The New "myRA" Savings account

As America ages the concern for adequate retirement savings provided my taxpayers themselves is an important concept.In his State of the Union address, the president talked about creating a new retirement savings vehicle called a “myRA”. This new savings idea is designed to be a simple and affordable “starter” savings account to help low and moderate income taxpayers save for retirement. The president through executive action has directed the Treasury Department to create this retirement savings vehicle. Approximately half of all workers and 75% of part-time workers are not included in employer sponsored retirement plans. The myRA will be available to these employees and is intended to help taxpayers save for retirement. The principal protection of these plans is that the account balance will never go down as such accounts will be backed by the US government similar to savings bonds. There will be no fees associated with contributions and tax-free withdrawals will be permitted at any time. These accounts are to be portable and taxpayers will have the option of rolling them over into private sector retirement accounts. The account will earn interest at the same variable interest rate that federal employees receive through the Thrift Savings Plan(TSP) Government securities investment fund. Taxpayers can start such an account with an initial investment as low as $25 and contributions as low as five dollars can be made through automatic payroll deductions. Participants can save up to $15,000 in their myRA account before transferring the balance to a private sector IRA. These accounts will represent little or no cost to employers since employers do not administer nor contribute to the accounts. A my RA pilot program will begin later this year and will be available nationwide in 2015.

Getting to Success

Success is a destination that most anyone can reach. It's not on any screen and no app yet will get you there. After 40 years of practicing law and 32 years teaching in the University and studying the subject from many angles I here present a road map to actually getting to success:

A positive attitude is essential; Are you a pessimist?

A positive attitude can be learned. (See: Learned Optimism-Seligman)

Set specific goals; use posted notes; create positive affirmations; recite them daily

Watch what you feed your brain; news programs are problem based not solution based.

Obtain self help books and tapes; listen to them in your car; admit the problem is you

Culture a sense of humor

Watch who you associate with; who are your real friends?

Create a "salon"- Hang out with smart people

Write, plan and learn. Keep a journal; Develop your creativity

Do what you love one hour a day for a year; you will be amazed at the results.

Most college courses do not train for success; Seek out those that do! Demand that they be taught!

Take personal control and responsibility for your own success.

Spend 30 minutes a day learning new things

The reality is, most people do not really want to do the work to succeed

IRS Dirty Dozen Tax Scams: #1 Identity Theft

Now that the 2013 filing season has officially begun the IRS has recently published its now infamous “Dirty Dozen” tax scams. An accountant friend of mine was concerned for an official looking correspondence received by a client purportedly from the Internal Revenue Service. I will admit that the fraud in preparing the document had been well-planned and executed. Nonetheless, closer scrutiny of the language and threats used made it crystal clear that it was one of the tax scams the IRS is concerned about. This year's list includes the most important scam development in recent years: Identity Theft. This occurs when someone uses personal information as such as a client’s name, social security number or other identifying information. This fraudulently obtained information is then used to file a tax return and claim a refund. Honest taxpayers often do not discover this problem until they go to file their own valid tax returns. IRS has included on its website entire sections devoted to the problem including a YouTube video. The website also provides information on how to contact the IRS identity protection specialized unit. Along with identity theft is the use of telephone scams. Preying often on elderly taxpayers purported IRS collection agents threaten immediate levy and seizure action on taxpayers bank accounts if payment of an outstanding tax liability is not made immediately by credit card. In a ridiculous attempt to scare people into action and payment these telephone scams often include a threat to revoke the taxpayer’s drivers license. In many cases follow-up calls are made by what appears to be local police officers inquiring about the tax debt and driver information. Return call phone numbers very similar to the real thing are provided with tax scammers ready to answer at the other end. Taxpayers may also receive fake e-mails directing them to a fraudulent though convincing IRS website where valuable personal information is requested. Also included in the list is outrageous claims of free money from tax return preparers. Often the earned income credit is the tool used. Taxpayers should be cautioned that they remain responsible for deductions and credits claimed on their own tax returns even though prepared by what appears to be a legitimate tax return preparer. Of the other dirty dozen, many on the list for several years are: Hiding income offshore, impersonation of charitable organizations, false income expenses or exemptions, promoters of frivolous tax scheme arguments, falsely claiming zero wages or using false forms 1099, abusive tax structures and misuse of trusts.

New Jersey On Line Gambling

       I have traveled some in my day, but I still love New Jersey. In what other state do people slap bumper stickers on their cars referring to the exit where they may either live or play on the Garden State Parkway? And is it any accident that Tony Soprano made his home in New Jersey? So my chest understandably swells with pride as New Jersey began allowing Internet gambling just a few weeks ago. Now insomniacs can waste away every paycheck with but a few clicks. People who once stood idle in supermarket checkout lines can now try their hand at a bit of blackjack or roulette. Even you, poor reader, may choose to read a few words of this meager blog while at the same time rolling virtual dice at your favorite casino. The New York Times reported that gambling analysts say that turning to the Internet was the most significant development since casinos opened in Atlantic City and that New Jersey's action has set off a furious competition for a share of the take. The “Take”? This certainly sounds like a script Al Capone would have published from Chicago. Let's make no mistake about this either we are not just talking about “harmless” poker. Oh No. New Jersey now offers a full range of casino games. Gov. Christie said that he hoped that $1 billion would be generated for the state's casinos this year and the state’s "take"would amount to $150 million in tax revenue. Naturally, the naysayers believe that Christie's comment was a sucker's bet and that in reality the state will be lucky if $300 million and revenue of perhaps $45 million appear annually. Gamblers do not seem to see the money that they are throwing away as a tax. Those who gamble frequently are always losers. The gaming industry has made sure that the suckers out number the winners by a drastic proportion. It remains to be seen whether New Jersey's laws restricting gambling to people over 21 can be enforced and whether casual gambling by young people will become as prevalent as sending text messages while driving. But there is a winner, a sure winner, in all of this and it is not New Jersey's educational institutions. It is of course, the Internal Revenue Service. Federal tax law taxes income from whatever source derived. By the way, that means legal or illegal. So should there be any winners among the state’s “Click and Play” citizens, they will be taxed on the income generated from their activity. They will be able to deduct their gambling losses only to the amount of their gain. Put another way, the real suckers will be left out in the cold by the tax code but IRS will be standing there collecting its" take" on any winnings. I would write more about this subject, and how gambling is a ruinous activity but I would bet 6 to 5 that you get the point.

Bitcoin Revolution?

 Your brother-in-law told you to buy Apple when it was selling at $40 a share. You didn't listen, and he reminds you of the fact at every family gathering. Well, if you've been reading this blog diligently you learned some time ago of the “bitcoin” revolution. The bitcoin is a money alternative. You may have initially heard about this from your computer savvy child or in some cases, grandchild. The bitcoin is a virtual currency, of which I know little. But I do know this. Its value is doing much better than Apple. So if you would like to remove the stigma of failing to heed your brother-in-law's advice, listen up. For example, since 2012 when its value was nearly worthless the price of a bitcoin on an exchange that converts the currency to dollars rose to $780 on Monday, November 18, 2013. When first introduced, federal regulators were worried that the bitcoin would undermine the entire financial system in America. Now the tune has changed. In recent hearings before the Senate, a number of federal officials said the bitcoin may offer real benefits to the financial system even as they acknowledge, according to the New York Times, that the new form of digital money had provided avenues for money laundering and illegal activity. It appears that the government is not willing to stand in the way of the bitcoin development. This suggests that the bitcoin could become a lasting and significant part of the American financial landscape.  By the way, you can tell your brother-in-law to keep his Apple stock and that you are now into the bitcoin revolution or you can just wait for the next big thing to come down the pike. By next year who knows the bitcoin may be alongside the hoolahoop, a collector's item but no more. Already a number of new money alternatives are showing up and more will surely follow.

Undisclosed Foreign Bank Accounts

The Undisclosed Foreign Bank Account and the IRS          

The first version of the Broadway show “Evita” made its way to Broadway in 1979. The revival of the show in 2012 was a hit as was the movie starring Madonna. From that show, portending perhaps future IRS action, was the song called “And the Money Kept Rolling In”, lyrics by Tim Rice. For those who may have missed the production, the story of Eva Peron is classic. She was the second wife of Juan Peron, dictator of Argentina. She became famously loved by her Argentinean constituents for the Peron Foundation which extracted money contributions which were then given by Eva to the poor and destitute. Only an application to show need and her approval was required. One verse of that song is particularly appropriate for the current melee surrounding foreign bank accounts and the failure to properly report their existence and any tax required to be paid to the IRS.

If the Money keeps rolling in, what's a girl to do?

Cream a little off the top for expenses, wouldn't you?

But where on earth can people hide their little piece of heaven?

Thank God for Switzerland!

Where a girl and a guy with a little petty cash between them

Can be sure when they deposit no one's seen them

Oh, what bliss to sign your checks as 30127

Never been an account in the name of Eva Peron!!

                                                                                                                                                           

And so it was for many years, whether Americans were using these foreign bank

accounts for their convenience when working overseas or as their little piece of heaven

individual clients and their lawyers and accountants will have to determine. But the

secrecy surrounding the Swiss bank account has been broken. The IRS through an

informant laid rest the magic numbered bank account. The now famous case involves the Swiss bank called UBS. Threatening IRS criminal action against the bank UBS turned over the names of more than 4000 US taxpayers who had maintained Swiss bank accounts. More banks have been leaned on by the Internal Revenue Service and the government of Switzerland has vowed its cooperation with the Internal Revenue Service. Other countries have followed suit and more are likely to agree to cooperate with IRS under threat of IRS action against them.

IRS soon realized it had hit the tax mother lode. But instead of attempting to assign numerous agents to ferret out these undisclosed bank accounts the agency decided instead to create a voluntary disclosure program called the “Offshore Voluntary Disclosure Initiative”. It has been wildly successful and has brought in over $5 billion in taxes, penalties and interest from approximately 35,000 cooperating and scared taxpayers. The teeth in the IRS program is the potential for criminal exposure. Having a foreign bank account may be one thing, but spending time in a federal penitentiary as a consequence is an entirely different matter. As news of the breach in the wall of silence in Switzerland began to spread and the resulting cooperation of banks and securities firms overseas, clients began showing up on we lawyer’s door steps.The pace of investigation will not soon abate as IRS and Government generally get more computer savvy and taxpayers realize that it may be better to come clean about these accounts than be exposed to huge tax penalties and possible criminal sanctions. Eva would have been caught in a New York minute. 

The Business of Lawyering Part 3- The Mission Statement and Business Objective

The Mission Statement

One can argue that a written business plan for lawyers is unnecessary. Don't we know what we are about and what we plan to do? The answer is a surprising no. When first I started my own practice one of my first cases was a simple bankruptcy. Although my background was entirely in the IRS tax procedure area nonetheless I spent countless hours dealing with a single client and bankruptcy issues beyond my grasp. A simple mission statement would have caused me to analyze what it is I plan to do and who do I plan to do it for. In fact, it wasn't for many years, until I realized the potential  I had with all my prior IRS experience.

The purpose of the mission statement is to explain succinctly, what is the purpose of this business. What type of clients will you seek? How do you plan to operate this business? This statement can be as short as a paragraph or two. For example:

“The purpose of this practice will be to represent individual taxpayers and small businesses before all branches of the Internal Revenue Service, including representation in the United States Tax Court. The practice will be conducted as a sole proprietorship in Bergen County New Jersey.”

With this as my mission statement I would never have taken the bankruptcy case. Instead, I would have referred that matter to a bankruptcy attorney and perhaps given myself the opportunity to explain to him the limited nature of my tax dispute practice. In the long run, this would have better served to build my practice as he could have become a referrer of business in my chosen field.

Once the mission statement has been written, it should define many of the other aspects of the business plan. Needless to say with changing times, a mission statement may have to be rewritten. Without the simple mission statement a lawyer thrown into the private practice of law has no idea whether he or she is fish or fowl. Even the general practitioner must know and put some limits as to the type of client problems he will attempt to resolve, if for no reason other than to try to keep their own sanity.

As a suggestion ,it may be useful to include in this mission statement, what credentials or experience you believe you have which will likely bring success to the business. For example, adding this to my mission statement:

“As a former IRS agent and IRS District Council attorney in New York, New York and having numerous current IRS contacts, the purpose of this practice will be…..”

The mission statement is not only drafted for your own use. It may be useful for future

employees and clients to know exactly what your business of lawyering  is about. Perhaps one day it will appear as part of your marketing strategy brochure about your firm or in a private website.

Business Objective:

The business objective is the plan to obtain the mission. How will the mission be accomplished? These objectives are more specific than the mission statement. For example:

To create a law practice initially as a sole proprietorship with potential for future associates to be hired. To retain and train associates with a view toward eventually growing into a law firm, which will have at least two partners. The firm will take an active role in the County and State Bar Association and will obtain a reputation as the state's premier firm in its field. The practice will be able to support retiring partners by the addition of new associates and partners while maintaining a continuous high level practice standard.

While the mission statement is involved with branding, the business objective makes clear how the brand will be obtained.

Naturally the business objectives should change as circumstances in the legal world change. For example: a downturn in the real estate market and resulting claims for real estate appeals may suggest moving into that field. No one should hold onto an objective that doesn't work, nor change the one that does.

Perhaps objectives should be broken down into:

Immediate Objective: This can be something as simple as paying the bills and earning a living

Higher Objective: growth, reputation, even fame.

Highest Objective: a contributor to the legal field, mentor, teacher.

Many lawyers attempt only to meet their immediate needs, but the long-term satisfaction in the practice comes from objectives that may be greater than oneself.

No businessperson expects obtaining the objectives without some difficulty. Lawyers should anticipate being bored and stressed at times, but that is not reason enough to toss out the business objectives.

The personal and professional growth embodied in the business objective should be set out early in the business plan.