TAX CHANGES CONCERNING DUE TO HAPPENINGS IN WASHINGTON

Q. With all that is going on in Washington, do you think we will see any big tax changes this year?

A. Despite the noise and the rhetoric, Congress remains a long way from enacting any tax legislation, let alone major tax reform legislation in the current year. In the unlikely event that such a process began tomorrow, Congress will likely choose to affect future tax years so there should be no impact on tax year 2011 and possibly a limited impact on 2012. The law enacted last December that extended the existing tax rates through 2012, remains in effect, with some tax credits and expiring provisions terminating at the end of 2011 and the rest at the end of 2012. Many tax credits and expiring provisions face an uncertain future going into 2013.

The weakened economy and the need for rebalancing of federal spending would indicate a need to shift both spending and tax revenues to expand economic activity and increase employment. We are closely monitoring congressional actions and stand ready (via webcasts and our blog) to get you the information and analysis you need as events warrant.

GROUPON'S ACCOUNTING CALLED INTO QUESTION

According to “Accounting Today”, the group coupon site, Groupon announced its plans for a $750 million initial public offering last week, but the Chicago-based company’s IPO filing contained some disquieting information about its finances.

Among the information, was the company’s uneven rate of cash flow. Revenue growth went from $3.3 million in the second quarter of 2009 to $644.7 million in the first quarter of 2011. But “free cash flow” in 2010 was said to be just $72.2 million, including $7.0 million in one quarter despite revenues of $644.7 million.

The company’s accounting has been termed, “Grouponistically Acclaimed Accounting Procedures” by the Daily Deal. Writer, Don Young Jr. noted that the company's net loss last year was $413.4 million, and in the first quarter of this year was $113.9 million, giving it an estimated burn rate of nearly $450 million a year. That's a whole lot of coupons!

EIGHT THINGS TO KNOW IF YOU RECEIVE AN IRS NOTICE

Each year, the Internal Revenue Service sends millions of letters and notices to taxpayers for a variety of reasons. Here are eight things to know about IRS notices – just in case one shows up in your mailbox.

1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
2. There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
3. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
6. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
8. It’s important that you keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax (For Individuals). Both publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

CELEBRITY TAX PROBLEM OF THE WEEK

Dominique Strauss-Kahn Accuser Said to Have Lied on Tax Return

The hotel maid who accused Dominique Strauss-Kahn, the former head of the International Monetary Fund, in May of rape in a New York hotel room, allegedly misrepresented her financial situation on her tax return.

Prosecutors found a number of inconsistencies in the accuser’s story about the incident as well as her finances, according to The New York Times. They found that she had lied on her application for asylum from Guinea about a gang rape, and misrepresented her income in order to qualify for public housing. She also claimed a friend’s child as her own on her tax return as a dependent, in addition to her own daughter. The Sofitel New York chamber maid also allegedly had $100,000 deposited in her bank account from unknown sources, and she had spoken to a friend in an immigration jail saying that she would make a lot of money from Strauss-Kahn because he was wealthy. She also admitted to returning to Strauss-Kahn's room to clean after the incident occurred.

Strauss-Kahn, 62, was released from house arrest over the weekend, but prosecutors have not yet dropped the charges against him. The accuser’s lawyer, Kenneth Thompson, defended his client and said the district attorney was giving up on the case. “Our concern is that the Manhattan district attorney is too afraid to try this case,” he said.

HOW LONG SHOULD YOU RETAIN YOUR TAX INFO?

Conventional wisdom says to hold on to tax documents for three years after filing a return, said Liz Weston in the Los Angeles Times. But the conventional wisdom isn’t always so wise. Many assisted-living facilities, for example, want to see five years’ worth of financial statements from prospective residents. Medicaid also looks back five years into would-be recipients’ financial pasts to ensure that people aren’t “artificially impoverishing themselves by transferring money or assets” before they apply for coverage. And the IRS can demand up to six years of records from taxpayers suspected of underreporting income. If you’ve already shredded your documents, most banks, brokers, and credit card companies will provide copies—for a fee.

For a FREE record retention guide from Kopsa Otte, click below:
http://www.kopsaotte.com/tax/files/file/Record%20Retention.pdf

THE IMPORTANCE OF VACATIONS FOR STRESS RELIEF, PRODUCTIVITY AND HEALTH

Vacations Are Important For More Than Just Fun…

 Vacations Promote Creativity: A good vacation can help us to reconnect with ourselves, operating as a vehicle for self-discovery and helping us get back to feeling our best.
 Vacations Stave Off Burnout: Workers who take regular time to relax are less likely to experience burnout, making them more creative and productive than their overworked, under-rested counterparts.
 Vacations Can Keep Us Healthy: Taking regular time off to ‘recharge your batteries’, thereby keeping stress levels lower, can keep you healthier.
 Vacations Promote Overall Wellbeing: One study found that three days after vacation, subjects’ physical complaints, their quality of sleep and mood had improved as compared to before vacation. These gains were still present five weeks later, especially in those who had more personal time and overall satisfaction during their vacations.
 Vacations Can Strengthen Bonds: Spending time enjoying life with loved ones can keep relationships strong, helping you enjoy the good times more and helping you through the stress of the hard times. In fact, a study by the Arizona Department of Health and Human Services found that women who took vacations were more satisfied with their marriages.
 Vacations Can Help With Your Job Performance: As the authors of the above study suggest, the psychological benefits that come with more frequent vacations lead to increased quality of life, and that can lead to increased quality of work on the job.
 Vacations Relieve Stress in Lasting Ways: It should come as no surprise that vacations that include plenty of free time bring stress relief, but research shows that a good vacation can lead to the experience of fewer stressful days at least five weeks later! That means that vacations are the gift to yourself that keep on giving.

The bottom line is that taking a good amount of time from the stresses of daily life can give us the break we need so that we can return to our lives refreshed and better equipped to handle whatever comes.

FOR THE DEMOCRATS TO BALANCE THE BUDGET, THE COUNTRY NEEDS MORE MILLIONAIRES

On Monday, July 11, 2011, Senate Budget Committee Chairman, Kent Conrad (D-ND) released his own deficit reduction plan that purports to cut $4 trillion from future deficits over the next ten years. According to Conrad's remarks on the Senate floor, roughly half of his deficit savings, ($2 trillion) would come "from closing tax loopholes, cutting tax subsidies, promoting tax fairness"; meaning, higher taxes on "who are sufficiently fortunate to be earning over $1 million a year -- the top 1 percent in this country."

But he is wrong on his 1%. The income threshold for the top 1 percent of taxpayers is roughly $370,000 not $1 million. I'm still puzzled on how Senator Conrad aims to extract $200 billion per year in additional taxes from this elite group of taxpayers since that's almost as much as they are already paying under current tax rates.

Let's look at the data. According to the IRS statistics for 2008 (latest available):

• There were 321,294 tax returns with AGI above $1 million (0.2 percent of returns).

• The total AGI for these returns was $1.076 trillion (13 percent of all AGI).

• Their taxable income was $934 billion.

• Their total income tax was $249 billion (24 percent of all income taxes paid).

So, if Conrad is going to raise $2 trillion from millionaires, he is going to either (1) need more millionaires or, (2) nearly double the amount of tax collections from existing millionaires.

How do you do the latter without doubling tax rates? Good luck. As the states that enacted so-called millionaire's taxes discovered, higher tax rates on millionaires tend to result in fewer millionaires and less taxes collected from them. Class warfare tax policy is simply not an effective means of funding government.

ANALYSIS: ONLY 23% OF FARM BILL DIRECTLY SUPPORTS AG PRODUCTION

Federal farm policy has direct and indirect consequences for Nebraska's economy, in both rural and urban areas. Because of the soaring U.S. debt, some in the media and on Capitol Hill have called for large cuts to the farm bill, which is set to expire next year. Critics say the U.S. cannot afford to financially support farmers at a time of record-high commodity prices.

But according to an analysis by the non-partisan Congressional Research Service (CRS), most of the farm bill's dollars are not going to ag producers. The farm bill's price-support programs -- which are comprised of marketing loans and counter-cyclical payments -- are utilized only in times of low commodity prices; they have cost taxpayers relatively little in recent years. Of the estimated $284 billion in total outlays to fund the 2008 farm bill over five years, CRS estimated that 67% of the cost would be spent on the farm bill's nutrition title, which expands eligibility for food stamps and increases benefits for the Supplemental Nutrition Assistance Program. Only 15% of the farm bill's cost was anticipated to be used for commodity programs, another 8% was for crop insurance, and 9% was for mandatory conservation programs. In terms of dollar amounts, about $189 billion was expected to be spent for food stamps and certain other nutrition assistance programs, $42 billion for commodity price-supports, $24 billion for conservation, and $22 billion for crop insurance, according to CRS.

IF YOU ARE INVOLVED WITH A NONPROFIT - CHECK THIS OUT

The Internal Revenue Service said in mid-June that approximately 275,000 organizations have automatically lost their tax-exempt status under the law because they did not file legally required annual reports for three consecutive years.

You might want to check with the leadership of the nonprofit that you are involved with to make sure that the necessary forms were filed. With volunteer organizations, many times these requirements are overlooked.

SUMMER DAY CAMP EXPENSES MAY QUALIFY FOR A TAX CREDIT

Along with the lazy, hazy days of summer come some extra expenses, including summer day camp. But, the IRS has some good news for parents: those added expenses may help you qualify for a tax credit.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

1. The cost of day camp may count as an expense towards the child and dependent care credit.

2. Expenses for overnight camps do not qualify.

3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.

4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.

5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information, check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available at http://www.irs.gov/ or by calling 800-TAX-FORM (800-829-3676).

CELEBRITY TAX PROBLEM OF THE WEEK

Super Bowl Ring in Auction for Back Taxes
The ring worn by former Green Pay Packers lineman, Fuzzy Thurston after his team won the second Super Bowl in 1967, will be auctioned in August to help settle his $1.7 million tax debt.

The Super Bowl II ring was seized by federal marshals, together with other sports memorabilia, from the now 77-year-old athlete, according to ESPN.com. Other items up for auction include footballs autographed by fellow Packers players and by coach Vince Lombardi. The ring is expected to sell for upwards of $20,000.

Federal marshals seized the ring and other memorabilia to settle a long-running tax dispute dating back to when Thurston co-owned a chain of restaurants known as the Left Guard after he retired from the NFL, according to the Greenbay Press-Gazette. He played for the Packers from 1959-1967, and opened the chain of restaurants in the mid-1970s. At one of the locations, some of the taxes withheld from employee paychecks was not sent to the Internal Revenue Service. Thurston’s three partners paid off judgments against them, but the court disputed whether Thurston had satisfied his judgment. In 1984, a court ruled against Thurston and ordered him to pay $190,806. With interest, that amount has now climbed to over $1.7 million.

A lien was placed on Thurston’s Florida home in 2004. The government is also seeking Thurston’s Super Bowl I ring, along with four other NFL championship rings that he won in 1958, 1961, 1962 and 1965. A Super Bowl I ring from another player sold last month for over $73,000.

CHOOSING YOUR CHARITY OF CHOICE

The demand for charitable services is always in high demand and you want to do your part. But how can you know whether the money you donate is actually used for the cause you want to support? Verify the charity before you give.

It’s all in the form - The IRS requires charities to make their three most recently filed annual Forms 990 (Return of Organization Exempt from Income Tax) available for public inspection. Form 990 details a charity’s accomplishments and discloses information about fundraising, compensation and governance. You can use the forms to evaluate how your potential choices are using their money and compare different organizations.

How can you get a copy of a charity’s Form 990? GuideStar (www.guidestar.org) and the Economic Research Institute (www.eri-nonprofit-salaries.com) provide free access to charities’ Forms 990 and other data. You can also check the charity’s website or request a copy from the organization or from the IRS. Charities and the IRS may charge a fee to cover photocopying and mailing.

For more say over your money - You might want to look at nonprofit organizations that allow potential donors to choose the specific projects they want to fund. Donors review a list of projects on an organization’s website and choose the one they want to fund. Support can be for an entire project or a portion of it.

To give more - Once you’ve chosen an organization to support, here’s one idea for making a significant donation. If you have a life insurance policy on your life that you no longer need, consider giving the policy to the charity or naming the charity as the beneficiary or contingent beneficiary, in case your family’s circumstances change in the future. When it comes to charitable giving, be sure to consult your legal and financial professionals for guidance.

POINTS TO CONSIDER WHEN BORROWING MONEY FROM A RELATIVE

Financial emergencies come up for all of us. You may be forced to ask a relative for financial help because you don’t have adequate reserves to drawn on. Before you consider that route, as either the recipient or the giver, here are some points to consider:

• Even small gifts may come with expectations that might have little to do with the money itself. If you don’t meet the giver’s expectations—showing up for every holiday dinner, for example—the relationship can become strained. Or, if you give money to a family member, you may find yourself scrutinizing the recipient’s future financial behavior.

• Borrowing money from a parent, for instance, may make you feel dependent, even if you pay the money back.

• Lending, rather than giving, a family member money might be a better idea. But, to avoid problems, always formulate a loan contract with specific repayment and interest terms.

Gift or loan, thoroughly talk about the transaction beforehand to make sure everyone is in uniform. In addition, make arrangements with your financial advisor to start building an adequate emergency fund of your own, so you’ll be prepared to handle a financial emergency yourself.

SMALL BUSINESS TAXES

OPRAH HATES WRITING CHECKS TO THE IRS

Oprah Winfrey told Piers Morgan that the most difficult check she has to write each year is for the Internal Revenue Service, and she usually needs some tequila from her accountants when she signs it.

Winfrey admitted to Morgan that she only signs checks for amounts over $100,000 nowadays. Winfrey launched her new cable TV network, the Oprah Winfrey Network, or OWN. But she still has “several hundred” checks to sign for over $100,000. “It would knock your socks off,” she told Morgan. “Millions are going out.” Morgan asked if that was painful. “The most pain I feel — and my accountants will tell you this — is every time I write a check to the IRS, it’s a ceremony. For years they came in with wine. Now they come in with tequila. It’s a tequila-signing ceremony.”

Morgan asked her what was the most painful check she ever had to write to the IRS, but Winfrey cannily ducked the question, teasing Morgan, “You’re good. You think I’m going to give you the number. No, no, no, no, no.” Morgan noted that Forbes magazine estimates that Winfrey is worth $2.7 billion, and asked if the figure was accurate. She responded, “I knew you were going to go there sooner or later. I’m not sitting around counting it.” However, she added that she knows how much she’s worth “because I already had counted it.”

Morgan followed up by asking Winfrey about her philanthropic endeavors, which include the Oprah Winfrey Leadership Academy for Girls, a school she runs in South Africa for economically disadvantaged young women. Morgan noted that Winfrey reportedly has given away over $300 million to various charities, and Winfrey corrected him, saying she knew it was more than that amount. He asked if she knew how much she has given away, and she replied, “No, I really don’t, but I know it’s more than $300 million. I have this school and it’s ongoing and I’m responsible for all of these girls and them getting an education, and I pay for every single thing and I think that the charitable work that you do — and when I’m gone everything that I have is going to go to charity because I don’t have children and I believe that that’s what you should do, that that’s how you should live your life. To whom much is given, much should be given back. To me, the money, it’s certainly a wonderful thing, but it is in direct proportion to how you’re able to bless yourself and how you bless others with it.”

Asked whether money can buy happiness, Winfrey responded, “It can certainly pave the way for it.”

CELEBRITY TAX PROBLEM OF THE WEEK

Tax Liens Filed against Bill Clinton’s Half-Brother

This is not a real celeb, but pretty close. Bill Clinton’s half-brother, Roger is facing about $90,000 in tax liens from the state of California and the Internal Revenue Service. Roger Clinton, 54, has struggled to establish a career as a musician and actor after he first drew attention following the election of his elder half-brother Bill in 1992.

California filed a $21,315 tax lien against the younger Clinton last month for taxes owed from 2003, 2004 and 2008, according to the Detroit News. The state had earlier filed a tax lien against Clinton for $2,951 in November, 2009, and for $8,405 in March, 2009. The IRS also filed a lien against him in 2008 for $57,762.

He was arrested for driving under the influence and disturbing the peace in 2001 after he challenged a nightclub doorman to a fight in Hermosa Beach, Calif. Clinton pleaded guilty to a reduced charge of reckless driving and was sentenced to two years' probation and a $1,350 fine. His half-brother pardoned him in 2001 for a 1985 cocaine-related conviction for which he served a year in prison.