Expecting An Audit? Expect to Wait

Have you ever been audited by the IRS? Have you been told that you might be audited soon? Are you waiting to be audited right now? If you answered yes to any of these questions, then chances are you have either played the waiting game or you’re playing it right now. Let’s face it; the waiting game is no fun, but when it comes to IRS audits, waiting is the norm.

 

According to a recent report from the Government Accountability Office, the IRS is actually guilty of misleading taxpayers who are facing audits. According to the report, the IRS tells these taxpayers that they will get back to them quickly (between 30-45 days) but many times they fall short of meeting that expectation. According to the GAO report, the IRS routinely takes several months before it responds to correspondence audits.

 

In fact, the IRS is late on more than half of all the correspondence from taxpayers regarding audits. These circumstances cause several problems for both taxpayers and IRS workers. Because taxpayers can’t get their refunds until an audit is complete that means those who are facing an audit have to wait even longer to get their return. IRS workers on the other hand have to answer more calls and inquiries regarding these audits and they often don’t have any answers.

 

The GAO has recommended that the IRS do better in giving realistic time frames to people who have been selected for an audit. Meantime, if you have been told that you will be audited the first thing you should probably do is contact a tax professional. At GROCO we know how to handle even the most difficult audits, so contact us right away if you have been selected for an audit.

 

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Will Taxing the Rich Even More Improve Inequality?

It’s been the cry of democratic lawmakers and many of the less fortunate for years: “We need to tax the wealthy even more.” “The rich have to pay their fair share of taxes, too.” The problem is the rich already pay a huge portion of the country’s tax bill, and in fact, despite those common complaints, taxing the wealthy really won’t end inequality.

Tell a Rich Person Thank You

The next time a member of the middle class comes across a wealthy person, he or she might want to say thank you, instead of clamoring for more of that person’s hard-earned money. That’s because the rich actually already do a lot for the rest of the population in America.

Rich Pay The Majority Already

First off, the wealthy pay more than the rest of the country thinks. In fact, according to the IRS, the top 1 percent of society makes 15 percent of the income. However, they pay 39 percent of all federal income taxes. Think about that; the top one percent pays more than a third of the country’s federal tax bill.

More Donations

The wealthy help the rest of the country out in another significant ways as well. Many of America’s wealthiest individuals, such as Warren Buffet and Mark Zuckerberg have made huge donations to charitable causes and continue to do so.

More Investments

Another way the wealthy make a difference is that they invest their income in other companies. That money is also put into financial institutions, which can in turn makes loans to the middle class to buy homes or start a new business.

Enough Is Enough

The fact is, the rich pay their fair share in taxes and they actually help the rest of the world in many other significant ways. There is no need to create even more taxes simply to take more of the wealthy class’s heard-earned money.

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Make Sure Your Heirs Inherit What You Want

The saying goes that their only two things that are certain in life: death and taxes. While people can generate endless amounts of money when they’re alive, they can’t live forever and they can’t take that wealth with them when they die. However, they can have a very detailed and specific say on how their wealth is distributed when they do pass away. Despite that, it seems that many wealthy people, as well as many in the middle class, overlook this important aspect of life.

 

Although you can make a change to your estate plan at any time, there are two ideal times in life when updating your estate plan is a good idea. If you have experienced any major life-changing events, like getting married, getting divorced, having a child or starting a new business venture, that is also a good time to update your plan.

 

Of course, we are always dealing with changes in tax laws at GROCO. It’s what we do every day. Every time a tax law change occurs that is also a good time to update your estate plan in order to ensure that you are taking full advantage of any tax law changes that could help you and in time your heirs.

 

If you want to make sure that you help your heirs avoid unnecessary taxes on the assets you leave them, then speaking with the experienced accountants and tax planning experts at GROCO is a smart move to make. Don’t let this important aspect of tax planning and estate planning go overlooked. Contact us today by clicking here or call us at your earliest convenience at 1-877-CPA-2006.

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It Pays to Be Rich for These Five Tax Breaks

Although it’s true that the ultra-wealthy are heavily taxed, and in many cases unfairly, there are also some tax break advantages that favor the upper class more than those in the middle. Let’s take a look at some of these breaks.

* Mortgage Interest – this deduction is available to all; however, because it is tied to the marginal tax rate of each taxpayer it tends to help people with higher income more. The numbers vary, but it has been reported that those with incomes of $250,000 or higher have an average write-off almost $5,500, compared to about $525 for those with incomes between $40,000 and $75,000. The numbers vary by state, but in general, more people with incomes of $100,000 or higher are taking advantage of this break than those who make $75,000 or less. However, there is an OK alternative for those with lower incomes. The Standard Deduction for married filing jointly is $12,200 for 2013 and $12,400 for 2014.

* Capital Gains – many wealthy people make their income from capital gains, which are only taxed at 20 percent plus 3.8 percent for AGI over 450,000, compared to the 39.6 percent maximum tax rate for regular income.

* Step-up in Basis – this tax break basically enables the rich to pass off their assets that have increased in value to their beneficiaries while never having to pay taxes on them. Your heirs will only pay tax on the increased value from their value at the time the assets were transferred price to the fair value at the time of sale, should the heir choose to sell the assets.

* Retirement Plans – Available to everyone, retirement plans are even more favorable to the wealthy because they tend to have more money to put away. Therefore, they tend to get more tax benefits than the middle class. There are, however, limitations on the amount that can be contributed ($17,500 for 401(k), 403(b) plans in 2014) and the amount of contributions that can be deducted is phased out for higher incomes (IRA contributions phase out for married filing jointly incomes between $181,000 and $191,000 for 2014).

* Charitable Deduction – this is similar to the mortgage deduction. The higher your income and the more you donate, the more valuable the deduction. The deduction is limited to 50% of the taxpayers AGI.

If you aren’t taking full advantage of these favorable tax deductions, then you should contact the professionals at GROCO for help. We can make sure that you’re maximizing your tax return and getting all the benefits to which you are entitled. Contact us today for more details and start saving more of your money.

 

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New Jersey Governor Says Enough is Enough on Taxing the Wealthy

It seems that no tax is a bad tax when it comes to the “left” side of the government. It’s a well-known fact that the wealthiest Americans pay the largest portion of the country’s taxes. However, there are some government leaders that lean “right” who still think that the rich already pay more than their fair share of their income to the government.

To that end, Gov. Chris Christie of New Jersey recently vetoed more tax increases that would have raised the state’s tax bill by more than $1 billion. Meantime, Gov. Christie also noted that the need for serious tax reform across-the-board is overdue. Gov. Christie recently signed New Jersey’s budget and pointed out that the state’s richest 1 percent are already paying around 40 percent of the total tax bill.

Gov. Christie is concerned that if the state continues to increase the tax bill for the wealthy they will simply decide to live elsewhere. Gov. Christie also noted that the state lost around $70 billion in the five years after the last major tax hikes in 2003 and 2004.

There’s no question that the government already takes enough from the wealthiest people in America. At GROCO we agree with Gov. Christie that tax reform is needed and not more taxes to the wealthy. Although paying taxes is important, we focus on helping you keep as much of your money as you are allowed by law. Contact us today for help with your tax planning.

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Clinton’s Using Careful Strategies to Avoid Tax They Support

Have you ever wondered what wealthy democrats do when tax laws they support and vote for come back to apply to them? Although people typically associate being wealthy with republicans, there are plenty of rich democrats in the nations’ capitol as well. So just what do they do when the taxes they push so hard for take aim at them?

 

It’s likely that every situation is different, but lets take Bill and Hilary Clinton for example. Although the Clintons have been long-time proponents of an estate tax aimed at preventing the U.S. from being taken over by inherited money, they never said anything about wanting to pay that tax as it applies to them.

 

That’s why the Clinton’s are using some helpful financial planning strategies that are aimed to assist the wealthiest 1 percent of U.S. households. America’s richest people commonly use these strategies in order to protect them from this estate tax that has now topped out at 40 percent of one’s assets when they die.

 

The Clinton’s are no different and they have made several moves to help them possibly save hundreds of thousands of dollars. That’s very interesting, since Mr. Clinton vetoed a bill to repeal this very tax back in 2000 when he was the president.

 

At GROCO, we also understand how these and other valuable tax planning strategies work and we can help you make them work to your benefit as well, just like the Clintons are doing. Just call us at 1-877-CPA-2006 or click hereto contact us.

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California Going After Tax-Evaders

We have discussed the federal government’s efforts to track down tax-evaders many times before, but the IRS isn’t the only tax agency looking to crack down on those who don’t pay their fair share of taxes. The California Franchise Tax Board is in the middle of a five-and-a-half-year effort to automatically find and identify noncompliant taxpayers. Judging by the returns so far, their plan is working.

 

According to reports, the modernization of the Board’s IT system is finding a lot of tax money owed to the state of California much quicker that expected. Since July 2011, when the project began, the system has already identified and collected $1 billion in tax revenue owed to the state.

 

Overall, the project, which is called the Enterprise Data to revenue Project (EDR), is expected to garner an additional $4.7 billion in tax revenue for the state through 2015. The gains don’t stop there, however. The new system is also expected to earn California an additional $1 billion in extra tax revenue every year after that.

 

According to an EDR spokesperson the majority of the money already collected comes from those whom the state considers to be noncompliant taxpayers, which consist of both individuals and businesses. With the tax gap in California estimated to be about $10 billion between what people owe and what they actually pay the early returns from the new system might just be the tip of the iceberg.

 

If you’re worried that the state considers you noncompliant then you should contact GROCO today for help with your tax planning and tax returns. Click here to contact us or call us at 1-877-CPA-2006.

 

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The IRS is Not a Bully, No.4

The IRS is Not a Bully
You can poke a bully in the nose.
By Alan L. Olsen, CPA, MBA (tax)

Palo Alto, CA. July 4, 2014 – This is the Fourth installment of “The IRS is Not a Bully” series, identifying taxpayer concerns and the difficult position in which Congress puts the IRS. Namely, applying ever increasing pressure to operate in ways its founders never intended; until it’s commonly misunderstood and misused, much like the schoolyard bully that seems more like a victim upon closer examination.

Recent events, including a scandal involving the missing emails of a former IRS official under investigation, Lois Lerner, have focused renewed attention on IRS policies, methods and integrity. Without question, the vast majority of IRS employees are reasonable, smart, good, hardworking, honest and competent professionals, just doing what Congress dictates. However, the institution, its employees, and more important its leaders, would do well to conduct themselves appropriately and avoid even the appearance of impropriety. Trust, integrity and fairness are not mere catch phrases, they are the bedrock foundation that the institution must be built upon to be successful. If integrity of the IRS is in doubt, good luck expecting the average tax payer to believe what the IRS claims is their fair share of taxes!

In her June, 2014 article, “IRS Faces Volley of New Scrutiny”, CNN Reporter Lisa Desjardins raised some excellent points while uncovering some real concerns. Senators from both parties summoned the agency’s chief to Capitol Hill, one House committee set up a new investigative hearing and another issued a subpoena for the head of the agency to appear. You may remember that before she retired, Lois Lerner ran the IRS division in charge of tax exempt status. An inspector general’s report concluded her staff had inappropriately targeted Tea Party and other groups for extra scrutiny.

If one political party targets members of another for harassment, or worse, what should be done? I think most reasonable Americans would first want the allegation thoroughly investigated to determine the authenticity, scope, severity, and how far up the chain of command was involved. Well, that’s when Ms. Lerner got into more hot water. It seems that she was instructed to plead the fifth, not to admit to, or tell investigators anything more than a prepared statement. Further, a year after being asked to turn over her emails for the time frame in question, she informed investigators that her hard drive had crashed two-years earlier and destroyed the emails requested. One prominent senator on the committee investigating the allegations, Orin Hatch of Utah, released the following statement; ”Today’s admission by the IRS that they cannot produce Lois Lerner’s emails is an outrageous impediment to our investigation”. This accusation was mild compared to the outright disbelief expressed by others.

So, the next time the IRS requests that you produce emails or receipts, don’t worry; simply invoke the precedent established by Lois Lerner. Namely, read a prepared statement detailing the unfortunate hard drive crash that destroyed the evidence, including (unbelievable as it may seem) any and all backups, and conclude by pleading the fifth. If it’s good enough for the IRS, why not you?

Good luck with that; of course, any legitimate tax strategy should first be reviewed by your tax professional. Because our CPA firm specializes in very complicated and international tax work, we have lots of experience helping clients pay only the taxes they owe, and helping them through IRS audits. If you’d like additional information, I can be contacted at www.GROCO.com or (510) 797-8661, ask for Alan Olsen. Just remember, the IRS is not a Bully; you can poke a bully in the nose.

What to Do About Corporate Taxes?

The debate over corporate taxes has raged for years, but even though the battle has been going on for decades, it has definitely experienced some changes. The business world, and the world in general, has changed since the days when Ronald Reagan was in office. That means politicians have also changed their battle cry.

It used to be that democrats argued that higher corporate taxes wouldn’t hurt economic growth. However, these days, conservatives no longer have to argue that point. Instead they simply have to say that these high domestic corporate taxes have influenced many corporations to invest outside of the country instead of within.

The fact is the tax effect on where you invest is now much larger than the tax effect on your actual investment. Unfortunately, although the developed world in large part understands this and has acted accordingly by lowering their corporate taxes, the Unite States still seems to be clinging to the past.

The evidence is clear though that the gap between the rich and the poor in the United States continues to grow. However, those that think that taxing the rich even more will solve the country’s economic disparity, should probably think again.

If the U.S. continues to tax corporations at a high rate there is a good chance that both foreign and American multinational companies will keep moving more investments, as well as jobs, to other countries. That is not a wining formula.

GROCO understands both domestic and international taxes, as well as individual and corporate taxes. Contact ustoday to learn how we can help you.

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New Jersey Dems Looking to Tax the Rich Even More

The rich are already taxed enough, right? Although many would disagree with this statement, unfortunately there are others who think that no matter how much they take from them, the rich can’t ever be taxed too much. To that end, democratic lawmakers in New Jersey are pushing for even greater income taxes on the wealthy, in an effort to keep the pension payment alive in the state’s budget for 2015.

According to the Assembly speaker, the hope is that the uptick in income tax would start for those who make $1 million instead of a previous plan, which had the hike starting at an income of $500,000.

Meantime democratic lawmakers were also reportedly looking to add a 15 percent surcharge on corporate business taxes, as well as suspending certain business grants for a year. As the democrats continue to iron out their plans, it might all be a moot point.

Whatever plan they come up with is likely to be vetoed by Gov. Chris Christie. That’s because this would be the fourth different time that democratic lawmakers have tried to create a so-called “millionaires tax.” Gov. Christie has vetoed it the previous three times.

Too many taxes aren’t helpful to businesses or the economy. At GROCO we believe in helping you keep as much of your money as legally possible. That’s why if you need help with your taxes or accounting then you should contact us today.

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