Wednesday, March 26, 2014

There's an App for That

Managing the Internal Revenue Service is no easy job. It takes a lot of automation to process over two hundred million tax returns per year. And, while the Service still stores master tax records on computers commissioned during the Johnson administration (Lyndon, at least, not Andrew!), the IRS still spends hundreds of millions per year to take advantage of the latest information technology.
The geeks who manage the IRS's computers do a great job with the limited resources Congress gives them. But they want to be like the cool kids in Silicon Valley, too. So they've created an app, called IRS2GO, that you can download to your iPhone or Android device. You can use the IRS app to track your refund, find free tax return preparers, access your tax records, and even connect with the IRS on Twitter, YouTube, Tumblr, and Facebook.
Those are all great functions, of course. But we got to thinking . . . what sort of things would you really want an IRS app to do for you? We thought maybe these would be even more popular:
  • The Refund Redirector: Knowing when your refund will show up is great. But the real fun is knowing where you're going to spend it. The Refund Redirector would aggregate prices from hundreds of online shopping sites to give you the best possible deal, then send your refund directly to the store. Planning to upgrade your family room to the latest 50-inch television? Let the Refund Redirector tell you where to buy it!
  • Flappy Tax: Flappy Bird is the latest handheld gaming sensation, with 50 million downloads. The only problem is, it's too hard to get that stupid bird through that stupid opening between those stupid pipes! Our version would let you thread a helpless taxpayer through a maze of tiny loopholes. But if you think that flappy bird has it tough, wait 'till you see our red tape!
  • Red Light/Green Light: This updated version of the classic children's party game would use an easy-to-understand traffic light to tell you if your deductions will fly with the IRS. Want to write off the mileage to and from the orthodontist for tightening your kid's braces? Green light! Thinking about writing off a bottle of Dom Perignon to celebrate your latest business deal? Yellow light for the "lavish and extraordinary" expense. Hoping the IRS "won't notice" that Swiss bank account you opened last year? Stop!
  • YelpTax: Apps like TripAdvisor, Urbanspoon, and Yelp let you post restaurant reviews before you even get the bill. Our version would let you review auditors and other IRS staff. How much more pleasant do you think an audit would be if the examiner knew you could rate him from one to five stars on punctuality, friendliness, service, and atmosphere? (If only they could say "we know you have a choice in auditors today . . . .")
We love how technology automates so many tasks to make our days easier and more productive. We love how the Internet puts a wealth of knowledge at our fingertips. But there's still no substitute for good, old-fashioned expertise and experience. And you can't get that from an app. That's where we come in. We can give you the plan you need to pay less tax. We can help you implement that plan without having to tap it all out on a tiny screen. So call us when you're ready for the most up-to-date tax-saving strategies and concepts. And remember, winning the tax game is more fun than anything you can do on your phone!

Friday, March 21, 2014

Seasoned Octopus

Most of the Internal Revenue Service's 90,000 employees are financial bureaucrats, working to collect the taxes that finance our government. But the Criminal Investigations unit, or IRS-CI, is an elite division of 3,700 financial crimefighters dedicated to protecting those taxes. Last month, they released their Fiscal 2013 annual report. And business sure is booming! In 2013, IRS special agents initiated 5,314 investigations (up 3.7% from 5,125 in 2012) and recommended 4,364 prosecutions (up 17.9% from 3,710 in 2012). There were 3,865 indictments and 3,311 convictions (the IRS doesn't take someone to criminal court unless they're pretty sure they can win). And 2,812 miscreants won themselves the proverbial "three hots and a cot" for terms averaging 25 months.
Most of IRS-CI's targets are plain old crooks. But some of them are just so awkwardly entertaining, we had to share their stories:
  • Every time you pump a gallon of gas, you pay 18.3 cents in tax to build and repair federal roads. But there's a little-known exemption that lets off-road users like drag racers apply for a refund. Evan Knoll, the "King of Drag Racing" and owner of Torco Racing Fuels in Grand Rapids, Michigan, saw that exemption and smelled opportunity. (Maybe it was something in the fumes?) Knoll claimed $83 million in refunds over nine years from 1999-2008 before pleading guilty to nine counts of fraud and drawing a 14-year sentence. Now that's some high-octane cheating!
  • Edward Picardi was a surgeon in South Dakota, who spent way too much time performing liposuction on his tax bill. First, he ran his income through a series of entities organized in Ireland, Hungary, Cyprus, the Isle of Man, Jersey, and Guernsey. (Really? Hungary? Were the Cayman Islands just too obvious?) Then he deposited it into various foreign accounts he controlled through a New Zealand trust, in the name of one last corporation established on the delightfully sunny island of Nevis. After several weeks in trial, the judge in Picardi's trial surgically removed five years of freedom from the good doctor's future. Without anesthesia. Ouch.
  • Michael Chen owned the Fune Ya Japanese Restaurant in Richmond, California, just north of Berkeley. (Apparently the fried banana dessert was a hit.) Chen kept detailed records of his daily sales in 26 boxes marked "Seasoned Octopus." But he never reported his cash sales to the IRS. Oops. He also paid his employees $548,919 in cash without sending the IRS any payroll tax on their income. Another mistake. Now the long tentacle of the law has got him for 33 months, enjoying his meals in a place where they don't serve octopus at all.
  • You might think that if you're already stuck in jail, you can't commit tax fraud. Well, you would be wrong. Michael Joseph III was feeling "underemployed" at the Apalachee Correctional Institution in the Florida panhandle when he hit upon one of those brilliant ideas we all wish we had thought of. Why not while away those idle hours filing false tax returns using other inmates' names and social security numbers? Yeah! And while we're at it, why not have the IRS mail the refunds to momma's house? Unfortunately for our enterprising would-be accountant, prison officials discovered the scheme during a routine mail search. Joseph pled guilty to 41 various offenses and drew another 63 months behind bars. At least now he's doing time in a classy federal joint instead of some loser state can.
We all know taxes have gone up this past year, and we all know nobody enjoys paying. That's the bad news. The good news is you don't have to risk a visit from the tax cops to pay less. You just need a plan. There's no shortage of court-tested, IRS-approved strategies for paying less. So if you're still worried about April 15, and you haven't asked us about our planning service, what are you waiting for?

Saturday, March 15, 2014

Finders, Keepers?

Nuestra SeƱora de Atocha, which sank in a hurricane off Key West in 1622. But sometimes finding buried treasure is far easier. Just ask the still-unidentified California couple, known only as "John" and "Mary," who took their dog for a walk and spotted the edge of an old can on the side of a trail they had walked almost every day for years.
Modern-day salvagers can spend years to find centuries-old treasures. Mel Fisher spent 16 years searching for the Spanish galleon.
That can was so heavy, they thought it held lead paint. But as they carried it back to the house, struggling with the weight, it burst open to reveal the glint of gold. (Sounds like a real "Beverly Hillbillies" moment, doesn't it!) That rusted-out can turned out to be just the first of eight containing 1,427 mostly mint-condition gold coins, mostly from the nearby San Francisco Mint, made from 1847 to 1894. Their face value comes to $27,980, which isn't bad. But their market value may top $10 million. In fact, one coin alone — an 1866 Liberty $20 piece without the usual "In God We Trust" inscription — may be worth a cool million all by itself!
At one point, it looked like John and Mary might have to give up their find. Back in 1900, a Mint employee named Walter Dimmick stole $30,000 worth of gold. Dimmick did his time for the crime, but the gold was never recovered. If it had been Dimmick's haul that our lucky couple found, they would have had to return it, even after all this time. Fortunately, the Mint says they don't think that's the case, and they won't be investigating. Mint spokesman Adam Stump told the San Francisco Chronicle, "we’ve done quite a bit of research, and we’ve got a crack team of lawyers, and trust me, if this was U.S. government property we’d be going after it.”
Unfortunately, there is one government agency that will be going after it, and you won't be surprised to hear it's our friends at the IRS. The tax code says "gross income means all income from whatever source derived," and that includes "treasure trove" proceeds like the coins. The IRS clarifies that "if you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession." And that, in turn, means John and Mary will have to report the value of the coins on their taxes. They don't even get to use the lower capital gains rates. So let's see . . . 39.6% for Uncle Sam, plus 13.3% for California, leaves . . . well, barely half of that $10 million! The worst part is, they owe the tax now even if they keep the coins instead of selling them.
What if John and Mary donated the coins to charity? Would that let them off the hook? Nope! The problem is, you can only deduct charitable gifts up to 50% of your income. That means our lucky couple could deduct just half the value of their fortune, and still pay tax on the rest — even if they give it all away. (The limit is even lower for gifts to private foundations — just 30%.)
Here at our firm, we search for hidden treasures, too. But instead of doing it on the high seas, or in California mountains, we do it in the tax code. Our quest is to unearth the deductions, credits, loopholes, and strategies that can save you thousands. And you don't even have to take your dog for a walk to do it. You just have to pick up the phone and call us. (419) 468-8509. So what are you waiting for? (419) 468-8509