A Massive New FinCEN [Government] Filing Requirement Is Coming

by Kenneth Hoffman in


Do you own or advise a corporation, limited liability company (LLC), limited partnership, limited liability partnership, limited liability limited partnership, or business trust?

Or are you planning to form one of these entities?   

If so, be alert. There’s a new federal filing requirement coming.  

Back in 2021, Congress passed a new law called the Corporate Transparency Act (CTA) that requires corporations, LLCs, and other business entities to provide information about their owners to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), which is a unit separate from the IRS.   

The CTA is part of a government crackdown on corruption, money laundering, terrorist financing, tax fraud, and other illicit activity. It targets the use of anonymous shell companies that facilitate the flow and sheltering of illicit money in the United States.   

Businesses subject to the law will have to file a “beneficial owner report” with FinCEN, including each beneficial owner’s full legal name, date of birth, and residential street address, as well as an identifying number from a legal document such as a driver’s license or passport. FinCEN will include the information in a database for use by law enforcement, national security and intelligence agencies, and federal regulators that enforce anti-money-laundering laws. The database will not be publicly accessible.   

Violations of the CTA can result in a $500-a-day penalty (up to $10,000) and up to two years’ imprisonment.  

The CTA did not take effect immediately. Rather, Congress gave the FinCEN time to write regulations governing how the CTA should be applied and to give businesses a heads-up about the new law. FinCEN has now issued its proposed regulations, and they take a fairly hard line on how the law will be applied.  

Here are four things the new regulations make clear.  

1. The filing requirement may begin soon. The CTA goes into effect when the proposed regulations become final, which is expected to occur sometime between mid- and late 2022. As soon as it goes into effect,   

  • new corporations, LLCs, and other entities will have to comply with the filing requirement within 14 days of being formed, and

  • existing entities will have one year to comply.

2. Millions of small businesses are affected. The reporting requirements will apply to almost every small business that is not a sole proprietorship or general partnership, including corporations, LLCs, limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships—over 30 million in all.   

Larger companies with over 20 full-time employees and $5 million in gross receipts are exempt.   

3. There will be many beneficial owners. The proposed regulations make it clear that a company can have multiple beneficial owners, and it may not always be easy to identify them all. There are two broad categories of beneficial owners:  

  • any individual who owns 25 percent or more of the company, and

  • any individual who, directly or indirectly, exercises substantial control over the company.

4. Law and accounting firms are not exempt. Neither the CTA nor the proposed regulations contain any exemption for legal or accounting firms, except for the relatively few public accounting firms registered under Section 102 of the Sarbanes-Oxley Act of 2002. Thus, any law or accounting firm that is a professional corporation or an LLC will have to file a beneficial owner report unless it has more than 20 employees and $5 million in annual income.   ​

If you have questions about the CTA and its effect on you, please call me on my direct line at 954-591-8290. 


Taxpayer Cannot Use Google Maps to Substantiate Miles Traveled

by Kenneth Hoffman


Taxpayer Cannot Use Google Maps to Substantiate Miles Traveled: In Geiman v. Comm'r, T.C. Memo. 2021-80, the Tax Court disallowed most of a taxpayer's travel expense deductions because the taxpayer did not meet the heightened substantiation requirements of Code Sec. 274. The court rejected the taxpayer's use of Google Maps printouts as substantiation for the number of business miles traveled.


Sole Shareholder Is Liable for Corporation's Tax Debt

by Kenneth Hoffman


Sole Shareholder Is Liable for Corporation's Tax Debt: In U.S. v. Lothringer, 2021 PTC 329 (5th Cir. 2021), the Fifth Circuit affirmed a district court and held that the sole owner of a C corporation, which ran a used car lot, was personally liable for his corporation's failure to pay taxes because the corporation was his alter ego. The Fifth Circuit agreed that the district court was correct in applying Texas law and relying on a slew of undisputed facts, including that the taxpayer was the sole shareholder, officer, director, and owner of the C corporation; exercised complete dominion and control over the corporation; failed to observe certain corporate formalities; loaned substantial money to the corporation; and made payments from the corporate bank account to service personal loans.


20 Reasons to File an Extension

by Kenneth Hoffman


Following are 20 reasons for obtaining an extension. The extension must be filed by this year’s due date of April 18. Further, the extension covers filing, not paying the tax which must be paid by April 18 or penalties will be assessed and the extension can possibly be disallowed.

  1. You did not receive some K-1s or 1099s or other documents with information that you need to report
  2. You did not receive letters confirming charitable contributions that are required to be in your possession by the due date (including extensions) of your tax return. This includes certified appraisals for contributions of property over $5,000.
  3. You have pending litigation or a tax audit and reporting certain transactions might prejudice your position or you are awaiting resolution which might affect an item on this year’s return
  4. You are involved in a marital separation, litigation or are a candidate for a public position that requires tax return disclosure and you want to delay this as long as possible
  5. You might want to reverse a 2016 IRA conversion to a Roth IRA and would rather not file by April 18 so an amended return would not be necessary if you decide to reverse the conversion by October 16, 2017
  6. Circumstances may have prohibited you from assembling all your information properly. This might include a medical emergency or searching for tax basis of securities or assets that have been sold, or being on jury duty for a protracted period
  7. If your tax preparer is unable to devote the necessary time to get the return ready to file on time
  8. You have a complicated situation and you feel it is best to have an extension so the preparer would have more time under less rushed conditions to devote to your return
  9. You might want to open and/or fund a SEP pension plan. By extending, you will have until October 17 to make your decision. If you have a Keogh, 401k or SIMPLE plan, the contribution for last year can be made by the extended due date, but the Keogh and 401k must have been established by the previous December 31 and the SIMPLE by September 30, 2015 (crazy and inconsistent rules for basically the same type of deductions)
  10. You did not file last year’s return and feel that filing this year’s return before the prior year will cause extra IRS attention to you. However, irrespective of what you did not file, you should file this year’s return on time which would include the extended due date. Note: I wrote about how to handle missed tax filings on Feb 20, 2012 and you can retrieve this in this blog’s archives
  11. Those with a 2016 installment sale might want to wait as long as possible in 2017 to consider electing out of the installment sale if your 2016 taxable income is substantially lower than what is expected for 2017 or later years
  12. People with net operating or other losses that can be carried back might want to delay filing to determine if they should elect to forego that and carry it forward
  13. The extension can delay elections that are made on the first-filed tax return reporting certain new transactions
  14. The extension is for a gift tax return where not all the issues are clear including generation skipping elections and spousal consents, or where basis information is not readily available or valuations are not completed
  15. There is a high risk of audit – filing an extension might reduce the chance of an audit. Note that it will not lower the chance of a computer-generated notice questioning an item or picking up income that was not reported
  16. An error is discovered on a prior year’s return and additional time is needed to research and correct it, and the current year’s return might be affected by the change
  17. You will be out of the country during the filing period. Note: If you are a U.S. citizen or resident and qualify under special rules for being out of the country on April 18, 2017 you will have an automatic two-month extension to file and make any payments and do not have to file for the extension. If you need additional time after that date, then you will need to file for an additional four-month extension. If you are abroad and want the extension because you expect to qualify for special tax treatment you should file Form 2350
  18. You did not receive a W-2 wage statement from an employer. This can be a problem, but the IRS has Form 4852 Substitute for Form W-2 to recreate your version of your W-2
  19. A suggestion to avoid filing an extension when you did not receive a K-1 that will report an insignificant amount is to estimate the amount and file on time. When you file next year’s return adjust the amount for the difference in what you reported and the actual K-1 amount. If the amount is substantial I suggest waiting for the final K-1 and filing the extension
  20. You ran out of time to get the return done

A tip for those filing extensions that also should pay estimated tax is to include the first quarter estimated payment with the extension payment. In case you underestimated your 2016 tax for the extension, the added first quarter payment would reduce that penalty which is greater than the penalty for the underestimated 2017 tax. Also, do not forget to file state and local extensions if applicable, and pay the tax you anticipate owing.

Those that want to file for an extension can easily do it using IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) which can be downloaded at https://www.irs.gov/pub/irs-pdf/f4868.pdf. Search your state’s and locality’s websites for their extension forms.

Let's Talk! For a deeper conversation on our services, or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.


Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. As a trusted senior advisor and counselor working closely with Entrepreneurs, Professionals and Select Individuals, Mr. Hoffman provides counsel to his clients who are navigating through the complexity of today's business, tax, and accounting challenges.

Click here to schedule an appointment with Kenneth Hoffman.

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

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

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

Kenneth Hoffman -Tax Counsel to Entrepreneurs, Professionals and Select Individuals  
KR Hoffman & Co., LLC
954-591-8290
www.krhoffman.com
info@krhoffman.com


Share a Coke with the IRS

by Kenneth Hoffman


Coca Cola has earned a lot of headlines for their "Share a Coke with . . . " marketing campaign, printing bottles and cans with 1,000 of the most popular names in the country, along with nicknames like "Mom," "Dad," Soulmate," and "BFF." You can even go online to customize your own bottle for just five bucks. (Just imagine the possibilities . . . "Share a Koke with a Kardashian" for reality-TV wannabes, or "Share a Diet Coke with Your Yoga Instructor" for fitness fanatics? The Center for Science in the Public Interest even created a "Share a Coke with Obesity" can.)

Last week, our friends at the IRS decided to open a little happiness of their own. And apparently, they want more than just a can or two of fizzy sugar water. On Friday, Coca Cola Enterprises filed a Form 8-K with the Securities and Exchange Commission revealing that, after a five-year audit, the IRS is dunning them for $3.3 billion in extra taxes. Plus interest! (Fun fact: the audit covered just three tax years from 2007-2009. That means the IRS spent more time auditing Coke's income than Coke spent earning it!)

The issue centers on "transfer pricing," which governs how businesses set prices between controlled or related entities. Let's say Coca Cola sells a bottle of their delicious Vanilla Coke in Bermuda. (That sounds especially delicious, right?) How much of their profit should be taxed in Bermuda, where the average effective tax rate for multinational corporations is just 12%? And how much of it should be taxed back here in the U.S., where the rate tops out at 35%? That may not sound like a huge difference on something you can buy for a pocket change at a highway rest stop. But Coca Cola sells a lot of beverages — $46 billion worth last year. And 57% of that revenue comes from international markets.

With all that money sloshing back and forth across international borders, you can see how shifting tax rates on a few cents of income per drink can really add up. Transfer pricing issues may sound boring (and they are), but they're a big deal. The very serious lawyers who specialize in these sorts of disputes work out of stuffy offices in high-rent big-city buildings, and they've never even heard of casual Fridays.

Naturally, the folks at Coke don't think it will be especially refreshing to send the IRS an extra $3.3 billion:

    "The Company has followed the same transfer pricing methodology for these licenses since the methodology was agreed with the IRS in a 1996 closing agreement that applied back to 1987. The closing agreement provides prospective penalty protection as long as the Company follows the prescribed methodology, and the Company has continued to abide by its terms for all subsequent years. The Company's compliance with the closing agreement was audited and confirmed by the IRS in five successive audit cycles covering the subsequent 11 years through 2006, with the last audit concluding as recently as 2009."

Coke says they plan to file a notice challenging the deficiency in Tax Court. They've reassured shareholders that they have "adequate tax reserves," which means they can pay up if they lose. And if all else fails, they've got that secret formula locked up in a vault in Atlanta. That's got to be good for something, right?

Here's the bottom line. Coke makes billions of dollars a year. But they understand it's what they keep that counts, and they're willing to fight to keep more. Shouldn't you be working for the same goal? So call us for a plan, and pay for your next Coke with the savings. It's the real thing!

Let's Talk! For a deeper conversation on our services, or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. As a trusted senior advisor and counselor working closely with Entrepreneurs, Professionals and Select Individuals, Mr. Hoffman provides counsel to his clients who are navigating through the complexity of today's business, tax, and accounting challenges.

Click here to schedule an appointment with Kenneth Hoffman.

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

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

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


10 Most Expensive Tax Mistakes That Cost You Thousand$

by Kenneth Hoffman


Are you happy with your contribution to the IRS?

Are you confident you're taking advantage of every available tax break?

Is your tax adviser giving you proactive advice to save on taxes?

When is the last time your accountant or CPA came to and said "I have an idea that could save you THOUSAND$?

If you're like most business owners and professionals, you're not satisfied with the taxes you pay. You're not taking advantage of every legal deduction, credit, loophole, and strategy. And you're frustrated because your accountant isn't giving you proactive strategies and concepts to save tax.

The good news is you don't have to feel that way. You just need a better plan.
Read this report to discover tax mistakes that cost business owners and professionals thousands, year after year after year. Then call me at 954-591-8290 to learn how to fix those mistakes.

1. Failing to PlanThe first mistake is failing to plan. Planning is the key to beating the IRS, legally.

I don't care how good your accountant is with a stack of receipts on April 15. If you didn't know you could set up a Section 105 plan and write off your kid's braces as a business expense, there's nothing you can do on April 15. You lose that deduction forever!

True tax planning gives you concepts and strategies needed to minimize your taxes; in plain English, not legalese; without intimidating spreadsheets or endless "projections" that change every time Congress decides to change the law. What should you do? When should you do it? How should you do it?

And tax planning gives you two more valuable benefits.

First, it's the key to your financial defense. As a business owner, you have two ways to put cash in your pocket. Financial offense is making more. Financial defense is spending less. Taxes are probably your biggest single expense. So it makes sense to focus your financial defense where you spend the most. Sure, you can save 15% on car insurance by switching to GEICO. But how much will that really save in the long run?

And second, tax planning guarantees results. You can spend all sorts of time, effort, and money promoting your business. But that can't guarantee results. Or you can set up a medical expense reimbursement plan, deduct your daughter's braces, and guarantee savings.

We like to start new client relationships with a comprehensive tax plan that lets us start saving you money right away, long before we prepare your first tax return.

2. Wrong Expectations - The second mistake, which keeps people from taking advantage of true tax planning, is holding the wrong expectations. Do you think tax planning means "raising red flags"? Taking advantage of "gray areas"? Being "aggressive" and hoping not to get audited? In fact, it means nothing of the sort.

True tax planning means proactively scouring your business and finances for tax-saving opportunities. Asking questions before you make financial decisions to avoid unpleasant surprises. And taking advantage of every legal deduction, credit, and loophole the law allows.

Our tax-planning strategies are all court-tested and IRS-approved. You'll find that with true tax planning on your side, you don't need to raise red flags, shade into gray areas, or be aggressive to keep more of what you earn.

3. Wrong Entity - The next mistake is choosing the wrong business entity. Most business owners and professionals start out as sole proprietor, then go on to establish a corporation or limited liability company. But which corporation? A "C" corporation for employee benefits or an "S" corporation for minimizing employment tax? Limited liability companies can be even more complicated. That's because you can choose whether to pay tax as a sole proprietor, a partnership, a C-corporation, or an S-corporation.

Choosing the wrong entity can waste thousands in tax, year after year, for as long as you operate your business. If you're operating as a sole proprietor when you could take advantage of an S-corporation, for example, you'll pay thousands more into a Social Security system that you probably aren't counting on to finance your retirement. If you're operating as an S-corporation, you might be losing thousands in employee benefits you could deduct if you were a C-corporation. You might even do best with more than one entity, like an S-corporation to minimize employment taxes and a C-corporation to maximize employee benefits.

Complicated? Unfortunately, yes. But that's where we come in. We'll evaluate your business to see which entity makes the most sense for you now. And we'll keep evaluating your business as we work together to make sure you have the best possible structure going forward.

4. Wrong Retirement Plan - Choosing the right retirement plan can be just as challenging as choosing the right business entity. How much do you want to contribute for yourself? How much can you afford to contribute for your employees?

If you're looking to save more than the $5,000 limit for IRAs, you have four main choices: Simplified Employee Pensions ("SEPs"), SIMPLE IRAs, 401ks, and defined benefit plans.

SEPs are easy to set up and administer. But will a SEP be enough for your needs?

SIMPLE IRAs are also easy to set up and administer. But will a SIMPLE let you contribute as much as you'd like? What about employee contributions?

401ks aren't just for "big business" anymore. Should you consider an "individual 401k" for yourself and your spouse? How much will a 401k cost if you have employees?

Defined benefit pension plans let you guarantee up to $185,000 in annual retirement income. But defined benefit plans have required annual contributions, and they're harder to manage. Will the benefits make sense for you?

We can guide you through the retirement plan jungle to choose the best plan for your unique needs.

5. Missing Family Employment - The minimum age for hiring a child is just seven years old. That lets you get started saving early, and even help give them good work habits. They can earn up to the standard deduction amount for a single taxpayer (roughly $6,000 per year) without paying any income tax at all. And earned income isn't subject to the dreaded "Kiddie Tax."

We can help you determine how to pay your child, how to document it, and even where to put the money once you've paid them.

6. Missing Health Care Strategies - Now let's talk about health-care costs. Surveys used to show that taxes used to be small business owners' biggest concern. Now it's rising health care costs.

If you pay for your own health insurance, you can deduct it as an "adjustment to income" on Page 1 of Form 1040. If you itemize deductions, you can deduct unreimbursed medical and dental expenses on Schedule A, if they total more than 7.5% of your adjusted gross income. But most of us don't spend that much on healthcare, so we don't get full deductions for what we spend.

What if there were a way to write off medical bills as business expenses? There is, and it's called a Section 105 plan, or Medical Expense Reimbursement Plan.

If you qualify, you can write off just about any legitimate medical expense. Health insurance, long-term care coverage, Medicare, and "Medigap" insurance. Co-pays, deductibles, and prescriptions. Dental, vision, and chiropractic care. Big-ticket expenses like braces for your kids' teeth, fertility treatments, and LASIK surgery. Even nonprescription medications and medical supplies, like aspirin and cold remedies.

The best part is, this is money you'd spend anyway, whether you get a deduction or not. You're just moving it from a nondeductible place on your return, to a deductible place. You'll save income tax on whatever you deduct. You may even save self-employment tax too.

If a Section 105 plan won't work, we can discuss Health Savings Accounts. These arrangements combine a high-deductible health plan with a tax-free savings account to cover unreimbursed costs. They give you much the same benefit as the 105 plan, without quite the flexibility.

7. Missing Home Office Expenses - Home office expenses are probably the most misunderstood deduction in the entire tax code. For years, taxpayers feared it raised an automatic audit flag. But Congress has relaxed the rules, so now home offices attract far less attention.

Your home office qualifies as your principal place of business if: 1) you use it "exclusively and regularly for administrative or management activities of your trade or business"; and 2) "you have no other fixed location where you conduct substantial administrative or management activities of your trade or business." This is true even if you have another office, so long as you don't use it more than occasionally for administrative or management activities.

Claiming a home office lets you deduct the "business use percentage" of your mortgage interest or rent, property taxes, utilities, repairs, insurance, garbage pickup, and security. You'll get to depreciate part of your purchase price. And claiming a home office even boosts your car and truck deductions. That's because it eliminates nondeductible commuting miles for that business.

We'll help you determine if you qualify for the home office deduction - and if so, how to make the most of it.

8. Missing Car and Truck Expenses - Car and truck expenses are easy to overlook. That's because most taxpayers simply take a standard mileage allowance. But that allowance is the same for all vehicles, no matter how big they are, how much they cost, or how much gas they guzzle. Do you think every car on the road costs the same amount per mile to drive?

It might surprise you to see how much it really costs to operate your car. And it's likely to be much more than the IRS standard allowance! If you're taking the standard deduction for a car that costs more to operate than that flat amount every time you drive for business.

You may be throwing away savings you could take with the "actual expense" method. We can walk you through both methods to see which saves you the most now, as well as help make the right decision when it comes to buying or leasing a new car for business.

9. Missing Meals and Entertainment Expenses - Let's finish up with some fun deductions for meals and entertainment. The basic rule is that you can deduct meals where you conduct a "bona fide" business discussion. This means clients or patients, prospective clients or patients, referral sources, and business or professional colleagues.

So let me ask you - when do you ever eat with someone who's not a client, prospect, referral source, or business colleague? If you're in a business like real estate, insurance, or investments, where you're constantly marketing yourself, the answer might be "never." Be sure you deduct every meal where you legitimately advance your business!

You don't even need receipts for expenses under $75. You just need to record the cost of the meal, the date of the meal, the place where it takes place, the business purpose of your discussion, and your business relationship with your guest.

Do you ever entertain at home? Ever discuss business when you do it? Are you deducting those meals, too? There's no requirement that you eat out. So don't forget to deduct home entertainment expenses too!

You can even deduct entertainment expenses - like tickets to the theatre, tickets to a ball game, or even a round of golf - if they take place directly before or a substantial, bona fide discussion directly related to the active conduct of your business. You can deduct the face value of tickets, greens fees, etc., as well as food and beverages, parking, taxes, and tips.

We'll help you make the most of your deductible meals and entertainment so you don't miss a deductible dollar!

10. The Biggest Mistake of All - Now that you see how business owners and professionals miss out on tax breaks, let's talk about the biggest mistake of all.

What mistake is that?

The biggest mistake of all is missing our tax planning service. Have you all heard the saying "if you fail to plan, you plan to fail"? It's a cliché because it's true. Fortunately, our planning service avoids the problem.

We offer true tax planning. We tell you what to do, when to do it, and how to do it.

Call me at today 954-591-8290 or by email info@krhoffman.com for your free Tax Appraisal. We'll find the mistakes and missed opportunities that can cost you thousands - then prepare a plan for rescuing those lost dollars.

We guarantee you'll leave with new information and savings, or we'll donate $50 in your name to your favorite charity.

You have nothing to lose but opportunity. So call me at 954-591-8290 and schedule your analysis today!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. As a trusted senior advisor and counselor working closely with Entrepreneurs, Professionals and Select Individuals, Mr. Hoffman provides counsel to his clients who are navigating through the complexity of today's business, tax, and accounting challenges.


What Goes Around Comes Around

by Kenneth Hoffman in


Ask anyone what makes them happy. (Go ahead, see who's around and ask them.) We're pretty sure they didn't say "paying taxes." Most of us just grumble and pay up. But millions of citizens from all walks of life express their unhappiness by choosing not to pay. The IRS currently has over 12 million accounts in collections, with state and local governments managing millions more. That's a lot of money not getting paid.

Of course, tax collectors are hardly powerless to collect those debts. They can garnish wages to pay back taxes. And they can seize property. Usually, this means financial assets like bank accounts, investments, and retirement accounts. But it also includes physical assets like houses, cars, and boats they can sell to raise cash. The IRS has seized less obvious assets, too, such as the contents of an Alabama scofflaw's hair salon, a pair of Boston parking spaces that sold for $280,000 each, and even $2 million worth of annuity payments that used to be New York Mets slugger Darryl Strawberry's deferred salary.  

Now we've learned that a Florida tax collector is taking aim at an even bigger target. Last month, Escambia County Tax Collector Janet Holley filed suit to seize the 200-foot-tall Skyview Ferris wheel, which has thrilled riders since 2013 near Atlanta's Centennial Olympic Park.

The Ferris wheel features 42 climate-controlled gondolas, including a VIP car with leather seats and glass floors. And it's enjoyed a scenic ride of its own. It originally opened in Paris, across from the famed Louvre museum. Then it moved to Bern, Switzerland. Then it crossed the Alps and the Atlantic for a year-long stop in Pensacola, Florida before finally settling in "the ATL."

Here's where taxes step aboard. When the wheel landed in Pensacola, it became subject to Escambia County property tax. The county assessed the wheel's value at $11.4 million, then billed the ride's operator $237,000. That company, Expo 60 Ventures LLC, has since gone out of business and dissolved. However, Florida law lets the tax on tangible property follow the property, in addition to the owner, which makes the wheel itself still subject to seizure. What's worse, interest and penalties have rolled the bill up to $350,000!

The wheel's current operators are quick to defend Atlanta's newest overpriced tourist trap scenic attraction. A spokesman says "This is a vendetta by a public official who's up for re-election in Pensacola, Florida. Pensacola has always been angry that this wonderful icon left their city and came to Atlanta." Having said that, they also paid $50,000 towards the debt. "Our only contention is that they're charging some ridiculous penalties and interest and things like that on the taxes, and we're willing to pay those as soon as the court tells us that that's what we have to pay," he added. (Doesn't exactly sound "willing" when you put it like that!)

Of course, the county doesn't really want to take possession of the Ferris wheel, not any more than the IRS really wanted a couple of parking spots in Boston. They just want their money. (We can just imagine Pensacola's roughest, toughest repo man gulping in disbelief when he gets this assignment!)
 
Ferris wheels are fun, but in the end you just wind up back where you started. That's fine for a scenic ride, but it's not good enough when it comes to your taxes. What you need is a plan. Whether you're running a business, managing a portfolio, or just raising a family, we can give you that plan — and you can save the thrill rides for the amusement park, not the IRS!

Let's Talk! For a deeper conversation on our services, or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. As a trusted senior advisor and counselor working closely with Entrepreneurs, Professionals and Select Individuals, Mr. Hoffman provides counsel to his clients who are navigating through the complexity of today's business, tax, and accounting challenges.

Click here to schedule an appointment with Kenneth Hoffman.

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

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

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


Who Won Most at Roland Garros?

by Kenneth Hoffman in ,


For two weeks every spring, the tennis world focuses its attention on Roland Garros, the Parisian center that hosts the French Open. This year, fans yawned as the dominant Serena Williams cruised to her 20th career major title in the 2015 French Open, defeating the 13th-ranked Czech Lucie Safarova. On the men's side, fans saw an actual contest, as the Swiss Stan Wawrinka used his devastating backhand to take his second major in four sets, upsetting top-ranked Novak Djokovic and denying him a career Grand Slam.
 
Both winners claimed €1.8 million, or about $2 million, in prize money. But does that mean they actually take home that much? Certainly not. You may have heard about this thing called "taxes" that eat into our bounty. So let's take a look at what happens to those purses to see who really comes out ahead.
 
Playing professional tennis isn't like signing a contract with a baseball or football team and collecting a guaranteed salary. It's more like running a small business whose "product" is winning tournaments. James Ward, currently ranked #101 in the world, put it well last year when he told International Business Times, "It's difficult . . . . You're paying your own expenses, your coach's, you're paying for your food, your hotel, your travel — for two people. And if you lose in the first round you're getting $300, minus tax. It's embarrassing. You've just got to win matches."
 
James is exaggerating a little bit — first round losers at the French Open get €27,000 in addition to their walk of shame. And in Williams's case, her coach is also her boyfriend, which brings down the cost of her entourage a bit. But still, if you want to get rich playing tennis, you've got to be very, very good. The real money, as with so many sports, is in the endorsements.
 
France takes the first slice at French Open winnings, and it's a big one. France's top tax rate is 45%, which is actually down, from 75% just two years ago. It's high enough that international athletes grumble about it publicly. In fact, last year Serena told Rolling Stone magazine, "Seventy-five percent doesn't seem legal. Nobody does anything because the government pays you to be broke. So why work?"
 
Then Williams comes home, and the IRS serves up a maximum rate of 39.6%, plus a Medicare tax of 3.8% on top of that. At least her home state of Florida doesn't impose an income tax.
 
As for Wawrinka, who ranks fourth in the world after this week's win, he wins the Tax Bracket Open. He pays a maximum federal income tax of just 11.5% on income over SFr700,000. (That's Swiss francs, for those of you keeping score at home — 700,000 Swiss francs equals about $658,000.) His home canton of Vaud (similar to a state government in Switzerland) and his home town of St. Barthélemy lob more taxes at him. Total tax burdens in Switzerland can reach 40% depending on where you live. Even so, Wawrinka squeaks out ahead of Williams. (He may not "love" paying them, but at least he gets to pay a bit less.)
 
When it comes to tennis, how hard you hit the ball is important. But it also matters where you hit it, too. It works the same way with taxes. How much you make is key. But how you make it and even where you make it are important, too. Serena Williams and Stan Wawrinka both have tennis coaches to help them win more tournaments. And they have tax coaches to help keep as much of what they win as possible. So don't risk double-faulting against the IRS. Call us for the plan you need!

Let's Talk! For a deeper conversation on our services, or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. As a trusted senior advisor and counselor working closely with Entrepreneurs, Professionals and Select Individuals, Mr. Hoffman provides counsel to his clients who are navigating through the complexity of today's business, tax, and accounting challenges.

Click here to schedule an appointment with Kenneth Hoffman.

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

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

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


Guaranteed Loser

by Kenneth Hoffman in ,


You've bought a lottery ticket or two in your time, right? The Powerball jackpot hits a bazillion dollars, and you realize you really can't win if you don't play. So you buy a ticket or two just to nurse that fantasy of champagne wishes and caviar dreams. Forget the reality that most lottery players never win, and even the ones who do make headlines usually seem to go bankrupt faster than a professional footballer who tears his ACL two games into his rookie season.

Most people who buy lottery tickets really do want to win. In fact, a 2006 study revealed that 21% of Americans believe playing the lottery was their best bet for financing retirement! (Really? That's not the same thing as counting on the lottery to retire, but it still doesn't say much about our financial planning smarts.) But would you believe there's a small group of Americans who pay top dollar for losing tickets? Why on earth would anyone ever do that? The answer, not surprisingly, lies in that financial cancer that we lovingly refer to as the Internal Revenue Code.

Start with the premise that gambling winnings are taxable income. That makes perfect sense, of course; the IRS doesn't really care how you make your living as long as they get their share. (Even illegal income is taxable — remember who finally nailed Al Capone?) And that stinks. Sure, winning a hundred million sounds like a lot, but you're lucky to be left with half of that after you take care of your Uncle Sam and all the rest of those greedy relatives who show up with their hands out as soon as they hear you've won.

The good news is, you can deduct your gambling losses from gambling winnings before the IRS takes their cut. You don't even have to net out your totals by contest — you can deduct casino losses against lottery wins, and vice versa. But deducting gambling losses creates its own problem. The lottery commission, casinos, and racetracks where you do your best "work" are happy to send the IRS a Form W2-G reporting your wins. So how do you show an auditor how much you lost?

That's where the losing lottery tickets come in. Just hop onto a website like Craigslist or Ebay, and look for folks with losing tickets to buy or rent! The sellers might try to disguise them as "memorabilia." But just between us, we know what they're really for. The Daily Beast even found one bold seller getting rid of $1,100 in losing tickets, for the bargain price of $500, "so ya don't look like a xxxxx :) come tax time"!

Wanna know what sort of financial genius cooked up such a great scheme? He was an accountant named Henry Daneault, and he used to work for the IRS! In 1985, his client Phillip Cappella won $2.7 million, paid out over 20 years, in the Massachusetts Megabucks. When tax time rolled around, Daneault and his client made up $65,000 in gambling losses to erase $20,000 in tax. Then his old employer the IRS came sniffing around. Uh oh, what now? He paid $500 to rent $200,000 worth of losing tickets for a month. It might have been a great idea if it had worked. Sadly, it did not, and Daneault and his client both wound up pleading guilty to fraud and serving time in jail.

So now you know how to be a guaranteed loser. Want to know how to guarantee a win? Call us for a plan to pay less tax, the right way. Our strategies are all court-tested and IRS-approved. You won't have to win the lottery — you'll just feel like you did!

Let's Talk! For a deeper conversation on our services, or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. As a trusted senior advisor and counselor working closely with Entrepreneurs, Professionals and Select Individuals, Mr. Hoffman provides counsel to his clients who are navigating through the complexity of today's business, tax, and accounting challenges.

Click here to schedule an appointment with Kenneth Hoffman.

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

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

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


Patriots 28, Seahawks 24, IRS Millions

by Kenneth Hoffman in ,


You probably thought the holiday season ended when the last Christmas lights finally came off the house. But then you would have forgotten the closest thing we have to a national fair. We're talking, of course, about the Super Bowl, our only nationally-televised event that makes people look forward to the commercials as much as the game!

This year's contest was another nail-biter that remained close until New England cornerback Malcolm Butler intercepted a Seattle goal-line pass with just 20 seconds left on the clock. (If the Patriots want the rest of the NFL to take their "dynasty" seriously, they're going to have to learn how to blow someone out like the 1990s-era San Francisco 49ers used to do!) But while Pats fans may be cheering loudest, there's another group that's cheering too, and that's the team at the IRS.

New England quarterback Tom Brady became just the third NFL passer to take home a fourth Super Bowl ring. He also took home a $400,000 bonus for his effort. (Brady and his wife, supermodel Giselle Bundchen, had to scrape by on about $60 million last year, so the cash is probably welcome.) And General Motors gave him a loaded Chevy Colorado pickup truck worth $35,000 for winning the MVP trophy, too.

So . . . the IRS intercepts 39.6% for income tax and 3.8% for Medicare on Brady's $400,000. The Massachusetts Department of Revenue picks off 5.2% more, and you can see why the tax man leaves Brady so . . . deflated. (Sorry.) Multiply that by everyone on the Patriots roster, and now you know why the receivers at the IRS cheer for every Super Bowl winner!

Now, Brady is awfully glad that Malcolm Butler intercepted that pass. So instead of taking that Chevy truck for himself, he's giving it to Butler. But that creates a tax problem. You see, if Brady takes the prize himself, then laterals it to Butler, Brady pays the same federal and state income and Medicare taxes on the truck as he does on his $400,000 cash bonus — but then he has to contend with gift tax, too. Brady can give up to the $14,000 "annual exclusion" amount, free from tax, to as many people as he likes in a year. If Brady and his spouse Giselle make a gift together, they can double that amount to $28,000. Anything above that annual exclusion eats away at Brady's $5.43 million "unified credit" against gift and estate taxes. Any gifts he makes during his life that aren't sheltered by the annual exclusion or unified credit are subject to a 40% tax. (Don't worry if none of this makes any sense — understanding it all is why estate tax lawyers drive Jaguars.)

But nobody wants to see Brady get sacked with extra taxes. So instead of giving the truck to Brady (to give to Butler), Chevy is shotgunning the truck directly to Butler. That means the undrafted 24-year-old rookie, whose career highlights include passing thousands of battered chickens into the fryer at his hometown Popeyes, will pay the same income and Medicare taxes that Brady would have paid. But calling the audible on the transfer to Butler protects Brady from the gift tax blitz.

Brady's running a play called "tax planning." It's saving him thousands. And it's not even one of Coach Bill Belichek's clever tricks! Here's some more good news — you don't have to be Super Bowl MVP to run the same play yourself. Just call us when you're ready to suit up against the IRS. And remember, we're here for your teammates too!

Let's Talk! For a deeper conversation on our services, or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. As a trusted senior advisor and counselor working closely with Entrepreneurs, Professionals and Select Individuals, Mr. Hoffman provides counsel to his clients who are navigating through the complexity of today's business, tax, and accounting challenges.

Click here to schedule an appointment with Kenneth Hoffman.

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

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

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