Topics Covered:

1. The Panama Papers – NPR Reports Massive Document Leak Reveals Offshore Accounts Of World Leaders
2. California and New York Pursue Pay Hikes, the Push For a $15 Minimum Wages is Heating Up
3. The Repercussions to U.S. Taxpayers Now That The IRS Has The “Panama Papers”.
4. Questions from our listeners:

• What can we expect to see from the U.S. markets when minimum wages starts going up? Have there been trends in the past associated with a wage rate increase like this in the past?
• I have foreign bank accounts which I never reported to the IRS. Why should I make a voluntary disclosure?

***************************************************************

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: California and New York Pursue Pay Hikes, the Push for a $15 Minimum Wages is Heating Up

Gary states:

Also coming up is:

Segment 3 material: the Repercussions to U.S. Taxpayers Now That The IRS Has The “Panama Papers”.

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 for today’s top story:

The Panama Papers – NPR has reported a massive document leak revealing offshore accounts of world leaders.

www.npr.org/sections/thetwo-way/2016/04/03/472889872/massive-document-leak-reveals-offshore-accounts-of-world-leaders

Gary continues: Yes, Jeff. And who do we have at the center of attention, Vladimir Putin. Documents leaked from a Panama law firm confirm that associates of the Russian President have funneled as much as $2 billion through offshore accounts, banks and shadow companies.

Jeff replies: Dubbed the Panama Papers, a collection of more than 11 million documents reveal how dozens of the most powerful and wealthy people around the world are laundering money, as well as evading taxes and sanctions, by using offshore accounts.

Gary states: Furthermore, the documents leaked from the law firm Mossack Fonseca connect to 140 politicians in over 50 countries including former leaders of Ukraine, Saudi Arabia, Argentina, Iceland, Georgia, Qatar and Iraq.

Jeff continues: Due to the extent of the papers, this leak is probably the hardest hit the offshore world has ever taken. The BBC even had reports of connections to families and associates of Syrian President Bashar Assad, former Libyan dictator Moammar Gadhafi, and former Egyptian President Hosni Mubarak.

Gary replies: The International Consortium of Investigative Journalists published these findings Sunday after working in collaboration with German newspaper Suddeutsche Zeithung. The newspaper leaked 2.6 terabytes of data that began a year-long investigation involving more than 370 journalists from 107 news organizations.

Jeff states: The files retrieved go back through 40 years of secretive dealings from the Mossack Fonseca law firm and delve deeper into the details behind operations by Putin associates to paint a tangled picture of what was going on.

Gary replies: Reports from the ICIJ claim the papers describe, in detail, the role of Sergei Roldugin, a classical cellist and very close friend of Vladimir Putin who is “a behind the scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies.”

Jeff states: Listed as the owner of several offshore companies, Roldugin is in “ostensible control” of $100 million worth of assets according to reports from The Guardian. Interesting considering Roldugin says he is not a businessman.

Gary continues: The ICIJ continues to say that evidence “suggests Roldugin is acting as a front man for a network of Putin loyalists – and perhaps for Putin himself.”

Jeff states: “In almost every instance, the result is the same: money and power moves in the direction of the network, to companies and people allied to Putin. The network’s covert deals allowed it to receive money in a variety of ways including hundreds of millions of dollars in sweetheart loans from a bank controlled by the Russian government.”

Gary replies: Also named in the papers are Iceland’s leading political figures. Showing “links” to secret offshore accounts include the prime minister, finance minister and minister of the interior according to reports by Suddeutsche Zeitung.

Jeff replies: No stranger to scandal, FIFA has several officials named in the leaked documents including Juan Pedro Damiani who ironically sits on FIFA’s ethics committee. He’s now currently under investigation as documents show Damiani “managed companies through which FIFA members may have received bribes.”

Gary states: The Center for Public Integrity places Panama law firm Mossack Fonseca as one of the leading creators of shell companies. Files from the firm include data on 214,488 “offshore entities” tied to individuals in roughly 200 countries and territories according to the ICIJ.

Jeff replies: The law firm responded to the reports on Sunday claiming that they have done nothing wrong and operate under “the highest due diligence standards that comply with all international laws and regulations.”

Gary continues: The firm continued to insist that the vast majority of their clients are not only regulated entities but that all of them are well-known and reputable companies and firms.

Jeff replies: And its becoming a “Who’s Who” List of world leaders and celebrities that are reported to be linked to the Panama law firm, Mossack Fonseca. Identified people include British Prime Minister, David Cameron; professional soccer player, Lionel Messi; and celebrity judge, Simon Cowell. In future shows we will report back with more details of these people as well as others for what is appearing to be the biggest scandal in offshore activity since the 2004 crackdown on Swiss Bank, UBS.

Jeff states: Well it’s time for a break but stay tuned because we are going to tell you about California and New York Pursuing Pay Hikes as the Push for a $15 Minimum Wages is Heating Up.

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.

But before we continue with this next segment, Gary please tell our listeners about your offer:

Gary 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 858-755-6696 x 3115. That is 858-755-6696 x 3115. Or visit www.guideyourstory.com.

Gary begins: Last Thursday, New York officials agreed on a deal that would increase minimum wage to $15-an-hour by 2019 in New York City, with the rest of the state in subsequent years.

California and New York Pursue Pay Hikes, the Push For a $15 Minimum Wages is Heating Up

http://www.wsj.com/articles/race-for-15-minimum-wage-heats-up-1459451862; www.wsj.com/articles/california-moves-toward-15-an-hour-minimum -wage-1459115685

Jeff states: Both California and New York have been working on becoming the first states to raise the minimum wage to $15 an hour. Once focused solely on major urban areas, this wage hike would now reach to include everything from farm communities to industrial towns.

Gary replies: In addition to New York passing the new wage increase last Thursday, legislature for own deal here in California was announced the same day. Although slightly different, California lawmakers agreed that large businesses will establish a $15 pay floor by 2022, with all firms falling in step a year later.

Jeff continues: The way New York Governor Andrew Cuomo puts it, “we want to pay our people a wage that allows them to lead their life with dignity, but we want to do it in a way that stimulates the economy and certainly doesn’t hinder the economy,” especially in upstate areas where cost is lower.

Gary replies: Now, having two of the nation’s four most populous states pass wage elevations in an election year will largely spawn debate on benefits vs. risks with voter concern on income equality and the government’s role in shaping the economy.

Jeff replies: With both Democratic presidential candidates proposing to raise the current federal minimum wage to $7.25, voting Democrats and union workers who are equally as enthusiastic about increased pay floors are likely to be pleased with lawmakers.

Gary adds: However, Republicans and other opponents warn against job loss from businesses that can’t cope with higher costs. They also point to the potential impact of the resulting higher prices on consumers and point out that any universal higher wage would not account for the variances in the cost of living across the U.S.

Jeff continues: But some policy makers see this increase in minimum wage as addressing the widening gap between the rich and the poor. Not to mention, it would stimulate a stubbornly slow income growth.

Gary states: In recent years, many companies have already increased starting pay voluntarily, although few to $15 per hour. Wal-Mart started paying their employees a $10 an hour starting rate earlier this year, Costco also increased its base rate to $13 an hour, and last year McDonald’s vowed to pay its employees at the very least $1 more than the local minimum wage.

Jeff replies: But these new increases that passed last Thursday could influence pending proposals that would ultimately push 18% of the U.S. workforce up to a $15 rate. The same happened in 2013 when California and New York approved minimum wage increases, 14 states followed suit a year later.

Gary continues: Leading Democrats in New Jersey proposed a wage bill earlier this year that would increase their base rate to $15, though the bill is still pending. And although they’re not looking as high, initiatives are under way in Colorado, Maine and Washington to increase their minimum.

Jeff states: Now the biggest debate still lies with uneven impact. Granted California and New York each have major cities with high costs of living like San Francisco and New York City, but they also have rural areas with substantially lower costs of living like Fresno or Schenectady, respectfully.

Gary replies: The fact of the matter is, the cost of living in New York City is 22.3% higher than the national average, according to data from 2013 available from the Commerce Department. The San Francisco region came in at 20.3% greater than the national average with the Los Angeles area up 17.7%.

Jeff states: Meanwhile, the cost of living in upstate New York in the Albany-Schenectady area was 1% below the national average with Fresno pulling numbers 2.2% below the average.

Gary replies: Unfortunately, wage increases to $15 outside the major metropolis’ could potentially alter the way that companies hire. Take Genn Hagan for example. Genn is the co-owner of GNH Lumber Inc. based in Greenville, NY. A wage increase would cause them to begin layoffs and force the company to cut back on hiring high school and college students who are unskilled laborers.

Jeff continues: And there are plenty more companies just like Genn’s who feel that paying an unskilled laborer a higher wage then that of current skilled workers already getting paid is a very difficult undertaking.

Gary states: Or you could look at it this way. Last year in Greenville, NY the average weekly earnings were $674, according to the Labor Department. When the wage increases take effect, the new minimum weekly pay for a full-time employee will be $600. At only $74 below the last average, you can see how much this will effect small businesses.

Jeff replies: As far as California is concerned, Governor Jerry Brown acted quickly after the initiative to raise minimum wage for all workers, sponsored by the union, qualified for the November ballot.

Gary states: The major difference about this bill is that the legislation has a provision. This provision allows a governor to suspend phased-increases in the event of a recession or budgetary downturn. Good news is that New York’s deal has this provision as well.

Jeff continues: But here in California, it’s been almost seven years since the last recession ended and parts of the state are still struggling. When the Labor Department publishes the unemployment rates for 387 metro areas, of the bottom seventeen, a dozen are in California.

Gary replies: The problem is that family incomes are just not high enough. You hear the broadcasts that say that the unemployment rate is about 5%? Well, that’s the national rate. Here in California the unemployment rate is 12.3%.

Jeff states: Realistically speaking, a $15 minimum wage, which equates to a 50% increase of the current minimum wage, would be like “a boulder” hitting the labor market. It would affect substantially more workers than the smaller increases that occurred before.

Gary continues: The last increase was actually less than half of the current proposed increase. In 2014, California’s minimum wage increased $2 in two years at an increase of 25% from the previous minimum wage. New York’s increased at a $2.75 phase-in.

Jeff replies: For those who are hurting financially, how would it help to make it illegal for them to work for under $15 per hour? Especially considering that (estimates according to American Action Forum) raising the wage rate to $15 could potentially eliminate more than one million jobs. Alternately, economists at UC Berkeley are predicting no significant job loss.

Gary states: Michael Reich of UC Berkeley, a labor market expert who has studied minimum-wage increase, believes that reduced worker turnover, improved productivity, small price increases and stronger spending by low-income families will compensate for higher wages doled out by employers. Increased debits are absorbed by increased credits.

Jeff replies: But it’s less clear how the wage increase would affect more rural areas like the agriculturally focused Central Valley. Increased labor costs may hinder our competitiveness with Texas or Mexico. Then again, so could our lack of water in addition to increases in the cost of labor.

Gary replies: It’s a good thing that Governor Brown is taking all of this into consideration. Although he signed a minimum wage increase in 2013, he cautioned against future increases. In his budget proposal that he released in January, the governor explained that we needed to proceed with caution, because raising the minimum wage to $15 too quickly could heighten economic hardships by raising costs for businesses.

Jeff continues: Labor unions pressed on though. In August last year, a poll by Field Research Corp. found that 68% of California’s were in favor of the minimum wage increase to $15 by 2021.

Gary states: On a local level, cities like Seattle, Los Angeles and San Francisco have already opted to raise their rates to $15 by 2021. But once you get out of the big cities, California is not a rich place at all. So while we all wait to see what the state and the federal government are going to do for us, let’s make sure you’re taking care of you, and call me….

Gary 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 858-755-6696 x 3115. That is 858-755-6696 x 3115. Or visit www.guideyourstory.com.

Stay tuned because after the break we are going to tell you the Repercussions to U.S. Taxpayers Now That The IRS Has The “Panama Papers”.

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

Jeff states: But before we continue with this segment, I want to remind our listeners of my offer 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.

Repercussions to U.S. Taxpayers Now That The IRS Has The “Panama Papers”

Amy states: The acquisition by IRS of the Panama Papers disclosing many wealthy individuals who have used Panama as a jurisdiction to hide assets from their home countries is the biggest news since the IRS was able to crack into the same type of activity going on with Swiss Bank UBS in 2004. UBS and thereafter Credit Suisse scandals effectively ended the effectiveness of Swiss Bank Secrecy Laws and propelled the legislation of the Foreign Account Tax Compliance Act (FATCA).

Jeff states: About 60,000 U.S. taxpayers have come forward in special voluntary disclosure programs established by IRS to avoid criminal prosecution and benefit from lower penalties than the maximum provided by law.

Amy states: 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).

Gary asks: So what are the Filing Requirements if someone has 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 FBARs. It is due by June 30 and must be filed electronically through the BSA E-Filing System website.

Amy continues: Generally, 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: But I thought that if income was earned abroad, it does not get reported on a U.S. income tax return?

Amy replies: Many people mistakenly believed that. 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.

Amy continues: Additionally 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 U.S. returns.

Jeff states: Now consider this – about 60,000 U.S. taxpayers have come forward to disclose their previously undisclosed offshore accounts but just last year alone, 300,000 U.S. taxpayers filed Form 8938 disclosing foreign accounts. That would mean that about 240,000 did not previously report their foreign accounts and that under this recent filing of Form 8938 to IRS, they have put the IRS on direct notice of their non-compliance.

Gary states: I am wondering how many of those 240,000 “new filers” just happened to be listed in the Panama Papers?

Jeff replies: That is a good point Gary. Our office saw an increase in interest and activity by U.S. taxpayers hiring our firm after the 2004 UBS scandal and subsequent implementation by IRS of its first dedicated Offshore Voluntary Disclosure Program.

Gary asks: So what are the penalties for non-compliance?

Amy replies: 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%.

Amy continues: 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 states: Additionally, 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.

Amy states: Lastly, 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: So if a U.S. taxpayer has undisclosed bank accounts, what are their options?

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

Jeff states: 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.

Amy states: 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.

Jeff states: Now if the IRS are targeted you for investigation or even started a random audit of your tax returns, you are locked out of going into any voluntary disclosure program. And with the release of the Panama Papers more people are going to be exposed and therefore they should not delay and act quickly before it is too late. 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 are 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: Gary 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 858-755-6696 x 3115. That is 858-755-6696 x 3115. Or visit www.guideyourstory.com.

You should also know that the securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered through Trilogy Capital, a Registered Investment Adviser. Trilogy Capital and NPC are separate and unrelated companies.

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 Gary, what questions have you pulled for us to answer?

Brian from Carlsbad asks: With the $15 minimum wage increase, how do you think this will affect the economy and the markets?

Gary responds.

Sara from San Diego asks: I have foreign bank accounts which I never reported to the IRS. Why should I make a voluntary disclosure?

Jeff answers: Taxpayers holding undisclosed foreign accounts and assets, including those held through undisclosed foreign entities, should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties, and generally eliminate the risk of criminal prosecution for all issues relating to tax noncompliance and failing to file FBARs. In contrast, taxpayers simply filing amended returns or filing through the Streamlined Filing Compliance Procedures do not eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in identifying those with undisclosed foreign financial accounts and assets. Moreover, increasingly this information is available to the IRS under tax treaties, through submissions by whistleblowers, and from other sources like the Panama Papers just released and will become more available under the FATCA and other Foreign Financial Asset Reporting systems.

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!