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!

EIGHT THINGS TO KNOW IF YOU RECEIVE AN IRS NOTICE

Each year, the Internal Revenue Service sends millions of letters and notices to taxpayers for a variety of reasons. Here are eight things to know about IRS notices – just in case one shows up in your mailbox.

1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
2. There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
3. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
6. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
8. It’s important that you keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax (For Individuals). Both publications are available at http://www.irs.gov/ or by calling 800-TAX-FORM (800-829-3676).

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.

EMPLOYERS BEWARE

DOL ‘Refocuses' on Enforcement; Adds 33% More Investigators

The U.S. Department of Labor (DOL) is promising to “refocus the agency on its enforcement responsibilities”. It’s added 250 new field investigators—a staff increase of more than a third—to look into employer noncompliance on pay and overtime issues. This comes after a scathing report that cited DOL for weak response to complaints. For a free eight-step plan to prepare for a DOL audit, go to www.theHRSpecialist.com/DOLaudit.

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.

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.