TAX CHANGES CONCERNING DUE TO HAPPENINGS IN WASHINGTON

Q. With all that is going on in Washington, do you think we will see any big tax changes this year?

A. Despite the noise and the rhetoric, Congress remains a long way from enacting any tax legislation, let alone major tax reform legislation in the current year. In the unlikely event that such a process began tomorrow, Congress will likely choose to affect future tax years so there should be no impact on tax year 2011 and possibly a limited impact on 2012. The law enacted last December that extended the existing tax rates through 2012, remains in effect, with some tax credits and expiring provisions terminating at the end of 2011 and the rest at the end of 2012. Many tax credits and expiring provisions face an uncertain future going into 2013.

The weakened economy and the need for rebalancing of federal spending would indicate a need to shift both spending and tax revenues to expand economic activity and increase employment. We are closely monitoring congressional actions and stand ready (via webcasts and our blog) to get you the information and analysis you need as events warrant.

GROUPON'S ACCOUNTING CALLED INTO QUESTION

According to “Accounting Today”, the group coupon site, Groupon announced its plans for a $750 million initial public offering last week, but the Chicago-based company’s IPO filing contained some disquieting information about its finances.

Among the information, was the company’s uneven rate of cash flow. Revenue growth went from $3.3 million in the second quarter of 2009 to $644.7 million in the first quarter of 2011. But “free cash flow” in 2010 was said to be just $72.2 million, including $7.0 million in one quarter despite revenues of $644.7 million.

The company’s accounting has been termed, “Grouponistically Acclaimed Accounting Procedures” by the Daily Deal. Writer, Don Young Jr. noted that the company's net loss last year was $413.4 million, and in the first quarter of this year was $113.9 million, giving it an estimated burn rate of nearly $450 million a year. That's a whole lot of coupons!

FOR THE DEMOCRATS TO BALANCE THE BUDGET, THE COUNTRY NEEDS MORE MILLIONAIRES

On Monday, July 11, 2011, Senate Budget Committee Chairman, Kent Conrad (D-ND) released his own deficit reduction plan that purports to cut $4 trillion from future deficits over the next ten years. According to Conrad's remarks on the Senate floor, roughly half of his deficit savings, ($2 trillion) would come "from closing tax loopholes, cutting tax subsidies, promoting tax fairness"; meaning, higher taxes on "who are sufficiently fortunate to be earning over $1 million a year -- the top 1 percent in this country."

But he is wrong on his 1%. The income threshold for the top 1 percent of taxpayers is roughly $370,000 not $1 million. I'm still puzzled on how Senator Conrad aims to extract $200 billion per year in additional taxes from this elite group of taxpayers since that's almost as much as they are already paying under current tax rates.

Let's look at the data. According to the IRS statistics for 2008 (latest available):

• There were 321,294 tax returns with AGI above $1 million (0.2 percent of returns).

• The total AGI for these returns was $1.076 trillion (13 percent of all AGI).

• Their taxable income was $934 billion.

• Their total income tax was $249 billion (24 percent of all income taxes paid).

So, if Conrad is going to raise $2 trillion from millionaires, he is going to either (1) need more millionaires or, (2) nearly double the amount of tax collections from existing millionaires.

How do you do the latter without doubling tax rates? Good luck. As the states that enacted so-called millionaire's taxes discovered, higher tax rates on millionaires tend to result in fewer millionaires and less taxes collected from them. Class warfare tax policy is simply not an effective means of funding government.

CELEBRITY TAX PROBLEM OF THE WEEK

Dominique Strauss-Kahn Accuser Said to Have Lied on Tax Return

The hotel maid who accused Dominique Strauss-Kahn, the former head of the International Monetary Fund, in May of rape in a New York hotel room, allegedly misrepresented her financial situation on her tax return.

Prosecutors found a number of inconsistencies in the accuser’s story about the incident as well as her finances, according to The New York Times. They found that she had lied on her application for asylum from Guinea about a gang rape, and misrepresented her income in order to qualify for public housing. She also claimed a friend’s child as her own on her tax return as a dependent, in addition to her own daughter. The Sofitel New York chamber maid also allegedly had $100,000 deposited in her bank account from unknown sources, and she had spoken to a friend in an immigration jail saying that she would make a lot of money from Strauss-Kahn because he was wealthy. She also admitted to returning to Strauss-Kahn's room to clean after the incident occurred.

Strauss-Kahn, 62, was released from house arrest over the weekend, but prosecutors have not yet dropped the charges against him. The accuser’s lawyer, Kenneth Thompson, defended his client and said the district attorney was giving up on the case. “Our concern is that the Manhattan district attorney is too afraid to try this case,” he said.

L'OREAL SALES HIT BY SLOWDOWN IN US AND EASTERN EUROPE

The French cosmetics maker has released its second quarter sales revealing that trading was down in Eastern Europe and North America due to less consumer demand.

Sales between April and June reached €4.64bn showing a 4.6 per cent increase on last year, but under the expected growth rate, particularly after a strong first quarter. Having seen revenue in the US grow above market expectation in the first quarter, L’Oreal saw reported figures fall 4.9 per cent in the last three months.

The biggest slowdown came in Eastern Europe, having recorded a slight growth in this region in the first quarter, reported sales tumbled 8.2 per cent. “After several years of growth, the sales trend in Eastern Europe is disappointing in all the countries of this zone, particularly in Russia and Ukraine,” commented CEO Jean-Paul Agon. The zone took another hit this quarter adding to what has been a slow start to the year in what L’Oreal call ‘a dismal economic environment’.

More difficult than expected

This has been attributed to the fact that consumer confidence and market dynamism have proved more difficult than expected, particularly in mass-market and the pharmacy channel.

Furthermore, in this zone, the cosmetics giant claims the launch phasing tends to be focused on the final months of the year. The Luxury Products Division made a good start to the year, thanks in particular to the rebound at Lancôme and another period of strong growth for Kiehl's and for fragrances.

THE IMPORTANCE OF VACATIONS, FOR STRESS RELIEF, PRODUCTIVITY AND HEALTH

Vacations Are Important For More Than Just Fun…

 Vacations Promote Creativity: A good vacation can help us to reconnect with ourselves, operating as a vehicle for self-discovery and helping us get back to feeling our best.
 Vacations Stave Off Burnout: Workers who take regular time to relax are less likely to experience burnout, making them more creative and productive than their overworked, under-rested counterparts.
 Vacations Can Keep Us Healthy: Taking regular time off to ‘recharge your batteries’, thereby keeping stress levels lower, can keep you healthier.
 Vacations Promote Overall Wellbeing: One study found that three days after vacation, subjects’ physical complaints, their quality of sleep and mood had improved as compared to before vacation. These gains were still present five weeks later, especially in those who had more personal time and overall satisfaction during their vacations.
 Vacations Can Strengthen Bonds: Spending time enjoying life with loved ones can keep relationships strong, helping you enjoy the good times more and helping you through the stress of the hard times. In fact, a study by the Arizona Department of Health and Human Services found that women who took vacations were more satisfied with their marriages.
 Vacations Can Help With Your Job Performance: As the authors of the above study suggest, the psychological benefits that come with more frequent vacations lead to increased quality of life, and that can lead to increased quality of work on the job.
 Vacations Relieve Stress in Lasting Ways: It should come as no surprise that vacations that include plenty of free time bring stress relief, but research shows that a good vacation can lead to the experience of fewer stressful days at least five weeks later! That means that vacations are the gift to yourself that keep on giving.

The bottom line is that taking a good amount of time from the stresses of daily life can give us the break we need so that we can return to our lives refreshed and better equipped to handle whatever comes.

SETTLEMENT FOR REGIS THE ABILITY TO UNIONIZE

According to the latest BIR, Regis Corp. lost a labor fight with the National Labor Relations Board (NLRB) in a settlement that declared that hair stylists and other Regis employees and its related salon chain must be given the right to organize labor unions. The NLRB settlement requires Regis to post notices that employees have the right to “form, join or assist a union” and that they cannot be fired for doing so. The settlement stems from complaints in several salons two years ago that workers were being required to sign agreements that revoked their future right to form a union. The company had previously asserted that a unionized workforce would put Regis at a competitive disadvantage. The settlement applies only to the 6,500 Regis-owned stores, which includes Regis, Supercuts, Cost Cutters, MasterCuts, and Hair Club for Men and Women. Regis’ 6,000 franchised stores are not affected by the settlement.

'TEMPORARY' FUTA SURTAX EXPIRES AFTER 35 YEARS

Ronald Regan once said, “there is nothing as permanent as a temporary tax act.” He was right.

The Federal Unemployment Tax Act surtax is set to expire Thursday after House Republicans refused to extend the 35-year-old “temporary” unemployment surtax. The surtax has been extended eight times since it was originally enacted in 1976. House Ways and Means Committee Chairman Dave Camp, R-Mich., refused to extend the tax beyond its current June 30, 2011 expiration date. “The death of any tax on jobs—no matter how big or small—is a historic moment and one to be celebrated,” Camp said in a statement. “The fact that it has taken 35 years for this ‘temporary’ tax to expire clearly illustrates the dangers of higher taxes—once in place, they are unlikely to ever go away. We need employers paying more salaries, not paying higher taxes. And when the surtax expires, job creators will get a little and long overdue relief.”

The original purpose of the "temporary" 0.2 percent surtax was to repay federal general revenues used to provide federal unemployment benefits paid in the wake of the 1973-75 recession. While the tax raised $27 billion (adjusted for inflation) and the general revenues were fully repaid by 1987, the 0.2 percent surtax remains on the books today. Since 1987, the tax has raised an additional $46 billion (adjusted for inflation) above and beyond what was needed at the inception of the tax in 1976.

The expiration of the surtax will reduce federal unemployment taxes by $1.4 billion per year, or about $14 per employee per year. That relief slightly offsets the effect of much larger state unemployment tax hikes imposed in recent years to pay for record unemployment benefit spending. Since unemployment benefits are not directly linked to the “temporary” federal tax, its expiration will not affect current or future unemployment benefit receipts.

Without the 0.2 percent surtax, the 0.8 percent FUTA tax rate will fall to 0.6 percent. It was last extended in 2009 as part of the Worker, Homeownership and Business Assistance Act.

IF YOU ARE INVOLVED WITH A NONPROFIT - CHECK THIS OUT

The Internal Revenue Service said in mid-June that approximately 275,000 organizations have automatically lost their tax-exempt status under the law because they did not file legally required annual reports for three consecutive years.

You might want to check with the leadership of the nonprofit that you are involved with to make sure that the necessary forms were filed. With volunteer organizations, many times these requirements are overlooked.

SUMMER DAY CAMP EXPENSES MAY QUALIFY FOR A TAX CREDIT

Along with the lazy, hazy days of summer come some extra expenses, including summer day camp. But, the IRS has some good news for parents: those added expenses may help you qualify for a tax credit.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

1. The cost of day camp may count as an expense towards the child and dependent care credit.

2. Expenses for overnight camps do not qualify.

3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.

4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.

5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information, check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available at http://www.irs.gov/ or by calling 800-TAX-FORM (800-829-3676).

CELEBRITY TAX PROBLEM OF THE WEEK

Super Bowl Ring in Auction for Back Taxes

The ring worn by former Green Pay Packers lineman, Fuzzy Thurston after his team won the second Super Bowl in 1967, will be auctioned in August to help settle his $1.7 million tax debt.

The Super Bowl II ring was seized by federal marshals, together with other sports memorabilia, from the now 77-year-old athlete, according to ESPN.com. Other items up for auction include footballs autographed by fellow Packers players and by coach Vince Lombardi. The ring is expected to sell for upwards of $20,000.

Federal marshals seized the ring and other memorabilia to settle a long-running tax dispute dating back to when Thurston co-owned a chain of restaurants known as the Left Guard after he retired from the NFL, according to the Greenbay Press-Gazette. He played for the Packers from 1959-1967, and opened the chain of restaurants in the mid-1970s. At one of the locations, some of the taxes withheld from employee paychecks was not sent to the Internal Revenue Service. Thurston’s three partners paid off judgments against them, but the court disputed whether Thurston had satisfied his judgment. In 1984, a court ruled against Thurston and ordered him to pay $190,806. With interest, that amount has now climbed to over $1.7 million.

A lien was placed on Thurston’s Florida home in 2004. The government is also seeking Thurston’s Super Bowl I ring, along with four other NFL championship rings that he won in 1958, 1961, 1962 and 1965. A Super Bowl I ring from another player sold last month for over $73,000.

POINTS TO CONSIDER WHEN BORROWING MONEY FROM A RELATIVE

Financial emergencies come up for all of us. You may be forced to ask a relative for financial help because you don’t have adequate reserves to drawn on. Before you consider that route, as either the recipient or the giver, here are some points to consider:

• Even small gifts may come with expectations that might have little to do with the money itself. If you don’t meet the giver’s expectations—showing up for every holiday dinner, for example—the relationship can become strained. Or, if you give money to a family member, you may find yourself scrutinizing the recipient’s future financial behavior.

• Borrowing money from a parent, for instance, may make you feel dependent, even if you pay the money back.

• Lending, rather than giving, a family member money might be a better idea. But, to avoid problems, always formulate a loan contract with specific repayment and interest terms.

Gift or loan, thoroughly talk about the transaction beforehand to make sure everyone is in agreement. In addition, make arrangements with your financial advisor to start building an adequate emergency fund of your own, so you’ll be prepared to handle a financial emergency yourself.

SMALL BUSINESS TAXES

CHOOSING YOUR CHARITY OF CHOICE

The demand for charitable services is always in high demand and you want to do your part. But how can you know whether the money you donate is actually used for the cause you want to support? Verify the charity before you give.

It’s all in the form - The IRS requires charities to make their three most recently filed annual Forms 990 (Return of Organization Exempt from Income Tax) available for public inspection. Form 990 details a charity’s accomplishments and discloses information about fundraising, compensation and governance. You can use the forms to evaluate how your potential choices are using their money and compare different organizations.

How can you get a copy of a charity’s Form 990? GuideStar (www.guidestar.org) and the Economic Research Institute (www.eri-nonprofit-salaries.com) provide free access to charities’ Forms 990 and other data. You can also check the charity’s website or request a copy from the organization or from the IRS. Charities and the IRS may charge a fee to cover photocopying and mailing.

For more say over your money - You might want to look at nonprofit organizations that allow potential donors to choose the specific projects they want to fund. Donors review a list of projects on an organization’s website and choose the one they want to fund. Support can be for an entire project or a portion of it.

To give more - Once you’ve chosen an organization to support, here’s one idea for making a significant donation. If you have a life insurance policy on your life that you no longer need, consider giving the policy to the charity or naming the charity as the beneficiary or contingent beneficiary, in case your family’s circumstances change in the future. When it comes to charitable giving, be sure to consult your legal and financial professionals for guidance.

OPRAH HATES WRITING CHECKS TO THE IRS

Oprah Winfrey told Piers Morgan that the most difficult check she has to write each year is for the Internal Revenue Service, and she usually needs some tequila from her accountants when she signs it.

Winfrey admitted to Morgan that she only signs checks for amounts over $100,000 nowadays. Winfrey launched her new cable TV network, the Oprah Winfrey Network, or OWN. But she still has “several hundred” checks to sign for over $100,000. “It would knock your socks off,” she told Morgan. “Millions are going out.” Morgan asked if that was painful. “The most pain I feel — and my accountants will tell you this — is every time I write a check to the IRS, it’s a ceremony. For years they came in with wine. Now they come in with tequila. It’s a tequila-signing ceremony.”

Morgan asked her what was the most painful check she ever had to write to the IRS, but Winfrey cannily ducked the question, teasing Morgan, “You’re good. You think I’m going to give you the number. No, no, no, no, no.” Morgan noted that Forbes magazine estimates that Winfrey is worth $2.7 billion, and asked if the figure was accurate. She responded, “I knew you were going to go there sooner or later. I’m not sitting around counting it.” However, she added that she knows how much she’s worth “because I already had counted it.”

Morgan followed up by asking Winfrey about her philanthropic endeavors, which include the Oprah Winfrey Leadership Academy for Girls, a school she runs in South Africa for economically disadvantaged young women. Morgan noted that Winfrey reportedly has given away over $300 million to various charities, and Winfrey corrected him, saying she knew it was more than that amount. He asked if she knew how much she has given away, and she replied, “No, I really don’t, but I know it’s more than $300 million. I have this school and it’s ongoing and I’m responsible for all of these girls and them getting an education, and I pay for every single thing and I think that the charitable work that you do — and when I’m gone everything that I have is going to go to charity because I don’t have children and I believe that that’s what you should do, that that’s how you should live your life. To whom much is given, much should be given back. To me, the money, it’s certainly a wonderful thing, but it is in direct proportion to how you’re able to bless yourself and how you bless others with it.”

Asked whether money can buy happiness, Winfrey responded, “It can certainly pave the way for it.”

STRESS MANAGEMENT

I received this from my good friend, Ken Cassidy. I thought it was too good not to pass on.

A young lady confidently walked around the room while leading and explaining stress management to an audience; with a raised glass of water, and everyone knew she was going to ask the ultimate question, 'half empty or half full?'...she fooled them all..."How heavy is this glass of water?", she inquired with a smile.

Answers called out ranged from 8 oz. to 20 oz.

She replied, "The absolute weight doesn't matter. It depends on how long I hold it. If I hold it for a minute, that's not a problem. If I hold it for an hour, I'll have an ache in my right arm. If I hold it for a day, you'll have to call an ambulance. In each case it's the same weight, but the longer I hold it, the heavier it becomes." She continued, "and that's the way it is with stress. If we carry our
burdens all the time, sooner or later, as the burden becomes increasingly heavy, we won't be able to carry on."

"As with the glass of water, you have to put it down for a while and rest before holding it again. When we're refreshed, we can carry on with the burden - holding stress longer and better each time practiced. So, as early in the evening as you can, put all your burdens down. Don't carry them through the evening and into the night... pick them up tomorrow.

Whatever burdens you're carrying now, let them down for a moment. Relax, pick them up later after you've rested. Life is short. Enjoy it and the now 'supposed' stress that you've conquered!"

1. Accept the fact that some days you're the pigeon, and some days you're the statue!

2. Always keep your words soft and sweet, just in case you have to eat them.

3. Drive carefully...it's not only cars that can be recalled by their Maker.

4. If you can't be kind, at least have the decency to be vague.

5. If you lend someone $20 and never see that person again, it was probably worth it.

6. Never put both feet in your mouth at the same time, because then you won't have a leg to stand on.

7. Nobody cares if you can't dance well. Just get up and dance!

8. Birthdays are good for you. The more you have, the longer you live.

9. You may be only one person in the world, but you may also be the world to one person.

10. A truly happy person is one who can enjoy the scenery on a detour.

***Save the earth...it's the only planet with chocolate!

CELEBRITY TAX PROBLEM OF THE WEEK

Tax Liens Filed against Bill Clinton’s Half-Brother

This is not a real celeb, but pretty close. Bill Clinton’s half-brother, Roger is facing about $90,000 in tax liens from the state of California and the Internal Revenue Service. Roger Clinton, 54, has struggled to establish a career as a musician and actor after he first drew attention following the election of his elder half-brother Bill in 1992.

California filed a $21,315 tax lien against the younger Clinton last month for taxes owed from 2003, 2004 and 2008, according to the Detroit News. The state had earlier filed a tax lien against Clinton for $2,951 in November, 2009, and for $8,405 in March, 2009. The IRS also filed a lien against him in 2008 for $57,762.

He was arrested for driving under the influence and disturbing the peace in 2001 after he challenged a nightclub doorman to a fight in Hermosa Beach, Calif. Clinton pleaded guilty to a reduced charge of reckless driving and was sentenced to two years' probation and a $1,350 fine. His half-brother pardoned him in 2001 for a 1985 cocaine-related conviction for which he served a year in prison.