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!

Tuesday, January 13, 2015

Trick Play Backfires; Team Thrown for Loss

College football fans have been crying for a season-ending playoff tournament for years, to replace the invitational "bowl championship" series that usually prompted as many questions as it answered. Monday night they got their wish, as the third-string quarterback Cardale Jones and the Ohio State Buckeyes overcame four turnovers to stun the Oregon Ducks, 42-20, in the very first College Football Playoff Championship Game.
Somewhere lower in the college football hierarchy, the University of South Dakota Coyotes aren't anyone's idea of national champions. They didn't even play Division I ball until 2008, when they joined the Missouri Valley Football Conference. This year's squad eked out just two wins, against William Penn's Statesmen and Northern Arizona's Lumberjacks. But one group of players took an even tougher hit. And their opponents weren't even wearing pads or cleats! What happened? Well, they challenged the team at the IRS — and they got thrown for a big loss.
Alphonso "Rico" Valdez grew up in Tampa, Florida, and graduated from Chamberlain High School before heading to the prairie to play cornerback for the 'Yotes. Maybe he felt exploited, playing for scholarship money instead of cold hard cash. But he didn't have the chops to go pro. So he recruited his own team of 11 conspirators, picking up some of his USD teammates, a former student government president who had been impeached for misusing student funds, and some friends from back home. Together, the group collected random names, addresses, and Social Security numbers, then used that information to file false tax returns on behalf of the victims and request fraudulent refunds in the form of prepaid debit cards.
We're not sure if any of the conspirators majored in accounting or not, but either way, pre-law probably would have been a smarter choice. The scheme came to light on a warm April day in 2012, when the criminal mastermind Valdez traded his helmet for sunglasses and a stocking cap, then made trip after trip to an ATM to convert those cards into cash. A concerned citizen noticed his unsportsmanlike conduct and called local police, who used surveillance video to pull the first string that eventually unwound the entire scheme.
The team scored $421,000 over the course of their "season" before officials threw a flag. Prosecutors don't know what happened to the money — they say there were no Mercedes-Benzes, no Louis Vuitton, and no Tiffany jewelry. USD athletic director Dave Herbster said "I'm not even sure that any of them had a car while they were here, and if they did, it probably wasn't a nice one."
At least they had the good sense to plead guilty to various charges of conspiracy and identity theft, and save real taxpayers the cost of a trial. They're even saying they're sorry! Valdez wants to become a high school football coach and show children they can further their education despite their mistakes. His girlfriend, Melissa Dinataly, said "the world is corrupt enough as it is. I shouldn't have done this." Of course, these aren't five-yard penalties — the whole team is headed to jail, for terms ranging from two to five years. They say prison life is structured — more than some people care for! So we'll see if the same discipline that helped Valdez excel on the field helps him excel in the yard.
Football fans are all familiar with the maxim that "offense sells tickets; defense wins championships." When it comes to your finances, the same rule holds true, and smart tax planning is the key to your financial defense. So call us to get the game plan you need to pay less tax — and remember, we're here for your teammates, too!

Monday, January 5, 2015

A Royal Mess!

Most of us don't get to choose our parents. And while we're usually grateful for the ones we have, we've also dreamed of lives that might have been. What little girl hasn't dreamed of growing up a princess, living in a palace, riding in a horse-drawn carriage, wearing a tiara? And don't forget marrying a handsome prince!
Infanta Cristina de Borbon, Duchess of Palma de Mallorca, is the brother of Spain's King Felipe VI and sixth in line to the Monarquía Hispánica. The Infanta grew up in the Royal Palace of Madrid, where she probably logged a ride or two in a carriage. And yes, she wore her mother's diamond-crusted floral tiara at her wedding. But she chose a thoroughly modern career, graduating from college, earning a master's degree in international relations at New York University, and working for UNESCO in Paris. Today she's a working mom of four children. She's also — if you believe Spanish judge Jose Castro — a tax cheat, named in a corruption scandal that's rocking Spanish society.
Cristina's husband, Iñaki Urdangarin, isn't a prince. But he's a former pro handball player and Olympian. (That's close, right?) Urdangarin, who was named Duke of Mallorca upon his marriage, is accused of embezzling €6 million ($7.4 million) in public funds through the Instituto Nóos, a charitable foundation he ran. Prosecutors say that he organized a series of sporting events for the regional governments of the Balearic Islands and Valencia — and hugely overcharged them.
Cristina hasn't been accused of participating directly in the fraud. However, she and her husband co-owned a company called Aizoon that received €1 million from the sports foundation, money that she and her husband used for personal expenses like furniture for their house in Barcelona, salsa lessons, and pricey hotel stays. Naturally, there were no taxes paid on those funds. The judge says "There are many indications that Cristina profited from illegal funds on her own behalf, and also helped her husband to do so, through silent cooperation and a 50% stake in his business." The judge also says that letting Cristina off the hook "would leave the question open and discredit the notion that justice is equal for all."
So now Cristina faces charges of failing to pay her taxes — quite a comedown for a member of a royal family that used to collect them rather than pay them! If she's convicted, she could spend the next few years in considerably "common" quarters — no palace, no carriage, and certainly no tiaras. (Of course, that's less punishment than a misbehaving royal might have gotten a few hundred years ago. Britain's Henry VIII never bothered imprisoning his ex-wives, he just beheaded them!)
Spain's monarchy has already suffered a series of PR hits after Cristina's father, King Juan Carlos, took a lavish trip to hunt elephants in Botswana at a time when Spanish unemployment was topping 25%. So what do they think of all this? Well, back in 2011, when the scandal first broke, they gave the Duke the royal boot from official events. In 2013, they cut Cristina off from the household budget and excised the Duke's biography from their official website. Most recently, after learning of the indictment, they declared their "complete respect for the independence" of Spain's judiciary. You'd like to believe the royals are too classy to throw someone under something as plebian as a bus, per se — but that sure sounds like what's happening!
Stories about princesses always ends with a moral, and this one is pretty simple. Being a princess isn't all it's cracked up to be, and there isn't always a happy ending! So if you want to pay less tax, do it right and call us for a plan. And call your mother! Yes, the holidays are over, but she'd still love to hear from you!

Monday, December 29, 2014

Decoding the Code

The Imitation Game is the critically acclaimed story of Alan Turing, a British mathematician who is widely credited as being the father of computer science and artificial intelligence. Benedict Cumberbatch plays Turing, whose work in cracking Nazi Germany's "ENIGMA" code helped lift the Allies to victory in World War II.
Seventy years later, retiring Senator Tom Coburn (R-OK) has picked up the code-breaking bug. But Coburn has decided to take on something even more twisted and fiendish than Nazi ciphers. That's right — he's just issued a 312-page "Tax Decoder" taking on our tax system. (Read it at your peril — if decoding takes 312 pages, just imagine what encrypting looks like!)
Coburn's goal is to give us "an educational reference guide designed to equip taxpayers and lawmakers with the details needed to thoughtfully reconsider many aspects of the existing tax code." We're not sure why Coburn thought he needed 312 pages to make his case — anyone who's ever seen their first paycheck and wondered "what's FICA?" knows the system is a mess. Still, here are some highlights:
  • Our tax system has metastasized like a glioblastoma. "In 2012, the Internal Revenue Code contained over 4 million words, enough to fill 9,000 pages. By way of comparison, a pamphlet with the original 1913 income tax required only 27 pages for the full text of the statute."
  • Our friends at the IRS really do want to help, but they're just under financed, understaffed, and underfed. “From FY 2004 to FY 2012, the number of calls the IRS received from taxpayers on its Accounts Management phone lines increased from 71 million to 108 million, yet the number of calls answered by telephone assistors declined from 36 million to 31 million."
  • The law is full of inappropriate and wasteful giveaways benefiting taxpayers who would do just fine without them. "There is no shortage of tax subsidies for the rich and famous, such as credits to renovate vacation homes and purchase luxury cars and deductions for yachts. McDonald’s even received tax breaks to sell Chicken McNuggets overseas."
  • Too many "not-for-profit" groups serve their own interests instead of the public interest. "Lady Gaga’s 501(c)(3) Born This Way Foundation is advertised as an organization that connects youth with antibullying, mental health, and other community resources, but its main activity appears to be throwing free pre-concert tailgate parties for fans."
Coburn's solution probably won't surprise you. Ideally, throw it all out and start over. At the very least, make it simpler, flatter, and fairer. "The tax code should be simple enough that everyone — including members of Congress — is capable of filling out their own tax return." (We'll let you decide if that means an easier tax system or smarter members of Congress!)
Still, there is some good news that we can help you put to work — and you'll find it on the very first page. "Due to the code’s complexity, your taxes are not a simple calculation of earnings and obligations. Instead, taxes are determined by how well you can take advantage of the hundreds of tax credits, deductions, exclusions, and carve-outs tucked into the code." In other words, all that complexity creates opportunity — and the more complicated your taxes are, the more likely we can help. So, if you're looking for a New Year's resolution to kick off 2015, call us and resolve not to waste any more money on taxes you don't have to pay!

Monday, December 22, 2014

Our Twelve Days of Christmas

Every year, PNC Bank publishes their "Christmas Wealth Index" to track the cost of the Twelve Days of Christmas. For 2014, it's $116,273.06, up 1.4% from 2013. (And you thought your holiday spending was out of control!)
The index may not be completely accurate — for example, the ten lords-a-leaping are valued using the cost of male ballet dancers, rather than actual lords, and the eight maids-a-milking don't come with eight actual cows. But still, it got us to thinking . . . what sort of taxes are we looking at on the whole affair?
  • Twelve drummers drumming and eleven pipers piping make quite a racket every holiday season. Hiring all that help will stir up a cacophony of payroll taxes!
  • Ten lords may look perfectly happy while they're leaping. But surely they must pay a king's ransom in income taxes — after all, they are lords!
  • Nine ladies dancing make a lovely sight at Christmas time — especially if they're Rockettes. They also pay a cabaret tax for the privilege of displaying their talent.
  • Eight maids-a-milking help make sure we have plenty of eggnog to drink. Good thing so many states offer dairy tax credits to spur the cows on to higher holiday production!
  • Seven swans-a-swimming? Six geese-a-laying? If we accept the rule of thumb that two birds per acre of pond is a manageable number, then we're looking at some serious property taxes to host our holiday flock!
  • Who doesn't want five gold rings under the tree? But selling those rings can be an expensive proposition. Remember, jewelry held for personal use is still subject to 20% tax on long-term capital gains, plus an extra 3.8% "net investment income tax"!
  • Four calling birds use a lot of cell phone minutes over twelve days. (They're calling birds, so unlimited texting won't help.) Naturally, that means a 5.82% federal excise tax, plus state and local sales tax too.
  • Three French hens add a sophisticated "continental" touch to any one's holiday festivities. But don't forget the import duties you pay to bring foreign livestock into the country!
  • Two turtle doves are known among bird watchers for forming strong "pair bonds," which makes them a symbol of devoted love. (That's why they're in the song!) Too bad that means they pay that pesky marriage penalty that hits high-income couples who file jointly! (Okay, we know this this one's a stretch. But we've got twelve days of taxes to file here, so what can we do?)
  • Nothing says "Christmas" like a partridge in a pear tree. And our tax code is full of juicy incentives for growing pear trees. You can deduct operating expenses associated with your crop; you can depreciate equipment and land improvements you use to manage your groves; and you can even take generous charitable deductions for rights you give up for conservation easements. Why, the tax savings alone should be more than enough to pay for the partridge!
Yes, even Twelve Days of Christmas just means twelve more opportunities for the tax man!
We wish you and your family the best this holiday season. We'll be back in 2015 to make sure you pay as little tax as possible, not just during the holidays, but all year long!

Monday, December 15, 2014

#1 On the Naughty List?

"Christmas comes this time each year," as the Beach Boys astutely observed in "Little Saint Nick." That means Santa Claus will be making his annual "list," checking it twice, and letting us know who's naughty or nice. (That's right, Santa "audits" himself by checking it twice.) This year, one San Diego resident will be somewhere near #1 on the "Naughty" list.
Lloyd Irving Taylor graduated from San Diego State University and Loyola Law School. As a CPA, he's authorized to prepare tax returns and represent clients before the IRS. And as an attorney, he's authorized to prepare tax returns, represent clients before the IRS, and represent them in court. He's well aware of what the law says he and his clients can do to pay less tax, and what will land him a big lump of coal in his stocking.
But Taylor apparently hates paying taxes with a Grinch-like grinchiness. No Burgermeister Meisterburger could tell him he can't have his toys!
So, he started off by stealing the identities of at least nine deceased children, some of whom had died as far back as the 1950s. He used those identities to finagle fraudulent passports from U.S. embassies in Europe. Then he used those passports to open financial accounts to hide his income and assets, including $1.6 million in gold coins.
Maybe stealing those identities made Taylor feel guilty. Why else would he have gone and made up over a dozen phony churches, too? He opened 31 more bank and investment accounts in the names of those churches. Then he argued that the churches' tax-exempt status meant he didn't owe tax on their income.
Things might not have been quite so bad if he had at least reported the income from his schemes. But Taylor, who's now 71, has filed tax returns just seven times since he finished school. That works out to once every six years. Those un-filed returns add up to $5 million in unreported income and $1.6 million in unpaid taxes.
Let's be honest here. It doesn't say much for the elves at the IRS that Taylor flew under their radar for so long! But he eventually did wind up in the cross hairs of the San Diego Regional Fraud Task Force, an alphabet soup of agents from the IRS, Secret Service, San Diego Police Department, and State Department Bureau of Diplomatic Security. (Bet you didn't know those last guys even existed!)
Taylor has been in custody since April, 2013 — the judge at his bond hearing noted his international travel on false passports, the millions in cash he controlled through his network of bank accounts, and his history of lying to banks as reason to rule him a flight risk. Last month, the jury at his trial took just 30 minutes to convict him on 19 felony counts. (They probably voted him guilty in the first two minutes, then had a cup of coffee or two just to make it look like they actually "deliberated.") The judge sentenced Taylor to 57 months with his fellow naughty-listers in an institution not noted for the cheerfulness of its holiday decorations. Taylor also owes $2.2 million in restitution.
What makes Taylor's case so outrageous, of course, is that he knows you don't need to steal a dead child's identity or establish a bogus church to pay less tax. You just need a plan to take advantage of all the IRS-approved deductions, credits, and strategies the law allows. You don't even have to wait for Santa to leave them in your stocking — just call us, and see what holiday savings we can deliver!