Friday, February 21, 2014

The IRS's Top 12 Dirty Tax Scams

The IRS just announced today (how's that for timely?) the top 12 dirty tax scams... and here they are:

1. Identity theft in order to fraudulently file a tax return
2. Pervasive telephone scams
3. Phishing
4. False promises of free money from inflated rebates and other techniques
5. Return preparer fraud
6. Hiding income offshore
7. Impersonation of charitable organizations and to help disaster victims donate to recognized charities
8. Claiming false income, expenses or exemptions
9. Frivolous tax arguments
10. Falsely claiming zero wages or using false 1099s
11. Abusive tax structures such as using foreign trusts, LLCs offshore debt cards, etc.
12. Misuse of trusts

Derived from IRS notice 2014-16, Achieve Financial Freedom – Big Time! and Lower Your Taxes: Big Time.

Sandy Botkin, Attorney and Certified Public Accountant, is the Chief Executive Officer and Principal Lecturer of the Tax Reduction Institute based in the Washington, D.C. area. Over the past 20+ years, Sandy has taught thousands of taxpayers how to save millions on their taxes with his seminar. He consistently earns rave reviews for his clear and humorous presentations.

Tuesday, February 11, 2014

Writing Off Entertainment Expenses

Now that some of you have shelled out at least $2,000 or more for those Super Bowl seats (which means you have more money than sense), it would be a lot better in the future if you could at least write off that expense. Tax law in both the U.S. and Canada allows a deduction for associated entertainment. What is "associated entertainment" you ask? Good question. Associated entertainment means fun! You can write off fun such as Super Bowl tickets if you discuss business with a prospect who you go to the fun with, within 24 hours of the fun! However, it can't be at the fun event. It has to be during some quiet time. Thus, if you talk business with a friend or distributor in the morning and then go to the game or to a play or play golf, the fun can be deducted at 50% in both the U.S. and Canada, although Canadians can't deduct green fees. The key is that you have the burden of proof that you discussed business within the same 24-hour day as the fun.

The next question is, "How do you do this?" The answer is that EVERYONE should have a tax tracker such as Taxbot (which can be gotten at and typing in the coupon code "save50" to get it at 50% off) that contains all of the required questions for both IRS and CRA. Thus, you would need to show: who was entertained, what was discussed in some specificity, when the business discussion took place, where the business discussion took place, how much was spent, and what type of entertainment was involved. Doing this in a tax tracker will make you audit proof, give you peace of mind of not having to worry about an audit, and make your life less taxing.

Material derived from my book, "Lower Your Taxes - Big Time" and my audio and video series, "Tax Strategies for Business Professionals."

Tuesday, February 4, 2014

Our Bank Accounts are NOT Safe

Government & Banks Targeting Private Accounts in Several Ways

Think your deposits are safe? Don't bank on it. For example, last month Stephen Cotton walked into the British building where he had banked for 28 years, a branch of London-based giant HSBC. He filled out a withdrawal slip for £7,000 he owed to his mother. The bank refused to let Mr. Cotton have money from his account.

“When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved,” Cotton said. Mr. Cotton was understandably upset about the situation, “I've been banking in that bank for 28 years. They all know me in there. You shouldn't have to explain to your bank why you want that money. It's not theirs, it's yours.”

However, according to new banking laws, he is mistaken. Your deposits belong to the bank. All you 'own' is a deposit receipt, an IOU. And the banks have no responsibility to share this information with their customers. This has just become the scariest moment I've ever seen to keep money in an American bank account. Our politicians are desperate for more money and are considering several ways to grab the more than $20 trillion now in private bank accounts.

A 'perfect storm' is putting our bank accounts in danger. Here are five of the many forces creating this high-risk storm for savers:

1. The U.S. and other Western governments have agreed that future bank crises will be handled not by taxpayer bailouts but by “bail-ins” that first seize banks' “unsecured assets” to pay the government.

Did you know that when you make a bank deposit, your money legally becomes the bank's money, part of its 'unsecured assets?' All you get in return is the bank's IOU promising repayment. But if government seizes the bank's funds, you can kiss your assets goodbye.

Do you believe your accounts are insured by the Federal Deposit Insurance Corporation?  The FDIC has only $27 billion, less than one percent of what might be needed to cover more than $7 trillion of deposits that could be lost in a national financial panic and storm.

The FDIC and Bank of England in a December 2012 joint document agreed that government could seize customer deposits as part of a bank's property. Three months later, in early 2013, savers on the Mediterranean island of Cyprus awakened to find their banks locked and savings seized exactly this way.

You no longer own your bank accounts. The bank you trusted, controlled by government rules and regulations, does. If government wishes, it can now grab banks' accounts.

2. When President Barack Obama controlled both houses of Congress, Democrats created a powerful new regulatory agency, the Consumer Financial Protection Bureau, funded not by Congress but directly by the Federal Reserve. The CFPB's Obama-appointed director boasted that he is “exploring” ways to control Americans' 401(k)s, IRAs and other retirement plans.

"The runaway, unaccountable regulators at the Consumer Financial Protection Bureau would like to 'protect' the IRAs of U.S. citizens by making them into a $20 trillion ATM for the government,” warned famed financial author George Gilder.

This happened in 2008 in Argentina. Savers woke one morning to find that the money in their retirement savings had been replaced by government bonds of the same face value. Trouble was the real market value of Argentina's government bonds was only 27 percent of face value, so by this gimmick the government stole almost three-quarters of Argentines' retirement accounts.

American savers might likewise soon “be forced to buy Federal debt” by having their savings seized and replaced with government bonds,” wrote Forbes Magazine columnist William Tucker.

This certainly could now happen here because shortly before Christmas 2013, the Democrat-controlled U.S. Senate suddenly erased a 225-year-old rule allowing filibusters against certain presidential appointees. President Obama immediately used this change to pack the D.C. Circuit Court of Appeals with judges who share his ideology.  This is the second most important court in America, the court that prevents regulators from abusing their power. This change removed the last barrier preventing President Obama from ruling via regulatory agencies, and from taxing without the Congress by imposing huge regulatory fines and seizing trillions in bank accounts.

It was no exaggeration that experts called this Senate power grab 'the Nuclear Option.' It just blew much of what was left of our Constitution to smithereens and opened the door to the President confiscating the wealth of savers and banks.

3. President Obama's regulatory agencies in recent weeks also forced more than $15 billion in penalties out of one bank, JPMorgan Chase. In January 2014 Federal regulators opened a new probe in JPMorgan and three other giant American banks, a probe that almost certainly result in billions more in fines and penalties.

Depositors at JPMorgan and at five other of the biggest banks – which, combined, control more than 50% of private American bank accounts – reportedly have had difficulty withdrawing or wire-transferring funds from their accounts. I wonder if these reports might be early signs of "capital controls" these banks expect very soon to be ordered to impose.

We all remember an early Supreme Court Chief Justice writing that "the power to tax involves the power to kill." We're about to learn that government's power to regulate is also the power to kill.

4. In the United States and other major Western nations, easy-money-addicted spendaholic politicians able to print debased money have run up what a December 2013 International Monetary Fund (IMF) Working Paper by two famous Harvard University economists describe as the greatest "debt in 200 years."

The best way to deal with "the endgame" to this "global financial crisis" of stratospheric debt, propose Carmen M. Reinhart and Kenneth Rogoff, is a combination of debt restructuring, deliberate inflation, a “variety of capital controls under the umbrella of macroprudential regulation,” and “an opaque tax on savers” using “financial repression” to siphon off the purchasing power from saver bank deposits.

This confiscatory tax, targeting private savings accounts, is in keeping with the theories of late British economist John Maynard Keynes, who wrote that the “paradox of thrift” is that when thrifty people save money, they slow its velocity through the economy and make their nation less prosperous. 

President Obama's Keynesian economic policymakers have targeted American savings accounts not only because this is where most of the last vast pools of private wealth are – but also because their aim is to punish thrift and transfer saver wealth into the hands of Big Government spenders for redistribution.

5.  Another IMF study published in October 2013, titled “Taxing Times,” calls for a global “'capital levy' – a one-off tax on private wealth.” This tax, the study advises, ought to be “implemented before avoidance is possible,” apparently by surprise against the assets of the wealthy. And what are the assets easiest for government to locate, lock up and easily confiscate? Bank saving accounts.

You might not think of yourself as wealthy, but if you earn more than $34,000 per year, you are among the top one percent of income earners on earth. The world's current astronomical debt crisis could be solved, this IMF study predicts, with a one-time levy “of about 10 percent on households with positive net wealth.”

As Forbes columnist Bill Frezza noted, this IMF tax will go after everybody with property or bank accounts, “everyone with retirement savings or home equity... would have their assets plundered under the IMF's formulation.”

Financial wealth is mobile,” write the IMF experts, who call for “enhanced international cooperation to make it harder for the very well-off to evade taxation by placing funds elsewhere.” International tax havens, as the banks of Cyprus were before the regulators and financial controls took them over in 2013, must be ended to achieve “a revenue-maximizing approach to taxing the rich....”

There is a surprisingly large amount of experience to draw on, as such levies [on the wealthy] were widely adopted in Europe after World War I,” write the IMF experts.

And we all know how well that worked out,” retorts Bill Frezza.

Many successful Europeans fled with their wealth, leaving poverty and politicians behind. Germany's Weimar Republic sought prosperity as today's governments have – not through productivity but a printing press churning out endless debased currency that enriched speculators, not producers. The resulting devastation of conservative values such as thrift paved the way to a Great Depression and Adolf Hitler.

If you wish to save your savings, withdraw them now before the perfect storm strikes and confiscates them. Convert a surviving remnant of your cash into something of proven, solid value that the politicians cannot run off a printing press. You can already see the perfect storm converging, the flashes of its lightning, and the evidence that its targets include your bank account. It is already siphoning the purchasing power from your savings because “financial repression” is a deliberate policy holding the interest rate you receive lower than the rate of government-created inflation. You may have only hours or days before this storm strikes your savings account. But if you free your money now from the traps of paper currency and the bank, your life savings will suddenly be much safer.

How to Reduce Your Taxes

I get queries from reporters all the time asking me for one tip that would reduce our taxes. Without hesitation, my answer is to start up a full- or part-time small or home-based business and work it like a business.  Why? We have two tax systems in both the U.S. and Canada. I'll give you a hint: It isn't one for the rich and one for the poor. It is, however, one to make you rich and one to make you poor. The one to make you poor is for employees. Why?

First, they don't get that many deductions. Second, they are taxed on dollar one. If they have employee business expenses, these expenses must exceed a threshold before any deduction can be taken. Finally, if you take too many employee deductions, they could cause alternative minimum taxes that result in the complete elimination of employee and itemized deductions.

However, if you have a small business, you can get all deductions available to employees PLUS you get to write off part of your house, your spouse, and the equivalent of your kids' education (no kidding). And you can set up a pension plan that makes any government plan look small. In addition, you get to take all of your business deductions with no threshold. Moreover, you are not taxed on dollar one like employees. Instead, you get to take all of your business deductions first before you pay any tax on your net income; and business deductions are NOT subject to any elimination under alternative minimum tax.

Finally, if your small business generates a loss, you can use that loss against any other form of income such as salaries, gains, pensions, interest, etc. If the loss exceeds all of this, you can carry back all business losses two years (three years in Canada) and get back up to the last two years of income taxes paid the federal government and most state taxes. And you get to carry over any excess losses up to 20 years! Thus, you never lose a properly documented business deduction as long as you are working your business like a business and not like a hobby.

Bottom line: I just can't fathom why anyone wouldn't want to set up a small business. In fact, they might make enough money to be able to quit their job and walk away from their boss, which is spelled backwards: double S.O.B." 

For much more detail about this, get my book, "Lower Your Taxes: Big Time." I have a whole chapter devoted to this. Every network marketer should get this book and give it to prospects.

By the way, the reason the government creates good tax laws for business is that they know that from small acorns come big trees. For example, Apple Computer didn't start with 200,000 employees; it started out of Steve Wozniak's and Steve Job's garage. Thus, passing good tax laws for business creates future jobs. [