Jeffrey B. Kahn, Esq. Discusses Budgeting, Taxes and the IRS On ESPN Radio – July 31, 2015 Show
Topics Covered:
- IRS Action – Civil Forfeitures: The Carole Hinders Story.
- How To Get Your Family Budget Started And Maintain Success.
- IRS Summertime Tax Tips:
- Tax Tips for Students with Summer Jobs
- Include a Few Tax Items in Your Summer Wedding Checklist
4.Questions from our listeners:
- Why does the IRS file tax liens?
- How Does A Tax Lien Impact You?
- How long should I keep my tax papers?
Yes we are all working for the tax man!
Good afternoon! Welcome to the KahnTaxLaw Radio Show
This is your host 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.
You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California.
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!
It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.
I have a lot to cover today in the world of taxes and helping me out will be my associate attorney Amy Spivey who will be calling in later.
And in the studio with me I have a special guest. I want to introduce you to Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Chit chat with Windus.
Jeff states so today’s top story is:
How The IRS Turned Carole Hinders’ Life Upside Down.
A restaurant owner in northwest Iowa has landed in the national news spotlight over her fight with the federal government. Carole Hinders who at the time was 67 years old and a grandmother has operated Mrs. Lady’s Mexican Food in Arnolds Park, Iowa for 38 years.
Nowadays it is most notable for a small business to be in operation for 38 years – especially if it is a restaurant which we all know “come and go”. Even more notable for Ms. Hinders was that she was always in full compliance with her tax obligations. But despite her clean tax record, on May 22, 2013 while settling into a crossword puzzle with her grandchildren she was visited at her home by a pair of IRS agents who stated that they had closed her business bank account and seized all her money, which at the time was almost $33,000.
Windus asks: Jeff if she did not owe any taxes to the IRS, how could this have happened?
Jeff continues: True she did not have any outstanding liability to the IRS. The problem though is that Ms. Hinders’ restaurant only accepts cash so Ms. Hinders makes frequent trips to the bank to avoid having large sums of money on the business’ premises.
As part of the federal government’s dragnet surveillance of the civilian population, everyone’s banking activities are monitored for “red flag” activities. Under the Bank Secrecy Act of 1970, banks are required to report to the IRS transactions on every individual who deposits or withdraws more than $10,000 in cash to or from a personal bank account on a given day. These reports indicate the financial activities that took place and include the individual’s bank account number, name, address, and social security number.
People who know of this law and are seeking to avoid this level of reporting by the bank will often go to great lengths to make multiple deposits so that no single deposit will be greater than $10,000. This tactic is called “structuring”. The IRS thinking that Ms. Hinders was making small deposits to evade this reporting requirement used its civil forfeiture power to seize Ms. Hinders’ bank account and close down her business.
That’s right – federal law enforcement agencies are invested with the power of civil forfeiture whereby the agency can take cash, cars and other property without charging the property owner with a crime. The property owner need not receive any advance warning or notice before the assets are seized by the federal government. The government need not prove that a person is guilty of a crime – only that he or she is suspected of committing a crime. This law was designed to catch terrorists, money launderers, drug lords and serious criminals – but it can also be used by the government against law-abiding businesses.
Ms. Hinders said she received no warning from either her bank or the government before her money was taken. The reason that the federal government does not have to read you your rights, or advise you that you can have a lawyer, or do any of the things that the constitution is supposed to provide, is that they don’t charge the person with the crime, they charge your money with the crime.
Since then, she’s had to borrow money and use credit cards to pay bills and keep her restaurant in business. But Ms. Hinder was not stopping there – she knew she didn’t do anything wrong and did not owe anything to the IRS. But yet the IRS took her money so Ms. Hinders’ decided she was going to fight the IRS.
The Battle Against IRS Begins
Remember Ms. Hinders was never accused of any crime. The Mexican restaurant she owned, Mrs. Lady’s, did not accept credit cards, and she regularly deposited earnings in a bank branch a block away.
Ms. Hinders wasn’t using the money for illegal purposes. Her business doesn’t accept credit cards and the law fails to provide provisions for small businesses with limited cash flow. Ms. Hinders frequently deposited money in order to keep it safe in the bank.
But yet the government was treating Ms. Hinders like a criminal, just for running an honest cash business.
She hired an attorney to sue the IRS and regain her property. In civil forfeiture cases, the government must file lawsuits “against” property or cash in order to keep it. This one was called United States of America v. $32,820.56 in United States Currency (Case No. 2013-CV-4102). This lawsuit was filed in Federal District Court for the Northern District of Iowa. Eventually Ms. Hinders was deposed and it then became clear that Ms. Hinders was an innocent and hardworking taxpayer. The Assistant United States Attorney on the case had then informed the IRS that they should not go forward with the case. The IRS agreed and the case was dismissed but without prejudice – meaning that the government can file another action in the future to get Hinders’ money if the court grants its motion.
Windus asks: Are There Any Safeguards In Place For The IRS To Follow So Things Like This Do Not Happen?
Critics say the IRS rarely investigates such cases to see if the business owner has legitimate reasons for making small deposits.
Seizing assets without criminal charges is legal under a controversial body of law that allows law enforcement agents to seize cars, cash and other valuables they believe are tied to criminal activity. The burden of proof falls on owners seeking the return of their property.
There is nothing illegal about depositing less than $10,000 cash unless it is done specifically to evade the reporting requirement.
The IRS made 639 of these seizures in 2012, compared to 114 in 2005. And only one in five was prosecuted as a criminal case. So you are probably thinking was the money from the other 80% of cases returned to its rightful owners?
Well it’s time for a break but stay tuned because if you seem to find it difficult to make a family budget my guest Windus A. Fernandez Brinkkord has some important information and tips that can make this easier for you.
You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.
BREAK
Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.
And in the studio with me I have as my special guest Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Chit chat with Windus.
How To Get Your Family Budget Started And Maintain Success.
Jeff asks questions, Windus responds:
- What is the best baby step to starting your family budget?
Windus response includes: start with a spreadsheet to brainstorm.
- What are some banks that have good tools for you to utilize if you bank with them?
Windus response includes: Wells Fargo, USAA, & AMEX
Jeff states: By the way, Windus is a licensed financial planner who can help you plan for financial success and she is offering a special offer to our listeners. Her firm Trilogy Financial Services will provide you with an Investment Audit which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. The number to call is 858.314.5169. That is 858.314.5169 for your free investment audit by Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Jeff asks questions, Windus responds:
- What sites can you go to in order to help you budget and stay on top of it and what are the differences?
Windus response includes: YNAB.com & mint.com.
- What are the best tools to pay down your debt?
Windus response includes: bankrate.com or vertex42.com
- Should you consolidate your credit card debt to a fixed pay off and fixed interest rate?
- What is crowd funding and how good of a resource is this really?
Windus response includes: New crowd funding out there, lendingclub.com prosper.com lightstream.com
Jeff states: Windus is offering a special offer to our listeners. Her firm Trilogy Financial Services will provide you with an Investment Audit which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. The number to call is 858.314.5169. That is 858.314.5169 for your free investment audit by Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Stay tuned because after the break we are going to tell you some important summertime tax tips that can help you avoid tax problems with IRS.
You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.
BREAK
Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.
And in the studio with me I have as my special guest Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.
Chit chat with Amy
IRS Summertime Tax Tips
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.
Tax Tips for Students with Summer Jobs. IRS Special Edition Tax Tip 2015-13, June 18, 2015
Jeff states: Students often get a job in the summer. If it’s your first job it gives you a chance to learn about work and paying tax. The tax you pay supports your home town, your state and our nation.
Amy states: Here are some tips students should know about summer jobs and taxes:
- Withholding and Estimated Tax. If you are an employee, your employer withholds tax from your paychecks. If you are self-employed, you may have to pay estimated tax directly to the IRS on set dates during the year. This is how our pay-as-you-go tax system works.
- New Employees. When you get a new job, you will need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use it to figure how much federal income tax to withhold from your pay.
- Self-Employment. Money you earn doing work for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction can cut taxes.
- Tip Income. All tip income is taxable. Keep a daily log to report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.
- Payroll Taxes. You may earn too little from your summer job to owe income tax. But your employer usually must withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
- Newspaper Carriers. Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from social security and Medicare taxes.
- ROTC Pay. If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. A subsistence allowance you get while in advanced training is not taxable.
Jeff states: Amy’s mention that our tax structure is designed as a “pay-as-you-go” system is an important concept. Because it is easy to fall behind and build up large liabilities, you could end up with big tax problems very quickly if you are not careful and diligent.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our 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.
Include a Few Tax Items in Your Summer Wedding Checklist. IRS Special Edition Tax Tip 2015-14, June 29, 2015
Jeff states: If you’re preparing for summer nuptials, make sure you do some tax planning as well. A few steps taken now can make tax time easier next year.
Amy states: Here are some tips to help keep tax issues that may arise from your marriage to a minimum:
- Change of name. All the names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. The easiest way for you to get the form is to download and print it on SSA.gov.
- Change tax withholding. When you get married, you should consider a change of income tax withholding. To do that, give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. The withholding rate for married people is lower than for those who are single. Some married people find that they do not have enough tax withheld at the married rate. For example, this can happen if you and your spouse both work so you may want to adjust the information on the Form W-4 so more tax is withheld.
- Changes in circumstances. If you receive advance payments of the premium tax credit you should report changes in circumstances, such as your marriage, to your Health Insurance Marketplace. Other changes that you should report include a change in your income or family size. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes in circumstances will allow the Marketplace to adjust your advance credit payments. This adjustment will help you avoid getting a smaller refund or owing money that you did not expect to owe on your federal tax return.
- Change of address. Let the IRS know if you move. To do that, file Form 8822, Change of Address, with the IRS. You should also notify the U.S. Postal Service. You can change your address online at USPS.com.
- Change in filing status. If you are married as of December 31, that is your marital status for the entire year for tax purposes. You and your spouse can choose to file your federal tax return jointly or separately each year. It is a good idea to figure the tax both ways so you can choose the status that results in the least tax.
Jeff states: Getting married is an important milestone and as I am certain that as you walk down the aisle the last thing you would be thinking about is taxes but after all the wedding festivities and honeymoon has passed, you should make sure you take care of this tax business early which should avoid future tax problems and keep your marriage happy.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our 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 Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.
BREAK
Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.
And in the studio with me I have as my special guest Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Jeff states: If you would like to post a question for me 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 a future show.
OK Windus, so you have the honors of reading off this weeks questions for me to answer?
- John from San Francisco asks: Why does the IRS file tax liens?
A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:
- Puts your balance due on the books (assesses your liability);
- Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
You:
- Neglect or refuse to fully pay the debt in time.
The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.
- Windus asks: How Does A Tax Lien Impact You?
The lien will impact you in the following ways:
- Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien.
- Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
- Business — The lien attaches to all business property and to all rights to business property, including accounts receivable.
- Bankruptcy — If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue after the bankruptcy.
- Patricia from Woodland Hills asks, How long should I keep my tax papers?
At least three years, but six years is preferable. The IRS has three years after you file a tax return to complete an audit. For example, if you file your 2014 income tax return on or before April 15, 2015, keep those records until at least April 15, 2018.
The IRS can audit you for up to six years if it suspects that you underreported your income by 25% or more. If the IRS suspects fraud, there is no time limit for an audit, although audits beyond six years are extremely rare.
Keep records of purchases of real estate, stocks, and other investments for at least three years after the tax return reporting their sale was filed. You will want to do the same for capital loss carryfowards and net operating loss carryforwards.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our 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 Windus for joining me today. Windus says Thanks for having me.
Well we are reaching the end of our show.
You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.
Have a great day everyone!
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