Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Financial Planning, Taxes and the IRS On ESPN Radio – September 4, 2015 Show
Topics Covered:
1. IRS Data breach much larger than first thought
2. The financial aspects of pursing the “Daddy Track” when balancing work and family time.
3. IRS Summertime Tax Tips:
a. Top Tax Tips about Filing an Amended Tax Return
b. Tax Tips for Starting a Business
4. Questions from our listeners:
a. I hear a lot about risk on bonds and bond credit ratings. What do they mean?
b. Can I receive a tax refund if I am currently making payments under an installment agreement or payment plan for a prior year’s federal taxes?
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Jeff states: Yes sometimes we just have to take the money and run!
Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
Windus states:
And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.
Jeff states:
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!
Windus states:
And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.
Jeff states:
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.
Jeff states:
For today’s show we have coming up:
Segment 2 material: The financial aspects of pursing the “Daddy Track” when balancing work and family time.
Windus states:
Also coming up is:
Segment 3 material: our continuation of the IRS’ Summertime Tax Tips and what they mean for you.
And of course towards the end of our show, we will be answering some of your questions.
Jeff starts chit chat with Windus.
So for our top story –
IRS Data breach much larger than first thought
Jeff states: Nobody likes getting letters from the IRS which usually informs a taxpayer that they are selected for an audit or the agency is taking collection action against an outstanding balance. But if you do not have either of these issues, you may be getting a letter from the IRS like other hundreds of thousands of taxpayers alerting that they you are a victim of a hack on IRS computer systems. The IRS now admits that this breach which occurred in May 2015 has affected twice as many people as the agency originally thought.
Additional IRS Statement on the “Get Transcript” Incident
Windus states: Reported by IRS on their website on August 17, 2015
Following an incident involving the IRS’s “Get Transcript” web application discovered in May, the IRS conducted an extensive review covering the 2015 filing season to assess whether other suspicious activity occurred. Following this review, the IRS has identified more questionable attempts to obtain transcripts using sensitive information already in the hands of criminals. As a result, the IRS is moving immediately to notify and help protect these taxpayers.
Jeff states: As it did in May 2015, the IRS is moving aggressively to protect taxpayers whose account information may have been accessed. The IRS will begin mailing letters in the next few days to about 220,000 taxpayers where there were instances of possible or potential access to “Get Transcript” taxpayer account information. As an additional protective step, the IRS will also be mailing letters to approximately 170,000 other households alerting them that their personal information could be at risk even though identity thieves failed in efforts to access the IRS system. So now that brings the total number of notifications to 390,000.
Windus states: In May 2015, the IRS determined unauthorized third parties already had sufficient information from a source outside the tax agency before accessing the “Get Transcript” application. This allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer.
Jeff states: When the IRS first identified the problem in May, it determined that these third parties with taxpayer-specific sensitive data from non-IRS sources cleared the Get Transcript verification process on about 114,000 total attempts. In addition, third parties made another 111,000 attempts that failed to pass the final verification step, meaning they were unable to have access to account information through the Get Transcript service.
Windus states: Since then, as part of the IRS’s continued efforts to protect taxpayer data, the IRS conducted a deeper analysis over a wider time period covering the 2015 filing season, analyzing more than 23 million uses of the Get Transcript system.
Windus continues: The new review identified an estimated additional 220,000 attempts where individuals with taxpayer-specific sensitive data cleared the Get Transcript verification process. The review also identified an additional 170,000 suspected attempts that failed to clear the authentication processes.
Jeff states: The IRS will begin mailing letters in the next few days to the taxpayers whose accounts may have been accessed. Given the uncertainty in many of these cases — where a tax return was filed before the Get Transcript access occurred for example — the IRS notices will advise taxpayers that they can disregard the letter if they were actually the ones seeking a copy of their tax return information.
The “Get Transcript” application was shut down in May, and the IRS continues to work on strengthening the system.
Jeff and Windus to comment.
Jeff states: The IRS claims that a wide variety of actions to protect taxpayers are being taken beyond the mailings, including offering taxpayers free credit protection as well as Identity Protection PINs. However, there are still unknown damages yet to come as the IRS believes some of this information may have been gathered for potentially filing fraudulent tax returns during the upcoming 2016 filing season
Jeff states: Well it’s time for a break but stay tuned because we are going to tell you the financial aspects of pursing the “Daddy Track” when balancing work and family time.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
The financial aspects of pursing the “Daddy Track” when balancing work and family time.
Jeff states: Windus you brought to my attention this article posted in the Wall Street Journal Article, September 1, 2015. http://on.wsj.com/1hQxQFa
Windus: That’s right and while their numbers are small, working fathers face stigma, isolation when they cut hours for child care
First, I think we are seeing a growing number of families with a part time second parent not two full time parents.
6.7 million men, or 4.6% of all employed workers voluntarily worked part time last year.
What I found interesting in the article is ultimately, I’m seeing this more in financial planning. Couples are choosing the parent with lower income and it isn’t as cut and dry as gender any longer.
What many of these men are finding is that they experience the same issues as woman who work part time for family reasons. Basically, their commitment to their careers is being questioned.
However, even though we are seeing this shift, the statistics still say that 47% of working mothers would rather only work part time where as that is only 12% for men, this is from a 2012 Pew Study.
There is huge pressure in the work environment for men to not take time or not work nontraditional hours.
Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
Jeff asks Windus: Having talked about the parental-workplace time management that any single parent with a job has to balance, what are your thoughts on the financial side of this issue?
Windus responds.
If you are going down to lower income, when children are often an increase on a family budget, you need to get that budget in line, regardless of who is working or not.
Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
Jeff states: Stay tuned because after the break we have some important summertime tax tips that can help you avoid tax problems with IRS.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
Jeff states:
Starting July 1st, the IRS began offering its Summertime Tax Tip series which include useful information in English and Spanish. Tax Tip subscribers receive a new Tip via email three times a week during July and August. They also get a Tax Tip each weekday during the tax filing season. The IRS also issues Special Edition Tax Tips on important tax topics throughout the year. Taxpayers can sign up for the IRS Tax Tips subscription through a free service on www.irs.gov. For this segment we have pulled some of these tips which we want to share with you and add our comments to them.
IRS Summertime Tax Tip 2015-26, August 31, 2015: Top Tax Tips about Filing an Amended Tax Return
Jeff states: We all make mistakes so don’t panic if you made one on your tax return. You can file an amended return if you need to fix an error. You can also amend your tax return if you forgot to claim a tax credit or deduction.
Windus asks: When should you amend your tax return and when is it not necessary to amend?
Jeff replies:
a. When to amend. You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return.
b. When NOT to amend. In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return. If you didn’t include a required form or schedule, the IRS will send you a notice via U.S. mail about the missing item.
Windus asks: What tax form do you use?
Jeff replies: Form 1040X. Use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending. Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.
Form 1040X has three columns. Column A shows amounts from the original return. Column B shows the net increase or decrease for the amounts you are changing. Column C shows the corrected amounts. You should explain what you are changing and the reasons why on the back of the form.
Windus asks: What if you need to file for multiple years?
Jeff replies: More than one year. If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. See “Where to File” in the instructions for Form 1040X for the address you should use.
Other forms or schedules. If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.
Windus asks: What if you are waiting for your refund from the originally filed tax return?
Jeff replies: Amending to claim an additional refund. If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return. Amended returns take up to 16 weeks to process. You will receive any additional refund you are owed.
Amending to pay additional tax. If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
Windus asks: Are there any time limitations as to when you should file amended tax returns?
Jeff replies: When to file. To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.
Jeff continues: Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. These rights include the right to be represented.
PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
IRS Summertime Tax Tip 2015-15, August 5, 2015: IRS Tax Tips for Starting a Business
Jeff states: When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules.
Windus asks: So what are some tax tips that can help you get your business off to a good start?
Jeff replies:
- Business Structure. An early choice you need to make is to decide on the type of structure for your business.
Choices for business structure:
- Sole proprietor,
- Partnership,
- Corporation (C-corp or S-corp), and
- LLC.
Each type of structure has its advantages and disadvantages. We call the process of which type to select “Choice Of entity”. The type of business you choose will determine which tax forms you will file.
Windus asks: What are the types of business taxes a business could face?
Jeff replies:
- Business Taxes. There are four general types of Federal business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up.
- Employment Taxes apply with you have payroll.
- Self-employment Tax generally applies to the owner of a sole proprietorship.
- Excise Taxes are special taxes charged against certain businesses based on the services used or products sold.
- Income taxes will be imposed at some point – either at the entity level or the individual level. It depends on the entity you use. Where income taxes are imposed at the entity level AND the individual level, taxes are being paid twice – we call this “double taxation”. You do not want this to happen.
Don’t forget that there are state taxes as well that any business would be subject to.
Windus asks: Does one need to get a tax id#?
Jeff replies:
3. Employer Identification Number. Unless you are a sole proprietor with no employees, you may need to get an EIN for federal tax purposes. If you do need one, you can apply for it online. If you are not required to have one, your social security number would be the identifying number used for your business. Not a good idea with all the fraud activity that is occurring.
Windus asks: What about maintaining a set of books of accounting for the business?
Jeff replies:
4. Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.
PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
You should also know that the securities and advisory services are offered through National Planning Corporation.(NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated Entities.
Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.
OK Windus, what questions have you pulled for us to answer?
Windus asks: Robert from San Diego asks: I hear a lot about risk on bonds and bond credit ratings. What do they mean?
Jeff states, Well Windus you are the financial planner so I will let you respond.
Windus replies: Answer:
Generally, bond risk refers to the possibility that the issuer will default. This is also called “credit risk”.
To determine credit risk, investors often look to a bond’s rating, issued by independent ratings agencies such as Moody’s, Fitch and Standard & Poors.
A credit rating is an independent assessment of the creditworthiness of a bond by a credit rating agency. It measures the probability of the timely repayment of principal and interest of a bond. Generally, a higher credit rating would lead to a more favorable effect on the marketability of a bond. The credit rating symbols are generally assigned with “triple A” as the highest and “triple B” as the lowest in investment grade. Anything below triple B is commonly known as a “junk bond”.
- Bonds rated AAA have the highest ratings assigned by rating agencies. They carry the smallest degree of investment risk but the issuer’s capacity to pay interest and principal is still considered extremely strong.
- Bonds rated AA are judged to be of high quality by all standards. They differ from the highest rated triple A bonds only in a small degree but the issuer’s capacity to pay interest and principal is still considered very strong.
- Bonds rated A have strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories.
- Bonds rated triple B are considered medium grade obligations. They are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or unreliable over any length of time. These bonds lack outstanding important characteristics and have speculative characteristics as well.
Bonds also have a “durational risk” to consider.
Windus asks: Barbara from Los Angeles asks: Can I receive a tax refund if I am currently making payments under an installment agreement or payment plan for a prior year’s federal taxes?
Jeff replies: Answer:
No. A condition of your installment agreement is that the IRS will automatically apply any refund due to you against taxes you owe.
- Because your refund is not applied toward your regular monthly payment, you must continue making your installment agreement payments as scheduled and in full.
- Regardless whether you are participating in an installment agreement or other payment arrangement with the IRS, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support
Other conditions of an installment agreement:
- Timely filing of future tax returns;
- No creation of new liabilities – applies to future tax returns AND audit adjustments to prior tax returns; and
- Compliance with estimated tax payment obligations (if required).
These conditions exist until the liabilities covered under the installment agreement are satisfied.
Jeff PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Jeff states: Well we are reaching the end of our show.
Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.
Windus states: Have a great day everyone!
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