IBS AND NEW YORK CITY

I spent a few days last week at the IBS show in New York City. I spoke for two days and then I visited with some of our clients that are in that area. My wife, Maggie, went along with me so we did have a day to do some shopping and visit art galleries.

The IBS show seemed a lot better this year. I don't know enough about the particulars of the show but it appeared to me that they have some additional show floor room so I wasn't quite as tight.  Of course I was doing education therefore I was at one of the side rooms and was not on main floor.

Once again all the major brands were not there but give us a chance to see some of the smaller new brands and also to talk to some of the different vendors.

Another item that I thought was much better this year is that it did not seem like such a flea market atmosphere. Last year, when I was there it seem like there was a lot of trinkets and not a lot of products being sold. This year seemed to be much more professional.

Staying in a hotel in New York is always an experience because space is so expensive. My room was 17' x 11. This included the bathroom, shower and then the bed. No closets only two drawers. At the same time this is a brand-new motel or hotel and unique experience because of all the technology that was involved.

One of my favorite books and a requirement for everyone that works in my office is Raving Fans. One of the principles that creates a Raving Fan is to do what you do very well but don't try to do everything. The hotel was a very good example of this. Everything they did they did with class and it was a credit a WOW factor. At the same time there were a lot of things they didn't do, which was okay.

If you've never been to New York I suggest that you put it on your bucket list. There's no place like it. On a weeknight at 11 PM to be walking down Eighth Street or Seventh Street or Times Square and to be shoulder to shoulder with people is amazing. Central Park- the theaters - the shopping - no place like in the world!

SALON TODAY'S MONEY PUZZLE ARTICLE

I was honored to be asked to be a part of this month's Salon Today's Money Puzzle article.  Salon Today asked a group of experts that examine every angle of your business to help you find, grow and save more money.

Please check it out: CLICK HERE

THE TAX SYSTEM EXPLAINED IN BEER

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from every body's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man, "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

CVS GOOD NEWS FOR BEAUTY INDUSTRY

Good news for professional beauty stores, as CVS announced it will close all of its 30 high-end Beauty 360 beauty retail stores and the corresponding e-commerce business to focus on the growth of its core CVS pharmacy beauty business. It’s one less beauty retailer to compete with.

AMERICANS WORK TO PAY TAXES

DEATH AND TAXES

Death and taxes aren’t only certain; they also seem to share a same deadline in the U.S., according to a study that points to the role of stress in fatal accidents.

According to Bloomberg.com: Deaths from traffic accidents around April 15, traditionally the last day to file individual income taxes in the U.S., rose 6 percent on average on each of the last 30 years of tax filing days compared with a day during the week prior and a week later, according to research published in the Journal of the American Medical Association.

Even allowing Americans to file their taxes electronically hasn’t negated the crash trend, lead researcher Donald Redelmeier said. The findings suggest stress, lack of sleep, alcohol use and less tolerance to other drivers on tax deadline day may contribute to an increase in deaths on the road, Redelmeier said.

“An increase of risk in this magnitude is about the same as what we observe on Super Bowl Sunday, a time notorious in the U.S. for drinking and driving,” said Redelmeier, a professor of medicine at the University of Toronto in Canada, in an April 6 telephone interview.

The research showed that there were 226 fatal crashes for each of the 30 tax days and 213 fatal accidents for each of the 60 control days.

Stressful Deadlines

“Our research suggests that stressful deadlines can contribute to driver error that can contribute to fatal crashes,” Redelmeier said. “People have, for a long time, speculated that psychological stress may contribute to real world crashes, but this is the first study to pin that down.”

The study, which appears as a research letter in the medical journal, looked at tax deadline data from the Internal Revenue Service and fatal traffic accident data from the National Highway Traffic Safety Administration from 1980 to 2009. The researchers then used a database to identify crashes that led to deaths. For every tax day, they also identified a day one week before and one week after as a comparison.

Redelmeier said drivers who are stressed should remember to buckle their seat belts, obey the speed limit, avoid alcohol, minimize distractions and refrain from driving recklessly.

“Under normal circumstances, everyone nods their heads agreeable,” he said. “Under stressful circumstances, it’s when you tend to forget these pieces of advice.”

To read the article: CLICK HERE

WE MADE IT

We finally made it to the end of the 2012 tax season and due to our office changing software, I must say it has been a little more difficult than normal and all of the returns took a little longer than usual, but our team did a great job and our clients, as usual, gave us some grace.

I just want to take this time to say thanks to all of our readers for their questions during the season and our readership continues to grow each month and I look forward to my 41st tax season next year.

I will be traveling to New York City this weekend, speaking at the IBS show at the Jacob Jarvis Center and then meeting with some of our New York clients and some of our other distance clients that are in attendance. My wife Maggie is going with me so there will be a little R&R between meetings.

TAX FREEDOM DAY 2012

OBAMA'S REVENUE SOUP

Wall Street Journal editorial, Obama's Revenue Soup: A History Lesson on Capital Gains Taxes:

In "Annie Hall," Woody Allen tells the joke of two women complaining about a restaurant. The first says the food here is awful and the second replies, yes, and they serve such small portions. Sounds like President Obama's proposal to raise the capital-gains tax: It will hurt the economy and it won't raise much new revenue.

Mr. Obama's plan would raise the capital-gains rate on January 1 to 20% on those who earn more than $200,000 ($250,000 for couples), plus a 3.8% investment surtax to finance ObamaCare. That 23.8% rate amounts to a nearly 60% increase from the 15% rate in effect since 2003. And that's without his new "Buffett rule," which would take the rate to 30% for many taxpayers.

This and other rate hikes aimed at higher-income earners are supposed to raise about $700 billion in tax revenues over the next decade. Fat chance. Ever since the famous 1978 bipartisan capital-gains tax cut sponsored by the late William Steiger of Wisconsin, the same pattern has repeated itself: raising the capital-gains rate reduces revenues, and lowering it leads to revenue increases.

The nearby chart shows the 35-year trend in capital-gains revenue and tax rates—through 2008, the last year data are available.

The data clearly show that the overall economy is the single biggest factor in capital-gains realizations and revenue. But the data also show that time and again revenue has multiplied despite a lower rate, and arguably because of it. ... Congress shouldn't be fooled by government forecasters who predict a revenue boom from a higher capital-gains rate. They have blown this call every time. ...

In our view the optimal capital-gains tax rate is one that leads to the most capital investment, jobs and wealth gains for American workers. That economically optimal rate is somewhere close to zero and would lead to more overall tax revenue as the economy grew faster. But if Congress wants a capital-gains tax, history suggests the revenue maximizing rate is closer to 15% than to 23.8%.

As John F. Kennedy put it in 1963 when he endorsed a cut in this tax: "The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital" as well as "the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy."

Today's Democrats in Washington are no Jack Kennedys. As President Obama told Charlie Gibson of ABC News in 2008, whether or not a higher capital-gains tax raises more revenue is irrelevant to him. He wants a higher rate as a matter of "fairness." The soup may be lousy but he wants more of it.

IRS GETS HALF A BILLION TO IMPLEMENT OBAMA HEALTH LAW

Did you ever wonder why the IRS is getting involved in our health care?  It has to do with them monitoring all the businesses to determine that they are providing the required coverage.  If you have ever tried to call the IRS you should be afraid.  It is not unusual to be on hold for 30 minutes.  I have even been on hold and then the music goes away and a busy signal comes over the phone.  I call back only to find that they are now closed for the day.

Even though the Supreme Court is looking at Obamacare they still are going forward funding the IRS.  See the article that was in Market Watch: CLICK HERE

2012 PRESIDENTIAL RACE

As you most likely know, on April 9, former Pennsylvania senator Rick Santorum suspended his campaign for the 2012 presidential race. This move effectively clears the way for former Massachusetts governor Mitt Romney to assume the Republican nomination.  This helps clear the way in determining your future tax situation Romney has made taxes a centerpiece of his campaign, and we expect to see even more attention focused on the issue as November draws near:

• Romney would make the Bush tax cuts permanent.
• He would cut top rates to 25% for both individuals and corporations.
• He would eliminate tax on interest, dividends, and capital gains for taxpayers making under $200,000.
• He would eliminate the estate tax entirely.
• He would eliminate the Alternative Minimum Tax (AMT) as well as new taxes imposed by the 2010 health care reform legislation.

We realize that this year's Presidential race will have a major effect on your taxes. So we're committed to tracking both candidates' tax proposals, letting you know how they affect your wallet, and offering proactive suggestions to plan for tax law changes. We're not here to take sides. We just want you to know we've got your back.

We'll be following the race carefully through November and beyond. So, if you have questions, don't hesitate to contact us.

BOOTH RENTER CAN'T PAY MY TAXES - WHAT DO I DO?

Q. I blew it. I started booth renting last year and I thought that my employer was withholding taxes. Now I find out I not only owe for 2011 but have to pay part of 2012. I thought that I had all this money to spend so purchased a cute little VW bug and went with some friends to Jamaica on vacation. I tried to sell the car but can’t even get what I owe. Don’t have the money. What do I do? Am I going to jail? Should I hide?

A. I would suggest selling your car and moving to Jamaica. Just kidding. By the way the person that you rent from is not your employer but actually a landlord. Many new booth renters do not save to pay their taxes. You are not alone.

 The worst thing you can do is ignore the problem. If you owe tax with your federal tax return, but can't afford to pay it all when you file, there are some things you can do to keep interest and penalties to a minimum.

· File your return on time and pay as much as you can with the return. By doing this it will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges

· Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code

· Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:

• Using the Online Payment Agreement application and

• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return

IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.

· Request an extension of time to pay. For tax year 2011, if you qualify you may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.

Good luck, and start saving for 2012. Estimated payments are due 4/15/12, 6/15/12, 9/15/12 and 1/15/13. I would work on the 2011 first.

BEWARE OF PHONEY TAX SCHEMES

Recently I was in Chicago speaking at an industry conference.  After my tax program a participant came up to me and said that he had been contacted by a group that promised him a refund due to a “loophole” in the tax law that would give him some type of education credit.  He was going to have to send them some money to have them get the credit for him.  My advise… run.

As a matter of fact the IRS recently issued a warning about the new scheme. Scammers have been targeting senior citizens, members of church groups, working families and other potential victims this tax season.  Just like the person that talked to me, the schemes promise large tax refunds to people who have little or no income and normally don’t have a tax filing requirement. Promoters claim they can obtain for their victims a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.

Con-artists falsely claim the tax refunds are available even if the victim went to school decades ago. A variation of the scheme also falsely claims the college credit is available to compensate people for paying taxes on their groceries. Huh?

The schemes can be extremely costly for the victims. Promoters may charge them exorbitant upfront fees to file the tax claims and are often gone before victims discover that they have been scammed.

There is a bigger problem in that regardless of who prepared their tax return, the taxpayer is legally responsible for the accuracy of your tax return and must repay any refunds received in error, plus any penalties and interest. You could even face criminal prosecution.

In recent weeks, the IRS said it has identified and stopped an upswing in these bogus tax refund claims coming in from across the country.

MORE TIME TO FILE FOR SOME

Most people must file their tax return on April 17th this year but some taxpayers get more time to file without having to ask for it.

These include:

• Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. Tax payments are still due April 17.

 • Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3 , Armed Forces Tax Guide.

 • People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Indiana, Kentucky, Tennessee and West Virginia are covered by federal disaster declarations, and affected individuals and businesses in these areas have until May 31 to file and pay.

STATE BEER

Did you ever wondered what the state excise tax rates on off-premise beer sales were? Well take a look at this....