New Hampshire Resident Pleads Guilty to Tax Evasion Scheme

December 20, 2017  |   Posted by :   |   Tax Evasion   |   0 Comments

New Hampshire tax payer Gary P. Borak will serve 2 years in federal prison pay $168k in restitution to US government and have 3 years of supervised release or defrauding the US treasury out of $168k taxes due.

Taxpayer amended 2007 and filed delinquent tax returns for 2008 (but never filed 2009 thru 2016).

Taxpayer listed bogus claims on his tax return to receive refunds and pleaded guilty to one count of tax evasion and two counts of making false statements on his tax returns (which are separate felonies for tax crimes; in addition the tax returns filed, if false tax returns are additional felonies).

So the taxpayer has effectively admitted to multiple separate crimes which were charged: tax evasion and making false statements on his tax returns. Additional felonies apparently not charged separately may include: filing false tax returns (3 year felony), obstruction of tax collection (3 year felony).

The IRS position is they are aggressively pursuing these types of cases. In the words of Joel Garland, IRS Criminal Investigation Division, “Our voluntary system of self-reported tax liability depends upon people to honestly report their income. Those who willfully file false tax returns and obstruct the IRS in their collection efforts damage our nation’s system of taxation.

Violators will be prosecuted, punished and obligated to repay the taxes along with applicable penalties and interest, which are substantial.”

Please click here for complete article.

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Annuities and Life Insurance

December 18, 2017  |   Posted by :   |   International Tax Planning   |   0 Comments

Annuities and Life Insurance get a “bad rap” because the commercial products that are sold to the general public lack “NET ROI”  (return on investment) due to costs, fees, and varied returns annually.

Life Insurance Cash Value has highly favorable tax rules which includes no tax due on earnings (while held in the cash value component of the policy), no tax reporting due on annual earnings and no tax on policy earnings withdrawn as a loan, as long as the policy is funded over 5 years as a NON-MEC.

Cash Value buildup is a sophisticated investment tax planning strategy used by Walt Disney (who used his policy cash value loan to finance his dream of opening his theme park DISNEYLAND); Max Foster (who used his policy cash value to purchase an 80 acre Modesto, CA farm which has grown into Foster Farms one of America’s largest chicken providers).

Wells Fargo Bank, America’s 3rd largest, carries over $30B in cash values of life insurance on their corporate books.

For the Global High Net Worth (HNW) Investor a far better tax planning strategy is to use Private Annuity (”PA”)/Private Placement Life Insurance (“PPLI”) to act as two separate tax-planning strategies for the client’s stock and bonds investment portfolio.

Tax Planning benefits for investors include: tax- free annual compounded earnings, no annual earnings reporting Form 1040 tax returns (not reportable as income unless withdrawn from PA), no disclosure of offshore PA or PPLI

Required under IRS form Fincen Form 114 (FBAR) for foreign bank and financial accounts over $10k; or FATCA Form 8938 for foreign financial assets over $50K (which also may require separate FBAR filing).

When combined, the PA/PPLI tax planning strategy for investment portfolios offer portfolio earnings both tax deferral (PA) and tax exempt returns (PPLI; which if a NON-MEC has tax free earnings).  For example, client sales stock held under the PPLI with a $5m capital gain.

Normal long term capital tax in Cal is 34% (blended Federal/CA tax rate) so tax of $1.7m is due on sale. If held by the PA at the time of sale, the tax is $0 (tax savings $1.7m).

No tax due until funds withdrawn from PA but while funds are in PA they compound tax deferred. If the PA then takes the $5m to fund the PPLI (NON-MEC; funded over 5 years) so both the basis and earnings may be withdrawn tax-free (i.e. basis withdrawal of amounts invested in PPLI is tax free, earnings borrowed out as a tax free loan repaid on a leveraged basis; premium paid for death benefit received).

Effectively, on a $5m policy premium ($1m per year), $1.7m of the premium paid (34%) is free $ (paid from capital gain tax savings). Please see my Lorman Education Services article, Doubling Net Investment Returns.

The key to the tax planning is annual, compounded, net tax-free earnings (both the PA and PPLI). Under the tax planning strategy, a client’s portfolio (e.g. $10m) annual earnings (e.g. at 10%; $1m per year) are taxed at $0 per year (unless withdrawn as an annuity at which time earnings are subject to tax). If taxed at 55% (highest blended Federal/CA tax rate), net after tax return is $450,000 ($1m -$550,000). Under the Tax Planning Strategy the net after tax return is $1m (and the additional amount i.e. $550,000 tax savings compounds tax deferred).

In the words of Albert Einstein Compounding is the 8th Wonder of the World.

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10% US Excise Tax

December 11, 2017  |   Posted by :   |   Excise Tax   |   0 Comments

I propose a 10% US excise tax on the commercial sale of addictive, socially useless, taxpayer financed products. These include: Junk Food, Tobacco, Gambling, Prostitution, and Pornography.

“What Prohibition Proved is there can be no way to stop people from doing what they want to do…” – Jimmy Breslin: Damon Runyon A Life

So, what to do:

1. Take a clear-eyed view and see the problem which are the costs to American taxpayers for the commercial sale of addictive consumer products;

2. Impose a 10% excise tax paid to the US government at the time of sale;

3. Use the funds to offset lost revenue from my American Tax Plan for elimination of the corporate income tax, increased size of estate/gift tax exclusion to $25m per US taxpayer, deductibility of payroll taxes (for workers), and making the first $20,000 in income not subject to US income tax (a tax break for all US taxpayers which tax savings may stimulate the US and State Economies.

Regarding the out of control hard drug problem in the US, legalize and tax Cannabis and use the revenues (earmarked) for drug treatment and rehabilitation, first responders, security for our borders from drug trafficking to counter the overwhelming national surge in death and health trauma from heroin, opioids, cocaine and other hard drugs. Turn security over to private contractors working with US educational institutions and State/Local Governments who will create a national security system including video cameras, databases of felons, and local community based policing to eliminate crime infested local areas.

Use targeted tax credits (20% of amount expended) to promote American business internationally (in export zones), inventions (research and development), infrastructure renovation and improvements for roads, bridges, airports, train stations, hospitals, and schools (including state parks throughout America and inner city gardens both edible and otherwise).

Establish a US Sports & Art Authority with 3 subdivisions : Training programs for Sports with Equipped Gyms nationally (that all Americans can use), Technology (Computer/Internet Training Skills) and Worker Retraining for new careers in technology, Art & Music, Literature & Film.

The geography may best work with a template which includes the following:

1. Federal purchase of State Land. A one mile (or more) area is created for a US Export Zone to include the establishment of a Park/Gym, separate facilities for each of the US Sports & Art Authority (3 separate buildings), a day care center for children (with both an indoor component and outdoors, too). All privafe companies who participate may benefit from the targeted tax credits (which also apply to wages paid in these designated areas)

2. US taxpayer designates that up to 25% of their tax payment be allocated to the US Sports and Authority (by checking the box and putting in the % of their contribution eg. on a $10,000 tax paid ; 25% allocation would be $2500 of the tax earmarked by the taxpayers to be paid directly to fund the national Sports and Arts Authority that receives federal block grants and in turn pays them over to the states under a stated formula;

3. The genius of America is when we all “row together”. The inspirational US template of government, higher education, business, labor and community leaders have created an economic miracle in Silicon Valley, CA. Duplicating it across American seems highly timely now. Exports of US products globally becomes the key metric to go from where exports are now 13% of the US GDP (which means 87% of all US made products are sold in the US) to over 50% of US GDP, which quadruples global sales (which given that the US has only 5% of the World’s population is GOOD MATH). Many jobs are created in the US since the products have to be at least 50% US made or no export tax credit.

4. The most successful Public/Private Partnerships to Finance America and create new inventions is Silicon Valley, CA. The “Silicon Valley” miracle should be considered on a state by state basis where the US government authorizes an annual block grant from funds allocated from the 10% US excise tax to go to states based on two criteria: #1) Population #2) Economic Needs so the economically challenged areas in the US are the priority recipients.
States determine how the block grants are distributed in their states under agreed guidelines.

5. Establish an internet US Best Practices Database in which an on-line community posts a Bulletin Board of Best Practices nationally. For example, which city airport has the best customer check in, on time flight arrival and safety… These types of Best Practices affect all industries so each industry should have its own Page on the National Bulletin Board.

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An American Tax Plan

December 04, 2017  |   Posted by :   |   Income Tax   |   0 Comments

In response to numerous inquiries I have decided to offer my response to the current proposed tax legislation, which is projected to add over $1 Trillion to our national debt (currently over $20 Trillion).

The current proposed tax legislation is just a new version of the 1986 Tax Act, which was a complete and unmitigated disaster. When President Reagan took office our national debt for our first 200 years as a nation was less than $1 Trillion ($994B), when he left office it was nearly $3 Trillion ($2.9 Tr).

In the words of former Vice-President Dick Cheney, “Reagan proved deficits don’t matter.” This misguided tax strategy has cost our country dearly- out of our $3 Trillion annual budget for America nearly $1 Trillion is for interest on the national debt which is the biggest budget item.

The root cause of this tax miscalculation is that Congress continues to debt finance our country’s needs. Politicians in Washington cannot agree on any key issues regarding spending vs. taxes. It is best to remove them from the equation and adopt an American Tax Plan.

What follows is my recommendations which I hope will start a national dialogue and lead to a true bi-partisan tax bill.

An American Tax Plan

1. Congress enacts a Balanced Budget Amendment to the US Constitution and requires all budgets be balanced so there will only be surpluses (no more deficits). There may be a force majeure exception for wars and disasters.

2. No income tax on first $20,000 in income (per taxpayer). Gives all Americans tax breaks, which will especially help low and middle class income taxpayers and those affected by higher health insurance premiums.

3. Payroll taxes paid are an income tax deduction, which will help all working Americans.

4. The corporate tax is eliminated (if S-Corporations, Limited Liability Companies, Partnerships which are all taxed as pass-thru entities do not pay tax, why should C-Corporations?). This one provision alone will ignite national investment, economic activity and make the US the most competitive business environment in the world.

5. The federal estate and gift tax exemption is increased from $5.49m to $25m per person to encourage inter-generational wealth transfers immediately and have the funds circulate and boost our economy.

6. The bulk of tax revenues come from individuals (not corporations or estates). These federal tax revenues may be more than replaced by imposing a 10% national excise tax on addictive consumer products which are sold by stateless, multi-national corporations who reap huge profits while sickening consumers and sticking the American with the bill. How much does it cost America in health care, family trauma, first responders for junk food (which kills more people than tobacco), tobacco (which kills more than 50,000 Americans yearly), gambling, prostitution (yes escort services are prostitution) and pornography. What social or national purpose do these products serve?

7. Legalize and tax Cannabis and earmark these funds to attack the national crisis for pills, heroin, meth and others.

8. Follow President Reagan’s excellent strategy to allocate tax credits to achieve national objectives. Separate tax credits for monies spent for inventions (research and development), infrastructure repairs (roads, bridges, ports, airports, buildings); additionally areas include: export tax credits for products made in the US (at least 50% US made), worker job retraining and revive the Work Progress Administration (from President Roosevelt) to include: sports and art.

I welcome all comments and would appreciate if you would tell your elected officials that you agree and want them to get to work and stop engaging in foolish, ineffective policies, which are bankrupting our great country.

“Ask not what your country can do for you, ask what you can do for your country.” ~John F. Kennedy

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DMX Pleads Guilty to Tax Fraud, Faces Jail Time

December 01, 2017  |   Posted by :   |   Tax Evasion   |   0 Comments

Rapper also known as Earl Simmons admits he hid millions of dollars in revenue in order to dodge $1.7 million in taxes

See complete article at thewrap.com

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