Wednesday, March 4, 2015

You Taxin' Me?

Actor Robert DeNiro has played some of the most compelling characters in movie history: the schizophrenic ex-marine Travis Bickle in Taxi Driver, the young mob boss Vito Corleone in The Godfather Part II, the Chicago bootlegger Al Capone in The Untouchables, the "gentleman" gangster Jimmy Conway in Goodfellas, and the shrewd bookmaker "Ace" Rothstein in Casino. He's accumulated seven Oscar nominations for his work (including two wins), along with nine Golden Globe nods (two wins), dozens of other awards, and even a star turn as Harvard's Hasty Pudding Club Man of the Year.
But DeNiro is more than just an actor. He's also a shrewd businessman and entrepreneur. He's co-founded the TriBeCa Productions studio and TriBeCa Film Festival, and partnered with successful real estate and restaurant developers throughout the city. He's even starred in "I Love NY"commercials promoting Hudson Valley tourism. (If Travis Bickle were still driving today — perhaps for Uber? — he wouldn't recognize the streets. Ironically, DeNiro is partly responsible for that cleanup!) DeNiro's business ventures have given him a $200 million net worth. And for a brief moment last month, they led to a $6.4 million back tax bill.
This isn't the first time DeNiro has made news for his taxes. His first fight involved a 98-acre compound he owns in the Hudson Valley town of Gardiner, which the New York Times reports includes a house, "two guesthouses; a 14,000-square foot barn converted into a recreation center with a full gym, a swimming pool, boxing ring and film production suites; another barn turned into offices; tennis courts; and a ski slope." In 2006, the trustees controlling the property sued the town to lower the assessed value, which was pegged at $6 million. The trustees argued it was worth $4 million, while the town countered it was actually worth closer to $9 million.
The town won and the trust's lawyers appealed that decision. But by that point, the town's legal bills dwarfed the extra tax they stood to collect, and the town's residents were turning against DeNiro. (It may not have been quite like how Jimmy Conway turned against Henry Hill in Goodfellas, but it certainly wasn't pleasant.) When DeNiro learned the trust's lawyers had filed their appeal, he threw a fit that would have made Travis Bickle proud, withdrew the suit, and ordered his accountant to reimburse the town for $129,000 in legal fees.
DeNiro's latest tax issue involves our friends at the IRS, with even more money at stake. Last month, the IRS filed a lien to collect $6,410,449.20 he owed on his 2013 personal return. That amount naturally includes interest and penalties that accumulated over time, but had to be a big bill to start out with!
Fortunately for everyone involved, DeNiro's latest tax caper has a happy ending. That's refreshing, considering how many of the characters he plays end up dead or in prison. His spokesman reported that the IRS bills had been "sent to an old address," and once the actor learned about the debt, "he had a check for the full amount hand delivered to the IRS" the next morning. Apparently it's good to be worth $200 million — even if you have so many addresses the IRS can't find the right one to send the bills!

Hollywood's brightest stars aren't generally known for their financial smarts. DeNiro is an exception to that rule, but his success still hasn't guaranteed him an easy time with the tax man. That's why it's so important to have the right advisors on your side, advocates who can help you pay the least amount possible with the least hassle possible. And that process starts with a plan. So call us when you're ready for your star turn!

Tuesday, February 24, 2015

It's Freezing Where?

Taxpayers across much of the Midwest and East coast have enjoyed a relatively light winter this year, with mild temperatures and little snow. But Old Man Winter made up for it last week. Temperatures dropped well below zero and wind chills broke records across the country. Friday morning saw thermometers dip below freezing in the Florida Everglades, and parts of North Carolina were colder than in Barrow, Alaska!
Care to guess where else temperatures have been falling? If you said "in Hell," you're right. That's because the House of Representatives, where gridlock appears to have found a permanent home, actually passed a bipartisan tax bill last week. The America Gives More Act would take three of those maddeningly "temporary" tax breaks that Congress barely manages to extend every year, and make them permanent. As the name implies, all three are intended to reward charitable giving:
  1. It lets taxpayers age 70½ and older contribute up to $100,000 per year from their IRAs directly to charity in lieu of taxable required minimum distributions.
  2. It lets taxpayers deduct gifts of "conservation easements" up to 50% of adjusted gross income (rather than the current 30%) and carry forward any unused balance for up to 15 years.
  3. Finally, it extends "above basis" deductions for food donations from business inventories. Usually, when you give something out of your business inventory to charity, your deduction is limited to the cost you paid for the item. However, if you donate "wholesome" food inventories, you can deduct either: 1) the price you paid plus one-half of your expected profit, or 2) twice the price you paid. (We can only imagine how many hours some clever lawyer working for Frito-Lay will get to bill arguing that Cheetos' new "Sweetos" cinnamon-sugar puffs qualify as "wholesome.")
As we all remember from Schoolhouse Rock, the bill now heads across the Hill to the Senate. Unfortunately, extending the three tax breaks would cost the Treasury $12.2 billion over the next 10 years, and the bill does nothing to replace that lost revenue. So President Obama has already pledged to veto it. Well, can't blame the House for trying, right?
"Comprehensive tax reform" is one of those lip-service goals that everyone in Washington says they support. But the political obstacles to making tax reform happen are so daunting that even the CSI team would be hard-pressed to discover who killed it. (Democrats insist it was Speaker Boehner in the Conservatory with the lead pipe, while Republicans point to Minority Leader Reid in the Library with the candlestick.) But last week's vote shows that individual reforms just might still stand a chance.
What's next? Well, a bipartisan group of Kentucky and Tennessee legislators have introduced a bill letting whiskey distillers deduct their production expenses currently, rather than capitalizing them for up to 20 years while the product ages. Members of Congress — whom Mark Twain described as the only "distinctly native American criminal class" — have a reputation for loving their whiskey. So the Aged Distilled Spirits Competitiveness Act of 2015 should have a bright future!
In the meantime, you don't have to wait for Washington to act to pay less tax. You just have to call us for a plan. We'll show you how to use the rules already in the tax code to pay the least amount allowed, so you can give more to whomever you like!

Monday, February 16, 2015

Baby, Don't Leave

State governments collect billions of dollars in taxes every year, and they work just as hard to protect their revenue base as their friends at the IRS. Sometimes that means putting lots of eggs in one basket — then watching that basket very, very carefully. But one state acknowledges taking that particular strategy to a new level. In a move that falls somewhere between "I can't believe they haven't done this already," and "Wow, that sure sounds like stalking," the Connecticut Department of Revenue Services has revealed they're "keeping an eye" on their top 100 individual taxpayers to make sure they don't leave the state — and take their taxable income with them.
Connecticut residents boast the fourth-highest median household income of any state in the country. It takes $678,000 per year to join the much-discussed "top 1%" club, compared to $389,000 for the United States as a whole. But we're not talking about dime-a-dozen Wall Streeters here. We're not talking "the millionaire next door." No, we're talking true fat cats. James Bond-villain money. Guys who are literally buried in so much cash it would take an entire village full of torch-wielding peasants to storm them out of their castles.
Let's take a closer look at one of the state's new pals. Steve Cohen is a hedge fund manager who lives in Greenwich in a 35,000 square foot home with an ice-skating rink the size of the one at Rockefeller Center and a two-hole golf course. He charges his clients four percent of the assets he manages, plus up to 50% of their gains. Forbes magazine reports that he hauled in $2.3 billion in 2014. (That's right, "billion" with a "b.") The Nutmeg State's top tax rate is 6.7%. A little fourth-grade math tells you the state siphoned $154.1 million out of Cohen's bulging pockets.
Now let's put that tax bill in a broader perspective. Connecticut's budget for Fiscal 2013 was $28.1 billion. That means Cohen picked up more than half a percent of the state government's entire tab for the year, all by himself. (Ironically, last year Cohen closed his fund to outside investors in the wake of an insider-trading scandal, which will virtually eliminate his earned income. We doubt that federal prosecutors were thinking about his state tax bill when they filed charges against his fund!)
Cohen's income may have vaulted him to the top of the heap. But he's hardly the only super-earner to make it rain in Connecticut. One accounting firm with offices in Greenwich reports preparing tax returns for <>three unidentified Nutmeggers with billion-dollar incomes. Ray Dalio, head of Bridgewater Associates, raked in $900 million in 2013. (Sure, that sounds like a lot, but it's actually down from $3 billion in 2011). Paul Tudor Jones, who lives in a Monticello-inspired mansion with a 25-car garage, scored $700 million.
"There are probably a handful of people, five to seven people, who if they just picked up and went, you would see that in the revenue stream," says Kevin Sullivan, the Department's commissioner. Two years ago, Sullivan adds, his office heard that one particular hedge funder might be leaving, and set up a meeting to urge him to stay. The manager moved (d'oh!), but agreed to keep his company back in "the little state that could."

Would you be flattered if you knew the government was watching your tax payments like a jealous lover? Or would you be creeped out? Either way, you'd probably want to pay less so you could disappear from that particular radar. That's where we come in. We give you a plan to keep as much as you legally can, no matter where you earn your income. So call us — unless you're looking for a new best friend!

Tuesday, February 10, 2015

Patriots 28, Seahawks 24, IRS Millions

You probably thought the holiday season ended when the last Christmas lights finally came off the house. But then you would have forgotten the closest thing we have to a national fair. We're talking, of course, about the Super Bowl, our only nationally-televised event that makes people look forward to the commercials as much as the game!
This year's contest was another nail-biter that remained close until New England cornerback Malcolm Butler intercepted a Seattle goal-line pass with just 20 seconds left on the clock. (If the Patriots want the rest of the NFL to take their "dynasty" seriously, they're going to have to learn how to blow someone out like the 1990s-era San Francisco 49ers used to do!) But while Pats fans may be cheering loudest, there's another group that's cheering too, and that's the team at the IRS.
New England quarterback Tom Brady became just the third NFL passer to take home a fourth Super Bowl ring. He also took home a $400,000 bonus for his effort. (Brady and his wife, supermodel Giselle Bundchen, had to scrape by on about $60 million last year, so the cash is probably welcome.) And General Motors gave him a loaded Chevy Colorado pickup truck worth $35,000 for winning the MVP trophy, too.
So . . . the IRS intercepts 39.6% for income tax and 3.8% for Medicare on Brady's $400,000. The Massachusetts Department of Revenue picks off 5.2% more, and you can see why the tax man leaves Brady so . . . deflated. (Sorry.) Multiply that by everyone on the Patriots roster, and now you know why the receivers at the IRS cheer for every Super Bowl winner!
Now, Brady is awfully glad that Malcolm Butler intercepted that pass. So instead of taking that Chevy truck for himself, he's giving it to Butler. But that creates a tax problem. You see, if Brady takes the prize himself, then laterals it to Butler, Brady pays the same federal and state income and Medicare taxes on the truck as he does on his $400,000 cash bonus — but then he has to contend with gift tax, too. Brady can give up to the $14,000 "annual exclusion" amount, free from tax, to as many people as he likes in a year. If Brady and his spouse Giselle make a gift together, they can double that amount to $28,000. Anything above that annual exclusion eats away at Brady's $5.43 million "unified credit" against gift and estate taxes. Any gifts he makes during his life that aren't sheltered by the annual exclusion or unified credit are subject to a 40% tax. (Don't worry if none of this makes any sense — understanding it all is why estate tax lawyers drive Jaguars.)
But nobody wants to see Brady get sacked with extra taxes. So instead of giving the truck to Brady (to give to Butler), Chevy is shotgunning the truck directly to Butler. That means the undrafted 24-year-old rookie, whose career highlights include passing thousands of battered chickens into the fryer at his hometown Popeyes, will pay the same income and Medicare taxes that Brady would have paid. But calling the audible on the transfer to Butler protects Brady from the gift tax blitz.
Brady's running a play called "tax planning." It's saving him thousands. And it's not even one of Coach Bill Belichek's clever tricks! Here's some more good news — you don't have to be Super Bowl MVP to run the same play yourself. Just call us when you're ready to suit up against the IRS. And remember, we're here for your teammates too!

Tuesday, February 3, 2015

The Postman Always Rings Twice

Getting mail from the IRS is rarely something to celebrate. If it's a bill, consider yourself lucky — at least you can just pay it and be done. If it's a "CP 2000" notice proposing a change to your taxes, get ready for a ride on the paperwork tilt-a-whirl. If it's an audit notice, all bets are off. (Relax — it only feels like you're a prisoner at a CIA black-ops site.)
But one taxpayer may have won the booby prize for "worst IRS correspondence ever" when he got a letter helpfully notifying him he had died. Deceased. Croaked. Bought the farm.
Siegfried Meinstein is 94-year-old World War II veteran. He's currently enjoying his retirement in an assisted-living facility just outside Columbus, Ohio. And granted, he is 94 — but plenty of 94-year-olds are doing just fine, thankyouverymuch. Here's how Fox News summed up his story:
" . . . The old-timer’s troubles began in April when he filed his tax return online through his accountant. The IRS rejected the return and the reason given was because the filer was dead according to the Social Security Administration.
A few days later, Meinstein and his son went to the Social Security office in Columbus and were told that their records did not list the elder Meinstein as deceased. The office gave the Meinsteins a letter to send to the IRS. They did, only to have the IRS kick it back to Social Security.
There was some back-and-forth and then Meinstein and his son visited the local IRS office where they were informed that the problem would be resolved.
Instead, the senior citizen received a letter from the IRS that said, 'We are unable to process your tax return. Our records indicate that the person identified as the primary taxpayer…was deceased prior the tax year shown on the tax form.'"
The IRS sent another letter reminding him that he was still dead in September. And again in November. His daughter-in-law appealed to the Taxpayer Advocate's office, which resolves problems that fall through the regular IRS cracks, and they said they had miraculously brought Meinstein back to life. Then, like a bad penny, the letter showed up again in December. The IRS says they're working to resolve the problem. But of course the gears of bureaucracy grind very slooooooooowly, and they're slowing even further after recent budget cuts. Here's hoping the IRS gets it all fixed before Meinstein owes estate tax!
In the meantime, being dead doesn't seem to be cramping Meinstein's style. "It isn't really a problem in my daily life," he told the Columbus Dispatch. "Everybody accepts my money." Even the IRS still cashes his checks!
If you're alive to read this, congratulations! Dealing with taxes isn't much fun, but it's a key to your financial defense, and a crucial part of any financial plan. So call us when you're ready for a plan to pay less, and here's to a long and healthy life!

Tuesday, January 27, 2015

Some Modest Proposals

Here in America, most of our tax debates center on "income." How do we define it? How do we count it? What do we get to exclude from it, deduct from it, or credit towards it. And finally, how much of it do we take, to make sure everyone pays their "fair" share. The end result is our tax code, a many-headed hydra that several wags have noted contains twice as many words as the Bible, but with none of the good news.
Of course, income isn't the only thing we tax. Uncle Sam and most states tax sales. They tax estates and inheritances. They tax medical devices. They tax booze and cigarettes to discourage consumption. (Of course, the real addicts are the governments who count on that revenue!) Politicians of both parties have even proposed taxing carbon emissions and financial transactions.
So, that got us to thinking . . . what else could clever politicians think of to tax? Who would be the winners under the new rules? And who would be the losers?
  • Excuses. They say excuses are like . . . well, you know — every one's got one. Here's the thing. Nobody likes hearing excuses, but it's hard to make it through the day without making at least one or two. That makes them perfect for taxing! Big winners under an "excuse tax" include every annoying perfectionist you've ever known in your life, who skates by without ever paying the tax. Biglosers would include the quarterback who throws the game-losing interception, the actor who releases the latest Hollywood bomb, and all 535 members of the United States Congress!
  • Showing Up Late. We all know how irritating it is to work hard to be ready on time, then sit around waiting for someone else to show up. So why not tax it instead of just grumbling? A "tardy tax" would raise millions, at least in theory. The hard part, of course, would be waiting for people to actually pay it. (Hmmmm, maybe not such a good idea after all.)
  • Snooze Buttons. Pretty soon we'll reach a point when everything we own is wired to the internet — even our alarm clocks! That will make it easy to impose a snooze button tax. Hit the button for nine more blessed minutes of sleep, and the IRS automatically "dings" your iTunes account for a buck or two. But just watch those collections grow! Clearly, the Monday after the Super Bowl will be the most lucrative day in government history!
  • Screaming Children. Whitney Houston sang "I believe the children are our future. Teach them well and let them lead the way." Kinda makes you wonder if she ever had to sit through a four-hour flight with a toddler screaming her head off about about a toy, a snack, or a loaded diaper. (Hint: it's not really "First Class" if there's someone else's baby throwing a fit across the aisle from you!) Look, we know our kids are always adorable little angels — but wouldn't it be great if we could make a little tax revenue from someone else's screaming brat?
What do you think? Let us know what you'd like to see taxed, and maybe we'll compile them for a future email.

In the meantime, of course, we're still stuck paying traditional income taxes, and still stuck wishing we could pay less. And the best way to do that is to make a plan. So stop making excuses, stop hitting that snooze button, and call us for your plan!

Monday, January 19, 2015

The Most Wonderful Time of the Year?

Way back in 1963, the singer Andy Williams introduced one of the most popular Christmas songs of all time: "It's the Most Wonderful Time of the Year." Decades later, the office-supply store Staples re-purposed it to sell school supplies, and Miller recycled it once again to sell light beer. But for our friends at the IRS, the most wonderful time of the year starts right now. So here are some tax time quotes to get you in the spirit of the season:
"It’s tax time. I know this because I’m staring at documents that make no sense to me, no matter how many beers I drink."
Dave Barry
"Nuclear physics is much easier than tax law. It’s rational and always works the same way."
Jerold Rochwald
"I don’t care anymore whether I pay more taxes or less taxes, as long as I don’t have to understand it."
Bob Thaves ("Frank & Ernest")
"If you make any money, the government shoves you in the creek once a year with it in your pockets, and all that don’t get wet you can keep."
Will Rogers
"You don't pay taxes — they take taxes!"
Chris Rock
"Nothing makes a man and wife feel closer, these days, than a joint tax return."
Gil Stern
"U.S. Internal Revenue Service: an agency modeled after the revenue raising concepts of the 19th century economist, Jesse James."
Robert Brault
"It would be nice if we could all pay our taxes with a smile, but normally cash is required."

Sure, writers and columnists like Will Rogers and Dave Barry can make you laugh at the tax man. But can they actually help you pay less? No! And there's nothing funny about wasting money on tax you don't have to pay. So call us when you're ready for a plan, and you'll enjoy having the last laugh on the IRS!