C form showed his speaker fees in 2010 earned him a $48,756 deduction for expenses.
Powers and Buddemeyer consulted with a lawyer before launching the site who told them TaxKilla wasn't providing any new information not already available on the IRS website. TaxKilla, Powers says, is only repackaging that information in a way that is readable for the 99 percent.
While the tactic is legal, a recent New York Times article described running your own business as "the easiest way to cheat on your taxes."
Greg Kyte, a Utah C.P.A., told the Times:
You can look through your receipts for the year and say, ‘Here’s some stuff I bought at Home Depot,’... The I.R.S. would have no idea if I bought that for my house or for my business.
What are the chances the IRS will come a knockin' if they think you're doing something fishy? That depends on how much you make. If you're making more than a $1 million, you have more than a one in eight chance of being audited. Overall, only 1 percent of individuals were audited in 2011.
Powers was adamant that what they're encouraging is not illegal.
"What I want to make clear is tax dodging is not our intention at all," she said. "We want people to file and pay but to be smart about how they do it."
If you have a hobby you think qualifies as a business entity, you'll have to jump on this fast, as the deadline for filing income tax returns is April 17. If you think you'll need more time to complete your taxes, be sure to file an extension with the IRS.
BEFORE YOU GO
Check out some of the most significant tax breaks the super rich take advantage of.