TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Durable Power of Attorney-the Smart Choice! Today I received a frantic telephone call from the adult daughter of a senior citizen client for whom I prepared an estate plan 10 years ago.  Unfortunately, the man, who is a widower, had a serious stroke.  He is alive but is not communicative.  The daughter called and asked if I had prepared a Durable Power Of Attorney.  Even though I had prepared a Will and a Living Will, the client had insisted that he did not want a Power Of Attorney. Specifically, this client is a very private person and wanted to be in complete control of all of his assets.  I had suggested that we establish a Trust, with him being the Trustee and having one of his children as a Co-Trustee who could take over if he came incapacitated.  That was rejected. I suggested a Durable Power Of Attorney.  That was also rejected because he did not want anyone to have authority over his affairs.  I suggest that the Durable Power Of Atto...

More Taxes – Time after Time Wake up and smell the coffee!  Its political season again and unfortunately it appears most candidates for State Governors and Congress are advocating a “tax the other guy” approach. “We need more money for the schools!”-Tax the Rich. “We need more money for the poor!” – Tax the oil companies. “We need more money for the seniors!”-Increase sales tax. “We need to fight Ebola!”-Tax the pharmaceutical companies. We need money for good clauses so therefore we need to increase taxes?  Does that really makes sense?  When a politician advocates increasing taxes they always try to make it sound like they are not going increase your taxes but somehow your taxes will be increased.  Has any country ever taxed themselves and prosperity?   The fact is if you tax something you get less of it.  That truth is immutable and is not difficult to understand.  Politicians just simply ignore that and try to get voters to forget abou...

The IRS announced in   IR 2014-99 increases to retirement plan contributions. Highlights include the following: The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000. The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000. The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) betw...

Most of my clients from around the world make their initial contact by email. It is usually a result of my website, blog posts (published on Tax Connections) and Avvo. Usually, they need a lawyer to negotiate a contract or deal with the IRS or State Tax agencies. When I get an email from a foreign business, even if the English is not perfect,  I respond. Unfortunately, the scam artists love a response and try their version of the famous “Nigerian Scam.” The trick usually works that I need to review a simple contract, receive payment from the buyer, deposit it in my trust account and immediately send the money (minus an unusually hefty fee) to them. Of course the check is no good and they will sucker me. The latest attempt was a so-called Japanese company selling a huge piece of equipment to a NJ business for $2 mil. The contract was one page and obviously not drafted by an attorney. There was a picture of construction equipment from a catalog. I emailed that I was not intereste...

Let’s review the facts: Ray Rice is a star NFL player. He is not a role model. He is not a minister. They pay him to be a “bruiser” and arguably a star attraction to the Baltimore Ravens. Rice clobbered his (now) wife in a domestic fight. The NFL kicked him out of the game. This hurt Rice, his wife (the victim?), his child and the Team. The NFL argues they had to do it to clean up football. This is an example for children! Well, maybe not. They banished Ray Rice. He is gone; disappeared. The Ravens are even offering refunds for Rice jerseys. The game will move on and he will disappear from the news. Not really much of a lesson. No discussions of the benefits of therapy, or the need for domestic violence education. If the NFL instead had taken a tax lawyers approach, it might have been far more effective - better for the Ravens and better for the game. Instead of an “indefinite suspension,” the NFL should have simply punished Rice by forcing him to suit up for the season and sit a...

The IRS is not calling to arrest you! Today, a new client appeared in my office and explained he needed a consultation right away.  This is very strange because most people call to set up an initial conference and we discuss the case on the telephone before meeting.  This man was middle-aged, dressed nicely, said he was an IT analyst, but was sweating and extremely nervous.  I asked him “what is wrong?”  He told me “the IRS called and said they had audited my tax returns, I owe a lot of money, and unless I contact the Restitution Department they are coming to arrest me.” I immediately told him this was a scam.  He was still very concerned.  So I asked him for the telephone number of the so called “IRS” and I called using my speaker phone.  The person answered “IRS Department.”  I immediately knew this was a scam because no one from the IRS answers stating the word “Department” because it is not.  The person was quite difficult to understa...

Cash is a good way to get clobbered for taxes! For many years, small restaurants, bars, pizza parlors, ice cream stands, and other food establishments have used all cash systems to hide their income and not pay sales tax and income tax on the full receipts. In New Jersey, the Division of Taxation has created a very aggressive system where they make up excessively high mark ons from food and liquor purchases, and absolutely slaughter businesses that don’t keep good records. The way this tack works by the New Jersey division of taxation is they subpoena the records from the major food suppliers and liquor distributors. The tax authorities then compared the expenses listed on the tax return to what these third-party sellers reported. Often a business that is trying to hide income lessons the income reported but also lessens expenses but only slightly. The division of taxation then takes the actual expenses and uses very high multiples of the expenses to with the growth should be. Usin...

IRS Letter 5043 - New way IRS Attacks Small Business Attempt to get "Cash" businesses The IRS has been pushing for many years to capture cash income of small businesses and force him to pay taxes.  That is one of the reasons that the IRS is requiring credit card merchant service companies to report a 1099-K for businesses to the IRS.  This form lists the amount of credit card payments made to the business by its customers.  The IRS then takes this information, comparing it to the gross sales of the business.  If the business has too high of a percentage of credit card sales, the IRS issues a letter 5043. This letter starts out that "your gross receipts may be underreported."  This is the beginning of a long series of letters and correspondence which could eventually lead to an audit in an attempt to force businesses to report cash income.  Most of the letters seem to be going out to clients that are restaurants, pizza parlors, bars and other s...

Senate Misses the Boat - US High Taxes force Businesses to Move to Other Countries. (see Cat.com) Once again, Congress is focusing on businesses that have used smart planning in order to avoid the excessive US corporate and personal tax rates as well as the extremely complex compliance costs.  Instead of focusing on how to lower US taxes and make tax compliance easier and less expensive, the US Senate is now picking on Caterpillar as a so-called "tax dodge". The US has extremely high corporate tax rates of 35%.  This means if a corporation makes a $100 profit, it pays $35 federal tax (plus State tax which could be 10% or higher).  The remaining money when distributed to the shareholders gets taxed again at the shareholders rate which could be up to 39 1/2% plus State tax. So for example $100 of earnings would be $35 of federal tax, $10 of State tax leaving $55.  The $55 would be taxed at the individual level with a combined federal and State...

Lauryn Hill is out of Jail, but the IRS keeps Hounding Singer songwriter Lauryn Hill was thrown into jail for 3 months for tax evasion, with another 3 months of home confinement.  This is all based upon her following some scheme by phony tax advisors claiming that she did not need to file and pay income taxes.  Like many people, from physicians to celebrities, she fell prey to the tax protesters coaxes. The IRS had a great time spending tens of millions of dollars prosecuting her but got incredible amounts of publicity to scare other people into filing their tax returns.  That is the basis of our "voluntary" tax system. Without people being scared of being thrown in jail, the system would collapse. Now, just before the tax filing deadline, the IRS is using Lauryn Hill's name to keep scaring taxpayers.  This time they are announcing the filing of federal tax liens.  Even though she already had tax liens and obligations, the refiling of these to include a...

Are you Married for Tax Purposes? You are married for tax purposes as of December 31. So, if you were married on or before December 31,  2013, you would be single (or head of household depending upon the circumstances for the 2012 tax year, but you would be Married for 2013 . Even if you were married on December 31. 2013, you are married for the entire year. As a married person. you may file jointly with your husband or wife, or as married filing separately .  You may not file as single or head of household. Note, if you and your spouse are both employed, especially if your income is similar, you may end up paying more tax being married (especially if you previously filed as head of household.) This is called the "marriage penalty." Here is a handy marriage penalty calculator: Marriage Tax Penalty Calculator

Scam IRS Calls! I am getting many calls from clients and potential clients saying the are getting calls from the “IRS” and are given strange numbers to call.  These are scam telephone calls trying to get personal information such as social security numbers, dates of birth, bank account information so that they can take money from your accounts and uses information as part of identity theft rings.  One typical sign of the scam fraud is the caller stating “you were going to jail”. You will Never Get a Call from IRS without First Receiving a Letter In fact, you will never get a call from the IRS threatening you in any way about jail, criminal matters or demanding that you give them information over the phone right away .  Before you get such a call, you will get a written notice from the IRS.  These notices will demand payment of tax and will either be from the IRS/ACS which does have 800 numbers, or from a local “Revenue Agent” who is in IRS employee and collect...

Once again, New Jersey is being unnecessarily dragged through the mud. First, the unfounded attacks against Gov. Christie. Then, not correctly attributing the SuperBowl to the correct State (the Meadowlands is in NJ, not NY), and now Rob Andrews is getting the "tommy-gun" from the press in an attempt to ignore the real issues in our Federal Government. Rob Andrews is resigning from Congress under an ethical cloud.    This is unfortunate since he certainly has been a highly energetic and active Congressmen for Southern New Jersey.  Even though I disagree with many of his viewpoints, he certainly always had an open door to me and any other constituents. Years ago, I sponsored a dinner honoring James Corbett, a retiring member of the Camden office of the SBA.  Rob was gracious enough to come speak at the event, and lend his staff for event assistance. He was a hard-working Freeholder Director before he got into Congress and he never forgot how important local...