Monday, December 28, 2015

Cast Your Ballot

The 2016 presidential election is almost here. Are you excited yet? (Some cynics would say the campaign actually started as long ago as November 7, 2012 — the day after the last election!) In just a few weeks, voters in Iowa and New Hampshire will gather to cast the first ballots to determine who takes the oath of office to become the 45th President of the United States. And while we aren't here to predict the winner, we can be sure that taxes and tax policy will take center stage. So we've assembled a collection of quotes from Presidents and presidential candidates to finish up your 2015:
"Our income tax system is a disgrace to the human race."
Jimmy Carter
"The really rich people figure out how to dodge taxes anyway."
George H.W. Bush
"If our current tax structure were a TV show, it would either be 'Foul-ups, Bleeps and Blunders,' or 'Gimme a Break.' If it were a record album, it would be 'Gimme Shelter.' If it were a movie, it would be 'Revenge of the Nerds' or maybe 'Take the Money and Run.' And if the IRS ever wants a theme song, maybe they'll get Sting to do 'Every breath you take, every move you make, I'll be watching you.'"
Ronald Reagan
"Make sure you pay your taxes; otherwise, you can get in a lot of trouble."
Richard M. Nixon
"I apologize for the inequities in the practical applications of the tax, but if we should wait before collecting a tax to adjust the taxes upon each man in exact proportion with every other, we shall never collect any tax at all."
Abraham Lincoln
"I'm delighted to pay big taxes. Big taxes mean big income."
H. Ross Perot
"[The tax code] is a monstrosity and there's only one thing to do with it. Scrap it, kill it, drive a stake through its heart, bury it and hope it never rises again to terrorize the American people."
Steve Forbes
"The taxpayer — that's someone who works for the federal government but doesn't have to take a civil service examination."
Ronald Reagan
Of course, 2016 is almost here too. And that means time for New Year's resolutions. This year you could be like everyone else and promise to lose weight, quit smoking, or call your parents every week. Or you could resolve to pay less tax. If that sounds like a resolution worth keeping, call us and we'll set you up with the plan you need!

Monday, December 21, 2015

Smile!

"Bar Rafaeli" sounds like a happening watering hole in a trendy part of Brooklyn — the kind of place where bearded hipsters rocking flannel shirts and man-buns tip back craft beers and artisanal cocktails with their tattooed girlfriends. But Bar Rafaeli is actually a 30-year-old Israeli supermodel. She's appeared on dozens of magazine covers, including the Sports Illustrated swimsuit edition. She's also hosted television programs, acted in television and films, and co-founded an online underwear retailer. And yes, she even made headlines for dating Leonardo DiCaprio — but clearly she's more than just another pretty face.
Models use all sorts of tricks to fool the camera. Smearing vaseline on their teeth to keep them from sticking to their lips? Check. Stretching pantyhose over the lens to create a gauzy, soft-focus look? Check. But Rafaeli stands accused of creating some new tricks to fool the taxman instead — and her next photoshoot may be a mugshot. That's because last week, the Israeli Tax Authority questioned her mother Tzipi and her on charges they they avoided millions of shekels in taxes. (A shekel is worth about 27 cents right now.)
Israel's tax law provides that citizens who live outside the country don't have to pay tax on the income they earn outside the country. (That's not the case here in the U.S., where citizens are taxed on their worldwide income wherever it's earned.) While that's great for expatriates, it also gives the country's top earners a pretty obvious incentive to leave the country — or at least look like they left the country — to avoid those taxes, which reach 50% on income over 811,560 shekels.
That said, then, the first allegation against Rafaeli is that she created the false appearance of living outside the country to avoid tax. Investigators accuse her of living in apartments in Israel rented under her mother's name and brother's name. (She claims the apartments were merely convenient alternatives to a hotel when she returns to her homeland — and since she doesn't actually "live" there, why should they have been in her name?) The Tax Authority also accuses Rafaeli of failing to report over a million shekels worth of benefits she received in exchange for promotional consideration. These include a Lexus and Range Rover from a rental car company in exchange for a secret agreement to be photographed in their cars. They also include use of an apartment at Tel Aviv's chi-chi YOO Towers in exchange for "leaking" her residency there to promote it.
Finally, they claim she failed to report a million shekels she received in the form of "celebrity discounts," like the 100,000 shekels worth of interior design work she got for 40,000 shekels (and even more publicity).
Naturally, the model denies the allegations. "There is no drama," her attorney says. "In the end, this is just a civil dispute. No one cheated anyone else. It will all clear up soon." In the meantime, Rafaeli and her mother have been ordered to turn over their passports. Neither can leave the country for the next 180 days without getting government permission and posting a 750,000 shekel bond.
It's too bad the supermodel Rafaeli isn't an American citizen! She would have thousands of pages of tax law, regulations, and court cases to help her pay less tax legitimately. We could have given her a plan to use them all to her advantage. But while it may be too late for her to avoid modeling the most stylish prison garb, it's not too late for you to take steps to pay less. So call us and see how much you can save!

Monday, December 14, 2015

Tax Advice for the Grinch

The holiday season is in full swing, and we expect you're on your best behavior to make Santa's nice list. But there's one famous guy who works harder than anyone else to be naughty this time of year, and that's everyone's favorite Dr. Seuss anti-hero, the Grinch.
We don't care if you prefer the original animated cartoon or Jim Carrey's 2000 live-action remake. Either way, when you think of the Grinch, you probably think about what he steals. But have you ever thought about what he pays? You can be sure the Whos down at the IRS do! Fortunately, the Grinch can take advantage of all sorts of tax deductions to help pull off his Grinchy plot. Those include:
  • Mileage. The Grinch can choose to deduct "actual expenses" (maintenance, upkeep and depreciation on his ramshackle sleigh) or the standard allowance (currently 56 cents per mile). In the Grinch's case, the short trip down from the top of Mount Crumpet to Whoville makes actual expenses his best bet.
  • Uniforms and Work Clothes. Uniforms the Grinch provides for himself are deductible so long as they're not "suitable for ordinary street wear." This time of year it seems like everyone enjoys a red coat and hat. Still, we think the Grinch's fake-Santy Claus look should be distinctive enough to pass the IRS test.
  • Meals and Entertainment. Feeding all those Whos at the end of a long day can't be cheap, even if you opt to save a little by carving the roast beast yourself. The Grinch can deduct 50% of all meals and entertainment he hosts, down to the last can of Who Hash. That's exactly the sort of subsidy that helps the Whos feast, feast, feast, feast.
  • Contractor Fees It's clear that the Grinch's dog Max would prefer to just go along for the ride. But that's no reason not to deduct any payment the Grinch makes to his four-legged friend. Max isn't regularly engaged in the trade or business of helping the Grinch steal Christmas, which suggests the IRS would classify Max as an independent contractor (rather than an employee), responsible for his own employment tax and withholding. (Getting off that particular hook is sure to bring out that evil Grinch smile!)
  • Medical and Dental. Speaking of the Grinch's smile, have you noticed how awful the Grinch's teeth are? With just a little planning, he could set up a Medical Expense Reimbursement Plan and deduct the cost of straightening and whitening those choppers!
Here's another reason for the Grinch to be happy that his heart grew three sizes that day — and he gave Christmas back. If he really had stolen Christmas, he would have owed tax on it! Ill-gotten gains are just as taxable as any other kind of income, right? We imagine all those flu floopers and tar tinklers would be treated as ordinary income — but who knows how an auditor would treat a set of silver jing tinglers, or a rare zu zitter carzay?
This holiday season, we wish you and your family all the best. And remember, don't hesitate to call us with any year-end finance questions!

Tuesday, December 8, 2015

IRS Employees Make the Naughty List

Back in 2002, Steve Epstein, the director of the Pentagon's Standards of Conduct Office, faced a common dilemma among ethics officials: how to keep his training sessions fresh and relevant? His answer was to avoid discussing dry statutes like 18 U.S.C. § 205, and focus instead on telling stories. "We discovered that the first thing you have to do is you have to entertain folks enough so they will pay attention."
Epstein found plenty of stories, and assembled them into the Encyclopedia of Ethical Failure, a compelling collection. He organized them into helpful categories like "Bribery," "Credit Card Abuse," and those always-entertaining "Time and Attendance Violations."
Epstein's list focuses mainly on military personnel. But we were curious to see if anyone at the IRS had wound up in his Hall of Shame. And sure enough, we found a few. Now, the vast majority of IRS employees are honest, hardworking public servants, doing a thankless job in an era of shrinking budgets and rising hostility. But Christmas is approaching, and somebody has to wind up on Santa's naughty list!
  • An IRS Revenue Agent became friends with the owner of a construction company that owed back taxes. The agent wound up accepting generous gifts like free dinners, free rounds of golf, and a check for $14,900 that he used to buy a car. He ended up admitting that the gifts from his new bestie made it hard to collect the construction company's outstanding debt, and spent three years thinking about it at a federal installation with no golf course.
  • Two rental-car company owners conspired with two IRS employees to ignore their tax debt in exchange for free rental cars and paid vacations to Florida. Alas, people in stories that begin with the word "conspired" rarely end well, and this one was no exception. Instead of finishing with "they all lived happily ever after," this one features words like "jail," "restitution," and "supervised release."
  • An IRS employee learned inside information about a stock transaction while he was working on a collection. After the assignment, he bought $2,000 worth of the stock. Apparently his conscience got the better of him, and he came clean to his supervisor. This led to charges for participating personally as a government employee in a matter in which he had a personal interest. The prosecution, in turn, led to his resignation, plus six months in a pretrial diversion program. Oh, and in a victory for karma, he lost money on the stock!
  • An IRS officer and two tax preparers dreamed up a scheme to cheat the government. The tax preparers convinced clients who owed money to the government that they could negotiate a better deal if they made an up-front payment. Then the IRS officer falsified records to show the clients were "uncollectible," which meant the IRS stopped pursuing them. Meanwhile, the money the clients thought they were paying over to the IRS never actually found its way there. Naturally, all three of our criminal masterminds wound up serving time.
Here's the good news this holiday season. It really is possible to pay less and make the nice list. You don't even have to wait for Santa to leave anything under your tree. Just call us for a plan, before the clock strikes midnight on December 31!