Now We Know Why She's Dancing

The Swedish pop band ABBA rocketed to global superstardom in the 1970s, with hits like Waterloo, Fernando, and, of course, Dancing Queen. Named for members Agnetha Fältskog, Björn Ulvaeus, Benny Anderson, and Anni-frid Lyngstad, ABBA is the one of the best-selling music groups of all time. They haven't performed together since 1982. But that didn't stop Ulvaeus and Anderson from turning their songs into a hit musical, Mamma Mia!, in 1999. Just one year later, they turned down an offer to reunite for 100 concerts and a billion dollars.

Lots of us are still embarrassed by the fashion choices we made in the 1970s. ABBA, whose members gained attention for glittering hotpants, sequined jumpsuits, and platform heels, is no exception. According to ABBA: The Official Photo Book, coming next month to celebrate 40 years since they won the 1974 Eurovision Song Contest, singer and guitarist Björn Ulvaeus confesses "in my honest opinion we looked like nuts in those years. Nobody could have been as badly dressed on stage as we were."

But now, we've learned there was more than just bad taste at work. It turns out the band was working to avoid the Swedish National Tax Board! As The Guardian reported last week, "the band's style was influenced in part by laws that allowed the cost of outfits to be deducted against tax — so long as the costumes were so outrageous they could not possibly be worn on the street."

Sweden's tax man has always taken a bigger bite of his citizens' earnings than Uncle Sam. The Swedes' top tax rate rose to 85% in 1980, at a time when Ronald Reagan was campaigning to take ours from 70% down to 50%. For 2014, their top marginal tax rate reaches 57% on income over about $88,180, versus a 39.6% top rate here. The Swedes also take 31.42% for payroll tax, versus 15.3% here. Apparently, taxes grow well in the cold Swedish climate.

So it might surprise you to learn that our tax code offers a version of the same deduction. Specifically, IRS Publication 17 says you can deduct the cost and upkeep of work clothes so long as you have to wear them as a condition of your employment and they're "not suitable for ordinary street wear." It's not enough that you wear distinctive clothing — it has to be required by your employer (or essential for your business if you're self-employed). And it's not enough that you simply don't wear your work clothes away from work — it "must not be suitable for taking the place of your regular clothing." (We think Lady Gaga's famous meat dress will qualify just fine.)

Ulvaeus himself is no stranger to tax controversy. In 2007, the Tax Board accused him of laundering royalty income through foreign accounts to avoid 90 million kroner ($12.8 million) in taxes from 1997-2005. Ulvaeus paid the tax as a precautionary measure, then appealed to his county administrative court, which eventually ruled in his favor.

We understand you want to pay less tax yourself. But we doubt you're willing to rock a spandex sequined jumpsuit to do it — at least, not in public. (What you wear at home is your own business!) Fortunately, there are hundreds of easier ways to pay less. You just need to start with a plan. That's where we take the stage. Just hit "reply" to this email and let us know you're ready to get started!

And the Gold Goes To . . . !

If you're like most of us, you've spent at least some time over the past couple of weeks watching the games of the 22nd Winter Olympiad. Who cares if the host city Sochi, a Black Sea beach resort, is warmer than Miami, Florida? 2,800 athletes from 88 countries have traveled to compete in 98 events, and the world is a better place for the fellowship.

Olympic games are famous for sports we don't usually see anywhere else. In the summer games, we get rhythmic gymnastics (dancing with a ribbon), dressage (dancing with a horse), and trampoline (dancing on a trampoline). In the winter games, it's ice dancing (to give you your dancing fix), biathlon mixed relay (dancing on cross-country skis with guns), and curling. (You don't have to appreciate dancing to enjoy curling, but it does help to be Canadian.)

So, in that same vein, what if nations competed for taxes we don't usually see? These would be our picks for medalists in the coveted "weird tax rule" event:

• Bronze: Tethered Hot Air Balloons in Kansas. Kansas levies a sales tax on "any place providing amusement, entertainment, or recreation services." That sounds straightforward enough. But the federal Anti-Head Tax Act prohibits state and local governments from taxing airlines or airport users. How does Kansas apply that law to hot-air balloon rides? Well, if the balloon stays tethered to the ground and doesn't actually go anywhere, it's a taxable amusement. But if it actually flies somewhere, you're off the hook for the tax!
  
• Silver: Cereal Toys in Canada. Cereal companies know that kids really just want the cheap throwaway toy at the bottom of the box. (Cracker jack knew that a century ago!) But in Canada, cereal makers have even more reason to add toys to their sugary goodness. That's because they can avoid the usual tax on cereal by throwing a toy in the box — so long as the toy doesn't qualify as "beer, liquor, or wine." (Now that might be a way to sell cereal to grownups!)
• Gold: Cow Flatulence in Europe. When you think of global pollution, you probably blame coal-fired electric plants or smoggy freeways. But the United Nations Food and Agriculture organization estimates that methane from slow-digesting cows accounts for up to 18% of Europe's production of greenhouse gases. (We understand not everyone is a fan of the United nations, but just trust them on this one — and don't ask for details.) Several European Union nations have enacted taxes on their cows to help keep those gases in check. They range from $18 per cow in Ireland all the way up to $110 per cow in Denmark!

The world is full of unique and sometimes silly taxes. But there's nothing silly about paying more tax than you have to. And that is one competition where you do not want to settle for the bronze! Fortunately, you don't have to train for years to bring home a medal. You just need a plan. So call us now for some world-class savings. And remember, we're here for your fellow teammates, too!

There's an App for That

Managing the Internal Revenue Service is no easy job. It takes a lot of automation to process over two hundred million tax returns per year. And, while the Service still stores master tax records on computers commissioned during the Johnson administration (Lyndon, at least, not Andrew!), the IRS still spends hundreds of millions per year to take advantage of the latest information technology.

The geeks who manage the IRS's computers do a great job with the limited resources Congress gives them. But they want to be like the cool kids in Silicon Valley, too. So they've created an app, called IRS2GO, that you can download to your iPhone or Android device. You can use the IRS app to track your refund, find free tax return preparers, access your tax records, and even connect with the IRS on Twitter, YouTube, Tumblr, and Facebook.

Those are all great functions, of course. But we got to thinking . . . what sort of things would you really want an IRS app to do for you? We thought maybe these would be even more popular:

• The Refund Redirector: Knowing when your refund will show up is great. But the real fun is knowing where you're going to spend it. The Refund Redirector would aggregate prices from hundreds of online shopping sites to give you the best possible deal, then send your refund directly to the store. Planning to upgrade your family room to the latest 50-inch television? Let the Refund Redirector tell you where to buy it!
  
• Flappy Tax: Flappy Bird is the latest handheld gaming sensation, with 50 million downloads. The only problem is, it's too hard to get that stupid bird through that stupid opening between those stupid pipes! Our version would let you thread a helpless taxpayer through a maze of tiny loopholes. But if you think that flappy bird has it tough, wait 'till you see our red tape!
• Red Light/Green Light: This updated version of the classic children's party game would use an easy-to-understand traffic light to tell you if your deductions will fly with the IRS. Want to write off the mileage to and from the orthodontist for tightening your kid's braces? Green light! Thinking about writing off a bottle of Dom Perignon to celebrate your latest business deal? Yellow light for the "lavish and extraordinary" expense. Hoping the IRS "won't notice" that Swiss bank account you opened last year? Stop!
• YelpTax: Apps like TripAdvisor, Urbanspoon, and Yelp let you post restaurant reviews before you even get the bill. Our version would let you review auditors and other IRS staff. How much more pleasant do you think an audit would be if the examiner knew you could rate him from one to five stars on punctuality, friendliness, service, and atmosphere? (If only they could say "we know you have a choice in auditors today . . . .")

We love how technology automates so many tasks to make our days easier and more productive. We love how the Internet puts a wealth of knowledge at our fingertips. But there's still no substitute for good, old-fashioned expertise and experience. And you can't get that from an app. That's where we come in. We can give you the plan you need to pay less tax. We can help you implement that plan without having to tap it all out on a tiny screen. So call us when you're ready for the most up-to-date tax-saving strategies and concepts. And remember, winning the tax game is more fun than anything you can do on your phone!

Adding Insult to Super Bowl Injury

On Sunday, quarterback Peyton Manning led his uncharacteristically hapless Denver Broncos to the second-most-lopsided Super Bowl loss ever. Manning & Company just couldn't catch a break, from the safety they gave up on the game's first play, to Manning's two interceptions, to Percy Harvin's second-half kickoff return, to . . . you get the picture. So, Manning didn't walk away with that hoped-for second Super Bowl ring. But at least he walks away with the $46,000 bonus the NFL awards to losing players.

Or does he? Well, here's the deal. It turns on two things:

1. New Jersey, like most states, tackles visiting athletes with a "jock tax." The state calculates Manning's taxable income by dividing the number of days he practices and plays in the state by the number of "duty days" he works for the whole year. Then they apply the regular tax rates, which range up to 8.97% on income over $500,000.
   
2. Next month, Manning heads to the doctor to follow up on a series of surgeries to his neck and spine. If everything still looks good, he plans to return for the 2014 season. If not, he'll ride off into the sunset, go to work as a broadcaster, and wait for his induction into the Hall of Fame.

Now, here's where the play gets complicated. If Manning's neck forces him to retire, he'll finish 2014 with $111,000 in playoff bonuses. He'll owe New Jersey tax for the seven days he worked in the state, out of 33 days he played for the year. He'll hand off $982 in tax, and probably hope he can forget the day ever happened.

BUT — if Manning's neck checks out okay, and he goes on to play next season, he'll earn another $15 million in 2014 salary. Then he'll owe New Jersey tax for a smaller fraction of the season — seven days out of 200, rather than seven days out of 33. But he'll apply that fraction to a whopping $15,111,000 of income. That means he'll turn over $46,844 in tax — $844 more than he actually made for playing Sunday's game!

And this is all before we get to Uncle Sam, who picks off 39.6% for income tax and 3.8% for Medicare. Manning's total tax bill on his $46,000 Super Bowl bonus could hit $66,808, meaning it actually cost him 20 G's to play! Where's the fun in that?

At least Manning still leads the NFL in endorsements. He makes $12 million per year from sponsors including Reebok, Buick, Wheaties, DirecTV, and Papa John's pizza. He should be thankful New Jersey doesn't tax him on a share of that endorsement income. Some U.S. golfers, among other athletes, have had to weigh whether or not to play tournaments in European countries that tax visiting athletes on a share of their endorsement income as well as contest winnings.

So, here's the final score. When you try something new, like earning income from a new venture or in a new place, you can't just add up the numbers at the end of the year and hope for the best. You need a plan to penetrate the tax man's defense — one that anticipates blindside rushers like New Jersey's jock tax. So call us when you're ready for your plan. And remember, we're here for your teammates, too!