Monday, June 30, 2014

Winning the Real World Cup

Here in the United States, we think our Super Bowl is the biggest sporting event around. Every four years, though, we're reminded that there are nearly seven billion other people on earth — and when it comes to sports, well, their version of futbol is even more popular than ours. This year's Super Bowl reached a record 111.5 million viewers, making it the most-watched event in U.S. history. That sounds impressive — but it pales next to the 3.2 billion who are expected to watch soccer's World Cup.
Of course, some things remain the same no matter how large a stage they occupy. Cities are willing to spend millions to host football's big game. And countries are willing to spend billions to host soccer's big event. Brazil has dropped $3.6 billion just to build and renovate stadiums for the games, including $300 million for the Arena Amazonia which will host only four games. And they've spent another $8 billion or so on infrastructure to support the games, like highways and airports.
As you can imagine, those direct expenses aren't the only costs associated with the game. That's because even the tax man has to stand for his share of penalty kicks! The Fédération Internationale de Football Association, or FIFA, requires host countries to grant all-encompassing tax exemptions to "FIFA's service suppliers established in Brazil" and "non-resident individuals hired or engaged to work in the events." This means no individual or corporate income taxes, no value-added or sales taxes, no excise taxes, and no other kind of taxes that local law might impose. Those tax breaks add to the host country's total burden by taking away revenue they might otherwise capture. And they extend even to international corporate sponsors like McDonald's and Anheuser-Busch InBev, maker of Budweiser. (What's the connection to soccer? Well, McDonald's has rolled out new French fry packaging with bold artwork celebrating the Cup. And there just might be a fan or two hoisting a Budweiser during the games.)
Now, some opponents of all that spending are calling foul on all that hype and cost. One antipoverty group estimates Brazil will give up as much as $569 million in revenue that could have been used to lift 37 million Brazilians out of poverty and improve basic services. "The price of these tax breaks for corporate giants will be paid by people living in poverty in Brazil and that is obscene," said Isabel Ortigosa of the Spanish group InspirAction. Her group is calling on FIFA President Sep Blatter to "give tax breaks for the World Cup sponsors the red card — and never impose these rules on World Cup host countries in the future."
Defenders reply that the goaltenders in Brazil's Federal Revenue Service will actually come out ahead with the Cup. Rabid soccer fans from across the globe are dropping billions in restaurants, bars, and hotels surrounding the 12 host stadiums. They'll spend millions more on souvenirs. And of course the Cup's winners will pay tax on the $576 million of prize money they earn for their skills.
Will this be the year the U.S. takes the Cup? Will 2014 be the year when the U.S. finally embraces soccer? Or will futbol disappear again for four more years, like biathlon, luge, and other "oddball" sports that only roll around for international competition? We have no idea. However, we can be pretty sure that, like FIFA, you want to pay less tax. So we give you a plan that gives you the strongest possible defense against IRS kicks. So enjoy the games, and call us when you're ready to put in the best goalie in the league!

Tuesday, June 24, 2014

Words of Wisdom

If you've spent any time online lately, you're familiar with so-called "listicles" — those irresistible lists of trivial facts that pass for "online content" these days. You know what we mean: "13 Cute Cat Videos to Watch Now," or "27 Hot Celebrities Who Overcame Teenage Acne," or even "5 Redesigned Acme Products That'll Help Wile E. Coyote Murder Roadrunner." Listicles may sound like something new, but they've actually been around since Moses came down from Mt. Sinai. And who are we to buck such a popular trend? So here, for your reading pleasure, are "Eight Quotes About Taxes to Put A Smile on Your Face":
"If the Lord had meant us to pay income taxes, he’d have made us smart enough to prepare the return."
Kirk Kirkpatrick
"I have no idea what was in my federal tax return. Like 93 percent of all U.S. taxpayers, I just sign it and send it in. For all I know, it states that I am a professional squid wrangler."
Dave Barry
"The Opera reminds me of my tax audit. It was in a language I didn’t understand. And it ended in tragedy."
Chris Cassatt and Gary Brookins (‘‘Jeff MacNelly’s Shoe’’)
"Most voters would rather have their purse or wallet stolen than be audited by the IRS."
Frank Luntz
"Few of us ever test our powers of deduction, except when filling out an income tax form."
Laurence J. Peter (the "Peter Principle")
"Like many Americans, I face a patriotic dilemma: how much cheating can I get away with? It's important to pay your taxes but it's just as important to pay as little tax as possible. Think of it as putting government on a diet."
Stephen Colbert
"Last year I had difficulty with my income tax. I tried to take my analyst off as a business deduction. The Government said it was entertainment. We compromised finally and made it a religious contribution."
Woody Allen
"Government can’t deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch."
Warren Buffett
Look, we realize any one of David Letterman's "Top Ten" lists is probably funnier than a collection of tax quotes. But can David Letterman give you a plan for paying less tax? We didn't think so!

Monday, June 16, 2014

Wanna Bet?

If you're a golfer, you've surely heard of "Long John" Daly, renowned for his distance off the tee. In 1991, he roared onto the scene by winning the PGA Championship as the ninth alternate. In 1997, he became the first PGA player to average more than 300 yards per drive over a full season. Daly can probably hit the ball farther with a shovel or a rake than we can hit it with Callaway's newest and highest-tech driver. He hasn't won a tournament since 2004, but his legion of fans still love him for his bad-boy, "non-country club" appearance and attitude. And who knows how he might "grip it and rip it" when he becomes eligible for the Senior Tour in 2016?
Daly is a man of many appetites. He's designed golf courses, licensed his own "Loud Mouth" line of clothing, owned a winery, and even recorded an album of his own songs. He's a legendary boozer with seven trips to rehab under his belt — in fact, he's even got a drink named after him. (Take a classic "Arnold Palmer" mix of iced tea and lemonade, add liquor of your choice, and voila, you've got a John Daly.) But his greatest vice may be his gambling. And that's where our friends at the IRS come in.
Daly loves, loves, loves to gamble. He told the gossip site TMZ that it was more about the adrenaline than the money . . . he really just loved the action. He would take out million-dollar markers to hit the blackjack tables, then play seven hands at a time for $15,000 each. In 2006, he lost a playoff to Tiger Woods, drove straight from the tournament in San Francisco to Las Vegas, and dropped $1.65 million in five hours on a $5,000 slot machine. (Hey, we've all been there, right? No?)
The news wasn't all bad. Daly kept detailed records so that when it came time to file his taxes, he could deduct his losses from his wins. So how did he do? Well, according to Daly, he won $35 million from 1991 through 2007. That's pretty good, considering his lifetime tour winnings total just $10,116,306.
There's just one problem. Over that same period, he lost $90 million. Ninety million dollars. For those of you who dropped math as soon as you could, that's a $55 million hole! It took him 10 years to pay off gambling debts, with sponsorship income, hustling appearance money, and "running myself ragged doing corporate outings instead of spending time with my family and working on my game."
And how did Daly come up with those figures? Combing through his tax records, of course! Gambling losses are deductible, sure — but only up to your amount of gambling winnings. That means if you go home a winner, Uncle Sam will be happy to take a cut — but if you've lost, you're on your own. (That's an even better deal than being the casino!)
Daly still loves the action and adrenaline. But, he says, "Now if I gamble, I play the $25 slots. If I hit something, I might move up to $100. But I don't do what I used to do anymore."



You probably won't ever need to check your tax returns to count how much you've lost at the casino. But your tax return is a great source of information on your overall financial health. And penalties for signing an incorrect tax return are lot greater than signing an incorrect scorecard! That's why you can't just file your taxes every year and call it a day. You need a plan to make the most of all your available deductions, credits, and strategies. So call us — we'll keep your taxes out of the rough, and help you avoid those tax bogeys that cost you thousands!

Monday, June 9, 2014

Honey or Vinegar?

Back when you were a kid, your mom said you'd catch more flies with honey than with vinegar. (We're not sure why she thought you'd want to catch flies — she can't have wanted them in her house in the first place.) Apparently, though, Andrew Calcione's mom never gave him that advice. Or maybe he just didn't listen. Either way, that failure to communicate wound up costing him big time.
Last year, the IRS was auditing Calcione — a former tax preparer from Rhode Island — for 2008, 2009, and 2010. The IRS argued he owed an additional $330,000 in tax. But time was running out on the audit. (They generally can't assess tax more than three years after the return's due date or the actual filing date, whichever is later.) So they asked Calcione and his ex-wife Patricia to sign a "Consent to Extend Time to Assess Tax" form.
You're probably asking yourself why on earth anyone would ever do that. But tax professionals will often tell you to sign so you'll have more time to defend yourself. If you don't sign, they'll just go ahead and hit you with the extra tax and you'll wind up even deeper in the hole.
Calcione signed the consent, but his ex-wife did not. Three months later, the auditor left a voicemail following up. Three days after that, Calcione called back — and instead of betting "honey," he doubled down on "vinegar." That vinegar took the form of a profanity-laced tirade with Calcione threatening to show up at the agent's house and torture him. Then tie him to a chair, gag him, and rape and kill his wife (in front of him). Then kill his daughter. (Click here if you insist on reading the whole play-by-play — but don't say I didn't warn you.)
Calcione called back later the same day to say "disregard my previous voicemail." (Ya think?) But by then it was too late. The agent had called the police. Unfortunately for Calcione, threatening to assault and murder an IRS agent (or member of his family) is a felony, punishable by up to 10 years in federal prison and a $250,000 fine.
Give Calcione credit for creativity. At first, he said he left the threat to toy with his own daughter — and gosh, just dialed the wrong number. Then he said he meant it for his ex-wife. (Family dinners at the Calcione house must have been a hoot!) Finally, he claimed he was talking to himself and "accidentally" butt-dialed the agent. All perfectly honest mistakes, right?
But District Court Judge William E. Smith wasn't buying any of it. Last month, he found Calcione guilty on two counts. Now he's looking at 20 years surrounded by people using similar off-color language when he's sentenced on September 11. “This Office will continue to protect and seek justice for government officials simply trying to do their jobs on behalf of the people of the United States," said the prosecutor. "Suffice it to say that we will be seeking the toughest, appropriate sentence in this case.”
Oh, and Calcione still owes the tax.
We know that you would never be foolish enough to threaten an IRS agent. But we also know you don't want to pay a penny more than you have to. That's why we focus on giving you a plan to pay less. And that's why everything we recommend is court-tested and IRS-approved — so you'll never have to choose between honey and vinegar!

Wednesday, June 4, 2014

Really?

Why did Willie Sutton rob banks? Because that's where the money is, of course. Why does the IRS focus its attention on income taxes? Same reason! For fiscal 2014, they expect to collect $3 trillion in taxes: $1.4 trillion in individual income taxes, $1.0 trillion in Social Security and Medicare, $332.7 billion in corporate income tax, $154 billion in transportation and excise taxes, and "just" $15 billion in gift & estate taxes. Three trillion dollars sounds like it ought to be enough to finance the government. But of course it's not. So our friends in Washington are constantly searching for more change in the national couch cushions. (Value-added tax, anyone? Carbon tax?) And now it looks like they may have found the mother lode. Would you believe they're finally coming after your frequent flyer miles?
The first frequent-flyer program took off back in 1972. Since then, nearly every airline has launched one, and hotel chains have climbed aboard, too. Loyalty programs are so popular that over half of all credit card purchases made in the U.S. are made with cards tied to loyalty programs. That's especially astonishing when you consider how cramped the airlines have made their seats and how many "junk fees" they've loaded up on — for checked bags, overhead bin space, curbside check-in . . . the list goes on and on. (Michael O'Leary, head of Ireland's Ryanair, actually proposed charging to use the loo.)
The IRS recognizes six kinds of frequent flyer miles, and taxes them according to how you receive them. These include:
  1. Miles awarded for travel (nontaxable)
  2. Miles awarded for credit card use (nontaxable)
  3. Miles awarded in connection with business travel (nontaxable but mainly because it would be too hard to track)
  4. Miles awarded for opening an account (taxable)
  5. Miles awarded for putting money in a mutual fund (which reduces your tax basis in the fund)
  6. Miles awarded as prizes (taxable)
For the most part, those rules make sense. (Would it really be worth the hassle to require business travelers to report the value of frequent-flyer points they redeem for personal travel?) But now it appears that change is on the radar. Last August, the Service released its 2013-2014 "Priority Guidance Plan" that included a project modifying the accounting rules for loyalty programs. And last month, a group of four major travel associations sent a letter to Treasury Secretary Jack Lew urging him to reject any changes to those rules.
It may be that changing the way the IRS treats loyalty programs at the airline level doesn't necessarily mean taxing the awards they grant their members. But does anyone doubt that airlines — who now charge for luxuries like pillows and blankets — will pass any new tax costs through to passengers? (If we're lucky, the new tax will arrive as late as your last flight did!)
We realize the prospect of taxing your frequent flyer miles doesn't keep you awake at night. But make no mistake about it, Washington is looking for new ways to pay for government. Pilots never take off without filing a flight plan — so why would you try to manage your finances without a tax plan? Call us for that plan, and you might be upgrading your next seat to first class!