Wednesday, November 27, 2013

FBAR: Revised IRS Penalty Appeals Procedures

Charles Rettig
, Contributor

Seal of the United States Financial Crimes Enforcement Network, part of the Department of the Treasury. The design is the same as the Treasury seal with a FinCEN inscription. (Photo credit: Wikipedia)

On October 28, 2013 the IRS revised the Internal Revenue Manual (IRM) providing guidance and clarification regarding the administrative review of FBAR penalties by the IRS Office of Appeals. See
The IRM is essentially the operational manual providing guidance and procedures for the various functions carried out by the IRS. The Office of Appeals serves as the administrative dispute resolution forum for any taxpayer contesting an IRS compliance action. It has long been Appeals’ mission to “resolve tax controversies, without litigation, on a basis that is fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.” See IRM
The Financial Crimes Enforcement Network (FinCEN) delegated its enforcement authority for penalties imposed under Title 31, Sections 5314 – 5321 for the failure to file Form 114, Report Of Foreign Bank And Financial Accounts (FBAR) to the IRS. This delegation was effective April 8, 2003, by memorandum of agreement between FinCEN and IRS. With respect to FBAR penalties being considered for resolution by IRS Appeals, the revised IRM 8.11.6 provisions reference 10 key points:
(1). IRS FBAR Administrative File. The IRS administrative file provided to Appeals will contain a brief summary memorandum explaining the FBAR violation(s) containing statistical information which will include a discussion of the FBAR violations, the number of penalty assessments, the dollar amounts involved, and the FBAR case disposition; A Form 13535, Foreign Bank and Financial Accounts Report Related Statute Memorandum, signed by the designated Program Manager affirming that the information shows the FBAR violations were committed in furtherance of income tax violations, when appropriate; A copy of any delinquent FBAR(s) secured during the examination; FBAR issue workpapers; the FBAR 30-Day Letter (Letter 3709 for pre-assessment; Letter 3708 for post-assessment); the Taxpayer’s protest; the representatives FBAR/Title 31 Power of Attorney Form 2848, if applicable; an IRS Counsel Opinion memo for FBAR penalties larger than $10,000 (for willful penalties only).
Before attending a conference with IRS Appeals, consider submitting a Freedom of Information Request Act (FOIA) to the IRS Disclosure Office requesting a copy of the IRS administrative file. Information regarding submission of a FOIA is available at
(2). Limited Jurisdiction for Post-Assessed FBAR Penalties. Post-assessed FBAR penalties in excess of $100,000 cannot be compromised by Appeals without approval of the Department of Justice (DOJ). See 31 USC 3711(a)(2) and 31 CFR §902.1(a) and (b). Once assessed, the FBAR penalty becomes a claim of the U.S. Government. Typically, the FBAR penalty case will usually be received in Appeals pre-assessment. However, upon request, Appeals will also conduct post-assessment hearings as provided in Title 31 CFR 5.4 and 900 to consider FBAR penalty liability and collection issues.
Post-assessment FBAR penalty cases will be handled by Appeals on a priority expedited basis. Appeals now requires these cases be completed and approved within 120 days of the date the Appeals Officer is assigned to the date the Appeals Team Manager (ATM) approves the case for closing. Previously, such cases were to be completed within 60 days. Appeals will require 180 days remaining on the applicable Title 31 assessment statute of limitations at the time the administrative file is received.
Appeals Cases with less than 180 days remaining on the assessment statute of limitations at the time the case is received by Appeals will be returned to the examining function as a premature referral so an extension of the statute of limitations may be secured. If no statute extension is secured then the FBAR penalty can be assessed and the taxpayer will be given post-assessment appeal rights. However, an Appeals Officer has the authority to execute a Title 31 FBAR statute extension. See IRM, Delegation Order 25-13 (formerly DO 4-35, Rev. 1). Also, see IRM for information on the statute of limitations for FBAR cases.
(3). Limited Availability of Alternative Dispute Resolution (ADR) Rights. ADR rights are not available for post-assessment FBAR penalty cases. However, Fast Track Settlement (FTS) is available for pre-assessed FBAR penalties only if the 30-Day Letter (Letter 3709) has not been issued. In FTS, the IRS Appeals Officer uses mediation techniques to focus issues and lead examiner and the taxpayer to determine the outcome of the dispute. If resolution is not reached through mediation, the Appeals mediator will propose a resolution, but such proposal is not imposed on either party. If FTS is unsuccessful in reaching a resolution, a taxpayer is not precluded from requesting traditional Appeals consideration.
Fast Track Mediation (FTM) is also available for pre-assessed FBAR penalties. In FTM, Appeals personnel trained in mediation help the examiner and the taxpayer discuss the issues in dispute, and possible ways to resolve it. The goal is to reach a jointly agreeable solution, consistent with relevant law, although the mediator will not require either party to accept a certain outcome. Post Appeals Mediation (PAM) is not available on any FBAR penalty case.
(4). Mitigation Threshold Conditions Survive. The revised guidance for the IRS Office of Appeals references the historic FBAR penalty mitigation provisions set forth in IRM Given recent IRS Offshore Voluntary Disclosure Programs (OVDP), the continued viability of the IRM FBAR mitigation guidelines has been subject to question. It should not be overlooked that the October 28, 2013 revisions to IRM 8.11.6 relating to FBAR penalty cases under consideration by the IRS Office of Appeals specifically reference these mitigation guidelines. For smaller foreign financial accounts, the mitigation guidelines might provide relief from the assessment of otherwise significant potential FBAR penalties of 31 U.S.C. § 5321 (a)(5).

(5). Joint and Several FBAR Penalty Liability. There is no joint and severable liability with FBAR penalty cases. FBAR penalties apply and are assessed individually and not jointly (there should only be one individual under examination per FBAR case file). Married couples under FBAR examination are treated as individual cases.

(6). Interest Does Not Accrue Until the FBAR Penalty is Assessed.Interest on FBAR penalties does not accrue until the penalty is actually assessed by the IRS. As such, some might consider executing an extension of the applicable FBAR statute of limitations to avoid a pre-mature assessment of a penalty with an accompanying interest accrual.

(7). Expedited Closings of Unagreed FBAR Penalty Cases. If the Appeals Officer and the taxpayer can not agree upon a resolution the assessment is to occur immediately without issuance of a Notice of Deficiency 

(8). No Chapter 11 Relief. Title 11 of the U.S. Bankruptcy Code does not provide relief from an assessed FBAR penalty.

(9). FBAR Penalties are an Appeals Coordinated Issue (ACI). Under existing procedures, Appeals resolutions involving coordinated issues must be approved by the Appeals FBAR Coordinator for that issue. The Appeals FBAR Coordinator serves as a resource person for the Office of Appeals. The purpose of the required coordination is to ensure that resolutions of FBAR penalties are consistent nationwide. A referral to IRS International Operations is required prior to holding the first Appeals conference regarding the FBAR penalty. Such coordination might make it difficult for certain taxpayers to obtain relief in Appeals from an FBAR penalty being considered by an otherwise understanding Appeals Officer.

(10). Litigation Forum. Litigation regarding FBAR penalties is within the jurisdiction of the U.S. District Court (rather than the Tax Court).
Summary. Significantly, the revised IRM added that IRS Counsel memo is needed for willful penalties over $10,000. The involvement of IRS Counsel in determining appropriate elements of willfulness could be significant. A non-willful civil penalty not to exceed $10,000, may be imposed on any person who violates or causes any violation of the FBAR filing and recordkeeping requirements of 31 U.S.C. § § 5314 and 5321(a)(5)(A). A civil penalty equivalent to the greater of $100,000 or 50% of the balance in the account at the time of the violation may be imposed on any person who “willfully” violates or causes any violation of any provision of 31 U.S.C. § § 5314 and 5321(a)(5)(A).
The test for willfulness is generally whether there was a voluntary, intentional violation of a known legal duty and the burden of establishing willfulness is on the IRS. Willfulness is shown by the person’s knowledge of the reporting requirements and the person’s conscious choice not to comply with the requirements. In the FBAR situation, the person need know is that they have a reporting requirement. If a person has that knowledge, the only intent needed to constitute a willful violation of the requirement is a conscious choice not to file the FBAR.
The failure to learn of the filing requirements coupled with other factors, such as the efforts taken to conceal the existence of the accounts and the amounts involved may lead to a conclusion that the violation was due to willful blindness. However, IRM provides that the mere fact that a person checked the wrong box, or no box, on a Form 1040, Schedule B is not sufficient, by itself, to establish that the FBAR violation was attributable to willfulness.
The involvement of IRS counsel lawyers familiar with the sometimes difficult task of demonstrating a person’s “voluntary, intentional violation of a known legal duty” could prove to be beneficial review in considering the difference between assertion of “non-willful” vs. “willful” FBAR penalties. Time will tell . 

Tuesday, November 26, 2013

Obamacare: Arrogance Corruption and Abuse (ACA)

by Peter Morici Twitter @pmorici1

It took paramount arrogance for President Obama and congressional Democrats to believe they could write an Affordable Care Act that would replace free markets across a healthcare sector as large as the economy of France. 

Among the results include five million Americans with private insurance getting cancellation letters for policies the president promised they could keep. As Obama claims, some had substandard coverage, but many had perfectly good policies.

Stories are surfacing of cancer patients losing policies that paid out hundreds of thousands of dollars in life-saving treatments, and now they cannot access the government-run exchange. If the patients are successful, premiums are dramatically higher, and they can no longer access clinics and doctors that kept them alive.

Businesses around the country are replacing full-time employees with part-time hires to avoid paying rising, burdensome premiums for qualifying workers. Others are simply dropping coverage altogether and electing to pay fines when those apply in 2014.

When the dust settles, millions of Americans that had health insurance will have to do without a policy and pay a less-expensive “tax,” as Justice Roberts euphemistically labeled the fines for individual non-compliance with the ACA. After all, for many it comes down to paying the rent and feeding their kids, or paying premiums double or triple their 2013 rates.

Some Americans will die — unable to access life-saving medical services — to satisfy the president’s obsession with “changing America” to create his ideal of a more-just society. 

How can any civilized society condemn cancer patients and others to premature death under the banner of social justice?

Now, insurance companies like United Health Care are dropping doctors from their networks and slashing payments to physicians. Many Americans will lose doctors they trust and who have intimate knowledge of their medical conditions.

Forty dollars for an office visit, $20 to read a mammogram and the like are fees that simply won’t sustain many doctors in private practice. 

Many physicians will be pushed into the employ of terribly inefficient hospitals which can overbill for other services to somehow pay their salaries. 

Others doctors will reconfigure into concierge practices that charge annual fees of $1,500 or more per patient, in addition to payments for premiums and co-pays.

The rich will keep their doctors, while the rest scramble and often go without prompt attention to emerging illnesses or any attention at all. 

Most doctors won’t be able to compete for the limited pool of patients, who can afford concierge fees, and face lower incomes and reduced professional satisfaction, which will be reflected in the care they provide. 

Voila! Obamacare raises costs, lowers quality and slashes the incomes of many healthcare providers. 

So where are all those rising health insurance premiums going? 

Simultaneously, the ACA made illegal many perfectly adequate private and employer-based policies, and required insurance companies to offer one-size-fits-all alternatives in each county across the country.

Cautious about the claims liabilities created by the uncertain risk characteristics of new pools of policyholders, insurance companies withdrew from many markets. Those that remain face much less competition, can jack up rates, and slash doctors’ fees.

That is a classic prescription for monopoly profits at health-insurance companies and outlandish executive bonuses.

The Justice Department has indicated little inclination to investigate these abuses under antitrust laws. It’s too busy seeking criminal indictments on Wall Street for sins committed during the financial crisis — five years later and only after many bank executives declined to support Obama’s 2012 re-election bid.

It’s hardly an accident that health companies have become cozy with the administration and congressional Democrats. Their executives are wholly disinclined to criticize a law that benefits them so much, and happily contribute to Democrats’ campaign coffers.

That’s Chicago-style corruption in its purist form. The president learned well while teaching law in the Windy City!

Monday, November 18, 2013

The Hidden Marriage Penalty in ... Obamacare

by: Garance Franke-Ruta

The first time I heard Nona Willis Aronowitz talk about getting divorced to save money on health insurance I thought she couldn't really be serious. We were at Monte's, an old Italian place in South Brooklyn, having dinner with a group of New York women writers in late July.

"Don't do it!" I urged her, certain, having watched my friends over the years, that no matter how casually she or her husband might treat the piece of paper that says they are married, getting unhitched would inevitably change their relationship as profoundly as getting hitched in the first place.

But with the arrival of the Affordable Care Act's insurance exchanges, the question for Nona and her husband Aaron Cassara moved from the realm of casual conversation to a real financial conundrum. Aged 29 and 32, respectively, they were facing tough times for their professions, a wildly expensive city, and the scary prospect that both of them could shortly be uninsured. Right now Nona only has a COBRA plan -- "which I can barely afford" -- that ends January 1, she tells me. Her last staff job ended when the media outlet she was working for laid off its whole editorial team; she's been a full-time freelancer since. Aaron, a filmmaker who works part-time and also freelances, has been uninsured since her layoff, because it would be too expensive to have him on COBRA too.

Any married couple that earns more than 400% of the federal poverty level -- that is $62,040 -- or a family of two earns too much for subsidies under Obamacare. "If you're over 400% of poverty, you're never eligible for premium" support, explains Gary Claxton, director of the Health Care Marketplace Project at the Kaiser Family Foundation.

But if that same couple lived together unmarried, they could earn up to $45,960 each -- $91,920 total -- and still be eligible for subsidies through the exchanges in New York state, where insurance is comparatively expensive and the state exchange was set up in such a way as to not provide lower rates for younger people. (Subsidy eligibility is calculated using a complicated formula involving income in relation to the poverty line, family size, and the price of plans offered through a state's marketplace.)

Nona and Aaron's 2012 income was higher than the 400% mark, but not by much. In New York City, that still doesn't take you very far for two people. If their most recent months of income are in the same range, they will get no help at all with buying insurance through the exchanges if and when they apply, according to the Kaiser Family Foundation and eHealth subsidy calculators. Premiums for the two for silver-level plans came in at $9,248 for the year.

But if they applied as unmarried individuals with something like their 2012 income, one of them would get at least $3,964 in subsidies toward the purchase of a plan, or possibly even be eligible for Medicaid, thanks to their uneven individual earnings that year. And if they fall below the 400% threshold, which Nona says they might this year, they could get substantial subsidies as a couple that are still worth less than what they'd be eligible for as individuals. These gaps are the marriage penalty.

Married people who are uninsured make up just a small fraction of the uninsured, for obvious reasons: It is easier to be insured if you have two potential pathways of getting there. Only 15.4% of married people were uninsured 2012, according to research from the Kaiser Family Foundation; the uninsurance rate for "single adults living together" was more than twice as high -- 33.4%.

That may be one reason the Obamacare subsidies are more generous to single people and one- or two-parent families with children in the house than to couples who lack children. They were designed to help single moms and struggling middle-class families with children, not married creative-class millennials in pricey cities who have not yet settled into well-paid work, or barring that, work for a single employer.

Health insurance isn't the only place where there's a marriage penalty. The federal income tax also hits married couples with similar earnings harder than couples with one main breadwinner.

"In the tax code, you have a different set of tax rates for married couples that mitigates the marriage penalty to some degree," says Robert Rector, a senior research fellow at the Heritage Foundation who has been writing about the marriage penalty in health reform since 2010. Under Obamacare, however, there are "dramatic" penalties that are "substantial -- particularly with couples in the upper age range," he says.

"What you are doing is saying ... you have to pay a penalty of multiple hundreds of dollars -- a substantial portion of your income -- to stay married," Rector says. "It's saying society is basically hostile to the institution of marriage."

Experts on the impact of marriage penalties were skeptical that many couples would consider divorce over insurance rates. Still, there is some data to suggest that marriage penalties embedded in government programs can discourage marriage among those who are benefiting from programs that favor the unmarried.

"The received wisdom in public finance is that marriage per se can be financially discouraged if both members of a couple have decent earnings potential and would face a higher combined tax rate as a married couple than as a pair of singletons," explains Gary Burtless, a senior fellow at the Brookings Institution. "At the lower end of the income scale, if the combined earnings potential of the couple is not very promising, marriage might prevent the mom and kids from receiving as much government assistance as they can receive if the adult couple remains unmarried."

There's no data yet on the potential size of the population potentially affected by such concerns under the Affordable Care Act, but Medicaid and other means-tested programs "already created that kind of potential marriage penalty," he notes. At least half of the newly insured under ACA will be insured under Medicaid.

The great irony, Nona explains, is "we wouldn't be married if it weren't for a situation that happened in 2009 where he needed health insurance."

Despite its administrative beginnings, their City Hall marriage has lasted so far. Aaron was on Nona's insurance at first; later, when their job arrangements changed, she was on his. Now Nona is looking to land a full-time staff job, in hopes of once again having an employer-based plan that Aaron, too, can join.

"I guarantee you that in six months I will either be divorced or I will have a full-time job," she says.

-- Garance Franke-Ruta

Article originally appeared here in The Atlantic.

Garance Franke-Ruta is the politics editor of The Atlantic Online. Previously she was a national web politics editor for the Washington Post and a blogger for its WhoRunsGov site, a senior editor at the American Prospect and a senior writer at the Washington City Paper, D.C.'s alternative weekly newspaper. Her work has also appeared in The Washington Monthly, The New Republic, Salon, Legal Affairs, Utne Reader and National Journal.

[Ed. Note: We're not recommending that you consider getting a divorce in order to save money in the wake of the Affordable Care Act. Considering the haphazard way the government is going about fixing problems as they come up, who knows how long this option will even be available.

Thankfully, there's plenty of other simpler ways that won't require you to change your marital status. Our health care professional has come up with a plan that could save you thousands in future medical costs. All while giving you control over your health care future.

Sunday, November 17, 2013

A Black Reporter Summarizes Barack and Michelle Obama

Say and believe what you want, but the below summarization of Barack and MichellObama’s 5 year reign in the White House is by far the best I have ever read!It squarely hits the nail on the head and it took a black reporter writing it to make it as effective as itis. A white man’s account would be instantly criticized by the liberal media as pure racism! But, how can anyone scream ‘racist’ when an exacting description of the Obamas is penned by a well known journalist of color?

*SUMMATION OF BARACK AND MICHELLE * by Mychal Massie, a respected writer talk show host in Los Angeles.

The other evening on my twitter, a person asked me why I didn't like the Obama's. Specifically I was asked:"I have to ask, why do you hate the Obama's? It seems personal, not policy related. You even dissed (disrespect) their Christmas family picture."

The truth is I do not like the Obamas, what they represent, their ideology, and I certainly do not like his policies and legislation. I've made no secret of my contempt for the Obamas.As I responded to the person who asked me the aforementioned question,I don't like them because they are committed to the fundamental change of my/our country into what can only be regarded as a Communist state. I don't hate them per definition, but I condemn them because they are the worst kind of racialists, they are elitist Leninists with contempt for traditional America. They display disrespect for the sanctity of the office he holds, and for those who are willing to admit same, Michelle Obama's raw contempt for white America is transpicuous. I don't like them because they comport themselves as emperor and empress. I expect, no I demand respect, for the Office of President and a love of our country and her citizenry from the leader entrusted with the governance of same. President and Mrs. Reagan displayed an unparalleled love for the country and her people. The Reagan's made Americans feel good about themselves and about what we could accomplish. Obama's arrogance by appointing 32 leftist czars and constantly bypassing congress is impeachable. Eric Holder is probably the MOST incompetent and arrogant DOJ head to ever hold the job. Could you envision President Reagan instructing his Justice Department to act like jack-booted thugs?

Presidents are politicians and all politicians are known and pretty much expected to manipulate the truth, if not outright lie, but even using that low standard, the Obama's have taken lies, dishonesty, deceit, mendacity, subterfuge and obfuscation to new depths.I do not like them, because they both display bigotry overtly, as in the case of Harvard Professor Louis Gates, when he accused the Cambridge Police of acting stupidly, and her code speak pursuant to not being able to be proud of America. I view that statement and that mindset as an insult to those who died to provide a country where a Kenyan, his illegal alien relatives, and his alleged progeny, could come and not only live freely, but rise to the highest, most powerful, position in the world. Michelle Obama is free to hate and disparage whites because Americans of every description paid with their blood to ensure her right to do same.

I have a saying, that "the only reason a person hides things, is because they have something to hide." No president in history has spent millions of dollars to keep his records and his past sealed. And what the two of them have shared has been proved to be lies. He lied about when and how they met, he lied about his mother's death and problems with insurance, Michelle lied to a crowd pursuant to nearly $500,000 bank stocks they inherited from his family. He has lied about his father's military service, about the civil rights movement, ad nausea. He lied to the world about the Supreme Court in a State of the Union address. He berated and publicly insulted a sitting Congressman.He has surrounded himself with the most rabidly, radical, socialist academicians today. He opposed rulings that protected women and children that even Planned Parenthood did not seek to support.He is openly hostile to business and aggressively hostile to Israel.His wife treats being the First Lady as her personal American Express Black Card (arguably the most prestigious credit card in the world). I condemn them because, as people are suffering, losing their homes, their jobs, their retirements, he and his family are arrogantly showing off their life of entitlement - as he goes about creating and fomenting class warfare.

I don't like them, and I neither apologize nor retreat from my public condemnation of them and of his policies. We should condemn them for the disrespect they show our people, for his willful and unconstitutional actions pursuant to obeying the Constitutional parameters he is bound by, and his willful disregard for Congressional authority.Dislike for them has nothing to do with the color of their skin; it has everything to do with their behavior, attitudes, and policies. And I have open scorn for their constantly playing the race card.

I could go on, but let me conclude with this. I condemn in the strongest possible terms the media for refusing to investigate them, as they did President Bush and President Clinton, and for refusing to label them for what they truly are. There is no scenario known to man, whereby a white president and his wife could ignore laws, flaunt their position, and lord over the people, as these two are permitted out of fear for their color.

As I wrote in a syndicated column titled, "Nero In The White House" - "Never in my life, inside or outside of politics, have I witnessed such dishonesty in a political leader. He is the most mendacious political figure I have ever witnessed. Even by the low standards of his presidential predecessors, his narcissistic, contumacious arrogance is unequalled. Using Obama as the bar, Nero would have to be elevated to sainthood. Many in America wanted to be proud when the first person of color was elected president, but instead,they have been witness to a congenital liar, a woman who has been ashamed of America her entire life, failed policies, intimidation, and a commonality hitherto not witnessed in political leaders. He and his wife view their life at our expense as an entitlement - while America's people go homeless, hungry and unemployed."

*"The democracy will cease to exist when you take away from those that are willing to work and give to those who would not"*

Sunday, November 10, 2013

Higher Taxes in 2014 - Year End Planning

By Margaret Collins & Richard Rubin - Nov 7, 2013 5:13 AM PT (

The higher tax rates passed by Congress this year have some top U.S. earners seeking last-minute strategies to lower their tax bite as year-end calculations turn up unpleasant surprises.

“There are many, many high-income taxpayers now who are finding themselves facing tax rates in excess of 50 percent,” said Suzanne Shier, a tax strategist and director of wealth planning at Chicago-based Northern Trust Corp. (NTRS) “That really gets their attention.”

High earners are seeing a combination of federal tax increases for 2013: a top marginal rate of 39.6 percent, up from 35 percent; a 20 percent tax on long-term capital gains and dividends, up from 15 percent; and a new 3.8 percent tax on investment income. Also, limits on exemptions and deductions are taking effect for this tax year.

Some top earners are only now realizing they may owe much more by April 15 because they’ve been paying quarterly estimated taxes based on their liability for 2012, which the Internal Revenue Service allows in a “safe-harbor” rule, said Elda Di Re, a partner at Ernst & Young LLP.

Others are absorbing the effects as they rush to implement strategies before Dec. 31 to limit the tax bite on earnings, market gains and stakes in businesses.

States’ Take

State taxes can push the bill higher for some high earners. InCalifornia, the top rate is 13.3 percent on income exceeding $1 million.

Investors with significant portfolios are seeing some of the biggest increases this year, said Martin Kalb, co-chairman of the global tax group at Greenberg Traurig LLP.

For wealthy taxpayers, the rate on long-term capital gains and qualified dividends now can be as much as 25 percent, including the new surtax and limits on deductions, Kalb said. That’s a 67 percent increase from 2012. The rate on other investment income such as royalties, interest and rents can exceed 43 percent.

“Clients are a little startled at the amount of additional taxes they are paying,” said Maury Cartine, a partner at Marcum LLP whose clients include private equity and hedge fund managers

According to an analysis by Cartine, a married couple in New York with $600,000 in wages, $100,000 in qualified dividends and $300,000 in long-term capital gains -- as well as $145,000 in itemized deductions for real estate taxes, mortgage interest and state and local taxes -- would pay about 17 percent, or $37,000, more in U.S. taxes this year.

$450,000 Threshold
By comparison, a family with $600,000 in wages, no investment income and $105,000 in itemized deductions would see about a 2 percent, or $3,000 increase, he said.
Congress set the top tax rate for income above $450,000 for married couples or $400,000 for individuals, after deductions. Those are the same thresholds for the top levy on long-term capital gains and dividends.

Additionally, two new taxes to help finance the 2010 health-care law -- a 3.8 percent surtax on investment income and 0.9 percent added levy on wages -- apply to income of more than $250,000 a year for married couples and $200,000 for individuals.

Lawmakers also reinstated phaseouts of personal exemptions and itemized deductions for adjusted gross income exceeding $250,000 for individuals and $300,000 for married couples.

‘Big Surprise’
“It’s going to be a big surprise when they find out they aren’t going to be able to take all of their itemized deductions,” said Tracy Green, a vice president in tax and financial planning in the advisory unit of Wells Fargo & Co. (WFC)

With less than two months left in the tax year, advisers and accountants are focusing on clients with closely held business stakes, mutual-fund holdings, charitable donations and retirement accounts to help maneuver around higher rates.

To minimize the effect of the 3.8 percent tax, high earners are reviewing their interests in S corporations and other flow-through entities to see if they can become active rather than passive participants, said William Zatorski, a partner in PricewaterhouseCoopers LLP’s private company services practice. Business income from active participation isn’t subject to the surtax and that shift in S corporations doesn’t trigger self-employment tax, he said.

This year’s stock market rally -- the Standard & Poor’s 500 Index returned 25 percent through October -- has tax implications for many investors with mutual funds, said Green of Wells Fargo Advisors.

Capital Gains
“This year the chances of having long-term capital gain distributions are going to be pretty good,” she said.

Mutual fund companies are releasing estimates of distributions this month, which investors can use to plan, Green said. Those intending to sell a fund should do so before distributions, while investors seeking to buy shares should wait until after, she said.

Some high earners may have to shift their usual year-end strategies because the new top rate means they are no longer subject to the alternative minimum tax, or AMT, said Di Re of Ernst & Young. Taxpayers not subject to the minimum tax can pre-pay state income or real estate taxes before Dec. 31 to lower their taxable income, Zatorski of PwC said.

Bumping up charitable donations is another strategy, Kalb of Greenberg Traurig said. Taxpayers with gains in publicly traded stocks can donate them to a public charity or their own private foundation. They’d be eligible for a charitable deduction equal to the fair value of the security, and would avoid the long-term capital gains rates, he said.

Retirement Plans
Individuals age 70 1/2 or older should consider giving as much as $100,000 to a qualified charity directly from an individual retirement account, Wells Fargo’s Green said. The donation can meet all or a portion of the annual required minimum distribution for IRA owners and isn’t recognized as income.

Also, high earners can maximize contributions to tax-advantaged retirement plans and realize some losses to offset capital gains, Green said.

Another recommended strategy is to defer income by investing in private-placement life insurance and private annuities. These are designed for high net-worth individuals, Kalb said.

Looking Ahead
Beyond 2013, high-income investors can add tax-exempt bonds or convert some retirement savings to Roth accounts, Green said. When savers put money into Roth IRAs and Roth 401(k)s, they pay taxes on the money upfront in exchange for tax-free withdrawals later.

Funds that capture losses throughout the year to offset gains will be especially attractive to investors because the strategy can reduce net income reported on tax returns at year-end,
Shier of Northern Trust said.

Once high earners figure out this year’s strategy, advisers are saying they should keep an eye on moves in Congress that could change their future tax picture.

House and Senate panels are considering making the biggest changes to the U.S. tax code since 1986. Representative Dave Camp, chairman of the House Ways and Means Committee, wants to lower the top individual rate to 25 percent in a way that would require eliminating or curbing many tax breaks. Camp, a Michigan Republican, has said he will release a plan this year.

Passage of any revisions would be difficult and wouldn’t happen until sometime in 2014, at the earliest.

The possibility of more tax changes has some high earners taking advantage while they can of breaks such as the sales tax deduction, Kalb said. That benefit, which allows deducting sales tax instead of state income tax, is set to expire Dec. 31 along with some other breaks.
“A lot of my clients are looking to buy very expensive assets that will pay a lot of sales tax, especially in Florida,” which doesn’t have a personal income tax, Kalb said. “If someone buys a $2 million boat this year they can get the deduction for sales taxes.”

We Need GOOD Missile Defense Today

Most of the time, the Department of Homeland Security (DHS) runs around worrying about backpack-wielding Islamic radicals, a la the Boston Marathon bombing. Naturally, these terrorists strike fear into the hearts of Americans. But ultimately these isolated attacks have little lasting impact on our national economy.

In reality, the single largest threat to America is a missile attack by a rogue country. An electromagnetic pulse (EMP) weapon detonated near our shores by North Korea – or a nuclear missile launched from northern Iran toward an American base in Europe – would have grave consequences, similar to what we experienced after the World Trade Center attack on 9/11.

That’s why America’s real national defense is tied to its ever-expanding technological superiority in missile defense. We have Ronald Reagan to thank – he made missile defense a priority, and his vision is now paying off.

Today, increasing threats and world-class technology have put U.S. defense contractors in the spotlight like never before.

The Deadliest Defensive Weapon We Have

Take the SM-3 (SM is short for Standard Missile), a purely defensive weapon used to demolish short- to intermediate-range ballistic missiles. The SM-3 hits inbound enemy missiles, literally blasting them out of the sky. The whole idea is known as “hitting a bullet with a bullet.” The effect is tantamount to a collision between 10-ton trucks traveling at 600 MPH.

The SM-3 is the Holy Grail in our fight against rogue missiles. It’s already part of the Japanese defense against the threat of North Korea. In Europe, the U.S. plans to counter Iran using ground-based SM-3 interceptors in Romania and Poland. The new, ground-based version could be deployed as early as 2018.

The proud manufacturer of the SM-3 is Raytheon (RTN), a premier U.S. defense and technology firm.
Of the most recent missile tests, Raytheon’s President of Missile Systems said, “Confidence in the SM-3 IB’s defensive capability continues to grow with each flight test.  When this weapon deploys in 2015, the U.S. and our allies will have a tremendously reliable, capable defensive asset on their side.”

The Race Is On

The SM-3 is just one example of the race to build missile defense systems. And trust me – it’s a race. You see, North Korea is allegedly developing an EMP weapon, according to recent reports from South Korea’s spy agency. The target is none other than Western society.

The outcome of such an attack would be gruesome. An EMP wouldn’t just take out computers and radios. 

In today’s complex society, it would shut down the electrical grid, inhibiting our ability to pump potable water and killing our ability to move food from farm to market. Some estimates suggest that a well-executed EMP attack over the Midwest could lead to starvation of up to half of America’s population.

The only real defense against an EMP attack is stopping the delivery system, which would most likely come from a ballistic missile. And as this threat from rogue nations grows, it not only affects the United States, but also impacts our friends and interests around the globe.

Not so Clean Wind Energy

Proponents of wind turbine energy tout its environmental advantages over fossil fuel energy sources that produce carbon dioxide emissions.

But what they don't talk about is the vast amount of radioactive waste and other toxic substances resulting from the mining of the rare earth minerals needed by wind turbines, according to a disturbing report from two energy experts.

Wind turbines use magnets made with neodymium and dysprosium, rare earth minerals mined almost exclusively in China, reported Travis Fisher and Alex Fitzsimmons, policy associates with the Institute for Energy Research.

An MIT study estimated that a 2-megawatt wind turbine contains about 752 pounds of rare earth minerals.

Simon Parry of Britain's Daily Mail traveled to Baotou in northern China to view the mines, factories, and dumping grounds associated with China's rare earth industry, including a 5-mile-wide lake of industrial waste.

"This vast, hissing cauldron of chemicals is the dumping ground for 7 million tons a year of mined rare earth after it has been doused in acid and chemicals and processed through red-hot furnaces to extract its components," Parry wrote.

"Rusting pipelines meander for miles from factories processing rare earths in Baotou out to the man-made lake where, mixed with water, the foul-smelling radioactive waste from this industrial process is pumped day after day."

As the lake of waste grew larger, local farmers told Parry, "anything we planted just withered, then our animals started to sicken and die."

Residents of a nearby village said their teeth began to fall out, their hair turned white at young ages, and they suffered from severe skin and respiratory diseases. Children were born with soft bones and the incidence of cancer and osteoporosis soared, the Mail reported.

The lake's radiation levels are 10 times higher than in the surrounding countryside, official studies found.

In Baotou, most people wear face masks wherever they go, Parry noted.

The report from Fisher and Fitzsimmons, published by Rightside News, disclosed that mining one ton of rare earth minerals produces about one ton of radioactive waste.

Last year the United States added 13,131 megawatts of wind-generating capacity, and at least 4.9 million pounds of rare earths were used in the turbines installed in 2012. That means at least 4.9 million pounds of radioactive waste were created to make those turbines.

In comparison, the U.S. nuclear industry produces between 4.4 and 5 million pounds of spent nuclear fuel each year. So the U.S. wind industry most likely created more radioactive waste last year than America's entire nuclear industry — while accounting for just 3.5 percent of all electricity generated in the country.

And the MIT study revealed that the demand for dysprosium could rise by 2,600 percent in the next 25 years as the wind industry grows, the Rightside News authors warn.

They conclude: "All forms of energy production have some environmental impact. However, it is disingenuous for wind lobbyists to hide the impacts of their industry while highlighting the impacts of others.

"From illegal bird kills to radioactive waste, wind energy poses serious environmental risks that the wind lobby would prefer you never know about." 


The Significance of Virginia

The governor’s election earlier this week in Virginia speaks to something I’ve been talking about recently … we’ll see 20 more years of Democrats in the White House because of the changing demographics of America.

If you weren’t following the Virginia election, Terry McAuliffe won. He’s a Democrat and a “friend of Hillary.” His victory will give Hillary a key state in the 2016 presidential election. McAuliffe won because of the urban vote, the welfare vote and the minority vote. That demographic is increasingly America … more Americans live in urban than rural settings and urban centers are increasingly “blue” voters. America is also increasingly welfare oriented, which also tends to be more “blue.” And America is increasingly a place where "minority" is moving toward majority status, which plays to the Democrats advantage too.

But, what also makes Virginia so interesting is its transformation. Just a few years ago, it was a “red” state … then it became a mixed state … and now it is trending “blue.”  Virginia is still a bit schizophrenic in that McAuliffe did not win a majority of the votes, just a plurality of the votes, narrowly beating a Tea Party contender. It represents the same transition America is struggling through at the moment. And it speaks to where America is headed – the urban welfare majority vs. the largely non-urban right wing faction of the Republicans.

How does this play out, you may wonder. My guess is that the urban majority will win this fight because of their sheer numbers. They will control the White House and, on occasion, control both chambers of Congress. But, the right-wing faction will most likely command large enough numbers in Congress to be a countering force. The right wingers will be a stone wall pushing to stop the lust for welfare expansion … while the urban faction will push for policies that the right wingers will fight tooth and nail. We, in turn, end up with increasingly rancorous politics in America. We face the increasing likelihood of more government shutdowns and other tactics in which the minority party tries to block the majority in power because it’s the only power the minority has. Virginia says a lot about our future as a country.

written by Jeff Opdyke 

Friday, November 1, 2013

Proposed (again) a Tax on Driving

Is driving an "option" for you? Me neither. You take the kids to school and after-school activities. You drive to work or your job requires you to drive for sales calls.  Maybe you are a farmer living in a rural area and need to go into town frequently to take care of business.
Unless you are a city-dwelling sort who uses a bicycle to get around, you are about to see your freedom to travel about this country infringed upon.
The government is coming to tax every mile you drive.
We told you earlier this year that Rep. Earl Blumenauer (D-OR) introduced a bill (H.R. 6662) that would require the Treasury Department to tax cars for each mile they drive.
Thankfully, it died in committee. Still, we can’t rest on this issue.
Prior to this, in March 2011, the Congressional Budget Office released a report saying a Vehicle Miles Traveled (VMT) program was a “practical option” for raising funds. The CBO helpfully suggested that devices could be put on cars that read mileage, and that information could be read electronically at gas stations.
But like most terrible ideas, it has come back.
The Chicago Tribune reports this week, “As America’s road planners struggle to find the cash to mend a crumbling highway system, many are beginning to see salvation in a little black box that fits neatly by the dashboard of your car.”
These liberals just won’t stop!
But I digress, The Tribune goes on, “The devices, which track every mile a motorist drives and transmit that information to bureaucrats, are at the center of a controversial attempt in Washington and state planning offices to overhaul the outdated system for funding America’s major roads.”
This tax is unfair as it weighs most heavily on the suburbs and rural communities. It’s robbing “the country to give to the city.”
What is next? Will they tax the air we breathe, the steps we take, or the number of kids we have?  Did you read about places already taxing people based upon the amount of rain that falls on the square footage of your property roof line! Chilling!
The Liberals believe they know what is best for you. You don’t know what insurance you need and you really don’t WANT to be an urban dweller. You really need to be living in a small apartment and eschewing private transportation.
When we talk about Agenda 21, people call us conspiracy theorists.  Now we know. It is all part of a global Agenda 21 “green scheme" to redistribute your wealth, change your behavior, change how you live, and where you live! 
With this “tax by the mile” it becomes clear that if you can dream of something outrageous, you’re probably too late—some Liberal somewhere has already thought of something worse!
Ryan Morrison is chief executive of True Mileage, a Long Beach company testing devices that can track drivers' mileage. "People will be more willing to do this if you do not track their speed and you do not track their location," he says. (Mark Boster, Los Angeles Times / October 24, 2013)