Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Market Changes, Unfair Drug Pricing and the IRS Targeting International Taxpayers on ESPN Radio – January 29, 2016 Show

Topics Covered:

1. Is there any truth to the theory that the Federal Reserve is the root of the cause why markets have plunged?

2. Why you should be outraged that we in the U.S. are paying substantially more for top prescription drugs than other countries!

3. What you need to know to stay out of trouble with the IRS if you live abroad or have foreign assets.

4. Questions from our listeners:

a. I am a U.S. citizen and in 2015 I married a nonresident alien, what should I use for my filing status for my 2015 income tax return?

b. When could we realistically be looking at the Federal Reserve earnestly considering the next rate hike?

c. What type of funds should I be considering for long term growth in say an IRA? Same question for a short-term wealth building individual account for unforeseen expenses?

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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: Why you should be outraged that we in the U.S. are paying substantially more for top prescription drugs than other countries!

Windus states:

Also coming up is:

Segment 3 material: What you need to know to stay out of trouble with the IRS if you live abroad or have foreign assets.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

Windus introduces her guest: Gary Sussman, Managing Partner at Trilogy Financial Services.

Gary says Hi!

Jeff states: So for today’s top story,
Is there any truth to the theory that the Federal Reserve is the root of the cause why markets have plunged?

Jeff continues: This is a question we picked up on various articles in The Wall Street Journal and Bloomberg News.

http://on.wsj.com/1PfzYU0; http://on.wsj.com/1PfxmFC; http://on.wsj.com/1nt5uDJ; http://www.bloomberg.com/news/articles/2016-01-25/deeper-dive-into-market-monsoon-shows-recession-alert-on-mute; http://on.wsj.com/1nwUAgo; http://bloom.bg/1KFGk9O

Jeff continues: The articles note that oil and stocks at their tightest correlation in 26 years. So how could the Federal Reserve’s 0.25% rise in rates this past December tank markets into the New Year and risk pulling us into a recession? You should know that current conditions have very little to do with the Central Bank and more to do with anxieties about China’s economy, emerging markets and oil.

Windus replies: Federal policy operates through a collaboration of financial conditions, i.e. stock prices, corporate bond yields, commodity prices, exchange rates and most of all, the desire for risk. Although the Fed doesn’t command the behavior of these comprehensive conditions, it does stimulate. Peter Berezin of BCA Research explains, “If you are a central bank reliant on increasing risk as your method for stoking spending, you’re going to run into a major problem. You can only increase risk so much. And when investors pull back, they do so in a very sharp way.”

Jeff states: The Fed quarter point rise in interest rates won’t push the U.S. economy into a downfall though, in actuality, short-term rates and bond yields really are not impacted by gradual rate changes made by the Fed. But an overall tightening of financial conditions in the U.S. could tip the scales toward a recession.

Windus continues: This doesn’t mean the Federal Reserve was wrong to begin implementation of such an aggressive monetary policy, considering the return of a low 5% rate of unemployment. So let’s look at the odds.

Jeff replies: Well currently, the unemployment rate is looking good at a seven year low, GDP is forecast at a 2.4% growth rate for 2016, and Goldman Sachs has said this will be a “reflationary year” even with the consideration of some price increasing yielding little to no gains.

Windus replies: This month’s Bloomberg survey of economists measures a median probability of a recession in the U.S. in the next twelve months at 19%. This is the highest probability since February of 2013; however, economists are looking not to 2017 but actually at 2018 for the likeliest year for contraction.

Jeff continues: At the same time Windus, the rough two-week start of the stock market this year, the worst on record, has been enough to shake investor confidence, destroying more than $2 trillion of equity value. Then again, signals are inconclusive if we go by history. The S&P 500, once down by 12% from its high, just made its 42nd correction of 10% since 1927, according to the Wall Street Journal.

Windus states: Looking at history out of the 42 corrections, only 13 of those corrections came within a year of a two quarter contraction in GDP. Chief Investment Officer at Leuthold, Doug Ramsey, is not convinced of the call of a recession. “If we go down to 25% on the S&P 500, then [he] would say, yes, we’ll have a recession. If we bottom here, I think it’s a much tougher call.”

Jeff states: Some might even say the economy is just having ‘digestion problems’. In a Bloomberg Television interview from the World Economic Forum in Davos on Friday, Laurence D. Fink, chairman of BlackRock Inc., the world’s largest money manager, explained that the over the course of the next year we’ll see improving market with global GDP around three-percent. Although, not as high as the IMF is forecasting, he believes “this is a capitulation, not a bear market.”

Windus replies: The S&P 500 would need to fall another five-percent from its January 20 worst low, in order to meet the threshold of a bear market warning. Only four recessions since the Great Depression have come without a bear market warning according to data compiled by Bloomberg.

Jeff continues: Now you should not be thinking that the recent junk bond massacre in the energy sector is signaling a recession, but if the world economy starts to slow down we need to look at U.S. industrial production for any warning signs of a recession. Trends in manufacturing tend to lead the economic cycle, as well as, being an indicator of market swings. Let’s face it, manufacturing is struggling.

Windus states: However Jeff, unlike declines in the past, the current decline in industrial production has been primarily driven by the collapse in the oil industry. The oil industry that just so happened to have been on the rebound this week.

Jeff replies: In fact, investors disregarded yet another sharp decline in Chinese shares as the rally in oil prices gave gain to U.S. stocks. This came about after a better-than-expected earnings report Tuesday.

Windus states: Taking a moment to consider the economic start of the New Year, it’s good to hear that even though the Shanghai Composite tanked to a grand total loss of 22% so far this year, U.S. stocks rallied freeing themselves from being pulled down further alongside the Chinese market.

Jeff states: Other earnings reports released on Tuesday, giving way to an upturn in the market include 3M, reporting profits and sales topping analyst’s expectations for the quarter as well as confirming its profit outlook for 2016. 3M shares gained 5%.

Windus continues: Johnson & Johnson increased 5% as well, despite a drop in quarterly sales, due to confidence in its core business and global health-care market.

Jeff continues: European shares also rebounded with the Stoxx Europe 600 Index gaining 0.9%, as recovering oil and base metal prices reprieved energy and mining companies.

Windus continues: Sprint shares jumped 19% after reporting a smaller than expected quarterly loss and boosted its direction for the year.

Jeff continues: In a recent turn of events, Coach reported quarterly sales gains for the first time since June 2013, and welcomed a share gain of 9.8%. Gold even rose 1.4% to $1,121.70 a troy ounce.

Windus states: Meanwhile, officials at the Federal Reserve announced Wednesday, that interest rates will remain unchanged. The Federal Open Market Committee is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the central bank said in the statement following a two-day meeting in Washington.

Jeff replies: “This doesn’t read like a statement from a committee that is expecting to tighten again in March,” according to Johns Hopkins University in Baltimore, professor and a former Fed economist, Jonathan Wright. “Four rate hikes this year is not impossible, but I think it is unlikely and would be unwise.”

Windus makes final comment on this.

Jeff states: Well it’s time for a break but stay tuned because we are going to tell you all about how U.S. consumers pay substantially more for top prescription drugs than consumers in other countries.

Jeff continues: 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.

Consumers in the U.S. are paying substantially more for top prescription drugs than other countries!

Jeff continues: I hope that after listening to this segment you will be outraged just as much as me and Windus that consumers in the U.S. are paying substantially more for top prescription drugs than other countries! But before we start this discussion, Windus wants to tell you about her special offer:

Windus states: 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. Or visit www.guideyourstory.com.

Windus begins: In recent articles by Bloomberg News and The Week, they’ve examined the eight top selling prescription drugs, finding that the cost of these drugs are higher in the U.S. than most other countries. It is speculated that the reasoning behind price gouging Americans, is to presumably fund prescription research and development.

http://www.bloomberg.com/graphics/2015-drug-prices/; http://theweek.com/articles/597868/ecigarettes-generic-drugs-guide-fda-2016

Jeff states: Yes Windus, the cost of brand-name prescription drugs is found to be greater in the U.S. than many other developed countries. However, contentions from the drug industry claim that focusing on the U.S. list prices unfairly excludes the discounts established between insurers.

Windus replies: However, analysts at Bloomberg News have determined that even after these sometimes greater than 50% off discounts, prices are still much higher for Americans then they are abroad. Let’s compare these top eight to see exactly where we are and which ones in specific we are focusing on.

Jeff replies: To start with, after the estimated 60% discount, AstraZeneca still charges the U.S. more than twice as much for its Crestor cholesterol pill than the next most expensive country, Germany.

Windus continues: Sanofi charges 30% more in the U.S. than in China, the second-most expensive country, for its Lantus long-acting insulin. This is after discounts of roughly 50%, according to SSR Health.

Jeff continues: Also striking deals at 50% off on their drug, Advair asthma inhaler, GlaxoSmithKline Plc’s charges at least twice as much in the U.S. as opposed to other well developed countries.

Windus continues: Again according to SSR Health data, the list price of Januvia, Merck & Co’s diabetes pill, has likewise been negotiated to an estimated 50% discount on average. Yet, even considering the price cut, the drug is priced for Americans more than double what it’s costing our neighbors in Canada, coming in second for most expensive, Bloomberg reports.

Jeff continues: To give you a better idea of cost, AbbVie Inc’s lucrative rheumatoid arthritis treatment Humira, is priced in the U.S. at an estimated $2,500 a month after discounts. The runner up Germany comes in around $1,750 a month, Bloomberg reports. The price continues to drop even further in other countries around the world.

Windus: Additionally, price imbalance seems more prominent in cancer drugs. For instance, after an estimated fifteen-percent discount on the Herceptin breast cancer infusion drug from Roche Holding AG, it’s one-third more than the second most-expensive, Saudi Arabia. In addition, the cost of this medication is still 85% higher for Americans than it is for citizens of other high-income nations.

Jeff states: Unfortunately, discounts for the eighth drug, the chronic leukemia/cancer treatment Gleevec, could not be obtained, but its list price is more than $7,000 a month more expensive than the next populace. Americans are being quoted over 70% more, before any negotiated discount for this particular treatment. However, a generic version is anticipated to be available in February 2016, Novartis AG reports.

Windus continues: Finally Sovaldi, the Hepatitis C pill from Gilead Science Inc., actually gives American a bit more of a break with the U.S. ranking second just under Saudi Arabia, only after discounts. However, both Saudi Arabia and the U.S., along with other ranking high-income countries are running fairly neck-and-neck in cost comparison.

Jeff replies: Furthermore, the 22% discount established with the U.S. in 2014 will more than double to 46% in February this year, Gilead released. Finally giving us a decent price-break on at least one of the top eight drugs.

Windus states: Chief Medical Officer Steve Miller of Express Script Holding Co, the largest manager of prescription-drug benefits insists, “We can no longer sustain a system where 300 million Americans subsidize drug development for the rest of the world.” Regardless, the drug industry sees it differently.

Jeff continues: In the U.S., drug companies set their own base price with increases in sticker price over time. Private insurers and benefit managers can then negotiate to strike a deal with the prescription manufacturers, which are rarely ever disclosed. Meanwhile Medicare, one of America’s largest buyers of medicine, is forbidden from haggling prices direct with drug companies.

Windus states: In the interim, given the current race for the White House, election years tend to focus heavily on issues like this. In fact, candidates are already pushing the Food and Drug Administration to lower drug costs. Then again, the agency only has indirect influence in this aspect.

Jeff states: However when we get down to the nitty-gritty, the FDA does have jurisdiction over 20-25% of every consumer dollar. Therefore, it matters what actions are taken and the agency has a considerable amount already on its plate outside of drug prices for 2016.

Windus replies: Lawmakers are turning to generic drugs that account for 88% of all prescriptions at 28% of the price, according to Generic Pharmaceutical Association. Far cheaper than their skyrocketing name-brand counterparts, these will effectively help ease the drain on consumer’s finances.

Jeff states: Currently, more than 4,300 generic medication applications are now awaiting FDA approval. The problem is that many of these applications are ‘deficient’ while “generic drug companies submit reports lacking critical information solely to win a space in the queue, and plan to fix them later,” according to The Week.

Windus continues: In order to expedite the issue, the FDA is expected to permit generic companies to later edit their labels with safety information prior FDA approval. The increased liability in the case of safety issues raises opposition in the industry. Which means, we had better start saving for the hefty cost of those prescription medications you’ll need in your retirement, which is why…

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. Or visit www.guideyourstory.com.

Jeff states: Stay tuned because after the break we are going to tell you what you need to know to stay out of trouble with the IRS if you live abroad or have foreign assets.

Jeff states: 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.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

Jeff states:

What You Need To Know To Stay Out Of Trouble With IRS If You Live Abroad Or Have Foreign Assets.

Jeff continues: The Internal Revenue Service continues its educational efforts to remind U.S. taxpayers living abroad, as well as other international taxpayers, of their tax reporting obligations by launching You Tube Videos on IRS.gov.

Windus states: The videos cover the following international taxpayer topics:

• Filing Requirements
• Foreign Earned Income Exclusion
• Individual Taxpayer Identification Number (ITIN)
• Filing Status if Married to a Nonresident Alien
• Foreign Tax Credit
• Introduction to the International Taxpayers Web Page

Jeff states: So we have taken the most important points from these videos which we will discuss in this segment as well as provide you with our comments and tips if you have undisclosed foreign bank accounts or need to report foreign income. I will let Windus read off a point and Amy and I will follow up on each point.

Windus states: The U.S. taxes persons on their worldwide income.

Amy replies: By law, Americans living abroad, as well as many non-U.S. citizens, must file a U.S. income tax return. In addition, key tax benefits, such as the foreign earned income exclusion, are only available to those who file a U.S. return.

Amy continues: The Internal Revenue Code requires U.S. citizens and resident aliens to report worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance:

Civil Fraud – If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%.

Criminal Fraud – Any person who willfully attempts in any manner to evade or defeat any tax under the Internal Revenue Code or the payment thereof is, in addition to other penalties provided by law, guilty of a felony and, upon conviction thereof, can be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than five years, or both, together with the costs of prosecution (Code Sec. 7201).

Jeff comments: The term “willfully” has been interpreted to require a specific intent to violate the law (U.S. v. Pomponio, 429 U.S. 10 (1976)). The term “willfulness” is defined as the voluntary, intentional violation of a known legal duty (Cheek v. U.S., 498 U.S. 192 (1991)).

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.

Windus states: The U.S. requires persons to report foreign bank accounts.

Amy replies: Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2015 must file with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) ) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). It is due to the Treasury Department by June 30, 2016, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance: The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.

For non-willful violations it is $10,000.00 per account per year going back as far as six years.

For willful violations the penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonment of not more than five years, for failure to file a report, supply information, and for filing a false or fraudulent report.

Jeff comments.

Windus states: U.S. requires foreign financial institutions to report U.S. accountholder to the IRS.

Amy replies: U.S. taxpayers with foreign accounts should also understand their reporting requirements under the Foreign Account Tax Compliance Act (FATCA). Third-party information reporting from foreign financial institutions or through intergovernmental agreements began in 2015.

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance: Foreign banks that are not certified by the IRS for reporting U.S. accountholders are subject to a 30% withholding tax on all U.S. sourced investments.

Jeff comments.

Windus states: The IRS requires disclosure of foreign financial accounts with your Form 1040.

Amy replies: In addition, under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets.  Generally, U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. Reporting thresholds vary based on whether a taxpayer files a joint income tax return or lives abroad. See the instructions for Form 8938 for more information.

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance: Failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40% penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.

Jeff comments.

Windus states: The IRS has special programs for taxpayers to come forward to disclose unreported foreign accounts and unreported foreign income.

Amy replies: The main program is called the Offshore Voluntary Disclosure Program (OVDP). OVDP offers taxpayers with undisclosed income from offshore accounts an opportunity to get current with their tax returns and information reporting obligations. The program encourages taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.

Windus asks: Amy, When did the IRS first start OVDP?

Amy replies: OVDP was first started by the IRS in 2009. Since then there have been more than 54,000 voluntary disclosures by taxpayers with undisclosed foreign bank accounts. The IRS has collected more than $8 billion from this initiative.

Windus asks: Both you and Jeff talked about the penalties and even criminal enforcement for non-compliance. What advantages does a taxpayer have coming into any of these programs.

Amy replies: For taxpayers who willfully did not comply with the U.S. tax laws, we recommend going into the 2014 Offshore Voluntary Disclosure Program (OVDP). Under this program, you can get immunity from criminal prosecution and the one-time penalty is 27.5% of the highest aggregate value of your foreign income producing asset holdings.

Jeff continues: For taxpayers who were non-willful, we recommend going into the Streamlined Procedures of OVDP. Under these procedures the penalty rate is 5% and if you are a foreign person, that penalty can be waived. This is a very popular program and we have had much success qualifying taxpayers and demonstrating to the IRS that their non-compliance was not willful. Which is why …

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.

Thanks Amy for calling into the show. Amy says Thanks for having me.

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.

And Windus and I always pleased to make our offers to our listeners where… 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.

Windus states: 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. Or visit www.guideyourstory.com.

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.

So Gary since you are our guest for today, we will let you pull the questions for us to answer on this week’s show.

Question from Paul of Carlsbad: I am a U.S. citizen and in 2015 I married a nonresident alien, what should I use for my filing status for my 2015 income tax return?

Answer: The filing status of a U.S. citizen or resident alien married to a nonresident alien is, in general, married filing separately. However, you can qualify to file Married Filing Joint by making an election on your tax return signed by both spouses. You can also make the election by filing a joint amended return within 3 years from the date you filed your original U.S. income tax return or 2 years from the date you paid your income tax for that year, whichever is later.

With this election in place, you and your spouse can file as married filing jointly but also you and your spouse must report the combined worldwide income and deduct the combined allowable worldwide expenses. Once made, the election applies to all later years until it is properly terminated.

Now if you do not make the election, you may be able to file under the Head Of Household Status if both of the following apply:

You paid more than 1/2 the cost of keeping up your home for the year; and
A qualifying person lived with you in your home for more than 1/2 the year.

Head Of Household Status should still produce a lower tax than Married Filing Separately so it would serve you best to meet with a tax adviser to get your options and make the best choice.

Question from John of LaJolla: When could we realistically be looking at the Federal Reserve earnestly considering the next rate hike?

Question from Brian in Chula Vista: What type of funds should I be considering for long term growth in say an IRA? Same question for a short-term wealth building individual account for unforeseen expenses?

Jeff states: Well we are reaching the end of our show. Gary, thanks for joining us today.

Gary states: Thanks for having me.

Jeff states: Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Windus states: Have a great day everyone!