January 8, 2014

Test Your Tax Knowledge

by Kenneth Hoffman in Business Counsel, Tax Counsel, Tax Planning

They say that knowledge is power, and that's especially true with taxes. So here's a quick quiz to test your tax knowledge in 2014. But look out — the questions (and the answers) might not be what you expect!:

We'll start with an easy one. Last year's "fiscal cliff" legislation raised the top marginal tax rate to 39.6%. What's the top effective rate?

A. 39.6%
B. 43.4% (39.6% plus 3.8% Medicare tax)
C. >43.4% (depending on "PEP" and "Pease" phaseouts)

Give up? It's a trick question — all three answers can be correct, depending on your own circumstances!

Alright, let's shift gears a bit. The tabloids love running stories about celebrities who run into tax trouble. After all, if they make so much money, shouldn't they be able to afford their taxes? So here's our next question — which of the following sets of celebrities ran into tax trouble in 2013?

A. Boxer Manny Pacquiao, rapper MC Hammer, and racecar driver Juan Pablo Montoya
B. Actor Stephen Baldwin, singer Lauryn Hill, and "Beanie Babies" creator Ty Warner
C. Actor Al Pacino, rapper Fat Joe, and "Real Housewife of New Jersey" Teresa Giudice

Well, which did you pick? The answer is, another trick question — every single one ran into tax problems last year!

Okay, final question. We know that tax laws can be impenetrably dense and hard to understand. So maybe "context" will give you a hint. Which of these passages is taken from the 2013 fiscal cliff act, and which is taken from California's workers' comp regulations?

A. "Notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds."
B. "In the case of covered OPD services furnished on or after April 1, 2013, in a hospital described in clause (ii), if— (I) the payment rate that would otherwise apply under this subsection for stereotactic radiosurgery, complete course of treatment of cranial lesion(s) consisting of 1 session that is multisource Cobalt 60 based (identified as of January 1, 2013, by HCPCS code 77371 (and any succeeding code) and reimbursed as of such date under APC 0127 (and any succeeding classification group)); exceeds (II) the payment rate that would otherwise apply under this subsection for linear accelerator based stereotactic radiosurgery, complete course of therapy in one session (identified as of January 1, 2013, by HCPCS code G0173 (and any succeeding code) and reimbursed as of such date under APC 0067 (and any succeeding classification group)), the payment rate for the service described in subclause (I) shall be reduced to an amount equal to the payment rate for the service described in subclause (II)."

Drumroll, please . . . the answer is, it's another trick question — both examples of sterling prose appeared in the fiscal cliff law! (Quit complaining about the trick questions — it's a tax quiz, after all!)

Don't be upset if you didn't get all three questions right. (Nobody else did, either!) Fortunately, there isn't any real money at stake. But that won't be true come April 15. So call us now for the plan you need to come up with the right answers in 2014!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Click here to schedule an appointment with Kenneth Hoffman.

If you found this article helpful, I invite you to leave a comment and please share it on twitter, facebook or your favorite social media site and with your friends, family and colleagues. Thank you.

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC.

Follow us on Twitter at @TaxReturnCoach, and let us know how we're doing.

December 27, 2013

Thoughts on Taxes for 2014

by Kenneth Hoffman in Tax Counsel, Tax Planning

2013 has been a big year for taxes. The "fiscal cliff" deal boosted the top federal income tax rate to 39.6%; "Obamacare" added new taxes on top earners; and dozens of state and local governments raised their taxes, too. Congress will finish 2013 even more divided than it began, which will probably protect us from new taxes next year. But here are some quotes to ease the sting of this year's higher bills:

"[A tax loophole is] something that benefits the other guy. If it benefits you, it is tax reform."
Sen. Russell B. Long (D-LA)
"The Eiffel Tower is the Empire State Building after taxes."
Anonymous
"Our party has been accused of fooling the public by calling tax increases 'revenue enhancement.' Not so. No one was fooled."
Dan Quayle
"When we played, World Series checks meant something. Now all they do is screw up your taxes."
Hall of Fame pitcher Don Drysdale
"When it comes to finances, remember that there are no withholding taxes on the wages of sin."
Mae West
"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
"Late one night, just blocks from the Capitol, a mugger jumped into the path of a well-dressed fellow and stuck a gun in his ribs. 'Give me your money,' the thief demanded. 'Are you kidding?' the man said. 'I’m a U.S. congressman.' 'In that case,' the mugger growled, cocking his weapon, 'give me my money.'"
Playboy Magazine
"A government which robs Peter to pay Paul can always depend on the support of Paul."
George Bernard Shaw

On a more serious note, we wish you all the best this holiday season, and we look forward to serving all your tax-planning needs in 2014!

December 18, 2013

The Naughty List

by Kenneth Hoffman in Tax Counsel

Christmas is almost here, and that means millions of parents across America are telling their kids to behave themselves or risk winding up on the "Naughty List." (Admit it — if you've got kids, and you celebrate Christmas, you've done it yourself.) But while kids may be on their best behavior, grownups sometimes fail to make the connection between their own behavior and what Santa leaves under the tree. This is especially true when it comes to taxes! Misbehave there, and you risk a lot more than a lump of coal. So here are four cautionary tales to consider as the holiday approaches.

Joel Grasman worked as an electrician for the Metropolitan Transit Authority in Long Island. He and his wife owed the IRS $10,000 in tax for failing to report a loan from her pension. So, late one night, Grasman snuck into the yard where he works to steal some welding machines to pay off that debt. He loaded the machines onto his truck just fine, but forgot to lower the long boom on the truck before driving off to store the machines at his brother's garage. Uh oh. “I wanted to get out of there before I attracted any attention and I forgot to put the boom down,” he told the New York Post. “I started driving and then I started to see sparks of light in the sky.” Turns out he had taken down a bunch of power lines, causing an estimated $2-3 million in damages, and leaving 6,100 people without power for their Christmas lights and blinking yard Santas.
Yetunde Oseni was a 37-year-old secretary working for the IRS in Maryland. Like many of us, Oseni loved shopping online, especially on Amazon.com. From 2009-2013, she stuffed her stockings with $8,515 worth of treats, including a chocolate fondue fountain, Bollywood movies, Pampers, Harlequin romance novels, Omaha Steaks, Apple Bottoms skinny jeans, mango body wash, and even a Ginsu knife set. She might still be enjoying her presents now if she had used her own credit card to pay for them. But the IRS gave her a CitiBank MasterCard to pay for office supplies, and it must have been just too tempting. Now she's looking at ten years in a cheerless gray room with no space for any of those goodies. Treasury scrooges say she may have even used her IRS computer to fake the receipts she submitted to cover up her purchases!
Walter Trizila is a more loyal employee than Joel Grasman or Yetunde Oseni — but can he make the "Nice List"? Last November, IRS officers showed up to seize a dump truck from his employer. Trizila climbed into a front-end loader, scooped up a load of dirt, drove it towards the officers, and dumped the dirt at their feet. After pleading guilty to a misdemeanor charge of assault, he accepted three years probation — and promised to attend anger management class.
Robert Fernandes got a great deal on a foreclosed house in Forks Township, Pennsylvania. But his wife homeschools their three kids, so he's not a fan of the school district tax. Now, you or I might just concede the value in having good public schools, even if we don't have kids using them. But not Fernandes! No, rather than just grumble privately and write the check, he marched to his local tax collectors with a stack of 7,144 dollar bills. He even brought a friend with a camera to document his stunt on YouTube. Fernandes may not have actually broken the law here, but he's still probably going to find himself on the naughty list. (He may have realized it, too, since he brought doughnuts for the county clerk's office!)

Here's the saddest part about all these stories. You don't have to risk finding a lump of coal in your stocking to pay less tax. You just need a plan. And yes, Virginia, there is still time to treat yourself to savings before 2013 runs out. So call us before Santa loads up his sleigh to stuff your stockings with savings to last a year.

December 11, 2013

"Ardente!" is Portuguese for "Hot!"

by Kenneth Hoffman in Tax Counsel, Tax Planning

Tax collectors generally don't choose their line of work for the pay. Glassdoor.com, a gossipy website covering salaries and careers, reports the average Revenue Agent earns $73,967. Careerbliss.com tells us the average criminal investigator earns $99,000 — which makes sense considering there's at least a chance they get shot at while working. That's not bad coin . . . but it's hardly enough to party with the rich and famous.

But what's true here in the United States may not be true in the rest of the world. Our neighbors to the south in Brazil have been transfixed lately by a sordid scandal of glitz and bling featuring — you guessed it — a gang of tax collectors, accused of helping construction companies evade over $200 million in taxes.

Our story starts, as so many tawdry stories do, with a woman scorned. Luis Alexandre Cardoso de Magalhaes met his former girlfriend, Vanessa Alcantara, at a sleazy nightclub. (She says they met when she tried to sell him a cellphone plan.) Magalhaes worked as a tax inspector for the city of Sao Paolo, earning $82,000 to oversee the city's "Imposto sobre Servicos," or service tax. He was also, it turns out, working with three other officials to help developers evade the tax. The builders delivered bags of cash with up to $30,000 every week to his office. Magalhaes would spirit the cash out of the building, and he and Alcantara would count it and divvy it up together in her living room.

And what did our young lovers do with their ill-gotten gains? Secure their retirement with a portfolio of carefully diversified mutual funds and prudently-laddered municipal bonds? (That wouldn't make much of a story, would it?) No — they blew the loot on $500 boxes of Cuban cigars, $2,260 bottles of wine, a Porsche Cayenne, and private plane rides to resorts on Angra dos Reis, an island off the coast. The couple dropped $50,000 to decorate Alcantara's apartment and splurged on $2,200 hotel suites. Magalhaes also showered up to $4,500 a night on a cavalcade of young women who valued their cash flow more than their virtue.

The party came to an end, as all parties must, when Magalhaes and Alcantara separated after giving birth to a son, and Alcantara became enraged at what she saw as a meager monthly child support offer. She dimed him out to city prosecutors, and the story went straight to the tabloids. The case has even produced two brand-new celebrities — Magalhaes's new girlfriend, Nagila Coelho, a personal trainer who plans to start her own line of bikinis, and Alcantara herself, who plans to run for office. Her proposed slogan? "Being a thief is easy; I'll be honest among the thieves."

We understand that you want to pay less tax, too. But we know you're not willing to risk scandal to do it. So we give you a plan to pay less, legally. Everything we do is court-tested and IRS-approved. The best part is, there's still time to act before 2013 draws to a close. So call us now for the plan you need!

Let's Talk! For a deeper conversation on how this issue might affect you or your business, or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Click here to schedule an appointment with Kenneth Hoffman.

If you found this article helpful, I invite you to leave a comment and please share it on twitter, facebook or your favorite social media site and with your friends, family and colleagues. Thank you.

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC.

Follow us on Twitter at @TaxReturnCoach, and let us know how we're doing.

December 4, 2013

Coach's Challenge

by Kenneth Hoffman in Tax Counsel, Tax Planning

December is here, and for millions of college football fans, that means following their favorite coach to a New Year's bowl game. In Tuscaloosa, Alabama's Nick Saban is reeling from the Crimson Tide's last-second loss to archrival Auburn in this year's "Iron Bowl." In Columbus, Ohio State's Urban Meyer is celebrating 24 straight victories after his Buckeyes beat Michigan by just one point in "The Game." And further west, Washington's Steve Sarkisian is celebrating his Huskies win over the Washington State Cougars in the 106th "Apple Cup."

As always, these coaches and dozens more will be paying attention to the latest Bowl Championship Series standings. But this year, they'll also be paying attention to the IRS. That's because a new strategy might help them block taxes when they switch jobs.

College football coaches can make a lot of money. Alabama's Saban will make at least $5.65 million this year, and 51 coaches make more than the average pro player ($1.9 million). In 27 states, the highest-paid public employee is a football coach. Naturally, that means they pay a lot of tax. So this is more than just an academic discussion — there's a lot of money at stake.

Let's take a closer look here. Butch Jones led the University of Cincinnati Bearcats to a 23-14 record before the University of Tennessee hired him away to coach the Volunteers. As part of Jones' new deal, Tennessee paid $1.4 million to buy out his contract with Cincinnati. The Bearcats, in turned, poached Tommy Tuberville away from Texas Tech — and as part of that deal, paid $943,000 to buy out Tuberville's old contract with the Red Raiders. (Why not? They can take it from the $1.4 million they're getting from Tennessee, and still have enough left over to pay an assistant or two!)

Now, traditionally, those payments Tennessee and Cincinnati made to buy out their new coaches' obligations under their old contracts have been considered additional income to the coaches, and thus taxable to them. "What's the big deal?" you might ask. "So Tuberville recognizes $943,000 in extra income. Can't he just deduct that same amount as an employee business expense and zero out the income?" Well, yes . . . but. First, employee business expenses are a miscellaneous itemized deduction, subject to a 2% floor. (That means Tuberville gets no deduction for the amount equal to the first 2% of his adjusted gross income.) That alone would make over $60,000 of Tuberville's payment nondeductible. Second, and even worse, employee business expenses are a preference item for the dreaded Alternative Minimum Tax, which could wipe out the deduction entirely!

Back in 2007, two law school professors argued that the buyout should be treated as a nontaxable business obligation. They reached that conclusion on two grounds: 1) the school's reimbursement actually converts the coach's payment into a non-itemized deduction, which avoids the 2% floor and AMT; and 2) the payment is made for the school's benefit and not as compensation for the coach. Schools have taken notice, and both Tennessee and Cincinnati worded their new coaches' contracts to take advantage of this interpretation. As coaches' salaries and their corresponding buyout obligations go up, we should see more and more of these changes.

We realize most of you won't ever tackle these sorts of seven-figure challenges. But you still need a strong defensive line when you suit up against the IRS. That's where we come in. We give you the plan you need to keep the tax man out of your end-zone. But time really is running out to save tax this season. So call us, now, before the IRS runs out the clock!

November 27, 2013

That's A Lot of Gravy!

by Kenneth Hoffman in Business Counsel, Tax Counsel

Back in 1621, a group of hardy Pilgrims sat down for a three-day festival of thanksgiving to celebrate surviving plague, starvation, cold, scurvy, Indian attack, and all the other obstacles that made life in the "new world" so delightful. They feasted on game birds, flint corn, venison, eels, shellfish, and native vegetables including beans, turnips, carrots, onions, and pumpkins. (No butter or flour, though, which meant no pumpkin pie. And aren't you glad we remember them now for turkey instead of eels?)

242 years later, President Abraham Lincoln proclaimed the first "official" Thanksgiving — a national day of "Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens." Since then, it's become one of America's favorite holidays, a four-day weekend of friends and family without the Christmas-season hype.

You know who else loves Thanksgiving? Our friends at the IRS, of course. That's because they get to stuff themselves with taxes on everything connected with our celebration!

Sales taxes on turkey and trimmings pile up like calories on your plate. The American Farm Bureau Federation reports that the average 16-pound turkey will cost $21.76 this year. At an average 7.25% combined state and local sales tax, that makes $1.58 in tax for the bird alone. Throw in some potatoes, stuffing, cranberry sauce, Aunt Edna's special green bean casserole, and the obligatory pumpkin pie, and the taxes alone could feed a hungry diner any other day of the year.
Sales and excise taxes on beer, wine, and liquor are even higher than on food. Taxes make up 33% of the total cost of a bottle of wine, 44% of the total cost of a case of beer, and even more for the bourbon in Uncle Harry's old fashioned.
What Thanksgiving would be complete without traveling over the river and through the woods? Here's where Uncle Sam really cleans up. Gas taxes average 49.5 cents per gallon. If you're traveling farther, the taxes on a $376 average plane ticket include a $28.20 federal excise tax, a $3.90 flight segment tax, a $4.50 passenger facility charge, and a $10 "September 11 Security Fee." (That's before you pay even more to check your bag, board early to snag space in an overhead bin, or claim an extra three inches of legroom!) The hotel tax on an average $95.61 room runs $13.12. Oh, and if you're renting a car, plan on another 13.21% tax there. Now you know why the IRS says "cha-ching" when you sing "to Grandmother's house we go!"

All told, Uncle Sam and his colleagues in state and local tax departments take in $3.6 billion in Thanksgiving taxes. That's enough to buy 165 million turkeys — enough to feed every man, woman, and child in America, with plenty left over for sandwiches.

This Thanksgiving season, you're probably not setting a place at the table for Uncle Sam. We can't do much about the tax you'll pay on your celebration. But we can help you with the tax you'll pay on the income you earn to pay for it. So don't be a turkey — call us now for the plan you need, and next year you'll really have something to give thanks for!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Click here to schedule an appointment with Kenneth Hoffman.

If you found this article helpful, I invite you to leave a comment and please share it on twitter, facebook or your favorite social media site and with your friends, family and colleagues. Thank you.

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC.

Follow us on Twitter at @TaxReturnCoach, and let us know how we're doing.

November 20, 2013

What's In A Name

by Kenneth Hoffman in Business Counsel, Tax Counsel

In Shakespeare's most recognized tragedy, the star-crossed lover Juliet asks "What's in a name? That which we call a rose by any other name would smell as sweet." Now, that may have been true back in Juliet's day. But is it still true now in today's era of celebrity branding?

Here's the deal. Back in 2009, executors for the King of Pop, Michael Jackson, filed an estate tax return reporting the value of his assets at his death. Jackson had been famously extravagant during his life, blowing through hundreds of millions in earnings and borrowing hundreds of millions more. His 2,600-acre "Neverland" ranch in Santa Barbara that included two railroads, a petting zoo, and a Ferris wheel reportedly cost $2.5 million per month to maintain. He spent millions more on travel, entertainment, antiques, and paintings. And feeding "Bubbles," his pet chimpanzee, couldn't have been cheap, either.

You would expect his estate to be pretty impressive, right? So, what was his "final score" as reported on Form 706 "United States Estate (and Generation-Skipping Transfer) Tax Return"? A mere $7 million. What's even more incredible, the executors valued Jackson's name and likeness at just $2,105. (Where did the $5 come from, anyway? Why not $2,104, or $2,106?)

Now, that may not be as ridiculous as it first seems — "Jacko" was in debt up to his eyeballs for much of his life, and he may have owed as much as $500 million at his death. But $7 million still seems a little light for an estate that earned $160 million in 2012 alone. Jackson's estate has actually earned more since his death than any living entertainer during that same time!

Our friends at the IRS thought that valuation was (wait for it . . .) bad. On July 26, they told Jackson's executors that their number was $1.1 billion, including a whopping $434 million for his name alone. Since they don't stop 'til they get enough, the IRS promptly billed the estate for an additional $505.1 million in tax, and added a $196.9 million undervaluation penalty as well!

Not surprisingly, Jackson's estate told the IRS to beat it. A spokesman said the IRS's valuation was "based on speculative and erroneous assumptions unsupported by facts or law," and added that the estate had already paid over $100 million in income taxes. And now they wanna be starting something in the U.S. Tax Court. They've filed Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co-Executor v. Commmissioner of Internal Revenue and set the stage for a legal thriller.

You may not have 26 American Music Awards, 13 number one singles, or the best-selling album of all time. But you're probably even more interested than Michael Jackson in keeping what you make. The answer, of course, is planning. But it's nearly Thanksgiving, and time is running out to save in 2013. So call us now to set up your appointment to get the savings you really want.

November 13, 2013

#Windfall

by Kenneth Hoffman in Business Counsel, Tax Counsel

Psychologists agree that the ability to concentrate is key to achieving our goals. But today's high-tech world is full of distractions, from thousands of cable TV channels to millions of internet sites, with smart phones constantly within reach. Some experts say our attention span is actually shrinking. So should it be any surprise that Americans have fallen in love with Twitter, the online social networking and "microblogging" site that lets users send and read "tweets" limited to no more than 140 characters?

Twitter attracted confusion (and no small amount of scorn) when it debuted in 2006 — co-founder Jack Dorsey admitted that the service is "a short burst of inconsequential information." But there are now more than 200 million "monthly active users" posting more than 500 million tweets per day. Singer Katy Perry currently has the most followers, at 46.8 million. She's trailed by Justin Bieber (46.7 million), Lady Gaga (40.4 million), and Barack Obama (39.5 million). Twitter's ubiquitous "hashtag," the pound sign (#) that denotes keywords, appears everywhere, including at the Oscars, the Super Bowl, and the floor of the U.S. Senate.

Twitter still doesn't make any money. But that didn't stop them from going public last week. On Thursday, Twitter issued 70 million shares at $26 each. The price nearly doubled in early trading before closing at $41.65 on Friday. And it made a lot of people rich. Co-founders Evan Williams and Jack Dorsey are billionaires. CEO Dick Costello, whose 2012 cash salary was just $200,000, is worth $300 million. All told, about 1,600 investors and employees became millionaires last week. (If you planned on buying a house or a Porsche in Silicon Valley, plan on standing in line and paying more!)

What does that all mean for our friends at the IRS? It means a #windfall, that's what!

Twitter has granted non-executive employees over 92 million "restricted stock units" which will essentially convert to stock over the next several years. Employees will owe regular income tax of up to 39.6% plus Medicare tax of up to 3.8% on the value of those shares. They'll owe an average of $420,000 each in federal tax!
Uncle Sam won't be the only taxman with his hand out. The state of California can conservatively expect to collect another $300 million or more. (California is no stranger to big IPOs — Golden State officials calculated they would collect $2.5 billion over four years from Facebook's debut.)
Not everyone is quite so happy. Two years ago, the city of San Francisco waived part of its payroll tax to keep Twitter headquartered downtown. City officials predicted the waiver would cost them $22 million over six years. Last week's windfall could mean leaving another $34 million on the table. Of course, the City by the Bay still collects millions more than if Twitter had bugged out for the suburbs.
Who's not paying a dime in tax? That would be Twitter itself. Of course, that's because they haven't made a dime in profit. In fact, Twitter has over $100 million in "net operating loss carryforwards" it can use to offset tax on future profits.

Twitter's investors and employees have some big tax planning challenges ahead. They're going to need more than just 140 characters to take advantage of all the legal strategies available to pay less. It works the same for you, even if you're not America's newest billionaire. If you want to #keepwhatyoumake, you need a plan. So call us now before December 31, when you can still do something about it!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance while reducing their annual IRS contribution, and bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Click here to schedule an appointment with Kenneth Hoffman.

If you found this article helpful, I invite you to leave a comment and please share it on twitter, facebook or your favorite social media site and with your friends, family and colleagues. Thank you.

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC.

Follow us on Twitter at @TaxReturnCoach, and let us know how we're doing.

November 6, 2013

Death, Taxes and Zombies

by Kenneth Hoffman in Tax Planning, Tax Counsel

Law reviews are scholarly journals focusing on legal issues, usually edited by students at a particular school. America's law schools currently crank out hundreds of different reviews, which means there aren't a lot of topics that haven't already been covered. (Chief Justice John Roberts once said "Pick up a copy of any law review that you see, and the first article is likely to be, you know, the influence of Immanuel Kant on evidentiary approaches in 18th Century Bulgaria, or something.”) But the Iowa Law Review has just published a new article on a crucial tax topic — and it's especially appropriate to discuss this week after Halloween. We're referring, of course, to Arizona State professor Adam Chodorow's groundbreaking new work, Death and Taxes and Zombies.

"The United States stands on the precipice of a financial disaster, and Congress has done nothing but bicker. Of course, I refer to the coming day when the undead walk the earth, feasting upon the living. A zombie apocalypse will create an urgent need for significant government revenues to protect the living, while at the same time rendering a large portion of the taxpaying public dead or undead. The government’s failure to anticipate or plan for this eventuality could cripple its ability to respond effectively, putting us all at risk. This essay fills a glaring gap in the academic literature by examining how the estate and income tax laws apply to the undead."

Don't laugh. This is 25 pages of lively prose, with 124 scholarly footnotes citing authoritative sources like Harry Potter and the Sorceror's Stone, the noted gourmand Hannibal Lecter, and even "Slimer" from Ghostbusters. Chodorow isn't afraid to ask the scary questions that the rest of us shy away from:

At what point does a zombie become a "decedent" for estate tax purposes? Currently, the legal definition of "death" varies from state to state, with some basing it on heart function and others on brain function. This means that zombies may not actually be "dead" in some states. Does someone who dies stay legally dead after being reanimated as a zombie?
Could it ever make sense to die for tax reasons, then come back when income or assets will be taxed at a lower rate? If so, would the IRS attack those deaths as sham arrangements?
Does someone remain married for tax purposes if they or their spouse become zombified?
What about vampires? They're typically wealthy and sophisticated, which makes estate planning a must. And they live for centuries, which makes tax-deferred vehicles like IRAs and cash-value life insurance even more valuable.
Finally, what about ghosts? Do phantoms owe tax on phantom income?

As you can see, there's a lot more to taxes and zombies than meets the eye. Chodorow urges Congress to create tax laws for them now, before members become zombies themselves.

Fortunately, the secret to navigating taxes in a land of walking dead is the same as navigating taxes now — it's planning. And speaking of acting now, before it turns too late, 2013 is quickly coming to an end. December 31 may not bring a zombie apocalypse, but it will drive a stake in the heart of some of your best planning strategies. So call us for the plan you need, before it's really too late!

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC.

October 30, 2013

Touchdown, IRS?

by Kenneth Hoffman in Tax Counsel, Tax Planning

It's Week Nine of the 2013 football season, and millions of Americans are following every play. The Kansas City Chiefs are still undefeated. The New York Giants have finally won a couple of games. And playoff races are already starting to take shape. (Bengals, anyone?) So, what does any of this have to do with taxes?

Today's National Football League is the biggest spectacle since the Romans packed the Colliseum to watch the Christians take on the Lions. (Needless to say, the Lions were heavy favorites — and usually covered the spread.) Last year, the league generated $9.5 billion in revenue from a combination of TV rights, ticket sales, stadium concessions, and licensing agreements. The biggest part of that cash geyser goes to the players (who naturally pay tax on their salaries). More chunks go to the owners (who pay tax on theirs), and stadium vendors (who pay tax on all those eight-dollar beers).

The NFL's league office, which promotes the sport and organizes the teams, took in $255.3 million last year, mostly from team dues. That same year, the league spent $332.9 million, including $35.9 million to a construction company for new office space (who naturally paid tax on their share), $29.4 million in salary for Commissioner Roger Goodell (who of course paid tax on his share), and what must seem like a token $2.3 million in grants for community groups like the United Way.

So, it sure sounds like the receivers at Team IRS are catching their share, right? Well, while the team owners, the players, the t-shirt sellers, and beer vendors are all in it for the money, would you believe the league office itself is a "not-for-profit" entity? That makes it sort of like the American Red Cross — if the Red Cross were in the business of giving concussions instead of treating them. (Technically, the Red Cross is a "501(c)(3)" public charity, while the NFL is a "501(c)(6)" trade association.) And that means the league office itself could earn $100 million or more per year without paying a dime in federal income tax. Talk about an end run around the IRS!

Last month, Senator Tom Coburn (R-OK) introduced the PRO Sports Act to revoke the tax exemption for professional sports leagues earning more than $10 million. This would of course affect the NFL, along with the National Hockey League, the Professional Golf Association, and other pro sports groups. Coburn is joined by 275,000 Americans who have signed a Change.org petition to strip the league of their nonprofit ball. Senator Coburn alleges unsportsmanlike conduct, saying that "working Americans are paying artificially high rates in order to subsidize special breaks for sports leagues," and estimates that his bill could generate at least $91 million of new revenue every year from the NFL and NHL alone. (So far, Coburn hasn't found any co-sponsors. Do you think he would be so bitter if Oklahoma City had a team?)

There's certainly no reason a league office needs a tax exemption to operate. Major League Baseball gave up theirs in 2007, partly to avoid the salary disclosures that come with tax-exempt status. The National Basketball Association has always been a for-profit entity owned by the various teams.

And if the NFL does lose their tax-exempt status, they can still avoid paying any tax. How can they do that? Through smart planning, of course — the same sort of planning we use to minimize your tax. But the clock is counting down for 2013, and there are no overtimes in this contest. So call now for your game plan!

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