I, Robot

For decades now, governments across the world have struggled with where to impose taxes to raise the revenue they need to offer modern services. Should they simply raise rates? Should they broaden the base by eliminating loopholes and deductions? Should they sock it to smokers, drinkers, or other disfavored groups? How about entirely new levies designed to influence behaviors, like a carbon tax or soda tax? The smartest minds in politics and economics have grappled with these questions. Not only have they failed to make everyone happy, they’ve failed to make anyone happy.

At the same time, writers and filmmakers have worked to populate our imagination with a variety of more-or-less human robots. These have included the Laurel and Hardy-esque R2D2 and C3PO of Star Wars fame, the seductively human replicants of Blade Runner, and the self-aware killers of Westworld.

Sooooo . . . how long did you think it would take for some mad genius to make a mashup of taxes and robots? Well, today is that day, and Microsoft founder Bill Gates is that genius. His proposal is exactly the sort of thing you’d expect from a guy who dropped out of college to lead the personal computer revolution. Forget trying to squeeze more taxes out of people — let’s just tax the robots!

“Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

At first blush, taxing robots might sound like science fiction. But robots don’t mind paying taxes. They don’t feel pain at the thought that their hard-earned money is going to pay for government spending they might not support. They don’t sweat late nights wrestling with W2s, quarterly estimates, or tax forms. And, at least as far as we know, no robot has ever opened a secret bank account or shell corporation in some sunny Caribbean tax haven.

Of course, robots can’t really pay taxes. In practice, taxing Team Robot would mean taxing the businesses that own the robots and use them to replace human labor. It’s really just a shift from taxing labor to taxing capital. Taxes could likely be calculated on a per-head basis, or an amount based on the revenue the robot helps produce, and be paid to wherever the robot lives.

Taxing robots can also help make up for the money government loses by not being able to tax the workers the robots replace. Right now, there are 3.5 million truck drivers hurtling down America’s highways, along with 220,000 taxi drivers and 160,000 Uber drivers. The driverless car revolution is sure to replace some of those jobs. That will torpedo taxes and be a real windfall for businesses that no longer have to hire human workers. Taxing the robots can help restore the current balance.

If taxing robots works, there’s no limit to where we can turn next. Taxing smartphones? Taxing video games? Taxing the Muppets? It’s all fun and games until somebody tries to tax you. Good thing you’ve got us! We’re here to give you the plan you need to pay less . . . so call our tax preparers on 773-728-1500 and you can focus on important things like the robot takeover!

Monkey Business

In Roman mythology, the hero Hercules used his divine strength to smash through the mountain that used to be Atlas. This created the Straits of Gibraltar, linked the Atlantic and the Mediterranean, and forged the famed Rock of Gibraltar. The so-called “rock” is an enormous limestone monolith, rising 1,398 feet nearly straight up from the sea, and making Gibraltar a key strategic crossroad. It’s also a natural paradise. It’s home to over 500 species of plants, as well as the famed Barbary macaques, which are the only wild monkeys living in all of Europe.

Admiral George Rooke seized Gibraltar from Spain in 1704, and the Treaty of Utrecht ceded it to the British in 1713. But the treaty didn’t specify a border, and the Spaniards are still bitter bumblebees about the whole thing. Local legend holds that when the monkeys leave, so will the British. Winston Churchill took that legend seriously enough that during World War II, when the population had dwindled to just seven, he issued an order to keep the population at no less than 24. (More about the monkeys in a bit.)

The territory today covers 2.6 square miles, including the Rock. That’s barely a tenth the size of Manhattan. It’s a bustling port and popular tourist destination. But there’s little industry to speak of, and no agriculture at all. So how does a dinky little flyspeck of a state like that make a living? Well, there’s new money coming in from online bookies and casinos. And like many territories clinging to the remnants of the British empire, it’s become a tax shelter.

Gibraltar has no VAT tax. No sales tax. No wealth tax. No tax on interest, dividends, or capital gains. No gift or estate tax. Personal rates are capped at 26.25%. There’s now a flat 10% tax on most corporations. Does that make for a true “tax haven”? Not necessarily — the government is proud to comply with OECD tax standards and our own Foreign Account Tax Compliance Act, which strong-arms foreign banks into identifying Americans with accounts topping $50,000. Gibraltar proudly calls itself a low-tax zone, and even sued a Spanish newspaper for calling it a “tax haven.”

Still, the friendly tax regime has made Gibraltar home to 30,000 people and 30,000 corporations. That’s quite a ratio! Data nerds will appreciate that Gibraltar has the second-highest number of “Big Four” accounting offices per capita (behind only the British Virgin Islands) and twelfth-highest number of banks. Conspiracy theorists will note that Mossack Fonseca, the law firm at the heart of last year’s Panama Papers revelations, kept an office overlooking the harbor before closing it down in the wake of the story.

Gibraltar even has some natural tax collectors. We’re talking about those macaques, who live in troops on the upper Rock. They share 99% of our DNA, which makes them curious and intelligent. And they have opposable thumbs, which makes them nimble and dextrous. They’re more than happy to pickpocket “tax” visitors of food and even items like hats, sunglasses, earrings, and wigs. Watch out!

You might think after reading all this that your next move should be to someplace like Gibraltar. In fact, the nonprofit Tax Justice Network ranks our own United States as the number three tax haven in the world. The reality is that you don’t need to move offshore to save money on taxes — you just need a proactive plan to make the most of legal opportunities here at home. So call our tax preparers on 773-728-1500 for that plan — we promise no monkeying around!

Fixed This For You

For generations, Americans fostered a culture of thrifty self-reliance, especially where it comes to taking care of our stuff. It started all the way back in pioneer days, and living on the frontier’s edge. Back when Pa Ingalls lived in that little house in the big woods, if his saw broke, he couldn’t just order up a replacement on Amazon. He had to fix it, or he would have a tough time heating his house for the winter! Ma had one nice dress, for Sunday church, and when she got home she spent the rest of the day taking care of it. Folks mended and darned and repaired until household items had more lives than the family cat.

More recently, though, we’ve become a throwaway society. Maybe it’s the flood of cheap, shoddy stuff from Walmart and China. Even formerly big-ticket purchases like TVs are cheap enough now that it rarely makes sense to repair them. (Think about it — your family room TV may have cost less than your phone.) Even real estate has become disposable, as thousands of Americans buy perfectly serviceable houses for the land they sit, then and tear them down to replace with something bigger (and usually gaudier and not as well built).

Our democratic socialist friends in the Kingdom of Sweden have noticed the same trend, and they’re not very happy about it. (Yes, Sweden is still a monarchy — King Carl XVI Gustaf hands out the Nobel Prizes every year, and collects Porsche 911s.) It might seem ironic for the country that unleashed IKEA’s particleboard aesthetic on the world to champion durability. But they’ve expressed it through their tax code, of all things, by passing a new law cutting taxes on fixing things.

Here’s the scoop. Like most European countries, Sweden imposes a value-added tax, which is a form of sales tax levied at each level of production (such as from producer to distributor to retailer). In Sweden, the tax is 25% for most goods and services, 12% for restaurant meals and hotel stays, and 6% for printed materials, cultural events, and travel within the country. For 2014, the VAT raised 353 billion krona ($39 billion dollars, give or take a couple of meatballs), which amounts to 21% of the country’s revenue.

Last November, the legislature chopped the VAT tax on repairs to items like bicycles, shoes, and clothing, from 25% to 12%. The goal is to encourage Swedes to buy higher-quality products. They also “Sweden the pot” by letting taxpayers deduct half the cost of repairs they make to appliances like refrigerators, ovens, and dishwashers. This makes repairs cheaper and helps keep repairmen employed in Sweden. (We suppose it could be possible to outsource refrigerator repairs to China or Mexico, but your food would probably melt before it gets back.)

Per Bolund, Sweden’s Minister for Financial Markets, told BBC News, “I think it will be a good incentive and I think there’s also a possibility that people will buy high-quality products and repair them, rather than buying cheap products they know will break down and then buy something new instead.” He estimates the new law will cost Sweden about $250 million krona, not to mention slowing the growth of landfill fjords.

As long as we’re on the topic of taxes and maintenance . . . how’s your tax plan looking these days? Still shiny and new? Or showing some wear and tear at the seams? Tax planning isn’t something you do just once and forget about. It’s an ongoing process that needs periodic maintenance and tuning. So call our tax preparers  on 773-728-1500 to help keep your plan running in tip-top shape! (And if you don’t already have a plan, what are you waiting for?)

Names!

Every year, the IRS gives us a peek inside the wallets of the highest-earning 400 Americans. It’s full of juicy facts like their average income ($318 million in 2014), how much they give to charity ($37 million each) and how much they pay Uncle Sam ($73.5 million). But there’s one set of facts the IRS guards as carefully as the secret formulas they use to decide who gets audited — the top taxpayers’ names. That wasn’t always the case. Back in 1924, the stock market was soaring, flappers were dancing the Charleston, and bootleggers were exploiting arbitrage opportunities in cross-border commodity transactions. The federal income tax wasn’t quite the big deal it is today. For starters, it didn’t kick in until you earned $5,000 of taxable income (about $71,000 in today’s dollars). Just seven million out of 114 million Americans even filed returns. Form 1040 and its instructions were just two pages each.

That’s when Congress decided to shake things up. Tax rates were still near their wartime highs, and new gift and estate taxes were unpopular. So the Revenue Act of 1924 dropped the top rate to 46% on incomes over $500,000, reduced the estate tax, and repealed the gift tax entirely. And, much to the delight of gossips everywhere, it directed local tax collectors to publish the names, addresses, and tax bills for every filer in their district.

Topping the national list, to nobody’s surprise, was Standard Oil heir John D. Rockefeller, who paid $6,277,669 (just north of $89 million today). Henry Ford and his son Edsel brought home the silver and the bronze. Treasury Secretary Andrew W. Mellon was number four. And lucky Payne Whitney, heir to the Payne and Whitney family fortunes, was number five.

The rest of the top 100 includes plenty of old-money names like Vanderbilt, Astor, and Guggenheim, along with newer Gilded Age tycoons and their progeny. The average top earner was married, fiftyish, with two children and five servants. But there were a few exceptions to that predictable profile: tobacco heiress Doris Duke, “the richest girl in the world,” paid $252,241 in tax — at age 17!

Of course, not everyone on the list inherited their fortune. John G. Shedd began his career as a stock clerk for Marshall Field, then rose to run the company. Thomas Lamont, who started out as a reporter for the New York Tribune, became a partner of J.P. Morgan and helped President Wilson negotiate the Treaty of Versailles. Arthur Cutten started out as a $4/week clerk for a Chicago commodity broker before speculating his way into, then out of, a $100 million fortune. He died under indictment for tax evasion.

Why did Congress pass a law making federal income tax bills public? Progressive supporters argued it would discourage cheating. Big-city newspapers split on whether to publish the information, with about half going for what today’s editors call “the easy clickbait” and the others sanctimoniously resisting the temptation. Just two years later, the buzzkills in Washington repealed the publicity provision, and tax returns have been private ever since.

Most of yesterday’s fortunes have long since faded into history, divvied up by generations of heirs or diverted into philanthropic foundations. But there’s one lesson that survives a century of changing fortunes, and it’s worth heeding, whether you’re a flashy celebrity or a discreet millionaire next door: the key to paying less is planning. So call our tax preparers on 773-728-1500 and count on us to help you keep more of your fortune!

Better Call Saul!

Upcoming Important Deadlines-

   March 15th:

       – Corporate Tax Returns DueDue date of 2016 income tax returns for calendar year S-Corporations (Form 1120S). An automatic six-month extension may be obtained.

      – Partnership Tax Returns Due Due date for 2016 income tax returns for Limited Liability Companies (2 member or more LLCs), General Partnerships, and Limited Partnerships (Form 1065). An automatic six-month extension may be obtained.

       Contact Salman Anwar at our office to file your tax return or extension at Salman@VadariaGroupCPA.com

 

April 15th:

        – ‘C’ Corporations Tax Returns Due Due date of 2016 income tax returns for calendar year C-Corporations (Form 1120).  An automatic five-month extension may be obtained.

        – Individual Tax Returns Due – Due date for 2016 income tax returns for Individuals (Form 1040).  An automatic six-month extension may be obtained.

        Contact Salman Anwar at our office to file your tax return or extension at Salman@VadariaGroupCPA.com

 

 

On January 20, 2008, AMC debuted a promising new drama called Breaking Bad. The series chronicled the highs and lows of high-school chemistry teacher Walter White, who was diagnosed with terminal lung cancer and put his knowledge to work opening a meth lab to secure his family’s financial future. Millions of viewers became addicted to White’s exploits as he plunged deeper and deeper into a life of crime, breathlessly watching him juggle relationships with his DEA-agent brother-in-law, arms dealers, cartel soldiers, and crooked strip-mall lawyer Saul Goodman. All fun to watch, sure . . . but there’s a reason the announcer always says, “Kids . . . don’t try this at home.”

Jack Vitayanon is a 41-year-old, Ivy League-educated attorney in the IRS Office of Professional Responsibility, where he investigates crooked accountants, attorneys, and IRS agents. He even taught a class called “Tax Lawyering and Professional Responsibility in Tax Practice” at Georgetown Law School. But apparently he needed to crank out some adventure in his life. And while we may never know if he drew his ambition from AMC’s antihero, it’s crystal clear that he decided to join the methamphetamine trade.

Agents from the Department of Homeland Security say that back in December, they intercepted a FedEx package containing 460 grams of meth at the end of its journey from Arizona to Long Island. (Everyone knows you ship your drugs FedEx instead of regular mail — who needs U.S. Postal Inspectors all up in your grill?) The unlucky recipient did what everyone does when they get busted with a pound of meth — he flipped and agreed to rat out someone further up the supply chain. Unfortunately, that chain included Vitayanon, who had been dealing with the Arizona sender since 2014.

Two weeks later, our new confidential source recorded a video chat with Vitayanon, “who was observed in his Washington DC apartment smoking what appeared to be methamphetamine from a glass pipe.” (C’mon, Jack, you never get high on your own supply!) Vitayanon promised to send a “zip” (one ounce of meth) to the source. A day later, he texted to confirm he was packaging the shipment and helpfully provided a FedEx tracking number for the delivery. (You’d expect that sort of attention to detail from an IRS attorney, wouldn’t you?)

Last month, agents tailed Vitayanon as he shipped two more zips to the same source on Long Island. At that point, he was pretty much cooked, and on February 1 he was arrested. Naturally, the Justice Department dropped a Breaking Bad reference in the press release announcing the bust.

Now the  attorney is looking at spending several years surrounded by fellow Walter White wannabes. Adding insult to injury, he might face another smack for failing to pay tax on his side gig. Remember, the IRS doesn’t care how you make your money. They even tweaked the tax code with a special provision, Section 280E, that prevents drug dealers from writing off their legal business expenses. No deductions for delivery and shipping, business use of the home, or even “cost of goods sold”!

Jack Vitayanon won’t be making much money over the next few years, so taxes will be the least of his worries. Unfortunately, you don’t have that luxury. So count on us and call us on 773-728-1500 to help you pay less — legally, morally, and ethically!

Star Power

Upcoming Important Tax Deadlines:

Tax Season is in full swing. Please come to the office to get your Income Taxes done. You can call us on 773-728-1500, fax us your info at 773-728-3534, email us at Salman@VadariaGroupCPA.com or stop by our office.

February 28th: Forms 1099 and 1096 must be mailed to the IRS.

March 15th: Due date for Income Taxes of S-Corporation and C-Corporation for the calendar year 2016.

April 15th: Due date for Individual Income Taxes (Form 1040) for the calendar year 2016.

 

On January 23, the IRS began accepting 2016 tax returns, and that means refund season is officially here. For 2017, the IRS expects 70% of Americans will get refunds, and those refunds will average around $2,840. Yes, if you’re among that 70%, it means you paid in too much over the course of the year and gave the IRS an interest-free loan. (And no, they won’t return the favor.) But millions of Americans still very consciously use their tax withholding as a savings account, and look forward all winter to receiving that sweet check.

That leaves just one nice problem to have — deciding where to spend it all. Feel like blowing it on a vacation? Your friendly travel agent will tell you that airfares to Europe are low and exchange rates are great. Want to update your home? The Wall Street Journal reports that this is an excellent time to buy a big-screen TV. Got kids in college? The bursar will be happy to cash your check, and you won’t even have to feel guilty about it. Feeling responsible? It never hurts to drop more into retirement savings.

Or you could turn to the Daily Horoscope and look to your sun sign for help spending it! Here are some of the site’s suggestions for that windfall:
Aries: “You have no impulse control,” so don’t even think about saving it. Harsh. But given that you can always adjust your withholding throughout the year, and spend those extra dollars the minute you earn them, it’s hard to imagine too many Aries collecting refunds in the first place.

Gemini: “Sort through that big pile of mail, and once you’ve found it, take it straight to the bank.” (Or use direct deposit to defeat temptation!) Of course, with banks averaging a miserly 1% or so on savings accounts, you might as well take it to your favorite casino and put it all on Red.

Leo: “Your tax refund may not be big enough for what you think you deserve.” But $2,840 still isn’t anything to sneeze at — so find your nearest Tiffany store and pick out something that makes you look as good as you feel about yourself, or give someone else a gift they’ll never forget.

Virgo: “The first thing you’ll do is open your spreadsheet or financial management program and enter your refund.” Of course, just having a spreadsheet to track your spending choices doesn’t guarantee they’ll be smart choices, does it?

Scorpio: “Since your sign rules reusing and recycling, consider going green with your greenbacks: put your money into funds that support socially and ecologically responsible companies.” Now there’s a choice you can be proud of.

Aquarius: “Whatever someone suggests you do with your refund, you won’t do it anyway.” Ouch. Still, that doesn’t mean you can’t make smart choices on your own. A little research, a little investigation, and pretty soon you’ll be ready to plunge into something that surprises everyone!

Whatever your sign, our primary goal has always been to help you pay less. But we’re happy to help you with the next step, too — and you’ll probably be happier with our suggestions than something you see advertised on the evening news or ESPN. The biggest refunds don’t come from the stars, they come from planning. So call our tax preparers on 773-728-1500 and we’re here to help you make everything align!

“Step Away From that Soda, Sir”

Upcoming Important Tax Deadlines:

Tax Season is in full swing. Please come to the office to get your Income Taxes done. You can call us on 773-728-1500, fax us your info at 773-728-3534, email us at Salman@VadariaGroupCPA.com or stop by our office.

February 28th: Forms 1099 and 1096 must be mailed to the IRS.

March 15th: Due date for Income taxes of S-Corporation and C-Corporation for the calendar year 2016.

 

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Last year, the Philadelphia City Council slapped a 1.5 cent-per-ounce tax on soda and artificially-sweetened drinks. The new tax, which became effective on January 1, sounds like something intended to fight obesity, diabetes, and other public health threats. Council actually designed it to finance universal pre-kindergarten for Philadelphia schoolchildren and pay for local development projects. However, like many taxes — especially so-called “Pigovian” taxes on market activities that impose societal costs (like smoking and drinking) — the soda tax may create some unexpected consequences of its own.

One and a half cents per ounce doesn’t sound like much. It’s been a long time since you could get much of anything for a penny. But multiply that penny and a half by a 12-ounce can and you’re talking 18 cents. Multiply that by a six-pack and you’re up to $1.08. Those 53-foot “Diet Coke” trucks you see lumbering down the highway hold 194,500 cans of the fizzy stuff. Do a little quick math and you’ll see that means $2,917.50 in tax. (Remember that number; you’ll be seeing it again.)

Naturally, consumers are already unhappy. Retailers are struggling over whether to pass the cost along to consumers. (The tax isn’t added to the retail price like a regular sales tax; it’s paid by the distributor.) Bars and restaurants are clamping down on free refills, as they’re paying almost $60 more for a five-gallon canister of concentrated soda syrup (enough to make 30 gallons of actual soda).

On the bright side, parents of pre-schoolers will be delighted. And there’s another, less obvious group that might smell opportunity here. We’re talking, of course, about the remnants of Philadelphia’s once-mighty mob, from bosses like Joseph “Skinny Joey” Merlino on down to the desperate last-chancers that Jersey Shore native Bruce Springsteen celebrates in hits like “Atlantic City” and “Meeting Across the River.”

A hundred years ago, give or take, Prohibition launched an era of bootleggers and speakeasies. Could the Philadelphia soda tax lead to similar lawlessness? We can imagine the scene already. Burly, unshaven men buying truckloads of soda across the river in tax-free New Jersey. Midnight rendezvous under dark bridges with furtive restaurant and supermarket owners glancing nervously out of the corners of their eyes. Sales of burner cellphones soaring. Whispered signals and codes piercing the night airwaves: “The dice are on the carpet. I repeat, the dice are on the carpet.”

Think it sounds ridiculous? Look at taxes on cigarettes in neighboring New York. The Empire State lights up smokers for $4.35 per pack, compared to just 30 cents down I-95 in nearby Virginia. As a result, a whopping 58% of cigarettes sold in New York are bootlegged. The nonpartisan Tax Foundation reports that “growing cigarette tax differentials have made cigarette smuggling both a national problem and a lucrative criminal enterprise.” At $2,917.50 per truckload, it hardly sounds impossible to see the same thing happen in Philadelphia.

In the long run, lots of taxes turn out to be fairly easy to avoid. Don’t want to pay the Philadelphia soda tax, and don’t want to risk being stopped at the Ben Franklin Bridge with a case of bootleg product? Switch to coffee. Don’t like paying tax on your capital gains? Find a more tax-efficient way to invest. It’s our job to help you find those legal strategies to pay less. So call our tax preparers on 773-728-1500 when you’re ready to put them to work!

 

Tax Apprentice

Upcoming Important Tax Deadlines:

Tax Season is in full swing. Please come to the office to get your Income Taxes done. You can call us on 773-728-1500, fax us your info at 773-728-3534, email us at Salman@TaxCutters.com or stop by our office.

January 31st: W-2s must be issued to the employees. W-2s and W-3s must be sent to the IRS.  If you need help, please call Salman at 773-728-1500 or reach him at Salman@TaxCutters.com

1099s must be issued to the Independent Contractors by January 31st.

February 28th: Forms 1099 and 1096 must be mailed to the IRS.

March 15th: Due date for Income taxes of S-Corporation and C-Corporation for the calendar year 2016.

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Back in 2004, Donald Trump was just another overextended real-estate developer with two divorces and four bankruptcies under his belt. That all changed with the debut of The Apprentice, the show that made “you’re fired!” a national catchphrase. It’s safe to say that without the popularity of The Apprentice, Trump wouldn’t have just taken the oath of office to become the country’s 45th President.

Apprentice candidates completed all sorts of business-oriented tasks, like opening a lemonade stand, designing an ad campaign for a private-jet service, and managing a restaurant on New York’s bustling Times Square. So we got to thinking . . . what would happen if NBC rolled out a season of Tax Apprentice? Who would host it? Who would compete? And what sort of challenges would they embrace to entertain the breathless millions who would anxiously wait for each “very special episode”?

We’re going to need a colorful celebrity host, one who knows their way through the jungle of the 70,000-page tax code. We considered baseball hit king and convicted tax felon Pete Rose. We considered Venice Film Festival winner and convicted tax felon Wesley Snipes. And we considered legendary country crooner and tax scofflaw Willie Nelson. But we think the strongest pick is Beanie Babies creator Ty Warner, who launched a billion-dollar business and paid a $53 million civil penalty for hiding income in a Swiss bank account.

Beyond the draw of the host, the real action comes from the weekly competitions featuring a representative sampling of astonishingly good-looking CPAs, Enrolled Agents, and Registered Tax Return Preparers:

  • Light Bulb Challenge: How many tax professionals does it take to screw in a lightbulb? Let’s find out! The challenge starts with a bare bulb screwed into a 20-foot ceiling and a file cabinet full of back tax returns, brokerage statements, and miscellaneous travel receipts. The winning team will be the first one to stack the files high enough to climb up and change the lightbulb without incurring a deductible medical expense.
  • Deduction Scavenger Hunt: Teams sit down with a moderately-complicated and totally clueless business owner’s annual returns: three 1065s, an 1120S, an 1120, and a 1040. Their goal is to comb through the returns to find the mistakes and missed opportunities that cost the owners thousands in tax, then prescribe solutions to rescue those wasted dollars.
  • Audit Lottery: Everyone knows that switching a business owner from a sole proprietorship to an S corporation can slash their risk of audit by over 50%. Teams will scrub a business owner’s return, identify opportunities to “fly under the radar,” and make sure all the paperwork is in order. Then a panel of guest judges made up of experienced auditors will put on their green eyeshades and examine the returns to see who’s the cleanest.

(Hey, wait a minute, a couple of those are completely legitimate!) Here’s today’s bottom line. Paying less tax isn’t a game, and you can’t afford to treat it like a reality show. Tax planning is serious business and you deserve serious expertise on your side. So call our tax preparers on 773-728-1500 to pay less, and tell unnecessary taxes, “You’re fired!”

Tax Thoughts for the New Year

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Happy New Year!!

I’m back to work after a couple of weeks of vacation in Pakistan.

Well, 2017 is likely to be a big year for taxes. House Speaker Paul Ryan and President-elect Donald Trump haven’t been shy about their New Year’s resolutions to rewrite the tax code, and we could be in for quite a ride. So here are some thoughts to start exercising your 2017 tax-planning muscles:

  • “If you get up early, work late, and pay your taxes, you will get ahead — if you strike oil.”
    J. Paul Getty
  • “If you are truly serious about preparing your child for the future, don’t teach him to subtract — teach him to deduct.”
    Fran Lebowitz
  • “The question is: What can we, as citizens, do to reform our tax system? As you know, under our three-branch system of government, the tax laws are created by: Satan. But he works through the Congress, so that’s where we must focus our efforts.”
    Dave Barry
  • “The avoidance of taxes is the only intellectual pursuit that carries any reward.”
    John Maynard Keynes
  • “The taxpayer — that’s someone who works for the federal government but doesn’t have to take the civil service examination.”
    Ronald Reagan
  • “Income tax returns are the most imaginative fiction being written today.”
    Herman Wouk
  • “Dear Tax Commissioner: Three years ago I cheated on my taxes. Since then I have been unable to sleep at night. Enclosed is $5,000. If I still can’t sleep, I’ll send you the rest.”
    Anonymous
  • “Just because you have a briefcase full of cash doesn’t mean you’re out to cheat the government.”
    Pete Rose
  • “The difference between death and taxes is death doesn’t get worse every time Congress meets.”
    Will Rogers
  • “Worried about an IRS audit? Avoid what’s called a red flag. That’s something the IRS always looks for. For example, let’s say you have some money left in your bank account after paying taxes. That’s a red flag.”
    Jay Leno

We wish we could tell you exactly what’s going to happen with taxes, in 2017 and beyond. But whatever the future holds, we can promise we’ll be here to help you make the best of it, in 2017 and beyond. So please give our tax preparers a call on 773-728-1500 and remember, we’re here for your family, friends, and colleagues too!

Creepy Little Elf Has Nothing on the IRS

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Phew! I’ve come back from my trip to Pakistan and I’m still jet lagged.  Last night I slept at 9pm and woke wide open at 1:30am with no sign of sleep near me.  I’m sure, I will sleep during the day and this exercise will continue for a couple of days.  Anyways, since I had nothing to do, I thought this is a good time to write a few lines for you:

If you have kids and you celebrate Christmas, you’re probably familiar with the Elf on the Shelf — a storybook and accompanying doll that help encourage your little darlings to behave themselves before the holidays. The book tells wide-eyed children how Santa marshals an army of scout elves to sneak into their houses before Christmas, then fly back to the North Pole every night to rat out the stinkers. Every day the elves return find a new place to hide, which turns this whole monstrous Fourth Amendment violation into an adorable ongoing game of hide and seek.

Parents love how the elf enforces good behavior. (Mommy says it’s that or an extra glass of wine!) But not everyone is a fan. The Atlantic magazine mocks it as a “marketing juggernaut dressed up as a tradition” that bullies kids into thinking good behavior equals presents. The Washington Post condemns it as “just another nannycam in a nanny state obsessed with penal codes.” And a Canadian professor argues that the elf brainwashes kids into accepting the surveillance state: “if you grow up thinking it’s cool for the elves to watch me and report back to Santa, well, then it’s cool for the NSA to watch me and report back to the government.”

Our friends at the IRS have their own version of the Elf on the Shelf. In fact, they have several — and they’re all more effective than the pointy-hatted little informant spying on your kids. Here’s how the IRS knows if you’ve been naughty when it comes to reporting your presents throughout the year:

  • The first “elf” is the IRS’s computerized income matching program. For example, employers report wages on Form W2, mutual funds report investment income on Form 1099-DIV, and partnerships report partners’ income and expenses on Schedule K1. IRS computers cross-check these figures to your return to make sure you’ve reported those amount. If you haven’t, you’ll get a lump of coal notice calculating how much more you owe and a deadline for paying up.
  • If computerized matching fails, the IRS can squeeze more information out of third parties. If the IRS elves suspect mischief, they can subpoena your bank records then add up your deposits to make sure you’ve reported the income. If those deposits add up to more than you’ve reported, the IRS will assume the difference is taxable. Good luck convincing a Tax Court judge that Santa left that extra cash in your stocking!
  • Finally, the IRS dangles cash bounties to catch tax cheats. The IRS Whistleblower Office pays rewards of up to 30% of amounts it collects in disputes topping $2 million. Bradley Birkenfeld, who helped the IRS score an $852 million settlement with Swiss bank UBS, spent two years in jail for his part in the scheme, but walked away with a $104 million reward for his effort. We can think of an elf or two who would be happy to make that trade!

The IRS systems may not be quite as effective as what the CIA or Department of Homeland Security can put to work. But they put that stool pigeon Elf to shame, at least until they can force Santa into filing a 1099-GIFT for every present he leaves.

Here’s the bottom line, for the elf and for you. Planning is the key to paying less tax, and you can do it without worrying about who’s watching. So call our tax preparers on 773-728-1500 to pay less in 2017, and have a Happy New Year!