Jeffrey B. Kahn, Esq. and Gary Sussman Discusses The Markets, Taxes and the IRS On ESPN Radio – June 17, 2016 Show

Topics Covered:

1. Special Guest Steven Hyde, Loan Officer at Movement Mortgage

2. The Most Pessimistic Bull Market in History

3. Streamlined Filing Compliance Procedures if you have undisclosed foreign accounts.

4. Questions from our listeners:

a. I have a 401(k), my spouse has a 401(k) and we make deductible contributions. Can I contribute to an IRA?

b. Can I still contribute to an IRA after I retire? How does that work with RMDs?

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Jeff states: Good afternoon! Yes sometimes we just have to take the money and run!

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.

Gary states:

And this is Licensed Financial Planner, Gary Sussman, 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!

Gary 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 Most Pessimistic Bull Market in History

Gary states:

Also coming up is:

Segment 3 material: Streamlined Filing Compliance Procedures if you have undisclosed foreign accounts.

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

Jeff starts chit chat with Gary.

Jeff states: So let’s introduce you to today’s guest:

Please welcome Steven Hyde, Senior Mortgage Loan Officer at Movement (858) 775-1005

Questions:
1. You have quite the passion for photography, not only working freelance for a while as a photographer, but also in web design and marketing. What prompted your career change and peaked your interest in becoming a Loan Officer?
2. What top factors determine if someone gets a loan?
3. Can you walk us through the process you take to select a mortgage loan for a client?
4. What’s more important when looking at a mortgage: rates, fees or points?
5. What do you expect to see happen to mortgage loan rates over the next couple of years?
6. Under what circumstances would you recommend to a client a refinance?
7. What are some of the things should people be aware that will increase their chances for being approved for a loan?

Well it’s time for a break but stay tuned because we are going to tell you about the Most Pessimistic Bull Market in History.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman 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, Gary Sussman.

And be aware of the special offer that Gary has for you: Gary states 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, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.guideyourstory.com.

The Most Pessimistic Bull Market in History

http://on.wsj.com/1ZKiTo3

1. Instead of chasing growth and profits, investors this year have bought into safety
a. Go-go stocks aren’t growing, investments geared toward utilities and consumer staples
b. (DISCUSS: examples of safety stocks or funds in relation to go-to stocks like Google, Amazon, Facebook, Netflix, etc.)
2. The bubble that pushed markets up in 2007 is elsewhere
a. Excess in credit created shaky profits; this time the government bond market
b. (DISCUSS: market sectors that took the hardest hit in the Great Recession)
3. Change of pace
a. Investors transitioning to stock from underperforming bonds are not risk takers; aiming for more conservative, bond-like equities
b. (DISCUSSION: Does it look like investors are still uneasy from the last recession? More cautious the next go-around while remembering what happened last time?)
4. Opting for the least exciting companies has worked brilliantly
a. (DISCUSS: super conservative market sectors that perform similarly to bond expectations yet have a greater dividend and annual return)
b. Utilities sector: Up 16%
c. Consumer Staples: Up 5.7%
d. Telecom Sector: Up 14%
e. All three sectors offer healthier dividends than the market
5. The two most obvious signs that the economy is improving
a. Small company figures
b. Chip maker yield
c. (DISCUSS: Russell 2000 Index for small capitalization stocks and the PHLX Semiconductor Index of the US sector; what should investors be looking at?)
d. Leading indicators for the economy tend to follow the direction of small-cap equity and chip makers
e. (DISCUSSION: With the market what it is, what ratio should investors be focusing on between domestic and international equities? Is there a way to safe guard yourself from another US melt-down by keeping a “toe” in global trade?)
6. Picking a side
a. Buying Bond proxies = believing insanely low global yields are right, economy is weaker than projected and bad times are ahead of us
b. Buying cheaper economically sensitive stock = believing we are going to continue the recovery of the past seven years/maintain growth in a pessimistic bull market
c. (DISCUSSION: Where do you see the market heading? How do you feel the election will affect the market come November or Inauguration Day? What if you’ve got a ways until retirement, how should you be planning you IRA investments?)

Gary states 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, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.guideyourstory.com.

Stay tuned because after the break we are going to tell you about the Streamlined Filing Compliance Procedures if you have undisclosed foreign accounts.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman 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, Gary Sussman.

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

Chit chat with Amy

And be aware of the special Offer that I have for you: 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.

Streamlined Filing Compliance Procedures

Jeff states: A reader of last week’s show commented on why we did not discuss the Streamlined Procedures as the solution to U.S. taxpayers who have undisclosed foreign accounts. Well we have talked about this in the past so maybe a refresher and update is due.

Gary asks: But before we get into this, Amy, what are the Filing Requirements If You Have Undisclosed Bank Accounts?

Amy replies: By law, many U.S. taxpayers with foreign accounts exceeding certain thresholds must file Form 114, Report of Foreign Bank and Financial Accounts, known as the “FBAR.” It is filed electronically with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). 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 FBARs. It is due by June 30 and must be filed electronically through the BSA E-Filing System website.

Amy continues: Additionally, U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on Form 8938 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. The lowest reporting threshold for Form 8938 is $50,000 but varies by taxpayer.

Gary asks: Is it true that the U.S. Requires Reporting Of Worldwide Income On U.S. Income Tax Returns?

Amy replies: The law 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.

Jeff states: The first Voluntary Disclosure Program for Undisclosed Foreign Bank Accounts came out in 2009. While the law imposes a penalty rate as high as 50% of the value of your foreign accounts, this program had a maximum rate of 20%. In later years this top penalty rate was increased to 25% and then 27.5%. The IRS still received a lot of complaints that the penalty rates under this program were to high.

Amy states: So on June 18, 2014, the IRS announced major changes in the 2012 offshore account compliance programs, providing new options to help taxpayers residing in the United States and overseas. The changes are anticipated to provide thousands of people a new avenue to come back into compliance with their tax obligations.

Jeff states: The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations.

Gary asks: How are the streamlined procedures different than the regular OVDP?

Amy replies: Taxpayers will be required to certify that the failure to report all income, pay all tax, and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22.1), was due to non-willful conduct. Under the regular OVDP it is not necessary to show your conduct was non-willful.

Gary asks: Under what circumstances would a taxpayer not be allowed to enter into this program?

Amy replies: If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

Amy continues: However, taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the OVDP or its predecessor programs) may still use the streamlined procedures.

Jeff states: Now the Streamlined Procedures are classified between U.S. Taxpayers Residing Outside the United States and U.S. Taxpayers Residing in the United States.

Gary: As I understand a key factor in qualifying for a full waiver of the penalty is that the taxpayer cannot be a U.S. resident.

Amy replies: That’s right. Individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days. Under IRC section 911 and its regulations, which apply for purposes of these procedures, neither temporary presence of the individual in the United States nor maintenance of a dwelling in the United States by an individual necessarily mean that the individual’s abode is in the United States.

Amy continues: Individuals who are not U.S. citizens or lawful permanent residents, or estates of individuals who were not U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the last three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not meet the substantial presence test of IRC section 7701(b)(3).

Gary asks: What if a taxpayer closed an liquidated their undisclosed foreign bank accounts, are they in the clear?

Amy replies: No. Recent closure and liquidation of foreign accounts will not remove your exposure for non-disclosure as the IRS will be securing bank information for the last eight years. Additionally, as a result of the account closure and distribution of funds being reported in normal banking channels, this will elevate your chances of being selected for investigation by the IRS. For those taxpayers who have submitted delinquent FBAR’s and amended tax returns without applying for amnesty (referred to as a “quiet disclosure”), the IRS has blocked the processing of these returns and flagged these taxpayers for further investigation. You should also expect that the IRS will use such conduct to show willfulness by the taxpayer to justify the maximum punishment.

Amy continues: Additionally, starting with the 2011 Tax Return Filing Season: U.S. taxpayers who have an interest in foreign assets with an aggregate value exceeding $50,000 must include new Form 8938 (Statement of Specified Foreign Financial Assets) with their Federal income tax return. This reporting will serve as an additional tool for the IRS to determine prior noncompliance of taxpayers who have undisclosed foreign accounts or unreported foreign income. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR (Report of Foreign Bank and Financial Accounts). 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.

Gary asks: What if someone is current in the 2012 Offshore Voluntary Disclosure Initiative (“OVDI”) and facing a penalty of 27.5%, can they get relief under the streamlined procedures and be subject to a 5% penalty?

Amy replies: For taxpayers who essentially applied to the 2012 Offshore Voluntary Disclosure Initiative (“OVDI”) on or before June 30, 2014, they can have their case converted to be under the new procedures which could substantially reduce their penalties to 5% and in some cases even eliminate them. Our office has been successful in getting such cases converted.

Gary asks: So what should one do if they have undisclosed foreign accounts?

Amy states: So we encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts. By then, it will be too late to avoid the new higher penalties under the OVDP of 50% percent – nearly double the regular maximum rate of 27.5% and 10 times more than the 5% rate offered in the expanded streamlined procedures.

Jeff states: And keep in mind that once the IRS contacts you, you cannot get into this program. You will now be subject to the maximum penalties (civil and criminal) under the tax law. 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, Gary Sussman 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, Gary Sussman.

And Gary 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.

Gary states 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, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. 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.

OK Steven since you are our guest, what questions have you pulled for us to answer?

James from Newport Beach asks: I have a 401(k), my spouse has a 401(k) and we make deductible contributions. Can I contribute to an IRA?

Gary answers.

James from Newport Beach also asks: Can I still contribute to an IRA after I retire? How does that work with RMDs?

Gary answers.

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.

Gary states: Have a great day everyone! And Happy Father’s Day!