Look What's Hiding Here

Everyone understands the concept of a "tax haven" — a delightfully sunny island somewhere in the subtropics, or a cozy European duchy tucked away on a scenic Alpine lake. Perhaps the global rich who take advantage of these safe deposit boxes just want someplace nice to stay when they visit their money. Surely that's why places like Kazakhstan and Burundi struggle to attract their share of global "flight capital." Tucking your money someplace miserable would just be silly when the world offers so many sunnier places for shady people to park their cash.

Except, it turns out not every tax haven lures depositors with sunny beaches, high-rise condos, and Hermès boutiques. In fact, there's a new financial hot spot that's grown from $57 billion to $355 billion in assets in just a single decade. No, there's not a Lamborghini dealer in site. "Dakota" is the name . . . specifically, South Dakota, the Mount Rushmore State. It's a mostly flat, featureless landscape that shares a 383-mile border with North Dakota — a place whose very name suggests such bleak desolation that officials once considered dropping "North" from the name entirely.

(Did you know we even have two Dakotas? Not everyone does!)

Trusts, not taxes, are the main reason South Dakota has become such a go-to spot for foreign money. Keeping your principal safe, it turns out, is sometimes even more important than keeping your income safe from taxes. If you're a Russian potash oligarch worried about Putin seizing your mines, a central African kleptocrat losing sleep over the ethnic minority you've been oppressing for a generation, or el jefe of a middling Columbian cartel, you want to stash your "safe" money someplace where no one can even find it, let alone steal it back.

Let's see . . . Switzerland is too obvious, the Caymans are too cliched, and the Cook Islands are just too far away. Look at this, though — the United States is the only major financial center that's not part of the international "Common Reporting Standard" agreement, so they won't report your U.S. assets back to your homeland!

Having said that, South Dakota trusts offer game-changing tax benefits for American money, too. If you leave your assets to your heirs in a regular trust, anything over about $12 million per person gets whacked by estate taxes at 40% — every generation. Most rich people are rightly terrified at the thought of their wastrel heirs struggling to eke out an existence on just $12 million. South Dakota was the first state to eliminate the common-law "rule against perpetuities," ushering in so-called "dynasty trusts" that never distribute their principal, thus avoiding transfer tax hits forever.

Eliminating that federal estate tax hit isn't the only way South Dakota trusts help rich people keep their assets under wraps. Local legislators have also made South Dakota the only state allowing true perpetual trusts with no state income tax, no tax on capital gains, and no state-level estate tax at all. Finally, South Dakota courts let trust grantors, fiduciaries, and beneficiaries seal filings and orders, in perpetuity, for ultimate privacy.

The lesson here is that you'll never know where the most powerful financial strategies are lurking. That's why we spend so much time looking for them, so we can put them to work for you!

War is Hell. Taxes, Too.

Moviegoers the past few years could be forgiven for thinking comic books had taken over Hollywood. So much of the "sophisticated adult drama" that grownups used to see in theaters has migrated to streaming video, that it seems suburban multiplexes are reserved for Batman, Superman, and their cape-wearing cronies. (Or are you more of a Marvel Cinematic Universe fan?)

Last month, director Sam Mendes released a welcome tale of actual human heroes based on his grandfather's service in World War I. 1917 follows two British soldiers with impossible orders to cross into enemy territory and deliver a message to save 1,600 of their comrades — including one's own brother — from walking into a deadly trap. The film is presented as being shot in a single unbroken take, which some reviewers have said comes across as gimmicky and grandstanding. Still, it's a visual feast, and it's already grabbed the Golden Globe for Best Drama.

Most viewers aren't going to be thinking about taxes when they see 1917. But we don't review movies here, we review taxes. And there is a connection. Before World War I, the income tax was just an experiment, but after the war, it had become the significant revenue source we've all come to know and love.

The Revenue Act of 1913 had dramatically cut average tariffs on imported goods, from 40% to 26% and replaced that lost revenue with a new income tax. Rates started at just one percent on incomes over $3,000 (about $78,000 in today's dollars) and climbed to 7% on incomes over $500,000 ($13 million today, or almost as much as Cincinnati Bengals quarterback Andy Dalton earned leading his team to a 2-14 season).

Those rates may have worked in peacetime. But World War I torpedoed international trade and tariff collections, and joining the war meant Uncle Sam needed cash, pronto. The Revenue Act of 1916 doubled the bottom rate to a whopping 2% and added a new top rate of 15% on incomes above $2 million ($47 million today, or as much as Robert Downey Jr. makes for putting on his Iron Man suit). The 1916 act added an estate tax of 10% on amounts over $5 million. The Revenue Act of 1917 went even further, quadrupling the top rate to 67% and bumping the estate tax rate to 15%.

In fairness, there weren't a lot of people not named Rockefeller making that kind of money. The hedge funds and stock options that create so much of today's eight-figure incomes hadn't been invented. "Motion pictures" were still silent. The NFL didn't even exist, and baseball's highest-paid player, Ty Cobb, made just $20,000 in salary. (Like many athletes, the Georgia Peach made far more on endorsements and investments — in Cobb's case, his early stakes in Coca Cola and General Motors grew to north of $12 million.)

After the war, Washington dropped rates to "just" 25% on incomes over $100,000. At one point, tax filings were even public — you could show up at the local IRS office and check out your boss's return. The result, of course, was the Roaring 20s, an era characterized by jazz, flappers, and bathtub gin. (OK, Prohibition might have had something to do with the quality of the booze.) Then the market crashed, and rates went back up because of the Depression.

Today, it's hard to imagine Congress and the White House mobilizing to quadruple tax rates in a single year. Fortunately, we're not facing a World War forcing us to do it! So if you make it to the theater, enjoy 1917 as an action movie, not a financial planning exercise, and leave the taxes to us!

We're From the IRS and We're Here to Help

Holiday season is drawing to a close, and we hope your celebration was exactly what you hoped for, whether you celebrate Christmas, Hanukkah, Kwanzaa, or Toyotathon. But now it's time to begin anew, with a new year and a new decade. That means resolutions: time to finally start that diet, give up those cancer sticks, or sign up for that newly-deductible gym membership that most people start regretting around Groundhog Day.

You probably don't think of the IRS as being interested in helping you keep your New Year's resolutions. But they do want to keep you healthy so you can keep paying taxes. Three years ago, the IRS sent letters to 3.9 million Americans who had paid fines for not carrying health insurance, suggesting ways to find coverage. At first glance, that seems incongruous — like, say, Quentin Tarantino directing a remake of Little Women. But a team of Treasury economists has discovered that the letters did encourage people to sign up — and saved an estimated 700 lives.

Now, we're not here to debate the merits of mandating health insurance. And we don't have anything to say about the IRS getting all up in your business. (They must think, hey, if Facebook can do it, so can they.) But the story got us wondering, what other ways the IRS could use the information they already have on us to remind us to make our lives better as we open the 2020s? The answers might surprise you!

• If you use your car for business, the IRS knows how old it is and how many miles you drive. (They can't tell how fast you drive, at least not yet, but if you use that State Farm safe driving doohickie that Aaron Rogers advertises, it's only a matter of time.) They can text you helpful reminders when it's time to rotate your tires and get your oil changed. (Just kidding . . . the IRS won't even email you, and they never text. If you get an email purporting to be from the IRS, it's a scam!)

• If you itemize deductions, the IRS knows how generous you are with your charitable dollars. They'd probably be happy to remind you when school fundraisers and ballet company donor drives are approaching. They might even urge you to be just a little more generous!

• Personal exemptions disappeared with the Tax Cuts and Jobs Act of 2017. But the IRS still knows how old your children are (to determine if they qualify for the expanded Child Tax Credit). We're sure they'll be happy to help schedule well-child checkups and six-month teeth cleanings.

• If you own your home, your Form 1098 tells the IRS when you bought it and how much you paid for it. They could help you schedule big-ticket maintenance like a new furnace or roof. (Sadly, those aren't deductible, except for investment properties.)

• IRS computers can match your Social Security number back to when your parents claimed you as a dependent, double-check to make sure they're still filing returns (i.e., still alive), and send you letters reminding you to call Mom more often.

The nightmare scenario, of course, would be if the IRS teamed up with Facebook to put all your data to work. Fortunately, we haven't arrived at that Black Mirror scenario, at least not yet. Right now, we're focused on helping you pay less. But we'll be sure to keep an eye out for helping safeguard your privacy. So welcome to 2020, and be sure to call us if your New Year's resolution involves anything financial!

The Twelve Days of Taxmas

Every year, PNC Bank publishes their "Christmas Price Index" to track the cost of the Twelve Days of Christmas. For 2019, it's a hefty $38,994. (And you thought your holiday spending was out of control!) The index may not be completely accurate — for example, the ten lords-a-leaping are valued using the cost of male ballet dancers, rather than board-certified British lords. As for the eight maids-a-milking, well, "cows not included." But still, it got us wondering . . . what sort of taxes are we looking at on the whole affair?

• Twelve drummers drumming and eleven pipers piping make quite a racket every holiday season. Hiring all that help will stir up a cacophony of FICA taxes!

• Ten lords may look perfectly happy while they're leaping. But surely they must pay a king's ransom in inheritance taxes — after all, they are lords!

• Nine ladies dancing make a lovely sight at Christmas time, especially if they're Rockettes. They also pay a cabaret tax for the privilege of displaying their talent.

• Eight maids-a-milking help make sure we have plenty of tasty eggnog to drink. Good thing so many states offer dairy tax credits to squeeze the cows on to higher holiday production!

• Seven swans-a-swimming? Six geese-a-laying? If we accept the rule of thumb that two birds per acre of pond is a manageable number, then we're looking at some serious property taxes to host our holiday flock!

• Who doesn't want five gold rings under the tree? But selling those rings can be an expensive proposition. Remember, jewelry held for personal use is still subject to 20% tax on long-term capital gains, plus an extra 3.8% "net investment income tax"!

• Four calling birds use a lot of cell phone minutes over twelve days. (They're calling birds, so unlimited texting won't help.) Naturally, that means a 5.82% federal excise tax, plus state and local sales tax too.

• Three French hens add a sophisticated "continental" touch to anyone's holiday festivities. But don't forget the import duties you pay to bring foreign livestock into the country!

• Two turtle doves are famed among bird watchers for forming strong "pair bonds," which makes them a symbol of devoted love. (That's why they're in the song.) Too bad that means they pay that pesky marriage penalty that hits high-income couples who file jointly! (Okay, we know this this one's a stretch. But we've got twelve days of taxes to fill here, so cut us some slack.)

• Nothing says "Christmas" like a partridge in a pear tree. And our tax code is full of juicy incentives for growing pear trees. You can deduct operating expenses associated with your crop; you can depreciate equipment and land improvements you use to manage your groves; and you can even take generous charitable deductions for rights you give up for conservation easements. Why, the tax savings alone should be more than enough to pay for the partridge!

Yes, even Twelve Days of Christmas just means twelve more opportunities for the taxman. So here's wishing you and your family the best this holiday season. We'll be back in 2020 to make sure you pay as little tax as possible, not just during the holidays, but all year long!

All the Tender Sweetness of a Seasick Crocodile

Would you believe that Spotify offers over a million Christmas songs? There’s something for every taste. The best of them, like Placido Domingo and Luciano Pavarotti's magnificent "O Holy Night," are sublime evocations that lift the human spirit. Some, like Mariah Carey's "All I Want for Christmas is You," are banal background noise for department store Santas. And some, like Paul McCartney's "Simply Having a Wonderful Christmas Time," are just a lump of coal in your stocking.

But there's one holiday classic everyone loves, and that's "You're a Mean One, Mr. Grinch." We're talking, of course, about Thurl Ravenscroft's crypt-voiced rendition from the original 1966 animation. Fifty-three years later, the Grinch polls nearly as well as Santa Claus. And in Hollywood, where imitation is the most risk-averse form of flattery, that means cynical studio executives will churn out garbage remakes every few years until the day their hearts grow three sizes.

Remakes rarely delight critics and viewers the same way as the original. (The cover band at the country club Christmas party isn't rockin' around the Christmas tree quite like Brenda Lee, either.) But the 2000 live-action Grinch starring Jim Carrey grossed over $345 million. And last year's animation with Benedict Cumberbatch cleared over half a billion. So it turns out the Scrooges at the IRS and various state tax departments don't care which Grinch steals all those floo floopers and jing tinglers — they just want their share!

Fortunately, the tax code gives moviemakers a 39½-foot pole to keep the IRS at bay. From 2004 through 2016, Section 181 let you write off 100% of specified production costs, as soon as you incurred them, up to a cap of $15 million ($20 million in certain economically distressed areas). To qualify, you had to spend at least 75% of your production costs here in the U.S. The goal was to fight "runaway production," where producers take everything else down to the last can of Who Hash abroad to film. And it worked, by helping domestic productions find financing.

The Tax Cuts and Jobs Act of 2017 makes those same expenses, still called "Section 181 costs," eligible for 100% bonus depreciation under Section 168(k). It also eliminates the previous $15 million cap. However, you can't take your bigger write-off until the film is "placed in service," meaning it's actually released. And you may not get to write it off against your W2. At least the net income from moviemaking is eligible for the new Qualified Business Income deduction. (Even Little Cindy Lou Who knows that where Hollywood accounting is concerned, there's never any "net.")

Uncle Sam isn't the only one who offers tax breaks for film producers. Many states offer incentives to lure productions to their jurisdictions like the Grinch lures his dog Max onto his sleigh. Louisiana has passed California as the most popular location for filming, thanks in part to the Bayou State's generous 40% tax credit on expenses up to $180 million. New York is another film hotbed, with industry titans like Robert DeNiro investing $400 million in a Queens soundstage serving all phases of movie and TV production.

2019 is drawing to a close, and the holidays are here. It's a special time of year, whichever holiday music brings you good cheer. And so, whether you're celebrating from high atop Mt. Crumpet, or somewhere in the village down below, we wish you the very best of the season.

Here's Where the Bodies Are Buried

Between 1983 and 1985, mobster Whitey Bulger whacked three people and buried them under the dirt-floor basement of a house in Boston's working-class "Southie" neighborhood. Bulger, an FBI informant who inspired Jack Nicholson's character in The Departed, vanished after his handler tipped him off that he was looking down the business end of an indictment. Sixteen years later, acting on a tip from a former Miss Iceland, the Feds found him in California. They hauled him back to Boston, convicted him of 11 murders, and shipped him off to prison where (of course) he got whacked himself.

Now that house, nicknamed "the Haunty," is under contract to be sold. (If knowing that a bunch of hardened killers call it "the Haunty" doesn't make you drool, what will?) It's not much to look at — a nondescript two-story row house, built in 1885, with 1,975 square feet on a 5,000-square-foot lot. But Southie isn't the same old Southie anymore — the Boston Globe calls it one of "the city's hottest neighborhoods" — and the buyer should be able to replace it with four bougie townhouses. You know the drill — hot tubs, granite countertops, the works.

The current owner dropped $120,000 for it back in 1985. While we don't know today's sale amount, the most recent asking price was $3.395 million. That sort of gain generally means a nice score for a different crew of Feds at the IRS. Naturally, that got us wondering, what could our sellers do to avoid that hit?

The easiest way to escape tax on that sort of gain is to hold your property until death. At that point, your heirs get what's called a "stepped-up basis" equal to the property's fair market value as of the date of the deceased owner's death. Good news: those rules apply whether you die of natural causes, you're shot in the back of the head (like Bulger victims Arthur "Buckey" Barrett and John McIntyre), or you're strangled (like third victim Deborah Hussey). This works with any sort of appreciated property, not just your house.

Fortunately, though, there are lots of ways to defer or eliminate the tax selling your house, while you're still alive to enjoy your gains. When you sell your primary residence, you can exclude up to $250,000 from your income ($500,000 for joint filers). You can roll your gain into a qualified opportunity fund to delay it until 2026. Or you can use advanced strategies like a charitable remainder trust, a pooled income fund, or coupling an installment sale with a monetizing loan.

The Haunty seller isn't the only one facing tax problems. When Feds finally busted Bulger at his apartment in Santa Monica, they found over $800,000 in cash. No one would believe he paid tax while he was on the lam, which means the IRS is going to want their taste. Illegal income is taxable just like if you went legit. More good news: you can deduct the costs of running most illegal businesses. So, when Whitey buys a shovel to bury the bodies, he can deduct the business-use portion. The Tax Cuts and Jobs Act of 2017 even lets him claim 100% bonus depreciation!

We've worked with clients who make their money all sorts of ways (although none of them have ever made the Most Wanted list). When it comes to paying less tax, we know where the bodies are buried. Call us when you're ready to pay less, and remember, we're here for the rest of your gang, too! 

Dirty Money

Let's say you need someone to help you do something really important. Would you settle for someone who just Googled it? Would you look for someone with the right professional license? Or would you hold out for the guy who literally wrote the book on whatever it is you need to do? Expertise doesn't guarantee success: great surgeons still lose patients; great lawyers still lose cases; and Super Bowl-winning quarterbacks still throw into double coverage all the time. But sometimes professional prowess is well worth the extra cost.

This week's search for expertise takes us to the University of Miami in sunny Coral Gables, Florida. Bruce Bagley, 73, is a rumpled, jowly professor of International Relations. His field is Latin America, which seems appropriate for a university in a city that feels more like part of Latin America than the United States. His specialty is money laundering. And he's a card-carrying expert — in fact, he wrote the go-to book on the subject, Drug Trafficking, Organized Crime, and Violence in the Americas Today. He's even testified on it before Congress.

Back in 2016, some shady characters in Venezuela found themselves with some dirty money. They looked around for the guy who wrote the book, and they found Bagley. Maybe he wanted a little adventure that day. Maybe he'd just finished binge-watching Ozark. (If so, he really missed the point.) Maybe surrounding himself with all that criminality just eroded his moral compass. As Nietzsche said, "Beware that, when fighting monsters, you yourself do not become a monster. And if you gaze long into the abyss, the abyss gazes also into you."

Whatever the reason, Bagley found himself with a new side gig running a specialized sort of laundromat. It's an easy business to start — you don't need a website, or business cards, or slick brochures. He probably thought he was downright brilliant. What better way to disguise your money laundering business than by being a professor of money laundering? We can just picture him sitting by the phone, waiting for the MacArthur Foundation people to call him with his Genius Grant. Unfortunately, someone else came calling.

Last month, the Department of Justice unsealed an indictment alleging Bagley had opened bank accounts to launder cash from bribes and embezzling. Those accounts received $200,000 in monthly deposits from overseas accounts owned by a Colombian national located in Switzerland and the United Arab Emirates. He passed 90% of the deposits on to a mysterious "Individual-1." Then he wired the remaining 10% into his personal account, which seems a fairly typical commission for fluffing and folding that sort of cash. That 10% added up to almost $300,000 over the course of the scheme.

Bagley may have made a bad choice — but it makes for a great final exam question: "You've been indicted on two counts of money laundering and one count of conspiring to commit money laundering. Each count carries possible tenure of 20 years in a federal facility where most of the laundry consists of orange jumpsuits. What do you do now?" Get your blue books and pens ready!

Although to date the IRS isn't involved in Bagley's case, money laundering often involves tax fraud, too — so the IRS Criminal Investigation unit routinely pursues money laundering crimes. (And what are the odds Bagley reported his side gig, anyway?) Now, we don't have any expertise in that area. We had to Google that 10% commission, honest! But if you're looking for legitimate ways to pay less tax in 2020, you've come to the experts. So call us, and see how much we can save! 

Gold Star Glitch

On Monday, Veterans Day commemorated those brave and selfless Americans who've served in our military. We honor them with History Channel specials, parades, and one-day-only sales on chicken sandwiches and big-screen TVs. Occasionally, we even let the occasion guilt us into trying to do a better job of taking care of them in more tangible ways.

This week's story involves children of Gold Star families, survivors of soldiers who died in military service. Now, kids aren't usually a profit center. They're noisy. They're sticky. They throw up at the worst possible times. But up until 1986, parents could at least use them as a tax shelter, shifting investments into their name to be taxed at the kids' lower rate. That changed with the Tax Reform Act of 1986 and the new "kiddie tax." Ever since then, minors' unearned income above a certain low threshold ($2,100 in 2017) has been taxed at their parents' rates.

Fast forward to December 20, 2017. Senators are furiously scrawling legislation on the back of cocktail napkins in hopes of passing tax reform in time to escape town for Christmas. (Hearings? We don't need no stinkin' hearings!) Their main goal is to cut corporate rates. But budget rules mean they can't just cut without restoring at least part of that revenue. Those add-backs included twisting the screw on kiddie taxes. The new law hits that income at even higher trust rates, which soar all the way to 37% at just $12,750 of income.

Here's the problem: that new rule isn't just hitting the children of millionaires and billionaires that it was targeting. It's also clobbering children receiving military survivor benefits. Thousands of Gold Star families are facing five-figure tax bills on those checks. That's not a great look for a country already struggling with a broken Veterans Administration and an epidemic of veteran suicides!

The "Gold Star glitch" wasn't the only mistake the Senate made in their late-night draftathon. (It passed at 1:51 AM, waaaaay past most Senators' bedtimes.) There were also provisions eliminating taxes entirely for farmers selling crops to cooperatives (the "grain glitch"), preventing retailers and restaurants from writing off leasehold improvements as fast as Congress intended (the "retail glitch") and creating conflicting start dates for limits on net operating losses (the "NOL effective date glitch"). Oopsies!

The Senate passed a bill in May to fix the Gold Star glitch. But in the House, it got thrown into the broader SECURE Act designed to boost retirement savings. The House passed that bill 417-3, which is a real triumph in a congress that looks more like a UFC octagon than a forum for civilized debate. But back in the Senate, Ted Cruz has held it hostage because it doesn't let parents use Section 529 accounts for homeschooling expenses. Gold Star survivors have lobbied Cruz's office, but gotten nowhere. (In fairness, Cruz isn't the only Senator who seems happy to put grandstanding above problem-solving.)

So here we are, celebrating veterans by mugging their survivors for extra tax on a couple thousand bucks a month of government benefits. It's especially frustrating to us because there's nothing we can do to help avoid it. Fortunately, that's not usually the case. There's almost always a way to pay less. You just need a plan that uses every rule to your benefit, regardless of how late at night it passed!

Welcome to the Desert of the Real

Twenty years ago, sci-fi fans geeked out to a new thriller called The Matrix following a dystopian vein established in Blade Runner, Total Recall, and The Terminator. It starred Keanu Reeves as "Neo" and Laurence Fishburne as "Morpheus": freedom fighters in a world where machines have trapped humanity in a computer-generated dreamscape called the Matrix, to distract their minds while sucking energy from their bodies and brains. (Their allies include another hacker named Trinity, famed for cracking the IRS database, but that's not what brings us here today.)

Early in Act One, Morpheus shows Neo two pills that look like ordinary cold medicine and presents him with a choice. "This is your last chance. After this, there is no turning back. You take the blue pill — the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill — you stay in Wonderland and I show you how deep the rabbit-hole goes." It wouldn't have been much of a movie if Neo had taken the blue pill — fortunately for viewers (and humanity), he picks red and challenges the machines to a future where "anything is possible."

The Matrix established the blue pill and red pill as cultural metaphors for two very different perspectives on the world. The blue pill represents, at its worst, basking in sheeplike submission and accepting an essentially dishonest illusion. The red pill, by contrast, represents the genuine freedom and opportunity that come from accepting harsh but liberating reality. The choice you make has consequences in every aspect of your life — including your taxes and your finances.

In our world, every competent tax professional works within the system. (The occasional crooks who cheat on behalf of their clients make headlines because they're so rare.) Most tax pros work the blue pill side of the line. They passively take the numbers their clients bring them, from their P&L statements, their W-2s, and 1099s. They feed the data into their computers to put the right numbers in the right boxes on the right forms. They do a great job telling clients how much they owe — and for most clients, the blue pill may be all they need.

But some tax pros do things a little differently. They work the red pill side of the line. They don't just take the numbers you give them and run them through "the Matrix" of IRS forms and procedures. They help you structure your business entities, your benefit plans, and perhaps even your investment portfolio to pay the minimum possible tax. They don't just accept the story the IRS writes for them. They work within the system to write you a happier ending.

You may not think choosing a tax advisor is quite as consequential as choosing between the red pill and the blue. But Neo didn't realize he was living in the Matrix, either, not until Morpheus welcomed him to the desert of the real. The good news is, at least as far as taxes are concerned, the red pill doesn't require you to outrun creepy agents of post-apocalyptic artificial intelligence or dodge bullets in a shadowy subway tunnel. It just takes opening your eyes to all the legal, ethical, and moral ways to pay less.

You don't have to be a sci-fi fan to appreciate that sort of success. And you don't have to follow the movies to appreciate the savings we create with the "red pill" approach. Just sit back and enjoy the show. And maybe next time you're feeling philosophical, ask yourself if the tax system we work in is real, or are we just trapped in some sort of twisted virtual reality? 

Pumpkin Spice-Flavored Taxes

October is chock-full of obscure holidays and commemorations. October 3 is National Boyfriend Day. October 15 — the real personal tax filing deadline — is National Grouch Day. (Coincidence? We think not.) October 19 serves up National Seafood Bisque Day (which sounds a lot tastier than October 25, National Greasy Food Day). Then there's October 21, National Clean Your Virtual Desktop Day, which sounds like it was cooked up by the same HR funsters who think "trust falling" into a co-worker's arms is somehow an appropriate thing to do at work. We swear we're not making any of this up.

But none of those can compare to the big orange ball of fun waiting towards the end of the month. We're talking about October 26: National Pumpkin Day. Believe it or not, pumpkins are more than just everyone's favorite gourd — they're responsible for generating millions of tax dollars for government everywhere.

For starters, check out actual pumpkin sales. Americans are expected to spend $377 million on cucurbita pepos to carve into jack o'lanterns in 2019. That means the IRS and state tax departments will harvest millions in income taxes from the farmers who grow them, then millions more in sales taxes from the families who buy them. No wonder all those pumpkins are smiling!

Next up, pumpkin pie: in 2015, Costco alone sold 5.3 million of them at $5.99 each. For those of you who weren't math majors, that's $31.7 million worth of creamy goodness. The high fat content in the crust, along with the egg-based custard filling, make them ideal for freezing until Christmas. So pick up two or three, and consider the extra sales tax a small price to pay for the taste of nostalgia.

And next, there's canned pumpkin pie filling. A couple of years ago, a vicious rumor started making the rounds that the glop you whip into your pie is actually just butternut squash. But Libby's, the Nestle subsidiary that sells $130 million of canned pumpkin filling every year, reports that they're just using a different strain of pumpkin that makes a richer, sweeter puree than regular carving pumpkins. Governments collecting sales on the pies can sigh in relief that they're not abetting a scam.

But while we're on the topic of "Things That Aren't Really Pumpkin for $200, Alex," pies are just the warmup for the real action. Love it or hate it (and there's not a lot of in-between), it's pumpkin spice season. It started as a twee Starbucks gimmick. But today's Pumpkin Spice Industrial Complex has inched its creepy tentacles into everything from candles to kale chips, and donuts to dog treats. Head to your doctor to get a flu shot, and the nurse will probably ask if you want pumpkin spice with that.

Here's the thing. Pumpkin spice — a blend of cinnamon, nutmeg, ginger, cloves, and allspice — started out as something called "pumpkin pie spice" to amp up the sometimes-bland pies. But lazy Americans quickly dropped the "pie" part. And ever since 2004, when Starbucks rolled out their flavored lattes nationwide, pumpkin spice has become a symbol for all things autumn. Americans will gobble $600 million worth of the stuff this fall, putting millions more in tax collectors' pockets.

Now, this whole discussion may sound like a silly exercise. (Ok, it is.) But there's an important lesson lurking under the filling and the whipped cream. Every financial decision you make has at least some tax consequence, even if it's just a trip to the bakery aisle. That's why it's so important to keep us involved before big financial choices, and avoid expensive tax mistakes! 

Pumpkin Spice-Flavored Taxes

October is chock-full of obscure holidays and commemorations. October 3 is National Boyfriend Day. October 15 — the real personal tax filing deadline — is National Grouch Day. (Coincidence? We think not.) October 19 serves up National Seafood Bisque Day (which sounds a lot tastier than October 25, National Greasy Food Day). Then there's October 21, National Clean Your Virtual Desktop Day, which sounds like it was cooked up by the same HR funsters who think "trust falling" into a co-worker's arms is somehow an appropriate thing to do at work. We swear we're not making any of this up.

But none of those can compare to the big orange ball of fun waiting towards the end of the month. We're talking about October 26: National Pumpkin Day. Believe it or not, pumpkins are more than just everyone's favorite gourd — they're responsible for generating millions of tax dollars for government everywhere.

For starters, check out actual pumpkin sales. Americans are expected to spend $377 million on cucurbita pepos to carve into jack o'lanterns in 2019. That means the IRS and state tax departments will harvest millions in income taxes from the farmers who grow them, then millions more in sales taxes from the families who buy them. No wonder all those pumpkins are smiling!

Next up, pumpkin pie: in 2015, Costco alone sold 5.3 million of them at $5.99 each. For those of you who weren't math majors, that's $31.7 million worth of creamy goodness. The high fat content in the crust, along with the egg-based custard filling, make them ideal for freezing until Christmas. So pick up two or three, and consider the extra sales tax a small price to pay for the taste of nostalgia.

And next, there's canned pumpkin pie filling. A couple of years ago, a vicious rumor started making the rounds that the glop you whip into your pie is actually just butternut squash. But Libby's, the Nestle subsidiary that sells $130 million of canned pumpkin filling every year, reports that they're just using a different strain of pumpkin that makes a richer, sweeter puree than regular carving pumpkins. Governments collecting sales on the pies can sigh in relief that they're not abetting a scam.

But while we're on the topic of "Things That Aren't Really Pumpkin for $200, Alex," pies are just the warmup for the real action. Love it or hate it (and there's not a lot of in-between), it's pumpkin spice season. It started as a twee Starbucks gimmick. But today's Pumpkin Spice Industrial Complex has inched its creepy tentacles into everything from candles to kale chips, and donuts to dog treats. Head to your doctor to get a flu shot, and the nurse will probably ask if you want pumpkin spice with that.

Here's the thing. Pumpkin spice — a blend of cinnamon, nutmeg, ginger, cloves, and allspice — started out as something called "pumpkin pie spice" to amp up the sometimes-bland pies. But lazy Americans quickly dropped the "pie" part. And ever since 2004, when Starbucks rolled out their flavored lattes nationwide, pumpkin spice has become a symbol for all things autumn. Americans will gobble $600 million worth of the stuff this fall, putting millions more in tax collectors' pockets.

Now, this whole discussion may sound like a silly exercise. (Ok, it is.) But there's an important lesson lurking under the filling and the whipped cream. Every financial decision you make has at least some tax consequence, even if it's just a trip to the bakery aisle. That's why it's so important to keep us involved before big financial choices, and avoid expensive tax mistakes!

Kids These Days

Here in the United States, we spend a lot of time arguing about income taxes . . . who should pay, how they should pay, and how The French Prime Minister Georges Clemenceau once said that if a man is not radical at 25, he has no heart — and if he's still radical at 45, he has no head. And while Clemenceau focused his attention on the battlefields of World War I, history supplies an endless number of stories where radical youth challenge their entrenched elders.

Income inequality has always been a popular target of the young. Today, It's growing even worse. The Berkeley economists who helped design Senator Elizabeth Warren's wealth tax have reported that for the first time ever, the 400 richest households in the country paid less tax, as a percentage of their income, than any other group of Americans. Naturally, that's inspiring young radicals to pick up their torches and pitchforks and storm some castles. Their ranks include some of those who have benefited most from the problem.

Last month, everyone's favorite chronicler of the carriage trade, Town & Country magazine, profiled "The Rich Kids Who Want to Give Away All Their Money." It's clear that at least some young inheritors are thinking critically about their fortune. The article quotes Sam, a 24-year-old Qualcomm heir with a $25 million trust fund, who says that for him, the concept of "risk" means the possibility of losing money in a hedge fund. But for someone his age working as a bike messenger in New York, it's the possibility of getting hit by a car while delivering a burrito.

The article also interviews Karen, who gave her $3 million trust fund to a private foundation. She concedes the challenge left-wing inheritors face: "You're not necessarily going to convince your dyed-in-the-wool Republican grandma that . . . Well, anything, probably. But you probably can move the needle a little bit."

Finally, there's Holly, daughter of a Fortune 500 CEO, who says families like hers will be happier when they don't have to deal with the burden of feeling responsible for the injustices their wealth helps create. She sounds delightfully idealistic and perhaps a bit naive — a Holly Golightly figure in a Paris Hilton world. But it's hard to argue with her commitment and her sincerity. Clemenceau would be proud.

Sam, Karen, and Holly are all members of a group called Resource Generation, a "membership community of young people (18-35) with wealth and/or class privilege committed to the equitable distribution of wealth, land, and power." The group counts 600 members in 15 chapters across the country, and raised over $20 million last year for social justice groups. (Click here to take their handy Class Privilege Quiz.)

Of course, the Resource Generation radicals want to see higher taxes. But while socking it to the wealthiest Americans would surely combat inequality, it won't solve the problem entirely. In 2016, the top 400 earners reported total income of $127 billion. But even if they paid 100% of their supersized earnings in tax, there would still be an enormous gulf between them and the rest of America. It's also worth noting that inheritors who give their fortunes to social justice groups deprive the government of billions in future inheritance taxes.

If you're like most clients, your financial concerns lie closer to home. But paying less tax leaves you more money to give to whatever causes you support, whether they spring from 25-year-old youth or 45-year-old maturity. And if you are looking to play a bigger role in your community, we can help you make the most of your gifts there, too. So call us when you're ready to change the world . . . you might be surprised how much we can help you accomplish! 

Teeny Little Slices

Here in the United States, we spend a lot of time arguing about income taxes . . . who should pay, how they should pay, and how much they should pay. Right now, the average American forks over 13.5% of their income in individual income tax, and 30% of their income in federal, state, and local taxes overall. Of course, "average" covers a pretty wide range — 50 million families pay no income tax at all, while the top twenty percent of earners pay over 69% of all revenue collected. It costs the economy $409 billion just to figure out the bill and get it paid.

Here's the biggest problem with today's tax system: no matter where rates fall or who picks up the tab, Uncle Sam still spends more than he takes in. Keeping up with spending is like playing tennis against Serena Williams — if Serena was an octopus with racquets in six arms. So politicians are constantly looking for new ways to cover their bills.

Now some politicians are proposing wealth taxes on the richest Americans. Massachusetts Senator Elizabeth Warren's plan starts at two cents for every dollar of net worth above $50 million, rises to three cents on amounts above a billion, and raises $2.75 trillion over 10 years. Vermont Senator Bernie Sanders's plan climbs all the way to 8% on assets over $10 billion. Both senators argue that limiting their reach to board-certified fat cats means most voters have nothing to fear from their plans.

A wealth tax may sound like an impossible lurch to the left in today's politically polarized era. But polls show it winning more support than higher income taxes. And if you own your own home, you're already paying one in the form of your local property tax. The real problem with a wealth tax is making it work. It doesn't matter how small a slice it takes, if the people who owe it can't or won't report their balance sheet accurately — especially if it's stuffed full of hard-to-value things like businesses, real estate, and art.

Want to see how much we can raise with even smaller slices? Consider calls for a tax on financial transactions. Hawaii Senator Brian Schatz's proposal is typical: he would charge just one-tenth of a penny for every dollar on stock, bond, and derivative trades. The Joint Committee on Taxation estimates this would raise about $777 million over 10 years. Bernie Sanders has a similar proposal that would charge 0.5% on stocks, which he says would raise enough to pay for free college (and bring the species Homo Billionairus to the brink of extinction).

A financial transaction tax would be far easier to manage than a wealth tax. It would-also take dead aim at the sort of high-speed trading Michael Lewis described in his 2014 book, Flash Boys, which Schatz says accounts for half of the market's eight billion daily trades. "High-frequency trading . . . screws regular people; that's the main reason to do this," he says. Does that sound like creeping socialism? Well, Australia, France, Hong Kong, Italy, South Korea, Switzerland, and the U.K. already have financial transaction taxes, and their markets seem to be doing just fine.

We spend most of our time looking for the green lights in the income tax system that let you pay less. But we would be negligent if we weren't keeping our eyes out for new ways that government can nick you for tiny little slices that add up big. We'll be ready with the plans that help you pay the least! 

Ornithology

Every fall, in one of nature's enduring miracles, birds fly south for the winter. The Sterna Paradisaea , or Arctic tern, flies as far as three times the distance between the earth and the moon in a lifetime. The Branta Canadensis, or Canadian goose, flies 3,000 feet high at 40 miles per hour and covers over 1,000 miles per day if the weather is right. The tiny archilocus colubris, or ruby-throated hummingbird, crosses the entire Gulf of Mexico in a single 18 to 22-hour marathon trip.

Birds aren't the only brightly-plumed creatures to fly south for winter. Many species of Homo Affluentus leave their homes in the northeast United States for winter nesting grounds ranging from the Carolinas through Florida. Homo Billionairus flies even farther, wintering in Palm Beach, Hobe Sound, and similarly pricey beaches dotted with palm trees and construction cranes.

Now those migratory patterns, which have remained stable for generations, are shifting. Global climate change is driving birds to migrate earlier in the season. And changes in the tax climate mean many of the wealthiest millionaires and billionaires aren't returning north for the spring.

Scientists are still debating the precise activities responsible for today's shifting climate. But we know exactly who to blame for the tax climate: Congress, which passed the Tax Cuts and Jobs Act of 2017 almost two years ago. That law brought us a 21% flat corporate tax, lower individual rates, higher standard deductions and a surprise $10,000/year limit on deductions for state and local income and property taxes. Tax code changes are hardly black swan events — but this one is creating chaos for our migrating species.

The northeast states where Homo Affluentus and Homo Billionairus make their year-round home are known for some of the stiffest taxes in the country. High-earning Manhattanites can pay 40.8% to Uncle Sam, 8.82% to the Empire State, and 3.876% to the Big Apple. Who wouldn't want to duck rates like that? The bills were easier to swallow when the state and local levies were fully deductible. But now they've become an albatross — the 2017 act raised total taxes for some, despite the lower rates.

More and more of those Masters of the Universe are flocking permanently to tax-free Florida. In fact, former Sunshine state Governor Rick Scott started poaching Wall Street bigwigs before the new law had even passed. Now Carl Icahn, who perches at #47 on the Bloomberg Billionaires index with a net worth of $20 billion, is the latest to announce he's moving to Florida. It's clearly more than just a lark — he's told employees that they're coming too, or losing their jobs.

Icahn's new permanent nest is on Indian Creek Island, up the road from trendy South Beach. There are only 38 homes on his gate-guarded street, with an average value of over $20 million each, making it the most expensive street in America. Icahn's neighbors include singer Julio Iglesias, supermodels Elle McPherson and Adriana Lima, and Miami Dolphins coach Don Shula, along with a Russian oligarch or two, and the hedge-fund guy who ran Sears into bankruptcy.

We understand that there's more that goes into deciding where to live than taxes. But we're happy to help you fly the coop, if that's the right move for your lifestyle. Call us before the weather turns and we'll give you something to sing about this winter!

Deductible Man

"Burning Man" is a celebration of creativity and community that pops up for nine days every year before Labor Day in the Nevada desert. (Turn right at Reno, go about 100 miles, and when it looks like you're actually driving on the moon, you're there.) It started as a simple bonfire for a handful of creatives on San Francisco's Baker Beach. Since then, it's become a see-and-be-seen destination for 70,000 social media influencers, celebrities, and Silicon Valley billionaires, with $425 tickets and the "guest of honor" standing up to 105 feet high before the ceremonial Saturday night burn.

Burning Man champions decidedly anti-capitalist values like "decommodification," "giving," and "communal effort." "Burners" have to schlep in their own food, water, and shelter, and leave no trace when they leave. They can't use cash with each other at the event. (Cash? It's 2019.) But those rules don't stop tech titans like Jeff Bezos and Elon Musk from dropping millions to helicopter in for luxury RVs, private chefs, and even concierge services to set up camp, then break it all down. Imagine "the Real Housewives of Beverly Hills go camping," and you get the picture.

If that sort of flamboyant spending sounds like something our friends in Camp IRS would frown on, well, trust your gut. But like it or not, the IRS is helping foot the Burning Man bill, as Bloomberg magazine suggests in a recent article, "Going to Burning Man — and Expensing It."

Plenty of Bay Area companies send staffers to pitch camp for CEOs and higher-level execs who attend the event for networking, PR, and business development. Bloomberg quotes one organizer whose first job at a social network startup involved buying tickets, renting trucks and RVs to build a camp, and arranging for 11 people to fly in from London to the event. Those are generally deductible business travel expenses, so long as they aren't lavish or extraordinary. (It's hard to argue that a desert camp without water is "lavish.")

But now some companies are encouraging employees to attend together simply to spur creativity and community at work. They even invite employees to file the tickets on their expense reports. We can assume those same companies will wind up passing those expenses on to the reports they file with the IRS. But hey, if stuffy Fortune 500 giants can write off sending cube monkeys to mind-numbing HR training in drab hotel conference rooms, why shouldn't hip tech startups get to write off sending the "talent" into the desert?

These companies see Burning Man as a valuable team-building exercise. But Bloomberg suggests they might want to keep a close eye on how far they take those teams. One camp offers clothing-optional group showers which, admittedly, sound like a real luxury in a community with no running water. Of course, any manager who sends his team to that camp is probably begging for a #MeToo violation, and paying extra to have it overnighted. (They might want to steer employees away from the recreational psychedelics, too.)

Having said all that, the IRS may actually break even now that gentrification has reached the white-hot Burning Man sands. Any time the tech bros start flying in models from New York, you can be sure there will be too much income flying in, too. And the IRS will be happy to claim their share. You just don't want them claiming it from you. We can help you create some nice new deductions before your next employee retreat. So call us before you spend, and don't be shy about inviting us, too!

A Riddle Wrapped in A Mystery Inside an Enigma

Millions of Americans who used to scoff at conspiracy theories (the moon landing was faked! Bigfoot is real!) have finally found one they can embrace. Autopsy results would have us believe the disgraced financier and pervert Jeffrey Epstein hanged himself in a Manhattan jail cell. But nobody's buying what the medical examiner is selling. Is Epstein really dead, or is he laying low on some extradition-proof island in the sun? And if he is dead, who murdered him? (No way was it suicide.) Was it the Clintons? Trump? Colonel Mustard in the library with a candlestick?

Epstein masqueraded as a Wall Street genius, a guy who would turn up his nose at your $700 million because you weren't a billionaire, too. The truth will probably turn out to be a lot sleazier. Real Wall Streeters are divided over how Epstein made his money. Was he blackmailing fellow perverts into handing over their accounts to manage? Was he laundering somebody else's money? Maybe he was running a Madoff-style Ponzi scheme? With Epstein now gone one way or the other, we may never know the truth.

Our friends at the IRS don't care how Epstein made his money. They just want to know if he paid his taxes. (And really, does he sound like the kind of guy who did?) Auditors will have plenty of places to look for clues. They'll be scouring the FinCEN database for Suspicious Activity Reports, digging through Foreign Account Tax Compliance Act filings, and looking for Currency Transaction Reports to understand the "piles of cash" that FBI agents found in his safe. Someone's getting a trip to the Cayman Islands, and they won't need to pack a swimsuit.

Uncle Sam will be happy to take 37% of any income Epstein didn't report in life. But the real payoff could come with his estate, depending on who gets whatever's left after the prosecutors and victims lined up to sue him get their due. Epstein had no wife or children to inherit his loot. He might have left it all to one of the charities he made a show of supporting. If there's no will, though, his assets would likely pass to his younger brother Mark — in which case the IRS will get 40% of anything over $11.4 million.

What, exactly, will the IRS and the victims' attorneys have to target? That's another mystery. Epstein's attorneys told the judge who slapped down his bail request that he owned $376 million in cash and financial assets. He also owned the Beaux Arts mansion in New York, the Regency-style villa in Palm Beach, the Avenue Foch apartment in Paris, the "Zorro Ranch" in New Mexico, two private islands (because why not), and the "Lolita Express" jets he used to fly his famous friends.

There are also tangible assets that will be harder to appraise, especially considering Epstein's creepy mad scientist aesthetic. How do you value a painting of Bill Clinton wearing a blue dress and red heels? What about the collection of framed eyeballs lining the front hall of his New York home? What about the dentist chair in the bathroom of the Palm Beach house? What surprises might be lurking inside the mysterious "temple" he built overlooking the waters surrounding "Pedophile Island"?

We usually wrap up these stories by telling you to call us to avoid whatever tax disasters our subjects have suffered. But we've gotta confess, we're out of our league here. If you're looking to fake your death in prison, you'll have to call someone else. So think about this, instead. Epstein "died" on 8/10/19. The numbers 8 + 10 + 19 add up to 37. There are 7 letters in "Epstein." 37 + 7 = 44. And there you have it. Epstein's killer was obviously . . . 44th President Barack Obama!

By the Time We Got to Woodstock...

Fifty years ago, a dairy farmer named Max Yasgur thought it would be a rockin' idea to rent his field to a bunch of kids who wanted to throw a concert. From August 15-17, 400,000 hippies, peaceniks, and plain old music fans converged on the scene. If you're a 60s fan, Woodstock represents the high point of that era, a giddy celebration of peace, love, and good vibrations. If you're a hung-up Mr. Normal, you might dismiss it as three days of mud-soaked filth, drugs, and public nudity. And while Woodstock Nation may not have managed to save the world, they managed to leave quite a legacy!

Woodstock Ventures hoped 200,000 fans would pay $6-18 for passes — about $41-124 in today's dollars. (By contrast, tickets to this year's Lollapalooza started at $340 and ran to $4,200.) In the end, organizers grossed $1.8 million, suggesting state and local tax collectors shared a groovy $108,000 in sales taxes (3% for the state and 3% for New York City, where most of the tickets were sold).

Sadly for the squares at the IRS, there was nothing left over for them to tax. It wound up costing $3.1 million to rent the farm, book the performers, and charter the helicopters to lift the musicians over the stalled traffic. At the height of the crush, some acts were demanding twice their usual fee to perform — in cash. The Woodstock documentary, edited in part by then-unknown Martin Scorsese, helped start recouping those losses. But it took until Ronald Reagan (!) was president to finally break even — an irony that shouldn't be lost on counterculture fans.

As the unticketed hordes grew closer, organizers realized there would be no way turn them back, so they declared it a free festival. The crowds turned Yasgur's farm into the third-largest city in New York, and even created their own sharing-based economy. We're talking, of course, about the pop-up pharmacies dispensing various psychoactive adventures, including the brown acid that emcee Chip Monck famously warned was "not specifically too good." Sadly for New York authorities, we suspect none of those unregulated commodity traders bothered filing Forms DTF-17 or ST-101.

Fun fact: members of the Hog Farm commune, led by Hugh Romney (aka "Wavy Gravy") were running a free kitchen on the premises. On Saturday morning, they served "breakfast in bed for 400,000 people" and introduced the hippies to a brand-new food called "granola" [gru-noh luh]. This has nothing to do with taxes, but it'll impress your friends when the topic of Woodstock comes up over the next few days.

Today, Yasgur's farm is still finessing taxes like Jimi Hendrix shredded the national anthem. That's because it's owned by the nonprofit Bethel Woods Center for the Arts, home to a 15,000-seat amphitheater and museum. Local sales tax collectors still take a piece of ticketing and merchandise. But income tax collectors are no-shows (just like concert no-shows Joni Mitchell, the Doors, and others). And while property taxes in Sullivan County generally range from $25-65 per thousand of assessed value, the center's nonprofit status takes 800 acres off the property tax rolls.

Today's music festivals, like Coachella and Burning Man, all try to recapture a bit of that Woodstock magic. Sadly for the fans, the acts are a bit more corporate, the facilities are a bit cleaner, and even the drugs are a bit tamer. (Legal marijuana . . . where's the rebellion in that?) So for this week we'll leave you with a pipeful of gentle hippie sentiments, and hope you enjoy the rest of your summer. Next month after Labor Day, official tax planning season starts, so get ready to save!

All Fun and Games Until Somebody Loses an Eye

On March 12, the "Varsity Blues" scandal hit the headlines, and gossips across America leaped at the fresh meat. That's the day we learned about a group of 1%ers who paid anywhere from $15,000 to $6.5 million to cheat their kids' way into some of the most prestigious colleges in America. The Department of Justice indicted 50 people, including actresses Felicity Huffman and Lori Loughlin. Those who pled guilty right away are starting to receive sentences. Those who claimed innocence got rewarded with additional money laundering charges.

The parents worked with a private college counselor named Rick Singer. In some cases, they paid him $15,000 or more for crooked proctors to doctor their kids' SAT tests. In others, they paid up to $6.5 million for him to bribe complicit coaches to tag the children as athletic recruits. Of course, nobody put "bribe" on the memo line of the check. Instead, they made "donations" to Singer's "charity," the Key Worldwide Foundation. That way, they got to deduct the bribes as charitable gifts! But now the chickens are coming home to roost . . . and the IRS is there to collect, too.

Prosecutors have piled up 3 million pages of evidence, including over a million pages of emails, 4,500 wiretapped phone conversations, extensive bank records, and cooperation agreements from Singer and half a dozen of his henchman. (When you conspire with a guy named "Singer," don't be shocked when he sings like a canary when the you-know-what hits the fan.) Deciding whether or not to plead sounds like some sort of one-question IQ test. Still, just 22 of the original 50 defendants have taken that easier way out.

Actresses Huffman and Loughlin have attracted the biggest headlines. Huffman represents the man-up end of the spectrum — she copped a tearful plea almost immediately to mail fraud charges for paying $15,000 to doctor her daughter's SAT scores. Since the dollar amount in her case was at the low end of the scale prosecutors have recommended a relatively light sentence: four months in a place that looks nothing like Wisteria Lane, 12 months of supervised release, a $20,000 fine, and additional restitution.

Loughlin and her husband, fashion designer Mossimo Gianulli, represent the opposite end of the spectrum. The couple dropped $500,000 to get their bratty daughters into a school they clearly don't even want to attend. Loughlin swiped left on a deal that would have included two years in a fuller house, and now faces up to 40 with the extra money laundering charge. Us magazine — everyone's go-to source for breaking legal news — reports that the IRS is eyeing the couple's tax returns like a hungry bear eyeing a particularly fat fish.

It looks like parents can count on paying back the taxes they avoided by deducting whatever they paid Singer. Real estate mogul Bruce Isackson pled guilty to paying (and deducting) $600,000 in bribes to pass his daughters off as athletes. The charges included one count of conspiracy to defraud the IRS. Prosecutors are recommending he spend 37-45 months occupying a 6'x8' parcel of federal property and pay $139,509 in restitution. That figure just happens to equal the exact amount of tax he saved by writing off the bogus "gifts."

Singer reports that he collected a total of $25 million to help 761 families open "side doors" to schools for their kids. That means we can probably expect more names to be named. Hopefully yours won't make the list! The good news is, while we can't help you get your kids into the Ivy League, we can help you make the most of tax breaks for paying the bill. So call us for a plan before you pack up the car to move them in, and see how much we can help you save!

Risky Business

Turn on any television, any time of day or night, and you're likely to see an insurance ad, or two, or a dozen. Flo is showing off her "name your price" tool, which sure looks like her company's way of saying "you may not be able to afford all the insurance you need, but we're happy to sell you whatever you can afford." There's the ubiquitous gecko, telling you his company sells insurance for your RV and motorcycle, too. And there's Duncan, age 42, buying an incredible half-million dollars of term life insurance for just $27 per month.

 Losing a tax audit may not sound as tragic as, say, Keith Richards losing his hands. But the whole concept of "insurance" is about guaranteeing payment in the event of a specified loss. So, if Keith Richards can insure the hands that conjured up "Jumpin' Jack Flash" out of an ordinary six-string, shouldn't we be able to buy insurance to cover unexpected losses to the IRS? It turns out the answer is yes . . . and there's even more than one way to do it.

    Business owners can use something called an enterprise risk management program to insure risks that they're currently covering out of their own pockets. These typically include operational and strategic risks, like the cost of defending sexual harassment claims, cyber risks, and the loss of key suppliers or vendors. But you might also insure against the cost of defending an IRS audit. The cost of insuring the risk is deductible — and if you have to collect, the cost of defending yourself is deductible, too!

Fortunately, most tax savings don't call for any insurance at all. We help clients save taxes with a complete menu of court-tested, IRS-approved strategies. In fact, some of our most powerful strategies actually lower your risk of being audited. So leave the gecko at home, because he wouldn't be any help at an audit anyway, and see if we can save you 15% or more on your income tax!

May the 21st Be With You, Yes?

A long time ago in a galaxy far, far away (okay, on May 21, 1980), The Empire Strikes Back introduced the world to Yoda, the oldest, most-powerful, and most syntactically-challenged Jedi knight in the universe. Yoda delighted audiences as he trained Luke Skywalker, launched him into battle against Darth Vader, and died peacefully at age 900, his body becoming one with the Force. Today, his fans remember Yoda by celebrating May 21 as National Talk Like Yoda Day. And celebrating we are this year by talking about taxes!

Hard to believe it is, but taxes lie at the heart of the Star Wars universe. In Episode One: The Phantom Menace, in the very first paragraph of the opening crawl, we learned that taxation of trade routes to outlying star systems was in dispute. The Galactic Senate had imposed taxes to fight interplanetary pirates, and in response, the Trade Foundation had blockaded shipping to Naboo to pressure the Senate into repealing those taxes. The Supreme Chancellor dispatched two Jedi Knights to resolve the dispute . . . and the adventure begins!

The Galactic Senate isn't the only body levying taxes in the Star Wars universe. On the desert planet of Tatooine, so common it was that Jabba the Hut imposed a tax on murder. The bodies murderers even plotted to cheat the tax by hiding. Smart tax policy on Jabba's part? Possibly . . . although probably not sustainable in the long run, yes? That is, unless the Tatooine Department of Tourism manages to make the desert planet appealing enough to attract future victims to emigrate!

Lucas with one last challenge success faces. With somewhere north of $5 billion in assets, he's facing an estate tax bill the size of a minor outlying planet. But estate planning moves he has. Lucas has signed Bill Gates' "Giving Pledge," which encourages wealthy people to donate most of their wealth to charity. Signing the pledge accelerates normal charitable giving into hyperdrive and cuts estate taxes with the power of the Millennium Falcon.