The Nanny Tax

by Kenneth Hoffman in , ,


Every few years the "nanny tax" becomes a big news story when some high-profile political figure reveals that he or she hasn't paid required nanny taxes.  While you may not plan on running for political office, failing to pay the nanny tax on the household workers you employ could result in IRS penalty and interest charges.  And that's in addition to the tax itself.

If you paid a household employee - such as a gardener, housekeeper, or nanny - more than $1,800 in wages in 2013, you may have payroll tax obligations to meet.  These taxes are called "nanny taxes."  You are generally required to pay social security taxes on your worker's behalf, and you may have other federal and state payroll tax obligations as well.

If you had household workers in 2013, it's worth contacting our office to discuss your tax obligations.  January 31, 2014, is the deadline for sending W-2 forms to your workers if the nanny tax applies for 2013.

Be aware that the nanny tax threshold increases to $1,900 for 2014.

Let's Talk! For a deeper conversation on how this issue might affect you or your business, 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. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

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 twitterfacebook 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.


Excuses, Excuses

by Kenneth Hoffman in , ,


So-called "tax protestors" have dreamed up dozens of excuses for not paying the taxes the rest of us grumble about. They argue that the Sixteenth Amendment, which authorizes the government to levy an income tax without apportionment among the states, was never "properly ratified." They accuse the "alleged" Internal Revenue Service of being a massive premeditated conspiracy to defraud U.S. citizens. Some groups assert that the gold tassels around the American flags that stand in many federal courts are a "mutilation," rendering them "courts of admiralty" with no proper jurisdiction. Still others contend that taxpayers aren't required to file a federal tax return because the instructions associated with Form 1040 don't display an OMB control number as required by the Paperwork Reduction Act. (Can you imagine risking jail time on an argument like that?)

Well, the IRS has heard it all. They've published a web page identifying 40 Frivolous Positions for Taxpayers to Avoid. They've warned taxpayers about a $5,000 penalty for using any of these arguments in a return. They've even pointed out that courts sometimes don't even bother refuting the frivolous claims anymore. But now Charles Adams, whom the First Circuit Court of Appeals described as "an unabashed opponent of the tax laws," has come up with a new argument to avoid facing the music. Think he'll fare any better?

Adams and his various co-conspirators are affiliated with a protest group called Save-a-Patriot. They ran a payroll service that helped client companies pay their employees "under the table" so they could hide their income from the IRS. On March 19, 2004, a federal magistrate issued a warrant to search Adams's home in Wrentham, Massachusetts. Four days later, armed agents executed that warrant and seized evidence. Prosecutors eventually used that evidence to convict Adams of tax evasion. District Court Judge Dennis Saylor IV sentenced Adams to four years in the pokey, and Adams appealed to the First Circuit.

Sounds straightforward enough, right? Well, here's the problem. Internal Revenue Code Section 7608(a)(1), which gives revenue enforcement officers their power, explicitly authorizes agents enforcing laws pertaining to alcohol, tobacco, and firearms to carry guns. Section 7608(b), which deals with all other tax laws, does not. The agents who searched Adams's home were packing heat. Therefore — at least according to Adams — the search was unlawful and the evidence they found should be suppressed. (It's like that scene in every episode of Law and Order when the defense attorney asks the judge to throw out the evidence against his client. Usually the judge says no, but sometimes he makes the cops go out and re-prove their case all over again.)

Not buying it? Neither did the First Circuit. The three-judge panel said "whatever intrusion may have occurred was not of constitutional dimension." They dismissed Adams's arguments as "futile" and "unavailing," and concluded, "without serious question, that the district court did not blunder in refusing to grant the defendant's motion to suppress." Even Adams's own lawyer acknowledged that his "convoluted ideas and beliefs seem far-fetched."

It's easy to laugh at protesters like Charles Adams. Their theories are clever and entertaining. But their refusal to pay their share of the tax bill leaves the rest of us holding the bag. That's why it's so important for you to have a plan to pay the least amount of tax allowed by law. Our strategies are all court-tested and IRS-approved. So call us when you're ready for your plan. And remember, we're here for your family, friends, and colleagues too!

Let's Talk! For a deeper conversation on how this issue might affect you or your business, 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. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

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.

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


The Endangered Species List

by Kenneth Hoffman in , ,


On September 1, 1914, "Martha," the last remaining passenger pigeon (ectopistes migratorius), died at the Cincinnati Zoo. On September 7, 1936, "Benjamin," the last Tasmanian tiger (thylacinus cynocephalus), died at Australia's Hobart Zoo. And on June 24, 2012, "Lonesome George," the last living Pinta Island tortoise (chelonoidis nigra abingdoni), died in Ecuador's Galapagos National Park.

When you think of endangered species, you naturally think of plants and animals. But the IRS has its own endangered species list (called "listed transactions"), and that means sometimes even tax strategies go extinct. So, for example, in October, 2006, the last grandfathered private annuity trust was formed. On April 10, 2007, most so-called "Section 419(e)" plans were shot down. Now, could the venerable Swiss bank account (bankum secretus strongius) be next?

Switzerland's banking laws have long made it a crime to reveal an account holder's name. At the same time, Swiss authorities have historically refused to cooperate with foreign countries where failure to report taxable income is concerned. Together, these policies made Switzerland the banker of choice for Colombian druglords, Sub-Saharan kleptocrats, Russian oligarchs, and even the so-called "Wolf of Wall Street," Jordan Belfort.

But recently those protections have melted away like so much Swiss chocolate sitting in the bright alpine sun. It started back in 2008 when Bradley Birkenfeld, a mid-level banker, blew the whistle on helping American taxpayers "forget" to report millions of dollars of interest income. Birkenfeld's bombshell landed him a 40-month prison sentence and a $104 million reward from the IRS. A year later, the Department of Justice fined the biggest Swiss bank $790 million and cut a deal with the Swiss government, giving them power to force their banks to disgorge information on American depositors almost on demand. In 2012, an even stronger settlement required 300 Swiss banks to identify their American account holders or face their own penalties. Most recently, "Beanie Babies" creator Ty Warner pled guilty to evading $5 million in tax and agreed to a $53 million fine — and still faces four years in jail.

And now? Well, some observers say that Swiss banks are actually doing the IRS's job for them. Better to rat out clients than pay IRS fines! Banks are pressuring Americans to report their accounts, and even freezing accounts unless clients can prove they're playing by the new rules. U.S. attorneys are generally advising clients with secret accounts to 'fess up now before the IRS finds them and penalizes them 50% of their balances. At this point, attorneys say, discovery is a matter of "when," not "if." That message appears to be hitting home. Since 2009, over 38,000 Americans have come forth and paid over $5 billion in taxes, penalties, and interest. The once-celebrated Swiss bank account appears headed the way of the dodo, as far as U.S. tax cheats are concerned.

Look, we understand that everybody wants to pay less tax. But there's a right way to do it and there's a wrong way to do it. The right way is to take advantage of hundreds of legitimate deductions, credits, and strategies contained in the tax code and treasury regulations. And it all starts with a plan. We can give you that plan, and it doesn't involve a trip to Zurich or Geneva to visit your money. So call us now to see how much you might be overpaying. And if you really like cuckoo clocks, fine watches, and yodeling, you can take a legitimate trip with the savings!

Let's Talk! For a deeper conversation on how this issue might affect you or your business, 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. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

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.


Test Your Tax Knowledge

by Kenneth Hoffman in , ,


They say that knowledge is power, and that's especially true with taxes. So here's a quick quiz to test your tax knowledge in 2014. But look out — the questions (and the answers) might not be what you expect!:

We'll start with an easy one. Last year's "fiscal cliff" legislation raised the top marginal tax rate to 39.6%. What's the top effective rate?

A. 39.6%
B. 43.4% (39.6% plus 3.8% Medicare tax)
C. >43.4% (depending on "PEP" and "Pease" phaseouts)

Give up? It's a trick question — all three answers can be correct, depending on your own circumstances!

Alright, let's shift gears a bit. The tabloids love running stories about celebrities who run into tax trouble. After all, if they make so much money, shouldn't they be able to afford their taxes? So here's our next question — which of the following sets of celebrities ran into tax trouble in 2013?

A. Boxer Manny Pacquiao, rapper MC Hammer, and racecar driver Juan Pablo Montoya
B. Actor Stephen Baldwin, singer Lauryn Hill, and "Beanie Babies" creator Ty Warner
C. Actor Al Pacino, rapper Fat Joe, and "Real Housewife of New Jersey" Teresa Giudice

Well, which did you pick? The answer is, another trick question — every single one ran into tax problems last year!

Okay, final question. We know that tax laws can be impenetrably dense and hard to understand. So maybe "context" will give you a hint. Which of these passages is taken from the 2013 fiscal cliff act, and which is taken from California's workers' comp regulations?

A. "Notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds."

B. "In the case of covered OPD services furnished on or after April 1, 2013, in a hospital described in clause (ii), if— (I) the payment rate that would otherwise apply under this subsection for stereotactic radiosurgery, complete course of treatment of cranial lesion(s) consisting of 1 session that is multisource Cobalt 60 based (identified as of January 1, 2013, by HCPCS code 77371 (and any succeeding code) and reimbursed as of such date under APC 0127 (and any succeeding classification group)); exceeds (II) the payment rate that would otherwise apply under this subsection for linear accelerator based stereotactic radiosurgery, complete course of therapy in one session (identified as of January 1, 2013, by HCPCS code G0173 (and any succeeding code) and reimbursed as of such date under APC 0067 (and any succeeding classification group)), the payment rate for the service described in subclause (I) shall be reduced to an amount equal to the payment rate for the service described in subclause (II)."

Drumroll, please . . . the answer is, it's another trick question — both examples of sterling prose appeared in the fiscal cliff law! (Quit complaining about the trick questions — it's a tax quiz, after all!)

Don't be upset if you didn't get all three questions right. (Nobody else did, either!) Fortunately, there isn't any real money at stake. But that won't be true come April 15. So call us now for the plan you need to come up with the right answers in 2014!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

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.


Thoughts on Taxes for 2014

by Kenneth Hoffman in ,


2013 has been a big year for taxes. The "fiscal cliff" deal boosted the top federal income tax rate to 39.6%; "Obamacare" added new taxes on top earners; and dozens of state and local governments raised their taxes, too. Congress will finish 2013 even more divided than it began, which will probably protect us from new taxes next year. But here are some quotes to ease the sting of this year's higher bills:

"[A tax loophole is] something that benefits the other guy. If it benefits you, it is tax reform."
Sen. Russell B. Long (D-LA)

"The Eiffel Tower is the Empire State Building after taxes."
Anonymous

"Our party has been accused of fooling the public by calling tax increases 'revenue enhancement.' Not so. No one was fooled."
Dan Quayle

"When we played, World Series checks meant something. Now all they do is screw up your taxes."
Hall of Fame pitcher Don Drysdale

"When it comes to finances, remember that there are no withholding taxes on the wages of sin."
Mae West

"The question is: What can we, as citizens, do to reform our tax system? As you know, under our three-branch system of government, the tax laws are created by: Satan. But he works through the Congress, so that’s where we must focus our efforts."
Dave Barry

"Late one night, just blocks from the Capitol, a mugger jumped into the path of a well-dressed fellow and stuck a gun in his ribs. 'Give me your money,' the thief demanded. 'Are you kidding?' the man said. 'I’m a U.S. congressman.' 'In that case,' the mugger growled, cocking his weapon, 'give me my money.'"
Playboy Magazine

"A government which robs Peter to pay Paul can always depend on the support of Paul."
George Bernard Shaw

On a more serious note, we wish you all the best this holiday season, and we look forward to serving all your tax-planning needs in 2014!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

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.


The Naughty List

by Kenneth Hoffman in


Christmas is almost here, and that means millions of parents across America are telling their kids to behave themselves or risk winding up on the "Naughty List." (Admit it — if you've got kids, and you celebrate Christmas, you've done it yourself.) But while kids may be on their best behavior, grownups sometimes fail to make the connection between their own behavior and what Santa leaves under the tree. This is especially true when it comes to taxes! Misbehave there, and you risk a lot more than a lump of coal. So here are four cautionary tales to consider as the holiday approaches.

  • Joel Grasman worked as an electrician for the Metropolitan Transit Authority in Long Island. He and his wife owed the IRS $10,000 in tax for failing to report a loan from her pension. So, late one night, Grasman snuck into the yard where he works to steal some welding machines to pay off that debt. He loaded the machines onto his truck just fine, but forgot to lower the long boom on the truck before driving off to store the machines at his brother's garage. Uh oh. “I wanted to get out of there before I attracted any attention and I forgot to put the boom down,” he told the New York Post. “I started driving and then I started to see sparks of light in the sky.” Turns out he had taken down a bunch of power lines, causing an estimated $2-3 million in damages, and leaving 6,100 people without power for their Christmas lights and blinking yard Santas.
     
  • Yetunde Oseni was a 37-year-old secretary working for the IRS in Maryland. Like many of us, Oseni loved shopping online, especially on Amazon.com. From 2009-2013, she stuffed her stockings with $8,515 worth of treats, including a chocolate fondue fountain, Bollywood movies, Pampers, Harlequin romance novels, Omaha Steaks, Apple Bottoms skinny jeans, mango body wash, and even a Ginsu knife set. She might still be enjoying her presents now if she had used her own credit card to pay for them. But the IRS gave her a CitiBank MasterCard to pay for office supplies, and it must have been just too tempting. Now she's looking at ten years in a cheerless gray room with no space for any of those goodies. Treasury scrooges say she may have even used her IRS computer to fake the receipts she submitted to cover up her purchases!
     
  • Walter Trizila is a more loyal employee than Joel Grasman or Yetunde Oseni — but can he make the "Nice List"? Last November, IRS officers showed up to seize a dump truck from his employer. Trizila climbed into a front-end loader, scooped up a load of dirt, drove it towards the officers, and dumped the dirt at their feet. After pleading guilty to a misdemeanor charge of assault, he accepted three years probation — and promised to attend anger management class.
     
  • Robert Fernandes got a great deal on a foreclosed house in Forks Township, Pennsylvania. But his wife homeschools their three kids, so he's not a fan of the school district tax. Now, you or I might just concede the value in having good public schools, even if we don't have kids using them. But not Fernandes! No, rather than just grumble privately and write the check, he marched to his local tax collectors with a stack of 7,144 dollar bills. He even brought a friend with a camera to document his stunt on YouTube. Fernandes may not have actually broken the law here, but he's still probably going to find himself on the naughty list. (He may have realized it, too, since he brought doughnuts for the county clerk's office!)

Here's the saddest part about all these stories. You don't have to risk finding a lump of coal in your stocking to pay less tax. You just need a plan. And yes, Virginia, there is still time to treat yourself to savings before 2013 runs out. So call us before Santa loads up his sleigh to stuff your stockings with savings to last a year.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

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.


"Ardente!" is Portuguese for "Hot!"

by Kenneth Hoffman in ,


Tax collectors generally don't choose their line of work for the pay. Glassdoor.com, a gossipy website covering salaries and careers, reports the average Revenue Agent earns $73,967. Careerbliss.com tells us the average criminal investigator earns $99,000 — which makes sense considering there's at least a chance they get shot at while working. That's not bad coin . . . but it's hardly enough to party with the rich and famous.

But what's true here in the United States may not be true in the rest of the world. Our neighbors to the south in Brazil have been transfixed lately by a sordid scandal of glitz and bling featuring — you guessed it — a gang of tax collectors, accused of helping construction companies evade over $200 million in taxes.

Our story starts, as so many tawdry stories do, with a woman scorned. Luis Alexandre Cardoso de Magalhaes met his former girlfriend, Vanessa Alcantara, at a sleazy nightclub. (She says they met when she tried to sell him a cellphone plan.) Magalhaes worked as a tax inspector for the city of Sao Paolo, earning $82,000 to oversee the city's "Imposto sobre Servicos," or service tax. He was also, it turns out, working with three other officials to help developers evade the tax. The builders delivered bags of cash with up to $30,000 every week to his office. Magalhaes would spirit the cash out of the building, and he and Alcantara would count it and divvy it up together in her living room.

And what did our young lovers do with their ill-gotten gains? Secure their retirement with a portfolio of carefully diversified mutual funds and prudently-laddered municipal bonds? (That wouldn't make much of a story, would it?) No — they blew the loot on $500 boxes of Cuban cigars, $2,260 bottles of wine, a Porsche Cayenne, and private plane rides to resorts on Angra dos Reis, an island off the coast. The couple dropped $50,000 to decorate Alcantara's apartment and splurged on $2,200 hotel suites. Magalhaes also showered up to $4,500 a night on a cavalcade of young women who valued their cash flow more than their virtue.

The party came to an end, as all parties must, when Magalhaes and Alcantara separated after giving birth to a son, and Alcantara became enraged at what she saw as a meager monthly child support offer. She dimed him out to city prosecutors, and the story went straight to the tabloids. The case has even produced two brand-new celebrities — Magalhaes's new girlfriend, Nagila Coelho, a personal trainer who plans to start her own line of bikinis, and Alcantara herself, who plans to run for office. Her proposed slogan? "Being a thief is easy; I'll be honest among the thieves."

We understand that you want to pay less tax, too. But we know you're not willing to risk scandal to do it. So we give you a plan to pay less, legally. Everything we do is court-tested and IRS-approved. The best part is, there's still time to act before 2013 draws to a close. So call us now for the plan you need!

Let's Talk! For a deeper conversation on how this issue might affect you or your business, 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. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

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 twitterfacebook 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.


Coach's Challenge

by Kenneth Hoffman in ,


December is here, and for millions of college football fans, that means following their favorite coach to a New Year's bowl game. In Tuscaloosa, Alabama's Nick Saban is reeling from the Crimson Tide's last-second loss to archrival Auburn in this year's "Iron Bowl." In Columbus, Ohio State's Urban Meyer is celebrating 24 straight victories after his Buckeyes beat Michigan by just one point in "The Game." And further west, Washington's Steve Sarkisian is celebrating his Huskies win over the Washington State Cougars in the 106th "Apple Cup."

As always, these coaches and dozens more will be paying attention to the latest Bowl Championship Series standings. But this year, they'll also be paying attention to the IRS. That's because a new strategy might help them block taxes when they switch jobs.

College football coaches can make a lot of money. Alabama's Saban will make at least $5.65 million this year, and 51 coaches make more than the average pro player ($1.9 million). In 27 states, the highest-paid public employee is a football coach. Naturally, that means they pay a lot of tax. So this is more than just an academic discussion — there's a lot of money at stake.

Let's take a closer look here. Butch Jones led the University of Cincinnati Bearcats to a 23-14 record before the University of Tennessee hired him away to coach the Volunteers. As part of Jones' new deal, Tennessee paid $1.4 million to buy out his contract with Cincinnati. The Bearcats, in turned, poached Tommy Tuberville away from Texas Tech — and as part of that deal, paid $943,000 to buy out Tuberville's old contract with the Red Raiders. (Why not? They can take it from the $1.4 million they're getting from Tennessee, and still have enough left over to pay an assistant or two!)

Now, traditionally, those payments Tennessee and Cincinnati made to buy out their new coaches' obligations under their old contracts have been considered additional income to the coaches, and thus taxable to them. "What's the big deal?" you might ask. "So Tuberville recognizes $943,000 in extra income. Can't he just deduct that same amount as an employee business expense and zero out the income?" Well, yes . . . but. First, employee business expenses are a miscellaneous itemized deduction, subject to a 2% floor. (That means Tuberville gets no deduction for the amount equal to the first 2% of his adjusted gross income.) That alone would make over $60,000 of Tuberville's payment nondeductible. Second, and even worse, employee business expenses are a preference item for the dreaded Alternative Minimum Tax, which could wipe out the deduction entirely!

Back in 2007, two law school professors argued that the buyout should be treated as a nontaxable business obligation. They reached that conclusion on two grounds: 1) the school's reimbursement actually converts the coach's payment into a non-itemized deduction, which avoids the 2% floor and AMT; and 2) the payment is made for the school's benefit and not as compensation for the coach. Schools have taken notice, and both Tennessee and Cincinnati worded their new coaches' contracts to take advantage of this interpretation. As coaches' salaries and their corresponding buyout obligations go up, we should see more and more of these changes.

We realize most of you won't ever tackle these sorts of seven-figure challenges. But you still need a strong defensive line when you suit up against the IRS. That's where we come in. We give you the plan you need to keep the tax man out of your end-zone. But time really is running out to save tax this season. So call us, now, before the IRS runs out the clock!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

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.


That's A Lot of Gravy!

by Kenneth Hoffman in ,


Back in 1621, a group of hardy Pilgrims sat down for a three-day festival of thanksgiving to celebrate surviving plague, starvation, cold, scurvy, Indian attack, and all the other obstacles that made life in the "new world" so delightful. They feasted on game birds, flint corn, venison, eels, shellfish, and native vegetables including beans, turnips, carrots, onions, and pumpkins. (No butter or flour, though, which meant no pumpkin pie. And aren't you glad we remember them now for turkey instead of eels?)

242 years later, President Abraham Lincoln proclaimed the first "official" Thanksgiving — a national day of "Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens." Since then, it's become one of America's favorite holidays, a four-day weekend of friends and family without the Christmas-season hype.

You know who else loves Thanksgiving? Our friends at the IRS, of course. That's because they get to stuff themselves with taxes on everything connected with our celebration!

  • Sales taxes on turkey and trimmings pile up like calories on your plate. The American Farm Bureau Federation reports that the average 16-pound turkey will cost $21.76 this year. At an average 7.25% combined state and local sales tax, that makes $1.58 in tax for the bird alone. Throw in some potatoes, stuffing, cranberry sauce, Aunt Edna's special green bean casserole, and the obligatory pumpkin pie, and the taxes alone could feed a hungry diner any other day of the year.
  • Sales and excise taxes on beer, wine, and liquor are even higher than on food. Taxes make up 33% of the total cost of a bottle of wine, 44% of the total cost of a case of beer, and even more for the bourbon in Uncle Harry's old fashioned.
  • What Thanksgiving would be complete without traveling over the river and through the woods? Here's where Uncle Sam really cleans up. Gas taxes average 49.5 cents per gallon. If you're traveling farther, the taxes on a $376 average plane ticket include a $28.20 federal excise tax, a $3.90 flight segment tax, a $4.50 passenger facility charge, and a $10 "September 11 Security Fee." (That's before you pay even more to check your bag, board early to snag space in an overhead bin, or claim an extra three inches of legroom!) The hotel tax on an average $95.61 room runs $13.12. Oh, and if you're renting a car, plan on another 13.21% tax there. Now you know why the IRS says "cha-ching" when you sing "to Grandmother's house we go!"

All told, Uncle Sam and his colleagues in state and local tax departments take in $3.6 billion in Thanksgiving taxes. That's enough to buy 165 million turkeys — enough to feed every man, woman, and child in America, with plenty left over for sandwiches.

This Thanksgiving season, you're probably not setting a place at the table for Uncle Sam. We can't do much about the tax you'll pay on your celebration. But we can help you with the tax you'll pay on the income you earn to pay for it. So don't be a turkey — call us now for the plan you need, and next year you'll really have something to give thanks for!

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

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.


What's In A Name

by Kenneth Hoffman in ,


In Shakespeare's most recognized tragedy, the star-crossed lover Juliet asks "What's in a name? That which we call a rose by any other name would smell as sweet." Now, that may have been true back in Juliet's day. But is it still true now in today's era of celebrity branding?

Here's the deal. Back in 2009, executors for the King of Pop, Michael Jackson, filed an estate tax return reporting the value of his assets at his death. Jackson had been famously extravagant during his life, blowing through hundreds of millions in earnings and borrowing hundreds of millions more. His 2,600-acre "Neverland" ranch in Santa Barbara that included two railroads, a petting zoo, and a Ferris wheel reportedly cost $2.5 million per month to maintain. He spent millions more on travel, entertainment, antiques, and paintings. And feeding "Bubbles," his pet chimpanzee, couldn't have been cheap, either.

You would expect his estate to be pretty impressive, right? So, what was his "final score" as reported on Form 706 "United States Estate (and Generation-Skipping Transfer) Tax Return"? A mere $7 million. What's even more incredible, the executors valued Jackson's name and likeness at just $2,105. (Where did the $5 come from, anyway? Why not $2,104, or $2,106?)

Now, that may not be as ridiculous as it first seems — "Jacko" was in debt up to his eyeballs for much of his life, and he may have owed as much as $500 million at his death. But $7 million still seems a little light for an estate that earned $160 million in 2012 alone. Jackson's estate has actually earned more since his death than any living entertainer during that same time!

Our friends at the IRS thought that valuation was (wait for it . . .) bad. On July 26, they told Jackson's executors that their number was $1.1 billion, including a whopping $434 million for his name alone. Since they don't stop 'til they get enough, the IRS promptly billed the estate for an additional $505.1 million in tax, and added a $196.9 million undervaluation penalty as well!

Not surprisingly, Jackson's estate told the IRS to beat it. A spokesman said the IRS's valuation was "based on speculative and erroneous assumptions unsupported by facts or law," and added that the estate had already paid over $100 million in income taxes. And now they wanna be starting something in the U.S. Tax Court. They've filed Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co-Executor v. Commmissioner of Internal Revenue and set the stage for a legal thriller.

You may not have 26 American Music Awards, 13 number one singles, or the best-selling album of all time. But you're probably even more interested than Michael Jackson in keeping what you make. The answer, of course, is planning. But it's nearly Thanksgiving, and time is running out to save in 2013. So call us now to set up your appointment to get the savings you really want.

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday for a no cost consultation, or drop me a note.

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