Author Archive for Jeffrey B. Kahn, Esq. - Principal Attorney

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses GOP Bold Tax Plans, The Rift In OPEC, and Year-end Tax Planning Tips On ESPN Radio – November 13, 2015 Show

Topics Covered:

  1. Republican Candidates Push Bold Tax Plans.
  2. How investments in oil are being impacted by the rift within OPEC.
  3. More 2015 year-end tax planning tips.
  4. Questions from our listeners:
  • If I’m earning dividend income and my asset value declines, should I be worried about my income?
  • I get invited to charity balls and I have been noticing that each one will advertise the charitable value of the tickets that I purchased. What does that mean?

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Windus states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

Jeff states:

And this is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

Windus states:

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Jeff states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states:

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states:

For today’s show we have coming up:

Segment 2 material: How investments in oil are being impacted by the rift within OPEC.

Windus states:

Also coming up is:

Segment 3 material: More year-end tax planning tips.

And of course towards the end of our show, we will be answering some of your questions.

Windus starts chit chat with Jeff.

SEGMENT 1

Windus states:

Republican Candidates Push Bold Tax Plans

An article in the November 9, 2015 Wall Street Journal touts that proposed changes go well beyond the party’s previous platforms and ensure the issue will play a central role in the general election. http://on.wsj.com/1WNM7Q9

Jeff states: Given that the still rather large number of candidates is driven to stand out in a crowded field, the GOP contenders are defying economic reality going beyond the typical promises to lower rates and expand the tax base.

Windus states: Campaign platforms on taxes matter. Each of the past three presidents ran in part on a tax plan and each got much of it implemented by the end of his first term. And no matter who emerges from the primary season, the contrast between Republican proposals for tax cuts and Democratic ideas about tax increases on top earners will be starker than before.

Jeff states: The article goes on further to state that Democrats are primed to make the case that the bold Republican plans would provide the biggest benefits to the wealthiest households and balloon the federal deficit.

Windus states: And just how much tax cuts can juice the economy is in dispute? Democrats point to the economy’s growth after President Bill Clinton raised top rates in 1993 and President Barack Obama lifted rates in 2013, and to the recession that occurred after President George W. Bush cut taxes, as proof that rates for the top few percent of households aren’t the biggest drivers of economic expansion.

Jeff states: In previous shows we talked about Jeb Bush’s tax plan and Donald Trump’s tax plan. While other GOP candidates have not come out with tax plans as comprehensive as Bush and Trump, they do make some very creative and bold statements.

Windus states: Senator Ted Cruz of Texas wants to eliminate payroll and corporate income taxes in favor of a national tax on consumption, via a value-added tax that would be assessed on businesses and absorbed in wages and prices.

Jeff states: What Mr. Cruz is talking about is let’s have a tax system following the European countries and for that matter most of the world. The more people consume, the more in taxes will be paid. Since rich people do not consume as much as a percentage of their income, it should be apparent that the tax burden will largely fall on the middle class in this environment. It also does not encourage people to take risk and invest in business because they would not be able to write off their losses.

Windus states: I think that Florida senator, Marco Rubio, got your point Jeff and he has proposed eliminating taxes on capital gains and dividends for new investments, and raising tax credits for people with children so that he can appeal to the middle class.

Jeff states: But in Mr. Rubio’s case, he does not say how these tax cuts and raise in tax credits will be paid.

Windus states: Gov. Bobby Jindal of Louisiana wants to scrap the corporate income tax and create a 2% personal tax bracket that would add lower-income people to the income tax rolls, as a way of disabusing the public of the notion that “money grows on trees in Washington.” That would reverse a decades-long bipartisan trend of using the tax system to bolster take-home pay for the poorest households, which generally don’t pay income tax today.

Jeff states: Mr. Jindal has forgotten how mad a lot of people are hearing that multinational corporations are keeping their profits overseas to avoid U.S. taxes and now he is going to completely take away taxes from corporations? Mr. Jindal, the last time I checked, it is people who vote and not corporations.

Windus states: But Jeff people complain how complex the tax code is. Carly Fiorina, former chief executive of Hewlett-Packard Co., says on her website she wants the tax code to be three pages long, which is “about all an individual can understand without having to hire an accountant, a lawyer, a lobbyist.”

Jeff states: I would not call Ms. Fiorina’s statement a plan but instead just a tactic to draw attention to her campaign. Everyone should know that you can’t condense a tac code that covers individuals, corporations and all other types of entities in just 3 pages. As the CEO of HP I wonder if she ever started a movement to make their contacts a lot more understandable and shorter.

Windus states: We have already critiqued former Florida governor Jeb Bush and Donald Trump’s tax plans which the article brought out that Mr. Bush wants to allow companies to write off capital purchases immediately and Mr. Trump has proposed a tax cut that would put federal collections at their lowest level since 1942.

Jeff states: And then there is Ben Carson who looks to the bible for tax guidance. He promotes a flat-tax plan based on the concept of Biblical tithing. His reading of the bible has fostered the idea of having a tax rate of 15%, eliminating all the deductions and all the loopholes and included a tax holiday for U.S. companies to bring back foreign profits stockpiled abroad.

Windus states: It sounds more like a fantasy to me. One thing should be clear is that each presidential candidate’s tax plan fails on how these tax cuts are to be funded. And as President the he or she would have to follow the same standard as prior Presidents and Congress must follow whereby any tax reductions are offset by new tax revenues so that the legislation is “revenue neutral”. No politician is against tax cuts but there is a lack of consensus on how to fund them.

Well it’s time for a break but stay tuned because we are going to tell you how investments in oil are being impacted by the rift within OPEC.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

OPEC Rift Exposed as Oman Oil Minister Calls Group ‘Irresponsible’

Another article from the Wall Street Journal stating that the comments from Mohammed Bin Hamad Al Rumhy come as OPEC’s Persian Gulf producers unleashed a broad defense of their strategy. http://on.wsj.com/1WLRAHd

But before we talk about this I call your attention to my offer … Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff states: Windus you brought this article to my attention to take the opportunity to discuss oil as a commodity which people invest in.

Windus states: Mohammed Bin Hamad Al Rumhy of Oman whose country produces oil but isn’t a member of OPEC stated “This is a commodity that if you have one million barrels a day extra in the market, you just destroy the market. We are hurting, we are feeling the pain and we’re taking it like a God-driven crisis. Sorry I don’t buy this, I think we’ve created it ourselves.”

Jeff states: The article stated that Mr. Rumhy’s comments came at a conference in Abu Dhabi as he shared a stage with Suhail al Mazrouei, the United Arab Emirate’s top oil official, who is a top advocate of the producer group’s strategy. The remarks also reflect the pressure on OPEC from less wealthy members like Venezuela and Algeria to intervene with production cuts to raise prices, as crude oil trades for less than $50 a barrel—down from more than $100 a barrel in 2014.

Windus states: But on the same day, OPEC’s Persian Gulf producers unleashed a broad defense of their decision to pump full throttle to keep their share of the market, less than a month before the group’s next meeting to decide whether to maintain or cut production. Mr. Mazrouei defended OPEC’s stance, arguing that production cuts would simply subsidize higher-cost producers in the U.S. and elsewhere. Oil in the U.A.E., Saudi Arabia and other Middle Eastern producers is fairly cheap to produce.

Jeff states: The article goes on to state that: The oil-producing group of 12 nations is pumping 31.57 million barrels a day, with Saudi Arabia producing at a record level for much of the year at more than 10 million barrels a day. That level of production, along with record output in Russia as well, has helped fuel a glut of oil supplies that outpaces demand by about 1 million barrels a day, according to OPEC. The production frenzy has occurred even as American output begins to decline. U.S. producers used hydraulic fracturing technology to foster a boom in crude supplies that helped lower prices, but those operations were generally much more expensive than projects in the Middle East.

Windus states: And for people who are invested in oil, they are uncertain where the market is going. Once a commodity we feared we’d run out of is not a commodity that we need to leave in the ground a little bit more then we currently are. You have U.S. production exceeding expectations and OPEC isn’t backing off. So the pressure is being felt in many emerging markets economies like Brazil and Venezuela.

Jeff states: Just a few years ago it was thought that a barrel of oil would cost $200. The views of many large investment banks and oil companies are now predicting oil prices at around $60 a barrel in 2016—far lower than needed to balance the budget in some oil-producing countries, including Saudi Arabia.

Windus continues: We are almost in a game of chicken right now with OPEC.  OPEC does not want to curb its own oil production as that could severely hurt those economies. But flooding the markets with oil is not the solution either.  No one wants to cut, unless everyone cuts is what I am feeling when I read the articles out there. It is very much a game of mistrust and one that impacts economies deeply.

Jeff states: I can imagine that this price of oil impacts other areas that are dependent on oil.

Windus replies: Other assets that are essentially collateral damage for oil prices are investments in the MLP space.  Many clients in dividend paying portfolios have felt the pain in the value of their portfolios as oil investments tend to be good dividend producing investments. Although dividends have mostly been unimpaired, the values of investments have declined.  As is the case in many market cycles, most clients should simply weather the storm as long as the investment was made to their correct risk tolerance, time horizon, and goal.

Which is why … Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Windus states: Stay tuned because after the break we are going to tell you top year-end tax planning tips.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

2015 Year-End Tax Planning for Individuals

Windus states: Well here we are in November and while many people are now thinking about the year-end holiday celebrations, you should also be thinking about year-end tax planning to perhaps save on taxes and use those tax savings instead on your holiday celebrations and gift giving.

Jeff states: So it really is important that you address your year-end tax planning now and that is where we can help. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: The end of year is also a good time to clean out your closets and garages. You could have some valuable tax deductions in there if the unwanted items are donated to a charitable organization.

Windus asks: Where do you report noncash contributions on your tax return?

Jeff replies: You must fill out Form 8283, Noncash Charitable Contributions, and attach it to your return, if your deduction for a noncash contribution is more than $500. If you claim a deduction for a contribution of noncash property worth $5,000 or less, you must fill out Form 8283, Section A. If you claim a deduction for a contribution of noncash property worth more than $5,000, you will need a qualified appraisal of the noncash property and must fill out Form 8283, Section B. If you claim a deduction for a contribution of noncash property worth more than $500,000, you also will need to attach the qualified appraisal to your return.

Windus asks: So how do you figure what Is Fair Market Value (FMV) of the item you are donating?

Jeff states: To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution.

Fair market value.   Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.

Example: If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Usually, such items are worth far less than what you paid for them.

Windus asks: What other considerations are there in determining Fair Market Value?

Jeff replies: Well it depends on what you are donating.

[Windus to read item and Jeff to comment]

  1. Household Goods. The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Such used property may have little or no market value because of its worn condition. It may be out of style or no longer useful. You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal.

  1. Used Clothing. Used clothing and other personal items are usually worth far less than the price you paid for them. Valuation of items of clothing does not lend itself to fixed formulas or methods. The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal.

  1. Jewelry and Gems. Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. The stone’s coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Sentimental personal value has no effect on FMV. But if the jewelry was owned by a famous person, its value might increase.

  1. Paintings, Antiques, and Other Objects of Art. Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less.

  • Art valued at $20,000 or more.   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request.
  • Art valued at $50,000 or more.   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. You must request the statement before filing the tax return that reports the donation. Your request must include the following: (i) A copy of a qualified appraisal of the item; (ii) A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Add $250 for each item in excess of three; (iii) A completed Form 8283, Section B; and (iv)The location of the IRS territory that has examination responsibility for your return.
  1. Collections. Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items.
  • Stamp collections.   Most libraries have catalogs or other books that report the publisher’s estimate of values. Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections.
  • Coin collections.   Many catalogs and other reference materials show the writer’s or publisher’s opinion of the value of coins on or near the date of the publication. Like many other collectors’ items, the value of a coin depends on the demand for it, its age, and its rarity. Another important factor is the coin’s condition. For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category.

Jeff states: So it really is important that you address your year-end tax planning now and that is where we can help. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Windus states: Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Windus, what questions have you pulled for us to answer?

Terry from Los Angeles asks: If I’m earning dividend income and my asset value declines, should I be worried about my income?

Windus replies: This is a great question and the answer is both yes and no.

First, dividends are paid as per share that someone owns.  A dividend is declared, for example, as 5 cents per share, therefore if you own 100 shares, you’d earn $5 on that position when the dividend paid.

Now, if a company is not as profitable and the company is under pressure, the dividend may be reduced.   Most companies that pay consistent dividends do tend to maintain that through varying times in the markets but this is not guaranteed.  Also, just because a stock price is down doesn’t mean the company is actually not profitable.  Stock pricing is  more complicated than this.

Needless to say, it has been my experiences that if the investment declines due to market fluctuation, most dividend income can remain stable but you would want to keep an eye on the companies to be sure they are stable and ok.

Kevin from Oceanside asks: I get invited to charity balls and I have been noticing that each one will advertise the charitable value of the tickets that I purchased. What does that mean?

Jeff replies: The tax code states that you can deduct as a charitable contribution only the amount that exceeds the fair market value of the benefit received if your contribution entitles you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance, or sporting event.

So for example, you buy a ticket for $100.00 to attend a charity ball and the ticket says that this has a value of $60.00. That would result in $40.00 being the excess of what you paid over the value of the ball and it is that $40.00 that you can take as a charitable contribution.

Now remember – for a contribution of cash, check or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the amount and the date of the contribution.

Also for any contribution of $250 or more you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services.

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Windus states: Well we are reaching the end of our show.

Jeff states: Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. Have a great weekend everyone!

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Crowdfunding, Social Security Changes and Year-end Tax Planning On ESPN Radio – November 6, 2015 Show

Topics Covered:

  1. SEC Adopts Rules to Permit Crowdfunding
  2. Big changes that are coming for how you claim social security benefits.
  3. Top 2015 year-end tax planning tips you need to be aware of.
  4. Questions from our listeners:
  • I am interested in investing in a particular company that has corporate bonds, preferred stock and common stock. What are the differences between each of those types of securities?
  • My university requires each incoming freshman to come to school with their own computer. Is there any way to deduct the cost of the computer from my tax liability?

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Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
Windus states:
And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.
Jeff states:
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states: And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states: Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.
Jeff states:

For today’s show we have coming up:

Segment 2 material: Big changes that are coming for how you claim social security benefits.

Windus states:

Also coming up is:

Segment 3 material: We have some top 2015 year-end tax planning tips you need to be aware of.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

SEC Adopts Rules to Permit Crowdfunding

Amendments to Existing Rules to Facilitate Intrastate and Regional Securities Offerings Put Out By The SEC. http://www.sec.gov/news/pressrelease/2015-249.html

Jeff states: The Securities and Exchange Commission on October 30, 2015 adopted final rules to permit companies to offer and sell securities through crowdfunding.  The Commission also voted to propose amendments to existing Securities Act rules to facilitate intrastate and regional securities offerings.  The new rules and proposed amendments are designed to assist smaller companies with capital formation and provide investors with additional protections.

Windus states: Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects.  Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.  And since then SEC Chair Mary Jo White has stated there is a great deal of enthusiasm in the marketplace for crowdfunding, and she believes these rules and proposed amendments provide smaller companies with innovative ways to raise capital and give investors the protections they need. She further states that with these rules, the SEC has completed all of the major rulemaking mandated under the JOBS Act.

Jeff states: So since these rules were made under a delegation of authority by Congress, it should be apparent that they are here to stay and therefore this is something that we should take advantage of.

Windus replies. That’s right. The final rules, Regulation Crowdfunding, permit individuals to invest in securities-based crowdfunding transactions subject to certain investment limits.  The rules also limit the amount of money an issuer can raise using the crowdfunding exemption, impose disclosure requirements on issuers for certain information about their business and securities offering, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions. 

Jeff asks Windus: What are some of the highlights of the recommended final rules?

Windus replies: The recommended rules would, among other things, enable individuals to purchase securities in crowdfunding offerings subject to certain limits, require companies to disclose certain information about their business and securities offering, and create a regulatory framework for the intermediaries facilitating crowdfunding transactions.  

Windus continues: More specifically, the recommended rules would: 

  • Permit a company to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period;
  • Permit individual investors, over a 12-month period, to invest in the aggregate across all crowdfunding offerings up to:
    • If either their annual income or net worth is less than $100,000, than the greater of:
      • $2,000 or
      • 5 percent of the lesser of their annual income or net worth.
    • If both their annual income and net worth are equal to or more than $100,000, 10 percent of the lesser of their annual income or net worth; and 
  • During the 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.

Jeff asks Windus: Do these rules do anything to with regards to what a company must disclose when seeking crowdfunding?

Windus replies: Companies that rely on the recommended rules to conduct a crowdfunding offering must file certain information with the Commission and provide this information to investors and the intermediary facilitating the offering, including among other things, to disclose: 

  • The price to the public of the securities or the method for determining the price, the target offering amount, the deadline to reach the target offering amount, and whether the company will accept investments in excess of the target offering amount;
  • A discussion of the company’s financial condition;
  • Financial statements of the company that, depending on the amount offered and sold during a 12-month period, are accompanied by information from the company’s tax returns, reviewed by an independent public accountant, or audited by an independent auditor.  A company offering more than $500,000 but not more than $1 million of securities relying on these rules for the first time would be permitted to provide reviewed rather than audited financial statements, unless financial statements of the company are available that have been audited by an independent auditor;
  • A description of the business and the use of proceeds from the offering;
  • Information about officers and directors as well as owners of 20% or more of the company; and
  • Certain related-party transactions.

In addition, companies relying on the crowdfunding exemption would be required to file an annual report with the Commission and provide it to investors.

Jeff asks Windus: Did the rules establish a marketplace where crowdfunding would occur?

Windus replies: Yes. A funding portal would be required to register with the Commission on new Forum Funding Portal, and become a member of a national securities association (currently, FINRA).  A company relying on the rules would be required to conduct its offering exclusively through one intermediary platform at a time. 

Windus continues [Time permitting]: The recommended rules would require intermediaries to, among other things:

  • Provide investors with educational materials that explain, among other things, the process for investing on the platform, the types of securities being offered and information a company must provide to investors, resale restrictions, and investment limits;
  • Take certain measures to reduce the risk of fraud, including having a reasonable basis for believing that a company complies with Regulation Crowdfunding and that the company has established means to keep accurate records of securities holders;
  • Make information that a company is required to disclose available to the public on its platform throughout the offering period and for a minimum of 21 days before any security may be sold in the offering;
  • Provide communication channels to permit discussions about offerings on the platform;
  • Provide disclosure to investors about the compensation the intermediary receives;
  • Accept an investment commitment from an investor only after that investor has opened an account;
  • Have a reasonable basis for believing an investor complies with the investment limitations;
  • Provide investors notices once they have made investment commitments and confirmations at or before completion of a transaction;
  • Comply with maintenance and transmission of funds requirements; and
  • Comply with completion, cancellation and reconfirmation of offerings requirements.

Jeff asks: When do these new rules come into effect?

Windus replies: The new crowdfunding rules and forms will be effective 180 days after they are published in the Federal Register. The forms enabling funding portals to register with the Commission will be effective January 29, 2016. 

Jeff states: So with the 2015 tax year coming to a close, this is another thing we should keep in mind. Well it’s time for a break but stay tuned because we are going to tell you about the big changes that are coming for how you claim social security benefits.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Big Changes Are Coming For How You Claim Social Security Benefits!

Jeff states: Windus you have spent ages telling clients how to elect social security in order to maximize their benefits and now all of this is likely going to change.

Windus states: That’s right. It looks like new rules will be coming into effect. https://www.kitces.com/blog/congress-ends-file-and-suspend-restricted-application-and-other-voluntary-suspension-social-security-strategies/

Windus continues: Which makes even more sense that you should take advantage of my offer … PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff asks Windus: So please go on and tell our listeners what happened.

Windus replies:

File and Suspend Method of Claiming Social Security Benefits to Be Eliminated:  The Bipartisan Budget Act of 2015 (H.R. 1314—the Act), signed by President Obama on November 2, 2015, eliminates the file and suspend method, a popular strategy used by married couples to maximize their lifetime Social Security benefits. Under this approach, a higher earning spouse claims benefits at his full retirement age (currently age 66) but suspends the benefits until a later date (e.g., at age 70 or sooner, if desired), allowing the Social Security credits to continue to grow. The lower earning spouse claims benefits based on the higher earning spouse’s earning record, which are more than the benefits based on his or her own earnings record. In a provision labeled “closure of unintended loopholes,” the Act effectively eliminates this opportunity for claims filed after April 30, 2016 (180 days after enactment). Now for those who’ve been using this method or other eligible individuals who file to claim benefits under this method within the next 180 days, you will not be affected. [Bipartisan Budget Act of 2015, Section 831(b)]

Restricted Application Method of Claiming Social Security Benefits to Be Eliminated:  The Bipartisan Budget Act of 2015 (the Act) also eliminates the restricted application method (sometimes called the claim some now, claim more later method) for claiming Social Security benefits by married couples. Under this strategy, a spouse reaching full retirement age who is eligible for both a spousal benefit (based on his or her spouse’s earnings) and a retirement benefit (based on his or her own earnings) could file a restricted application for spousal benefits only, then delay applying for retirement benefits based on his or her own earnings record (up until age 70). This would allow the Social Security credits to continue to grow. For those who turn 62 after 2015, the Act eliminates the ability to file a restricted application for only spousal benefits. Note that individuals who are age 62 or older in 2015 should still be able to use the restricted application method for spousal benefits only upon reaching full retirement age. [Bipartisan Budget Act of 2015, Section 831(a)]

Jeff asks Windus: So is this another example of how the government giveth and the government taketh away?

Windus: It sure is. You see when Congress passed the Senior Citizens Freedom to Work Act in 2000, it introduced a new concept called “voluntary suspension” of benefits, allowing those who had already started Social Security benefits to stop their payments and earn delayed retirement credits. In the process, however, the new voluntary suspension rules unleashed several additional Social Security claiming strategies, including the “claim now, claim more later” tactics I just described which the recent Budget Act will be eliminating.

Jeff states: So by Congress closing these loopholes they are effectively reducing future social security benefits that would have to be paid out thus putting less pressure on the budget and extending the solvency of the Social Security Trust Fund.

Windus replies: Ultimately, that is the effect if these provisions.

Perhaps most notable for the new Social Security crackdown, though, is the effective date for the rules. While the new limits to Restricted Application will not apply to anyone who is already age 62 or older in 2015, the new crackdown will kick in April 30, 2016, grandfathering anyone currently going through file-and-suspend but limiting anyone who tries to suspend benefits thereafter. Beyond that point, anyone who suspends will find that no benefits will be payable until the individual who suspended chooses to reinstate benefits (either to restart them now, or finish waiting until age 70).

Windus continues: Notably, the crackdown on these voluntary-suspension-related tactics doesn’t actually kill the rules for voluntary suspension itself, which remains on the books. But now, aside from a few esoteric scenarios (including the recent Hold Harmless Medicare claiming strategy), voluntary suspension will be relegated to those unique scenarios where someone truly started benefits early, has had a change of mind and wants to stop them (after a year has passed and it’s already too late to withdraw the application) to earn delayed retirement credits, with the plans of starting benefits again at age 70. Of course, ideally those who wish to delay benefits for the value of earning delayed retirement credits will simply delay from the start to maximize the benefit, which makes voluntary suspension a moot point altogether for most retirees in the future.

Jeff asks Windus: Is there a dollar amount that you can associate with these changes?

Windus replies: Well the maximum benefit that a spouse could claim under File and Suspend was limited to 50% of a worker’s Primary Insurance Amount (PIA), which would be 50% x $2,787.80 = $1,393.90/month, or about $16,700 per year. And at the most, the strategy would only unlock four years’ worth of benefits (from when the retiree reached full retirement age at 66, until age 70 when benefits would have started anyway). Nonetheless, the new rules could cut off as much as about $67,000 of benefits over a 4-year time window for those who planned to engage in File-and-Suspend and as much as 3.5 years of benefits for those who were already receiving File-and-Suspend-based benefits.

Jeff asks Windus: But I would figure that when and how you claim social security benefits is just one aspect of what you would consider when making a retirement plan with a client.

Windus replies with her comments on this.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Stay tuned because after the break we are going to tell you some top 2015 year-end tax planning tips you need to be aware of.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

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Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

2015 Year-End Tax Planning for Individuals

Jeff states: Well here we are in November and while many people are now thinking about the year-end holiday celebrations, you should also be thinking about year-end tax planning to perhaps save on taxes and use those tax savings instead on your holiday celebrations and gift giving. So in this segment we are going to discuss some tax strategies that you may want to consider.

Jeff asks Amy: Why is it important to know what tax rate or tax bracket one is in?

Amy replies: Well for one thing, the higher the tax bracket you are in, the more valuable and greater tax benefit you can secure with proper tax planning.

Amy continues: For 2015, the top tax rate of 39.6% will apply to incomes over $413,201 (single), $464,851 (married filing jointly and surviving spouse), $232,426 (married filing separately), and $439,000 (heads of households). However, high-income taxpayers are also subject to the 3.8% net investment income tax and/or the 0.9% Medicare surtax. If a taxpayer is subject to one or both of these additional taxes, there are certain actions he can take to mitigate the impact of these additional taxes.

Windus asks: I am a big proponent of funding for retirement, what tax considerations should one be aware in making retirement plan contributions for 2015?

Amy replies: Fully funding a company 401(k) with pre-tax dollars will reduce current year taxes, as well as increase retirement savings. For 2015, the maximum 401(k) contribution taxpayers can make with pre-tax earnings is $18,000. For taxpayers 50 or older, that amount increases to $24,000. For taxpayers with a SIMPLE 401(k), the maximum pre-tax contribution for 2015 is $12,500. That amount increases to $15,500 for taxpayers age 50 or older.

Amy continues: If certain requirements are met, contributions to an individual retirement account (IRA) may be deductible. For taxpayers under 50, the maximum contribution amount for 2015 is $5,500. For taxpayers 50 or older but less than age 70 1/2, the maximum contribution amount is $6,500. Contributions exceeding the maximum amount are subject to a 6% excise tax. Even if a client is not eligible to deduct contributions, contributing after-tax money to an IRA may be advantageous because it will allow the client to later convert that traditional IRA to a Roth IRA. Qualified withdrawals from a Roth IRA, including earnings, are free of tax, while earnings on a traditional IRA are taxable when withdrawn.

Windus asks Amy: Now if a client already has a traditional IRA how would it work if she converted it to a Roth IRA?

Amy replies: The client will have to pay tax on the amount converted as ordinary income, but subsequent earnings will be free of tax. And if the client has a traditional 401(k), 403(b), or 457 plan that includes after-tax contributions, a new rule allows her to generally rollover these after-tax amounts to a Roth IRA with no tax consequences. A rollover of a SIMPLE 401(k) into a Roth IRA may also be available. As with all tax rules, there are qualifications that apply to these rollovers that practitioners should discuss before their clients take any actions.

Jeff states: PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Not all individuals are aware that they could be hit with an additional 3.8% tax on certain net investment income. Amy please tell our listeners about this.

Amy replies: That’s right. A 3.8% tax applies to certain net investment income of individuals with income above a threshold amount. The threshold amounts are $250,000 (married filing jointly and qualifying widow(er) with dependent child), $200,000 (single and head of household), and $125,000 (married filing separately). In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading of financial instruments or commodities. Thus, while the top tax rate for qualified dividend income is generally 20%, the top rate on such income increases to 23.8% for a taxpayer subject to the net investment income tax.

Windus asks: Is there any way to avoid this?

Amy replies: One way around the increased tax rate on dividend income is to invest instead in tax-exempt state and municipal bonds. The bonds generate tax-exempt income which isn’t subject to the net investment income tax and is not included in determining if taxpayers meet the threshold amount for being subject to the net investment income tax. Note, however, that such income may be subject to state taxes and the alternative minimum tax.

Windus asks: Does this investment income tax also apply to someone who owns their own business?

Amy replies: Only if that trade or business constitute a passive activity. An activity is not generally considered passive if the taxpayer materially participates in the activity. If a client is engaged in an activity which may be considered passive and thus has the potential to trigger the net investment income tax, steps should be considered to make this investment active to avoid this tax.

Jeff states: Not all individuals are aware that they could be hit with an additional 0.9% tax on their wages and self-employment income. Amy please tell our listeners about this.

Amy replies: That’s right. An additional Medicare tax of 0.9% is imposed on wages and self-employment income in excess of a threshold amount. The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case. Employers are required to withhold the extra .9% once an individual’s wages pass $200,000. No deduction is allowed for the additional tax. However, married taxpayers may be due a credit if, for example, they use the married filing jointly status, one spouse had wages over $200,000, but joint wages are less than $250,000. On the flip side, married taxpayers may owe the additional .9% if they file jointly and each made under $200,000 of wages but together made over $250,000 in wages.

Jeff states: Now sometimes getting to aggressive with tax deductions could backfire and you can end up owing more in tax. Amy please explain how this could happen.

Amy replies: That would be true where you are subject to the Alternative Minimum Tax. Because many deductions taken for regular tax purposes are not allowed for alternative minimum tax (AMT) purposes, individuals may be subject to the AMT if he or she has excessive deductions. Deductions which typically throw taxpayers into an AMT situation include high state and local taxes, interest on home equity loans, a high number of dependent deductions, and a large amount of miscellaneous itemized deductions. For 2015, the AMT rate is 26% on alternative minimum taxable income (AMTI) up to $185,400 ($92,700 for married filing separately) and 28% on AMTI over that amount. Taxpayers are allowed an AMT exemption depending on filing status, but the exemption is phased out for taxpayer’s above a certain income level.

Since the calculation of the AMT begins with adjusted gross income, lowering your adjusted gross income by maximizing contributions to a tax-deferred retirement plan (e.g., 401(k)) or tax-deferred health savings account may be appropriate. Additionally, if you use your home for business, related expenses (e.g., a portion of the property taxes, mortgage interest, etc.) allocable to Schedule C will also reduce adjusted gross income.

Jeff asks: Amy is there still any legislation that Congress may enact before the end of the year that we need to keep a look out for?

Amy replies: Yes, additional tax benefits may be available if Congress passes Tax Extender legislation introduced in the Senate last August. That legislation would retroactively extend many tax breaks that expired in 2014. If it passes, the bill will extend various tax breaks through 2016 that include the following:

  • the exclusion from income of imputed income from the discharge of acquisition indebtedness for a principal residence;
  • the tax deduction for mortgage insurance premiums;
  • the tax deduction for state and local general sales taxes in lieu of state and local income taxes;
  • the deduction from gross income for qualified tuition and related expenses; and
  • the tax-free distributions from IRAs for charitable purposes.

Windus asks: Are there any other things to consider before the end of the year?

Amy replies: There are and we call these the “big-picture items”.

Accelerating Income into 2015 Depending on the client’s projected income for 2016, it may make sense to accelerate income into 2015 if the client expects 2016 income to be significantly higher.

Deferring Income into 2016 There are also scenarios (for example, if the client thinks that his or her income will decrease substantially next year) in which it might make sense to defer income into 2016 or later years.

Deferring Deductions into 2016 If a client anticipates a substantial increase in taxable income, practitioners may want to explore pushing deductions into 2016

Accelerating Deductions into 2015 – If a client expects his or her income to decrease next year, accelerating deductions into the current year can offset the higher income this year.

Jeff states: So it really is important that you address your year-end tax planning now and that is where we can help. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

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Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Windus, what questions have you pulled for us to answer?

Question from Patricia from San Diego: I am interested in investing in a particular company that has corporate bonds, preferred stock and common stock. What are the differences between each of those types of securities?

Answer: Common stocks are ownership interests in a publicly traded business, and owners of it are called shareholders. If a company liquidates or goes bankrupt, common stock shareholders likely won’t see any equity distribution.

Preferred stocks are less volatile than common stocks, and pay dividends at a regular interval. However, with reduced volatility comes reduced reward, and there is very little chance that a preferred stock will ever produce large capital gains for an investor. On the plus side, if a company becomes insolvent, preferred stockholders are entitled to assets before common stockholders.

Corporate bonds are debts issued by companies. When you buy a bond, you are lending money to the corporation that issued it. The corporation promises to return your money, or principal, on a specified maturity date. Until that time, it also pays you a stated rate of interest, usually semiannually. The interest payments you receive from corporate bonds are taxable. Unlike stocks, bonds do not give you an ownership interest in the issuing corporation. If a company becomes insolvent, bondholders are entitled to assets before any stockholders.

Question from Jose from Chula Vista: My university requires each incoming freshman to come to school with their own computer. Is there any way to deduct the cost of the computer from my tax liability?

Answer: Autos, Computers and other Electronic Devices fall into a category that the IRS calls “Listed Property”. With Listed Property, you not only have to document the cost of the property but also document the business use. The cost of a personal computer is generally a personal expense that is not deductible. However, you may be able to claim an American opportunity tax credit if you are required to have a computer to enroll or attend your university.

The American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40% of any remaining amount of the credit (up to $1,000) refunded to you.

Be on the look-out for a Form 1098-T Tuition Statement, from your school by January 31. This statement helps you figure your credit. The form will have an amount in either box 1 or 2 to show the amounts received or billed during the year. But, this amount may not be the amount you can claim as it will not include qualified education expenses you paid such as buying that personal computer.

To claim the American Opportunity Tax Credit, you must complete the Form 8863 and attach the completed form to your Form 1040.

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Windus states: Have a great day everyone!

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses New Budget Deal, Federal Reserve and IRS Tax Saving Tips On ESPN Radio – October 30, 2015 Show

Topics Covered:

  1. House Passes Two-Year Budget Deal
  2. Fed Stays Rates But Keeps December Rate Hike in Play
  3. How to make Halloween candy and costumes deductible.
  4. Questions from our listeners:
  • What are the most important indicators of a stock’s health?
  • The IRS corrected my return and sent me an additional refund. Does this mean I am also entitled to an additional refund on my state tax return?
  • The IRS audited my return and charged me with additional tax, interest and penalties. Does this mean I will also owe additional monies on my state tax return?

*******************************************************************************

Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

Windus states:

And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Jeff states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states:

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states:

For today’s show we have coming up:

Segment 2 material: Fed Stays Rates But Keeps December Rate Hike in Play

Windus states:

Also coming up is:

Segment 3 material: How to make Halloween candy and costumes deductible.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

So for the top story:

House Passes Two-Year Budget Deal

An article announcing this from the Wall Street Journal brought up some interesting points. http://on.wsj.com/1GxPTuY

Jeff continues: While the legislation must still be approved by Senate which by all accounts it likely should, Congress has once again succeeded in avoiding a government shut-down that could of happened as early as next week.

Windus states: The agreement has drawn GOP opposition in both chambers and on the presidential campaign trail from conservatives upset that it raises spending by $80 billion through September 2017 and extends the government’s borrowing authority through mid-March 2017.

Windus continues: The Article included a quote the House Freedom Caucus, a group of conservatives who opposed the bill, calling it a “fiscal monstrosity” and objecting to secret talks between top lawmakers and President Barack Obama that produced it.

Jeff states: But senior Republicans said the agreement was preferable to the alternative: raising the debt ceiling with no policy strings attached, known as a “clean” increase. Our new speaker of the house, Rep. Paul Ryan (R., Wis.), said he would support it despite his objections over the last-minute deal-making with the administration. The bill passed with the support of 79 Republicans and 187 Democrats.

Jeff continues: The agreement lifts federal spending above limits established in a 2011 law that have been in effect since 2013, known as the sequester. It would increase spending by $50 billion in fiscal-year 2016 and $30 billion in fiscal 2017, evenly split between military and domestic spending. The big take-away here is that the stick of “sequester” is gone for two years.

Windus states: The legislation also incorporates fixes to two federal safety-net programs lawmakers wanted to address well before next year’s elections. The agreement would extend the solvency of the Social Security program used to help support disabled people. The deal also would prevent an expected 52% increase in premiums for roughly 30% of the people enrolled in Medicare Part B, which covers outpatient care such as doctor visits.

Here’s What’s In the New Budget and Debt Ceiling Deal

http://blogs.wsj.com/washwire/2015/10/27/heres-whats-in-the-new-budget-and-debt-ceiling-deal/?mod=capitaljournalrelatedbox

Jeff states: So Windus let’s do a rundown of the key provisions of the agreement.

[Jeff to read off an item followed by Windus discussing the details.]

Debt Limit Increase

The agreement effectively raises the debt limit, which had been suspended until last March. The Treasury Department has been using emergency cash-management measures to remain below the $18.1 trillion borrowing ceiling since then. It says those steps will be exhausted by Tuesday November 3rd, leaving the U.S. very close to running out of cash and being unable to pay its bills.

The agreement would again suspend the debt limit until March 15, 2017. After that, the debt limit would be reset to include any borrowing done before then. Remember this legislation suspended the “sequester” for two years so Congress now can merely press the reset button and there now is that much more debt accumulated by the U.S. Raising the debt limit doesn’t approve new spending programs, but instead allows the government to pay for things that Congress has already agreed to spend money on.

Budget Agreement

The deal sets out the top-line numbers that lawmakers will use later this year to round out spending bills before government funding expires on December 11th. It also establishes overall funding levels through Sept. 30, 2017. It adheres to two principles that President Barack Obama laid out earlier this year: it boosts spending above sequester caps previously set by Congress, and it ensures that spending rises equally for defense and domestic budgets. Discretionary spending will increase $50 billion in the budget year that began October 1st and $30 billion in the following fiscal year.

It also boosts military funding, a top priority of Republicans. There’s an additional $16 billion in each of the next two years for the Pentagon and State Department for war funds that aren’t subject to the sequester.

Settling the Tab

Jeff asks: How will the government pay for this extra spending?

Windus replies: Most of the $80 billion in higher discretionary spending for the next two years is covered by various revenue increases and spending cuts that don’t materialize for several more years. For example, discretionary spending in 2025 will be cut $14 billion from current levels, and certain cost cuts for Medicare are extended two years from current law, through 2024.

Jeff states: Since budgets are formulated by looking forward ten years, Congress justifies an increase in spending now because in the 9th and 10th years of this forecast, Congress is cutting spending.

Jeff continues: Although we know that just as easy as it was for Congress to suspend sequester for two years, it is also could be just as easy for Congress to delay or avoid spending cuts in 2024 and 2025.

Windus states: The budget reduces subsidies on crop insurance purchased by farmers, which could save $3 billion – but with the unusual weather patterns we have been facing it seems that crop insurance will be more important.

Windus continues: The budget also authorizes the sale of oil from the Strategic Petroleum Reserve, which could raise $5 billion over the next 10 years – but with oil prices at an all-time low and supply plentiful that oil would likely be sold at a loss.

Jeff states: The budget also makes it easier for the Internal Revenue Service to audit large partnerships, including private-equity firms and hedge funds, by updating a 33-year-old law that sets the rules for partnership audits and requires the IRS to pass additional taxes to each of the partners.

What Isn’t Included

Jeff states: The budget doesn’t address a few other outstanding pieces of business facing Congress, including refilling the highway trust fund, which could exhaust its latest short-term extension this winter, and reauthorizing the Export-Import Bank, a priority of most Democrats and dozens of Republicans. It also doesn’t resolve a series of temporary tax provisions that businesses and households have come to rely on and which have regularly been extended.

Well it’s time for a break but stay tuned because when we come back we will talk about the Fed’s Decision To Stay Interest Rates.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Federal Reserve Stays Rates And Keeps December Rate Hike in Play

Jeff states: And before we hear Windus’ comments on this, Windus has a special offer to tell our listeners:

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Windus continues: In an article published by the Wall Street Journal Federal Reserve officials explicitly said they might raise short-term interest rates in December but omitted any mention of concern over the direction of overseas markets.  http://on.wsj.com/1GxNVe0

Windus continues: Top Fed officials have been saying for months they believed the economy was nearly strong enough to tolerate an increase in the benchmark short-term rate from near zero, where it has been since December 2008. But they have hesitated to move.

Jeff asks: I know that over the last few months that you have been covering the Federal Reserve, you and many others figured that by now there would have been some movement up in interest rates. What happened?

Windus replies: Well you should recall that last September the Fed pointed to worries about turbulence in financial markets and uncertainties about growth overseas—particularly in China—as reasons to stay put.

Windus continues: Since then market and international developments have turned in the Fed’s favor in recent weeks. The People’s Bank of China last week cut short-term lending rates in an effort to boost growth in the world’s second-largest economy. European Central Bank President Mario Draghi suggested he might extend a bond-purchase program in an effort to stimulate his region’s economic growth rate.

Windus continues: These moves sparked a global stock-market rally and could support world-wide growth. The Dow is up 6% since the Fed met last month; a sign financial-market stress has dissipated.

Jeff asks: So with this recent perception that global things could be getting better, where does that put the Fed?

Windus replies: The Fed responded Wednesday by playing down its earlier-stated concerns. Officials struck from their policy statement a sentence introduced in September that pointed to market turbulence and global developments as potential restraints on U.S. economic activity. As those concerns recede, the Fed has fewer impediments standing in the way of a rate increase.

Windus continues: Officials pointed specifically in the policy statement to their Dec. 15-16 meeting as a moment when they might act on rates. Individual officials have signaled before that they expected to move before year-end, but the Fed’s policy-making committee hadn’t previously pointed so explicitly in an official statement to the potential timing of a rate increase.

Windus continues: You see that inflation has been persistently low; in part because the Fed has already delayed several times; and in part because economic data appeared to take a turn for the worse since September. Most notably, the Labor Department reported early this month that hiring slowed in September and was less than previously reported in August and July.

Jeff asks: Now Windus I know that you cannot predict the future on when rates will raise and by how much, but is there anything coming up that the Fed may be looking at that could impact their decision making?

Windus replies: Officials repeat regularly that their decision is “data-dependent.” The Fed will see two more monthly jobs reports—including one next week—before officials need to decide whether rates should be increased in December.

In so with the certainty that at some point interest rates will increase, you need to be prepared …

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff states: So I trust that our listeners are getting ready for Halloween. Well, stay tuned because after the break we are going to talk about how to make Halloween candy and costumes tax deductible.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

How to make Halloween candy and costumes deductible

So Amy, with Halloween coming up, I understand that you have some ideas on how to make Halloween candy tax deductible.

Amy replies: It is true. You can in fact deduct Halloween candy if you figure out a way to make it business related. The IRS doesn’t say a lot about this topic because they don’t want to give you “permission” to deduct these items, but they also have not specifically stated that you cannot deduct Halloween candy.

Windus asks, so how can you deduct those over-priced bags of snack size chocolates?

Amy replies – will I have five different ways!

1. Make a promotion out of it. Attach your business card or a promotional flyer to packets of M&M’s and voila! Deductible.

2. There are many companies who will print candy wrappers with your logo on it. An even better and more advanced way to promote your business and still have something for trick-or-treaters.

3. Send a box of candy to potential or existing clients during October. This promotes your business and would likely not be questioned as a business deduction.

4. Donate any leftover candy to the US troops. “Charitable organizations with 501(3)(c) status like Operation Gratitude (EIN 20-0103575) and Soldiers’ Angels (EIN 20-0583415) collect leftover Halloween candy to include in care packages for soldiers. They are two of many 501(c)(3) organizations on the IRS-approved list to donate tax deductible charitable goods. Always be sure to check the IRS list before claiming your donations are tax deductible, as status can change.”

5. Make it a party. You can deduct a portion of a Halloween party if the party is to conduct or promote business. Typically this looks like an open house of some sort where you mingle with current and potential clients, play a few Halloween games, give out candy and treats, and discuss business. The IRS does not specify how much time you must spend discussing the business to claim a deduction but you must invite people that you do business with or are looking to do business with.

Jeff says: Amy those are some great ideas.

PLUG: You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. We will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff says: Now when I think of Halloween, I look forward to seeing all of the different costumes that people wear. Some are very extravagant and I am sure pricey. And for some they would like to know how that can be deductible. Since costumes fall under the category of clothing or uniforms, Amy please explain what the tax law requires.

Amy says: The tax law requires three elements for clothing useful only in the business environment to be deductible. They are:

  1. The clothing is required or essential in the taxpayer’s employment;
  2. The clothing is not suitable for general or personal wear; and
  3. The clothing is not so worn for general or personal wear.

If these three requirements are satisfied, not only is the cost of the closing deductible but also its upkeep.

Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).  Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.

Windus asks: How about a white cap, white shirt or white jacket, white bib overalls, and standard work shoes a painter is required by his union to wear on the job and there is nothing on any of the clothes that indicate the company this person works for? 

Amy replies: No that would not be deductible because it is not distinctive.  Similarly, blue work clothes worn by a welder are not deductible even if the foreman requires them.  However, required protective clothing like safety boots, safety glasses, hard hats, and work gloves are deductible.

Amy continues: But consider this – by adding the company’s logo on the clothing will make it deductible even if it can be worn outside the scope of employment because you are advertising your company. In that case you are a walking billboard.

Jeff asks: We have a large military presence here in San Diego County. How about Military Uniforms?  

Amy replies: You generally cannot deduct uniforms if you are on full-time active duty in the armed forces.  However, reservists can deduct the unreimbursed cost of uniforms if military regulations restrict wearing it except on duty.  Still, you must reduce your deduction by any nontaxable allowance you receive.  If local military rules don’t allow wearing fatigues off duty, you can deduct the amount by which your uniform cost exceeds your uniform allowance. 

Windus asks: Given today’s dot.com and casual era environment, people are not coming to work as dressed up as they used to. So could lawyers and others argue their suits are just like uniforms and therefore ought to be tax deductible?

Amy replies:  No. Where business clothes are suitable for general wear, there’s no deduction even if these particular clothes would not have been purchased but for the employment. 

Jeff asks: Being on the radio, our listeners cannot see what we are wearing but would being on TV be any different?  

Amy replies: While these tax rules are pretty circumscribed, they are also intensively factual.  Someone is always pushing the tax envelope.  Such was the case with an Ohio TV news anchor, Anietra Y. Hamper. She was claiming approximately $20,000 a year in 2005, 2006, 2007 and 2008 in clothing expense that included not only what she wore for each broadcast but also lounge wear, a robe, sportswear, lingerie, thong underwear, an Ohio State jersey, jewelry, running shoes, dry cleaning, business gifts, cable TV, contact lenses, cosmetics, gym memberships, haircuts, Internet access, self-defense classes, and her subscriptions to Cosmo, Glamour, Newsweek, and Nickelodeon.  Her argument was that as a TV anchor she was required to maintain a specified appearance described in the Women’s Wardrobe Guidelines.  These guidelines say the “ideal in selecting an outfit for on-air use should be the selection of ‘standard business wear’, typical of that which one might wear on any business day in a normal office setting anywhere in the USA.”

Windus asks: Was that enough? 

Amy replies: No.  Where business clothes are suitable for general wear, there’s no deduction even if these particular clothes would not have been purchased but for the employment.  For this TV anchor, that was no help.  She claimed the requirement to dress conservatively made the clothing unsuitable for everyday use, and that’s how she treated it.  She wore the business clothing only at work and even kept it separate from her personal clothing.  But the IRS and Tax Court denied her wardrobe deductions.  And they added penalties.

Jeff asks: Well in the history of tax law is there anyone who prevailed in getting their costumes deducted?

Amy replies: Well Jeff you remember the Swedish disco group ABBA?

Jeff replies, I sure do – I know there songs well. Maybe we can get our engineer to play one for our break.

Amy continues: Well according to ABBA: The Official Photo Book, released to commemorate the 40th anniversary of the group career-making Eurovision victory for Waterloo, the Swedish foursome adopted their outlandish dressing style in order to ensure they could deduct the cost of their costumes under Swedish tax code. Like U.S. tax law, Swedish laws allowed work wear to be tax deductible so long as it was demonstrably apparel that couldn’t be worn on the street – which, with its garish coloring and liberal use of sparkle, ABBA’s certainly was.

PLUG: Now while you will find no one on the kahntaxlaw team wearing outrageous costumes you should know that the Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

You should also know that the securities and advisory services are offered through National Planning Corporation.(NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Windus, what questions have you pulled for us to answer?

Question from Stephanie of Carlsbad: What are the most important indicators of a stock’s health?

Answer: Whether a stock is “healthy” often relies on your objective. If you seek high returns and high risk, you’ll want stocks with a relatively large price range over a short time period. If you are looking for less risk and moderate growth, stick to stocks whose price ranges over the past 52 weeks are narrow. All publicly traded companies issue quarterly earnings reports to the Securities and Exchange Commission (SEC). You can find a few key pieces of data in the reports to evaluate a stock’s health:

  • Earnings per share (or EPS): Ratio of total earnings divided by the total investor shares. You can compare stocks with this number.
  • Price/Earnings ratio (P/E): What customers are paying for a dollar of the company’s earnings. There is no magic number to look for, though according to the Financial Industry Regulatory Authority, the long-term average number has been about 15. A stock with a high P/E might mean that the future looks bright — but it has to work harder to keep the performance. A low P/E might mean that a price increase is on the way — or that a company is in trouble.

You also need to ask some commonsense questions, like whether the company’s products and industry are in demand, what its past performance is like, and how much debt it carries. All of these issues are addressed in a company’s annual financial report, which is usually available via its website in a section labelled for investors.

Question from Sergio of San Diego: The IRS corrected my return and sent me an additional refund. Does this mean I am also entitled to an additional refund on my state tax return?

Answer: Whether you are entitled to an additional state tax refund depends on the change that was made to your federal return. For example, if you used the wrong line on the tax tables to figure your tax on your federal tax return, this may not affect your state tax return. However, if the change was made to the amount of your taxable income, it may affect your State tax return.

Question from Steven in Los Angeles: The IRS audited my return and charged me with additional tax, interest and penalties. Does this mean I will also owe additional monies on my state tax return?

Answer: Like the previous question, whether you need to amend your State income tax return depends on the change that was made to your federal return. Keep in mind that the results of the audit do get reported to your State. If the change does require a State amended income tax return, you have up to six months after the close of the IRS audit to file the State amended income tax return. If you do not file the State amended income tax return, the State will use the information it received from the IRS audit to generate a tax bill that could include penalties and a greater amount of tax due than if you filed a State amended income tax return. So that is why we recommend that you should prepare and file a State amended income tax return promptly after the close of the IRS audit.

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Windus states: Have a great day everyone and Happy Halloween!

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses the IRS, Investments, and New Developments on OVDP and FATCA On ESPN Radio – October 23, 2015 Show

Topics Covered:

  1. Are You Looking To Pay A $100 Million Tax Bill? If So, IRS Will Turn You Away If You Pay With A Check!
  2. Investing In Charter-Schools
  3. Fall 2015 Report Card Out By IRS On OVDP Milestones And FATCA Implementation.
  4. Question from our listeners: I just got in the mail a Notice from IRS. It is identified as Notice Number CP504 and says – “Urgent!! They intend to levy Certain Assets.” I don’t agree that I owe this amount. How can I appeal? Will that stop the levy action?

*******************************************************************

Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

Windus states:

And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Jeff states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states:

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states:

For today’s show we have coming up:

Segment 2 material: Investing In Charter-Schools

Windus states:

Also coming up is:

Segment 3 material: Fall 2015 Report Card Out By IRS On OVDP Milestones And FATCA Implementation.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

Jeff states: So for today’s top story:

Are You Looking To Pay A $100 Million Tax Bill? If So, IRS Will Turn You Away If You Pay With A Check!

Jeff continues: This story was first reported by the Associated Press on September 14, 2015.

http://bigstory.ap.org/article/169640d82cd9462c9e006bc0b51b5b72/no-checks-please-irs-no-longer-takes-checks-over-100m

Starting in 2016, your check won’t be any good at the IRS if you’re making a tax payment of $100 million or more.

Windus states: Jeff you are saying that if you walk into an IRS Service Center with a check for $100 million dollars, the IRS will not accept it?

Jeff replies: It’s true. The IRS says it will reject all checks for more than $99,999,999 because check-processing equipment at the nation’s Federal Reserve banks can’t handle checks that big. Checks of $100 million or more have to be processed by hand, increasing the risk of theft, fraud and errors, according to a pair of memos from the IRS and the Treasury Department.

Windus states: And you would think that if someone was paying that much money, they would get special treatment anyways for the processing of that payment.

Jeff states: I guess the richest among us will have to pay their taxes just like everyone else and either wire their tax payments electronically or write multiple checks for less than $100 million apiece.

Windus: I bet the conservatives have latched on to this.

Jeff states: The Article does touch on this recognizing that conservatives have been complaining for years that President Barack Obama is trying to stick it to the rich, regularly proposing to raise their taxes. Now, they say, the Obama administration is making it harder for the super-rich to pay those taxes. Apparently, people sending huge checks to the federal government is a growing problem.

Windus asks: OK Jeff so how big of a problem is this – I cannot imagine somebody having to write a check for $100 million to the IRS for taxes?

Jeff states: Actually this limitation in amount is a problem not only with IRS but other federal agencies as well. The Treasury Department says it has noticed an increase in federal agencies trying to deposit checks of $100 million or more. In 2015 the IRS so far has accepted 14 checks for at least $100 million each.

Jeff continues: You see the Federal Reserve says most commercial banks can’t process checks with amounts that stretch for more than 10 digits, including cents. The Fed says federal agencies have been prohibited from depositing checks of $100 million or more for years.

Windus states: Apparently, the IRS didn’t get the memo. Do we know who any of the 14 taxpayers are that wrote checks to the IRS for at least $100 million?

Jeff replies: Confidentiality laws prevent those kinds of disclosures so we would never know unless it is admitted by the paying taxpayer. Very few individuals pay that much in federal income taxes. However, each year, the IRS tracks the 400 taxpayers with the highest incomes. These high rollers had an average income of nearly $336 million in 2012, the latest year for data. Their average tax bill was $56 million. A corporation would have to make nearly $300 million in taxable profits to have a tax bill of $100 million. Investors who get the bulk of their income from capital gains would have to make about $500 million in taxable income to have a tax bill that big.

Windus states: I wonder whether anyone in Congress has commented on this?

Jeff states: I do not think you will find much sympathy for people who will no longer be able to write enormous checks to the government. Most politicians would probably not mind making enough money to pay $100 million in taxes.

Windus states: Now for those people who have to pay $100 million or more, you still have the option to pay electronically.

Jeff states: That’s right and nearly 90% of individuals already file their federal taxes electronically, according to the IRS.

Windus states: I still don’t get it. The government is running at a deficit! 14 checks at $100 million a piece is $1.4 billion dollars and you can’t hire a government clerk to process this!

Jeff states: Windus you are assuming that each of those 14 people are writing a check for only $100 million. I am sure that there are checks even larger than that that would make the total even higher than $1.4 billion dollars.

Jeff continues: So bringing this to the level of us ordinary folk, you have got to understand that we are dealing with the government – not a general creditor. They want their money paid in full and in the manner that most suits them. For example, say you owe the IRS $50,000.00 and do not have the money to pay and want to enter into an Offer In Compromise whereby you are willing to pay $5,000.00 as a lump sum settlement. If the IRS believes you have the ability to pay the amount owed over as long as 10 years with interest and penalties that continue to accrue, they will not accept your $5,000.00 payment and instead put you on a payment plan collecting your money over the next ten years! That is why people who attempt to make their own Offer In Compromise to the IRS without representation usually fail.

Well it’s time for a break but stay tuned because we are going to tell you about Investing In Charter-Schools.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Jeff states: So Windus before we go into the next segment, please tell our listeners of your offer:

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Investing In Charter-Schools

Jeff states: So Windus you saw an article in the October 13, 2015 Wall Street Journal that caught your attention. http://on.wsj.com/1VZI82z

Windus states: That’s right apparently a new niche is developing as more charter schools open doors and some states even help with financing. Almost all charter schools are operated by nonprofit organizations. But these groups often rent and buy their buildings from private real-estate developers, and that is creating a new niche asset for some investors. The schools usually open in office buildings that are otherwise vacant.

Not a bad thing but what is interesting is:

1.  Why more charter schools? 

2.  Why office buildings? 

3.  Does State help hurt public schools?

Jeff to comment with Windus.

Windus states: Now another article on this topic came out in the Wall Street Journal on October 18, 2015 which is really summed up clearly. http://on.wsj.com/1Ps7SWp

Windus states: If we look at demographics of kids in charter schools versus public schools, ones that go to charter schools likely have parents taking a much more serious interest in their overall education.

Windus continues: So to know if a charter school is really better, “A true test would be for a charter school to take over a failing public school and, without changing any of the students and working with the same budget, show significant improvement.”

Jeff states: But you mentioned that some States help out in the financing and I would think that as an investor, those would be the better states to put your money in if you were looking to invest in charter schools.

Windus states: True and those States that have the highest percentage of students who perform poorly would probably fare well by having the State help out in financing of charter schools. Massachusetts could be one of those states.  Massachusetts Governor Charlie Baker wants to expand charter schools.  But again, why not reform public schools instead of creating a new school system. We are at a critical situation where reading and math scores are terrible.  In Massachusetts the comment was that 50% of their students are below average.  Kids in great home environments are not suffering, but the less fortunate you are in what Warren Buffet calls the “ovarian lottery” the more likely you are to just fall through the “crack” in public schools.

Jeff asks: Any such movement going on in Southern California?

Windus replies: In Orange County, there is a different kind of an activist that is really targeting fixing the school at the source. I read this article back in September in the Wall Street Journal and it deeply impacted me. http://on.wsj.com/1Yp90gq
Windus continues: In some cases the school and the unions are not helping the children and need to be challenged to change and get better.  A “parent revolution” can help fix a school but often this in communities where parents are working multiple jobs and the home environment is part of the issue with a child’s success. And so whether you are looking to investment in charter schools or have other investment/financial concerns, remember that:

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff states: Windus I know that you have to get back to your meeting but I am glad you were able to be on with me for the first half of the show.

Windus signs off.

Jeff states: Stay tuned because after the break Amy Spivey will be joining me to tell you the Fall 2015 Report Card out by IRS On OVDP Milestones And FATCA Implementation.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

Jeff states:

IRS Issues Fall 2015 Report Card On OVDP Milestones And FATCA Implementation

Offshore Compliance Programs For Taxpayers With Undisclosed Foreign Bank Accounts Generate $8 Billion; IRS Urges People to Take Advantage of Voluntary Disclosure Programs

Jeff states: On October 16, 2015 the IRS announced in a news release that more than 54,000 taxpayers have entered into offshore voluntary disclosure programs since 2009. Both the Offshore Voluntary Disclosure Program (OVDP) and the streamlined procedures enable taxpayers to correct prior omissions and meet their federal tax obligations while mitigating the potential penalties of continued non-compliance. There are also separate procedures for those who have paid their income taxes but omitted certain other information returns.

Amy states: IRS Commissioner John Koskinen stated “The groundbreaking effort around automatic reporting of foreign accounts has given us a much stronger hand in fighting tax evasion. People with undisclosed foreign accounts should carefully consider their options and use available avenues, including the offshore program and streamlined procedures, to come back into full compliance with their tax obligations.”

Jeff asks: Amy what sort of dragnet has the IRS created to catch non-compliant taxpayers?

Amy replies: Under the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements (IGAs) between the U.S. and foreign jurisdictions, automatic third-party account reporting began in 2015, making it less likely that offshore financial accounts will go unnoticed by the IRS.

Amy continues: In addition to FATCA and reporting through IGAs, the Department of Justice’s Swiss Bank Program continues to reach non-prosecution agreements with Swiss financial institutions that facilitated past non-compliance. As part of these agreements, banks provide information on potential non-compliance by U.S. taxpayers. Potential civil penalties increase substantially if U.S. taxpayers associated with participating banks wait to apply to OVDP to resolve their tax obligations.

Jeff states: OVDP offers taxpayers with undisclosed income from offshore accounts an opportunity to get current with their tax returns and information reporting obligations. The program encourages taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.

Jeff asks: Amy, When did the IRS first start OVDP?

Amy replies: OVDP was first started by the IRS in 2009. Since then there have been more than 54,000 voluntary disclosures by taxpayers with undisclosed foreign bank accounts. The IRS has collected more than $8 billion from this initiative. 

Jeff states: And the IRS is confident that it will catch those taxpayers who are not coming forward in OVDP. So we encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts or the foreign banks are reporting you to the IRS. By then, it could be too late to avoid the higher penalties and you may be subject criminal prosecution.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

OVDP Myths

Jeff states: During the course of U.S. taxpayers with previously undisclosed interests in foreign financial accounts and assets consulting with us on their options, we have heard a lot of myths out there causing confusion and misinformation so we are going to try and clear some misconceptions.

[Jeff to reading off each Myth and Amy to respond.]

Myth #1: An individual will be better off “explaining” the undisclosed foreign bank accounts through amended tax returns, rather than opting into OVDP.

Even outside of OVDP, any disclosure to the IRS requires that the taxpayer file amended tax returns and be prepared to provide the foreign bank information and statements to support the new income being reported. Such returns are signed by the taxpayer that they are true and complete. Being outside of OVDP the government can develop a case supporting severe penalties and even criminal prosecution using the combination of original filed tax returns which omitted the foreign income and amended tax returns reporting the foreign income as admissions of intent to evade U.S. income tax.  

Myth #2: Once an individual enters into OVDP, you cannot dispute the amount of penalties imposed by the program.

Just because the penalty rate structure is set in OVDP does not mean the amount of penalty can never be disputed. Agents assigned to OVDP cases do make mistakes and do misinterpret foreign bank income and transaction activity including those accounts, assets and transactions that should not be part of any penalty calculation. These disputes or differences can still be contested and challenged through different means and channels while still remaining in OVDP.

Myth #3: An individual who enters into OVDP opens up all years for examination since becoming a U.S. person for tax purposes with undisclosed foreign bank accounts and unreported foreign income.

While the normal Statute Of Limitations to examine a tax return is three years, it can be extended to six years where there is a substantial omission of income and where the government can show fraud, the government has no limitation on how far back it can go. Furthermore, the government has a six-year Statute Of Limitations to pursue criminal prosecution. A person who is in OVDP avoids criminal exposure and any income tax return amendments are limited to the last eight years or if shorter, from the time the individual becomes a U.S. person for tax purposes.

Myth #4: An individual who enters in OVDP is forfeiting assets, including entire lifetime savings and more to the government so that any income, inheritances, or gifts these people may receive in the future will belong to the IRS. 

Outside of OVDP, the MINIMUM penalty is 50% of the value of your foreign assets. But for taxpayers participating in OVDP, the MAXIMUM penalty is 27.5%. That means for taxpayers who are in OVDP, they will still get to keep at least 72.5% of their foreign assets.   And under the new Streamlined Procedures with a penalty of 5%, you still get to keep 95% pf your foreign assets.

Jeff states: Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”) or the new Streamlined Procedures. Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Jeff states, Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment with Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff continues: You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Amy, what questions have you pulled for us to answer?

Question from Eric of Newport Beach: I just got in the mail a Notice from IRS. It is identified as Notice Number CP504 and says – “Urgent!! They intend to levy Certain Assets.” I don’t agree that I owe this amount. How can I appeal? Will that stop the levy action?

Answer. That notice is meant by the IRS to be threatening and intimidating but the IRS cannot levy with just this notice. The IRS must first issue a formal Notice of Intent to Levy. So while the IRS cannot carry out this threat now, you should not ignore the problem as the IRS will next issue a “Final Notice” that if the problem continues as unresolved will result in levy action. Eric I suggest that you call our firm and let us take control of your tax problem.

Now it was helpful that Eric told us the notice number that appeared on his letter from the IRS. The IRS knows that there are certain procedures they must follow before they can start levy action on your bank accounts, wages and other sources of income. The IRS also knows that taxpayers must be given the opportunity to appeal before levy action may begin. Perhaps that is the reason why the IRS will make these notices confusing and look the same so that when a notice gets issued offering appeals rights, it is overlooked by the taxpayer.

Be on the lookout for a Letter L-1058 or LT11 FINAL NOTICE OF INTENT TO LEVY AND NOTICE OF YOUR RIGHT TO A HEARING. Also be on the lookout for a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, Letter 3172. These letters will be sent to you by certified mail. These are the letters that if any appeal is not filed within the next 30 days from the date of the notice regardless of when you claim it or read it, the IRS will be able to commence levy action or keep the tax lien in place. It is imperative that you contact us when you get one of these notices so that you do not waive your appeals rights and your case can be resolved outside of IRS Collections.

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Well we are reaching the end of our show.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Jeff states: Have a great day and a great weekend!

IRS Issues Fall 2015 Report Card On OVDP Milestones And FATCA Implementation

Offshore Compliance Programs For Taxpayers With Undisclosed Foreign Bank Accounts Generate $8 Billion; IRS Urges People to Take Advantage of Voluntary Disclosure Programs

On October 16, 2015 the IRS announced in a news release that more than 54,000 taxpayers have entered into offshore voluntary disclosure programs since 2009. Both the Offshore Voluntary Disclosure Program (OVDP) and the streamlined procedures enable taxpayers to correct prior omissions and meet their federal tax obligations while mitigating the potential penalties of continued non-compliance. There are also separate procedures for those who have paid their income taxes but omitted certain other information returns.

IRS Commissioner John Koskinen stated “The groundbreaking effort around automatic reporting of foreign accounts has given us a much stronger hand in fighting tax evasion. People with undisclosed foreign accounts should carefully consider their options and use available avenues, including the offshore program and streamlined procedures, to come back into full compliance with their tax obligations.”

Under the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements (IGAs) between the U.S. and foreign jurisdictions, automatic third-party account reporting began in 2015, making it less likely that offshore financial accounts will go unnoticed by the IRS.

In addition to FATCA and reporting through IGAs, the Department of Justice’s Swiss Bank Program continues to reach non-prosecution agreements with Swiss financial institutions that facilitated past non-compliance. As part of these agreements, banks provide information on potential non-compliance by U.S. taxpayers. Potential civil penalties increase substantially if U.S. taxpayers associated with participating banks wait to apply to OVDP to resolve their tax obligations.

OVDP offers taxpayers with undisclosed income from offshore accounts an opportunity to get current with their tax returns and information reporting obligations. The program encourages taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.

Since OVDP began in 2009, there have been more than 54,000 voluntary disclosures by taxpayers with undisclosed foreign bank accounts. The IRS has collected more than $8 billion from this initiative. 

The streamlined procedures, initiated in 2012, were developed to accommodate a wider group of U.S. taxpayers who have unreported foreign financial accounts but whose circumstances substantially differed from those taxpayers for whom the OVDP requirements were designed. More than 30,000 taxpayers have used streamlined procedures to come back into compliance with U.S. tax laws. Two-thirds of these have used the procedures since the IRS expanded the eligibility criteria in June 2014.

What Should You Do?

We encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts. By then, it will be too late to avoid the new higher penalties under the OVDP of 50% percent – nearly double the regular maximum rate of 27.5% and 10 times more than the 5% rate offered in the expanded streamlined procedures.

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or you are in the 2012 Offshore Voluntary Disclosure Initiative (“OVDI”), you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Financial Markets, Covered California, and FATCA Milestones On ESPN Radio – October 16, 2015 Show

Topics Covered:

  1. The Economic Cycle And The Monday Morning Quarterback.
  2. Covered California and what you need to know going into 2016.
  3. Milestones in Foreign Account Tax Compliance Act, also known as FATCA.
  4. Questions from our listeners:

    • What if a taxpayer has already filed amended returns reporting income from foreign assets without entering into the Offshore Voluntary Disclosure Program?

    • In what situation would you take social security at 62 versus 67 or 70?

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Windus states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Licensed Financial Planner, Windus A. Fernandez Brinkkord and my guest host today Sean Greene with Morrison Insurance Services, Inc. Jeffrey is out today, hopefully enjoying some time with the family as we speak

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Windus States, I’m going to fill in for Jeffrey and say:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

For today’s show we have coming up:

Segment 2 material: Covered California and what you need to know going into 2016.

Sean states: Also coming up in Segment 3 is Amy Spivey joining us from The Law Offices of Jeffrey B Kahn, P.C. to talk about: Milestones in Foreign Account Tax Compliance Act, also known as FATCA.

Windus: And of course towards the end of our show, we will be answering some of your questions.

Windus starts chit chat with Sean.

The Economic Cycle And The Monday Morning Quarterback

Last week the show took a pause mostly because both Jeffrey and I were on family vacations. Jeffrey in Florida and my husband and me in Charleston. It was a great five days and it gave me an opportunity to catch up on some reading. Ultimately my job is twofold: I help clients plan for their long term/mid-term/ & short term goals; and then I help them stay the course when things are turbulent. We just experienced an event that makes the second part of my job the most important: A market correction. While on planes traveling I did some reading, and it dawned on me that knowing where you are in an economic cycle is just like being a Monday morning quarterback. Everyone calls it after, few call it before.

A great example of this would be how much I “knew” the Fed would raise rates in September. And then, they didn’t. They ultimately didn’t for a number of factors and one of which was the correction the stock market was in at the time in which they had their meeting. Although they ultimately need to raise rates to give themselves more monetary policy in recessionary times, many believe we have a little more time before that next recession and therefore they still have some room. BUT how much room and how long before the next recession? No crystal balls here but I wanted to touch on a few articles that may be examples of how you can tell where we are in an economic cycle.

Sean, jump in here with questions.

There are four parts to an economic cycle. Understanding that can help to better understand timing of the next possible recession. However, peaks and expansion can last a longer than expected time, so just because we show signs of peak doesn’t mean that a recession is going to start tomorrow!

Here are the four parts: Expansion, peak, contraction, and trough. Pretty simple. To break it down quickly:

  • Expansion is when the markets are growing. You typically see unemployment falling, and increases in pay, more housing “starts”/new construction.
  • Peak is ultimately when this starts to wane a bit, maybe we start to see company’s thin work forces, hire less.
  • Contraction is when manufacturing plummets, layoffs become prevalent.
  • Trough is that time in between when the manufacturing turns around and companies start to hire again.

This is just a simple break down for everyone.

What caught my eye while traveling home from Charleston this week was the front page of the Business & Tech section of the Wall Street Journal on October 14th. There were two articles. One stating that Truckers are seeing BIG increases in pay. The other article talked about how companies are trying the “firm 40” which is saying that they have enough employees to not need more than 40 hours of work from each and that they are focusing on quality of life. Wow. This is a 180 turnaround from 2008. In 2008, companies slashed their work forces squeezing each hour they could get out of each employee in order to try to stay profitable. And in many cases, reducing pay while doing that!

Sean, do you have any memories of what it was like in your industry in 2008?

Sean talks:

I’d like to pause quickly and let you know of an offer for the viewer’s today: Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Sean, I have several clients in different industries and another client made me start to think more about where we are in this cycle. She runs a staffing company. Staffing companies often see the peak coming before others because their businesses slow. Orders for new employees stall a bit. Do you have any companies that you work with that have spoken to you about that?

I’d like to re-visit another interesting aspect of the last two recessions, they started at the beginning of a new presidency. Ultimately at the end of the prior presidency the “tech” bubble started as Bill Clinton was finishing his term and George Bush Jr was starting his term. In fact. the tech bubble started in March of 2000 and George Bush was elected in the fall of that year. Let’s fast forward to the “Great Recession”. This started in December of 2007, President Obama was elected in November of 2008 and sworn in January of 2009. This recession ended in June of 2009, but the aftermath was a long term global recession that kicked off in 2009 and lasted for some time making the recession feel like it was longer then it was in reality. Food for thought, it’s been over 6 years since the last recession and that is longer than the average gap. In most recent history, though, this isn’t the case. The gap between the last few recessions has grown. Between the last 3 recessions the average has been 7.67 years. Kind of putting us in line with our next presidential turn over.

It kind of makes me feel bad for the next President. What do you think Sean?

Ultimately, knowing when the next recession will be would be fantastic, but we don’t get to know until it’s already started. Something that appears to be a correction, can turn into a recession if markers start to turn. What you should be focusing on in your investments is always investing with the correct timeline in mind and the correct risk tolerance in mind. People ask me for options to beat the less than 1% interest they are getting at the bank. If this is short term money and is needed for something on a short time horizon, you have to leave it in the bank. If this is money you don’t need for 3 to 5 years, you may have options, but those options likely won’t have guarantees and just realize that. For retirement money, if you aren’t retiring for 10 or more years, these pull back and recessions provide you with tremendous buying opportunities. These are the moments you should be saving more, and not worrying about the volatility in your principal balance. Working with an advisor during times where your ability to stay the course is challenged is a huge benefit.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Well it’s time for a break but stay tuned because when we come back we are going to talk with Sean about employee benefits, covered California and all the changes in regulation that are staying for the long term!

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Licensed Financial Planner, Windus A. Fernandez Brinkkord and my guest host today Sean Greene with James Morrison Insurance Services, Inc. Jeffrey Kahn is out today, hopefully enjoying some time with the family as we speak.

Sean, thank you again for being here to co-host. Sean has a treat for us today, he is going to help us sort through some of the health insurance regulation for the state of California. Sean, you told me this has been a big week for health insurance. Why don’t you start by sharing what happened? Sean doesn’t just help companies with benefits but is also Vice President of political action committee of our local chapter of the association of health underwriting.

Sean, why don’t you tell us more about this association and then we’ll jump into the bills from this week.

Covered California and what you need to know going into 2016.

A few major bills:

  1. Federally the PACE act has been passed.  This allows for the small group expansion to 100 employees to become a choice by each state.  Because California already passed in to law the expansion last year we will be staying with the small group definition of 2-99 employees at least thru 2016. 
  1. On a state basis: Senate Bill 137- Carriers must update their online directories on a quarterly basis at minimum. AB 248- Large employers must provide plans with at least 60% actuarial value

General California group insurance news: 100,000 small businesses are renewing their coverage on December 1st. Last year one third of the amount of business moved and the carriers were still installing December business in mid-January

Companies on smartcare plans are seeing renewals of 40+ %.  Best solution for these businesses are Sharp and Calchoice

Healthnet has best rates for PPO

Blue Shield has 2nd best and most consistent PPO rates

United Healthcare for companies offering HMO/PPO Options

According to Kaiser Family Foundation more than half of the still un-insured Californians qualify for either medical or subsidies thru the Affordable Care Act

3.85 Million Uninsured Residents in California.  37% or 1.4 million would qualify for medical.  16% or 623,000 are eligible for subsidies

Love it or hate it- Covered California is doing a great job of pinpointing pockets of uninsured and trying to connect with them

Individual open enrollment begins in November for January 1st effective dates.  This is the one time of year (outside of qualifying events) that individuals can purchase or change their Health Insurance

Well it’s time for a break but stay tuned because when we come back we have Amy Spivey calling in to discuss Key Milestones in FATCA Implementation. If you have undisclosed foreign bank accounts you will not want to miss this.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Licensed Financial Planner, Windus A. Fernandez Brinkkord. Jeffrey Kahn is off today so with me as my guest host today is Sean Greene with Morrison Insurance Services, Inc.

Calling into the studio from my Walnut Creek Office is Jeffrey Kahn’s associate attorney, Amy Spivey.

IRS Announces Key Milestone in FATCA Implementation; U.S. Begins Reciprocal Automatic Exchange of Tax Information under Intergovernmental Agreements

Windus states: The Internal Revenue Service announced on October 2, 2015 the exchange of financial account information with certain foreign tax administrations, meeting a key September 30th milestone related to FATCA, the Foreign Account Tax Compliance Act.

Amy states: This information exchange is part of the IRS’s overall efforts to implement FATCA, enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts or foreign entities. FATCA generally requires withholding agents to withhold on certain payments made to foreign financial institutions (FFIs) unless such FFIs agree to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

Amy continues: To achieve this, the IRS successfully and timely developed the information system infrastructure, procedures, and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the intergovernmental agreements (IGAs) implementing FATCA.

Windus asks: Amy, what is the reason behind the Federal government enacting FATCA into law?

Amy replies: Well for a long time the IRS felt that U.S. taxpayers were keeping money abroad to evade paying U.S. taxes. There are also many U.S. taxpayers who are still not aware that when they file their U.S. income tax returns, they must report their worldwide income. So by enacting FATCA, foreign banks would eventually be reporting the same level of financial information as domestic banks already do to the IRS which the IRS can then use to verify compliance of U.S. taxpayers in reporting their worldwide income on their U.S. income tax returns. IRS Commissioner John Koskinen has even said that “meeting the September 30th deadline is a major milestone in IRS efforts to combat offshore tax evasion through FATCA and the intergovernmental agreements and that FATCA is an important tool against offshore tax evasion.”

Windus: I understand that a lot of foreign countries are also looking to benefit from the enactment of FATCA by in facilitating and participating in the exchange of financial account information so they can enforce their own tax laws on their citizens who may be evading that country’s tax laws.

Amy replies: That’s right. The U.S. government has entered into a number of bilateral IGAs that set the groundwork for cooperation between the jurisdictions in this area. Certain IGAs not only enable the IRS to receive this information from FFIs, but enable more efficient exchange by allowing a foreign jurisdiction tax administration to gather the specified information and provide it to the IRS. And some IGAs also require the IRS to reciprocally exchange certain information about accounts maintained by residents of foreign jurisdictions in U.S. financial institutions with their jurisdictions’ tax authorities. Under these reciprocal IGAs, the first exchange of information had to take place by September 30, 2015.

Windus states: It should be apparent that the risks of hiding money offshore are growing and the potential rewards are shrinking which is why if you have undisclosed foreign account or other tax issues, why do not even have anything to do with foreign accounts, you need to contact … The Law Offices Of Jeffrey B. Kahn as they will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. The number to call to make an appointment to meet with Jeffrey Kahn right here in downtown San Diego or at one of his other offices close to you is 866.494.6829. That is 866.494.6829.

Windus asks: So Amy what should one do if they have undisclosed foreign bank accounts and unreported foreign income?

Amy replies: You should see tax counsel as soon as possible. The tax law imposes penalties as high as $100,000 or 50% of the principal value of your foreign accounts per violation and you can be incarcerated for as long as 5 years if convicted by a Federal court. Since 2009, U.S. taxpayers have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP), which is open until otherwise announced.

Windus states: That is some serious punishment. Amy, what different programs are available to U.S. taxpayers?

Amy replies: The two main options are:

  1. Offshore Voluntary Disclosure Program; and
  2. Streamlined Filing Compliance Procedures.

Amy continues: The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets.  OVDP is designed to provide to taxpayers with such exposure (1) protection from criminal liability and (2) terms for resolving their civil tax and penalty obligations.

Amy continues: OVDP requires that taxpayers go back as far as eight years in amending income tax returns to report foreign source income and disclose foreign bank accounts. The taxpayers would include with their submission of these tax filings the payment of the back taxes, interest each year on the unpaid tax and a 20% accuracy-related penalty which is applied against the unpaid tax. In addition, the taxpayers would include payment of what we call the “OVDP penalty” which is 27.5% of the highest balance of the foreign bank account in the past eight years. The IRS in return will not pursue charges of criminal tax evasion which would have resulted in jail time or a felony on your record and the IRS will not pursue impose the other multitude of penalties the tax law otherwise provides.

Windus asks: What about the other option you mentioned of Streamlined Filing Compliance Procedures?

Amy replies: The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.  The key factor to be eligible for the streamlined procedures is that a taxpayer must show that he is non-willful in failing to report worldwide income and disclose foreign accounts.

Windus asks: If the streamlined procedures require a taxpayer to prove he was non-willful in failing to report the foreign account and foreign income and the regular OVDP does not, why would it still be beneficial to pursue the streamlined procedures?

Amy replies: Well for one thing that penalty is a lot lower. Recall that under regular OVDP the penalty is 27.5% penalty based upon the highest balance of the account in the past eight years. Beginning August 4, 2014, this rate increases to 50% for U.S. accountholders of certain foreign banks. Under the streamlined procedures the penalty is 5% of the highest balance of the account in the past six years and if you are a foreign person, that penalty can be waived under the streamlined procedures.

Windus states: So it appears that for the streamlined procedures, the effort that you must place the most emphasis on to have a successful result is not so much in the preparation of the amended tax returns but showing that a taxpayer is non-willful.

Amy replies: That is correct. Many people think just by stating to the IRS that they did not know the law requires that you must report foreign income on your U.S. income tax return and disclose foreign accounts on an FBAR will satisfy this non-willful standard. There is a lot more than that to meet this standard. In fact we have identified over 50 factors that we cover with our clients which we then address in the non-willful statements that get included with the packages submitted to IRS. A comprehensive non-willful statement is the key to a successful submission.

Windus states: This is a great opportunity to come into compliance and is no longer available to you if the IRS has found you first so contact… The Law Offices Of Jeffrey B. Kahn as they will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. The number to call to make an appointment to meet with Jeffrey Kahn right here in downtown San Diego or at one of his other offices close to you is 866.494.6829. That is 866.494.6829.

Hey Amy please stay on the phone with us for our questions to answer in segment 4 and Sean gets the honor of reading them!

Stay tuned. You are listening to Licensed Financial Planner, Windus A. Fernandez Brinkkord & Sean Greene, employee benefits broker and Amy Spivey with the Law Offices Of Jeffrey B. Kahn, P.C. on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Licensed Financial Planner, Windus A. Fernandez Brinkkord. Jeffrey Kahn is off today so with me is my guest co-host Sean Greene with Morrison Insurance Services.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

You should also know that the securities and advisory services are offered through National Planning Corporation.(NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Windus states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

Sean, please do the honors of asking the questions today:

Question 1: What if a taxpayer has already filed amended returns reporting income from foreign assets without entering into the Offshore Voluntary Disclosure Program?

Windus: Amy, this is obviously a question for you, I’ll let you take it away.

Amy replies: When a taxpayer bypasses the Offshore Voluntary Disclosure Program and instead files the delinquent FBAR’s and amends income tax returns to include foreign income, that we call is a “quiet disclosure”.

Amy continues: The IRS is aware that some taxpayers have made “quiet disclosures” by filing amended returns, by filing delinquent FBARs, and paying any related tax and interest for previously unreported income from foreign assets without otherwise notifying the IRS. Because of this the IRS has put procedures in place whereby its computers can detect these filings and now open up examinations or investigations against these taxpayers. Our firm has already seen this happen.

Amy continues: That is why taxpayers who have already made “quiet disclosures” are encouraged to participate in OVDP by submitting an application, along with copies of their previously filed returns (original and amended), and all other required documents and information to the IRS’s Voluntary Disclosure Unit. By doing this taxpayers are protected from criminal prosecution and obtain the favorable penalty structure offered under OVDP. Unlike a voluntary disclosure through OVDP, quiet disclosures provide no protection from criminal prosecution and may lead to civil examination and the imposition of all applicable penalties. And remember, once the IRS starts an examination or investigation, it is too late to enter into OVDP.

Windus states: Clearly the landscape has changed for those with foreign accounts which we why you need to contact …The Law Offices Of Jeffrey B. Kahn as they will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. The number to call to make an appointment to meet with Jeffrey Kahn right here in downtown San Diego or at one of his other offices close to you is 866.494.6829. That is 866.494.6829.

Sean asks Question 2: In what situation would you take social security at 62 versus 67 or 70?

Windus: I love this question. I go over this with clients in all different situations. Just to tie this into our first segment, this is very much a Monday morning quarterback issue. Unless you can tell me definitively when you are going to die, we wouldn’t know for sure. There is certainly guidance I can give you though. In many cases if you are married, you can be creative and wait until full retirement age, opt to take your spousal benefit and the switch to your benefit at 70. Social security grows at an 8% growth rate from your normal retirement age until 70. I’ve had clients tell me that they aren’t going to live a day past 80. If that is the case, taking it at 62 will likely earn more money. There is great software that helps us navigate this. It allows us to take in to consideration if you aren’t married now but have been for more than 10 years and we can take a look at the spousal versus your own benefit. If you are going to live until 100 we can tell you how much more you’d earn if you were to take it early versus wait. In some cases, waiting earns you $100,000 over the course of your life. If that was the case, why would you wait? This question is really about being armed with the knowledge on how to navigate the system and we have some great tools for that.

Windus states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Windus states: Sean, thank you for joining us, hope to have you back again. Amy, thank you for calling in! Have a great weekend everyone.

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Trump Tax Plan and New IRS Developments Detecting Non-compliant Taxpayers With Foreign Bank Accounts On ESPN Radio – October 2, 2015 Show

Topics Covered:

  1. Donald Trump’s Tax Plan.
  2. How Some Investors Get Special Access to Companies
  3. Beware if you have undisclosed foreign bank accounts and unreported foreign income – U.S. Signs Competent Authority Arrangements with Australia and the United Kingdom
  4. Questions from our listeners:
  • What if I haven’t invested enough for retirement?

  • What’s the difference between an exemption, credit and deduction?

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Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

Windus states:

And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Jeff states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states:

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states:

For today’s show we have coming up:

Segment 2 material: How Some Investors Get Special Access to Companies.

Windus states:

Also coming up is:

Segment 3 material: How two important tax agreements that have been signed by the U.S. and the countries of the United Kingdom and Australia could impact you if you have undisclosed foreign bank accounts and unreported foreign income.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

Donald Trump’s Tax Plan.

Jeff states: For today’s top story we are going to round two of the presidential candidate tax plans to discuss Donald Trump’s tax plan just unveiled. You should recall that in a previous show we talked about Jeb Bush’s tax plan.

Windus states: Yahoo Finance on September 29, 2015 performed a “fact check” on Trump’s proposed tax plan and concluded that his numbers just do not add up. http://news.yahoo.com/fact-check-math-trumps-tax-plan-doesnt-always-081901786–finance.html

Jeff states: It’s true. I looked at his plan and also have my reservations about it. So Windus as we did with Jeb Bush let’s break down Trump’s tax plan for our listeners.

Windus states: Trump boldly stated that his tax plan “reduces or eliminates most of the deductions and loopholes available to special interests and to the very rich. In other words, it’s going to cost me a fortune.”

Jeff replies: Now I agree with the article that only Trump and his accountant can be sure Trump’s plan will cost him a fortune since he doesn’t specify which deductions and loopholes he plans to eliminate and has yet to release any of his tax returns.

Windus states: Well regarding his tax returns maybe he will offer the press to view them like his companies’ payroll compensation registers to show that he is gender-neutral when it comes to paying his employees.

Jeff states: Need I remind you though that Trump would first require you to sign a Confidentiality Agreement that also limits what you can state after reviewing any of his personal or business information.

Windus states: Well we do know that an income statement he released alongside his personal financial disclosure report this past summer reported his 2014 income as $362 million.

Jeff states: Now under the Trump tax plan, Trump would reduce the number of tax brackets from the current seven to four: 0 percent, 10 percent, 20 percent and 25 percent. While such a change would reduce taxes for middle-income earners, the “most other Americans” who would benefit the most would be those who make enough to fall into the current top tax bracket and pay 39.6 percent on income above $413,000. So how can Trump say his plan will cost him a fortune when under his plan Trump would pay 25 percent, instead of the current 39.6 percent, on any income above $300,000.

Windus states: I think Trump may have mis-spoke because the way you describe it, he would be making a fortune under his tax plan.

Jeff states: But he does not stop with income taxes, Trump is also looking to eliminate estate taxes. His proposal to eliminate the 40 percent tax on inheritances of more than $5.4 million would allow him to pass his estate to heirs tax-free, a savings worth billions given his self-estimated net worth of more than $10 billion.

Windus: So under the Trump tax plan he is going to save taxes while he is living and then pass on his wealth when he dies tax free to his family.

Jeff states: That’s right and let’s not forget about his businesses. In his tax plan he proposes cutting 10 percentage points from the current corporate tax rate of 35 percent. That would result in the Trump Organization and its subsidiaries to pay even less in taxes assuming they don’t already use tax strategies to reduce their effective rate below 15 percent.

Windus states: Now I read Trump’s tax proposal and his claim that the reduction in tax rates would provide major tax relief for middle income, and for most other Americans.

Jeff states: And I do agree with the article that Trump’s tax plan will undoubtedly reduce the amount Americans pay in income taxes. Trump’s tax plan goes on as far to provide that single people making less than $25,000 and married couples earning less than $50,000 a year would not have to pay any federal income taxes (keep in mind that they would still have to pay social security/Medicare taxes which Trump does not mention). He also keeps the Earned Income Tax Credit, a benefit low-income Americans can claim even if they pay no taxes under the current system.

Windus states: All of those tax cuts over a decade would cost nearly $12 trillion as estimated by the Tax Foundation, an organization which advocates for lower tax rates.

Jeff states: But Trump is no different from any other presidential candidate’s tax plan in the plan fails on how these tax cuts are to be funded. And as President he would have to follow the same standard as prior Presidents and Congress must follow whereby any tax reductions are offset by new tax revenues so that the legislation is “revenue neutral”. No politician is against tax cuts but there is a lack of consensus on how to fund them.

Windus: So can Trump really back up his claim that “And all of this does not add to our debt or our deficit.”

Jeff states: I don’t think so. Trump proposes making up some of the lost revenue by eliminating some deductions. But he’s ruled out a couple of the biggest ones, for home mortgage interest and charitable gifts, which are worth more than $120 billion a year. So how do you make up for the lost revenues from these tax cuts? Should we eliminate deductions for state and local taxes (you know Californians will not like that!). Perhaps we should begin fully taxing social security and retirement savings.

Windus states: So what about Trump’s statement that “We are reducing taxes, but at the same time if I win, if I become president, we will be able to cut so much money and have a better country.”

Jeff states: I remember hearing that argument when Ronald Regan announced how supply-side economics would save the economy. The Tax Foundation who said that Trump’s tax plan with a $12 trillion estimated cost over the next decade could come down to $10 trillion when the economic growth the cuts may spur is taken into account. So to get Trump’s tax plan to be revenue neutral, something still needs to be put in place to offset the cost of the tax cuts.

Windus states: Well he did say that “we won’t be losing anything other than we will be balancing budgets and getting them where they should be”.

Jeff states: But even if Trump’s tax plan wound up being revenue neutral, it wouldn’t bring in enough money to balance the budget. At the end of the current fiscal year on Wednesday, the Congressional Budget Office projects the deficit will be $426 billion. The Government Accountability Office has estimated all improper or insufficiently documented payments made by the federal government in 2014 to be $124 billion. Where do you fund the difference? So Mr. Trump it’s time to go back to the drawing board.

Well it’s time for a break but stay tuned because we are going to tell you How Some Investors Get Special Access to Companies.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

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Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Jeff states: Now Windus has a special offer for our listeners:

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

How Some Investors Get Special Access to Companies

Jeff states: Windus an article in the September 27th Wall Street Journal caught your attention. http://on.wsj.com/1YJdY7T

Windus discusses article. Jeff to comment.

Points to cover:

Investors gain special access to company top management, when they invest a specific dollar amount. 

I see plugs or one-line comments regarding how Wall Street isn’t as transparent as we like to think or that it isn’t as fair as we like to think.

An example stated in the article is that of Proctor & Gamble. Investors paid upwards of $1.4 Billion to gain access to top management in 2014. 

Many companies have private closed door meetings with specific investors/money managers. 

According to the article another company that uses this practice is General Electric.

Now many companies state they do this to help gain investor support, which is good for the stock and in turn, good for other investors.  BUT it isn’t always good.

For example, people in on these meetings with P&G earlier this year could have learned from the body language of the CEO that he was going to step down. By July he had resigned.  This could have definitely given an unfair advantage to those individuals in those meetings.

Specific companies choose to not hold meetings like this.  One example cited in this article is Morningstar, Inc.   Morningstar, Inc. stated for the purposes of this article that they believe this gives a certain section of investors an unfair advantage.  How could anyone really disagree with this statement?

A great example of companies giving an advantage was Bebe Stores Inc. when they inadvertently disclosed performance a day before it was release publicly.

Many companies hold quarterly investor meetings that people can call into.  In the case of P&G, the CEO stopped attending and commenting in this meeting.  Maybe these are the only places that investors should have access to company management.

Some companies even do road shows to gain access to investors and this is likely the best forum for a CEO to meet with investors instead of behind closed doors to people who pay for the right.  In my opinion, it likely takes very little for an investor to ascertain in a one on one meeting that can be a trading advantage.  Body language is important and very significant. 

The article goes on to identify studies where it tracked investors in specific companies without naming which companies, and those that had face time with management, made better investment decisions pertaining to those companies.  Even noting that trading volume was impacted around the time of these private meetings, as Brian Bushee of the Univ of Penn Wharton School of business noted.

There is another great example about when a CEO doesn’t comment on something in a private meeting, like breakfast with the CEO of JC Penny and the stock slumps because of his body language.  This hurts average investors.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Stay tuned because after the break we are going to tell you two important tax agreements that have been signed by the U.S. and the countries of the United Kingdom and Australia that could impact you if you have undisclosed foreign bank accounts and unreported foreign income.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

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Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

U.S. Signs Competent Authority Arrangements with Australia and the United Kingdom 

The IRS announced on September 24, 2015 that the United States has signed Competent Authority Arrangements (CAA) with two countries that the U.S. previously had intergovernmental agreements (IGAs).  The CAAs were signed with the Competent Authorities of Australia and the United Kingdom to Improve International Tax Compliance and to Implement FATCA.

For those of you who do not FATCA it stands for the Foreign Account Tax Compliance Act. Enacted in 2010 by Congress, since 2014 it has been in full force requiring foreign banks to disclose information on their U.S. accountholders to the IRS.

Jeff asks: Amy what is the significance of these CAA’s?

Amy replies: The CAAs with Australia and the United Kingdom are the first such arrangements to be signed. The U.S. expects that numerous other CAAs with additional competent authorities in IGA jurisdictions will be signed in the near future. IRS Commissioner John Koskinen stated that “The signing of these Competent Authority Arrangements marks another significant milestone in the international effort to gain proper reporting of offshore accounts and income.” He goes on to say that “Together in partnership with other tax authorities, we are demonstrating how far we have come in the fight against offshore tax evasion.”

Windus asks: You mentioned that the U.S. already has IGA’s with the U.K. and Australia. Before you explain how the CAA’s are better to the U.S. than IGA’s, please tell us what are IGA’s.

Amy replies: The IGA which again stands for intergovernmental agreement was developed by the IRS in consultation with the revenue authorities of France, Germany, Italy, Spain, and the United Kingdom to implement the information reporting and withholding tax provisions under FATCA. A list of all the intergovernmental agreements that are in effect are listed by the government on the internet. [Click here]. Financial institutions and host country tax authorities will use the International Data Exchange Service (IDES) as the secure electronic data transmission system to transmit and exchange FATCA data with the United States to target non-compliance by U.S. taxpayers using foreign accounts.

Windus asks: I understand that there are two versions of the IGA’s.

Amy replies: Yes. Under Intergovernmental Agreement Model 1, Foreign Financial Institutions (FFI’s) will be able to report information on U.S. account holders directly to their national tax authorities, who in turn will report to the IRS.

Under Intergovernmental Agreement Model 2 financial institutions will report information directly to the IRS rather than their local jurisdictions. Model 2 IGA was designed to address potential conflicts of national and local laws in countries like Switzerland and Japan that would make it difficult for FFI’s to comply with FATCA.

Either IGA still results in information on U.S. accountholders of foreign accounts to be eventually transmitted to the IRS so for U.S. taxpayers the version of the IGA that applies to the foreign country is not relevant.

Jeff asks: So what is the benefit of entering into a CAA?

Amy replies: A Competent Authority Agreement (CAA) is a bilateral agreement between the United States and the treaty partner to clarify or interpret tax treaty provisions. These agreements are more powerful and authoritative because they are made under a delegation of power to the Treasury Department that is built into the tax treaty that was signed off by the U.S. and the foreign country and ratified by the Senate. It also benefits the foreign country because that country will now also receive information on its citizens directly from IRS so that country can better enforce its own tax laws.

Jeff states: Clearly the landscape is changing where no longer can people hide assets in foreign accounts to avoid taxes which is why you need to contact … The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff asks: So Amy what should one do if they have undisclosed foreign bank accounts and unreported foreign income?

Amy replies: You should see tax counsel as soon as possible. The IRS has special programs in place that allow non-compliant taxpayers to come forward and avoid criminal prosecution and be subject to a lower amount of penalties. The tax law imposes penalties as high as $100,000 or 50% of the principal value of your foreign accounts per violation and you can be incarcerated for as long as 5 years if convicted by a Federal court.

Windus states: That is some serious punishment. Amy, what different programs are available to U.S. taxpayers?

Amy replies: The two main options are:

  1. Offshore Voluntary Disclosure Program; and
  2. Streamlined Filing Compliance Procedures.

The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets.  OVDP is designed to provide to taxpayers with such exposure (1) protection from criminal liability and (2) terms for resolving their civil tax and penalty obligations.

OVDP requires that taxpayers:

  • File 8 years of back tax returns reflecting unreported foreign source income;
  • File 8 years of back FBAR’s reporting the foreign financial accounts;
  • Calculate interest each year on unpaid tax;
  • Apply a 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651; and
  • Apply up to a 27.5% penalty based upon the highest balance of the account in the past eight years. Beginning August 4, 2014, this rate increases to 50% for U.S. accountholders of certain foreign banks.

In return for entering the offshore voluntary disclosure program, the IRS has agreed not to pursue:

  • Charges of criminal tax evasion which would have resulted in jail time or a felony on your record; and
  • Other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a FinCEN 114, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance).

Jeff asks: What about the other option you mentioned of Streamlined Filing Compliance Procedures?

Amy replies: The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.  The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations.

  • Taxpayers will be required to certify that the failure to report all income, pay all tax, and submit all required information returns, including FBARs (FinCEN Form 114), was due to non-willful conduct.
  • If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures.   Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.
  • Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the OVDP or its predecessor programs) may still use the streamlined procedures.  

Windus asks: If the streamlined procedures requires a taxpayer to prove he was non-willful in failing to report the foreign account and foreign income and the regular OVDP does not, why would it still be beneficial to pursue the streamlined procedures?

Amy replies: Well for one thing that penalty is a lot lower. Recall that under regular OVDP the penalty is 27.5% penalty based upon the highest balance of the account in the past eight years. Beginning August 4, 2014, this rate increases to 50% for U.S. accountholders of certain foreign banks. Under the streamlined procedures the penalty is 5% of the highest balance of the account in the past six years and if you are a foreign person, that penalty can be waived under the streamlined procedures.

Jeff states: This is a great opportunity to come into compliance and is no longer available to you if the IRS has found you first so contact… The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

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Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

You should also know that the securities and advisory services are offered through National Planning Corporation.(NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Windus, what questions have you pulled for us to answer?

Steve from Irvine asks: What if I haven’t invested enough for retirement?

Windus responds: Here are some strategies to help build up your assets prior to or during retirement:

  • Delay retirement until you are 65 or older. If you could use a few more years to invest, it may be worth thinking about staying in your current job or starting a second career.
  • Work part time in retirement. Bringing in extra income may keep you from using up your retirement savings too early. Nearly one-quarter of adults 65 to 74 years old are in the work force.
  • Reduce your spending during market declines. By cutting expenses in a down market, you can significantly lessen the financial impact on your portfolio. Retirees who move everything from stock investments to bond and money market investments risk missing out on the potential gains generated by stocks once they recover.
  • Contribute as much as possible to your retirement plan. If you are 50 or older, you may be able to make catch-up contributions that set aside additional funds in your retirement accounts. If possible, try not to borrow or make a large withdrawal from your retirement plan.

Bill from San Diego asks: What’s the difference between an exemption, credit and deduction?

Jeff replies: Exemptions and deductions work the same way. They reduce your taxable income, which lowers your tax bill. For example, if you take a $1,000.00 deduction, and you’re in the 20% tax bracket, you could save $200.00 on your taxes. Or if you get a $4,000.00 exemption, that amounts to an $800.00 savings in taxes.

The difference between exemptions and deductions lies in what you get and take them for.  Every deduction you claim must be something permitted under the tax law and there are substantiation requirements that you must meet if the IRS were to question these deductions. But exemptions are what you get for people in your family. You get one for being you, one for a spouse, one for each child and one for any other dependents.

Credits work differently. They’re a straight-up discount on your tax bill. So if you get a $1,000.00 credit, you pay $1,000.00 less in taxes.

Some people will go to extremes to accumulate tax deductions thinking they are saving more money when in fact they have less money in their pocket. For example, you decide to make a charitable contribution of $1,000.00. To claim the deduction you have to pay $1,000.00 to the charity. So you are now out of pocket by $1,000.00. Now you will end up saving $200.00 in taxes using our example of a 20% tax bracket so really your net out-of-pocket is $800.00. However, if you never made that charitable contribution, you have the $1,000.00 still in your pocket but will owe $200.00 in tax as you will not be claiming this deduction. Comparing the two alternatives, by not making the charitable contribution you are ahead by $600.00!

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Windus states: Have a great day everyone!

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Finance and the Federal Reserve, IRS Administration Of The Streamlined Procedures for Undisclosed Foreign Bank Accounts and Taxes On ESPN Radio – September 18, 2015 Show

Topics Covered:

  1. So the Federal Reserve made its decision yesterday to hold rates steady
  2. Have ETFs Reached A Breaking Point?
  3. How the new Streamlined Procedures for taxpayers reporting undisclosed foreign bank accounts are being administered by the IRS.
  4. Questions from our listeners:
  • I am a U.S. citizen living and working outside of the United States for many years. Do I still need to file a U.S. tax return?
  • I pay income tax in a foreign country. Do I still have to file a U.S. income tax return even though I do not live in the United States?
  • I am a U.S. citizen married to a nonresident alien. What is my filing status and can I claim an exemption for my foreign spouse?

******************************************************************

Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

Windus states: And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services. You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Jeff states: When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states: And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states: Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states: For today’s show we have coming up:

Segment 2 material: Have ETFs Reached A Breaking Point?

Windus states: Also coming up is:

Segment 3 material: How the new Streamlined Procedures for taxpayers reporting undisclosed foreign bank accounts are being administered by the IRS.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

Jeff states: So for today’s top story:

So the Fed made its decision yesterday to hold rates steady

This was breaking news reported on September 17th and of course all the news media picked to up. We looked at an article posted in Yahoo Finance on September 17th http://finance.yahoo.com/news/looming-fed-rate-decision-test-050656810.html

Jeff continues: So in case you have not heard this yet, the U.S. Federal Reserve in its September meeting voted to keep interest rates unchanged given their concerns about the global economy, financial market volatility and sluggish inflation at home, but left open the possibility of a modest policy tightening later this year.

Windus states: Fed Chair Janet Yellen said in a press conference that developments in a tightly linked global economy had in effect forced the U.S. central bank’s hand.

Windus states: The U.S. economy has been performing well enough to perhaps justify a rate hike “and we expect it to continue to do so,” Yellen said shortly after the Fed’s policy-setting committee released its latest statement following a two-day meeting.

Windus states: But Yellen added that “the outlook abroad appears to have become less certain,” driving down U.S. equity prices, pushing up the dollar, and tightening financial conditions in a way that may slow U.S. growth regardless of what the Fed does.

Windus states: “In light of the heightened uncertainty abroad … the committee judged it appropriate to wait,” Yellen said. “Given the significant economic and financial interconnections between the U.S. and the rest of the world, the situation abroad bears close watching.”

Jeff states: Now we have been hearing for a long time from Ms. Yellen that the decisions of the Fed are still be “data-dependent”. Windus, in making this decision to hold rates steady, is the Fed marching to a different beat?

Windus replies: I do not think so but it should be clear that international events and how they impact global markets are a variable for the Feds to consider.

Jeff asks: What about the concept that the U.S. economy is so large that even with a slow-down abroad, the U.S. economy could still be strong and weather through such a storm?

Windus replies.

Jeff asks: So getting back to the Fed’s decision, is there any future guidance we can pull from this?

Windus replies: The Fed still maintains its bias towards a rate hike sometime this year, while lowering its long-term outlook for the economy. The Fed still has two more meetings this year – one in October and one in December. Fresh economic projections showed 13 of 17 Fed policymakers foresee raising rates at least once in 2015, down from 15 at the last meeting in June. Four policymakers now say rates should not be raised until at least 2016, compared to two who felt that way in June.

Jeff asks: I always hear terms describing Fed officials as being doves or hawks. Can you explain the difference to our listeners?

Windus replies:

Jeff states: Now the Fed does make projections of GDP growth, unemployment and inflation and considers the projected movements in making rate change decisions. Windus, what are some of the projections that the Fed has communicated to the public that this article mentions?

Windus replies: Taken as a whole, the latest Fed projections of slower GDP growth, low unemployment and continuing low inflation suggest that concerns of a so-called secular stagnation may be taking root among policymakers. One policymaker even suggested a negative federal funds rate.

Windus states: The median projection of the 17 policymakers showed the Fed expects the economy to grow 2.1% this year, slightly faster than previously thought. However, its forecasts for GDP growth in 2016 and 2017 were downgraded.

Windus states: The Fed also forecasted that inflation would creep only slowly toward its 2% target even as unemployment dips lower than previously expected. It sees the unemployment rate hitting 4.8% next year and remaining at that level for as long as three years.

Windus states: Considering the foregoing, the Fed’s projected interest rate path shifted downward, with the long-run federal funds rate now seen at 3.5%, compared to 3.75% at the last policy meeting.

Jeff asks: So do you think that the Fed is being more dovish or hawkish now that growth projections revised down?

Windus replies: Despite the possibility that we could enter into some period of stagnation, I agree with the consensus that in the absence of any serious derailing of the economy, there will be some increase in rates before the year is out. Remember that we still have two Fed meetings to go before year’s end.

Jeff states: So it looks like the saga will continue into the 4th quarter of 2015 and for now the status quo continues.

Well it’s time for a break but stay tuned because we are going to tell you about the new concerns over ETF’s.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

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Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Jeff states: Windus is calling into the studio as she is out on assignment and so in this next segment we want to talk about ETF’s.

Have ETFs Reached A Breaking Point?

Jeff states: A September 13, 2015 article in the Wall Street Journal caught your attention Windus. http://on.wsj.com/1QyPjgM

Jeff states: And in this article it reports how fund managers such as Black Rock, Inc. are trying to figure out what went wrong as the extreme stock-market gyrations in August exposed cracks in the business of exchange-traded funds.

Windus states: Which is one of the reasons why I thought we could talk a bit about the difference between a mutual fund and an ETF and when or why you’d chose to use one over the other.

Jeff asks: So first describe what is a mutual fund?

Windus replies: A mutual fund is a pooling of investors dollars towards a common objective.  Like growth, or income, etc. 
Windus states: This investment instrument can be either all stocks, all bonds, or a blend.  It can even have currencies in them and what have you.

Windus states: Mutual funds were originally created as a means to allow investors to invest with less risk because they were able to diversify with the purchase of one share, but also with a lower minimum.  With a mutual fund, you can typical start investing for as little as $50 a month.  Instead of trying to figure out how to buy one stock at a time, you have access to many with a small amount monthly.  Another great aspect of a mutual fund is the ability to always sell.  With a stock you technically have to reach out to the open market to find a buyer, with a mutual fund, you simply hit the redeem button.  Only in rare occasions will redemptions be stopped, or paused for a period of time.  Mutual funds are actively managed by a portfolio manager and typically a team of analysts.  Some have multiple portfolio managers.

Windus states: Another aspect of a mutual fund is that they settle in what we call “end of day” meaning that no matter when you sell during the day, the sale price will be reflective of the end of the market day not the time in which you imputed your sell order.  Now we are starting to talk about the differences of a mutual fund and an ETF.  Mutual funds sometimes get bad raps in markets where an index would have outperformed it.  What we need to realize is there are going to be rolling periods in the market when an index would have outpaced the mutual fund, and vice versa, and that you are ultimately buying the mutual fund instead because you believe in the manager’s ability to navigate the markets over time better than a straight index would. 

Jeff asks: so what is an EFT?

Windus replies: ETF’s are Exchange Traded Funds.  Like mutual funds, they can be a blend of both stocks bonds, or one or the other or even currencies, etc.  BUT unlike a mutual fund, and ETF is not necessarily actively managed.  ETF’s are commonly passively managed, meaning that they are periodically reset or reviewed by a manager but not daily reviewed or managed like a mutual fund.  Actively managed ETF’s have some about in current time and may gain traction but the benefit of the ETF is the lower fees, which wouldn’t be the case if they were to become managed the same way a mutual ultimately is.  Another interesting aspect of an ETF, which is the cause of some recent issues, is that you can redeem it the same way you redeem a stock.  If it is 9:02am and I enter the order to sell, the price I am given at that time is my settlement price, not the end of day price like it is with a mutual fund. 

Jeff states, before we go on Windus has a special offer for our listeners.

Windus states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Windus states: You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.
Jeff states: Windus now that you have done a brilliant job in explaining mutual funds and ETF’s, tell us about what the Wall Street Journal article reported that really put ETF’s to the test. 

Windus states: As the Wall Street Journal article on September 14th highlighted, at 9:42am on August 24th one specific ETF tumbled 35% to its lowest level of the day, this is right when the markets were about to open with a 1000 point drop in the DOW.  At that time the combined weighted values of the stocks the ETF held was $72.42, just down 2.7% for the day.  How can the ETF sale price be $48.00 when the real value would be $72.42?  Assets in the ETF market have grown to roughly $2 trillion up from $305 billion a decade ago.  The volume of ETF’s being trades are up 14.9% compared to a decade ago.  Real time valuing an asset that holds multiple positions is a real challenge and apparently discrepancies can be found when trading volatility picks up. 

Windus continues: This isn’t the first time we’ve seen this, another instance was reported in 2012 as well.  As more and more investors connect to the markets on a daily basis more readily, this instant “valuation” of products that have so many positions may come under further pressure.  It has also yet to be seen how a bond ETF can actually handle money rapidly flowing out of it, and that time will come one day as well.  Mutual funds experience similar pressure but because they are not as instantly traded and because you often pay to be there, people are more cautious on getting out as they are when you can click a button and get out that second. 

Jeff asks: It seems that if people and get in and out of investments quickly by going online, I would think that more of these transactions are being made without much thought people are making bad decisions. Windus what do you think?

Windus responds.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Well Windus I know that you have to head off but I am glad that you were able to stay on for the first half of the show.

Windus signs off.

Jeff states: Stay tuned because after the break we are going to tell you how the new Streamlined Procedures for taxpayers reporting undisclosed foreign bank accounts are being administered by the IRS.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus is on assignment today so calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

Streamlined Filing Compliance Procedures

PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: For someone with undisclosed foreign bank accounts and unreported foreign income who does not come forward and the IRS instead finds them, they are be looking a huge penalties. The penalties for noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes. The criminal penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonment of not more than five years, for failure to file a report, supply information, and for filing a false or fraudulent report. As for the civil penalties they include a penalty equal to 50% of the principal in the undisclosed foreign bank accounts.

Jeff continues: We have been putting the word out for quite some time that if you have unreported foreign income and undisclosed foreign bank accounts, there are special programs in place with the IRS that you can avoid criminal prosecution and get a reduction in penalties that would otherwise be charged by the IRS. One of those programs are the “streamlined procedures” offered under the Offshore Voluntary Disclosure Program (OVDP).

Amy states. That’s right. The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.

Jeff asks: So let’s discuss the eligibility criteria for the streamlined procedures. [Jeff to read off each item and Amy to explain].

Jeff states: Taxpayers must certify that their conduct was not willful.

Amy replies: Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be required to certify, in accordance with the specific instructions, that the failure to report all income, pay all tax and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22.1) was due to non-willful conduct.  

Jeff states: We will talk more about what constitutes non-willful conduct but for now you need to recognize that you cannot just make general statements that you did not know about this. The IRS is looking for details of your circumstances and your background to show that you had no reason to know or to make further inquiry on what were your reporting obligations.

Amy states: And when you make the statements to justify that your conduct was non-willful in the streamlined procedures, you are making them under penalties of perjury. Making false statements in an attempt to get this treatment will put you in more trouble.

Jeff states: The standard of what you need to show that you are non-willful is complicated as many factors need to be considered. When conducting the analysis for our clients and compiling these statements, we consider over 50 factors to justify that a taxpayer is non-willful. These are then incorporated and addressed in our non-willful statements to provide the most persuasive argument that a taxpayer should be deemed non-willful and therefore benefit under the streamlined procedures.

Jeff states: IRS has initiated a civil examination of taxpayer’s returns for any taxable year.

Amy replies: If the IRS has initiated a civil examination of taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures. Taxpayers under examination may consult with their agent. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

Jeff states: So even if the IRS were to randomly select you for an audit not knowing that you have unreported foreign income, you are locked out from this program. That is why one should not delay in coming forward – you want to beat the IRS at the pass.

Jeff states: Taxpayers eligible to use streamlined procedures who have previously filed delinquent or amended returns must pay previous penalty assessments.

Amy replies: Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the Offshore Voluntary Disclosure Program (OVDP) or its predecessor programs) may still use the streamlined procedures. However, any penalty assessments previously made with respect to those filings will not be abated. 

Jeff states: So just because you may have been hit with a penalty by the IRS for a late-filed foreign information return like an FBAR or you filed amended income tax returns disclosing the foreign income, you can still get into this program.

Jeff asks what is the general treatment by the IRS under the streamlined procedures?

Amy replies: Tax returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be processed like any other return submitted to the IRS. Consequently, receipt of the returns will not be acknowledged by the IRS and the streamlined filing process will not culminate in the signing of a closing agreement with the IRS. 

Jeff states: So these submissions are treated no differently than when you file your annual income tax return. Just because you include a check for the balance due and the IRS cashes does not mean you can’t be selected for audit sometime in the next three years.

Amy replies: Returns submitted under either the Streamlined Procedures will not be subject to IRS audit automatically, but they may be selected for audit under the existing audit selection processes applicable to any U. S. tax return and may also be subject to verification procedures in that the accuracy and completeness of submissions may be checked against information received from banks, financial advisors, and other sources.

Jeff states: The penalty under the streamlined is equal to 5% of the highest annual aggregate foreign account balance over the last 6 years and if you can show that you were a foreign person in any of the last three years, this penalty is completely waived. Additionally, as long as you are in the program, the IRS states it would not be pursuing criminal charges.

PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus is on assignment so I have my associate attorney, Amy Spivey, helping me out.

Jeff continues:

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call Windus A. Fernandez Brinkkord at her office to make an appointment. The number to call is 858.314.5169. That is 858.314.5169.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Amy, what questions have you pulled for us to answer?

Question: I am a U.S. citizen living and working outside of the United States for many years. Do I still need to file a U.S. tax return?

Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits. 

Question:  I pay income tax in a foreign country. Do I still have to file a U.S. income tax return even though I do not live in the United States?

You have to file a U.S. income tax return while working and living abroad unless you abandon your green card holder status by filing Form I-407, with the U.S. Citizen & Immigration Service, or you renounce your U.S. citizenship under certain circumstances

Question:  I am a U.S. citizen married to a nonresident alien. What is my filing status and can I claim an exemption for my foreign spouse?

In general, if you are a U.S. citizen or resident alien married to a nonresident alien, you are considered “Married Filing Separately” unless you qualify for a different filing status. If you pay more than half the cost of keeping up a home for yourself and a qualifying child or other relative, you may qualify for the head of household filing status.

If you are a U.S. citizen or resident alien married to a nonresident alien, you and your spouse can choose to have your spouse treated as a U.S. resident for all U.S. federal income tax purposes. This allows you and your spouse to file a joint return, but also subjects your nonresident alien spouse’s worldwide income to U.S. income tax.

If you file a joint return, you can claim an exemption for your nonresident alien spouse. If you do not file a joint return, you can claim an exemption for your nonresident alien spouse only if your spouse has no income from sources within the United States and is not the dependent of another U.S. taxpayer.

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Amy thanks for joining us on today’s show.

Amy replies: Thanks for having me.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Jeff states: Have a great day everyone and a great weekend!