“Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.” — F. J. Raymond, humorist
By Catherine Austin Fitts
This week on the Solari Report, Patty Kemmerer of Kemmerer Schooley, CPAs joins me to help you with yearend US tax and financial planning.
Our goal is to inspire you to take action now while there is still time, before the end of the tax year.
Patty will be review the full gamut of tax issues, big and small, including yearend trading in investment accounts, 401ks and IRA investments, and Affordable Care Act penalties. We will review new US tax reform legislation likely to be reconciled by Congress and signed into law by the President this month.
Look for practical ideas to address your tax bite and help compliance go smoothly.
In Money & Markets, I will discuss the latest in news and markets, as well as US tax reform in greater detail. Cui bono? What are the consequences of continuing to lower the corporate tax contribution to fund the US federal budget and military intelligence machinery? What are the consequences to global markets and offshore havens if a significant portion of $2.5 trillion of US corporate offshore holdings are reinvested domestically?
In Let’s Go to the Movies, I recommend Marije Meerman’s The Tax Free Tour, which takes a look at tax havens, providing background on the corporate repatriation issues being debated currently in Congress.
Talk to you Thursday!
If you are not a subscriber yet, you are most welcome to join here.
On Proposed US Legislation:
Heritage Foundation: Comparison of House and Senate Tax Bills
Related Special Solari Reports:
Special Solari Report: Foreign Asset Reporting Requirement Update: FBAR and FACTA for 2016 Tax Year
Related Reading:
The 50 Largest Stashes of Cash Companies Keep Overseas
The Interactive Calculator Shows How Much Tax Havens are Costing America
Hi Catherine, this is Catherine Baldi (my first name is used in my acciunt) in this wrap up you mention control files on individuals in your discussion on block chain. Does the IRS/government jeep co trol files on individuals?
IMO the government and their private contractors do keep control files on individuals. Facebook and social media now make it economic to generate them and manage on everyone in combination with banking and brokerage information. I have assumed that IRS is a source of data. I don’t know to what extent they can independently access without DOJ, CIA or contractors.
I’d like to contribute some thoughts on the college situation.
About 529s now available for k-12, that appears to be merely a simplification. They are ending the Coverdell, which is also for k-12 as well as college. The contribution limit for Coverdell accounts is a very low $2k and I suspect few people used them anymore. With the liberalization of the 529 rules over the years, there’s really little point in having both types of accounts.
In the end, all these accounts do is give colleges cover to raise their tuition. College has become a massive scam, bankrupting (or potentially) too many people–including the federal govt. They’re little more than a propaganda machine. Anyone who pays $300,000 for their child to attend one of these far-left-brainwashing sex camps either has a screw loose or is horribly misinformed.
If you have to play the game, you can crash the tuition to a very manageable level by simply using AP and CLEP tests, community college, and online programs such as BYU’s. Most private colleges will recognize one year of credits, and state schools will recognize at least two. Have your child go to a college near you and live with you. You have just saved one half to two thirds the cost and still have your cherub under your watchful eye.
If possible, contributing to an IRA for both parents (and grandparents) is better since you’re not limited to education payments for that money. Having your own business, hiring your children (age 7 and up) and opening Roths for them saves even more. Also, grandparents having Roths is great strategy since if there’s any money left after education expenses, they can leave the accounts to children or grandchildren when they die, giving their heirs souped up Roths.
If your child can get into an Ivy or equivalent, what you are providing him is NOT an superior education, but access to the children of the rich and powerful. This is what college in the US was originally for. That can open doors for him, but it might not. If your child can’t get in, then have him go to an inexpensive college. Below the top 20 or so colleges, it really doesn’t matter where he goes. A motivated student will develop his intellect wherever he is, an unmotivated one shouldn’t go. Also, it’s far more important for a student to go to a very selective graduate school than a very selective undergraduate school.
Any strategy that can be used to starve this culture-killing beast is a big plus for you personally and our society as a whole. And please don’t donate to “higher” education. You are paying for your own demise.
About the graduate tuition waiver being taxed, the chance of that going through is not good. For one thing, the people who get those tuition waivers are in the STEM fields. Those PhDs go straight into the MIC, big Pharma and other favored industries. If the waivers were taxed, a significant % of those PhDs would have to drop out in 2018. Further, it’s my weak understanding that only the tuition waiver would be taxed, while there are other ways to pay PhD candidates, such as grants and fellowships, which I think are considered gifts. A likely strategy for the universities would be to recharacterize how their doctoral students are paid.
How likely is it that Congress will cut off the flow of researchers into the MIC? How likely is it they will screw the universities, their most important channel for court intellectuals? I suspect some flunky aid thought up this brilliant idea and it will be quietly dropped.
Anyway, our daughter is in a PhD program at a top 20 university. Earlier this year, there were panicked emails going to all the candidates about the tax bill. Then a couple of weeks ago, the all clear sign was sent out. So, we shall see…
Finally, I’d like to comment on finding a CPA. The IRS has really put the screws on tax preparers over the past few years, and it seems to be having a noticeable effect. Most seem only interested in filling in the forms. They’re scared to death of audits, and instead of knowing the expectancy of various strategies, they default to saying, “RED FLAG!!” The accountants who are knowledgeable about small biz and tax saving strategies are swamped with clients and won’t take on new ones.
An excellent book to read about how to look at the income tax is by John Reed called Aggressive Tax Avoidance for Real Estate Investors. It’s well worth the $20 or so. If your CPA doesn’t have the same point of view as Reed, keep looking until you find one.
Catherine:
Thanks so much for this detailed post. In my experience, the key to any strategy with the IRS is that it must be within the law and you must be prepared to take an audit and win. Will check out Reed’s book.
One thing I do like about 529 is that it is eligible to pay for many foreign institutions who I don’t think are part of the US bubble and do provide very real education. I believe the best education occurs when you have excellent teachers able to focus with students on location. Yes, a motivated person can do a lot on line and by themselves – but it is not as good as when they can participate in person in a great academy experience.
Bottom line – if parents want to create a crowdfunding capacity so friends and family can contribute to a child’s education, what is the best way to create that? Just open a bank account and have them gift or are there benefits to doing it through a 529?
Catherine
IRAs can be used for tuition at foreign universities, too. The IRS has an excel spread sheet with the eligible educational institutions and list is for all the savings plans and tax breaks. I did a quick check and found several universities in Europe on it.
There are quiet a few articles on line comparing IRAs v. 529s for tuition. It’s actually complicated and needs to be tailored to the family. The big bugaboo with IRAs is the contribution limit. But if you use strategies to lower the cost, you won’t need to put away as much. We saved for tuition for two children using the Coverdell with its stingy $2k contribution limit. But because we crashed the tuition costs, it was plenty.
Btw, I wasn’t suggesting alternative strategies for all four years, but for the first two years. Let’s face it, most students graduate high school with an extremely deficient education and they need about two years to catch up to the prepared students. Therefore the first two years are generally not very demanding. I went to a competitive college (millions of years ago) and had a parade of classmates at my door asking me questions and wanting to learn how to study–I seemed somewhat bored in class and had free time. But by junior year, all that changed. 😉
I completely agree that good, engaged faculty is important. The fact is, though, that you don’t have to go to the top 20 to find good engaged faculty. Those Ivy grads have to find teaching jobs all over the country, ya know. 😉
PS I’ll be interest to see what you think of Reed’s book. Of course you have to stay within the law and document everything, but there’s plenty of room for interpretation in many provision.
I worked with a clients daughter to “crash tuition” After looking at her choice of colleges and programs, we took it down to a time budget and money budget for every thing she needed to learn and the most efficient way (BOTH time and money) to get it. She decided to do a program that had her moving from institution to institution and special experience to special event or workshop. Essential, we designed a curriculum bottom up based on a knowledge plan organized around goals. Created something quite unique and MUCH more respectful of her time and much, much cheaper. I am convinced everytime I work with a young person to put together a knowledge/learning plan and goals with a related time and money budget that the chief constraint is their time. Have to make sure they optimize the return on investment on their time.
Just a quick update from AP this afternoon:
“Also, the [tax] bill would no longer start taxing graduate-school tuition waivers, said the aides, who spoke on condition of anonymity because they were not authorized to publicly discuss private negotiations.”
Whew. That was going to be too ugle for words, I hope the interest exemption change was dropped as well.