Millions of Americans earn their living collecting commissions on various products and services. Insurance agents collect commissions on premiums they write. Real estate agents collect commissions on homes they sell. Car salesmen, retail salespeople, and even restaurant servers all earn a piece of the business they generate.
Did you know there's a way to earn "commissions" on someone's taxes? That's right — tax whistleblowers can earn "commissions" of up to 30% of underpaid tax, plus penalties, interest, and other amounts they help recover. You'll need to give the IRS "specific and credible information" about a case that leads to collection — not just educated guesses or unsupported speculation. (As the IRS says, "this is not a program for resolving personal problems or disputes about a business relationship." Of course, if your jerk of an ex-husband or crook of an ex-partner really is a tax cheat, that's a different story!) You'll use Form 211 to file your report. And Internal Revenue Manual Section 25.2.2.9.2 outlines a predictably complicated formula for calculating just how much you'll get — but don't worry, if you don't like your booty, you can appeal it to the Tax Court!
The Treasury has been authorized to pay bounties for tax cheats since as far back as 1867. (No doubt they delivered rewards by Pony Express.) The program picked up steam in 1996, when the Taxpayer Bill of Rights authorized rewards for reporting mere underpayments in addition to outright cheating. And the Tax Relief and Health Care Act of 2006 created a dedicated Whistleblower Office, dedicated to tax underpayments topping $2 million. Since launching the new office, which has about 17 employees, the IRS has gotten 9,540 claims from 1,387 whistleblowers. Hundreds of those tips alleged tax underpayments topping $10 million, with dozens more alleging underpayments topping $100 million. Clearly there's big money — and big rewards — at stake.
What's the catch? Well, if you want to make a living tattling on taxpayers, you'll have to be prepared to wait for your reward. And wait . . . and wait . . . and wait. First the IRS has to audit the targeted returns to verify your claims. Taxpayers can appeal those findings and exercise other rights that add years to the process. And taxpayer privacy laws that prohibit the IRS from even acknowledging that your target is being audited make it impossible to just "check in" with the IRS on the status of "your" claim. The General Accounting Office reports that over two-thirds of the claims submitted as far back as 2007 and 2008 are still being processed.
But there is light at the end of the tunnel. Back in 2007, an in-house accountant tipped the IRS off to a $20 million underpayment by his financial-services employer. After hearing nothing for two years, he hired an attorney to follow up. Finally, this April, the IRS paid him a whopping $4.5 million reward. (It sure beats finding lost puppies for $100 a head!)
Oh, and because we know you'll ask — yes, you'll owe tax on your "commission." In fact, the IRS will helpfully withhold 28% of any award topping $10,000!
Of course, there's an easier way to slice the IRS pie. A good tax plan is the key to keeping the most of what you earn. And no one will call you a rat! But time is running out to plan for 2011. So, at the risk of sounding like a broken record, call us now for the plan you deserve. Your holiday season will be even brighter, knowing there's nothing more for the IRS to collect from you!
Monday, November 28, 2011
Monday, November 21, 2011
One Small Reason to Give Thanks
Nobody likes paying taxes. But what adds insult to injury for so many of us is just how maddeningly complicated it all gets. If you're like most Americans, you've seen your own return grow longer and more complicated over the years. Maybe you've noticed the new Schedule M for the Making Work Pay Credit. Maybe you've bought rental property and filed separate depreciation schedules for regular tax, state tax, and Alternative Minimum Tax. President Obama's 2010 tax return ran to 59 pages. And it's not unusual for complicated individual returns to run over 100 pages including forms, schedules, worksheets, and statements.
Of course, that's not really surprising, given the source of all the confusion. The U.S. Government Printing Office's own version of the Internal Revenue Code — available for the bargain price of just $179 — runs 3,387 pages. Add the IRS's regulations, for $974 more (shipping generously included!), and you're up to 16,845 pages. Sounds ugly, right? It is. (Trust us, we actually have to read this stuff.) But if you need any reason to be thankful this holiday season, be glad you're not responsible for filing the country's largest tax return.
General Electric is America's sixth-biggest corporation and its biggest conglomerate. Originally founded by Thomas Edison in 1890, GE manufactures everything from light bulbs and refrigerators to jet engines, locomotives, and nuclear reactors. Their NBC subsidiary reaches millions of viewers daily. And their GE Capital unit, which accounts for over half of their profit, is bigger than all but six standalone banks. It shouldn't surprise you, then, that GE files a pretty hefty tax return. Their tax department, which the New York Times reports "is often referred to as the world's best tax law firm," employs 975 people. They file literally thousands of tax returns every year, for every country in the world (or at least every one that requires a tax return), every state in this country, and more cities than you can name.
But nobody really cares what GE's Vermont return looks like, right? What about their flagship U.S. federal income tax? Well, 2006 was the first year the IRS required corporations with assets over $50 million to file electronically. That year, GE spent over $500,000 just to develop their own e-filing system! Their first electronic return took a full 30 minutes to transmit — but replaced what would have been 24,000 pages of paper. (That's 24,000 pages the IRS would have had to convert into electronic form anyway.)
Since then, GE's return has grown even fatter. For 2010, the firm reported worldwide profits of $14.2 billion. (That's more than the entire economies of Iceland and Jamaica.) They paid $2.7 billion in worldwide tax, but actually claimed a $3.2 billion refund from the U.S. Treasury — most of it due to losses at the GE Capital unit resulting from the 2008 financial collapse. Their actual tax return swelled to 57,000 pages. Print them all out and you'll have a stack of paper 19 feet high!
Oh, and of course they get audited, every year. Imagine the smile that brings to everyone's faces.
Here's the good news. You don't need a staff of 975 to manage your taxes. You just need a plan to make the most of every deduction, credit, loophole, and strategy the law allows. Now the bad news. Time is running out to get that plan. So enjoy the Thanksgiving holiday with your family. Brave the crowds for some Black Friday shopping if you feel like stimulating the economy. Then call us to make sure you're not missing any opportunity to bring good things to life!
Of course, that's not really surprising, given the source of all the confusion. The U.S. Government Printing Office's own version of the Internal Revenue Code — available for the bargain price of just $179 — runs 3,387 pages. Add the IRS's regulations, for $974 more (shipping generously included!), and you're up to 16,845 pages. Sounds ugly, right? It is. (Trust us, we actually have to read this stuff.) But if you need any reason to be thankful this holiday season, be glad you're not responsible for filing the country's largest tax return.
General Electric is America's sixth-biggest corporation and its biggest conglomerate. Originally founded by Thomas Edison in 1890, GE manufactures everything from light bulbs and refrigerators to jet engines, locomotives, and nuclear reactors. Their NBC subsidiary reaches millions of viewers daily. And their GE Capital unit, which accounts for over half of their profit, is bigger than all but six standalone banks. It shouldn't surprise you, then, that GE files a pretty hefty tax return. Their tax department, which the New York Times reports "is often referred to as the world's best tax law firm," employs 975 people. They file literally thousands of tax returns every year, for every country in the world (or at least every one that requires a tax return), every state in this country, and more cities than you can name.
But nobody really cares what GE's Vermont return looks like, right? What about their flagship U.S. federal income tax? Well, 2006 was the first year the IRS required corporations with assets over $50 million to file electronically. That year, GE spent over $500,000 just to develop their own e-filing system! Their first electronic return took a full 30 minutes to transmit — but replaced what would have been 24,000 pages of paper. (That's 24,000 pages the IRS would have had to convert into electronic form anyway.)
Since then, GE's return has grown even fatter. For 2010, the firm reported worldwide profits of $14.2 billion. (That's more than the entire economies of Iceland and Jamaica.) They paid $2.7 billion in worldwide tax, but actually claimed a $3.2 billion refund from the U.S. Treasury — most of it due to losses at the GE Capital unit resulting from the 2008 financial collapse. Their actual tax return swelled to 57,000 pages. Print them all out and you'll have a stack of paper 19 feet high!
Oh, and of course they get audited, every year. Imagine the smile that brings to everyone's faces.
Here's the good news. You don't need a staff of 975 to manage your taxes. You just need a plan to make the most of every deduction, credit, loophole, and strategy the law allows. Now the bad news. Time is running out to get that plan. So enjoy the Thanksgiving holiday with your family. Brave the crowds for some Black Friday shopping if you feel like stimulating the economy. Then call us to make sure you're not missing any opportunity to bring good things to life!
Tuesday, November 15, 2011
Today's Tax Deadline
Today is November 16. And why, might you ask, is that important?
Well, on this date in 1914, the Federal Reserve Bank of the United States officially opened for business. (Some might argue it's all been downhill since!)
On November 16, 1945, the U.S. Army moved forward with "Operation Paperclip" and secretly admitted 88 German scientists and engineers to the United States to help develop rocket technology.
Oh, and November 16, 1964, marks the birthday of Canadian jazz singer and pianist Diana Krall. Her lush rendition of Boy From Ipanema was the highlight of her 2008 "Live in Rio" concert.
And tragedy struck on November 16, 2005, with the death of Donald Watson. Donald who, you ask? Watson, a British animal-rights activist, founded the Vegan Society, and even invented the word "vegan." Apparently his animal-free diet worked for him, as he lived to the ripe old age of 95.
But those aren't why November 16 is important. It's important because there are just 45 days left in the year.
That's plenty, right? Well, subtract out the weekends, and we're down to 34. Still plenty, right? Subtract all the holiday downtime and we're down to . . . what, 28 days? 29? Maybe 30?
That's not much time at all. Especially when it comes to year-end tax planning. Especially because so many tax breaks are a lot like Cinderella's carriage — that's right, at midnight on December 31, they turn into pumpkins. Some of them disappear for 2011 — you won't get a chance to use them again until next year. And some of them disappear for good — you won't ever get to use them again.
If you've already got a plan, that's great. Has anything changed in your life or your finances that we should know about?
If you don't have a plan, that's a different story. You don't have much time left to make one. And we don't have much time to help you!
The holidays are almost here. We know nobody wants to spend their holiday thinking about taxes. But nobody wants to waste money on taxes they don't have to pay, either. And good tax planning can help pay for a pretty nice holiday! We know your calendar is filling up fast. So is ours. That's why it's crucial to call now if you want a plan to save in 2011.
Well, on this date in 1914, the Federal Reserve Bank of the United States officially opened for business. (Some might argue it's all been downhill since!)
On November 16, 1945, the U.S. Army moved forward with "Operation Paperclip" and secretly admitted 88 German scientists and engineers to the United States to help develop rocket technology.
Oh, and November 16, 1964, marks the birthday of Canadian jazz singer and pianist Diana Krall. Her lush rendition of Boy From Ipanema was the highlight of her 2008 "Live in Rio" concert.
And tragedy struck on November 16, 2005, with the death of Donald Watson. Donald who, you ask? Watson, a British animal-rights activist, founded the Vegan Society, and even invented the word "vegan." Apparently his animal-free diet worked for him, as he lived to the ripe old age of 95.
But those aren't why November 16 is important. It's important because there are just 45 days left in the year.
That's plenty, right? Well, subtract out the weekends, and we're down to 34. Still plenty, right? Subtract all the holiday downtime and we're down to . . . what, 28 days? 29? Maybe 30?
That's not much time at all. Especially when it comes to year-end tax planning. Especially because so many tax breaks are a lot like Cinderella's carriage — that's right, at midnight on December 31, they turn into pumpkins. Some of them disappear for 2011 — you won't get a chance to use them again until next year. And some of them disappear for good — you won't ever get to use them again.
If you've already got a plan, that's great. Has anything changed in your life or your finances that we should know about?
If you don't have a plan, that's a different story. You don't have much time left to make one. And we don't have much time to help you!
The holidays are almost here. We know nobody wants to spend their holiday thinking about taxes. But nobody wants to waste money on taxes they don't have to pay, either. And good tax planning can help pay for a pretty nice holiday! We know your calendar is filling up fast. So is ours. That's why it's crucial to call now if you want a plan to save in 2011.
Monday, November 7, 2011
Tax Strategies for Kim Kardashian
When most women slide on a pair of jeans, the last thing they want is to make their butt look big. But socialite Kim Kardashian has parlayed her generous posterior into what passes for celebrity these days. She's appeared on Dancing With the Stars, penned an autobiography, launched her own fragrances, and starred in not one, not two, but three reality shows.
Kim married the latest love of her life, New Jersey Nets power forward Kris Humphries, on August 20. Just 72 days later — on Halloween, no less — she announced she was filing for divorce. And hearts across America sank. Why, if these two krazy kids can't make it, what hope do the rest of us have, right? Not surprisingly, skeptics have alleged that the wedding was just a hoax. (It's not clear that the groom, who has said "I love my wife and am devastated to learn she filed for divorce," was actually in on the joke.) We'll resist the temptation to heap more scorn on the situation, so we can focus on what people really want to know — specifically, how will the whole train wreck affect Kim's taxes?
For starters, how will the heartbroken Kim file, single or married? Filing status is determined as of the last day of the tax year. So if Kim rings in the New Year subject to a legal separation, she'll file at the higher single rate, even for income earned during the marriage. (Makes you wonder if anyone at the IRS has any romance in their soul.)
And what about the wedding payday? (Mock the Kardashians all you want, they still managed to turn a $10 million wedding into a profit center.) The star-krossed kouple reportedly earned $15 million from E! for broadcasting the ceremony, $2.5 million from People Magazine for photos, $300,000 more from People for their engagement announcement, and even $50,000 from Las Vegas nightclub Tao for hosting the bachelorette party. Those paydays are obviously taxable, of course. Kim will also owe tax on some of the freebies she got from publicity-hungry vendors. These include a $15,000 cake, $60,000 for three Vera Wang dresses, $400,000 in Perrier Jouet champagne, $150,000 (!) in hair and makeup, and even $10,000 in Lehr & Black wedding invitations. Dumping Humphries doesn't mean she gets to dump the taxes she owes on what she scored for marrying h im!
As for Kim's ring, it's a stunner — at 20.5 carats, it's roughly the size of the asteroid that wiped out the dinosaurs. TMZ reports that Kim's pre-nup requires her to buy the ring from Kris if she wants to keep it in case of divorce — ironic, considering that under California law, the bride usually just has to say "I do" to take ownership outright. This means if Kim someday sells the ring (at auction, televised on E!, no doubt), she'll owe tax on any gain above that purchase amount.
What about the wedding gifts from the 500 guests who presumably also weren't in on the joke? Gifts are never taxable as income, so there's no problem there. But Kim has announced she'll be donating the value of the gifts to the nonprofit Dream Foundation, a charitable organization that grants wishes to terminally ill adults. So she gets a double win — tax-free gifts plus a fat deduction for the value of her donation.
Most Americans spend a lot more time planning their wedding than they do planning their taxes. That can be an expensive mistake. For some of us, a good tax plan can actually pay for a pretty nice wedding. But time is running out. If you want to save taxes for 2011, you have to plan for it in 2011. There are fewer than two months left in the year — with plenty of time out for holidays — and our calendar is filling up fast. So call now, so you have plenty of time to enjoy A Very Kardashian Khristmas!
Kim married the latest love of her life, New Jersey Nets power forward Kris Humphries, on August 20. Just 72 days later — on Halloween, no less — she announced she was filing for divorce. And hearts across America sank. Why, if these two krazy kids can't make it, what hope do the rest of us have, right? Not surprisingly, skeptics have alleged that the wedding was just a hoax. (It's not clear that the groom, who has said "I love my wife and am devastated to learn she filed for divorce," was actually in on the joke.) We'll resist the temptation to heap more scorn on the situation, so we can focus on what people really want to know — specifically, how will the whole train wreck affect Kim's taxes?
For starters, how will the heartbroken Kim file, single or married? Filing status is determined as of the last day of the tax year. So if Kim rings in the New Year subject to a legal separation, she'll file at the higher single rate, even for income earned during the marriage. (Makes you wonder if anyone at the IRS has any romance in their soul.)
And what about the wedding payday? (Mock the Kardashians all you want, they still managed to turn a $10 million wedding into a profit center.) The star-krossed kouple reportedly earned $15 million from E! for broadcasting the ceremony, $2.5 million from People Magazine for photos, $300,000 more from People for their engagement announcement, and even $50,000 from Las Vegas nightclub Tao for hosting the bachelorette party. Those paydays are obviously taxable, of course. Kim will also owe tax on some of the freebies she got from publicity-hungry vendors. These include a $15,000 cake, $60,000 for three Vera Wang dresses, $400,000 in Perrier Jouet champagne, $150,000 (!) in hair and makeup, and even $10,000 in Lehr & Black wedding invitations. Dumping Humphries doesn't mean she gets to dump the taxes she owes on what she scored for marrying h im!
As for Kim's ring, it's a stunner — at 20.5 carats, it's roughly the size of the asteroid that wiped out the dinosaurs. TMZ reports that Kim's pre-nup requires her to buy the ring from Kris if she wants to keep it in case of divorce — ironic, considering that under California law, the bride usually just has to say "I do" to take ownership outright. This means if Kim someday sells the ring (at auction, televised on E!, no doubt), she'll owe tax on any gain above that purchase amount.
What about the wedding gifts from the 500 guests who presumably also weren't in on the joke? Gifts are never taxable as income, so there's no problem there. But Kim has announced she'll be donating the value of the gifts to the nonprofit Dream Foundation, a charitable organization that grants wishes to terminally ill adults. So she gets a double win — tax-free gifts plus a fat deduction for the value of her donation.
Most Americans spend a lot more time planning their wedding than they do planning their taxes. That can be an expensive mistake. For some of us, a good tax plan can actually pay for a pretty nice wedding. But time is running out. If you want to save taxes for 2011, you have to plan for it in 2011. There are fewer than two months left in the year — with plenty of time out for holidays — and our calendar is filling up fast. So call now, so you have plenty of time to enjoy A Very Kardashian Khristmas!
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