Topics Covered:
1. IRS Data breach much larger than first thought
2. The financial aspects of pursing the “Daddy Track” when balancing work and family time.
3. IRS Summertime Tax Tips:
a. Top Tax Tips about Filing an Amended Tax Return
b. Tax Tips for Starting a Business
4. Questions from our listeners:

a. I hear a lot about risk on bonds and bond credit ratings. What do they mean?

b. Can I receive a tax refund if I am currently making payments under an installment agreement or payment plan for a prior year’s federal taxes?

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

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: The financial aspects of pursing the “Daddy Track” when balancing work and family time.

Windus states:

Also coming up is:

Segment 3 material: our continuation of the IRS’ Summertime Tax Tips and what they mean for you.

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 our top story –
IRS Data breach much larger than first thought
Jeff states: Nobody likes getting letters from the IRS which usually informs a taxpayer that they are selected for an audit or the agency is taking collection action against an outstanding balance. But if you do not have either of these issues, you may be getting a letter from the IRS like other hundreds of thousands of taxpayers alerting that they you are a victim of a hack on IRS computer systems. The IRS now admits that this breach which occurred in May 2015 has affected twice as many people as the agency originally thought.

Additional IRS Statement on the “Get Transcript” Incident

Windus states: Reported by IRS on their website on August 17, 2015

Following an incident involving the IRS’s “Get Transcript” web application discovered in May, the IRS conducted an extensive review covering the 2015 filing season to assess whether other suspicious activity occurred. Following this review, the IRS has identified more questionable attempts to obtain transcripts using sensitive information already in the hands of criminals. As a result, the IRS is moving immediately to notify and help protect these taxpayers.

Jeff states: As it did in May 2015, the IRS is moving aggressively to protect taxpayers whose account information may have been accessed. The IRS will begin mailing letters in the next few days to about 220,000 taxpayers where there were instances of possible or potential access to “Get Transcript” taxpayer account information. As an additional protective step, the IRS will also be mailing letters to approximately 170,000 other households alerting them that their personal information could be at risk even though identity thieves failed in efforts to access the IRS system. So now that brings the total number of notifications to 390,000.

Windus states: In May 2015, the IRS determined unauthorized third parties already had sufficient information from a source outside the tax agency before accessing the “Get Transcript” application. This allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer.

Jeff states: When the IRS first identified the problem in May, it determined that these third parties with taxpayer-specific sensitive data from non-IRS sources cleared the Get Transcript verification process on about 114,000 total attempts. In addition, third parties made another 111,000 attempts that failed to pass the final verification step, meaning they were unable to have access to account information through the Get Transcript service.

Windus states: Since then, as part of the IRS’s continued efforts to protect taxpayer data, the IRS conducted a deeper analysis over a wider time period covering the 2015 filing season, analyzing more than 23 million uses of the Get Transcript system.

Windus continues: The new review identified an estimated additional 220,000 attempts where individuals with taxpayer-specific sensitive data cleared the Get Transcript verification process. The review also identified an additional 170,000 suspected attempts that failed to clear the authentication processes.

Jeff states: The IRS will begin mailing letters in the next few days to the taxpayers whose accounts may have been accessed.  Given the uncertainty in many of these cases — where a tax return was filed before the Get Transcript access occurred for example — the IRS notices will advise taxpayers that they can disregard the letter if they were actually the ones seeking a copy of their tax return information.

The “Get Transcript” application was shut down in May, and the IRS continues to work on strengthening the system.

Jeff and Windus to comment.

Jeff states: The IRS claims that a wide variety of actions to protect taxpayers are being taken beyond the mailings, including offering taxpayers free credit protection as well as Identity Protection PINs. However, there are still unknown damages yet to come as the IRS believes some of this information may have been gathered for potentially filing fraudulent tax returns during the upcoming 2016 filing season

Jeff states: Well it’s time for a break but stay tuned because we are going to tell you the financial aspects of pursing the “Daddy Track” when balancing work and family time.

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.

The financial aspects of pursing the “Daddy Track” when balancing work and family time.

Jeff states: Windus you brought to my attention this article posted in the Wall Street Journal Article, September 1, 2015. http://on.wsj.com/1hQxQFa
Windus: That’s right and while their numbers are small, working fathers face stigma, isolation when they cut hours for child care
First, I think we are seeing a growing number of families with a part time second parent not two full time parents.

6.7 million men, or 4.6% of all employed workers voluntarily worked part time last year.

What I found interesting in the article is ultimately, I’m seeing this more in financial planning.  Couples are choosing the parent with lower income and it isn’t as cut and dry as gender any longer.

What many of these men are finding is that they experience the same issues as woman who work part time for family reasons.  Basically, their commitment to their careers is being questioned.

However, even though we are seeing this shift, the statistics still say that 47% of working mothers would rather only work part time where as that is only 12% for men, this is from a 2012 Pew Study. 

There is huge pressure in the work environment for men to not take time or not work nontraditional hours.

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 asks Windus: Having talked about the parental-workplace time management that any single parent with a job has to balance, what are your thoughts on the financial side of this issue?

Windus responds.

If you are going down to lower income, when children are often an increase on a family budget, you need to get that budget in line, regardless of who is working or not.

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: Stay tuned because after the break we have some important summertime tax tips that can help you avoid tax problems with 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.

Jeff states:

Starting July 1^st, the IRS began offering its Summertime Tax Tip series which include useful information in English and Spanish. Tax Tip subscribers receive a new Tip via email three times a week during July and August. They also get a Tax Tip each weekday during the tax filing season. The IRS also issues Special Edition Tax Tips on important tax topics throughout the year. Taxpayers can sign up for the IRS Tax Tips subscription through a free service on www.irs.gov. For this segment we have pulled some of these tips which we want to share with you and add our comments to them.

IRS Summertime Tax Tip 2015-26, August 31, 2015: Top Tax Tips about Filing an Amended Tax Return

Jeff states: We all make mistakes so don’t panic if you made one on your tax return. You can file an amended return if you need to fix an error. You can also amend your tax return if you forgot to claim a tax credit or deduction.

Windus asks: When should you amend your tax return and when is it not necessary to amend?

Jeff replies:

a.  When to amend.  You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return.

b.  When NOT to amend.  In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return. If you didn’t include a required form or schedule, the IRS will send you a notice via U.S. mail about the missing item. 

Windus asks: What tax form do you use?

Jeff replies: Form 1040X.  Use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending. Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.

Form 1040X has three columns. Column A shows amounts from the original return. Column B shows the net increase or decrease for the amounts you are changing. Column C shows the corrected amounts. You should explain what you are changing and the reasons why on the back of the form.

Windus asks: What if you need to file for multiple years?

Jeff replies: More than one year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. See “Where to File” in the instructions for Form 1040X for the address you should use.

Other forms or schedules.  If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.

Windus asks: What if you are waiting for your refund from the originally filed tax return?

Jeff replies: Amending to claim an additional refund.  If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return. Amended returns take up to 16 weeks to process. You will receive any additional refund you are owed.

Amending to pay additional tax.  If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.

Windus asks: Are there any time limitations as to when you should file amended tax returns?

Jeff replies: When to file.  To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.

Jeff continues: Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. These rights include the right to be represented.

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.

IRS Summertime Tax Tip 2015-15, August 5, 2015: IRS Tax Tips for Starting a Business

Jeff states: When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules.

Windus asks: So what are some tax tips that can help you get your business off to a good start?

Jeff replies:

1. Business Structure.  An early choice you need to make is to decide on the type of structure for your business.

Choices for business structure:

• Sole proprietor,
• Partnership,
• Corporation (C-corp or S-corp), and
• LLC.

Each type of structure has its advantages and disadvantages. We call the process of which type to select “Choice Of entity”. The type of business you choose will determine which tax forms you will file.

Windus asks: What are the types of business taxes a business could face?

Jeff replies:

2. Business Taxes.  There are four general types of Federal business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up.

• Employment Taxes apply with you have payroll.
• Self-employment Tax generally applies to the owner of a sole proprietorship.
• Excise Taxes are special taxes charged against certain businesses based on the services used or products sold.
• Income taxes will be imposed at some point – either at the entity level or the individual level. It depends on the entity you use. Where income taxes are imposed at the entity level AND the individual level, taxes are being paid twice – we call this “double taxation”. You do not want this to happen.

Don’t forget that there are state taxes as well that any business would be subject to.

Windus asks: Does one need to get a tax id#?

Jeff replies:

3.  Employer Identification Number.  Unless you are a sole proprietor with no employees, you may need to get an EIN for federal tax purposes. If you do need one, you can apply for it online. If you are not required to have one, your social security number would be the identifying number used for your business. Not a good idea with all the fraud activity that is occurring.

Windus asks: What about maintaining a set of books of accounting for the business?

Jeff replies:

4.  Accounting Method.  An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.

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 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?

Windus asks: Robert from San Diego asks: I hear a lot about risk on bonds and bond credit ratings. What do they mean?

Jeff states, Well Windus you are the financial planner so I will let you respond.

Windus replies: Answer:

Generally, bond risk refers to the possibility that the issuer will default. This is also called “credit risk”.

To determine credit risk, investors often look to a bond’s rating, issued by independent ratings agencies such as Moody’s, Fitch and Standard & Poors.

A credit rating is an independent assessment of the creditworthiness of a bond by a credit rating agency. It measures the probability of the timely repayment of principal and interest of a bond. Generally, a higher credit rating would lead to a more favorable effect on the marketability of a bond. The credit rating symbols are generally assigned with “triple A” as the highest and “triple B” as the lowest in investment grade. Anything below triple B is commonly known as a “junk bond”.

• Bonds rated AAA have the highest ratings assigned by rating agencies. They carry the smallest degree of investment risk but the issuer’s capacity to pay interest and principal is still considered extremely strong.

• Bonds rated AA are judged to be of high quality by all standards. They differ from the highest rated triple A bonds only in a small degree but the issuer’s capacity to pay interest and principal is still considered very strong.

• Bonds rated A have strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories.

• Bonds rated triple B are considered medium grade obligations. They are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or unreliable over any length of time. These bonds lack outstanding important characteristics and have speculative characteristics as well.

Bonds also have a “durational risk” to consider.

Windus asks: Barbara from Los Angeles asks: Can I receive a tax refund if I am currently making payments under an installment agreement or payment plan for a prior year’s federal taxes?

Jeff replies: Answer:

No. A condition of your installment agreement is that the IRS will automatically apply any refund due to you against taxes you owe.

• Because your refund is not applied toward your regular monthly payment, you must continue making your installment agreement payments as scheduled and in full.
• Regardless whether you are participating in an installment agreement or other payment arrangement with the IRS, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support

Other conditions of an installment agreement:

• Timely filing of future tax returns;
• No creation of new liabilities – applies to future tax returns AND audit adjustments to prior tax returns; and
• Compliance with estimated tax payment obligations (if required).

These conditions exist until the liabilities covered under the installment agreement are satisfied.

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!

Topics Covered:

1. Surface Transportation And Veterans Health Care Choice Improvement Act of 2015 – Watch Out For The Hidden Tax Pitfalls!

2. Beware Of The Robo-Adviser!

3. IRS’ Summertime Tax Tips and what they mean for you.

4. Questions from our listeners:

a. I have been hearing a lot about ETF’s and always wondered what they are?

b. I just moved from Chicago to Los Angeles. How do I notify the IRS my address has changed?

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

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, 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: Beware Of The Robo-Adviser!

Windus states:

Also coming up is:

Segment 3 material: our continuation of the IRS’ Summertime Tax Tips and what they mean for you.

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

Jeff starts chit chat with Windus.

Surface Transportation And Veterans Health Care Choice Improvement Act of 2015 – Watch Out For The Hidden Tax Pitfalls!

Windus states: On July 31, 2015, President Obama signed into law the Surface Transportation And Veterans Health Care Choice Improvement Act of 2015 (H.R. 3236). While getting any legislation through Congress nowadays is momentous, this Act is no different from many others whereby Congress is faced with a funding expiration (in this case maintaining our highways) and instead of passing something that is long term, they merely pass a “stop-gap” measure which will require them to revisit this issue much sooner. In the case of this Act that will be October 29, 2015.

Jeff states: The difficulty that Congress faces each time it must pass legislation to fund something, it must find a revenue source to pay for it. No lawmaker (either Democrat or Republican) wants to fund the cost by raising taxes so instead lawmakers find more creative ways to generate the additional revenues without having to call it a tax increase. Usually, this is done by limiting tax deductions and phasing out tax benefits but in the case of this Act Congress turned to “tax compliance” measures for revenue. And over a 10 year period, these measures are projected to generate $5 billion in revenues.

Windus states: Commerce Clearing House (a publisher of tax information) recently issued a special report on the tax provisions that were included in this Act.

http://www.cchwebsites.com/content/pdf/tax_brief/us/2015_July_Highway-Bill_7-31-2015.pdf

Windus continues: We are going to point out a few of them that would have the greatest impact to most of us taxpayers.

Jeff states:

RETURN DUE DATES $314 million revenue raiser over 10 years.

Under the Act, the due date for partnerships to file Form 1065, U.S. Return of Partnership Income and Schedule K-1s, Partner’s Share of Income, will move from April 15th to March 15th. This will be the same filing deadline now in place for S corporations.

Windus states:

IMPACT. The shift to a March 15th deadline will better enable partners, like current S corporation shareholders, to receive their Schedules K-1 in time to report that information on their Form 1040 before its April 15th due date and thus hopefully avoid the need to file an extension. Thus having individual taxpayers file their tax returns sooner and pay sooner (which Congress can take credit as a revenue generator).

Jeff’s comment:

1. Taxpayers will still likely avail themselves of filing an extension even though they may have all the information needed to file their Form 1040 by April 15^th especially if they will end up owing with their tax return. That surely goes against the perception that there would be less extensions if all Schedule K-1’s have to be issued by March 15^th.

Windus states:

When is the change effective:

The changes to the filing deadlines are generally applicable to returns for tax years beginning after December 31, 2015. For calendar-year taxpayers, that means the new deadlines will first apply to the 2016 tax returns filed in 2017.

Jeff’s comment:

1. Taxpayers and their tax professionals will still utilize extensions to avoid missing deadlines and for tax professionals help even out the workflow.

Jeff states:

REPORTING OF FOREIGN BANK ACCOUNTS

The Act also aligns the FBAR (Report of Foreign Bank and Financial Accounts) due date with the due date for individual returns, moving it from June 30th to April 15th.

There has been a lot of publicity surrounding foreign bank accounts over these last few years especially since Congress passed into law the Foreign Account Tax Compliance Act (“FATCA”) in 2010.

If you have foreign accounts that in the aggregate topped $10,000.00 at any time during the year, you must electronically file a return called a FinCEN Form 114. This filing must be taken very seriously as the penalties are substantial and could involve criminal prosecution. Just by failing to timely file an FBAR, you can be hit with a $10,000.00 penalty – per violation (that is per account!).

Windus states:

IMPACT. Under prior law no extension was available for the June 30^th deadline and your Form 1040 extension did not apply to the FBAR. Although the Act makes the FBAR due earlier than under prior law, it now has a filing date that is the same as individual income tax returns and you can now get an extension of time to file this return.  The Act allows a maximum six-month extension for filing this information return to October 15^th.

Jeff’s comments:

1. Putting the filing obligations of the FBAR on the same parity as income tax returns makes good sense. Helps taxpayers maintain compliance and add the flexibility of providing more time if needed.

Windus states:

When is the change effective:

Applies for FBAR’s for taxable years beginning after December 31, 2015.   This means that Form 114 for the 2016 calendar year will be the first year impacted by this new rule.  The Form 114 due for the 2015 calendar year will still be due June 30, 2016. The Form 114 due for the 2016 calendar year will be due April 15, 2017.

Jeff’s comments:

1. Given the change in the law effective with the 2016 FBAR, I would not be surprised if the IRS were to issue regulations that would waive late-filing penalties of 2015 FBAR’s due June 30, 2016 where a taxpayer filed an extension for the 2015 Form 1040 and filed both the 2015 Form 1040 and 2015 FBAR by October 15, 2016. Of course, we will keep you informed if the IRS should implement this.

Jeff states:

MORTGAGE REPORTING $1.8 billion revenue raiser over 10 years

Under current law, mortgage servicers are generally required to report to the IRS (Form 1098, Mortgage Interest Statement) how much you pay in mortgage interest each calendar year. The Act imposes additional reporting, including the amount of the outstanding principal balance, the address of the property, and the loan origination date.

Jeff states:

IMPACT. The modifications are intended to boost compliance but also impose new burdens on mortgage servicers.

Jeff’s comments:

1. With this additional information reported to IRS, the IRS computers can run additional analytics on each tax return to uncover tax returns that are suspect in overstating mortgage interest deductions.

Jeff states:

When is the change effective:

To give mortgage servicers time to reprogram their systems for the new reporting requirements, the Act will apply to returns and statements the due date for which (determined without regard to extensions) is after December 31, 2016.

Jeff states:

SIX-YEAR LIMITATION PERIOD FOR OVERSTATEMENT OF BASIS $1.2 billion revenue raiser over 10 years

In UNITED STATES v. HOME CONCRETE & SUPPLY, LLC, 132 S. Ct. 1836, a tax case decided by the U.S, Supreme Court in 2012, the Court held that an overstatement of basis does not result in an omission of income for extended statute of limitations (SOL) purposes.

Windus states:

In plain language that means that unless you understate your income on your tax return, the IRS has only three years to select it for audit.

Jeff states:

Well now the Act provides that the six-year limitations period applies where any overstatement of basis results in substantial omission (in excess of 25%) of gross income stated in the return.

Windus states:

When is the change effective:

This legislative override of the Supreme Court’s decision in Home Concrete is effective for all returns for which the normal assessment period remained open as of the date of enactment (July 31, 2015), and for returns filed after that date.

Jeff’s comments:

1. This is a great example of what happens when the IRS looses in Court – they go to Congress and have the law changed!

2. Under Code Sec. 6501(a), the IRS ordinarily must assess a deficiency against a taxpayer within three years after the return is filed. Code Sec. 6501(e) (1)(A) extends the three-year period to six years if a taxpayer “omits from gross income an amount properly includible therein” which exceeds 25% of the amount of gross income shown on the return.

3. Until now, overstating basis so that you have less income to report was only subject to the standard three-year statute for audit – now it is 6 years.

4. But still if you overstate your deductions and accurately reported your income, the statute remains at 3 years that the IRS has to audit your return.

Windus states:

AND FOR THOSE ITEMS THAT DID NOT MAKE IT INTO THE ACT…

Now there were controversial amendments that lawmakers tried to push through to get into Act and for good reason they did not make it into the final version.

1. Allow the IRS to reinstate the use of non-government bill collectors to collect tax debts.

Jeff comments.

2. Allow the State Department to revoke or deny a U.S. passport if you have unpaid taxes.

Jeff comments.

Well it’s time for a break but stay tuned because if you are looking to start some financial planning we are going to tell you about Robo-Advisers.

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.

Beware Of Robo Advisor!

Jeff asks Windus: Until you brought this up to me, I never heard of a Robo Advisor. What is this?

Windus replies: It is computer generated financial planning.  Essentially, you work through an online portal, typically, to set up the account and investments and utilize mostly ETF strategies.

This was something I found discussed in the August 9, 2015 edition of the Wall Street Journal. http://www.wsj.com/articles/why-investing-robots-dont-march-the-same-1439172128.

The Article goes on to state what I consider to be the best description for what/how a Robo-Advisor attempts strategic asset allocation. You know that in rolling periods of the markets, sometimes active managers win and sometimes Index strategies win.  We are coming out of a period in time where the index strategy likely would have been better.

It is my belief, this is creating energy around the Robo-Advisor concept, but that this will not ultimately best serve most clients.

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 asks: So what are the advantages of Robo-Advisors?

Windus replies:

1. Less in costs.

2. Designed by experts in behavioral finance. 

3. They are over seen by professionals with years of experience and diversified typically using modern portfolio theory.

4. Eliminates conflicts of interest between what is being recommended to the client.

Jeff asks: So what are the disadvantages of Robo-Advisors?

Windus replies:

1. Ultimately somewhere a person is deciding the one plan fits all. 

2. How do you know that this is really what is in your best interest?

3. Mutual fund companies allow you to do this online directly with them, without the additional fee of the robo-advisers firm.  Obviously only utilizing their funds though.

4. A financial advisor bases advice on someone’s goals and risk tolerance, but also their needs.  When these are not aligned, they can talk to the client about how to over come this.

Jeff asks: So what is the big picture that people should see here?

Windus replies:

Positive over all:  it is better that someone is working with someone, Robo-adivsor or not, to build wealth and take an interest in their long term plan.

Eventually, if you feel like you need more advice, you are not stuck on the robo-adivsor platform.  You aren’t stuck with an advisor either. 

The best thing to do is think about what your needs are before you make a decision on which route to go.

1.  Do you have complex needs for full service financial planning?

2.  Do you need accountability to save and encouragement to stay the path in volatility

3.  Do you need help understanding what you are buying and if you should be taking more risk or less risk on specific goals. 

Just like traditional financial advisers, not all Robo-Advisor firms are the same.  Make sure you interview and go with a route that you are really comfortable with.

Robo Advisor doesn’t replace your financial advisor. It is simply another route or option that may be good for you to explore.

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 have Amy Spivey joining in to tell you some important summertime tax tips that can help you avoid tax problems with 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.

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

Chit chat with Amy

Jeff states:

Starting July 1^st, the IRS began offering its Summertime Tax Tip series which include useful information in English and Spanish. Tax Tip subscribers receive a new Tip via email three times a week during July and August. They also get a Tax Tip each weekday during the tax filing season. The IRS also issues Special Edition Tax Tips on important tax topics throughout the year. Taxpayers can sign up for the IRS Tax Tips subscription through a free service on www.irs.gov. For this segment we have pulled some of these tips which we want to share with you and add our comments to them.

Jeff states: And like Windus talked earlier about Robo-Adviser in the financial planning industry, it looks like IRS is trying to establish the same for taxes.

IRS Summertime Tax Tip 2015-17, August 10, 2015 – IRS Offers Easy-to-Use Online Tools

Amy states: That’s true. The main reason IRS is doing this is to alleviate the need to maintain higher levels of staff at IRS walk-in centers and call centers to answer questions and instead devote those personnel to enforce the tax laws.

Windus states: Well I would also guess that as a matter of convenience, it would be a lot easier to look something up on line whenever you have the time then drive to a distant IRS office and wait in line or be put on hold on the phone for hours.

Amy states: And in that spirit when you need tax help, the IRS has many online tools that are easy to use. You can e-file your tax return free, check your refund’s status or get your tax questions answered. 

Jeff asks: So what are some of the most popular self-help tools that taxapyers have used to get free tax help?

Amy replies: Well there are 4 tools that I find most useful in an on-line environment:

• IRS Free File.  You can use IRS Free File to prepare and e-file your federal tax return for free. Free File will do much of the work for you with brand-name tax software or Fillable Forms. If you still need to file your 2014 tax return, Free File is available through Oct. 15. The only way to use IRS Free File is through the IRS website.
• Where’s My Refund?  Checking the status of your tax refund is easy when you use Where’s My Refund? You can also use this tool with the IRS2Go mobile app.
• Direct Pay.  Use IRS Direct Pay to pay your tax bill or pay your estimated tax directly from your checking or savings account. Direct Pay is safe, easy and free. The tool walks you through five simple steps to pay your tax in one online session. You can also use Direct Pay with the IRS2Go mobile app.
• IRS Select Check.  If you want to deduct your gift to charity, the organization you give to must be qualified. Use the IRS Select Check tool to see if a group is qualified.

Jeff states: Now if you have a tax problem, there likely is not a Robo-Adviser App that will be able to provide you with a solution which is why…

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.

IRS Summertime Tax Tip 2015-12, July 29, 2015 – Tips on Travel While Giving Your Services to Charity

Jeff states: Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year.

Amy states: Here are several tax tips that you should know if you travel while giving your services to charity.

• Qualified Charities.  In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are qualified, and do not need to apply to the IRS. Ask the group about its IRS status before you donate.

Windus asks: Amy, how do you know if the organization is a qualified charity and continues to be one when you make your donation?

Amy replies: The IRS used to have to publish a book listing all the qualified charities. Now though you can also use the Select Check tool on IRS.gov to check the group’s status.

Jeff states: Now giving up your time no matter how valuable is not deductible but what about any associated costs?

Amy replies:

• Out-of-Pocket Expenses.  You may be able to deduct some costs you pay to give your services. This can include the cost of travel. The costs must be necessary while you are away from home giving your services for a qualified charity. All  costs must be:

o Unreimbursed,

o Directly connected with the services,

o Expenses you had only because of the services you gave, and

o Not personal, living or family expenses.

Windus asks: So if I am planning a trip to Central America and happen to visit an orphanage for a day, can I write off the cost of trip as a charitable expense?

Amy replies:

• Genuine and Substantial Duty.  Your charity work has to be real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.

Jeff asks: But if your trip does involve a genuine and substantial duty of charitable service, what can you deduct?

Amy replies:

• Deductible travel.  The types of expenses that you may be able to deduct include:

o Air, rail and bus transportation,

o Car expenses,

o Lodging costs,

o The cost of meals, and

o Taxi or other transportation costs between the airport or station and your hotel.

• Nondeductible Travel.  Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation.

Jeff states, so important to know how far you can push envelope and where you pushed it to far, you need to get with …

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.

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?

Nancy from Oceanside asks: I have been hearing a lot about ETF’s and always wondered what they are?

Jeff states, I think that is a great question for Windus to answer so I will let you respond. Windus responds.

Eric from Los Angeles asks: I just moved from Chicago to Los Angeles. How do I notify the IRS my address has changed?

Jeff replies: Well, Eric welcome to Southern California! There are different ways to let the IRS know you moved and its important that the IRS has your current address. First if the IRS needs to send you a refund check, you want to make sure it is going to the right address so it is not delayed. Second, if the IRS is sending out notices because you owe the IRS, you don’t want those to go unanswered especially if there is some limited right to appeal that runs from the date of the letter not from when you decide to accept the letter and read it.

So to change your address with IRS:

1. Do it through a tax return filing – Use your new address on your tax return.

2. Even better – use Form 8822, Change of Address, which can be filed at any time.

3. Alternatively to using Form 8822, send the IRS a signed written statement with your:

• full name
• old address
• new address
• Social Security number (or individual taxpayer identification number or employer identification number)

Mail your statement to the address where you filed your last return

4. Orally you can call IRS and if you get through to someone after they verify your identity, you can tell them the new address.

5. There is only one way to notify an address change via electronic notification and that is if your refund check was returned to IRS you can use the Where’s My Refund? Tool to complete your change of address online.

Remember, if you filed a joint return, you should provide the same information and signatures for both spouses. Also, if you filed a joint return and you and/or your spouse have since separated, you both should notify the IRS of your new addresses.

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!

Topics Covered:

1. IRS Action – Civil Forfeitures: The Carole Hinders Story.
2. How To Get Your Family Budget Started And Maintain Success.
3. IRS Summertime Tax Tips:

• Tax Tips for Students with Summer Jobs
• Include a Few Tax Items in Your Summer Wedding Checklist

4.Questions from our listeners:

• Why does the IRS file tax liens?
• How Does A Tax Lien Impact You?
• How long should I keep my tax papers?

Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show

This is your host 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.

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

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!

It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.

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

I have a lot to cover today in the world of taxes and helping me out will be my associate attorney Amy Spivey who will be calling in later.

And in the studio with me I have a special guest.  I want to introduce you to Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

Chit chat with Windus.

Jeff states so today’s top story is:

How The IRS Turned Carole Hinders’ Life Upside Down.

A restaurant owner in northwest Iowa has landed in the national news spotlight over her fight with the federal government. Carole Hinders who at the time was 67 years old and a grandmother has operated Mrs. Lady’s Mexican Food in Arnolds Park, Iowa for 38 years.

Nowadays it is most notable for a small business to be in operation for 38 years – especially if it is a restaurant which we all know “come and go”.  Even more notable for Ms. Hinders was that she was always in full compliance with her tax obligations.  But despite her clean tax record, on May 22, 2013 while settling into a crossword puzzle with her grandchildren she was visited at her home by a pair of IRS agents who stated that they had closed her business bank account and seized all her money, which at the time was almost $33,000.

Windus asks:  Jeff if she did not owe any taxes to the IRS, how could this have happened?

Jeff continues: True she did not have any outstanding liability to the IRS.  The problem though is that Ms. Hinders’ restaurant only accepts cash so Ms. Hinders makes frequent trips to the bank to avoid having large sums of money on the business’ premises.

As part of the federal government’s dragnet surveillance of the civilian population, everyone’s banking activities are monitored for “red flag” activities. Under the Bank Secrecy Act of 1970, banks are required to report to the IRS transactions on every individual who deposits or withdraws more than $10,000 in cash to or from a personal bank account on a given day. These reports indicate the financial activities that took place and include the individual’s bank account number, name, address, and social security number.

People who know of this law and are seeking to avoid this level of reporting by the bank will often go to great lengths to make multiple deposits so that no single deposit will be greater than $10,000.  This tactic is called “structuring”.  The IRS thinking that Ms. Hinders was making small deposits to evade this reporting requirement used its civil forfeiture power to seize Ms. Hinders’ bank account and close down her business.

That’s right – federal law enforcement agencies are invested with the power of civil forfeiture whereby the agency can take cash, cars and other property without charging the property owner with a crime. The property owner need not receive any advance warning or notice before the assets are seized by the federal government.  The government need not prove that a person is guilty of a crime – only that he or she is suspected of committing a crime. This law was designed to catch terrorists, money launderers, drug lords and serious criminals – but it can also be used by the government against law-abiding businesses.

Ms. Hinders said she received no warning from either her bank or the government before her money was taken.  The reason that the federal government does not have to read you your rights, or advise you that you can have a lawyer, or do any of the things that the constitution is supposed to provide, is that they don’t charge the person with the crime, they charge your money with the crime.

Since then, she’s had to borrow money and use credit cards to pay bills and keep her restaurant in business.  But Ms. Hinder was not stopping there – she knew she didn’t do anything wrong and did not owe anything to the IRS. But yet the IRS took her money so Ms. Hinders’ decided she was going to fight the IRS.

The Battle Against IRS Begins

Remember Ms. Hinders was never accused of any crime. The Mexican restaurant she owned, Mrs. Lady’s, did not accept credit cards, and she regularly deposited earnings in a bank branch a block away.

Ms. Hinders wasn’t using the money for illegal purposes. Her business doesn’t accept credit cards and the law fails to provide provisions for small businesses with limited cash flow. Ms. Hinders frequently deposited money in order to keep it safe in the bank.

But yet the government was treating Ms. Hinders like a criminal, just for running an honest cash business.
She hired an attorney to sue the IRS and regain her property.  In civil forfeiture cases, the government must file lawsuits “against” property or cash in order to keep it. This one was called United States of America v. $32,820.56 in United States Currency (Case No. 2013-CV-4102).  This lawsuit was filed in Federal District Court for the Northern District of Iowa.  Eventually Ms. Hinders was deposed and it then became clear that Ms. Hinders was an innocent and hardworking taxpayer.  The Assistant United States Attorney on the case had then informed the IRS that they should not go forward with the case.  The IRS agreed and the case was dismissed but without prejudice – meaning that the government can file another action in the future to get Hinders’ money if the court grants its motion.

Windus asks: Are There Any Safeguards In Place For The IRS To Follow So Things Like This Do Not Happen?

Critics say the IRS rarely investigates such cases to see if the business owner has legitimate reasons for making small deposits.

Seizing assets without criminal charges is legal under a controversial body of law that allows law enforcement agents to seize cars, cash and other valuables they believe are tied to criminal activity. The burden of proof falls on owners seeking the return of their property.

There is nothing illegal about depositing less than $10,000 cash unless it is done specifically to evade the reporting requirement.

The IRS made 639 of these seizures in 2012, compared to 114 in 2005. And only one in five was prosecuted as a criminal case. So you are probably thinking was the money from the other 80% of cases returned to its rightful owners?

Well it’s time for a break but stay tuned because if you seem to find it difficult to make a family budget my guest Windus A. Fernandez Brinkkord has some important information and tips that can make this easier for you.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back.  This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And in the studio with me I have as my special guest Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

Chit chat with Windus.

How To Get Your Family Budget Started And Maintain Success.

Jeff asks questions, Windus responds:

1. What is the best baby step to starting your family budget?

Windus response includes: start with a spreadsheet to brainstorm.

2. What are some banks that have good tools for you to utilize if you bank with them?

Windus response includes: Wells Fargo, USAA, & AMEX

Jeff states:  By the way, Windus is a licensed financial planner who can help you plan for financial success and she is offering a special offer to our listeners.  Her firm Trilogy Financial Services will provide you with an Investment Audit which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. The number to call is 858.314.5169. That is 858.314.5169 for your free investment audit by Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

Jeff asks questions, Windus responds:

3. What sites can you go to in order to help you budget and stay on top of it and what are the differences?

Windus response includes: YNAB.com & mint.com.

4. What are the best tools to pay down your debt?

Windus response includes:  bankrate.com or vertex42.com

5. Should you consolidate your credit card debt to a fixed pay off and fixed interest rate?

6. What is crowd funding and how good of a resource is this really?

Windus response includes: New crowd funding out there, lendingclub.com prosper.com lightstream.com

Jeff states:  Windus is offering a special offer to our listeners.  Her firm Trilogy Financial Services will provide you with an Investment Audit which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. The number to call is 858.314.5169. That is 858.314.5169 for your free investment audit by Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

Stay tuned because after the break we are going to tell you some important summertime tax tips that can help you avoid tax problems with IRS.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back.  This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And in the studio with me I have as my special guest Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

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

Chit chat with Amy

IRS Summertime Tax Tips

Starting July 1^st, the IRS began offering its Summertime Tax Tip series which include useful information in English and Spanish. Tax Tip subscribers receive a new Tip via email three times a week during July and August. They also get a Tax Tip each weekday during the tax filing season. The IRS also issues Special Edition Tax Tips on important tax topics throughout the year.  Taxpayers can sign up for the IRS Tax Tips subscription through a free service on www.irs.gov. For this segment we have pulled some of these tips which we want to share with you and add our comments to them.

Tax Tips for Students with Summer Jobs. IRS Special Edition Tax Tip 2015-13, June 18, 2015

Jeff states: Students often get a job in the summer. If it’s your first job it gives you a chance to learn about work and paying tax. The tax you pay supports your home town, your state and our nation.

Amy states: Here are some tips students should know about summer jobs and taxes:

1. Withholding and Estimated Tax.  If you are an employee, your employer withholds tax from your paychecks. If you are self-employed, you may have to pay estimated tax directly to the IRS on set dates during the year. This is how our pay-as-you-go tax system works.
2. New Employees.  When you get a new job, you will need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use it to figure how much federal income tax to withhold from your pay.
3. Self-Employment.  Money you earn doing work for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction can cut taxes.
4. Tip Income.  All tip income is taxable. Keep a daily log to report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.
5. Payroll Taxes.  You may earn too little from your summer job to owe income tax. But your employer usually must withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
6. Newspaper Carriers.  Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from social security and Medicare taxes.
7. ROTC Pay.  If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. A subsistence allowance you get while in advanced training is not taxable.

Jeff states: Amy’s mention that our tax structure is designed as a “pay-as-you-go” system is an important concept.  Because it is easy to fall behind and build up large liabilities, you could end up with big tax problems very quickly if you are not careful and diligent.

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 KahnTaxLaw 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.

Include a Few Tax Items in Your Summer Wedding Checklist. IRS Special Edition Tax Tip 2015-14, June 29, 2015

Jeff states: If you’re preparing for summer nuptials, make sure you do some tax planning as well. A few steps taken now can make tax time easier next year.

Amy states: Here are some tips to help keep tax issues that may arise from your marriage to a minimum:

1. Change of name.  All the names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. The easiest way for you to get the form is to download and print it on SSA.gov.
2. Change tax withholding.  When you get married, you should consider a change of income tax withholding. To do that, give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. The withholding rate for married people is lower than for those who are single. Some married people find that they do not have enough tax withheld at the married rate. For example, this can happen if you and your spouse both work so you may want to adjust the information on the Form W-4 so more tax is withheld.
3. Changes in circumstances.  If you receive advance payments of the premium tax credit you should report changes in circumstances, such as your marriage, to your Health Insurance Marketplace. Other changes that you should report include a change in your income or family size. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes in circumstances will allow the Marketplace to adjust your advance credit payments. This adjustment will help you avoid getting a smaller refund or owing money that you did not expect to owe on your federal tax return.
4. Change of address.  Let the IRS know if you move. To do that, file Form 8822, Change of Address, with the IRS. You should also notify the U.S. Postal Service. You can change your address online at USPS.com.
5. Change in filing status.  If you are married as of December 31, that is your marital status for the entire year for tax purposes. You and your spouse can choose to file your federal tax return jointly or separately each year. It is a good idea to figure the tax both ways so you can choose the status that results in the least tax.

Jeff states: Getting married is an important milestone and as I am certain that as you walk down the aisle the last thing you would be thinking about is taxes but after all the wedding festivities and honeymoon has passed, you should make sure you take care of this tax business early which should avoid future tax problems and keep your marriage happy.

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 KahnTaxLaw 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.

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 Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back.  This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And in the studio with me I have as my special guest Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

Jeff states: If you would like to post a question for me 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 a future show.

OK Windus, so you have the honors of reading off this weeks questions for me to answer?

1. John from San Francisco asks: Why does the IRS file tax liens?

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:

• Puts your balance due on the books (assesses your liability);
• Sends you a bill that explains how much you owe (Notice and Demand for Payment); and

You:

• Neglect or refuse to fully pay the debt in time.

The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

2. Windus asks: How Does A Tax Lien Impact You?

The lien will impact you in the following ways:

• Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien.
• Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
• Business — The lien attaches to all business property and to all rights to business property, including accounts receivable.
• Bankruptcy — If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue after the bankruptcy.

3. Patricia from Woodland Hills asks, How long should I keep my tax papers?

At least three years, but six years is preferable. The IRS has three years after you file a tax return to complete an audit. For example, if you file your 2014 income tax return on or before April 15, 2015, keep those records until at least April 15, 2018.

The IRS can audit you for up to six years if it suspects that you underreported your income by 25% or more. If the IRS suspects fraud, there is no time limit for an audit, although audits beyond six years are extremely rare.

Keep records of purchases of real estate, stocks, and other investments for at least three years after the tax return reporting their sale was filed.  You will want to do the same for capital loss carryfowards and net operating loss carryforwards.

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 KahnTaxLaw 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.

Thanks Windus for joining me today.  Windus says Thanks for having me.

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw.  You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.  That’s k-a-h-n tax law.com.

Have a great day everyone!

 

 

Topics Covered:

1. Tax Time – Why we pay.
2. Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 1: Travel Expenses, Cell Phones, Home Office Deduction and Home Computers.
3. Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 2: Personal Expenses, Guard Dogs, Uniforms and Wages Paid To Family.
4. Answering Your Questions:

• When Should You Lawyer Up When Dealing With the IRS?
• Is It True That Taxpayers With Legal Counsel are Treated Better?
• Why Should I Only Use A Tax Attorney For Representation In A Criminal Tax Investigation?

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

Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show

This is your host 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.

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

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!

It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.

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

I have a lot to cover today in the world of taxes and helping me out today will be my associate attorney Amy Spivey who will be calling in later in today’s show.

So It’s Tax Time – Why do we pay?

Well I must tell you how it began with an earthquake. What hit San Francisco in 1906 was one of the worst natural disasters in American history. Once the water mains broke, there was no way to fight the dozens of fires caused by ruptured gas mains, except by dynamiting buildings in the fire’s path, which made things worse. The fires lasted for days. More than 3,000 people died, including the city’s fire chief, who fell two stories after the dome of the California Hotel crashed into the fire station. Most of the city was destroyed. Economic aftershocks were felt as far away as London. Twelve insurance companies went bankrupt, and, after a gold shortage and a doomed scheme to corner the copper market, the Knickerbocker, the second-largest trust in New York, failed, setting off the Panic of 1907. The New York Stock Exchange nearly collapsed. So did the United States Treasury.

The Panic of 1907 contributed to the passage of the Sixteenth Amendment, in 1913, which granted Congress the right to levy an income tax, and to the establishment of a central banking system, the Federal Reserve. It’s hard to believe that both the Sixteenth Amendment and the Federal Reserve have now been around for 102 years.

Taxes dominate domestic politics and as expected all of the 2016 presidential hopefuls are no exception to this. But this was not always the case. Since the 1970’s, almost all of that talk has been about cuts, which ought to be surprising, because more than 90% of Americans receive social or economic security benefits from the federal government. Americans, though, find it easier to see what they pay, than what they get — not because they aren’t paying attention but because the case for taxation is so seldom made.

Oliver Wendell Holmes, Jr., said, nearly a century ago “Damning taxes is a piece of cake. It’s defending them that’s hard because taxes are what we pay for civilized society,” In case you did not know this statement made by Mr. Holmes’ is engraved on the front of the I.R.S. Building in Washington. No one’s said it better since. And that, right there, is the problem.

The concept of taxes, which dates to the beginning of recorded history, are payments made to a ruler in exchange for military protection, public services, and civil order. In the ancient world, taxes were paid in kind: landowners paid in crops or livestock; the landless paid with their labor. Taxing trade made medieval monarchs rich and funded the early-modern state. Then a series of political revolutions began that led to monarchs ceding the power to tax to legislatures. One of those revolutions lies behind our American independence.

But let’s go back to the earthquake. In 1906, the day the earthquake hit and the fires began, people raced to the San Francisco Bay and boarded ferries to escape the flames. A handful of men rushed to the banks, but before long all that was left of the city’s deposit and lending institutions, aside from rubble and ashes, were their fireproof steel vaults: red hot, smoking, and locked.

During the recession that followed the panic that followed the earthquake, the number of people applying for poor relief in New York tripled; in Philadelphia, it increased nearly fivefold. A purpose of a federal reserve was to allow the government to halt a panic by shoring up faltering banks. A purpose of a federal income tax was to undergird the Treasury with a stable source of revenue. But it had another purpose, too. The richest one per cent of households, which had held about a quarter of the nation’s wealth in 1890, now held more than a third. The new income tax was intended to answer populist rage at the growing divide between the rich and the poor. In the election of 1908, both parties favored an income tax—Democrats hoping to close that gap, Republicans hoping to quiet that rage.

Republicans won. The new President, William Howard Taft, who had been a federal judge (and who went on to serve as Chief Justice), wanted to avoid signing a law that would end up going back to the Supreme Court. So he decided to support a constitutional amendment. It went to the states for ratification in 1909.

Constitutional amendments are notoriously difficult to ratify. The Sixteenth Amendment was not. Once it got out of Congress, it passed, handily, in 42 of 48 states, six more than required, and took effect on February 25, 1913. The House voted on an income-tax bill in May; Woodrow Wilson signed it in October. Its highest rate was 7%. The next year, the Bureau of Internal Revenue printed its first 1040. The form was three pages, the instructions just one.

Taxes have got a lot hairier since. The Revenue Act of 1916, anticipating the United States’ entry into the war in Europe, raised taxes on incomes, doubled a tax on corporate earnings, eliminated an exemption for dividend income, and introduced an estate tax and a tax on excess profits. Rates on the wealthiest Americans began to skyrocket, from 7% to 77%, but most people paid no tax at all. By 1918 only about 15% of American families had to pay personal income taxes, and the tax payments of the wealthiest 1% of American families accounted for about 80% of the revenues.

Remember, taxes are what we pay for civilized society, for modernity, and for prosperity. The wealthy pay more because they have benefitted more. Taxes, well laid and well spent, insure domestic tranquility, provide for the common defense, and promote the general welfare. Taxes protect property and the environment; taxes make business possible. Taxes pay for roads and schools and bridges and police and teachers. Taxes pay for doctors and nursing homes and medicine. During an emergency, like an earthquake or a hurricane, taxes pay for rescue workers, shelters, and services. For people whose lives are devastated by other kinds of disaster, like the disaster of poverty, taxes pay, even, for food.

What’s surprising, given how much money and passion have been spent to defeat a broad-based, progressive income tax over the past century, and how poorly it has been defended, is that it has endured. In addition, the IRS which is government agency charged with administering the tax laws and enforcing compliance has become one of the largest and most powerful government agencies. 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 it all started with an earthquake in San Francisco.

Lest we not forget on October 17, 1989 – a 6.9 magnitude earthquake rocked the San Francisco Bay Area. Remember history does have a way of repeating itself.

Well it’s time for a break but stay tuned because we are going to tell you the top tax write-offs that could get you in trouble with the IRS.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

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

Chit chat with Amy

Jeff states: Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 1 of 2

From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Amy opens up with Tax Write-Off: Travel Expenses
One of the top write-offs scrutinized by the IRS is Travel Expenses. Traveling out of town to attend a business convention should be straight-forward but what if you travel to see a show along with one of your clients?  And what if you and your client each bring their spouse?  You can see how it becomes harder to justify that this has a business purpose but if you can it all is deductible including 50% of the related meals.

Jeff states:

• Key Issue: You can deduct most of your business travel expenses on your tax return; however, there are some limitations and considerations that the IRS sets on what constitutes business travel. According to the IRS, “travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.” However, for these expenses to be deductible, you must be away from your tax home (the town where your business is located) for a period longer than one day’s work, and you must be away overnight and the travel is reasonably related to your business.       Keep in mind that any related meals and entertainment will only be 50% deductible.

• How to Do It Right: The more accurate your records are, the more likely they’ll be accepted and validated by the IRS if you become involved in an audit situation. Start making it a point with your next business trip to collect all your receipts and put them in an envelope or one of those extra zip-lock bags you happened to bring with you. Label the envelope or zip-lock bag with the trip name and date and file it so that now you have the backup should it be questioned later.

Amy opens up with Tax Write-Off: Cell Phone Bill
The IRS recognizes that cell phones are used to conduct business.  The problem is many people have ditched the ol’ land line and solely use a cell phone not only for business but all telephonic communication.  Once you start doing that, your deduction for cell phone charges could be reduced or even eliminated because of  the personal use conducted on the same phone line.

Jeff states:

• Key Issue: Unlike the past when cell phones were good just for talk, many people now use them to text and search on the internet and even as a personal computer or organizer.  Also, the cell-phone companies have come out with various plans where multiple phones and features are bundled into single plans.  All of this has resulted in the IRS scrutinizing the deductibility of cell phone charges.  Keeping a copy of your bills and even plan terms becomes important to demonstrate what portion actually relates to your business.

• How to Do It Right: Grab your last cell phone bill and look up the current terms of your plan (it may have changed since you first got your last cell phone or started service). Cell phones are classified as “listed property” by the IRS requiring that you keep detailed records of their business use. While a phone on a land line is not listed property, I suggest that you have a second land line which is exclusively used for business as the IRS will not allow any allocation of business use of the cost of a single phone in your home to your home office. The problem in determining what amount of these expenses can be allocated to business use is a lot more arbitrary now a days because of the bundling of services (phone, internet, cable) on one bill by providers and the marginal costs of adding that additional line or service which you intend to use for business. Example, if the extra cost for adding an additional cell phone with unlimited talk, text and data to your plan which you intend to exclusively use for business is $10.00, the IRS could argue that of your $300.00 monthly cell phone bill, only $10.00 should be deductible.

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 KahnTaxLaw 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.

Amy opens up with Tax Write-Off: Home Office

Going back to times before the 1990’s it was uncommon to work out of your house so home office deductions were not as popular back then.  But with the advances in technology and new businesses that do not require a formal traditional brick and mortar presence, home offices are more prevalent.  Since claiming a home office deduction can still be a trigger for an audit, you need to make sure you have done your homework to back this up.

Jeff states:

• Key Issue: Home office space is the exact square footage area in your home dedicated exclusively to the running of your business.

• How to Do It Right: Get an accurate floor plan of your residence and the exact square footage of the space exclusively used for business. Once you figure out the percentage of your home office compared to your overall home, then you can go back to your heating bills, electric bills and all other bills that go to supporting your home, and figure out the amount you can deduct for running your business.

Jeff states – the rules and recordkeeping for the home office deduction apply the same whether you are a home-owner or you are a home-renter.

For taxable years starting on, or after, January 1, 2013 (filed beginning in 2014), you now have a simpler option for computing the business use of your home (IRS Revenue Procedure 2013-13, January 15, 2013). The standard method has some calculation, allocation, and substantiation requirements that are complex and burdensome for small business owners. This new simplified option can significantly reduce recordkeeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses.

Highlights of the simplified option:

• Standard deduction of $5 per square foot of home used for business (maximum 300 square feet). That means the maximum amount of home-office deduction is $1,500.00.
• Allowable home-related itemized deductions claimed in full on Schedule A. (For example: Mortgage interest, real estate taxes).
• No home depreciation deduction or later recapture of depreciation for the years the simplified option is used.

This simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction.

Amy opens up with Tax Write-Off: Home Office Computer

By now you should be seeing a theme that mixing your business world with your personal life does make it harder to determine and justify how much in various expenditures are business related and therefore deductible.  Usage of computer at you home is another one of those classic examples where you really should  avoid using your home office computer for personal tasks.

Jeff states:

• Key Issue: If there is the only one computer in your house, how are you able to deduct its cost when it is not solely used it for business purposes?

Computers are “listed property.” These are items that can easily be used for personal as well as business purposes–for example, cars and certain other vehicles, computers, and any other property generally used for entertainment, recreation, or amusement such as VCRs, cameras, stereos, and camcorders.

• How to Do It Right: The problem with having one computer in the house is similar to what we discussed about having one land line in the house.  The nest way to solve that is to purchase a second computer device such as a laptop or tablet and dedicate that device for personal use. You then use your desktop computer solely for business. This way you need not worry about the business use of your desktop coming under scrutiny in an IRSaudit.

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 KahnTaxLaw 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.

Stay tuned because after the break we are going to tell you more of the top tax write-offs that could get you in trouble with the IRS.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And on the phone from our Walnut Creek office I have my associate attorney, Amy Spivey.

Jeff states: From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Amy opens up with Tax Write-Off: Personal Expenses
By now you should be seeing a theme that mixing your business world with your personal life does make it harder to determine and justify how much in various expenditures are business related and therefore deductible.  So you need to be careful.

Jeff states:

• Key Issue: That’s right.  You simply can’t deduct personal expenses which have no relation to your business.  But where do you draw the line when there is some relationship to your business?

• How to Do It Right: Getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense. The cost of high-speed internet service should be deductible but you can’t deduct such homecare services as gardening, landscaping and tree removal simply because you work out of a home office.

Amy opens up with Tax Write-Off: Office Setup & Artwork

This is another category business owners can easily get into trouble with if they’re not careful. Here business owners claim that the purchase of expensive artwork or antiques is to brighten up the office and impress their clients. The IRS seems more willing to accept this as a deductible business expense when the item purchased is physically used in your business and can wear-out and get used over time.

Jeff states:

• Key Issue: This goes back to the concept that business expenses to be deductible must be ordinary and necessary and reasonable in amount. You can’t fully deduct expenses that do not meet these standards.

• How to Do It Right: When it comes to high-end furniture or antiques or fine art work, getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense.       You have to look at this on a case-by-case basis. What may be ordinary and necessary and reasonable for one business may not be so for another.

Amy opens up with Tax Write-Off: Dogs & Other Pet Creatures

Dogs and other pet creatures could be a legitimate write-off if they have a valid business purpose and other requirements are met.  The most straight forward example would be that of a guard dog.  It helps when that dog resides fully at the premises of the business guarding the premises and is a breed that is typical for such a job (I don’t think that little toy poodle would qualify but a German Shepherd would).

Jeff states:

• Key Issue: You will need to document what portion of the dog’s total time is devoted to “guard-dog” duty as that percentage of business use would then be applied to the expenses of the dog.

• How to Do It Right: Knowing the percentage of time devoted to guard-dog duty and applying this business use percentage should allow you to deduct a portion of the expenses relating to the dog. You may even be able to depreciate the dog over a certain term just like you would with any capital asset.

Jeff states, with regards to other pet creatures – Having a high tech salt water aquarium in the lobby of your office could be deductible but put that same unit in your home office – not likely. Remember what may be ordinary and necessary and reasonable for one business may not be so for another. So getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense.

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 KahnTaxLaw 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.

Amy opens up with Tax Write-Off: Uniforms or Costumes

If you buy a smart new suit for your profession or uniforms for your trade, it might seem these are obvious work expenses and valid tax deductions. But this is not necessarily so according to the IRS. Work clothes that can double as street or evening clothes are no more deductible than anything else in your closet. To claim a deduction for buying clothes, the clothes have to be mandatory for your job and unsuitable for everyday wear.

Jeff states:

• Key Issue: Is the costume or uniform something suitable you could wear outside your job?  If yes, the IRS will not let you write it off.  A perfect example of some rather unusual clothing you can write-off would be a clown suit. But a new suit would not be deductible since you can wear it outside of your work environment and it would be considered “suitable” in that environment.

• How to Do It Right: Well regarding that new suit, if it happened to be something that included a patch or embroidery of your business, your could make the argument that it is a business expense even though  you can wear it other places outside of your work environment because in that case you are advertising your business.   Entertainers have a harder time but if their clothing purchases are used only in there performers it would be hard for the IRS to maintain that there was a personal use component.  In these cases a picture is worth a thousand words. Likewise if the clothing somehow identifies or promotes your business, it should also qualify as a write-off. A good example is you order polo knit shirts that have your company’s name embroidered on them. Despite the fact that a polo knit shirt is something acceptable to wear outside your work environment, the addition of your company’s now can make it deductible.

Amy opens up with Tax Write-Off: Paying Wages To Family.

The IRS does pay close attention to a business owner who employs a spouse, child or close relative. Many self-employed people want to hire family members to work for them. But as with many things in life, there’s a right way and a wrong way to do this. Doing it correctly not only promotes family togetherness, it can also create tax savings for you because when you hire a family member your business can take a deduction for reasonable compensation paid to this employee, which consequently reduces the amount of taxable business income that flows through to you.

Jeff states:

• Key Issue: Is the compensation of these family members based on their responsibilities of their job,  their age and experience? You should be paying them the same reasonable salary you would pay anyone else doing the same job. The key here is that you meet the standard of “reasonable compensation” because the IRS can question compensation paid to a family member if the amount doesn’t seem reasonable given the services actually performed.

• How to Do It Right: Just like any other employee, you should maintain a personnel file and include them on your worker’s compensation coverage. Include them with your other employees on the business’ employment tax returns and issue W-2’s at the end of each year. As with wages paid to all employees, wages paid to family members are subject to withholding taxes. The payment of the employer-share of these taxes will be a deductible business expense for tax purposes.  Of course that portion of the taxes withheld from the employees’ paychecks are not deductible.

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 KahnTaxLaw 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.

Stay tuned as we will be taking some of your questions. You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team along with my associate attorney, Amy Spivey.

If you would like to post a question for us to answer, you can go to our 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 from the kahntaxlaw inbox for me to answer?

William from Encino asks: When Should You Lawyer Up When Dealing With the IRS?

Answer: If you receive a notice from the IRS regarding small mistakes and omissions with your income tax return, you can probably deal with the IRS directly or by giving your tax preparer a quick call. However, if there is any chance your case could go sour, you need to call a qualified and experienced tax attorney, and pronto. The IRS is the world’s largest collection agency. They will ask the taxpayer for information on their employment, bank accounts, properties owned, automobiles and any other assets they may have for the purpose of knowing what they can levy or garnish. They will note down all conversations with the taxpayers for future use by other agents. The IRS can seize just about any assets needed to pay unpaid taxes. A good rule of thumb is that if you’re asking yourself whether it’s serious enough to merit calling a tax attorney, it probably is.

Sam from Ventura asks: Is It True That Taxpayers With Legal Counsel are Treated Better?

Answer: It’s unfair, even illegal, but it’s also human nature. IRS agents are flesh and blood and if they can get away with bullying someone into their interpretation of the law, they probably will. A tax attorney can ensure the IRS is playing by the rules and treating you fairly. IRS investigators are much more careful about asking inappropriate questions or wasting your time with unnecessary requirements, if they know they are dealing with a tax attorney. Now on the other side, many taxpayers think that because they exercise their right to hire representation, the IRS will think that they have something to hide. Well it is no secret that the Federal Tax Code is complicated and ever-changing. Just keeping up to date on these changing tax codes is a full-time job, and something you don’t have time to do. The IRS recognizes this and also knows that you have a business, a job for that matter a life that must still go on despite you being selected for examination. In my 27 years of practice I have not had one case where by my virtue of representation of a client the IRS thought anything different about the client’s motives in hiring me.

Seth from Irvine asks: Why Should I Only Use A Tax Attorney For Representation In A Criminal Tax Investigation?

Answer: When it comes to tax planning, business budgeting and asset management, a CPA is – all things being equal – more useful than a tax attorney is. But when you have a dispute with the IRS, especially if you’re accused of tax fraud or tax evasion, a tax attorney is the only intelligent choice. Tax attorneys are the only ones who can represent you in a court of law and provide you the legal advice and analysis you need. Anything discussed with your tax attorney is protected under the attorney-client privilege. Unlike CPA’s and accountants, attorneys cannot be subpoenaed to testify against a client in a criminal procedure. One of the worst things a CPA can do is to get more involved with your case that has potential criminal exposure before you hire tax counsel. The government likes this because they can subpoena the CPA and his files on you and the CPA being unfamiliar with the legal consequences and procedures of criminal investigations could unknowingly be hurting your case.

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 KahnTaxLaw 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.

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

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.

Have a great day everyone!

Issues discussed:

Mr. Credit said: I was listening to your radio show last week and heard a couple things I think are worth repeating to our audience as well:

a. Tell us about the data breach at the IRS…

The IRS announced recently that criminals used taxpayer-specific data acquired from non-IRS sources to gain unauthorized access to information on approximately 100,000 tax accounts through IRS’ “Get Transcript” application. This data included Social Security information, date of birth and street address.
For those of you who are not familiar with the “Get Transcript” application, it is a self-help service created by the IRS where taxpayers and their authorized representatives can get taxpayer account information through the IRS computers without the assistance of IRS personnel. In light of the IRS budget cuts, the IRS has been working on creating these self-help systems to reduce the personal needed at IRS call centers and IRS walk-in centers and thus save costs. During this past filing season, taxpayers successfully and safely downloaded a total of approximately 23 million transcripts.
Unfortunately, putting self-help systems in place without solid security features could lead to bigger problems and opportunity to defraud the government. And this is what happened over the past few months when third parties gained sufficient information from an outside source before trying to access the IRS site, which allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer.

This apparent data breach is under review by the Treasury Inspector General for Tax Administration as well as the IRS’ Criminal Investigation Division. The IRS has identified 200,000 total attempts to access data and will be notifying all of these taxpayers about the incident. And for those 100,000 or so taxpayers whose accounts were accessed, the IRS announced it will provide free credit monitoring services.

b. Many people may not realize this, but the IRS is using “big data” to run all sorts of screenings, filters and ultimate select people for audits, correct?

To keep track of this, the IRS has one of the most extensive data collections in the world. Traditionally its power to enforce has come through the matching of data. For example, you received a W-2 Form from your employer showing how much you earned. That same form is submitted by your employer to the IRS. Now the IRS can match your return to that form to make sure you are reporting the income. The same thing goes for 1099 forms showing your earnings from miscellaneous income, gambling winnings, interest and dividend income, sales of assets, deductions, and so on.

But the IRS is not just stopping with Big Data Transactions, the IRS is now pursuing Big Data Social Media Analytics just like Google.

But unlike the normal corporate big data analytics, the IRS has one big advantage: It knows everyone’s social security numbers, as well as all the tax information from the firms we as taxpayers interact with, and as such the IRS can join the dots between Google,EBay, LinkedIn, Facebook, Yelp, Twitter, and perhaps your PayPal and credit card accounts along with your emails to overseas bankers.

And speaking of offshore banks, the IRS has been collecting information from the offshore banks on their U.S. accountholders and account characteristics so that by identifying an account number with a foreign bank, the IRS knows what type of account it is and when it was opened. That information becomes relevant when the IRS computers are scouring tax return information to verify foreign income is being reported and foreign accounts being disclosed.

c. What are 4 ways that returns are selected for examination?

1. Potential participants in abusive tax avoidance transactions – Some returns are selected based on information obtained by the IRS through efforts to identify promoters and participants of abusive tax avoidance transactions. Examples include information received from “John Doe” summonses issued to foreign and domestic banks, credit card companies, businesses and participant lists from promoters ordered by the courts to be turned over to the IRS.

2. Computer Scoring – Some returns are selected for examination on the basis of computer scoring. Computer programs give each return numeric “scores”. The Discriminant Function System (DIF) score rates the potential for change, based on past IRS experience with similar returns. The Unreported Income DIF (UIDIF) score rates the return for the potential of unreported income. IRS personnel screen the highest-scoring returns, selecting some for audit and identifying the items on these returns that are most likely to need review.

3. Information Matching – Some returns are examined because payer reports, such as Forms W-2 from employers or Form 1099 interest statements from banks, do not match the income reported on the tax return. Starting this year the IRS is getting this same level of information from foreign banks who have U.S. account holders.

4. Related Examinations – Returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for examination. In examinations that include undisclosed foreign bank accounts, the IRS will look for family relatives who may have the same involvement in foreign accounts and also failed to make the proper disclosures.