How to Guarantee an Audit
Most of us would rather have a root canal without anesthesia than face an IRS audit. Fortunately, your chances of winding up in that particular hot seat are fairly low. Audit odds vary according to how much you earn and how you earn it, but generally range from 0.9% (for incomes up to $200,000) to 12.1% (for incomes over $1 million). That means most of us can take comfort knowing our chances of winding up in the crosshairs are slim.
Now, if you look up “guaranteed audit” in the dictionary, you won’t find it, because it’s two separate words. Still, there is one way youguarantee yourself an audit. And some of your most prominent fellow citizens are working night and day to put themselves in that position. So, how do you get there? Easy . . . just get yourself elected President of the United States!
Take a look at Section 4.2.1.11 of the Internal Revenue Manual and you’ll see it in black and white: “The individual income tax returns for the President and Vice-President are subject to mandatory examinations.” Yikes! As if it’s not bad enough having everyone from the New York Times to the National Enquirer all up in your business, now you’d have to contend with the IRS, too!
Presidential audits are no ordinary examinations. The Internal Revenue Manual spells out the kind of excrutiatingly detailed rules that you might imagine for the “First 1040”:
- “The returns should be kept in an orange folder at all times.” (We wouldn’t want to confuse them with the President’s nuclear launch codes in the red folder.)
- “The returns should not be exposed to viewing by other employees.” (Of course, Presidents routinely release their returns to thepublic, so employees without “Double Secret Presidential Clearance” will just have to find them online.)
- “The returns should be locked in a secure drawer or cabinet when the examiner is away from the work area.” (Gotta keep those Russian teenagers from hacking in and running up the balance on the President’s American Express!)
The kid-glove treatment doesn’t stop when the audit ends, either. Presidential returns “must be closed directly to the Employee Audit Reviewer in Baltimore Technical Services. The ‘Other’ box in the ‘Forward to Technical Services’ section of Form 3198 must be checked and the examiner should notate ‘President (or Vice-President) Examination; Forward to Baltimore Technical Services.'” That’s reassuring — can you imagine how embarrassing it would be send the Presidential return to the wrong archive!
On the bright side, if you do find yourself having to put up with that mandatory annual audit, you’ll get some nice perks out of it: a fleet of limousines, a comfy jumbojet for avoiding the TSA’s usual “perp walk,” and a roomy white house on 18 acres in the middle of Washington, DC. You can even walk to work! Still, there might be a nagging feeling in the back of your mind, knowing the IRS has isolated your return like an Ebola specimen — in it’s own special orange folder, under lock and key.
We realize that you aren’t getting ready to move to 1600 Pennsylvania Avenue. But we make sure that our tax planning advice can stand up to a Presidential-level audit. It all starts with a proactive plan to take advantage of every legal deduction, credit, and strategy to cut your tax. So call us for that plan, and you’ll have more to contribute to your White House run!
In The Headlines
Southwest Airlines Takes its Magic International
With plans to increase international flights, Southwest Airlines is flying high. It has leveraged its low fares and customer-friendly heart to become the nation’s largest carrier of domestic fliers. Now it’s heading for the borders.
More than 100 million people catch a Southwest flight annually. That makes it the nation’s largest carrier of domestic passengers, beating out rivals like American Airlines, United, and Delta. Known for its customer-friendly ways, Southwest is one of the few remaining airlines that still provide one free checked bag and no change fees. The former regional player has transformed itself into a domestic powerhouse.
As other airlines have struggled through bankruptcy filings in recent years, Southwest has kept its low fares and balance sheet intact. The airline has recorded four straight years of revenue gains, and annual sales are expected to be up again in 2014—to nearly $18.6 billion, an all-time high.
The 43-year-old airline is not stopping at the border. It expanded beyond the U.S. for the first time this year, though international flights currently account for only 1% of its network. Southwest now flies to the Caribbean and Mexico, routes it acquired from its $1.4 billion purchase of AirTran Airways in 2011, and is considering as many as 50 other international destinations, including potential flights to Canada and Central America. As it extends its global reach, Southwest is staying true to customers: Passengers on international flights are allowed two free checked bags.
By the end of the year, Southwest will complete its integration of AirTran, its largest acquisition ever. Southwest got a makeover last month when it unveiled a new corporate rebranding and paint job for its fleet of Boeing aircraft. The airline revamped everything from its cocktail napkins to employee uniforms. The belly of each newly painted plane features a larger-than-life heart, to underscore the airline’s motto, “New look, same heart.”
Cities that Southwest flies into have seen a dual result: Prices drop and passenger traffic booms. The U.S. Department of Transportation dubbed this the “Southwest effect.” The airline ushered in an unprecedented era of affordability, though that has started to moderate, says Stifel Nicolaus analyst Joseph DeNardi. Southwest’s costs have come closer to their competitors, especially after bankruptcy filings wiped out much of the debt of larger rivals. Yet even as Southwest’s cost advantage decreases, its legacy of inexpensive flights remains. “Airfares are still pretty low relative to broader pricing metrics in the economy,” says DeNardi.
Southwest takes environmental awareness seriously and considers it part of its triple bottom-line approach: profits, people, and planet. Beginning in 2016, the airline will use low-carbon, renewable jet fuel on select flights in partnership with Red Rocks Biofuels. Southwest was searching “for a viable biofuel that uses a sustainable feedstock with a high rate of success,” says Bill Tiffany, Vice President of Supply Chain for Southwest. Red Rocks passed that standard, meeting both financial and sustainability objectives. Southwest plans to buy up to three million gallons of fuel in the first year, the equivalent of roughly 2.1 million flight miles at cruising speed.
Top TV Brands Follower Viewers to the Internet
Recent weeks have brought a steady stream of established TV brands and personalities into the Internet’s burgeoning world of direct-to-consumer entertainment networks. The list keeps growing: Glenn Beck, WWE, Paula Deen, and now even the illustrious HBO.
CBS recently joined the digital race with the launch of CBS All Access, a subscription-based, video-on-demand network that will allow viewers to binge-watch the broadcaster’s programming via Internet-connected devices for $5.99 a month. Why is this all happening now?
One key factor driving the TV programing rush to the Internet is that with each passing year, more and more Americans are starting to watch some, if not all, of their TV shows online. What might have looked like a more or less fringe viewing habit in 2010 is now a well-established staple of the American living room—and one that looks increasingly like the future of the home box office.
Of course, many of these viewers are still paying for cable or satellite packages even as they augment their home entertainment with the occasional selection from Netflix, Amazon.com, or Hulu. Americans continue to consume the bulk of their TV shows from traditional distributors rather than over the Internet. In 2014, according to EMarketer, U.S. adults spent an average of 55 minutes a day watching video content on PCs and mobile devices. Cable and broadcast television, by contrast, got an average of more than 4.5 hours.
But the shifting viewership behavior has reached a level of adoption where major players believe they can make significant fortunes delivering their content outside the traditional bundle. HBO Chief Executive Officer Richard Plepler, while revealing his plans to launch a streaming video service, noted that the number of households in the U.S. that have broadband, but no pay TV package, has now reached 10 million, roughly half of which are already paying for a streaming service. “That’s low-hanging fruit,” Plepler said.
CBS executives see the same thing: “CBS All Access is another key step in the company’s long-standing strategy of monetizing our local and national content in the ways that viewers want it,” CEO Leslie Moonves said in a statement.
For home viewers, this means that the a la carte online-TV menu is about to get a lot more diverse and a lot more tempting. And with major outfits such as HBO and CBS leaping into the fray, expect this emerging, hotly contested market to get much more volatile.
Sources:
1. http://for.tn/1slJGIS – Fortune
2. http://buswk.co/1ps9UoE – Businessweek
The Good News Is . . .
• Industrial production jumped 1.0% in September after a decline of 0.2% in August. Utilities were particularly strong, spiking a monthly 3.9%, following a 1.2% gain the prior month. Manufacturing rebounded 0.5% in September after a 0.5% decline the month before. Mining also advanced 1.8%. Within manufacturing, the production of durable goods increased 0.4% percent in September. With the exception of petroleum and coal products, each of the major components of nondurable goods posted gains in September.
• Netflix Inc., the world’s leading Internet television network, reported earnings of $0.96 per share, an increase of 84.6% over year-ago earnings of $0.52. The firm’s earnings topped the consensus estimate of analysts by $0.03. The company reported revenues of $1.4 billion, an increase of 27.4%. Management attributed the company’s results to increased membership and revenue from video streaming.
• Endo International agreed on Thursday to acquire Auxilium Pharmaceuticals for $2.6 billion ($33.25 per share) in the latest deal to reshape the drug industry. The deal has ramifications for the boom in inversion deals, which have been a driving force in many health care transactions this year. With the deal, Endo said it would have a stronger position in the market for men’s health and urology drugs. It also said it expected to save $175 million a year by combining the companies.
Sources:
1. http://bloom.bg/1bidM2T – Bloomberg
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1rmfJDG – Netflix, Inc.
4. http://nyti.ms/1welMPV – NY Times Dealbook
Planning Tips
Tips for Guarding Against Ebola Scams
The recent news about cases of Ebola in the U.S. has created anxiety and uncertainty among Americans concerned about contracting the deadly disease. As a result, scammers have tried to cash in on the public’s fears. These scams are particularly prevalent online. Below are some guidelines to be wary of with regard to online offers and pitches about the Ebola crisis:
Products claiming to treat the Ebola virus – Like other disasters, the Ebola scare is ripe for scams that claim to have medicine or other treatment that will prevent or cure the potentially deadly virus. According to the Federal Trade Commission (FTC), scam artists are making unsubstantiated claims that products containing everything from silver to herbal oils and snake venom can cure or prevent Ebola. The companies and individuals promoting these “cures” tend to use dramatic headlines to lure their victims. If you are interested in how to guard against Ebola, consult with reputable medical or scientific sources.
Investment scams about companies that could profit from the Ebola crisis – Another variant of scam to beware of is one that purports to offer you a way to profit from the disease. That scam aims to take advantage of investors by convincing them a business will grow exponentially from a “cure” or tool, like face-masks, that will see a surge in sales due to the inevitable demand. It is important to vet any claims about a potential investment before putting your money into it.
E-mails offering to provide updates about the Ebola virus – Another type of Ebola scam emanates from e-mails purporting the message has updates about the Ebola crisis. Someone who clicks on a photo or video in these e-mails that is supposed to be about the Ebola virus, or downloads a program, could be exposed to malware, which are viruses, and software that infect your computer and can give hackers access to your e-mails, bank accounts, or the ability to watch your actions remotely.
Fake charities soliciting funds to fight Ebola – Fake charities that claim to raise money to fight Ebola, are another threat for which the FTC has issued warnings. They urge you to verify any organizations requesting donations for this. It is common now for these kinds of scams to emerge during crises like hurricanes or floods, claiming to collect money to help struggling victims. The Better Business Bureau, a consumer education group, allows you to search for charities to find out whether they are legitimate.
Be vigilant – Be especially wary of emails and cyber campaigns using the Ebola virus disease as a theme. Phishing e-mails may contain links that direct users to websites, which collect personal information such as login credentials, or contain malicious attachments that can infect your system. You should use caution when encountering these types of e-mail messages and take the following preventative measures to protect themselves:
- Do not follow unsolicited web links or attachments in e-mail messages.
- Maintain up-to-date antivirus software.
- Avoid opening e-mail attachments from sources with which you are not familiar.
- Do not provide your personal information to sites offering products, information, or soliciting donations for the Ebola crisis.
Sources:
1. http://aol.it/1y8msqk – DailyFinance.com
2. http://www.cnbc.com/id/102085981 – CNBC
3. http://bit.ly/1wPJelE – US News & World Report
4. http://usat.ly/1zdhzRc – USA Today
5. http://1.usa.gov/11EQXtD – US-Cert.gov
