Leslie C. Daane, CPA, Managing Director of Barnard Vogler & Co. in Reno, NV has been certified as an Accredited Estate Planner® (AEP®) by the National Association of Estate Planners and Councils.

The Accredited Estate Planner® designation is awarded by the National Association of Estate Planners & Councils (NAEPC) to recognize estate planning professionals who meet stringent requirements of experience, knowledge, education, professional reputation and character.

NAEPC is a national organization of professional estate planners and affiliated local Estate Planning Councils focused on establishing and monitoring the highest professional and educational standards.

Barnard Vogler & Co. is one of Reno’s oldest and most respected accounting firms with over four decades of experience providing quality service to a wide variety of clients.  For more information or to contact Leslie, please call us at (775) 786-6141 or visit our website at bvcocpas.com.

In recent years with the uncertainty in the economy and Baby Boomers coming into retirement age, Social Security has been a hot topic. 

What is there not to worry about!?  Will it be there when you are ready to retire?  Should you take it early? Should you postpone benefits?

A recent article by Dan Kadlec for Time showed that the number of retirees taking early social security has fallen for the second consecutive year to a 35 year low.  According to Kadlec, this is possibly a return to the downward trend that was broken up by the recession, which caused many workers to opt for early retirement in frustration over their inability to find work.  Social security can be taken as early as 62 with reduced payments, but benefits can by maximized by delaying payouts to age 70.  Social security plays a varying role in retirement planning. For some it is supplemental to 401K and savings, but for others, it may be their only source of income.

In May of 2012, the Social Security Administration announced that the online version of the Social Security Statement was now available on their website at:  http://www.ssa.gov/mystatement/.  You have to jump through a few security hoops to get your statement, but it is there for your convenience.  The statement provides estimates for retirement and disability plus gives the user an opportunity to verify that their income has been properly reported. Setting up an account also helps you with information about qualifying for benefits and allows you to apply for benefits online when you are ready to take that step.

Not quite ready to retire, but looking for some planning guidelines?   

The Social Security Administration also offers a variety of benefit calculators  and tools for estimating retirement benefits.

Even if Social Security is only a supplemental part of your retirement plan, it is important to keep tabs on your account. Keeping the full picture of your retirement in view will give you a clear idea of what to expect.

Having lived in Nevada for the majority of my adulthood, I have long been acquainted with tipping. It has gotten to the point where I feel guilty for not putting a dollar in the tip jar at Starbucks for a $2 coffee or at my local sandwich shop. While living in Las Vegas I heard stories of people making thousands of dollars a night as a cocktail waitress or doorman at a club and valet drivers earning six figures a year.

Since these tips were usually in the form of cash, I presumed that a lot of income wasn’t being reported to the IRS. I knew that the casino industry had agreements in place with the IRS for years where a fixed amount of tips per hour was reported on their W2s. I’m sure more tip income was earned, but since cash tips are so hard to trace the IRS needed some piece of the pie without being overly burdened.

Recently, my presumption on tip earners not claiming all their tips has come true. According to a Las Vegas Review Journal article, a club co owner and some of his employees recently got busted for not claiming all their tips as income. This particular club owner didn’t pay $141,306 in taxes on $403,732 of tip income in just two years! Three hosts and a doorman plead also plead guilty, although the article doesn’t say what they earned. These employees didn’t have any sort of elaborate scheme; they just didn’t report hundreds of thousands of dollars to the IRS from their tips!

I don’t know this guy personally, but I’m sure he wasn’t living a modest lifestyle and driving around town in a Hyundai. The IRS can easily construct a taxpayer’s income. If someone is driving around in a Porsche, living in a mansion with gardeners and pool guys, and wearing fancy jewelry, the IRS can figure out how much all that costs and calculate how much income would be needed to facilitate this lifestyle. Not being truthful to the IRS is an easy way to land in jail. Just ask Al Capone who got busted for tax evasion!

A recent article published in the New York Times, highlights how Apple is taking advantage of Nevada’s 0% corporate tax rate.

Apple has created a subsidiary for their $100 billion in cash that invests in bonds and other low risk financial instruments. All the interest earned, $2.5 billion since 2006, has been shielded from state income tax because it is a Nevada subsidiary. By creating this Nevada subsidiary, Apple has saved $221 million by not having to pay California’s onerous 8.84% corporate tax. There are many other technology corporations headquartered in California that have billions in cash that could do the same as Apple.  Cisco Systems Inc. has over $35 billion in investments, Google $34 billion, and Intel $5 billion just to name a few. These corporations could save millions of dollars each year if they would just relocate some employees to Nevada a couple hundred miles away and shield their investment income from California state tax.

I have always lamented over how Nevada doesn’t get more businesses to relocate here when there is no corporate and personal income tax as well as low property taxes compared to say Texas, another state with no income tax. More motivation should be that home prices are significantly lower in all parts of Nevada compared to California. Sure, our school systems have extremely low graduation rates, but when it comes to saving millions of dollars, money trumps all. Corporate CEOs and their employees should gladly move to our great state at the prospect of saving millions of dollars personally and for their businesses.

Just yesterday, June 27th, 2012, Apple announced they are relocating to Reno their servers for cloud computing and ITunes, and their business and purchasing center.

I’m sure tax savings, in addition to savings from cheaper land, labor and electricity, was a factor in this decision. I’m guessing Apple’s income from ITunes and portions of their business is now being sourced in Nevada, potentially saving millions a year in future taxes. Let’s hope this is the start of a trend of companies wising up to the high costs of doing business in California!

As I’m staring at an article in Business Week, I keep searching for the article to explain why my company wants to pay for something we already have. The “cloud” is by definition just a network of computers and the reason they came up with the name is because of the original diagram shape of the internet (a cloud). In the cloud are networks, applications, data, servers, etc…the usual stuff, which I already have.

What am I paying for with the cloud? In all respects you are paying for three things – security, expertise and opportunity costs.

Supposedly there are armed guards guarding these database centers where your cloud is located. Ok, that’s a step up from the glass windows and wooden doors at the office. Security covered.

The expertise consists of IT managers making sure you get the right amount of speed and continuous accessibility of your information.

The opportunity costs could add up. As accountants, we think of everything to make the cloud have superior cost effectiveness over a server. The cost of the server, say $5,000-$10,000 a year depending if you buy a new one, the IT personnel hired, the relevant costs of your business growing out of your current server, the rent space, carrying costs and the electricity overhead of the server.

But in order to take advantage of these opportunity costs you would have to do a lot of service analysis. How much accessibility will you need? When will your accessibility needs change? What services do you require? In accounting there’s busy season and then there’s really busy season, so calling up the cloud and saying you are going to increase your accessibility requirements and pay more the next couple of months isn’t the easiest estimate. If estimating sales variability and growth at the drop of a hat were that easy then we’d all be working alongside guys named Professor X and Obi-Wan Kenobi.

The cloud is having all your information online, in real time, freely secure and accessible all within reach. But that distance is only as far as your nearest wi-fi connection, and that’s what it truly boils down to. Sure wi-fi and Internet hot spots are popping up exponentially but they just aren’t everywhere yet. Until they do I look forward to the days without a cloud in the sky.

So you think you have financial issues?  Just listen to what Nina Olson, National Taxpayer Advocate, has to say about the IRS.  In her annual report to Congress she suggested that the IRS’s increasing workload and declining resources are the most serious problems facing taxpayers.  So how does she connect the dots to conclude that this is a “taxpayer” problem?

  She reasons that the resulting inadequate taxpayer service, erosion of taxpayer rights and reduced taxpayer compliance are causing harm to the taxpayers.  That’s how!  I don’t know.  Seems to me like an IRS problem rather than a taxpayer problem.  But, then again, doesn’t the taxpayer always get stuck with the tab?

But wait.  Maybe there is a solution that doesn’t stick the taxpayer with the bill.  It turns out that increasing funding for the IRS might actually be a good investment.  Current inadequate funding contributes to many of the problems facing today’s IRS.  When the federal individual income tax was first enacted in 1913, it applied only to high-income taxpayers, which totaled about 358,000 people.  That total today stands at 141.2 million with one tax return for about every two people in the United States.  And believe me, the returns are a lot more complicated now than they were almost 100 years ago.

It seems that as the collection agency for the U.S. government, the IRS does a pretty good job.  On a budget of $12.1 billion, the IRS collected $2.42 trillion in fiscal year 2011.  That is to say that for every $1 that Congress appropriated for the IRS, it collected about $200.  Now with the current “tax gap” at about 15%, every household is paying an annual “noncompliance surtax” of about $2,700 to enable the federal government to raise the same amount of money it would have collected if all taxpayers had reported their income and paid their taxes in full.

While I doubt that appropriating an extra $1 would produce the same collection rate when applied to the last 15% of noncompliance, I’ll bet it would provide an attractive return on the investment.

If you have a CIO or IT manager who is in the know, you may have already had discussions about the following items. If you manage the IT functions yourself, then read carefully so you don’t miss the boat!

• The consumerization of IT. No surprise here, consumer technologies like the iPhone and the Droid, tablets, etc. are creeping into the workplace. If you haven’t dealt with this issue, the time has come to allocate a portion ofyour IT budget to secure and support these new technologies. These “cutting-edge” technologies (well, they were “cutting edge” at the writing of this blog-in a week they could already be dated) can allow employees to be more productive and most likely little training would need to be involved as employees are already using these technologies outside of the work environment.

Handling all that data. A push for developing business intelligence and analytical tools is on the rise to help businesses manage the massive amounts of data they have. Experts agree that utilizing analytical tools will be a key competitive advantage in 2012. Why just store all that data? Why not try and get something out of it? Before building a giant data integration and business intelligence strategy, CFOs need to ask themselves one main question: What kind of data does the business value most? How can your IT staff deliver information and reports that your company needs most if they don’t know the answer to question 1?

 
Cloud computing. The Cloud is not going away. If you don’t even know what the Cloud is, it’s an umbrella term for delivering hosted services over the Internet. Low-cost cloud services are expected to become increasingly available, as well as traditional vendors are offering or will be offering cloud services. The ability that business leaders will have to reach out and download a new cloud service without the assistance of an IT staff will only increase in 2012. One key thing to think about if you move to the Cloud is how to keep all those services integrated and secure.

Blog based on article at CFO.com “How 3 Big IT Trends Will Affect You and Your CIO in 2012”

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According to the NY Times, credit scores are getting a facelift.

A company called CoreLogic has introduced a new type of credit report which contains additional consumer data than what the traditional credit bureaus (TransUnion, Experian, Equifax) show.
Have you missed a rental payment that is now in collections or are you behind on HOA dues? Have you been evicted or served child support judgments? Ever taken out a payday loan? All of this is included in the new credit report. There is also the possibility to show that your house is worth less than what you owe.

Since most of this information is already available to the public, it was only a matter of time before someone decided to compile this data to help lenders determine credit worthiness. An estimated 100 million American consumers will have a CoreScore credit report. The actual score will only be available to mortgage and home equity lenders at this time. Next year, CoreLogic will begin to evaluate whether the report should include even more data, like your payment history on utility and cellphone bills.

The positive: the added information can help illustrate positive behaviors otherwise not noted.

The obvious negative: consumers may now have additional dings in their credit history that previously went undetected. Consider yourself warned.

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There has been much debate recently over Mitt Romney and his paying only 14% of his gross income in taxes in 2010 and still only 17.5% after itemized deductions (see his tax return at http://www.washingtonpost.com/wp-srv/politics/documents/romney-2010-tax-return.html). This is the same percentage of taxes that a single person making only $60,000 would pay. Does this sound fair to you? Now how does a business man making over $21,000,000 pay less than this single person? He does this with one of the multitude of tax benefits that the rich enjoy, the carried interest rule.

The carried interest rule is a tax law that many hedge fund managers enjoy including Romney and hedge fund managers like John Paulson. These people organize a partnership, get many investors to give them money to be limited partners, and invest it how they see accordingly. They can invest in businesses, stocks, options or land and agree to give the managers a certain percentage of the profits. Since the underlying asset is capital in nature, they are taxed at the capital gains rate of 15%, even though this is usually their only source of income.

Now to John Paulson. This is a hedge fund manager who in two years during the economic crisis made the biggest profits ever by an individual, $9,000,000,000. This profit wasn’t made by doing some benefit to society, but exactly the opposite. It was made by simply making bets that the housing market would tank (which it inevitably did) and the next year by betting that gold would go up. It seems to me that there is a huge problem in the tax code when somebody who does no benefit to society gets taxed less than the average person with a college degree. In fact, some of the bail out money that was given to banks to keep them liquid was just given to them as a conduit to Paulson so he could collect on his bets. This taxation doesn’t seem fair to me, but at least Paulson’s Advantage Plus fund can’t beat karma like it can the system, it lost 51% in 2011 by investing in Bank of America and Citigroup, among others.

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Did you ever wonder how many people do not actually pay their taxes under our “voluntary compliance” system here in the United States? Well, it turns out that the latest IRS estimates show about 15% of the total tax liability owed for 2006 was actually collected.
This rate is virtually unchanged from the 2001 compliance rate and amounts to $450 billion for 2006. This represents a $105 billion increase over the2001 estimated tax gap of $345 billion. Enforcement efforts and late payments reduce the net tax gap to $385 billion for 2006 which is still $95 billion greater than the $290 billion net tax gap in 2001. While these numbers are staggering, the growth in the tax gap somewhat mirrors the growth in total tax liabilities. Furthermore, the increased estimate may well result from better data and improved estimation methods.

This “tax gap” results from three different types of non-compliance: failure to file, underreporting taxable income, and underpayment of amount of tax due. Underreporting of income continues to be the largest contributing factor to the 2006 gross tax gap accounting for $376 billion of the $450 billion total. Tax non-filing and underpayment of tax accounts for $28 billion and $46 billion, respectively.
As you might imagine, non-compliance is lowest where there is third-party information reporting and/or withholding, such as wages and salaries. Conversely, amounts not subject to information reporting had a 56% net misreporting rate in 2006.

Just think how much progress we could make towards reducing our horrendous deficit if this gap were closed!

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