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Windows 8 - WOW Does It Look Different!

Scott Blake is a Senior Network Engineer with Tech Experts.

Microsoft's venture into a truly mobile operating system, that can be spread spectrum across all of their platforms, was in theory a great idea.

What went wrong was underestimating the public's attachment to the look and feel of their Windows XP and Windows 7 (we'll just forget about Vista) operating system.

With many users still looking sideways at the new stylish Windows 8 interface, and even with the slight upgrades and changes in looks (ha, I laugh at the new start button) that Windows 8.1 has brought on since its release.

For many users out there, this still is not a big enough change to truly bring enjoyment to their personal computer experience.

If you are in "ever search mode" to locate and regain that look and feel of operating systems of yesteryear, there are two great programs that allow anyone of any level of computer experience to install and customize to regain that feeling of comfort.

Classic Shell, a freeware program, can enable a legacy-style Start menu and Windows Explorer interface. You can even have the Windows 7 menu back! But why stop there? Windows XP and Windows Classic menus are available as well. The Classic style will be a comfort to anyone upgrading from Windows 98.

The classic Explorer settings can also transport you into the way-back machine, and users can now have the simple Windows XP style back that they know and love.

A small low impact application that gives you a true look and feel of a Windows 7 interface, while still maintaining the complete functionally of the Windows 8 operating system.

Classic Shell, gives you a true start button and brings back that all too familiar look and feel of your dearly departed Windows XP or 7 systems.

Check it out, it even offers a "Shut Down" button. Classic Shell also allows for customization of the new start menu.

Created by Stardock, a company that's been making Windows user interface mod's for years, Start8 comes as a free 30-day-trial. After that, you can "unlock" the third-party software for just $4.99.
Start8 does not re-enable the Windows Start menu. Instead, it creates a new menu that looks similar to it. Because of this, Stardock provides a great deal of customization.

Users can make the menu appear Metro-like by giving it square edges, or can stick with the Windows 7 look by giving it rounded edges. It's also possible to change color, add or remove translucency, and give the Start menu button a custom icon.

And that's just the beginning. There's a plethora of options available in the app's configuration and control menus for users to explore and customize.

Considering its low price and the large number of options, I think this software is a good deal. I even like the optional faux-Metro style.

However, Start8 doesn't add any new functionality, so users are essentially paying $5 to have what was bundled with Windows 7.

So there you go. Two great choices, it just all comes down to "to pay or not pay, that is the question." Remember the technicians at Tech Experts are always ready to lend a hand.?



Effective Ways To Increase Your Privacy Online

With the increased hacking and account infiltration attempts, protecting people's privacy has become extremely important.

While online, you can minimize your exposure by browsing privately or completely anonymously.

Private Browsing

You can browse the internet privately, by turning on the private browsing feature. It will prevent the history tracking of pages you visit. The feature is found in the main browser menu.

In Internet Explorer, the feature is called 'Private Browsing,' in Firefox, it is called 'Private Window' and in Google Chrome, it is called 'Incognito mode.'

However, there are limits to private browsing: Any files you save or websites you visit will have your IP address as well as unencrypted data you send.

For greater privacy, there is Sandboxie, an application which prevents other programs from saving any data to your disk.


Protect Personal Data

It is good practice to use unique usernames and passwords for each computer user, including guests.

This will help to reduce unwanted access to your files. You could also encrypt your hard drive by enabling Bitlocker which will encrypt your entire drive, making it inaccessible to anyone without your Windows user password.

In case you don't have Bitlocker built into your OS, TrueCrypt is another free alternative that will secure your files. When you need to completely delete your files, use a utility like Eraser which will ensure they can never be recovered.


Use a Private OS

The best way to ensure complete anonymity and privacy, you could work in an entirely different operating system from your regular OS through virtualization.

A wall is set up around the virtual computer to prevent anything you do from leaving files on your normal Windows file system.

This is an entire operating system devoted to privacy, and is installed on a DVD or USB to run on any computer.

Nothing is written to the computer's main drives and your browsing activity is completely anonymous.

Most, if not all, small business owners are barraged by the large number of emails they receive on a daily basis. As a consequence, way too much time is spent on email that actually slows down productivity.

Email has become a 'disruptive' technology that could take you on a tangent and eat up your time fast. So, it is important to take charge of your inbox and filter unwanted emails. Here are some ways you could do that:


Prioritize incoming emails

As a rule, not every email you receive requires immediate attention. Filtering out the most important messages allows you to prioritize the emails you should answer and saves you valuable time.

Most email software have a few good filters that make this possible.

Set specific times to respond to your emails

Giving in to the temptation of checking and responding to your emails is actually an issue of inefficiently dealing with emails rather than the abundance of emails.

Instead of continuously checking your email from multiple devices, set specific times throughout the day to check your email and refrain from checking email outside these times. It is actually more efficient to respond to your emails in bulk rather in piecemeal.


Use the search function

Organizing your emails in folders are important; however, if you are searching for an old email, use the search function, the advanced search operators, and filters to quickly find what you are looking for.


Unsubscribe from unwanted lists

To eliminate the many emails that are not spam but which are still cluttering your inbox, take some time and unsubscribe from newsletters or services which you no longer read or use. Look into using a mass unsubscribe tool if you don't want to unsubscribe from each list.


Use filters

Most email systems allow filtering, which you can assign to any type of email that you get regularly. For instance, a filter makes it possible to forward emails which contain particular keywords to your assistant or have a particular automated response to certain emails. This significantly reduces the amount of time you spend on email.


Turn off notifications from social media sites

You really don't need to get an email each time someone responds to your Facebook comment or tweet. Since you'll eventually see such updates once you actually visit those sites, they shouldn't be allowed to clutter your inbox. In fact, such notifications are just distractions that could cut on your productivity.



IRS Successfully Assesses 50% FBAR Penalty for "Quiet Disclosures"!

THURSDAY, MAY 29, 2014

We have previously posted on Tuesday, May 13, 2014, "Zwerner' FBAR Case Goes To Trial 5/20/14 and Will Test The IRS' Ability to Assert The Willfulness Penalty For Multiple Years." where we discussed the U.S. government's Complaint to collect multiple civil FBAR penalties in the amount of $3,488,609.33 previously assessed against Carl R. Zwerner of Coral Gables, Florida for his alleged failure to timely report his financial interest in  a foreign bank account, as required by 31 U.S.C. § 5314 and its implementing regulations. See United States v. Carl R. Zwerner, Case # 1:13-cv-22082-CMA (SD Florida, June 11, 2013).  

We had stated that as this case goes to trial on May 20, 2014 it may help to set the standard for whether the IRS can assert willfulness and multiple year penalties in a taxpayer's failure to timely file the Report of Foreign Bank and Financial Accounts (FBAR).

On May 28, 2014, the Department of Justice released the outcome of that trial declaring that a jury in Miami found Carl R. Zwerner responsible for civil penalties for willfully failing to file required Reports of Foreign Bank and Financial Accounts(FBARs) for tax years 2004 through 2006 with respect to a secret Swiss bank account hecontrolled. According to evidence introduced at trial, the balance of the bank account during each of the years at issue exceeded $1.4 million, and the jury found Zwerner should be liable for penalties for 2004 through 2006. Zwerner faces a maximum 50 percent penalty of the balance in his unreported bank account for each of the three years. The jury found that Zwerner’s failure to report the account was not willful for 2007, and the court will determine the final amount of the judgment after further proceedings in June 2014.

“As this jury verdict shows, the cost of not coming forward and fully disclosing a secret offshore bank account to the IRS can be quite high,” said Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division. 

“Those who still think they can hide their assets offshore need to rethink their strategy.”

U.S. citizens who have an interest in, or signature authority over, a financial account are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, U.S. citizens must file an FBAR with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signatory or other authority. Those who willfully fail to file their FBARs on a timely basis, due on or before June 30 of the following year, can be assessed a penalty of up to 50 percent of the balance in the unreported bank account for each year they fail to file a required FBAR.

            The evidence at trial showed that Zwerner opened an account in Switzerland in the1960s, which he maintained in the name of two different foundations he created. Zwerner was able to use the proceeds of the account whenever he wanted and used it for personal expenses,including European vacations. Even though he filled out a tax organizer provided by his accountant, every year, Zwerner answered “no” to questions asking whether “you have an interest in or signature authority over a financial account in a foreign country, such as a bank account, securities account or other financial account” and whether “you have any foreign income or pay any foreign taxes.”

            U.S. persons must report their worldwide income on their taxes. Plus, they must file an FBAR annually if their offshore accounts total over $10,000 at any time.  If you have both failures, the IRS wants you to go into the Offshore Voluntary Disclosure Program, also known as the OVDP. It involves reopening 8 tax years, and paying taxes, interest and penalties, but no prosecution.

            The OVDP penalties including the FBAR Penalty equal to 27.5% of the highest balance in the offshore accounts; can  and do and do far exceed the unpaid tax on the undeclared account. As a result, some people want to amend  and file their taxes and file FBARs  without  participating  in the OVDP  program and  thereby pay the taxes they owe, but no the 27.5% penalty. The IRS  refers to this as a "quiet disclosure," which they currently discourage and advise taxpayers that they will find  these quite disclosures, audit them and that they have exposure  to the higher 50% FBAR penalty.

            The IRS is reviewing amended returns and could select any amended return for examination. The IRS has identified, and will continue to identify, amended tax returns reporting increases in income. The IRS will closely review these returns to determine whether enforcement action is appropriateIf a return is selected for examination, the 27.5 percent offshore penalty would not be available. When criminal behavior is evident and the disclosure does not meet the requirements of a voluntary disclosure under IRM, the IRS may recommend criminal prosecution to the Department of Justice." 

            Many have been wondering whether the IRS will pursue examinations of "Quiet Disclosures" of taxpayers residing in the United States in some manner.  Now these Taxpayer's have their answer: They Will!

As Mr. Zwerner  discovered a incomplete attempt to make a voluntary disclosure on an anonymous  basis will not  protect you from  the assertion  of the 50%  intentional failure to file penalties. You are either in  the OVDP program or you are not!

            The IRS  assessed Mr. Zwerner $3,488,609.33 in penalties for FBAR violations, based upon 50% of the highest balance in his account(s) each year. Mr. Zwerner fought the penalty in court, but a jury has found in favor of the IRS. The jury found Mr. Zwerner willful for 2004, 2005 and 2006, but not for 2007.

            That meant  upholding the assessment of FBAR penalties  in the amount  of  $2,241,809 for an account worth $1,691,054. . The fact that Mr. Zwerner kept the accounts under two different entity names, and his tax return said “No” he didn’t have any foreign accounts; supported  the IRS is  conclusion  that Mr.  Zwerner's  failure  to file his FBAR report was intentional.  

            The court is expected to next address that the issue whether such penalties could be unconstitutional. The Excessive Fines Clause of the  Eighth Amendment  provides that a civil penalty may be unconstitutional if it is part punishment, and if the punishment is grossly disproportionate to the conduct.


Marini & Associates, P.A. - Forbes - Marini & Associates, PA concentrates its practice in Representation before the IRS and All Other Tax Authorities, IRS Collections, Offers in Compromis, Installment Payment Plans, Appeals, Sales Tax Audits, International and Tax Law, Asset Protection and Estate Planning.



IRS May Expand Holds on Tax Refunds for Delinquent Taxpayers



The Internal Revenue Service is considering expanding a program under which it delays tax refunds for up to six months for delinquent taxpayers.

A new report released Tuesday by the Treasury Inspector General for Tax Administration noted that the IRS has the authority to delay issuing income tax refunds for up to six months while it investigates tax return delinquencies from other tax years. Holding the tax refund encourages taxpayers to resolve their delinquent filing obligations earlier, the report noted.

In 2012, the Delinquent Return Refund Hold Program collected nearly $242 million, which was applied to balances due on delinquent returns. From 2008 to 2012, the program held an average of 156,422 tax refunds per year. During that same period, the program secured an average of 64,222 returns from taxpayers per year and coordinated with the IRS’s Automated Substitute for Return program to prepare and post an additional 117,895 substitute returns per year.

IRS management had earlier considered expanding the program by lowering the dollar threshold required to put a tax refund on hold. The exact amount of that threshold and where it would be expanded were redacted from the public version of the report. However, the IRS has not expanded the threshold because of limited resources.

Under one change proposed by the IRS in 2009 for reducing the tax gap and bringing more taxpayers into compliance, approximately 50,000 additional refund returns would have been included in the program that year, adding potential revenue of $21 million, or $105 million over a five-year period.

TIGTA pointed out that taxpayers who become compliant with their prior-period filing requirements could remain compliant in future years and reduce the need for additional enforcement resources in subsequent filing seasons. TIGTA also identified other opportunities for expansion.

In compiling the report, TIGTA reviewed two separate random samples of 30 taxpayer cases each in which a refund was held and the refund hold was either manually or systemically released. The results indicated that IRS employees properly followed procedures when working cases and when refund holds were released.

TIGTA compared delinquent return data for a population of refund hold cases with a certain dollar amount above the threshold criteria to a population of cases with a certain dollar amount below the threshold criteria (that is, refunds were not held for these cases). Analysis showed that 88 percent of delinquencies associated with the held refunds were subsequently resolved, compared with less than 1 percent of delinquencies associated with cases for which refunds were not held, thus indicating the value of the program in improving filing compliance.

TIGTA pointed out that the IRS has not established performance measures to evaluate the program’s primary goal of increasing taxpayer filing compliance. As a result, IRS management does not have complete information about how well the program is achieving its goal, or if it is an effective tool for improving taxpayer filing compliance over time.

TIGTA recommended that the IRS consider opportunities to expand the use of the program as resources become available and develop specific performance measures to compare the actual results with management’s goal to improve filing compliance.

In response to the report, IRS management agreed with both recommendations. However, the IRS did not commit to a specific corrective action plan to expand the program and agreed only to explore the development of performance measures, with implementation dependent on the availability of resources. The IRS has been struggling with a series of budget cutbacks in recent years that have forced it to rethink its allocation of resources.

“As you noted in your report, implementation of a lower dollar threshold or a change in the program exception criteria will require additional resources,” wrote Karen Schiller, commissioner of the IRS’s Small Business/Self-Employed division. “When those resources become available, we will consider lowering the dollar threshold and re-evaluating certain program exception criteria.  However, with no certainty as to when those resources may become available, we are not able to predict what monetary benefits may be realized.”

TIGTA said it continues to believe that expansion of the program is important, as it represents an opportunity to increase both taxpayer filing compliance and revenue at a lower cost than traditional collection programs. In addition, until specific performance measures are implemented, TIGTA noted, IRS management will not have complete information about how well the program is achieving its goals.



Donald Sterling's Last Laugh: Tax-Free $2 Billion Clippers Sale

L.A. Clippers owner Donald Sterling seems to be sitting pretty. Sure, he endured bad press and probably would not have sold the team were it not for the NBA action. He may not even get to do his own negotiating, since the NBA stepped in. But a $2 billion sale to Microsoft’s Steve Ballmer isn’t half bad.

Still, taxes could eat a big piece of his outsize profit. With these high numbers and Sterling’s advanced age, income and estate taxes look bleak, but are they? First, let’s take income tax.

Mr. Sterling only paid $12.5 million for the Clippers in 1981. The Clippers are apparently a corporation, but is it a C or an S corporation? C corporations pay corporate taxes, S corporations don’t. The legal owner is the Sterling Family Trust, though that trust could just be a living trust that avoids probate but is not taxable.

            Since Mr. Sterling is probably well advised, the corporation is likely an S corporation. That means whether Mr. Ballmer buys stock or assets, there should be no corporate tax. If the corporation had to pay tax on the $2 billion sale, corporate taxes alone could be $700 million! Then Mr. Sterling would have to pay tax himself when the remaining $1.4 billion was distributed! The two taxes combined could be over 50%.

Assuming the S corporation structure, though, Mr. Sterling and his wife Rochelle would just pay taxes on the deal personally. With a federal long-term capital gain rate of 20%, that’s approximately $397.5 million. It seems unlikely that Mr. Sterling will pay the Obamacare 3.8% net investment income tax. If the Sterlings spent over 500 hours per year on team-related management activities, it should mean the 3.8% tax wouldn’t apply.

What about California taxes? Unless the Sterlings try to quickly move to Nevada, Texas, or another no-tax state, California will collect nicely. The Golden State’s top rate rose from 10.3% to 13.3% in 2012. That makes the California income tax on the sale over $264 million. Notably, California doesn’t give any break to long-term capital gain.

Some say that’s the worst part of the state’s tax law, making California capital gain taxed among the highest in any state—or country—in the world. See Killing Golden Goose, California Taxes Capital Gains As Ordinary Income. It is one reason California is constantly pursuing people who exit right before making a sale.

            In all, federal and California income taxes total about $662 million, about a third of the $2 billion sale price. Estate taxes are another matter. It is likely that the Sterlings have an estate plan, and it may in part rely on the team structure. Such things can materially reduce an estate tax bill. But cash is harder, and the sale could be a big hit to the Sterlings’ estate plan.

If the sale nets $2 billion, and the Sterlings pay $662 million in income tax, that leaves $1,338,000,000. Upon their deaths, Mr. and Mrs. Sterling will each be able to transfer only $5.34 million tax-free, leaving estate tax of over $500 million. Maybe. After all, it’s likely that Mr. Sterling has good tax advisers, so don’t look for this check to be written just yet.

            First, recall that he is suing the league and claiming $1 billion in damages. That could be an offset. He might even try to report his gain on sale as capital gain, but deduct losses as ordinary! Yet latest reports say Mr. Sterling is dropping his suit, agreeing to the sale.

That could mean Mr. Sterling will try to roll over his gain into other investments. How is that possible? Section 1033 of the tax code allows you to defer taxes when your property is taken involuntarily, like eminent domain. Mr. Sterling can argue the Clippers sale was forced on him by the NBA.

            What’s more, Mr. Sterling wouldn’t have to buy another team, as long as within 2 years, he invests the money in similar or related investments. Those standards are pretty loose, allowing him to diversify his investments.

Incredibly, Mr. Sterling might even do some estate planning at the same time. Assuming his basis in the Clippers is only the $12.5 million he paid, it would also be his basis in the replacement investments. Upon death, there’s a step up in basis to market value. That could mean that by dying, his $662 million income tax bill just goes away!

Sure, he might face estate taxes, but the basis step up prevents paying income taxes and estate taxes at the same time. Mr. Sterling’s age could give his cadre of advisers big reasons to try Section 1033 treatment. Other ideas might be a structured sale or installment sale deal that would stretch out payments over time. That can work well but may not be ideal for someone of advanced years.

In that sense, the Section 1033 involuntary conversion idea could be a bonanza. If successful, it could eliminate not only the federal income taxes, but California’s painful taxes as well. That’s right, California replicates Section 1033. Sure, the IRS or the California Franchise Tax Board could disagree. Sure, he or his estate might have to go to court. But Mr. Sterling might enjoy that and there’s plenty at stake.

Bottom line? The NBA may be doing Mr. Sterling a big favor.

You can reach me at This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.




IRS warns taxpayers to beware of phishing scams

Phishing is a scam typically carried out by unsolicited e-mail and/or bogus websites posing as legitimate sites luring unsuspecting victims to provide personal and financial information. The IRS has recently warned consumers to watch for e-mails appearing to be from the Taxpayer Advocate Service (TAS) that include a bogus case number. The e-mail may include the following message: “Your reported 2013 income is flagged for review due to a document processing error. Your case has been forwarded to the Taxpayer Advocate Service for resolution assistance. To avoid delays processing your 2013 filing contact the Taxpayer Advocate Service for resolution assistance.” The e-mail may contain links appearing to provide information about the “advocate” assigned to the recipient’s case but actually lead to Web pages soliciting personal information. 

If you receive an e-mail claiming to be from the IRS that contains a request for personal information, do not reply to the e-mail, open any attachments, or click on any links. Instead, forward the e-mail to the IRS After forwarding the e-mail to the IRS, delete the original e-mail you received. 

Remember — the IRS, including the TAS, does not initiate contact with taxpayers by e-mail, text, or any social media. 

If you receive a phone call from an individual claiming to be from the IRS but you suspect they are not an IRS employee: (1) Ask for a call-back number and employee badge number, and (2) contact the IRS to determine if the caller is an IRS employee with a legitimate need to contact you. If you determine it is a legitimate call, then call the IRS employee back or call us to handle it for you. If you receive a notice or letter via paper mail, contact us to help you determine if it is a legitimate IRS letter. If it is a legitimate IRS letter, we can help you reply if needed. For information on how to contact the IRS, see If either the caller or letter is not legitimate, report the incident to the Treasury Inspector General for Tax Administration at




Tips for businesses that outsource payroll duties

Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers and reporting agents (often referred to as service bureaus). Reputable payroll service bureaus can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer's behalf and filing required payroll tax returns with state and federal authorities.

Though most payroll service bureaus provide very good service, there are, unfortunately, some who do not have their clients' best interests at heart. Over the past year, a number of these companies have been prosecuted for stealing funds intended for the payment of payroll taxes. So, a thorough background investigation is essential.

There are several different types of payroll service bureaus. Regardless of the type your business uses, it's important to understand that the service bureau is only acting as an agent. This means state and federal tax authorities will hold you — the employer — responsible for the service bureau's errors or omissions.

Like employers who handle their own payroll duties, employers who outsource payroll duties are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee's share of Social Security and Medicare taxes. This is true even if the employer forwards tax amounts to the service bureau to make the required deposits or payments.

If you use a service bureau to process some or all of your payroll functions, here are some steps you can take to protect the company from unscrupulous service bureaus.

• Be familiar with your payroll tax due dates. Require the payroll service provider to provide timely proof that it has actually performed the requested services.

• Consider performing some payroll activities yourself. For example, you could ask the service bureau to prepare the withholding reports and send them to you for review. After reviewing the reports, you can make the deposit directly.

• Investigate the service bureau's financial condition and credit standing, both initially and on a periodic basis thereafter. How are the company's funds isolated from financial problems from which the bureau or its other clients may suffer, and what coverage and conditions apply to fiduciary bonds for service bureau employees? This is important because little protection or recourse is available to employers whose service bureau misuses funds intended for payroll tax payments and then goes bankrupt. Having the funds held in trust will also protect the funds from an IRS levy of the service bureau's bank account.

• Document clearly in the contract the service bureau's policy on indemnifying the company for interest and penalties that the service bureau's errors cause.

• Make sure your service bureau uses the Electronic Federal Tax Payment System (EFTPS) to make tax deposits. Then, enroll in and use EFTPS to check your company's payment history to ensure the service bureau is properly carrying out its tax deposit responsibilities.

• Use your company's address (not the service bureau's) as the address on record with the IRS. Doing so ensures that the company will continue to receive bills, notices, and other account-related correspondence from the IRS. It also provides a way to monitor the service bureau and easily spot any improper diversion of funds.

• Contact the IRS about any bills or notices as soon as possible. This is especially important if it involves a payment that the service bureau should have made. Call the number on the bill, write to the IRS office that sent the bill, or contact the IRS business tax hotline at 800-829-4933.

If you have any questions, please give us a call.




Midyear tax planning ideas

Tax planning is a year-round process, so now is a good time to think about the following:

• Are you considering making a cash gift to a relative? If so, consider making the gift in conjunction with the overall revamping of your stocks and mutual funds held in taxable brokerage accounts to achieve better tax results. Don’t gift loser shares (currently worth less than you paid for them). Instead, sell these shares, recognize the capital loss on your tax return, and then gift the cash proceeds to a relative. However, do gift winner shares to lower tax bracket relatives (unless they are under age 24 and subject to the Kiddie Tax). The 2014 annual gift tax exclusion is $14,000.

• Are you considering making a contribution to a favorite charity? The previous strategies will also work well for contributions to qualified charities. Sell loser shares, recognize the loss on your tax return, and then give the cash proceeds to the charity and claim the resulting charitable contribution (if you itemize). Donate winner shares to the charity and deduct the full current fair market value at the time of the gift (without being taxed on the capital gain). The tax-exempt organization can sell your donated shares without owing tax. 

• Are you self-employed? Consider employing your child in the business (but pay a reasonable wage for their age and work skills). This practice can shift income (which is not subject to the Kiddie Tax) to the child who is normally in a lower tax bracket, decrease payroll taxes, and enable the child to contribute to an IRA. 

• Is your estate plan current? If you already have an estate plan, it may need updating to reflect the current estate and gift tax rules. For 2014, the unified federal gift and estate tax exemption is a generous $5.34 million, and the rate is 40%. Furthermore, the impact of the Supreme Court’s Windsor decision and resulting IRS changes in the federal definition of marriage mean that legally married same-sex couples need to revise their estate plan. Plus, there may be nontax reasons to update your estate plan. 

Please contact us to discuss any tax planning strategies you are interested in implementing.





Expenses qualifying for the child care credit

Working parents can find summer child care solutions challenging. However, a nonrefundable credit is available if the qualifying child care expense is incurred so that you (and your spouse, if married) can work. The maximum credit is 20%–35% (depending on your adjusted gross income) of the lesser of (1) your qualifying child care expenses up to $3,000 for one and $6,000 for two qualifying individuals or (2) your earned income (or your spouse's, if less).

Qualified child care expenses provide for the well-being and protection of a dependent child under age 13 and must be reduced by the amount of any employer-provided dependent care benefits. Amounts paid for food and education generally are not considered work-related expenses; however, services that are incidental to and cannot be separated from the costs of caring for a child are not excluded from the credit. Therefore, expenses paid to a day care center are usually eligible for the credit, whereas summer school or tutoring expenses are not. The cost of day camp should qualify for the credit; however, overnight camps are not considered work-related and don't qualify.

If you pay someone to come to your home and care for your dependent child, you may be a household employer required to withhold and pay Social Security and Medicare tax and pay federal unemployment taxes.

 Keep these rules in mind as you plan summer child care.



IRS toughens the one-year wait between IRA rollovers

IRA rollovers are a popular way of obtaining a short-term tax-free loan from an IRA. To receive tax-free treatment, the amount withdrawn from the IRA must be redeposited into the same or another IRA no later than 60 days after the taxpayer received the distribution (the 60-day requirement). In addition, the tax-free rollover privilege is limited to one rollover within any one-year period. The one-year period starts on the date the amount rolled overwas received — not the date it was rolled over.

For years, the IRS has held that the one-year waiting period between IRAs applies separately to each IRA. This taxpayer-friendly interpretation allowed taxpayers with multiple IRA accounts to roll over two or more distributions during a 12-month period, provided each was from a different account.  

However, the IRS has adopted the Tax Court’s recent unfavorable interpretation of the one-IRA-rollover-per-year rule, which considers all the taxpayer’s IRAs together for the limitation. To ease the pain, they have provided some transitional relief and will not apply the new, stricter interpretation to any rollover involving a distribution that occurs before January 1, 2015. So there is still a little time to take advantage of the current, more liberal, rules.  

Example: Transitional relief for the one-IRA-rollover-per-year rule.

Stella desperately needs cash, but only for a relatively short time. She wants to temporarily use the funds held in her three traditional IRAs (IRA-1, IRA-2, and IRA-3). In 2014, Stella takes $75,000 out of IRA-1. Fifty-nine days later (still in 2014), she withdraws $75,000 from IRA-2 and deposits that amount back into IRA-1. Fifty-nine days after that (still in 2014), she withdraws $75,000 from IRA-3 and deposits the amount back into IRA-2. Fifty-nine days after that, her cash crunch is over, and Stella deposits $75,000 back into IRA-3.

Under the transitional rule, Stella is effectively able to borrow $75,000 from her IRAs for almost half a year without any tax consequences via three tax-free rollover transactions because all the IRA distributions rolled over were withdrawn before January 1, 2015.

Variation: If Stella withdraws the $75,000 from IRA-3 in January of 2015, she will fall outside the transitional relief (because it only applies to distributions occurring before January 1, 2015). Therefore, the distribution from IRA-3 cannot be rolled over because she already used up her one-IRA-rollover-per-year privilege with the earlier rollovers in 2014.

Please contact us to discuss this IRA law change and the beneficial aspects of IRAs that have not changed.



IRS to Step up Penalties for Delinquent Payroll Taxes

WASHINGTON, D.C. (MAY 29, 2014)



Employers owed the Internal Revenue Service approximately $14.1 billion in delinquent Social Security, Medicare and individual federal income taxes that they had withheld from employee paychecks as of June 30, 2012, and the Internal Revenue Service is being urged to do more to assess penalties against them. 

A new report from the Treasury Inspector General for Tax Administration found that the IRS’s penalty actions against employers who don’t remit payroll taxes are oftentimes neither timely nor adequate. When a business does not remit trust fund taxes withheld from its employees, the IRS can collect the unpaid taxes from the individuals responsible by assessing a Trust Fund Recovery Penalty, or TFRP, when appropriate.

Employees who have taxes withheld from their wages expect the funds to be properly remitted to the IRS, the TIGTA report noted, and businesses that do not pay their taxes have an unfair advantage over businesses that do pay their taxes in full and on time.

TIGTA found that the IRS’s TFRP actions were not always timely or adequate in 99 of the 265 cases it reviewed in a statistically valid sample of cases. For 59 of the 99 cases, the untimely actions averaged more than 500 days to review and process the penalty assessment. Among the problems, TIGTA found incomplete investigations, unsupported collectibility determinations and expired assessment statutes.

When the penalty assessments are not made in a timely way, taxpayers’ financial ability to pay can decline and the IRS’s chances of collecting the overdue taxes decrease. In addition, the government’s interest is not protected if the potential tax assessments are overlooked or missed.

In recent years, TIGTA acknowledged, the IRS has introduced new guidance to better control the Trust Fund Recovery Penalty process and has achieved some improvement in the average time it takes to complete investigations and assess the TFRP. However, significant untimeliness still exists, the report added.

TIGTA recommended that the IRS emphasize to group managers their responsibilities to monitor TFRP cases and ensure that revenue officers take timely TFRP actions; and enhance TFRP communication and training. The IRS should also ensure the completion and adequacy of scheduled system improvements and take appropriate actions to implement the changes, TIGTA suggested. In addition, the report recommends the IRS revise its TFRP guidance regarding the accuracy of the collectibility determination support and controlling the completion of TFRP investigations when installment agreements or currently not collectible closures are approved.

In response to the report, IRS officials agreed with all of TIGTA’s recommendations and plan to take corrective actions.

Karen Schiller, commissioner of the IRS’s Small Business/Self-Employed Division, pointed out that the IRS has significantly improved the timeliness of its TFRP case actions in response to a 2008 report from the Government Accountability Office that found businesses owed billions of dollars in federal payroll taxes. She noted that the IRS’s overall average improvement in the timeliness of TFRP case actions increased from 74 percent in fiscal year 2010 to 93 percent in fiscal 2013, and that the sample TIGTA used for the analysis in its report included cases with actions prior to 2012 before the IRS’s improvements had been fully implemented. 

“As we discussed during the audit, we worked diligently to implement the recommendations made by GAO and to improve the timeliness and adequacy of all TFRP actions,” she wrote. “Limiting your review to case actions that occurred after FY2012, when increased controls and guidance had been completely implemented, would have provided a more accurate picture of our current program.”

The IRS plans to make programming changes in its Automated Trust Fund Recovery system to ensure it works more efficiently and it will provide additional training to managers. 

“We remain committed to continued improvement and recognize the opportunity for additional systemic enhancements to increase our case processing efficiency and accuracy,” said Schiller.




Tips for Safeguarding Tax Records


BY JEFF STIMPSON – Accounting Today

As this year’s hurricane season starts, the IRS is reminding individuals and businesses to safeguard their records against natural disasters.

Taxpayers should keep a set of backup records in a safe place and away from the original set, the service recommends. Keeping a backup set of records – including such documents as bank statements, returns and insurance policies – is easier now that many financial institutions provide statements electronically and much financial information is available on the Internet. Original records on paper should be scanned into an electronic format.

Among other tips:

  • Taxpayers can save e-documents to the cloud, download them to such backup storage devices as an external hard drive or USB flash drive, or burn them to a CD or DVD.
  • Taxpayers can also photograph or videotape the contents of their home, especially items of higher value. The IRS disaster-loss workbook (,-Casualty,-Disaster,-and-Theft-Loss-Workbook-(Personal-Use-Property)) can help taxpayers compile a room-by-room list of belongings. Photos should be stored with a friend or family member who lives outside the area.
  • Emergency plans should also be reviewed annually. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.
  • Employers who use payroll service providers should ask if the provider has a fiduciary bond in place to protect the employer in the event of default by the payroll service provider.

More information is available from the IRS at (866) 562-5227. Back copies of previously-filed returns and attachments can be requested by filing Form 4506, “Request for Copy of Tax Return.”

Transcripts showing most line items on returns can be ordered online, at (800) 908-9946 or by using Form 4506T-EZ, “Short Form Request for Individual Tax Return Transcript”  or Form 4506-T, “Request for Transcript of Tax Return.”

The IRS also maintains an ongoing list of disaster areas granted tax relief.



For Samsung heirs, little choice but to grin and bear likely $6 billion tax bill


By By Se Young Lee  June 5, 2014 5:12 PM


SEOUL (Reuters) - The heirs of ailing Samsung Group patriarch Lee Kun-hee face one of the biggest inheritance tax bills ever, and appear to have little option but to pay up.

By some calculations, Lee's 45-year-old son Jay Y. Lee, the group's presumed heir apparent, and his two sisters could be on the hook for about $6 billion in tax under South Korea's top level inheritance tax rate of 50 percent.

To put that in perspective, the United States expects to collect just $16 billion this year in estate and gift taxes - a levy that has long been a political bone of contention and which many rich Americans go to great lengths to minimize.

However, attempts by the Lee family to ease its tax burden could weaken its control over an empire it now runs through a complex structure of interlocking ownership - and risk stirring up public condemnation.

The elder Lee's assets, held mostly in shares of Samsung Electronics <005930.KS>, the world's dominant smartphone maker, and Samsung Life Insurance <032830.KS>, have a market value of around 13 trillion won ($12.7 billion). Depending on how the inheritance levy is applied, tax on those holdings could top 6 trillion won at current levels.

Because the shares are crucial to maintaining management control of the group's various affiliates, analysts say the family would aim to retain them even at great expense.

"The typical strategy is to adjust the amount of assets before death, take advantage of deductibles that are legally permitted or gift assets to push down the inheritance tax bill in advance. But at 6 trillion won, deductibles don't have much meaning," said Ku Sang-su, a certified public accountant at law firm Jipyong. "Once Chairman Lee passes, there aren't many options to reduce the inheritance tax."

The elder Lee, 72, was hospitalized last month following a heart attack. While his condition is said to be improving gradually, it is not clear whether he will be able to play as big a role in the conglomerate as he did in the past.

A Samsung Group spokeswoman declined to comment on succession planning.

The bill could be more than triple the 1.7 trillion won that South Korea collected in inheritance taxes in 2012. A National Tax Service official said the authority does no advance monitoring of potentially large payments.


The sprawling Samsung conglomerate, whose 2012 revenues accounted for more than a quarter of South Korea's nominal gross domestic product, appears to be accelerating a restructuring in anticipation of an eventual succession.

Samsung Everland Inc, a key holding company within the group, this week announced plans for an IPO, following a similar announcement last month by the group's IT solutions affiliate Samsung SDS. Both deals could help the Lee heirs raise cash to tighten their grip on group companies, and help pay the looming inheritance tax bill.

Both Hong Kong and Singapore, with sizeable billionaire populations, have done away with estate taxes in the last decade, although Japan, like South Korea, imposes an estate tax of up to 50 percent. In the United States, the top federal estate tax rate is 40 percent.

In South Korea, the tax has long been a headache for the seriously wealthy, such as the heads of the conglomerates known as chaebol that dominate the economy. Hyundai Motor Group and Doosan Group may also face costly successions.

Michael Shikuma, a Tokyo-based international tax and estate planner at U.S. law firm Morrison & Foerster, said there tends to be less use of estate planning in Asia. "In Japan, historically, tax planning has not really been considered something that's a patriotic thing to do," he said.


The Lees have long prepared for succession in anticipation of the eventual transfer of control to the younger generation.

However, a series of maneuvers that was widely criticized by civic groups and politicians means the group would be less likely to attempt any tax measures that might stir a public outcry, some analysts and tax experts said.

The elder Lee's three children acquired big stakes in Samsung Everland and Samsung SDS at prices far below market value during the 1990s in deals that were detailed during 2008-09 trials at which Lee Kun-hee was charged with breach of trust and tax evasion. He was found guilty of breach of trust regarding Samsung SDS, and tax evasion, and given a suspended 3-year jail sentence, but later received a presidential pardon.

The younger Lees' shares in Everland and SDS will likely be worth billions of dollars after the companies go public.

Lee Kun-hee's daughters, Boo-jin and Seo-hyun, both in their early 40s, are expected eventually to control the group's hotels and fashion businesses, respectively.

"Any tricks to try to skimp on the inheritance tax in the current public climate will lead to a huge backlash," said Chung Sun-sup, chief executive of research firm "The information is public and there is a consensus on how much the family should pay. If they try to pay 20-30 percent instead of half, would the public accept that?"


Despite past measures to shift assets to the younger generation, the huge increase in market value of the elder Lee's holdings makes it virtually impossible for his heirs to do much to lessen the tax bill in advance.

But there are steps they can take to manage the payment.

The listings of Samsung Everland and SDS will provide them with resources to raise cash, either by selling shares or borrowing against them. They could also use shares they inherit from their father as collateral to meet their obligations.

Increasing dividends from affiliates and seeking a multi-year payment plan may also help reduce the pain, analysts say.

The family could also create charities and transfer portions of the elder Lee's stakes to reduce the tax bill. However, rules limit how much of a company can be given to charities, and tax experts said it was unlikely the younger Lees would try to control the group's various arms through a chain of foundations.

"I don't think the Korean people will accept the scenario in which the decision-making process for a publicly traded company is decided by a group of foundations controlled by the Lee family," said a tax expert at a major local accounting firm, who declined to be identified due to the sensitivity of the issue.

Tax experts said they expect the family to use a combination of methods to meet their tax burden in a way that the public perceives as legitimate.

"Without inheriting Chairman Lee Kun-hee's shares, the Lees will not be able to retain both ownership and control two generations from now," brokerage E*Trade Korea said in a report. "The problem is taxes."

(Additional reporting by Sohee Kim and Kahyun Yang; Editing by Tony Munroe and Ian Geoghegan)



People with High Incomes Paying Zero Federal Income Taxes



The Internal Revenue Service has released the spring 2014 edition of its quarterly Statistics of Income Bulletin, with statistics up through 2011 indicating there are still people who earn over $200,000 a year who pay no federal income taxes, although the number of them has been decreasing.

“For 2011, there were 4.8 million individual income tax returns with an expanded income of $200,000 or more, accounting for 3.3 percent of all returns for the year. Of these, 15,000 returns had no worldwide income tax liability,” according to one report in the bulletin by Justin Bryan. “This was a 6.7-percent decline in the number of returns with no worldwide income tax liability from 2010, and the second decrease in a row since reaching an all-time high of 19,551 returns in 2009.”

The report defines expanded income as adjusted gross income plus tax-exempt interest, nontaxable Social Security benefits, the foreign-earned income exclusion, and items of “tax preference” for alternative minimum tax purposes less unreimbursed employee business expenses, moving expenses, investment interest expense to the extent it does not exceed investment income, and miscellaneous itemized deductions not subject to the 2-percent-of-AGI floor.

Among the reasons cited for nontaxability are tax-exempt bond interest and itemized deductions for interest expenses. “Because they do not generate AMT adjustments or preferences, tax-exempt bond interest, itemized deductions for interest expenses, miscellaneous itemized deductions not subject to the 2-percent-of-AGI floor, casualty or theft losses, and medical expenses (exceeding 10 percent of AGI) could, by themselves, produce nontaxability,” said the report. “Due to the AMT exemption of $74,450 on joint returns ($48,450 on single and head-of-household returns and $37,225 on returns of married taxpayers filing separately), a return could have been nontaxable even though it included some items that produced AMT adjustments or preferences. Further, since the starting point for “alternative minimum taxable income” was taxable income for regular tax purposes, a taxpayer could have adjustments and preferences exceeding the AMT exclusion without incurring AMT liability.”

The advocacy group Citizens for Tax Justice pointed out that the numbers are still high when looked at over a longer period.

“From the report’s first publication in 1977 through 2000, the number of high-income Americans paying no tax never exceeded 3,000,” said CTJ. “But the past four years have seen an explosion of high-end tax avoidance: in each of these years, the number of zero-tax Americans found in this report has exceeded 30,000. In 2011 (the latest year for which data are available), almost 33,000 people with incomes over $200,000 paid no federal income tax. For this group—less than one percent of all Americans with incomes over $200,000 in 2011—tax-exempt bond interest and itemized deductions are among the main tax breaks that make this tax-avoiding feat possible.”

In addition to the report on high-income tax returns through 2011, the spring 2014 Statistics of Income Bulletin also contains articles on individual income tax rates and sharesindividual noncash contributions andindividual foreign-earned income and foreign tax credits for 2011.

The IRS noted that of the 145 million individual tax returns filed in tax year 2011, 91.7 million were classified as taxable returns or returns with a total income tax greater than $0. Adjusted gross income (AGI) for taxable returns was nearly $7.7 trillion, up 6 percent from the prior year. Total income tax was more than $1 trillion. To be included in the top 1 percent of returns for 2011 required an AGI of $388,905.

For tax year 2011, there were more than 22 million individual taxpayers who reported a total of $43.6 billion in deductions for noncash charitable contributions. About a third (7.5 million) of these taxpayers reported nearly $39 billion in deductions for charitable contributions of $500 or more.

Nearly 450,000 U.S. taxpayers reported $54 billion of foreign-earned income for tax year 2011, representing growth in real terms of over 32 percent since the last study in 2006.

The Statistics of Income Bulletin is available for download at



State governments may be expanding wealth gap

Thursday, 5 Jun 2014 The Associated Press

Lawmakers in many states have been trying to boost their post-recession economies by cutting income taxes, curbing aid to the long-term jobless or holding down the minimum wage. Some have pursued all of these steps.

Whether such policies will spur businesses to expand as hoped isn't yet clear. But collectively, the actions could ease the financial burden for the states' most affluent residents while reducing the safety net for those at the bottom.

The shift may also contribute to a trend that is prompting growing national concern: the widening gap between the richest Americans and everyone else. The divergence has developed over four decades and accelerated in recent years.

Economic statistics show that incomes for the top 1 percent of U.S. households soared 31 percent from 2009 through 2012, after adjusting for inflation, yet inched up an average of 0.4 percent for those making less. Many economists are sounding alarms that the income gap, greater now than at any time since the Depression, is hurting the economy by limiting growth in consumer spending.

Yet those concerns aren't resonating in some states. Last year, at least 10 states passed income tax cuts targeted at businesses or those in the top individual brackets. Several more already have cut taxes this year, including Democratic-led New York and Republican-led Oklahoma. Yet over the past three years, nearly one-fifth of the states have pared back unemployment benefits, and more cutbacks are under consideration.

The theory is that business owners are more likely to hire, expand and drive economic growth when their own financial burdens are eased. But others contend that formula comes with side effects.

"What's happening at the state level is increasingly important, and, to many eyes, it appears to be moving things in one direction - towards greater inequality," said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a Washington-based tax research group.

The once-obscure income gap has become an issue in the 2014 elections as Democrats and Republicans differ over the best way to ensure America fulfills its promise as a land of opportunity.

Economists point to a variety of factors contributing to the gap, from the shift toward foreign manufacturing to a growth in single-parent households. Federal policies also come into play.

But state governments also have an impact.

Since the mid-1970s, states as a whole have cut their top individual income tax rates by nearly one-fourth, while boosting state sales tax rates by almost half, according to an Associated Press analysis. That has meant lower taxes for those earning the most and a bigger proportionate tax bite for those who spend more of their income on retail sales. Vermont, for example, has cut its top personal income tax rate from 17.5 percent to less than 9 percent while doubling its sales tax rate to 6 percent.

At the same time, states have scaled back some of the aspects of the financial safety net that keep low-income people out of poverty. The inflation-adjusted value of state welfare payments has been dropping in every state except Maryland and Wyoming and - even with federal food stamps included - leaves recipients below the poverty level in all states.

A divorced mother of three, Amy Jennewein came to the Missouri Capitol earlier this year imploring lawmakers to raise the minimum wage from $7.50 an hour to $10. Instead, the Republican-led Legislature voted to gradually cut the top individual income tax rate from 6 percent to 5.5 percent and referred a three-quarters cent sales tax increase to the ballot. It also curbed unemployment benefits.

"The middle class is disappearing - that's what it feels like," said Jennewein, who works two jobs at a preschool and a grocery store to support her family at a poverty-level income. "Every single day, I feel it's getting worse instead of getting better."

As the safety net shrinks, the chance that residents will be impoverished at some point has grown. The percentage of people ages 35-45 experiencing poverty rose by one third during 1988-2008 compared with the previous two decades, according to research by Mark Rank, a social welfare professor at Washington University in St. Louis.

"Folks are getting less in terms of redistribution on the bottom end, and folks are getting more in terms of tax cuts on the top end," Rank said.

The last time the income gap was this wide was in the Roaring '20s, when government did little to redistribute income. That changed after the Great Depression, when many states began using income taxes to improve public education, prevent poverty and add services to boost the quality of life.

But business groups began protesting their growing share of the burden.

In Missouri this year, business leaders stood beside GOP lawmakers at news conferences before they enacted an income tax cut with a special break for many business owners.

Jack Lonsinger, who employs about 20 people at a carbon recycling business near Kansas City, said he would put the eventual tax savings toward the purchase of new equipment.

"We use the money we get back to invest - it's nothing we're going to stick in our pocket," he said.



Why a Partnership Loss May Not be Deductible

JUNE 9, 2014


When an individual receives a Schedule K-1 from a partnership reflecting a loss, there are several things to consider before deciding if the loss can be deducted. In order to determine deductibility, a partner's basis and at risk limitations need to be evaluated.

First and foremost, a partner must have adequate basis in the partnership in order to consider the deductibility of the partnership loss. A taxpayer's tax basis in a partnership interest (often called the partner's outside basis) represents the partner's cost for tax purposes and is used to measure the taxable gain or loss upon disposition of the partnership interest.

In addition, a partner's tax basis can (1) limit the partner's ability to deduct a partnership loss; (2) cause a cash distribution to be taxable instead of tax-free; and (3) affect the basis of property received as a distribution.

A partner's initial basis equals the amount of money contributed, plus the adjusted basis of property contributed, plus the partner's share of the partnership's liabilities. 

All liabilities of the partnership are classified into three categories. First is recourse debt, which is debt that a partner would be responsible to pay back if there is an economic risk of loss on the debt, such as security deposits and loans made by partners to the partnership.

Next is nonrecourse debt, which is debt a partner is not liable to repay if the entity cannot. The last type of liability is qualified non-recourse debt, such as a mortgage held by a financial institution.

Typically, all three types of liabilities are allocated to the partners in the same proportion as the profit and loss allocation, except for recourse debt, which is allocated based on whoever bears the risk of economic loss.

Once a partner passes the basis test, the next test to be applied is that of the “at risk” rules of Section 465 of the Tax Code. The at-risk rules are applicable at the partner level, rather than the partnership level, and are designed to ensure that a taxpayer deducts losses only to the extent he or she is economically or actually at risk for the investment.

A partner is considered at risk with respect to an activity for (1) the amount of money and the adjusted basis of other property contributed to the activity; and (2) amounts borrowed for use in the activity if the partner is personally liable for repayment of the borrowed amount or has pledged property, other than property that is used in the activity, as security for the borrowed amount.

The primary distinction between basis and at risk— thereby causing losses to be deductible for one while not the other—are the nonrecourse liabilities. A partner's share of the nonrecourse liabilities can increase their basis, but not the at risk limitation. In order to deduct these losses, partners may be tempted to guarantee partnership debt. Depending on the type of partnership, limited partnership (LP) or limited liability company (LLC), the impact on the at risk limitation can be different than the desired result.

In a recent IRS communication, the IRS distinguished the LLC guarantee from a debt guarantee in a limited partnership. Generally a limited partner in an LP who guarantees partnership debt is not at risk with respect to the guaranteed debt, because the limited partner has a right to seek reimbursement from the partnership and the general partner for any amounts that the limited partner is called upon to pay under the guarantee. However, in the case of an LLC, all members have limited liability with respect to LLC debt. In the absence of any co-guarantors or another similar arrangement, an LLC member who guarantees LLC debt becomes personally liable for the guaranteed debt and is therefore at risk in relation to the debt. 

As you can probably tell, this is a very complex area, and navigating the rules should be done in coordinated consultations between the client’s attorney and tax advisor. We do recommend that clients consult with a tax advisor to discuss their liabilities to ensure their basis and at risk limitations are being properly reported.

Christie Butcher, CPA, MST, is a senior tax manager at Kessler Orlean Silver CPAs, in Deerfield, Ill.  She can be contacted at



IRS Adopts Taxpayer Bill of Rights

WASHINGTON, D.C. (JUNE 10, 2014)



The Internal Revenue Service has adopted a "Taxpayer Bill of Rights" that it said would become a cornerstone document to provide the nation's taxpayers with a better understanding of their rights.

The Taxpayer Bill of Rights takes multiple existing rights that have already been included in the Tax Code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on

Publication 1, "Your Rights as a Taxpayer," has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for taxpayers and employees to see.

"The Taxpayer Bill of Rights contains fundamental information to help taxpayers," said IRS Commissioner John A. Koskinen in a statement. "These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”

The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. Since 2007, adopting a Taxpayer Bill of Rights has been a goal of National Taxpayer Advocate Nina E. Olson, and it was listed as the Advocate’s top priority in her most recent Annual Report to Congress.

“Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,’” Olson said. “However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.”

The Tax Code includes numerous taxpayer rights, but they are scattered throughout the code, making it difficult for people to track and understand. Similar to the U.S. Constitution’s Bill of Rights, the Taxpayer Bill of Rights contains 10 provisions. They are:

1. The Right to Be Informed
2. The Right to Quality Service
3. The Right to Pay No More than the Correct Amount of Tax
4. The Right to Challenge the IRS’s Position and Be Heard
5. The Right to Appeal an IRS Decision in an Independent Forum
6. The Right to Finality
7. The Right to Privacy
8. The Right to Confidentiality
9. The Right to Retain Representation
10. The Right to a Fair and Just Tax System

The rights have been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. Millions of these mailings go out each year. The new version has been added to, and print copies will start being included in IRS correspondence in the near future.

The timing of the updated Publication 1 with the Taxpayer Bill of Rights is critical because the IRS is in the peak of its correspondence mailing season as taxpayers start to receive follow-up correspondence from the 2014 filing season. The publication initially will be available in English and Spanish, and updated versions will soon be available in Chinese, Korean, Russian and Vietnamese.

The IRS has also created a special section of to highlight the 10 rights. The web site will continue to be updated with information as it becomes available, and taxpayers will be able to easily find the Bill of Rights from the front page. The IRS internal web site for employees is adding a special section so people inside the IRS have easy access as well.

As part of this effort, the IRS will add posters and signs in coming months to its public offices so taxpayers visiting the IRS can easily see and read the information.

"This information is critically important for taxpayers to read and understand,” Koskinen said. “We encourage people to take a moment to read the Taxpayer Bill of Rights, especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see.”

“I also want to emphasize that the concept of taxpayer rights is not a new one for IRS employees; they embrace it in their work every day,” Koskinen added. “But our establishment of the Taxpayer Bill of Rights is also a clear reminder that all of the IRS takes seriously our responsibility to treat taxpayers fairly. The Taxpayer Bill of Rights will serve as an important education tool, and we plan to highlight it in many different forums and venues.”

During a conference call with reporters Tuesday, Accounting Today asked Koskinen and Olson about whether tax preparers would also be able to assert the Taxpayer Bill of Right on behalf of clients.

“Absolutely,” Olson responded. “Between November 2013 and February 2014, my office conducted 32 focus groups around the country, 16 with taxpayers and 16 with preparers, including CPAs. It was interesting. The preparers felt unanimously that this was an incredibly helpful thing to have and enabled them to explain sort of the process in a way and the protections to their clients and that they would like very much to have brochures or to see it in Pub 1 because it would really help educate their clients. It probably will help educate some preparers as well, particularly those that are not what we would call Circular 230 preparers—the attorneys, the accountants, the CPAs, the enrolled agents, who may not know about these things.”

“We are delighted to encourage the taxpayers to be comfortable contacting us directly, particularly if they have questions,” Koskinen pointed out. “If they have difficulty becoming compliant, we’re happy to talk to them directly. But it is important for them to understand they don’t lose any rights and we don’t treat them any differently if they are represented by a certified accountant, preparer, enrolled agent, or attorney. We’re perfectly comfortable with that. We’re delighted when they choose to be represented. We want people to understand that you can deal with us directly, but if you have a representative, you won’t lose anything. We won’t treat you any differently. You still have the right to a fair and just system.”

They noted that the House has recently passed legislation containing an earlier version of Olson’s suggested Taxpayer Bill of Rights, but the Senate has not approved similar legislation, Olson noted.

Koskinen said the subject of a Taxpayer Bill of Rights had come up when he visited IRS offices across the country and met with employees after taking over as commissioner.

“One of the things I learned when I became commissioner back in December was the importance of taxpayer rights and also how focused our employees are on this issue,” he said. “Over the past several months I have visited dozens of IRS offices around the country and had the opportunity to see and hear the many ways our employees serve taxpayers and work to protect their rights. I also came to believe that we as an institution needed to do a better job of communicating taxpayer rights to the public and showing taxpayers how deeply we respect those rights.”

Koskinen said he would encourage taxpayers to take a look at the Taxpayer Bill of Rights, especially when they are interacting with the IRS. However, he pointed out that budget cuts at the IRS in recent years have had a negative impact on IRS taxpayer service. He and Olson had met to discuss which of the initiatives in her report to Congress could be implemented without costing much in IRS resources, and the Taxpayer Bill of Rights seemed to be at the top of the list, as it contained protections that were already included in the Tax Code.

“I also want to mention a concern I have in regard to taxpayer rights, and that involves our funding situation,” said Koskinen. “This is a concern that I know is shared by the Taxpayer Advocate. The IRS budget, as you know, has been reduced by more than $850 million, or about 7 percent since 2010. These reductions greatly complicate the work we do to ensure that we provide quality service, which is one of the 10 fundamental taxpayer rights. If we do not have adequate funding, that means we don’t have enough people answering the phones, taking care of correspondence, or staffing our walk-in taxpayer assistance sites. So I will continue making the case to Congress that the IRS needs adequate resources in order to properly serve taxpayers.”

Olson pointed out that she has long called for a Taxpayer Bill of Rights in her reports to Congress, and she had recommended that the IRS adopt its own Taxpayer Bill of Rights and not wait for Congress to codify it. Even though the various provisions are already scattered across the Tax Code, many taxpayers are not aware of them.

“I want to emphasize that this is a real issue that has real impact on taxpayers that the IRS is adopting the Taxpayer Bill of Rights,” said Olson. “The Taxpayer Advocate Service commissioned a survey in 2012 with a representative sample of United States taxpayers and we found that only 46 percent of U.S. taxpayers believed that they had rights before the IRS. That is, 54 percent of them did not believe that they had rights before the IRS or just didn’t know, and only 11 percent of taxpayers knew what those rights were. Let me emphasize, if you don’t know what your rights are, you will never avail yourself of those rights and things will happen to you.”



Supreme Court Rules Inherited IRAs are Not Protected in Bankruptcy Print Email Reprints


WASHINGTON, D.C. (JUNE 13, 2014)



A unanimous Supreme Court has held that the funds in an inherited IRA do not qualify for exemption in bankruptcy because they do not share the same characteristics as “retirement funds” that traditional IRAs have. 

In 2000, Ruth Heffron established a traditional IRA and named her daughter, Heidi Heffron-Clark, as the sole beneficiary. When Ms. Heffron died the next year, the IRA, worth at the time about $450,000, passed to Heidi as an inherited IRA. Heidi elected to take monthly distributions from the account.

In October 2010, Heidi and her husband filed a Chapter 7 bankruptcy petition. They identified the inherited IRA, by then worth around $300,000, as exempt from the bankruptcy estate under 11 U.S. C. section 522(b)(3)(C). The bankruptcy trustee and the unsecured creditors of the estate objected on the ground that the funds in the inherited IRA were not “retirement funds” within the meaning of the statute. The Bankruptcy Court agreed, concluding that an inherited IRA does not contain anyone’s retirement funds, since, unlike traditional IRAs, the funds are not segregated to meet the needs of any person’s retirement.

The District Court reversed the Bankruptcy Court, and the Seventh Circuit reversed the District Court. The Supreme Court granted certiorari to resolve a conflict between the Seventh Circuit and the Fifth Circuit.

In her written opinion on the case, Clark v. Rameker, Justice Sonia Sotomayor said that the text and purpose of the Bankruptcy Code make clear that funds held in inherited IRAs are not retirement funds within the meaning of the Section 522(b)(3)(C) bankruptcy exemption.

“Three legal characteristics of inherited IRAs lead us to conclude that funds held in such accounts are not objectively set aside for the purpose of retirement,” she stated. “First, the holder of an inherited IRA may never invest additional money in the account. Inherited IRAs are thus unlike traditional and Roth IRAs, both of which are quintessential ‘retirement funds.”

“Second, holders of inherited IRAs are required to withdraw money from such accounts, no matter how many years they may be from retirement. Finally, the holder of an inherited IRA may withdraw the entire balance of the account at any time—and for any purpose —without penalty. Whereas a withdrawal from a traditional or Roth IRA prior to the age of 59 1/2 triggers a 10 percent tax penalty subject to narrow exceptions—a rule that encourages individuals to leave such funds untouched until retirement age—there is no similar limit on the holder of an inherited IRA.”

Sotomayor observed that as a general matter, “the provisions of the Bankruptcy Code’s exemption provisions effectuate a careful balance between the interests of creditors and debtors.”
Exemptions serve the important purpose of protecting the debtor’s essential needs. While allowing debtors to protect funds held in traditional and Roth IRAs comports with this purpose by helping to ensure that debtors will be able to meet their basic needs during their retirement years, the same cannot be said of an inherited IRA, she indicated.

“For if an individual is allowed to exempt an inherited IRA from her bankruptcy estate, nothing about the inherited IRA’s legal characteristics would prevent (or even discourage) the individual from using the entire balance of the account on a vacation home or sports car immediately after her bankruptcy proceedings are complete,” she wrote. “Allowing that kind of exemption would convert the Bankruptcy Code’s purposes of preserving debtors’ ability to meet their basic needs and ensuring that they have a ‘fresh start,’ into a ‘free pass.’ We decline to read the retirement funds provision in that manner.”




5 Money Management Mistakes

by  JosephMontanaro  from USAA


It can be dizzying. And there’s lots of hard-to-ignore noise on the periphery.


No, I’m not talking about trying to work at home with the kids buzzing around. Instead, I’m talking about managing your investments. Peruse the paper, surf the Internet or turn on your TV and you’ll be bombarded with “can’t-miss opportunities” and gut-wrenching financial news that inevitably work their way into decisions you make on your investment portfolio.


Truth be told, I’m surrounded by money managers and money news, and sometimes I wonder, “What’s the right move?” And that’s with 20 years of experience in the business of personal finance! There’s no doubt about it: Managing your investments can be perilous – ripe with opportunities to make a bad move.


With the accuracy of hindsight on my side, here are five common mistakes I’ve seen people make while trying to tackle this task.


Timing instead of “time in.” Buy low, sell high. Sounds easy enough, right? But the reality is far different. At the beginning of 2013, a budget crisis, pending government shutdown and a long-running bull market could have easily led investors to jump out of stocks. A correction was surely imminent. Oops, U.S. stocks surged more than 30%. The lesson? Don’t try to time the market. Among the challenges you’ll face is the need to make two decisions – when to get out and when to get back in. Can you get them both right? If so, can you do it more than once? Probably not.  Don’t try to time the market, let your long-term money work for, yes, the long-term.


Picking off the top of the list. Avoiding this market mishap is a battle with human nature. It’s way too easy to look at last year’s winners and choose to jump on the bandwagon by shifting your money to whatever did best. Don’t do it! Remember, the rule is: Buy low, sell high. Maybe last year’s winner will go even higher. Or maybe it won’t. Typically, you’ll arrive at the party just in time for a big disappointment. Plus, chasing last year’s return isn’t really an investment strategy.


Hankering for a home run. In 2013, if you owned Rite Aid stock, you would have seen a healthy 272% return. If you had bet on the gold-mining stock Newmont Mining, you would have lost nearly half your investment. The point? For most people, broad-based mutual fund or exchange-traded fund investments make more sense than swinging for the fences … and the risk of striking out.


Believing more is better. Everything in moderation. It’s a saying that works well in many aspects of life, and investing is no exception. Some gold, commodities or real estate might be a nice addition to your portfolio. However, like cayenne pepper in your favorite recipe, more is not necessarily better! A diversified portfolio should contain a mix of different investments but not wild bets on the latest trend.


Following the headlines. Today’s 24-hour news cycle makes it difficult to focus on your long-term goals. But overhauling or overturning your plan for the next quarter-century based on the latest and loudest talking head’s thoughts (which won’t match next week’s rant) is not a solid portfolio management model. Follow the news, but don’t let it run you in circles.


Are you guilty of these missteps? Hopefully not! But if you feel any of these mistakes creeping into your life, bust out your long-term plan and your noise-canceling headphones. Like it or not, the investment world will always be a loud one. The key is to block out the extraneous noise and tune in to the goals you’re trying to achieve.





Grassley Warns of Tax Season Delay Next Year

WASHINGTON, D.C. (JUNE 13, 2014)



Sen. Charles Grassley, R-Iowa, the former chairman of the Senate Finance Committee, is warning that tax season could be delayed next year if approval of tax extenders legislation is put off until after the mid-term elections in November.

Grassley pointed out in a speech on the Senate floor Thursday that Senate Majority Leader Harry Reid, D-Nev., expressed the view last week that legislation for extending dozens of expired tax breaks is unlikely to be passed until a lame-duck session following the election. “The majority leader blames this on the minority, but it is the majority leader that is uniquely situated under Senate rules to determine what legislation will be considered on the Senate floor,” said Grassley.

“The majority leader’s excuse for not proceeding to extenders before the lame duck is that Republicans are seeking to offer amendments unrelated to tax extenders. This excuse simply does not fly.”

Senate Minority Leader Mitch McConnell, R-Ky., has also voiced skepticism about a tax extenders bill passing this year before the election, given the basic disagreement between both parties over tax reform priorities. Leaders of the Senate Finance Committee have announced a series of hearings over the summer to move ahead on tax reform (see Senate Leaders Plot Path for Tax Reform).

Grassley noted, however, that consideration of tax extenders legislation can’t wait until the end of the year without disrupting tax season. When tax provisions have expired in previous years, as when the Bush tax cuts expired at the end of 2012 and Congress and the Obama administration made a last-minute deal, passing legislation on New Year’s Eve 2013 to avert the so-called “fiscal cliff,” the delay also postponed the start of tax season. The Internal Revenue Service was forced to produce new tax forms and change its tax tables and systems much later than usual.
“Delaying tax extenders legislation to the lame duck has real consequences for our constituents,” said Grassley. “We know from previous years, late action on tax extenders poses significant tax administration burdens that cause headaches and hardships for millions of taxpayers. When we fail to act in a timely fashion, tax forms are not ready and refunds are delayed. We owe it to our constituents to see to it that these added complications are not a factor this year. Tax season is unpleasant enough without us adding to it by failing to do our job in a timely fashion.”

Grassley pointed out that some of the most popular tax deductions are among the many that have expired and not yet been renewed.

“While many view tax extenders as benefitting businesses, the truth is the delay of widely used individual tax provisions will impact millions of taxpayers,” Grassley observed. “Three of the most widely used tax provisions are the state and local sales tax deduction, claimed on over 11 million returns in 2011, the above-the-line deduction for teacher expenses, claimed on over 3.8 million tax returns in 2011, and the college tuition deduction, which was claimed on about 2 million tax returns. These three provisions alone give us over 16 million reasons to act now to ensure we don’t subject these taxpayers to needless delays and complications this filing season.”

Some expired business tax provisions have been voted on in the House, such as the research and development tax credit in a vote last month. The House also voted Thursday to extend the Section 179 expensing limit of up to $500,000, but the Senate has not yet acted on that and other business tax extender items (see House Passes Pair of Business Tax Break Bills).

“These 16 million tax filers should provide more than enough reason for not putting off tax extenders legislation until the lame duck,” said Grassley. “But, if you need another reason, think of the small businesses that are anxiously looking on wondering what we are going to do about the expiration of the enhanced expensing rules under Section 179. I’m sure I’m not the only one hearing from small business owners and farmers who are putting off purchasing that new truck or tractor all because they do not know the fate of this provision. This is bad for economic growth and bad for jobs.”

Grassley also pointed to expired tax breaks for renewable energy sources, such as wind energy, an important industry in his home state of Iowa. 

“Then there is the lapse of the renewable energy incentives that support millions of jobs, not only in Iowa but in states across the country,” he said. “The expiration of these provisions has already hampered the strides made toward a viable self-sustainable renewable energy and fuel sector. Delaying extension of these important provisions is hurting the economy and costing jobs. A biofuels organization found that nearly 80 percent of U.S. biodiesel producers have scaled back production this year. Sixty-six percent of biodiesel producers have reduced their workforce or anticipate cutting jobs. This is a direct result of policy uncertainties in Washington, including the expiration of the biodiesel tax incentive.”

Grassley blamed Reid for standing in the way of tax extenders legislation by blocking other senators from introducing further amendments, using a Senate tactic known as “filling the tree.” 
“The only thing standing in the way of passing the extenders package here in the Senate is Majority Leader Reid and a handful of reasonable amendments,” said Grassley.

Last month, Senate Republicans blocked a package of tax extenders legislation that would renew more than 50 of the expired tax breaks from advancing after it was introduced by the current Senate Finance Committee chairman, Ron Wyden, D-Ore. (see Tax Cuts in Limbo as Senate Republicans Block Extenders Bill). The legislation had needed 60 votes to advance in the Senate, but received a vote of only 53 to 40. Republican lawmakers objected to their inability to offer amendments. Wyden’s Republican counterpart on the committee, ranking member Orrin Hatch, R-Utah, said he would work with Wyden on resolving the impasse.

“Mr. President, we were all sent here by our constituents to represent them in the legislative process,” said Grassley. “So, let’s legislate. A bipartisan bill such as tax extenders would be a perfect opportunity to show our constituents our ability to work together and get things done. I call on the majority leader to bring the tax extenders bill back to the floor. Allow for a reasonable amendment process that permits individual senators of both parties to have a say in crafting this legislation.”



People with High Incomes Paying Zero Federal Income Taxes




The Internal Revenue Service has released the spring 2014 edition of its quarterly Statistics of Income Bulletin, with statistics up through 2011 indicating there are still people who earn over $200,000 a year who pay no federal income taxes, although the number of them has been decreasing.


“For 2011, there were 4.8 million individual income tax returns with an expanded income of $200,000 or more, accounting for 3.3 percent of all returns for the year. Of these, 15,000 returns had no worldwide income tax liability,” according to one report in the bulletin by Justin Bryan. “This was a 6.7-percent decline in the number of returns with no worldwide income tax liability from 2010, and the second decrease in a row since reaching an all-time high of 19,551 returns in 2009.”

The report defines expanded income as adjusted gross income plus tax-exempt interest, nontaxable Social Security benefits, the foreign-earned income exclusion, and items of “tax preference” for alternative minimum tax purposes less unreimbursed employee business expenses, moving expenses, investment interest expense to the extent it does not exceed investment income, and miscellaneous itemized deductions not subject to the 2-percent-of-AGI floor.

Among the reasons cited for nontaxability are tax-exempt bond interest and itemized deductions for interest expenses. “Because they do not generate AMT adjustments or preferences, tax-exempt bond interest, itemized deductions for interest expenses, miscellaneous itemized deductions not subject to the 2-percent-of-AGI floor, casualty or theft losses, and medical expenses (exceeding 10 percent of AGI) could, by themselves, produce nontaxability,” said the report. “Due to the AMT exemption of $74,450 on joint returns ($48,450 on single and head-of-household returns and $37,225 on returns of married taxpayers filing separately), a return could have been nontaxable even though it included some items that produced AMT adjustments or preferences. Further, since the starting point for “alternative minimum taxable income” was taxable income for regular tax purposes, a taxpayer could have adjustments and preferences exceeding the AMT exclusion without incurring AMT liability.”

The advocacy group Citizens for Tax Justice pointed out that the numbers are still high when looked at over a longer period.

“From the report’s first publication in 1977 through 2000, the number of high-income Americans paying no tax never exceeded 3,000,” said CTJ. “But the past four years have seen an explosion of high-end tax avoidance: in each of these years, the number of zero-tax Americans found in this report has exceeded 30,000. In 2011 (the latest year for which data are available), almost 33,000 people with incomes over $200,000 paid no federal income tax. For this group—less than one percent of all Americans with incomes over $200,000 in 2011—tax-exempt bond interest and itemized deductions are among the main tax breaks that make this tax-avoiding feat possible.”

In addition to the report on high-income tax returns through 2011, the spring 2014 Statistics of Income Bulletin also contains articles on individual income tax rates and sharesindividual noncash contributions andindividual foreign-earned income and foreign tax credits for 2011.

The IRS noted that of the 145 million individual tax returns filed in tax year 2011, 91.7 million were classified as taxable returns or returns with a total income tax greater than $0. Adjusted gross income (AGI) for taxable returns was nearly $7.7 trillion, up 6 percent from the prior year. Total income tax was more than $1 trillion. To be included in the top 1 percent of returns for 2011 required an AGI of $388,905.

For tax year 2011, there were more than 22 million individual taxpayers who reported a total of $43.6 billion in deductions for noncash charitable contributions. About a third (7.5 million) of these taxpayers reported nearly $39 billion in deductions for charitable contributions of $500 or more.

Nearly 450,000 U.S. taxpayers reported $54 billion of foreign-earned income for tax year 2011, representing growth in real terms of over 32 percent since the last study in 2006.

The Statistics of Income Bulletin is available for download at




Women face retirement roadblocks

Guest Contributor | Kathleen Burns Kingsbury@KBKSpeaks


The modern woman is well educated and more likely to be a key financial contributor, if not the main breadwinner, for her family than in previous decades.

However, despite earning more money and controlling more wealth, many women fail to adequately save for retirement. A recent study by Transamerica Center for Retirement Studies found that only 29 percent of women made saving for retirement a priority in their financial lives.

Intellectually, women know that it makes good financial sense to invest in their future. So what gets in the way? 

Often, the emotional side of money inhibits women from taking proactive steps to save for retirement. Here are five emotional roadblocks that can put a crimp in these plans:

1. Practicing an "everyone comes first" philosophy: Women are socialized and hardwired to take care of others and often put their family's needs before their own. This results in many women significantly underfunding their retirement accounts, as they are preoccupied with paying for their children's college educations, their elderly parents' day care or their partners' expensive hobbies.

It is not easy to say no to the ones you love, but keep in mind that there are student loans and insurance plans to cover, respectively, college and health-care costs. There are no retirement loans. It is up to you to prioritize this area of your financial life. It does not have to be all or nothing. Simply put your needs in the mix with those of the kids, your partner and parents.

2. Believing the myth that "A man is the plan": In the 1950s, the best way for a woman to acquire wealth was to marry a rich man. This is no longer true. Four out 10 women are the primary breadwinners for their families, and women are creating wealth in their own right, author Liza Mundy reports in her book, "The Richer Sex: How the New Majority of Female Breadwinners Is Transforming Sex, Love and Family."

Despite these advances, some women still rely on meeting Mr. Right as a retirement strategy. 

Keep in mind that you may meet Mr. Right, but he may come with debt or decide to divorce you just as he enters his pre-retirement years. The sad truth is that a woman's income usually drops by 40 percent post-divorce, whereas a man's declines by 25 percent, according to "Family and Retirement: The Elephant in the Room," a study from Merrill Lynch Wealth Management.

The best strategy is to be financially responsible for your own retirement and proactive in funding that account, married or single. This way, if you find a relationship that is fulfilling and dreamy, you can enjoy it and not have to worry about relying on a man as your plan.

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3. Getting sidetracked and sandwiched in: According to Family Caregiver Alliance, women are more likely than men to take time off from work to care for children and elderly parents. In addition, female caregivers spend as much as 50 percent more time providing care than their male counterparts.

Whether it is a small child or an ill parent, this time away from work decreases a woman's earnings and derails retirement savings. 

There are no easy answers, as people are living longer and health-care costs are increasing annually. However, the best strategy is to be proactive and consider your options before quitting your job to care for others.

When it comes to children, take time to look for a solution that is best for the family but also for you and your future financial picture. Talk to your elderly parents, preferably before they become ill, and encourage them to sign up for long-term care insurance to help cover some of their anticipated health-care expenses, should they end up needing your support.

4. Lacking financial confidence: Only 7 percent of women are "very confident" in their ability to fully retire and live comfortably, according to the Transamerica Center retirement study. This lack of confidence permeates other areas of women's financial lives, too, and results in 49 percent of women staying awake at night worrying about becoming homeless and destitute in their old age, according to a study from Allianz called "Women, Money and Power Study: Empowered and Underserved."

The dilemma is that this worry does not always motivate women to increase their financial literacy. Without a good understanding of basic saving and investment strategies, it is challenging to adequately save for retirement.

Of course, there are solutions for these women. It's essential to make time to learn more about your finances. Find a financial advisor who is good with women and is willing to teach you the basics of good money management and investing. Finance may never be your passion, but similar to learning about good nutrition, knowing how to confidently invest for retirement is part of being a responsible adult.

5. Not controlling spending habits: The pressure on women to look beautiful and fashionable is strong in our society and costs women millions of dollars. The fashion industry is a multibillion-dollar business, and many women invest more in looking good than in their 401(k) plans.

InStyle magazine reported that the average woman spends $15,000 on makeup during her lifetime. Just imagine if a woman who just turned 21 put that exact amount into a retirement account earning 5 percent annually. If she kept the money in the account until she was 65, she would have saved in excess of $128,000—without adding a cent. 

Most women want to wear makeup, but the real question is about how much you need to spend to look good. If you are spending big bucks on beauty products and clothing, take a moment to think about how these expenditures might impact your financial security in the long run.

"Make sure you understand the emotional roadblocks in your way when it comes to planning for retirement, and work diligently to remove them."

To cut down on overspending and keep long-term savings goals in mind, attach a picture of your ideal retirement location or activity to your credit card. Enlist the support of a financial advisor to support you in reaching your savings goals, and just say no to that new, expensive leather handbag.

Being a woman in today's world is both exciting and complicated. Make sure you understand the emotional roadblocks in your way when it comes to planning for retirement, and work diligently to remove them.





Disclaimer: This article is for general information purposes only, and is not intended to provide professional tax, legal, or financial advice. To determine how this or other information in this newsletter might apply to your specific situation, contact us for more details and counsel.


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