www.waltonsun.com
June 19, 2010
Dan Duncan, the richest man in Houston, Texas, recently died and his estate, valued at $9 billion, has no estate tax liability. Some people express outrage at the bonanza, but Mr. Duncan did include sizable bequests to many charitable organizations. In addition, there is a capital gains tax liability on the inherited assets, so temper your indignation.
National Public Radio took a different approach on the story. Rather than directing fury toward Mr. Duncan?s heirs? good fortune, NPR compared their situation with folks a bit farther down the income ladder. Specifically the IRS has launched a program designed to tighten up the under-reporting of cash tips targeting servers and bartenders.
To put it mildly the incongruence is striking
.
NPR?s John Dimsdale reports that the IRS estimates 200,000 tip disclosure forms are due annually contrasted with the 50,000 actually returned. Smelling blood in the water, the IRS is increasing its audits and has implanted procedures to identify non-filers. Cash transactions have always been targets of opportunity for tax avoidance. In my business, yielding to this temptation is a non-issue, receiving cash for services or for an investment is prohibited. However, according to NPR, 40 percent of tips are cash and to quote Deep Throat, ?Follow the money.?
At first glance, this logically appears to be the equivalent of trying to kill a mosquito with a shotgun, but then I remembered how the Georgia Department of Revenue zeroed in on underreporting of sales tax revenue by beer joints.
Georgia has way, way too many Baptists ? who like the Republican nominee for Harry Reid?s Nevada Senate seat ? do not appreciate spirituous beverages. Therefore, one finds a preponderance of emporiums scattered throughout Georgia where selections are limited to beer, hence the moniker ?beer joints.?
Many budding entrepreneurs attempting to boost their bottom line would fudge sales tax revenue. The Revenue Department would compare sales tax revenue with wholesale beer purchases that conveniently are reported to the Revenue Department. Scofflaws would then find an assessment from the Georgia Department of Revenue in the mail if the numbers did not jibe.
It gives me great pride that the Walton Sun scoops NPR, but Mr. Dimsdale lacks my perspective. Rather than singling out individuals, what I anticipate is that the IRS will compare total restaurant sales with tips reported. The IRS?s focus is likely restaurant owners rather than staff. While the IRS declined to speak with NPR, I speculate this could be their tact. If this is the game plan, then restaurants and bars will be forced to provide additional documentation and face increased scrutiny.
Restaurants along 30A cannot seem to catch a break. First, there was the worst economic decline since the Great Depression coupled with a dizzying collapse in real estate prices, followed by a looming ecological disaster. Now the IRS could potentially be looking over their collective shoulders.
Tax Analysts www.taxanlysts .com is a worldwide leader in tax news and analysis. Their spokesperson Chris Bergin points out that the huge deficit the United States is running is changing the dynamics. ?The IRS is under political pressure to close what?s called the ?tax gap? (the difference between taxes owed and taxes paid) and go after people who are not paying their taxes.?
It?s all right, mama, your son potentially scooped NPR. He could not have done it if he had stayed out of honkytonks. His CFP designation helped, too.
?Close up the honkytonks, throw away the key and maybe the one I love will come home to me.?
Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@ LivingstonFinancial.net .
June 19, 2010
Dan Duncan, the richest man in Houston, Texas, recently died and his estate, valued at $9 billion, has no estate tax liability. Some people express outrage at the bonanza, but Mr. Duncan did include sizable bequests to many charitable organizations. In addition, there is a capital gains tax liability on the inherited assets, so temper your indignation.
National Public Radio took a different approach on the story. Rather than directing fury toward Mr. Duncan?s heirs? good fortune, NPR compared their situation with folks a bit farther down the income ladder. Specifically the IRS has launched a program designed to tighten up the under-reporting of cash tips targeting servers and bartenders.
To put it mildly the incongruence is striking
.
NPR?s John Dimsdale reports that the IRS estimates 200,000 tip disclosure forms are due annually contrasted with the 50,000 actually returned. Smelling blood in the water, the IRS is increasing its audits and has implanted procedures to identify non-filers. Cash transactions have always been targets of opportunity for tax avoidance. In my business, yielding to this temptation is a non-issue, receiving cash for services or for an investment is prohibited. However, according to NPR, 40 percent of tips are cash and to quote Deep Throat, ?Follow the money.?
At first glance, this logically appears to be the equivalent of trying to kill a mosquito with a shotgun, but then I remembered how the Georgia Department of Revenue zeroed in on underreporting of sales tax revenue by beer joints.
Georgia has way, way too many Baptists ? who like the Republican nominee for Harry Reid?s Nevada Senate seat ? do not appreciate spirituous beverages. Therefore, one finds a preponderance of emporiums scattered throughout Georgia where selections are limited to beer, hence the moniker ?beer joints.?
Many budding entrepreneurs attempting to boost their bottom line would fudge sales tax revenue. The Revenue Department would compare sales tax revenue with wholesale beer purchases that conveniently are reported to the Revenue Department. Scofflaws would then find an assessment from the Georgia Department of Revenue in the mail if the numbers did not jibe.
It gives me great pride that the Walton Sun scoops NPR, but Mr. Dimsdale lacks my perspective. Rather than singling out individuals, what I anticipate is that the IRS will compare total restaurant sales with tips reported. The IRS?s focus is likely restaurant owners rather than staff. While the IRS declined to speak with NPR, I speculate this could be their tact. If this is the game plan, then restaurants and bars will be forced to provide additional documentation and face increased scrutiny.
Restaurants along 30A cannot seem to catch a break. First, there was the worst economic decline since the Great Depression coupled with a dizzying collapse in real estate prices, followed by a looming ecological disaster. Now the IRS could potentially be looking over their collective shoulders.
Tax Analysts www.taxanlysts .com is a worldwide leader in tax news and analysis. Their spokesperson Chris Bergin points out that the huge deficit the United States is running is changing the dynamics. ?The IRS is under political pressure to close what?s called the ?tax gap? (the difference between taxes owed and taxes paid) and go after people who are not paying their taxes.?
It?s all right, mama, your son potentially scooped NPR. He could not have done it if he had stayed out of honkytonks. His CFP designation helped, too.
?Close up the honkytonks, throw away the key and maybe the one I love will come home to me.?
Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@ LivingstonFinancial.net .