A Different Kind of Holiday Party

Your kids have finally finished eating their Halloween candy, which means that the real holidays are right around the corner. But before you sit down to open presents, December 16th marks the 244th anniversary of an important holiday in tax history — a pop-up costume ball in Boston Harbor called the Boston Tea Party.

From 1698 through 1767, Britain's Parliament passed a series of laws giving the East India Company a monopoly on the British tea trade, forcing the colonies to buy their tea from British wholesalers, and slapping hefty taxes on it all. But Dutch traders, who paid no tax, could sell their tea for less, costing the East India Company a fortune. (If you remember Miami Vice in the 1980s, try picturing a colonial-era Crockett and Tubbs, dressed in fly white buckskins, chasing Dutch bootleggers in a sleek Italian brigantine.)

In 1767, Parliament passed the Indemnity Act to lower the tax on tea to compete with the Dutch. (Earl Gray was just three years old, so he didn't vote.) But they needed a "payfor" to make up the lost revenue, so they brewed up the Townshend Acts taxing colonial imports, including tea. (Hmmmm . . . sounds like the sort of horse-trading today's Congress is up to right now with the Tax Cuts and Jobs Act.) Five years later, the Indemnity Act expired, and everyone was back where they started. (Sort of like what happened in 2013 when the Bush tax cuts expired . . . . )

The Tea Act of 1773 brought things to a head. The new law actually lowered the price of tea to undercut the smugglers. But the colonists still hated Parliament taxing them without their consent. They hated how England used those taxes to pay colonial governors and judges, thus insulating them from local influence. And that's where things stood in November, 1773, as the tea ship Dartmouth sailed into a Boston Harbor steeped in resentment and controversy.

British law required the shipper to unload and pay the tax within 20 days. But colonists, who gathered by the thousands, were determined to prevent that. On the night of December 16, the final deadline, a group of 30 to 130 of them boarded the Dartmouth and two more ships. A few of them sported elaborate Mohawk warrior costumes to hide their faces and show their loyalty to American identity. They spent three hours dumping 342 chests of tea into the water. The next day, future President John Adams wrote in his diary:

"There is a Dignity, a Majesty, a Sublimity, in this last Effort of the Patriots, that I greatly admire . . . . This Destruction of the Tea is so bold, so daring, so firm, intrepid and inflexible, and it must have so important Consequences, and so lasting, that I cant but consider it as an Epocha in History."

The Tea Party set all sorts of consequences in motion besides the obvious "American Revolution" thing. (Does that remind you of Taylor Swift's song, "We Are Never Ever Getting Back Together"?) If you're a coffee drinker, for example, you should know that coffee first became popular here as an alternative to "unpatriotic" tea. (Sort of like renaming french fries "freedom fries" during the Second Iraq War . . . . )

244 years later, we still resent paying taxes we don't have to pay. The good news is, you don't have to don a Mohawk headdress and row out into the middle of the harbor for three hours of creative vandalism to pay less. You just need a plan. So call us when you're ready to save, and let us give you something to celebrate!

Ivy League Tax Problems

They say that "what goes up must come down." But that's not true when it comes to college costs. U.S. News reports the average private college tuition stood at $16,233 back in 1997-98 — roughly $24,973 in 2017 dollars. But the same tuition today costs $41,727. And that's before pricing in luxuries like, you know, meals, and a place to sleep. In-state college costs are rising even faster as legislatures cut budgets for higher education. That means colleges are increasingly turning to alternate funding sources, including their endowments.

In academia, though, as in so many other parts of our "winner take all" society, there's the 1%, and there's everyone else. America's richest 800 colleges and universities hold over $500 billion in endowments, which sounds like there should be plenty to help supplement tuition and fees. But the top 1% of schools hold over $10 billion each, and 11% of schools hog 74% of those assets. That leaves the Faber Colleges of the world essentially fighting over scraps. ("Knowledge is good.")

Now, the Phi Beta Kappas who write our tax code have turned their green eyeshades towards those mammoth pools of tax-free wealth. Both the House and Senate tax bills working through Congress would impose a 1.4% excise tax on net investment income of private colleges holding more than $250,000 per student. That group includes about 70 schools, including obvious targets like Harvard, Yale, and Princeton. At the same time, the proposal spares public school systems with big endowments like the Universities of Texas ($25.4 billion), Michigan ($9.7 billion), and California ($7.4 billion).

It's true that if any schools have "too much money" (LOL), it's the top-shelf Ivies. Harvard's endowment started in 1638 with £779 and 400 books. Over the next 379 years, it's grown to over $37 billion (and 16 million books), leading critics to call it a hedge fund with a university attached. In 2015 that fund grew by just 5.8%, compared to rival Yale's 11.5%. But Harvard Management Company paid its chief executive a whopping $14.9 million, with his deputy taking home $11.6 million. (And you thought college football coaches were overpaid!)

Academic endowments have grown so large that they're starting to use some of the same tax strategies as the richest individuals. The New York Times recently exposed how colleges use offshore entities to boost earnings, including "blocker corporations" that let them avoid tax on debt-financed "unrelated business taxable income." (Trust us, those UBTI rules are even more boring and technical than they sound.)

But naturally, academics are irate at the proposal, rolling up their leather-patched tweed sleeves and prepping for a (genteel) fight. "Endowments support substantial student aid and student service programs, and provide funding for instruction, research, and for building and maintaining classrooms, labs, libraries, and other facilities," said the Association of American Universities. At Princeton (the #1 target with $2.5 million per student), undergraduates from families earning under $56,000 pay no tuition, room, or board, while those from families earning under $160,000 pay no tuition. 

Here's the good news. You don't have to be an Ivy League university — or even have an Ivy League education — to save big on your tax bill. You just need a proactive plan. So call us when you're ready for some real-world lessons on how to pay less!

The Rock Star, The Nude Estates, and the Lithuanian Shopping Mall

We've all got an image in our minds of who uses "offshore tax havens" to host their business. Let's say you're a junior-varsity Russian oligarch. You've spent a lifetime looting your country's resources like an all-you-can-steal buffet, and now it's time to take some of your chipskis off the table. You buy a flat in London's posh Mayfair, or maybe a condo overlooking New York's Central Park. Then you stash the rest of your rubles in some sunny flyspeck of an island like Bermuda or the Caymans, where Putin's goons can't steal them back.

But most people who do business offshore aren't crooked billionaires. They're perfectly legitimate multinational corporations, business owners, and investors just like us. If you've worn shoes from Nike, made calls on an iPhone, or downloaded music from Sheryl Crow, you've even done business with them!

Last month, the investigative journalists who brought us 2016's Panama Papers dropped Season Two of their effort to expose how the global 1% use international entities to structure their wealth. The "Paradise Papers" include 13.4 million electronic documents, mostly gleaned through a "data security incident" from the Bermuda-based law firm of Appleby Spurling Hunter. And one of the names that those intrepid detectives uncovered was Paul David Hewson, originally from Dublin's middle-class Finglas suburb.

Of course, you probably know Hewson better by his stage name, Bono. (His U2 bandmates dubbed him Bono Vox, meaning "good voice," in high school.) Now, Bono's made hundreds of millions of dollars in his career. But he's also hobnobbed with the Dalai Lama and been nominated for a Nobel Peace Prize. He's hardly the sort of guy you'd expect to be moving money in mysterious ways. So what's the deal? Here's how the BBC lays it out:

"Bono owned a share in the Ausra shopping center located in the Lithuanian city of Utena via his stake in a company called Nude Estates, based in Malta. In 2007, Nude Estates bought the mall via a company they incorporated in Lithuania called UAB Nude Estates 2. In 2012, Nude Estates Malta Ltd. transferred the ownership of both Nude Estates 2 and the mall to a new offshore company, Nude Estates 1, based on the English island of Guernsey. Both Malta and Guernsey are low-tax jurisdictions, though foreign investors pay a five percent tax on company profits in Malta, while they pay no tax in Guernsey."

There you have it. Even paying 5% tax in Malta, they still hadn't found what they were looking for. So Nude Estates tripped through the waters with Bono's money for the rattle and hum of tax-free Guernsey. Bono himself seemed taken aback by the disclosure. He said he would be distressed if "anything less than exemplary" was done with his name anywhere near it. And he said, "I take this stuff very seriously. I have campaigned for the beneficial ownership of offshore companies to be made transparent. Indeed this is why my name is on documents rather than in a trust."

Here in the U.S, we're subject to tax on all our worldwide income, no matter where it's earned. That means that moving investments offshore doesn't convey any sort of automatic tax benefit, with or without you. Fortunately, the same internal revenue code that taxes us on foreign income offers countless strategies to minimize or avoid that tax. All you really need is a plan. So call us when you desire to save, and let's see if we can rescue enough wasted tax dollars to send you someplace where the streets have no name!

Naughty or Nice

When I was growing up, I was told that Santa kept a list of “those who were naughty and nice”.  Now, he has expanded his techniques for acquiring that information.  According to the storybook, Elf on the Shelf, Santa has recruited an army of scout elves to sneak into children’s houses before Christmas and rat you out. 

Santa is not alone in using others and modern technology in spying on your children’s behavior.   The IRS has a number of ways to check up on you.  Read my email which is distributed on Wednesday, December 28 to learn how the IRS is tracking your behavior.  If you are not currently receiving my email, send us a request to be receive it at info@coloradotaxcoach.com.  We will gladly squeal on the IRS for you.

Chocolate Covered Anything Day

Today is the reason for the season.  Chocolate Covered Anything Day is today, December 16.  It is your chance to put chocolate on everything you eat.  From breakfast (chocolate covered pancakes) to dessert (chocolate covered cherries) and in between snacks (chocolate covered peanuts).  Who does not love their peanut MMs?

Since the time of the Aztecs, chocolate has been loved.  The Aztecs believed Quetzalcoatl, their spiritual leader, received chocolate as a gift from the gods.  They actually used cocoa beans as their money.  Have you tried paying your taxes with Hershey bars?

Most of us do not want to waste chocolate – your income, your investments, and anything else.   We are always looking for ways to enjoy more of what we have.  There’s nothing pleasurable about wasting your money paying taxes you don’t owe.  We are also looking for ways to help you avoid that waste.  As you are enjoying your chocolate treats this holiday, give us a call with your questions.

Call 970-668-0772 today!

Taxes and Gift Horses

What do they say about looking a gift horse in the mouth? When given a horse, it would be bad manners to inspect the horse’s mouth to check its age and condition. This analogy can be applied to any gift. Student loan debt is over trillion dollars, and many loan forgiveness programs have sprung up to assist borrowers who go to work for qualifying employers like the government and 501 (c) (3) nonprofits. Those borrowers may face an unexpected surprise. Sometimes the debt amount forgiven is considered taxable income by the IRS! Yes. Having $50,000 of student loan debt forgiven would be nice for the dedicated teacher or social worker. But what about the $12,500 of additional taxes that comes with it?

When it comes to taxes, school is never out.  So, email us at info@coloradotaxcoach.com before you apply for any debt relief and let us help you with the planning you need.

Back-to-School

August 29, 2016

Back-to-School

In case you missed it, back-to-school season is here. Everyone is busy getting ready to go back-to-school. Back-to-school specials by stores are everywhere. Mom and Dad are buying school supplies such as pens, paper, computer and smart phones for their students.

Families are not the only ones shopping for needed supplies this time of year. Teachers have to adapt to shrinking school budgets, and they often contribute their own funds to the cause depleting the amount of money they receive (small as it is). The IRS wants to do its share, too. The Education Expense Deduction allows teachers who work full-time at any accredited school to deduct up to $250 paid to purchase books, school supplies, computer equipment, software and even sports gear on behalf of their students.

So today’s lesson is – when it comes to taxes, school is never over. The more you know and the more you plan, the less you’ll waste on taxes you don’t have to pay. So email us at info@coloradotaxcoach.com and let us help you with a little tutoring.

Holy Taxes, Batman!

On July 23, Batman turned 75! Everyone knows how the billionaire industrialist Bruce Wayne dons a bat-like costume to protect Gotham City from supervillains like The Joker, The Penguin, and The Riddler. But did you know that he's just as resourceful when it comes to fighting The Tax Man, too? Let's use the occasion of the DC Comics character's Diamond Anniversary to see what bat-deductions he can bring to the fight:

• Batman may be a brilliant detective and master martial artist, but he can't protect Gotham all by himself. Dick Grayson was the youngest member of the "flying Graysons" acrobat troupe when a mafia boss killed his parents. Batman took Grayson in as his legal ward, and soon Grayson became "Robin." Claiming Robin as a dependent gives Batman a personal exemption, which would reduce his taxable income by $3,950 this year if Batman's high income didn't phase out most of that deduction. But more important, it lets Batman file his taxes using more advantageous "head of household" rates!

• Batman and Robin live at stately Wayne Manor, an enormous fortress outside Gotham City. Batman's family has owned the home for generations, which means Batman isn't likely to be paying tax-deductible interest on a mortgage. However, he can deduct an unlimited amount of property tax he pays on the home and grounds, including the Batcave. Oh, and the solar panels Batman installed after the mansion was damaged in an earthquake qualify for a 30% solar investment tax credit.

• Alfred Pennyworth is a British actor and former intelligence agent who serves as Batman's butler and best friend. Alfred manages Wayne Manor and cares for the Batcave below. It's not a business relationship, so Batman can't write off Alfred's salary. However, it seems evident that Alfred is required to live on the premises as a condition of his employment — which at least makes his room and board tax-free to him.

• When Robin left for college, Batman decided Wayne Manor was a bit too stately for just Alfred and him. So they decamped to a penthouse high atop the Wayne Foundation building in Gotham City. Naturally, the penthouse includes a secret elevator, leading to a secret Batcave, in a secret sub-basement deep under the building. But there's no need to hide anything from the IRS — it also qualifies as a second home, meaning Batman can deduct interest on up to $1 million of "acquisition indebtedness" on the property, plus an unlimited amount of property tax as well.

• Batman is one of those rare comic book superheroes without actual superpowers. He can't fly, like Superman, or breathe underwater like Aquaman, or transform himself into an invulnerable green humanoid like The Incredible Hulk. (He can't even make plants grow like the Clorophyll Kid!) But he can harness an arsenal of specially-designed bat-themed gadgets and tools. This includes the fleet of vehicles we all love — the Batmobile, Batplane, Batboat, Bat-sub, and Bat-cycle. And it includes a special utility belt to carry the "batarangs" he uses in lieu of firearms (because a gun killed his parents). Batman's "toys" naturally help him fight crime. But they also help him fight taxes — inventing and producing them qualifies for lucrative Research & Development tax credits and Domestic Production Activity deductions!

Billionaire Bruce Wayne understands that smart tax planning doesn't have to mean revealing his secret identity. We can be sure he uses at least part of the savings to fund his fight against the supervillains! But you don't have to be a millionaire crime-fighting playboy to benefit like he does. Activate your bat-signal — or just pick up your batphone and call us — and we'll give you the plan you need to fight taxes you just don't have to pay.

Berkshire Giveaway

Someday, the financial wizards who run things on Wall Street will realize there's "paper to be stacked" opening an Investor Hall of Fame. (Hey, the Rock and Roll Hall makes $40 million a year, and it's in Cleveland.) And when they do, they'll have to dedicate an entire wing to Warren Buffett. The so-called "Oracle of Omaha" has become a rock star among money managers. His chart-topping net worth soared by $37 million per day last year. And his annual Berkshire Hathaway shareholder meeting attracted 40,000 attendees this spring, making it the Burning Man Festival for the cocktail set.

Buffett affects a folksy style, posing for photos with a ukelele and quipping that Wall Street is the only place where people drive Rolls-Royces to get advice from people who ride the subway. But he didn't get to be #2 on the Forbes 400 by being dumb — and this is true with taxes, too. Buffett has made headlines criticizing the carnival of confusion that passes for the "Internal Revenue Code" for taxing his secretary at a higher rate than it taxes him. But his actions show a keen grasp of the power of smart tax planning.

Let's take a look at Buffett's charitable giving. Now, there's no doubt that his motives are sincere — he's pledged to give a whopping 99% of his fortune to charity. But his generosity may have the side benefit of saving him $30 billion or more in tax.

So far this year, Buffett has donated $2.8 billion, including $2.1 billion to the Gates Foundation, $215 million to the Susan Thompson Buffett Foundation, and $150 million each to the Howard G. Buffett Foundation, the Sherwood Foundation, and the NoVo Foundation. But those gifts didn't really "cost" him $2.8 billion. That's because he didn't give cash — he gave Berkshire Hathaway stock. Donating appreciated stock lets Buffett deduct the fair market value of that stock at the time of the gift, even though his "cost basis" — or actual investment in it — is likely to be far, far less. Giving away appreciated stock also lets him avoid tax on the appreciation in that stock.

Let's say Buffett's basis in this year's gift stock was an even billion dollars. (It's probably even less, but who's counting?) If Buffet had sold the stock at a $1.8 billion gain, then given cash, he would have had to pay $712,800,000 in regular tax, plus another $68,400,000 in "net investment income tax." Giving appreciated stock directly, then letting the charities sell it, boosts his largesse by nearly $800 million — money that Buffett evidently thinks his charities can spend better than the folks in Washington.

Buffett probably won't ever "retire" in the go-fishing-in-Florida-and-eat-dinner-at-4 sense of the word. But at some point, he'll get promoted to that great boardroom in the sky. That's when his charity will really sidestep our friends at the IRS. Buffett could set up his heirs for generations to come. But with a 40% estate tax, leaving his current net worth of $58.5 billion to family would cost $23.4 billion in tax. Leaving his wealth to charity avoids that hit. And it spares the rest of us decades of reality TV about spoiled, dissolute heirs — their gilded lifestyles, their trips to rehab, and their endless Paris Hilton-esque shenanigans.

We realize you don't have billions to give like Buffett. But if you're one of the millions of Americans who admire his business wisdom, take a lesson from his tax wisdom as well. And call us before you make any sort of major gift, to your church, your college, or your community. We'll help you structure it to squeeze out the maximum advantage. You can be sure Warren Buffett would approve!

Cleveland Rocks!

Cleveland, Ohio has historically been one of America's most populous and productive cities, peaking as the fifth-largest back in 1920. Today, "C-town" is a shadow of its former glory, another Rust Belt factory town, best known for the Rock and Roll Hall of Fame. But last week, Clevelanders had reason to celebrate once more. Are we talking about the Republican National Committee's decision to host their 2016 nominating convention in the city dubbed "the Mistake on the Lake"? Of course not! We're talking about basketball superstar LeBron James's decision to leave the Miami Heat and return to the city where he spent the first seven years of his career.

On the face of it, James's decision seems curious. Few athletes with any choice in the matter would happily trade Miami's bright lights, sunny pastels, and Caribbean vibe for Cleveland's cold winters, gray skies, and flammable river. But LeBron, who grew up in nearby Akron, believes in home — and for him, the move is a slam dunk. "My presence can make a difference in Miami, but I think it can mean more where I’m from," he told Sports Illustrated. "I want kids in Northeast Ohio . . . to realize that there’s no better place to grow up. Maybe some of them will come home after college and start a family or open a business . . . Our community, which has struggled so much, needs all the talent it can get."

Cleveland fans aren't the only ones who will applaud LeBron's move. You can be sure that basketball fans at the IRS will cheer, too. LeBron will make a reported $20.7 million per year in Cleveland — $1.6 million more than the $19.1 million he earned last season in Miami. He'll pay the top income tax rate of 39.6% on that difference, along with an extra 3.8% Medicare tax — and that, in turn, will mean about $694,000 more for Uncle Sam. (His total Medicare tax on his playing salary will reach almost $785,000, or nearly enough to pay for a heart transplant.)

But the biggest winner here may be the Ohio Department of Taxation. Last season, LeBron played his home games at Miami's American Airlines Arena, where he enjoyed Florida's lack of personal income tax. When he returns to Cleveland's Quicken Loans Arena, he'll pay Ohio's top rate of 5.421%. That's no mere technical foul — state taxes on the half of his games that he'll play at home will run more than half a million dollars per year!

Fortunately for LeBron, he makes his real money off the court. In 2013, he collected a whopping $50 million in endorsements from Nike, Coca Cola, Cadbury Schweppes, Juice Batteries, Upper Deck, Cub Cadet, McDonald's, Microsoft, and State Farm — among others. He was an early investor in Beats by Dre, and reportedly parlayed that stake into $30 million when Apple acquired the headphone maker. But LeBron will keep his residence in Florida, which should shelter the bulk of his financial three-pointers. No less a business authority than Warren Buffett has said of LeBron, "He's savvy. He's smart about financial matters. It's amazing to me the maturity he exhibits."

When it comes time to pay all those taxes, you can be sure that LeBron James doesn't just drop off a shoebox full of receipts with his accountant on April 15. He's got a plan to "defend his net" as vigorously as the law allows. Now, you probably can't fill Lebron's size-16 sneakers. But you can take advantage of the same sort of proactive planning that superstar athletes use to save millions. And you don't even have to wait for free agency! You just have to pick up the phone and call us. So, what are you waiting for? 

Inside Job

The IRS currently has nearly 90,000 employees — about the population of Springfield, OH, or Muncie, IN. The vast majority of them are honest, hardworking civil servants, doing their best to navigate the all-you-can-eat buffet of confusion known as "the Internal Revenue Code." They use their training and knowledge to do their sometimes thankless jobs, then head home to their families, secure in knowing they're helping our government finance its operations.

But a tiny number of these so-called "servants" use their powers for evil instead of good. They cheat the system to enrich themselves, at the expense of all the rest of us. Fortunately, for those of us who play by the rules, they usually leave tracks behind them. Here's one of the better stories, from the IRS Criminal Investigations unit's Fiscal 2013 annual report.

Patricia Fountain had worked at the IRS Service Center in Philadelphia for 10 years. In 2006, she discovered the IRS wasn't verifying requests for the telephone tax credit from filers claiming less than $1,500. Then she learned the Service wasn't verifying claims for first-time homebuyer credits. She smelled opportunity — and launched a criminal scheme of such dazzling brilliance that . . . well, we'll let you be the judge.

First, she enlisted her boyfriend, her hairdresser, and a third friend to join her scheme. According to the Philadelphia Inquirer, the four conspirators then recruited a motley collection of "drug addicts, welfare recipients, and ex-cons" who needed cash, would let the gang file false returns on their behalf, and would hand over $400 of the resulting fraudulent refunds. Fountain's henchmen used her position within the IRS to "add an air of credibility" to the scheme and convince the straw filers to join. And life was good, at least for awhile. From 2006 through 2012, our criminal masterminds bilked the government out of more than $3 million.

And how could Fountain count on her straw filers to cooperate and kick back her $400? If she didn't think they were coughing up her share fast enough, she would "red flag" them by filing another return, triggering the IRS to seek repayment and unleashing the collections department on them. (Yes, she actually did this — eight times!)

Fountain's vindictive streak proved to be her undoing — predictably, one of the women she "red flagged" ratted her out. Things fell apart from there, with conspirators pointing fingers at each other in a mad rush to avoid consequences. Fountain claimed she was framed by her boyfriend, then had a hard time explaining her fingerprint on the stamp used to mail her own fraudulent return. Another co-conspirator — a Mensa wannabe by the name of Calvin Johnson, Jr. — used information from the scheme to continue filing false returns as late as 2012, while he was being supervised on pretrial release for filing his first batch of fraudulent returns!

Fountain will have the next 19 years to decide if orange really is the new black, plus $1.7 million in restitution. Her boyfriend got 12 years behind bars and $1.75 million in restitution. Johnson gets 18 years of federal hospitality. And four more of the gang, including Johnson's father, drew sentences for their parts as well.

It's all pretty comical, yes. But in the end it's more sad than funny. There are so many honest ways to make a good living, and so many honest ways to pay less tax on it. So call us when you're ready for a plan — because, in the end, it's what you keep that counts.

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!

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!

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 we 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!

Oops!

Politicians in Iowa, like politicians everywhere, want to encourage their local economy to grow. (Happy voters lead directly to reelection, of course.) But back in 2008, construction in Iowa, like construction everywhere, had slowed because of the recession. So the Hawkeye state's legislators did what they thought was a smart thing. As part of an overall reform that raised the sales tax rate from 5% to 6%, they streamlined the rules regarding heavy construction equipment. Specifically, they said that sales would be subject to the equipment excise tax — but rentals and leases would not. Makes sense, right? Why make construction more expensive by imposing a sales tax on folks who aren't actually buying the equipment they use?

Since then, the Iowa Department of Revenue has collected more than $20 million in tax on equipment sales. Nobody paid any special attention to the new rules — at least, until last summer. That's when a curious attorney for an equipment buyer contacted the Department with the unwelcome news that the legislature had streamlined the tax a little too well. In fact, the language of that legislation had accidentally repealed it entirely!

And nobody noticed. Not the staffers who wrote the law. Not the legislators who introduced it into the statehouse, marked it up, and passed it. Not the governor who signed it. Not the 185 or so equipment vendors who mistakenly collected the tax on behalf of the state. And certainly not the Department of Revenue who happily took the vendors' deposits, year after year after year.

Oops. "I think you call that a mess," said Rep. Tom Sands, Chair of the Iowa House Ways & Means Committee.

What could Iowa do? Honoring the mistake would mean paying back $20-30 million in taxes and interest, plus giving up $7 million more every year going forward. That may sound like a drop in the bucket compared to the state's overall $15 billion budget. But in today's tight economy, every bit counts.

The legislators who accidentally repealed the tax probably would have preferred to ignore the whole thing and hope that nobody noticed. (Insert your own joke about political cover-ups here.) But once that lawyer discovered their goof, the game was up. So they did something any golfer understands. They took a mulligan! On March 10, the Iowa House voted 95-0 to pass a "technical administration" bill reinstating the tax, retroactive all the way back to 2008. On March 27, the state Senate concurred, 26-21. And on April 10, Governor Branstad signed it into law.

So, does it count as "raising taxes" to pass a bill retroactively reinstating a tax you never meant to repeal in the first place?

Then a tree falls in the forest and no one is around to hear it, does it make a sound?

You probably shouldn't hold your breath waiting for Congress to accidentally repeal the Internal Revenue Code. Fortunately, you don't need that sort of foulup to pay less. You just need a plan — a blueprint for taking advantage of all the deductions, credits, loopholes, and strategies you're legally entitled to. So call us when you're ready for that plan, and see what we can construct for you!

Tax Man Asks "What's On The Grill?"

If you're like millions of Americans, you spent last weekend welcoming the unofficial start of summer. (Time to start wearing white again!) You might have enjoyed a day at the pool, a game of tennis, or a round of golf. You may have even hosted a backyard barbecue. If so, you probably didn't realize that serving fancy fare like lobster or crabcakes would impress the tax man as well as your guests — at least, if you live in England.

Across "the pond," Her Majesty's Revenue & Customs is the equivalent of our IRS, charged with collecting the taxes that pay for royal kibble for the Queen's royal corgis. And just as here in the former colonies, there's a "tax gap" between what officials believe they should be collecting and what they actually get. In England's case, that difference is about £35 billion (a spot under $60 billion depending on the exchange rate).

HMRC has already drawn heat for going all "Big Brother" in their efforts to ferret out tax evaders. Last year, they announced a new program to use credit checks to find suspected tax cheats. The goal is to cross-check what people report on their tax returns against they actually spend. Officials started with a pilot program involving 20,000 people — and they expect to expand it to as many as two million. (Blimey!)

But now they're going even farther. Now they're using images from Google Earth and Google Street View (for that all-important "kerbside" look) to literally spy on homes to trap suspected tax cheats! Are you paying proper tax on your home improvements as you've described them on tax forms? Are you paying enough tax on all the cars parked in your driveway? Presumably, if the images of your lawn party are detailed enough to distinguish between ordinary bangers and high-end potted shrimp, they'll use that against you too!

And what are they doing with those images? Four years ago, they dropped £50 million on a supercomputer named "Connect" to help decide who to investigate. According to the Daily Mail, it already holds more than a billion records, including "tax payment records, interest on bank accounts, details of any properties owned, loans, job history and electoral records." Bragging about your new car or your "trip of a lifetime" on Facebook can also trigger unwelcome attention.

Back here in the states, our National Security Agency's wholesale snooping in the name of fighting terrorism ignited a row of protest — and that was nothing compared to what HMRC freely admits doing, just in the pursuit of a few bloody quid. Can you imagine the outcry if, say, the reporters who helped break the Edward Snowden story discovered the IRS was analyzing credit scores and voting records to help decide who to audit?

(In related news, the latest trend among the Russian oligarchs, Arab sheiks, and ordinary billionaires who have made London the world's hottest real-estate market is excavating luxury basements with swimming pools, ballrooms, and gymnasiums. They say they're going underground because there's just no place else to build — but avoiding the tax man's probing electronic eye can't hurt, either!)

Well, old chap, what should we make of all this? The happy news is that you don't need to hide from satellites if paying tax isn't your cup of tea. You just need a plan — and it's our job to give you that plan. Call us now, and we'll have it in place before you put away the whites on Labour Day!

From Russia With Love

The former Soviet republic of Ukraine has become the world's hottest military and diplomatic flashpoint as Ukrainian nationalists face off against pro-Russian separatists. Russian President Vladimir Putin courteously waited until after the Sochi Olympics to seize Crimea, then position troops throughout eastern Ukraine. Now he's announced he'll withdraw the troops he denied dispatching in the first place. But sabers are rattling, and the situation is so volatile that combat could explode before you finish reading this email.

The United States obviously wants to avoid that possibility. But Secretary of State John Kerry's best efforts appear to be having little effect. We're certainly not going to involve our own military anytime soon. Even James Bond himself would be hard-pressed to parachute in with a solution. So, who can we turn to?

Well, how about those stalwarts of democracy at the IRS?

Back in 2010, Washington passed the Foreign Account Tax Compliance Act ("FATCA") to stop tax evaders from parking assets in secret foreign accounts. (Add another "t" to that acronym and you'll see who it's aimed at!) That law requires all foreign banks to spill the beans on American accounts with more than $50,000. If they don't, starting July 1, they'll have to withhold 30% of the interest and dividend payments their clients earn on most U.S. stocks and bonds.

Almost 50 countries have agreed to let their banks participate and avoid that penalty. That list includes traditionally "sunny places for shady people" like the Cayman Islands. But guess who still says nyet? That's right, Russia. What's worse, Russia's bank secrecy laws prevent banks from going around the country and working directly with our Treasury. And even worse, at least for Putin and his henchmen, our Treasury suspended negotiations entirely when Russia rolled into Crimea.

At this point, then, it looks like law will make it way more expensive for investors to use Russian banks to invest in the U.S. And private investors who use Russian banks to facilitate trades are also subject to the law. It gets worse in 2017 — if there's still no agreement in place, banks will have to withhold 30% of the gross proceeds of stock and bond sales, on top of the interest and dividends they earn.

FATCA may not be the only way to marshal the power of taxes against Russia. Putin's cronies — the billionaires who own Russia's biggest oil, gas, mining, and retail companies — have moved tens of billions of dollars of assets out of Russia and into western jurisdictions like Luxembourg, the Netherlands, and Switzerland. They did so to dodge Russian taxes (apparently, ex-commies resent paying them as much as any other capitalists). But now they find their assets exposed to possible U.S. sanctions and vulnerable to freezes. It's probably too soon to break out the balalaikas and celebrate — but we can hope that the risk of losing their assets motivates the oligarchs to pressure Putin to pull back.

Closer to home, we help you pay less tax on your investments. Fortunately, you don't have to risk international sanctions to do it! You just need a plan. So call us for that plan, and save a bunch of rubles on your bill!

Nice Mouth

Two weeks ago, few Americans had heard of Los Angeles Clippers owner Donald Sterling. Now, thanks to Sterling's big mouth, we're all talking about him. As President Barack Obama said, "when ignorant folks want to advertise their ignorance you don’t really have to do anything, you just let them talk. And that’s what happened here."

National Basketball Association commissioner Adam Silver wasted no time banning Sterling from the league for the rest of life. (No communication with players, coaches, or staff. No practices or games. No owner meetings at cushy resorts or other league activities of any kind.) He announced he would urge the league's Board of Governors to force Sterling to sell the team. And he fined Sterling the maximum $2.5 million allowed by the league constitution.

At first glance, $2.5 million sounds like a mere technical foul for a guy with Sterling's wealth. (Forbes estimates his total net worth at $1.8 billion.) But the real cost of Sterling's words may turn out to be $100 million or more. Where does that extra penalty come from? Thank our friends at the IRS, of course.

Sterling bought the team in 1981 for just $12.5 million. According to the Wall Street Journal, it's worth $700 million or more today. We'll assume for the purposes of this discussion that Sterling could sell it for $700 million.

If Sterling holds onto the team until his death, his estate will owe Uncle Sam 40% on the $700 million. The $280 million tax will leave his heirs with just $420 million. That's a big bite, of course. But the heirs will take the team with a "stepped-up basis" equal to the full $700 million. In other words, they avoid tax on the full difference between the $12.5 million purchase and the $700 million value.

Now let's say Sterling's fellow NBA owners force him to sell. Sterling will owe 20% federal capital gain tax on his $687.5 million gain (the $700 million selling price minus his $12.5 million "basis.") He'll owe the new 3.8% "unearned income Medicare contribution" on the same amount. And, as a California resident, he'll owe the Golden State another 13.3%. The California tax is deductible from his federal income. Still, all told, he'll pay in the neighborhood of $230 million on his gain. Talk about fouling out!

Those tax hits will leave Sterling with just $468 out of the team's $700 million. At his death, estate taxes will take another $187.2 million, leaving his heirs with just $280.8 million. That's nearly $140 million less than if he had held the team until his death.

As bad as $140 million sounds, the real penalty could climb even higher. The team's television contract expires after the 2015-16 season, which could mean hundreds of millions in new revenue from a more lucrative replacement contract. Plus, celebrities from NBA great Magic Johnson to rapper-entrepreneur Sean "Diddy" Combs, and even Oprah Winfrey have announced interest in buying the team. That sort of financial jump shot could push the price to well over a billion dollars.

Selling appreciated assets like stocks, mutual funds, real estate, or a business can feel like striking it rich. But you can't forget that your friends at the IRS are waiting to share your good fortune, too. That's why it's crucial to have a plan to minimize your tax when you sell. And that, of course, is where we come in. So call us before you sell, and remember, it's what you keep that counts.

Toby Keith's "I Love This Tax Problem"

In 2003, country music superstar Toby Keith released "I Love This Bar," the first single from his Shock'n Y'All album. (For those of you under age 25 or so, an "album" is . . . oh, never mind.) Billboard predicted the song would become "a beer-joint staple for years to come," and it promptly shot to #1 on the charts, selling over a million copies.

"I Love This Bar" is just one of Keith's odes to drinking — he's also scored hits with "Whiskey Girl," "Get Drunk and Be Somebody," and "Get My Drink On." "Red Solo Cup," his 2011 smash, made the red plastic cups the symbol of "party time" for the under-30 set. Naturally, with that sort of appeal, Keith had to open a bar of his own. Singer-songwriter Jimmy Buffet pioneered the concept, opening dozens of tourist traps Margaritavilles anywhere middle-aged men of a certain disposition gather to recall their youth. If Jimmy can do it, why can't Toby?

And so it came to pass that there are now fifteen Toby Keith's I Love This Bar & Grill locations from sea to shining sea. Keith's namesake joints feature guitar-shaped bars, beer served in mason jars (just like in the song), and elegant southern fare like chicken-fried chicken (?), fried bologna sandwiches (!), and deep-fried twinkies (!!). You'll find them plunked down in cities across our fair land, including such traditional country-music strongholds as Boston, Detroit, Cincinnati, and even Syracuse.

It's that last location in upstate New York — 1,400 miles from Keith's hometown of Norman, Oklahoma — that brings us to our story. You'd think the guy who sang "Beer for My Horses" with Willie Nelson would have no problem turning a profit with sales from a bar packed with thirsty fans. But apparently, you'd be wrong. The New York Department of Taxation and Finance has just hit the store with a "tax warrant" for $189,392.17 in unpaid sales taxes. The warrant lets the state levy the business' bank account or even seize the business entirely. (The restaurant remains open for now, as officials seem to think they have a better job collecting if they don't kill their golden goose. Phew!)

Bars and restaurants are notoriously risky businesses, even with "can't miss" concepts like "I Love This Bar." (If you think rising meat and cheese prices are hitting your wallet hard, just imagine what happens when you're feeding thousands of fans a month!) Restaurant owners who find themselves in trouble can be tempted to "borrow" from the government by hanging on to taxes they collect on behalf of customers and employees. The problem, unfortunately, is that every day they continue, they fall deeper and deeper into the hole — and sometimes they never dig back out.

Keith's restaurant may be struggling. But the singer himself isn't having any money problems. Forbes magazine has called him "Country's $500 Million Man," and "a one-man cash machine." He owns a liquor company, a record label, and a golf course. There's even an eight-passenger Learjet, painted in Oklahoma Sooner crimson and cream, outfitted with saddle-leather seats. But one thing Keith doesn't own is "his" restaurant in New York. While he does own chunks of the first few locations, he generally just licenses the newer locations to outside operators in exchange for a piece of the gross.

We realize few of you could imagine making millions selling fried bologna sandwiches. But we can imagine how unhappy you'd be if word leaked out that you owed enough tax to pay for an entire house! That's why we work so hard to help you plan to pay less. So call us if you'd rather spend your money treating your friends to a round of drinks. And remember, we're here for them, too!

The New Known Unknown

The New Known Unknown
Donald Rumsfeld may be one of the most controversial figures of our time, but you have to respect his resume. He won a seat in Congress at an age (30) when some of today's college graduates are still living in their parents' basements. He served as the youngest Secretary of Defense in American history (under President Ford) and the oldest Secretary of Defense in American history (under Bush #43). Between those positions, he headed G.D. Searle, General Instrument Corporation, and Gilead Sciences, Inc. Those corporate posts helped make Rumsfeld the second-richest member of Bush's cabinet, with a net worth north of $62 million.
 
Rumsfeld is also known for his unique, sometimes blunt and sometimes slippery, speaking style. Who can forget this response he gave a reporter who asked him about the lack of evidence tying Saddam Hussein's Iraqi government to weapons of mass destruction?

"[A]s we know, there are known knowns; there are things that we know that we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns, the ones we don't know we don't know."

Rumsfeld's quote has been roundly mocked, and even has its own Wikipedia page. But now he's weighed in on a new "known unknown" that we all can support. We're referring, of course, to the letter he sent on April 15, addressed to "Sir or Madame" at the IRS:

"I have sent in our federal income tax and our gift tax returns for 2013. As in previous years, it is important for you to know that I have absolutely no idea whether our tax returns and our tax payments are accurate. I say that despite the fact that I am a college graduate and I tried hard to make sure our tax returns are accurate."

Four paragraphs later, you have to wonder if he's being snide or sad about the whole exercise:
"I do hope that at some point in my lifetime, and I am now in my 80s, so there are not many years left, the U.S. government will simplify the U.S. tax code so that those citizens who sincerely want to pay what they should, are able to do it right, and know that they have done it right."

At this point, a cynic might reply that Rumsfeld can find "tax simplification" hiding in the same place as Saddam's weapons of mass destruction. But cynicism aside, if Rumsfeld really wants to see tax simplification, he should write to his former colleagues in Congress. They're the ones who wrote the 2,600-page monstrosity known as "the tax code" that gives him such fits. And one remedy he could pursue in the meantime is to sit down for a plan. We would be happy to show him how he can pay less on his income from speaking fees, memoirs, and investments. Of course, if Rumsfeld doesn't come knocking, that means more time for you. So call us about your "unknown unknowns," if you think you paid too much on April 15!