The Foreign Account Tax Compliance Act

One of the biggest problems the Internal Revenue Service faces is making sure all people from the United States, including those living outside the country, accurately report all of their income when filing tax returns. However, since this is rarely done, problems can arise. Not only can the money be used for illicit purposes, but it also keeps the United States government from generating the revenue needed to support various programs. To help in the fight against this activity, the federal government passed the Foreign Account Tax Compliance Act in an effort to solve this growing problem.

Basics of FATCA

Known as FATCA, the Act requires all U.S. persons to report their non-U.S. financial accounts to the Financial Crimes Enforcement Network. In addition, all foreign financial institutions are required to search their records for any U.S. persons suspected of having financial assets in those institutions that have not been reported to the United States government. Enacted by Congress, it became effective March 18, 2010 as part of the Hiring Incentives to Restore Employment Act, a stimulus bill of which FATCA was the revenue-generating portion.

Revenue Gains

Upon implementation, FATCA was estimated to produce almost $9 billion in additional tax revenue over an 11-year period. While originally this was thought to be a substantial gain, critics of the Act have stated it will be only a small part of the nearly $40 billion in international tax evasion that occurs annually. Problems have also risen regarding the cost of implementing the Act in financial institutions. Compliance costs have been conservatively estimated to be $8 billion per year for financial institutions, which far exceeds the expected annual revenue generated.

Foreign Relations

Along with questions about its cost and implementation, many foreign nations have also raised concerns about FATCA. For example, Canada recently expressed its concerns about its citizens rights to privacy being violated, as well as having the belief that the country’s banks would be under more and more control from the Internal Revenue Service. Along with Canada, many other nations have threatened to no longer open accounts for Americans, which would create almost impossible conditions for those living and working abroad.

IRS Capabilities

While the Act sounds good in theory, many political leaders in the U.S. and abroad question if the IRS is capable of handling the additional influx of tax filings that would result from FATCA. With many cuts in personnel in recent years, the IRS itself has expressed concerns about its readiness. However, the agency recently released a statement saying 2015 would be considered a transition year for FATCA, with the emphasis being on entity enforcement and administration, rather than focusing on individual investors.

While countries such as France, Germany, Italy and Spain have all agreed to implement FATCA in their financial institutions, other nations such as China have stated their banking laws prohibit them from complying with FATCA. Still other nations have reported tremendous numbers of U.S. citizens renouncing their citizenship in an effort to avoid compliance with the Act. While it is believed that most nations will ultimately agree to FATCA, there are still many questions left unanswered as to its overall effectiveness. As the U.S. government and IRS continue working toward a viable solution, FATCA will have a chance to prove its effectiveness at home and abroad.

Posted in Tax Law |

What is a Limited Liability Company?

One of the challenges that most entrepreneurs face is choosing the most suitable business entity. The entity that one chooses has its repercussions. It determines how taxes are paid, the regulations that come along with it as well as personal liability. A limited liability company is one of these entities. Before making a decision, it is important for one to understand what is entailed in the entity.

The Definition and Categories of LLC

An LLC is a hybrid kind of a legal structure that has limited liability features and also provides operational flexibility and tax effectiveness of a partnership. Its structure majorly depends on the state that one is in. However, broadly, it is possible to choose one of the three types of LLC’s:

  • Professional LLC– It is organized with the aim of providing professional services. In most states, the individuals involved are required to have their respective licenses, such as architects, doctors or lawyers. The members are usually individuals within a similar profession. They must operate within the profession’s code of practice.
  • L3C– This is an enterprise that should not be aimed at maximizing income, but rather for performing socially beneficial activities. It combines the benefits of nonprofit organizations, the market position of a social enterprise and the legal flexibility of a traditional LLC.
  • Series LLC– It allows a single LLC to separate its assets into separate series. This is advantageous in that in case the lender forecloses on one series, the others are not affected.

Advantages of LLC

    Fewer Compliance Requirements– whereas corporations are required to have annual reports, regular meetings with shareholders and the board of directors as well as have written corporate minutes, LLCs do not have to hold frequent meeting. This largely reduces the paperwork that ought to be done.

  • Tax Flexibility– The members do not experience double taxation. The IRS does not regard an LLC as a separate entity. Thus, it is not taxed directly. Instead, the members decide on how they will be taxed. The can choose to be partners, single members, or as corporations.
  • Limitless Members– There are no restrictions on the number of members required. Thus, the LLC can have many or as few members as desired. However, the IRS recognizes LLCs, which have at least two members.
  • Protected Assets– They provide limited liability to the members. Therefore, the members are not regarded to be personally responsible for the business debts. This means that their creditors cannot pursue their personal assets.

Disadvantages of LLC

  • Transferring Ownership– It is quite difficult to transfer ownership. The owners must first approve the addition of new members or altering of the existing member percentage.
  • Additional Taxes– In some states such as New York and California, these companies are required to pay capital values tax or franchise tax.
  • Raising Capital– It is harder to raise money due to two reasons. One of them is that some people find it difficult to put their money in the company because of lack of a strict corporate structure. The other reason is that it cannot be easily converted into a tradable stock company.
  • Less Precedent– This form of business is a new concept. Therefore, there is not much law precedent for the limited liability companies, unlike corporations.
Posted in Business Contracts, General Law |

What Are Confidentiality Agreements?


A confidentiality agreement, also known as a non-disclosure agreement, is a legal agreement between at least two parties that stipulates that specific confidential material that can be shared only with the agreeing parties and none outside. There are two forms of a confidentiality agreement: a unilateral agreement is a one-way share of information from one party, and the other party must keep it secret, and in a bilateral agreement both parties supply confidential information, such as during a merger.


A confidentiality agreement can be used in several different situations. A common usage is for strategic business meetings where sensitive information may be shared between companies but not be accessible to a competitor or the general public. The agreement creates a confidential partnership to guard trade secrets or proprietary information. Often when individuals are exposed to sensitive information through work, they are required to sign a confidentiality agreement as both a legal guard for the company they work for and a way to impress upon them the need for secrecy. Whether the agreement is between two companies or an individual employee and employer, a confidentiality agreement makes any potential legal issues much easier to deal with.

Pertinent Cases

One well-known confidentially agreement court case was RRK Holding Company v. Sears, Roebuck & Co, decided on May 27th, 2008. RRK had entered into a confidentiality agreement with Sears in 1997 when RRK agreed to produce a next generation spiral saw under Sears store brand, Craftsman, and sold exclusively in Sears stores. The two companies signed a confidentiality agreement that prohibited the disclosure of the prototype concept. When negotiations eventually failed and the two companies parted ways, Sears manufactured a similar product two weeks before RRK, and with a lower price. In court, Sears argues that the product designs fell within the general knowledge of the industry and was not a trade secret. A jury found that the product was innovative and that Sears had breached the confidentiality agreement, and Sears was hit with a $25 million judgement.

Consequences of Violation

For employees who breaches a confidentiality agreement with their employers, their jobs could be terminated immediately even with an employment contract, and that is just the start. An employer can sue and if successful, obtain monetary damages from the employee. In some cases, the employee can be charged with criminal activity (by the government, but instigated by the employer) for intellectual property theft or other similar crimes. Outside the law, a fired employee may have trouble finding another job in the same field if it is a specialized and close-knit industry.

That being said, sometimes a confidentiality agreement can be hard to prove in court. The suing party must prove that they suffered monetary damages and that the agreement was not overly broad in regards to what could not be revealed – and no matter how much money they potentially gain back, the once-secret information is out there and can never go back to being confidential. Any competitive advantage that those secrets once held is now gone.

Posted in Business Contracts, General Law |

What Are Antitrust Laws?

With the current antitrust case brought by European regulators against Google moving forward, there is renewed interest among investors in learning about the laws that control anticompetitive practices. In the most general sense, antitrust laws are intended to prevent any one company or group of companies from unfairly controlling a market. In recent years, antitrust laws have also been increasingly used to correct perceived market inefficiencies. The vagueness of this regulatory mission is one of the primary sources of angst for business leaders regarding these laws, as it can be challenging to plan for future growth in an uncertain regulatory environment.

What is antitrust law?

The vagueness of antitrust laws is what makes them so tricky to understand. At a gut level, most people feel that it’s wrong to leverage one’s own position to extract disproportionate amounts of wealth from the system by discouraging competition. In practice, however, it can be hard to state clearly when a company has begun to operate in bad faith against the public good and the market.

In the late 1800s, several companies in the United States founded trusts that acted as what we would today call holding companies. These trusts owned shares from a number of corporations in order to skirt the letter of laws established in the 1600s by the English to prevent monopolies from being formed. The goal was to create the appearance of multiple corporations operating within an industry while in fact centralizing control within a single board of trustees.

From the 1880s to the 1930s, American legislators passed a series of laws aimed at breaking up these trusts, giving rise to the term “antitrust” that we use today to describe a whole host of activities that extend beyond the original model. With the emergence of American financial power in the aftermath of World War II, the American version of antitrust became the global standard. Ultimately, the European Union adopted its own version of these laws in its early decades.

In the modern view of regulators, there are three primary concerns about the power of corporations to control a market. There is market allocation, where companies carve up different territories and decide not to compete with each other. Regulators also worry about bid rigging, where companies agree not to bid contracts lower. Finally, there is price fixing, where companies agree to maintain artificially high prices for goods sold to the public.

The case against Google

On April 15, regulators from the European Union made official claims that Google is using its search engine to direct customers to its own products and services. The E.U. had previously made unsuccessful attempts to reach an agreement with Google regarding its search operations in Europe. The company believed that it had reached an agreement with the E.U. in February and that the matter was largely behind them.

Google controls about 92-percent of the market share for search queries in Europe, meeting almost any accepted standard for a monopoly. The main thrust of the complaint is that Google uses its search engine to redirect people who are looking for specific products and services to its own shopping site. Google, however, contends that it treats all search results equally and is only serving consumers search results that are considered most appropriate by its algorithm to their queries.

Posted in General Law |

Trademark Law

A trademark is a unique or distinctive sign of origin or authenticity that identifies a product or service as coming from a specific manufacturer or service provider. The trademark allows the product or services to be distinguished from those of a competitor. It might also be called a service mark.

What Makes a Trademark?

A trademark can be a brand name. Included as trademarks by the U.S. Patent and Trademark Office are words, names, symbols or any combination of them that are intended to distinguish and indicate the source of certain goods and services from those of competitors. Think of a Campbell’s Soup label. The specific cursive writing of the name of the maker of the product with the red background operates as a trademark. We don’t have to pick the can up and read the fine print on the back to know that it’s Campbell’s Soup. Think of the Nike “swoosh” on a pair of shoes or a shirt. That’s a trademark too. Trademarks are acquired by using them, not by registering them, but registering a trademark enhances the owner’s rights.

What Trademarks Are Used For

Trademarks are used to claim, protect or enforce specific proprietary rights of goods and services. Trademarks can have tremendous monetary value because of the products or services that stand behind them. Apple has the world’s most valuable trademark. Google and Coca Cola are right behind it. Products of all of these businesses are identified by their trademarks in highly specific manners. By identifying these products and services through their trademarks there is no likelihood of confusing them with those of competitors.

Trademarks vs. Copyrights

A trademark is an insignia, stamp or symbol that specifically identifies where certain goods or services originated from. Copyrights provide an entirely different form of protection that’s focused on original creative works like literary works, music, theater, paintings, sculptures or even dance and pantomimes. A copyright doesn’t protect the name or title of a creative work, nor does it protect any symbols or logos one might use to promote the work. It protects the creative work itself. Like a trademark, a copyright isn’t required to be registered either, but registration enhances the copyright owner’s rights.

How Trademarks Are Protected

If a person or entity owns a trademark, they’re permitted to sue an infringer. Infringement is caused when a likelihood of confusion has arisen as to the source of the goods or services. Courts will look at a variety of factors in an infringement suit to determine whether a likelihood of confusion has arisen. Those include but aren’t limited to the strength of a trademark, the similarity of the marks and the alleged infringer’s intent. Products or services that can amicably exist with each other involve completely dissimilar products like Apple Computers and Apple Records.

Notwithstanding the fact that registration of a trademark isn’t required for protection, registration does avail the owner to specific legal benefits. It provides constructive notice to all of the United States of ownership of the trademark. After five years, the trademark becomes incontestable so long as it’s properly maintained. Trademarking permits an infringement action to be brought in federal court where treble damages, attorneys fees and costs can be awarded.

Posted in Business Litigation |

4 Things to Consider When Deciding to Start a Business

After losing a job (or even quitting a job), the thought of how fulfilling and satisfying owning and running your own business would be tends to cross your mind. While taking on self-employment can be the most rewarding decision of your life, it can also be a costly one. Here are some questions to consider before you decide to forego applying for new jobs in exchange for starting your own business.

  1. Do you have passion and motivation?
    • Starting your own business is going to have several ups-and-downs, if you do not have the passion or motivation to roll with the punches, then you will sink with your business. Having passion means that this business may have been on your mind for several years now. Your idea should not only be something that you believe in, but something that you think others will want to be a part of. Once you recognize your own vision for the future of your business, you have to take action. Your motivation will give you the strength to overcome obstacles because as a new business owner, you are the one responsible for its success or failure.
  2. Do you have a business plan?
    • All the passion in the world means nothing if you do not have the right business model, plan, and skills to get the job done. Do the research and master your understanding of the field that you want to enter. Many models have been tested and proven, but now you have to develop your own business plan that will be able to standout and compete in the market. Take classes in business management or teach yourself how to read and understand financial reports, best practices, legal requirements, and marketing. All of these skills will help you to be better prepared in business meetings, employee interviews, and any court situations that may arise (lawsuits or patent-filing).
  3. Do you have financial resources?
    • Having the right financial backing is key to getting a start-up off the ground. You may already have some savings for the venture or a great credit score/history, but money goes fast. It is hard to find people that will recognize your vision and be willing to work for free, so you be will have to give your employees their paychecks, pay for all of your resources, and probably start paying rent or developing a store location. If you think your family or friends are willing to contribute, don’t be afraid to ask. Some of them might even want to form a partnership. If you do form a partnership, be specific on the terms and thoroughly explain the role you want to have and the role you want them to have.
  4. Do you have an exit strategy?
    • Whether your business becomes a huge success or it doesn’t quite reach its potential, you are going to want to have an exit strategy. An exit strategy will help you to better understand your goals and aspirations, which in turn will help you to make important decisions. For example, if you want to keep it a family business and exit on your own one day, you will have to choose and train your protege. If you plan to sell if for a large profit, you have to document everything to back its history, have signed and valid contracts, and keep good relationships with customers and clients. Most importantly, if your business is not turning the profit you expected, you have to have a strategy in place that keeps a roof over your head.
Posted in Business Contracts, Business Transactions, General Law |

Top 7 Overlooked Tax Deductions for Small Business

Congress knows that it takes money to make money, so the Internal Revenue Code makes pretty much any expenditure that is used to produce business income deductible. The list of items that can be deducted is so long and broad that many small business owners miss out on deductions they qualify for. Here is a list of the top 7 small business deductions that are commonly overlooked.

Home Office

If you have a home-based business, you may be able to deduct part of your rent or, if you own your home, take a depreciation deduction on your property. This tax break is known as the home office deduction. An apartment, house, boat, mobile home, condominium, or any other place with cooking and sleeping facilities will qualify. According to the IRS, just over two million small business owners claim the home office deduction. Undoubtedly, more people qualify for it but are either unaware or afraid they will be audited if they do.

Employees and Independent Contractors

At some point, as your business grows, you will need to hire employees and/or independent contractors to perform specific tasks. Salaries, wages, and money paid to hired hands are tax deductible. This includes regular wages, vacation pay, sick leave, bonuses, training expenses, and reimbursements.


If you are a business that sells goods, usually you have to maintain an inventory. It is important to know that only your net profit from goods sold is taxed as income. This means that you deduct what you spent for your inventory as well as general business expenses. The IRS demands that small business owners list the fair market value of their inventory.

Retirement Account Deposits

Employer-made contributions to retirement accounts are tax deductible as compensation paid to employees. These contributions must come from earned income, not investing or inheritance.

Fees Paid to Professionals

Business related fees paid to accountants, lawyers, and consultants are always deductible, however, sometimes the deduction must be spread over future years.

One-Time Deals:

  • Fees related to one-time business deals or sales are immediately deductible.


  • Professional services that provide a benefit that goes beyond the present year, a long-term contract or example, must be deducted over the life of the expected benefit.

Start-Up Costs

You can claim tax deductions for money spent on your business before it was even operational. There are three start-up tax rules and one bonus rule to choose from and each provides its own benefit.

  • Rule One: Allows you to deduct up to $10,000 of your start-up costs your first year. Anything over $10,000 must be deducted over the following 15 years.
  • Rule Two: You may choose to deduct your start-up costs pro rata over 15 years.
  • Rule Three: You may choose not to deduct start-up costs. Instead, you may choose to recover start-up expenses after you sell or close your business.
  • Bonus Rule: In addition to the start-up cost deduction, corporations, partnerships, and limited liability companies can claim an extra $10,000 deduction as long as total start-up expenses do not exceed $60,000.

Education Expenses

Tuition, books, fees, and supplies are deductible as business expenses if they are related to your established business, occupation, or trade, and are used to maintain or develop skills that are required in your field or by law.

Posted in Tax Law |

The Pros and Cons of Getting a Tax Extension

What is a Tax Extension?

A tax extension is a simple form that you file with the Internal Revenue Service (IRS) to get an increase of time to file your tax return. You must complete form 4868 to get the automatic six month filing extension. This means your 2014 tax form will need to be filed by October 15, 2015 instead of April 15, 2015.
One of the most important things to know is that this is an extension for filing the tax paperwork but not for paying your taxes. You will still have to pay any owed taxes by April 15th or pay interest and payment penalties. You will need to do your best to estimate the amount of tax that must be paid. You can print out and file the required paper form by mail with a payment check, if needed, or you can file and pay electronically via e-filing. You can also pay by phone with a credit or debit card.

When An Extension is Useful

A tax extension can be a lifesaver if you simply require some additional time to get your tax paperwork together and properly complete your tax return. It is much better to get an extension rather than not filing a return or throwing together your return and potentially making serious mistakes. Not filing or filing improperly are great ways to get audited.
The IRS does not require any explanation of why you are requesting an extension, you just have to fill out the form and file it before the tax deadline. If you file for the extension before the April 15th due date you will avoid the late filing penalty. And if you make a proper payment, you will also avoid the interest and late payment penalty; that is if you correctly estimate your liability. Even if you miscalculate the amount, your prepayment will still lessen the interest and any penalties.

When an Extension is Not Recommended

The main reason to not request an extension is if you are going to get a large refund. Filing an extension in that situation basically just delays the return of your money. It allows the IRS to keep your money longer with no extra compensation. While the IRS charges you interest on late payments they do not give you any interest on the money they hold while you wait to file. In fact, if you are owed a large refund, you should probably change your withholding paperwork so that the proper amount is withheld and that should be done sooner rather than later.

If you are procrastinating and simply need a jump start then get to work and get that tax return done. You don’t want to be in this same position, six months from now, when there are no more extensions available. If you run into trouble or find you are missing some necessary papers, then you still can file for an extension before the 15th.

And if your return is complete but you cannot pay the full amount, do not file an extension. In this situation, the IRS says it is best to file, pay what you can, and make payment arrangements with them.

Posted in Tax Law |

Tax Scams to Watch for in 2015

Tax season is one of scammers’ favorites to gain and abuse the confidence of unwary individuals. Every year sees the emergence of new and creative ways to steal personal information from taxpayers, but knowing a few simple facts goes a long way for identifying what is real and what isn’t.

Basic Tips

The IRS explicitly does not issue phone calls or emails asking for personal information or demanding payments. All communication between the IRS and taxpayers starts with mailed notices, and any communication afterwards will only be to inform individuals of any actions they need to take, not to collect. Scammers will do everything they can to appear legitimate, including fake caller IDs, fraudulent use of the IRS logo, and impersonating agents. Before taking any actions or revealing personal information, taxpayers are advised to verify whom they are speaking to on their own. The more aggressively a phone call or email attempts to gain sensitive information, the more likely it is to be a scam.

Phone Scams

One of the most prevalent scamming methods involves criminals attempting to deceive people over the phone. They will do this by impersonating IRS agents, representatives of charities, or anything else they can use as a pretext to get valuable information from their targets. Pretending to be representatives of an organization people trust, they will use any angle, from using threats of penalties to offering special rewards and opportunities, provided the victim give over their credit card or Social Security numbers. Anyone who presses people for this kind of information is most likely a scammer.

Fraudulent Tax Preparation Services

The information included in every tax return is the responsibility of the taxpayer. However, many individuals use tax preparers to handle the details of their return. Most of these agencies provide excellent services to their clients, but it is important to verify their credentials, policies, and examine their work when it’s done. Tax preparers that make outstanding claims compared to their competitors may try to submit falsified information on the behalf of unknowing taxpayers to make money for themselves. These agents will often base their fee on how big the return is, and inflate a return illegally to increase their pay. Reputable agencies will be happy to display their dedication to educational and ethical standards that guarantee taxpayers the best return they can legally get.

IRS “Dirty Dozen” Tax Scams

Every year, the IRS compiles a list of the most prevalent schemes targetting taxpayers. People who are aware of these scams are more capable of filtering out any attempts by criminals to steal their money and identities, and are also warned to pay attention to the details of their return forms. In addition to phone scams, return preparer fraud, and fake charities, taxpayers should be on the lookout for:

  • Phishing: Describes attempts to gain personal information through fake websites and email.
  • Identity Theft: Especially common during tax season.
  • Offshore Tax Avoidance and Hiding/Falsifying Income with Fake Documents: The IRS is getting better at finding hidden incomes and will act on any discoveries it makes both overseas and domestically.
  • Excessive Claims for Fuel Tax Credits: Fuel tax credits are primarily used by farmers and associated businesses and should not be abused.
  • Frivolous Tax Arguments: Individuals should not attempt to avoid paying their taxes without very good reasons.
Posted in Tax Fraud |

Tax Deductions and Filing Your Taxes

Every year, Americans scramble to get their paper work together to go file their taxes. It is a stressful time, leaving tax payers wondering how their tax situation will effect their financial situation overall. With new healthcare penalties being carried out this year, taxpayers are more uncertain than usual; however, they still harbor a little faith in the role deductions play within the tax process.

What Is a Tax Deduction?

If this is the first time you have ever paid taxes, then it is critical that you know what a deduction is. Deductions are a mechanism used by taxpayers to save themselves from having to pay hefty taxes. It is important to understand the difference between a tax deduction and a tax credit. A tax credit directly reduces the amount of taxes you are said to have to pay. For example, if you owe the IRS 2,500-dollars in taxes, a tax credit of 500-dollars will reduce that amount down to 2000-dollars. A tax deduction, on the other hand, directly reduces the amount of taxable income you are bringing to the table. In other words, if you earned 40,000 in income, but you have 5,000 in tax deductions, this means that the IRS can only tax you on 35,000-dollars of your income, rather than the full amount. After all your tax deductions are factored in, the amount of income you will have to pay taxes on will typically be far less than the amount you actually earned as income. What taxpayers truly like to see are a lot of tax deductions and tax credits at the same time. In this situation, both the amount of money you can be taxed on and the amount of actual taxes you owe are being reduced to a more manageable value. This means, after all tax issues have been factored in, that you get to keep more of the money you earned.

Types of Deductions

There are two primary types of deductions. These are the Standard Deduction and Itemized deductions. The most straight forward deduction a person can take is the Standard Deduction. It is a set figure that a single income earner, or that people filing jointly, are able to deduct from their earned income. Once this deduction is subtracted from their income, what is left over is taxable income. Alternatively, a person, or people filing jointly, are able to refuse the Standard deduction and take an Itemized deduction instead. An Itemized deduction allows the person filing their taxes to claim deductions, item by item, from a number of different categories that they may qualify for. Generally, it is best to take the option that best reduces your taxable income.

Smart Tax Deductions

When a person gets to know the tax code better, it becomes evident that there are quite a few different deductions that can be taken during an itemization. For this reason, savvy taxpayers tend to like to itemize their taxes to try and maximize their savings. Taking deductions for healthcare costs, interest paid on certain investments and even job related expenses are all smart deductions to claim. If a person digs deeper, they will often find tax deductions that some tax professionals are not aware exist. Provided that they can document these deductions as being a legitimate part of the tax code and demonstrate why they qualify to take them, it is a smart idea to make the effort. When you get a handle on how to effectively use deductions, then you will be able to save money on your taxes like a pro.

Posted in Tax Law |

When You Don’t Pay Your Taxes

Paying taxes can be one of the more arduous responsibilities for those that earn income. While it might be tempting to not pay your taxes or you simply don’t have enough money to do so at the moment, there are some large legal and monetary ramifications for those that don’t pay their taxes on time. The following will provide in-depth details on what these consequences are.

You’ll Eventually Have to Pay More

Skipping one or two years of paying taxes because you just don’t feel like it is not something that will slip by the IRS. It’s important to note that this is different than situations where you file taxes and just aren’t able to pay all that you owe. Doing so will only serve to add to the amount that you eventually have to pay once you decide to pay your taxes again. While the standard deadline for filing taxes is April 15th, you can always choose to file Form 4868 as a means of asking for a 6 month extension on the due date for your taxes.

If this isn’t done, the penalties won’t involve anything like jail time, but you will be subjected to a large amount of fees the next time you do file. If you don’t file, you will eventually receive a letter from the IRS detailing the amount of taxes that you owe, complete with a penalty fee and an interest fee. Interest rate accrues over time and is set to the federal short-term rate, as well as an additional 3 percent in interest of what you owe.

Your Credit Score Could Be Affected

Once you have reached a certain amount of back taxes from not paying, generally around $10,000, a lien will be placed on the property you own, which is typically a house. A state tax lien could also be provided to you upon failing to pay state taxes. If this happens, the lien will appear on your credit report and will dramatically affect your credit score for the worse. While this doesn’t necessarily mean you won’t be able to get a loan, it does mean that the loan will likely have a high interest rate.

Your Monetary Livelihood Could Take a Big Hit

Though it’s difficult to go to jail unless the government deems that you are trying to defraud it, which doesn’t usually happen unless you’re rich, you will still face the possibility that your property will be seized or your wages garnished. Once you start to file again, any return you would have received will go straight to the IRS, while you will have to pay interest for any money you still owe. If you have to, try filing Form 9465 in order to settle on a monthly payment for the taxes you owe. This should only be done if you don’t have the ability to pay back the full amount of what you owe.

You’ll Waste Time Trying to Fix the Situation

Even if you’re quick to change your mind on paying your taxes and decide to do so, filing late will still bring with it a whole host of problems that typically requires a tax professional to properly fix. As such, this will invariably cost you time and money that could have been better used elsewhere.

Posted in Tax Law |

Economics of Valentine’s Day

According to a popular 2015 media news report, Americans spent $17.3 billion in 2014 on jewelry, flowers, candy and other Valentine’s Day gifts. In 2015, it was expected to rise to $19 billion. Interesting statistics on Valentine’s Day spending include:

  • The average amount spent is $142.31 by most individuals
  • $96.63 is the average expected to be spent on spouses or a significant other
  • Americans, age 35 to 44 will spend the most
  • Less than half the seniors over the age of 65 will celebrate Valentine’s Day

Facts and Figures of Valentine’s Day Spending

While the jump in spending for Valentine’s Day from 2014 to 2015 is just 2% higher, it does show that even in economically austere times, Valentine’s Day gifts are considered an important symbol of love and/or generosity. Interviews of average individuals by journalists show a slightly different attitude about this particular day. Single men, even those engaged or about to be, consider the expense of Valentine’s Day to be out of control. Single women feel it accentuates their lifestyle as devoid of romance.

The Best Economical Strategy for Valentine’s Day

The depth of expense on Valentine’s Day depends on individual financial resources. Those who feel the celebration of this day has become too commercialized may want to consider other strategies to reduce the economical burden without appearing too mercenary.

The best economical strategy for Valentine’s Day is to consider the recipient of the gift and their particular ideas about this day. For some spouses, a quiet evening together at home with a nice dinner and candlelight might be a better choice than spending $150 for a dozen red roses.

According to one major media source, a 50% hike in the price of roses can be expected on Valentine’s Day in 2015. Jewelry is another costly expense that ranks No. Two, in terms of most popular gifts. Jewelry prices rise 35% around Valentine’s Day. The strategy to use here is to determine if jewelry is necessary or the cost spent on jewelry could be better spent on a special, more memorable evening at a favorite restaurant, concert or other event.

Candy is the other pricey gift most popular on Valentine’s Day. It ranks No. 3 among most popular gifts. Chocolates, ornately packaged, are the top choice. Imported and hand turned chocolates can cost nearly $50 for a single box.

Single is Better on Valentine’s Day

For spouses and those with significant others, the aura of expectation of Valentine’s Day gifts can be quite costly.

Perhaps, single is better. Florists are claiming there’s been a rise in orders for black roses for those about to shed partners. Single is more economical on Valentine’s Day. It can be a wonderful day for singles to be good to themselves. Singles should use the day to treat themselves to things they may have wanted, but never got around to doing or buying. Singles can enjoy a quiet interlude at a luxury spa or plan a special dinner. Nothing precludes a single’s ability to lavish themselves on Valentine’s Day with a box of chocolates, flowers or a piece of jewelry in their price range. In effect, busy singles might arrive at the realization Valentine’s Day is not just a day for couples. It can be the one day singles celebrate being single.

Posted in Economy |

The Advantages and Disadvantages of a Company Buyout

There may come a time when the management of one company considers giving a buyout offer to another company. There will probably be many advantages and disadvantages on both sides. Several things must be taken into consideration for this to be successful. The agreement should be structured so the needs of both companies are met. Neither side will get everything they want or be required to give up everything. All the pros and cons of a company buyout need to be carefully considered on both sides.

ADVANTAGE: Gaining New Products Or Technology

There are situations where an established company desires to purchase a smaller company that has developed a very promising new product or technology. This can quickly benefit each company. The smaller business will have access to more and better resources. It will also be able to offer its products or technology to a larger customer base. The larger business will be able to incorporate new products or technology into their existing product line. This can be done without paying to license the acquired company’s product or technology.

DISADVANTAGE: Increased Debt

It’s possible the larger company may have to borrow money to acquire the new company. This will change their debt structure and increase any loan payments on the books. This also can require a company to make drastic cuts in their expenses. It may require layoffs or selling another part of the business to remain profitable. The money a company uses to buyout a business also takes funds away from any in-house product development.

ADVANTAGE: Reduced Competition

When a business is able to purchase its competition, it is able to increase its profits. The buyout will provide them with an increased scale of economics. It will also eliminate the need to participate in a price war with the competition. This can have a positive impact on customers if they experience decreased prices for a company’s products or services. Less competition means a business can spend more time expanding.

DISADVANTAGE: Loss of Key Personnel

Company buyouts can be viewed as a time for founders or key personnel to leave for a new challenge or retirement. Depending on their contract with the business, they may sell their interest to the company or an outside business. It can be a challenge for a company to find individuals with the same level of knowledge and experience. This may cause a period of adjustment that could be hard on the business.

ADVANTAGE: Increased Efficiency

A buyout may do away with any areas of product or service duplication between businesses. This could lead to a raise in profits resulting from a decrease in expenses. The companies involved in the buyout will be able to compare their processes and choose the best one. The newly formed company will be able to get better prices for products, insurance and more. Office spaces and other working areas can be combined for additional cost savings.


It will take time to integrate the procedures and personnel of one company into another. The two companies may do similar things but have very opposite corporate cultures. Resistance to change is a very real thing in the business world. It has been known to cause serious problems. Unless there is a plan to address integration issues, it could take a long time and become costly. It could lead to a loss in productivity and have a negative impact on the newly formed business.

Posted in Buying or Selling a Business |

The Two Tiered Economy Emerging in the U.S.

Income inequality in the U.S. is continuing to expand, and the issue is beginning to attract widespread attention. Although the country’s economic recovery has prompted more discussion about the conspicuous income gap, it is really a continuation of a trend that existed before the recession. The trend is, however, growing undeniably stronger since the recovery. As these conditions persist, a two-tiered economy that shrinks the middle class is emerging.

The Privileges of Wealth

Many factors have contributed to the growing wealth gap, and they have created a powerful trajectory that will be difficult to alter. Privatization and the perpetuation of deregulation have stimulated income growth for the wealthiest sectors, and this has increasingly strengthened their influence over political and economic policies. Money, power and influence have naturally made it easier for the wealthy to advance their own interests.

To further widen the wealth gap, the outsourcing of jobs to nations offering cheap labor has driven profits to the wealthiest sectors, leaving workers at home scrambling for sources of income. Companies raking in record profits are also following a trend of holding cash rather than reinvesting it. This funnels incomes to shareholders in the short term, but it stagnates opportunities for the workforce and the economy.

The wealthiest sectors also have access to avenues of income that are closed to other segments of the population. The middle and working class families with their wealth tied to their home values suffered devastating losses in the recession, but affluent Americans with wealth invested in stocks, mutual funds and complex investment vehicles rebounded tremendously and continue to prosper.

Impact on the Middle Class

As the rich get richer and the poor get poorer, many members of the middle class find themselves sinking into the poorer classes. In an economy that requires money and influence to succeed, the declining wealth of the middle and poorer classes means fewer people have the opportunity to elevate their economic status. Higher education and financial investments, two of the major resources used for income improvement, are increasingly out of reach. The decline of income that perpetuates a deterioration of opportunities has become cyclical, and the solution is fast becoming a matter of debate among economists and policymakers.

What the Future Might Hold

Rather than a thriving economy creating a strong middle class, it is a strong middle class that ensures a thriving economy. Buying power from only one small segment of the population does not nurture a healthy economy, even if that small segment is wealthy. To flourish, an economy requires a robust middle class. When an economic system features a strong middle class, it has a broad sector of the population to spend money in ways that are productive for the economy as a whole.

Unless policy making begins to address the income gap, the population will have gradually less effective spending power. In this case, impaired growth for the entirety of the economy will be inevitable. An economic system that performs poorly is also linked to environmental decay, increased crime rates, and declining health of the people. History has not been kind to societies with significant economic stratification. For a rosier outlook, the opposing political ideologies currently responsible for policy making will have to acknowledge the causes of the wealth gap, and they will need to put aside the polarization that allows it to persist.

Posted in Economy |

President’s State of the Union Address and the Economy

On January 20th of 2015, President Barack Obama gave his traditional State of the Union speech to the nation. The speech covered a number of topics, ranging from education to immigration. His thoughts regarding the economy provided a number of statements and proposals:

Economic Recovery

Unlike previous occasions in which the President downplayed the improving economic numbers, in his recent speeches, he enumerated the individual data points indicating that the “shadow of the crisis has passed.” He touched these specific facts:

  • The national unemployment rate is now at 5.6 percent.
  • No sign of inflation threatens the economic picture
  • Gasoline prices are down to $2 per gallon, helping the recovery.
  • Consumer sentiment is improving as more people return to work.

Educational Access For New Jobs

To counteract stagnant wages that have beset the country, the President hopes to increase training that will help to prepare workers for better paying jobs in today’s highly technical workplace by offering free community college for students who keep a 2.5 grade point average and graduate on time.

Proposals To Boost the Middle Class

President Obama proposed legislation to require sick pay for the 43 million American workers who do not yet have it, noting that loss of wages during minor illnesses negatively impacts many American families’ financial stability and affects the health of workers across the nation. He also proposed tripling the child tax credit to $3,000, and increasing the federal minimum wage.

Increased Taxes on the Wealthy

One of the President’s proposals asks for a higher tax on long-term gains, such as stocks held for more than one year. In 2014, the maximum tax rate on these investments was 23.8 percent. The President would raise this rate to 28 percent. In addition, he would eliminate the step-up inheritance tax loophole that allows stocks that increase significantly in value to pass on to heirs without taxation of their increased value. However, capital gains of $100,000 for individuals and $200,000 would be tax-free.

Infrastructure Building and Repair

The nation’s infrastructure is in serious disrepair, and the President hopes to correct this problem with a comprehensive bill that would modernize ports, build high-speed rail systems and expand broadband connection to all cities. The President downplayed the building of the Keystone XL pipeline as a significant infrastructure project that would help to create more jobs for Americans.

Trade Policy

One area that President Obama is likely to get more support from the opposition party is on trade. He emphasized the importance of fast-tracking two trade deals that are currently under consideration, one involving the Pacific Rim countries and another involving countries around the Atlantic. Some secrecy surrounds the details of these trade deals, which has made them controversial even in the President’s own party.

The Republicans in Congress, who hold majority votes in both houses, are likely to be a stumbling block for implementation of many of these proposals. However, they may have to contend with significant public support of the programs that would help the vast majority of Americans.

Posted in Economy, Tax Law |