It’s no secret that Washington uses the tax code to do more than just raise revenue. Lawmakers also use it to influence some of our biggest financial decisions, with tax deductions for mortgage interest to encourage homeownership, tax credits for fuel-efficient cars to encourage conservation, and “bonus depreciation” to stimulate business spending. Washington seems to believe those incentives really work. And cynics argue that the real reason we’ll never see a true flat tax is because lawmakers are loath to give up the power to regulate that comes with their power to tax.

Government also uses the tax code to sway some of our smaller decisions, too. This is especially true with so-called “sin taxes” — essentially, fees we pay to consume unhealthy products or engage in unhealthy behaviors. As Adam Smith wrote in The Wealth of Nations, “sugar, rum and tobacco are commodities which are nowhere necessaries of life, which are become objects of universal consumption, and which are therefore extremely proper subjects of taxation.”

230 years later, sugar, rum, and tobacco are still taxed. (In New York City, a pack of smokes comes with a hefty $6.86 in federal, state, and local taxes — the tobacco is extra!) The 2010 health care reform slapped a 10% tax on tanning beds. Public health advocates have proposed taxes on fatty foods and sugary sodas to fight obesity. And many Americans, discouraged by what they see as a decades-long failure in the War on Drugs, call for legalizing drugs, taxing them to shift profits from private cartels, and using the revenue to fund anti-addiction efforts.

So, how effective are sin taxes at balancing their dual goals of raising revenue and discouraging unhealthy behavior? Well, federal and state tobacco taxes alone raise nearly $30 billion per year. They seem to do that job just fine. But some economists find that sin taxes send the wrong message by legitimizing the behavior they try to discourage. Here’s what Harvard Professor Michael J. Sandel says in his new book, What Money Can’t Buy: The Moral Limits of Markets:

“A study of some child-care centers in Israel shows how this can happen. The centers faced a familiar problem: parents came late to pick up their children. A teacher had to stay with the children until the tardy parents arrived. To solve this problem, the centers imposed a fine for late pickups. What do you suppose happened? Late pickups actually increased.”

Clearly, telling parents “don’t be late or we’ll fine you” sends a very different message than telling them simply “don’t be late.” And so it goes with sin taxes, too. Telling smokers and drinkers “don’t indulge or we’ll tax you” offers them implicit forgiveness — that it’s actually OK to light up and enjoy two-for-one Happy Hour so long as they pay the fee. (If you’re reading these words with a cigarette in one hand and a Red Bull in the other, you can breathe a sigh of relief!) It may sound hypocritical for Uncle Sam to wag his finger at you with one hand while he reaches into your pocket with the other. But sin taxes have been around a lot longer than income taxes, and they aren’t going away.

There’s really no “planning” we can help you do to avoid sin taxes. (We would just give you the same advice as your mother.) But it may be worth it, next time you pay any tax, to ask yourself “what’s the government trying to accomplish with this tax? What’s the government trying to get me to do?” Understanding why you pay a tax can make you a better-informed consumer. And that, in turn, helps all your dollars go farther.

We are money managers.  We work with and continue to look for professionals who are the best in their field; CPAs, mortgage brokers, insurance agents and attorneys.  Please contact us if you would like to join our referral program as a trusted professional or if you’re are looking for specific services.

This information was provided in part by TaxCoach Software, LLC

For 20 years now, Apple has blazed a reputation for stylish design and innovative products, creating a near-cult following among fans. Apple’s computers appeal to the artists and designers who set so many of today’s trends. Their iPod has helped change how the world listens to music. Their iPad has made online content available nearly anywhere. And their iPhone is helping change the way we communicate with friends, family, and colleagues. (Just a few years ago, your mother-in-law didn’t have a cell phone. Now she sends text messages and “checks in” on Facebook.)

Apple may be the most successful company on earth. At one point last year, they had more cash on hand ($76.2 billion) than the United States government ($73.8 billion). And Apple is currently the most valuable company on the planet, with a “market cap” (total value of tradeable shares) that topped $590 billion dollars on April 10. (That’s right . . . those iTunes you casually download for a buck each have created a company worth over half a <em >trillion dollars.) In fact, Apple’s current market cap is more than the gross domestic products of Iraq, North Korea, Vietnam, Puerto Rico, and New Zealand — combined.

But Apple’s most recent annual report reveals the company’s genius for creating successful marketing strategies also extends to successful tax strategies. How else would you describe a strategy that lets Apple earn billions and pays less than 10% of their taxable income in tax?

How do they do it? Largely by keeping the money they earn outside the United States, outside the United States. Apple owns subsidiaries in tax havens like Ireland, the Netherlands, Luxembourg, and the British Virgin islands. They helped pioneer the “Double Irish with a Dutch Sandwich” strategy that hundreds of other multinational companies have imitated. Apple even maintains a subsidiary in tax-free Nevada — the blandly-named “Braeburn Capital” — to manage that enormous cash haul without paying tax in its home state of California. For 2011, the company paid a worldwide tax of $3.3 billion on $34.2 billion of profit. But one study concludes that Apple would have paid $2.4 billion more without these rules.

Now Apple has become part of the political debate. At the risk of grossly oversimplifying a pretty complicated discussion, Democrats in Washington scoff that taking an extra $2.4 billion in tax last year would have squelched Apple’s creativity. Republicans reply that using the cash to grow the business or distribute more dividends to shareholders will grow the economy faster than if it goes to the IRS. Both President Obama and presumed Republican nominee Mitt Romney have called for eliminating corporate tax loopholes in order to pay for lower rates (28% in President Obama’s plan, 25% in Governor Romney’s). Either way, Apple is likely to become one of the stories — like Warren Buffett paying a higher tax rate than his secretary — that come to define this year’s campaign.

Taxes always play a part in Presidential races. But this time, with the economy still struggling and the Bush tax cuts scheduled to expire in a few short months, taxes will be even more important than usual. Our job, as November approaches, includes helping you understand just what the candidates’ proposals mean for your bottom line. So keep up with these emails — and if you’re curious how any of the proposals you hear about would affect your plan, call us!

We are money managers.  We work with and continue to look for professionals who are the best in their field; CPAs, mortgage brokers, insurance agents and attorneys.  Please contact us if you would like to join our referral program as a trusted professional or if you’re are looking for specific services.

Disneynature’s newest movie, Chimpanzee, is a documentary masterpiece for all ages. It’s a truly original film that stands out in a multiplex of lookalikes, copies, remakes, and sequels. And Chimpanzee’s cinematography is amazing — the simple beauty of the jungles and the animals stands in contrast to so many of today’s movies all tricked out with 3D gimmicks and computer-generated special effects.

Filmmakers spent four years “embedded” in the lush rainforest of Ivory Coast’s Tai National Park to make the movie, which follows the life of “Oscar,” a predictably adorable young chimp. Oscar learns how to use rocks to open nuts (apparently harder than it looks) and use sticks to go “fishing” for army ants (apparently a real delicacy to chimpanzee foodies). There’s a turf war with a rival community for control over a valuable nut grove. And, this being a Disney movie, Oscar loses his mother to a leopard around the beginning of the third reel. (It’s handled sensitively — there’s nothing to terrify children or grandchildren in the audience.) Losing his mother poses a real threat to Oscar’s life, until, remarkably, he’s “adopted” by Freddy, the community’s alpha male. The film is narrated by Tim Allen, whom even the youngest viewers will recognize as the voic e of “Buzz Lightyear” from Disney/Pixar’s mega-successful <em >Toy Story series.

Primatologists have suspected that chimpanzees like Freddy might altruistically adopt orphaned young in their group. But this is the first example of such behavior actually caught on film. (There’s no word on whether Freddy “taxed” the rest of the community for the expenses of caring for Oscar, or whether “tax avoidance” is part of their natural behavior!)

Disney has announced that they are donating a portion of <em >Chimpanzee’s opening-weekend ticket sales to the Jane Goodall Institute for the “See Chimpanzee, Save Chimpanzee” program to protect habitats. Disney will donate 20 cents for every ticket sold, with a minimum donation of $100,000. (The movie grossed $10.2 million over its opening weekend, the highest opening gross in history for any nature documentary.) <em >So — and here at last we come to the <em >tax question of the day — does that mean that if you were one of the first to see it, you can deduct part of your ticket?

Unfortunately, no, that’s not how it works. You got <em >your “money’s worth” from the movie itself, although Disneynature can certainly deduct the contribution on <em >its return. It’s like buying a ticket to a college football game. The college itself may be a not-for-profit organization — but buying a ticket isn’t a “donation” because you get something of value in exchange. (Some colleges let you make donations in exchange for the right to buy season tickets — in those cases, the IRS treats that “right” as being worth 20% of the donation amount and lets you deduct the remaining 80%.)

Deductions for charitable contributions are a mainstay of the tax code. Charitable contributions let you do well for society while you do well for yourself — which of course is something <em >we want to help with, too! We can help you maximize deductions for gifts of used clothing and household accessories. We can help you plan for bigger gifts of cash, cars or boats, art or antiques, appreciated securities, real estate, and even life insurance. And don’t forget, we’re here for the rest of your “community,” too!

We are money managers.  We work with and continue to look for professionals who are the best in their field; CPAs, mortgage brokers, insurance agents and attorneys.  Please contact us if you would like to join our referral program as a trusted professional or if you’re are looking for specific services.

This information was provided in part by TaxCoach Software, LLC

Now, The Atlantic magazine reports that landowners on the other side of the country are saving millions in tax by taking advantage of “America’s Dumbest Tax Loophole: The Florida Rent-a-Cow Scam.” But are those Florida cows as happy as their cousins in California?

Here’s how it works. Florida’s “greenbelt law” aims to help preserve farmland by taxing it according to its agricultural-use value, rather than its (higher) potential development value. To qualify, you just have to file a four-page application and convince your county tax appraiser that you’re using the land for “bona fide” agricultural purposes. You don’t even have to make an actual income from your “farming” in order to lower the valuation on your property. Pretty sweet so far, right?

But what if you’re not even really a farmer? What if you’re a rich developer, with land just sitting idle that you’re getting ready to build on, and you want to get in on the party? No problem! Lease your land to a nearby cattle rancher, plop a few cows in what’s left of the grass, and start saving big! Some landowners let ranchers graze their cattle for free. But the tax breaks are so rich and creamy that some landowners actually pay the ranchers to graze their cows, justifying the “rent-a-cow” nickname.

At this point, you’re probably scoffing this is . . . well, udderly ridiculous. Au contraire, my naive friend, au contraire!

The Miami Herald reported back in 2005 that over two-thirds of the greenbelt law’s biggest beneficiaries aren’t true farmers. Developer Armando Codina saved $250,273 in 2004 by grazing cattle on land he owned in northwest Miami-Dade County while he built industrial warehouses on it. Then he asked the county to declare his “ranch” to be an environmentally contaminated “brownfield,” while he still had cows on the land! (That had to make the cows happy.) Developer Richard Bell saved $140,168 that same year by grazing 16 cows on a 49-acre tract where he planned to build million-dollar McMansions. Even U.S. Senator Bill Nelson got in on the act — he keeps “about six cows” on 55 acres of property near the Indian River and saves $43,000 per year. The Herald found “skinny” and “underfed” cows eating garbage and grazing on bare, rocky land throughout the state.

Developers confess that this may not have been exactly what the Florida Legislature intended when they passed the greenbelt law back in 1959. But they argue that vacant land shouldn’t be taxed at full value if it’s just aging till ripeness. And they point out that once the land is developed, new homes and offices generate plenty of tax revenue.

We have no clue if the Florida cows are as happy as the California cows. Nor can we tell you if their cheese is any good. But we can tell you that you don’t have to go to such ridiculous lengths to save big on your income taxes. The tax code is full of legitimate deductions, credits, and opportunities that serve legitimate public goals. And it’s our job to help put all those opportunities to work for you.

We are money managers.  We work with and continue to look for professionals who are the best in their field; CPAs, mortgage brokers, insurance agents and attorneys.  Please contact us if you would like to join our referral program as a trusted professional or if you’re are looking for specific services.

The IRS is struggling just like the rest of us to carry out its mission with limited resources. Back in 2003, they audited just one out of every 203 returns. By 2010, that number was up to one out of 90. To stretch that audit budget even further, they’re auditing more and more taxpayers by mail. But one study shows that 10% of IRS mail never gets where it’s supposed to go, and 27% of those who do get their mail don’t even realize they’re actually being audited! Naturally, that leads to more and more of the paperwork screwups that every taxpayer fears.

Enter Nina Olson. She’s the IRS’s first and only Taxpayer Advocate, a position created by the 1998 “Taxpayer Bill of Rights” act. She supervises the Taxpayer Advocate Service, a nationwide group of 2,000 caseworkers who specialize in cutting through red tape and greasing the wheels of the great gummy IRS machine. If the IRS sends your mail to the wrong address, slaps you with a lien after you’ve already paid your bill, or just makes a mistake they can’t seem to fix, Olson’s office is the one we’ll call.

Last month, Olson delivered a presentation to the Federal Bar Association on how “the 99%” experience the tax system. And the picture she painted makes a tent in lower Manhattan Park look like a room at the Ritz. One in three taxpayers who call the Service don’t get an answer. Only half of those who write hear back within six weeks. The IRS is relying on computers instead of people to audit all but the highest-income taxpayers. And perhaps most curious of all, she says, “we’re getting to a situation where the only people who get face-to-face audits are the 1%”!

Now, correct us if we’re wrong, but do you really consider face time with an IRS auditor a “privilege”? We all know that at least some level of government is necessary. But there are just some parts you don’t want to see up close and in person. Like the “Level 4″ Biolab at the Atlanta Centers for Disease Control, for example, where we store the Ebola virus, Crimean-Congo hemorrhagic fever, and other superbugs we can’t risk having out on the loose. Or the “Supermax” penitentiary in Florence, Colorado, where we “store” the most dangerous felons we can’t risk having out on the loose. Or the inside of any IRS Service Center!

Does Olson’s “1%” comment conjure up images of plush IRS offices, with thick oriental carpets and rich leather upholstery, staffed by discreet, white-gloved concierges sitting at granite-topped desks? We can assure you that when it comes to getting audited, even the 1% have to settle for the same government-issue linoleum floors, metal chairs, and battleship gray desks as everyone else. (And really, in the unlikely event you are audited, we probably won’t let you go with us anyway! Trust us — it’s for your own protection.)

We talk in these emails about how proactive planning cuts your tax bill. But paying less tax isn’t the only perk of a good tax plan. Did you know that smart tax planning can also cut your audit risk? In fact, some strategies — like choosing certain business entities — can cut that risk by as much as 90%. So call us if you think face time with an auditor is a “privilege” you can do without!

We are money managers.  We work with and continue to look for professionals who are the best in their field; CPAs, mortgage brokers, insurance agents and attorneys.  Please contact us if you would like to join our referral program as a trusted professional or if you’re are looking for specific services.