In The Headlines
RadioShack in Bankruptcy – New Life or Fade to Black?
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!
Was Intuit’s Popular Turbo Tax Software Hacked?
Tax filing season arrived with a bang and an uptick in fears about fraud. For many, the tax season starts with collecting W-2s and 1099s and making those worrisome judgment calls about what is deductible. For the IRS and state tax agencies, however, it also means preventing fraud. Given that virtually everything is electronic these days that has become a big issue.
On February 5, Minnesota announced it would stop (at least temporarily) accepting returns submitted by TurboTax, one of the most popular individual return preparation programs. About 29 million people used TurboTax to file their tax returns last year. Minnesota’s Department of Revenue cited “potentially fraudulent activity.” So far 18 states, including New York, Georgia, and Alabama, plus the District of Columbia, have expressed concern about “data compromised through a third-party commercial tax-preparation software process,” according to the Utah State Tax Commission. But Minnesota is the first to say it will reject returns. Other states, including Connecticut, Massachusetts and Vermont, are holding back refund checks temporarily and warning of delays.
Minnesota and other states discovered that when some people log in to TurboTax to file their return, they find that a return has already been filed. Utah says its own fraud-detection systems began to identify similar activity about a week ago, and as of today, Utah has identified 18 fraudulent filings and flagged 8,000 more as potentially fraudulent.
Vermont also announced that after reports of a rise in fraudulent filings in other states it had suspended issuing refunds two days earlier “in an abundance of caution.” Massachusetts announced that it was holding back refunds and adding layers of screening to identify fraud; it said approximately 160,000 returns claiming refunds would get more scrutiny. Virginia, North Dakota, Delaware, Montana and Wisconsin Departments of Revenue all warn taxpayers on their websites that extra measures to validate tax refunds could delay checks.
Intuit, the company that makes TurboTax, said it briefly stopped transmitting state e-filing tax returns, and then resumed transmitting the returns after increasing security. The company also said it does not believe the fraudulent activity stemmed from a security breach of its systems but from “sources outside the tax-preparation process.” The investigation is ongoing, the company said, and Intuit is working with state agencies “to address growing concerns over state tax fraud.” Intuit has set up a dedicated toll-free number (800 944-8596) and says it will provide identity protection services, free credit monitoring, and access to tax preparers at no expense.
The IRS and the states have sophisticated software systems to detect and prevent identity theft. Still, no system is perfect. The IRS has an entire suite of resources available to taxpayer who think they have been victims of identity theft, including a hotline to call. Various states have similar resources.
Of course, identity theft is just one of many types of fraud that taxing agencies must monitor closely and guard against. Common items, like the earned income tax credit, are often flagged as potentially fraudulent by automated systems. Still, the government’s record on preventing such fraud is not stellar. It looks like it is going to be a long, difficult tax season ahead for state and federal tax agencies.
Citations
1. http://onforb.es/1vva9YI – Forbes
2. http://bloom.bg/1DahkX4 – BusinessWeek
The Good News Is . . .
• Total nonfarm payroll employment rose by 257,000 in January, and the unemployment rate was remained at 5.7%, the U.S. Bureau of Labor Statistics reported. Job gains occurred in retail trade, construction, health care, financial activities, and manufacturing. Average hourly earnings climbed 0.5% last month—up 12 cents to $24.75—and 2.2% over the past year.
• Biogen Idec, Inc., a leading global biotechnology firm, reported earnings of $4.09 per share, an increase of 74.8% over year-ago earnings of $2.34. The firm’s earnings topped the consensus estimate of analysts by $0.31. The company reported revenues of $2.6 billion, an increase of 34.3%. Management attributed the company’s results to the strong performance of its TECFIDERA and TYSABRI products in world markets.
• The Harris Corporation, which makes satellite and other communications equipment for businesses and governments, said that it had agreed to acquire Exelis for $4.7 billion in cash and stock. Exelis makes navigation equipment, sensors and air traffic management and communications systems for aerospace and defense. Together, the companies have more than $8 billion in annual sales and 23,000 employees.
Citations
1. http://1.usa.gov/1gck641 – Bureau of Labor Statistics
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1usGxdB – Biogen Idec Inc.
4. http://nyti.ms/16YAy63 – NY Times Dealbook
Planning Tips
Guidelines on Different Ways to Invest in Gold
Gold has been a favorite investment of the wealthy throughout history, and it remains the most popular investment of all the precious metals. Gold is fungible, portable, and accepted anywhere in the world. Below are some guidelines for ways to invest in gold. The best choice depends on the amount of money you have to invest, your investment objectives, the amount of risk you can absorb, and the length of time you intend to hold on to your gold investment. As with all investments, it is a good idea to consult with your financial advisor before committing any funds.
Why invest in gold? – If you have funds to invest, it is important to understand why people invest in gold in the first place, so that you can make sure it is the right thing for you. Understand that gold mainly serves as a store of value and as an investment hedge. Common reasons for investing in gold include:
• Gold is always in high demand. It is a tangible product that can always be passed on without concerns for its desirability in the future.
• Owning gold can protect you from a decline in currencies or from inflation. Countries often start investing in gold when economic growth starts to decline; the more debt-laden an economy, the higher the price of gold.
• Gold can be a way to diversify your investment portfolio. Diversification is considered to be the best reason to own gold, according to many financial experts.
• Gold is a sound means for protecting wealth over a long period of time.
Buying scrap gold – Collecting and storing scrap gold has become a popular investment strategy. During times of rising gold prices, buying scrap gold is a low-risk way to invest in this valuable resource. You can acquire scrap gold from family or friends, by placing ads in local papers, or on Internet auction sites where gold items may sell for less than its scrap value.
Buying gold coins or bars – Often, the same dealers, brokerage houses and banks sell both coins and bars. When assessing a dealer, see how long they have been in business, whether they are certified with an industry or government body, and in what investment activities they specialize. In the United States, the U.S. Mint provides a list of authorized sellers that you can check One factor to keep in mind is your ability to safely store your bars or coins.. With bars and coins, the greater the weight, the greater its price will be.
• The American Eagle Gold Coin and the other coins listed above are made in four weights: 1 oz., 0.5 oz., 0.25 oz. and 0.10 oz.
• Gold bullion bars are generally sold by the ounce and include 1 oz.,- 10 oz.- and 100 oz.-bars.
Buying shares in gold mining companies – Gold mining stocks are divided into two distinct groups: majors and juniors. The majors are well-capitalized companies with decades of history, world-spanning operations and a slow and steady cash flow. Major mining companies are no different from large oil companies, and many of the same metrics apply with a mining twist. Both have proven and probable reserves, except mining companies break down profit and cost on a given deposit by ton, instead of barrel. In short, a mining major is easy to evaluate and easy to invest in. The junior gold mining stocks tend to have little capital, short histories and high hopes for huge returns in the future. The most common fate for these stocks is failure and for that reason should be shunned by investors who are risk averse.
Gold exchange traded funds (ETFs) – Exchange Traded Funds (ETFs) aim to track silver and gold prices and are generally bought through a typical stockbroker. They are much like derivative contracts that track prices, but they differ in that you will not own the underlying gold assets if you invest in this vehicle. Note that these funds may charge a fee each year that deducts from the amount of gold backing your investment.
Citations
1. http://bit.ly/1yXy5jb – Investopedia
2. http://bit.ly/1CIIuW4 – TheStreet.com
3. http://www.cnbc.com/id/101853499 – CNBC
4. http://www.wikihow.com/Buy-Gold – WikiHow
5. http://bit.ly/1Dahz49 – WikiHow
6. http://bit.ly/1ljiE2p – Kiplinger
