Ernest Patrick Smith John M. Spatola CPA/ABV/CFF, CVA, CFE CPA/ABV/CFF, CVA, CFE Nawrocki Smith LLP Nawrocki Smith LLP 1
“The best way to solve our economic problem would be put less money through the government grinder, which is extremely inefficient. They’re constantly building bridges to nowhere – power plants to get disassembled – wasting billions of dollars per year on really stupid things. ” “Mr. Wonderful” – Kevin O’Leary 2
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The economy has continued to gain strength during November. Improvements have been observed in jobs and consumer spending. Estimated 3 rd quarter GDP growth was estimated at 5.0%, capping its two strongest back-to-back quarters of growth since 2003. The U.S. national debt continues to grow, soaring past $18.0 trillion on November 28 th . Budget deficit for FY 2014 was $483 billion, compared to $1.09 trillion in FY 2012. 4
As of November 2014: ◦ Unemployment fell to 5.8% Lowest unemployment rate in last 6 years ◦ Underemployment rate fell to 11.5% in October. Unemployed individuals + part-time works who would prefer to work full time. ◦ Long-Term unemployment fell to 30.7% of unemployed. Those who have been jobless for 27+ weeks. ◦ When referring to the above statistics, PNC economist Stuart Hoffman indicated, “if you don’t like this [report], nothing is going to make you happy. ” 5
According to the Center for Immigration Studies, net employment growth in the United States since 2000 has gone entirely to immigrants – legal and illegal. From November 2007 to November 2013: # of employed native-born Americans decreased 1.45million+. # of employed immigrants increased by 2million+. 6
Amnesty Plan: Will add 5 million illegal immigrants to U.S. Will add as many foreign workers to the nation’s legal labor force as the total number of new jobs created by the economy since 2009. New workers include not only low-wage laborers from Mexico and Central America, but also a large influx of foreign college graduates competing for higher-paying salaried jobs. These workers are not eligible for Obamacare, so the Obamacare employer mandate gives employers a $3,000 incentive to hire foreign vs. American workers. 7
Consumer confidence present situation index is now at its highest level since February 2008. Acccording to Thomson Reuters, Consumer sentiment to its highest level in nearly 8 years on cheaper gasoline and better job and wage prospects. The Bloomberg Consumer Comfort index is at its highest level in 7 years. Economic optimism hits 18-month high. 8
According to HealthPocket, insurance premiums have risen by as much as 78% in the year since Obamacare’s full implementation. 33% of American’s put off seeking medical treatment in 2014 due to high costs. According to a Gallup poll, 37% of American’s approve of Obamacare and 56% disapprove. Approximately 25% of all active U.S. physicians have opted out of Obamacare and will not participate in the new Affordable Care Act plans. 9
“I find it insane to say, “Work hard,” when the harder you work, the more you pay in taxes … . Crazy. ” Ziad Abdelnour CEO of Blackhawk Partners, Inc. a NY based private equity firm. 10
Federal tax revenues set record of $3.02 trillion in taxes during FY 2014. According to the Tax Policy Center the top 1% of U.S. households (income averaging $1.4 million) will pay an average federal tax rate of 35.5% this year, among the highest in the history of such reporting (1979). According to The Wall Street Journal, the U.S. ranks 32 nd in the world in terms of the favorability of its tax code toward business. 11
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The outlook for Long Island’s economy is positive on a whole. Consumer confidence is high and spending appears solid. Labor market is improving steadily Growth and strong economic conditions are expected to increase on Long Island in 2015. 13
As of November 2014: ◦ The unemployment rate was 4.6%, compared to 5.3% the previous year. ◦ Unemployment in Nassau was 4.4% and Suffolk was 4.8%. ◦ Nassau and Suffolk have among the lowest unemployment rates relative to other counties in NY State. ◦ Number of private sector jobs on Long Island rose by 1.4% to 1,116,600. 14
The NY Metropolitan area consumer sentiment increased significantly in November 2014, when compared to the previous year. The NY Metropolitan area consumer sentiment was considerably more favorable than that of the rest of NY State. 15
As of November 2014: ◦ Residential real estate performed poorly on Long Island in 2014 and could exert a drag on economic growth if the pattern persists. ◦ Both Nassau & Suffolk county experienced median property sales price increases in October 2013: Suffolk County median sales price = $325,000 (2.9% ↑) Nassau County median sales price = $428,000 (3.1% ↑) ◦ However, number of home sales: Suffolk County = 961 (0.7% ↓ ) Nassau County = 813 (14.1% ↓) 16
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** Numbers based upon % change from preceding period. ** Forecasts are based upon % change from preceding period (excluding unemployment rate, 3- month treasury bill, 10-year treasury bond yield) Source: Business Valuation Update – January 2015 Vol. 21 No. 1 18
“One thing is clear: The Founding Fathers never intended a nation where citizens would pay nearly half of everything they earn to the government. ” Ron Paul 19
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The days of the Wild Wild West are Over X 21
All matters connected with a presentation to the IRS relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the IRS. Preparing or filing documents, corresponding and communicating with the IRS, rendering written advice, and representing a client at conferences, hearings and meetings. Practice = All Tax Return Preparation 22
Reprimand (Private) Censure Suspension Disbarment Monetary Sanction (Individual & Firms) 23
Must exercise Due Diligence in: ◦ Preparing, approving and filing tax returns, documents, affidavits, etc. relating to IRS matters. ◦ Determining correctness of oral/written representations made to the client or to Treasury personnel. Reliance on another’s work product must be done with reasonable care. 24
May not sign a tax return or advise a position on a tax return, willfully, recklessly, or through gross incompetence if: ◦ Lacks reasonable basis ◦ Unreasonable position ◦ Willful attempt to understate liability ◦ Reckless, intentional disregard of rules and regulations Patterns matter. 25
May not advise taking positions that are frivolous. May not advise submissions: ◦ To delay or impede tax administration ◦ That are frivolous ◦ Containing or omitting information that demonstrates an intentional disregard of rules or regulations 26
Must advise client of potential penalties and their avoidance through disclosure. Reliance on client information in good faith, without verification, is ok, but: ◦ Cannot ignore implications of other information furnished. ◦ Cannot ignore actual knowledge. ◦ Must make reasonable inquiries for incorrect, inconsistent or incomplete information. No willful blindness. No Don’t ask, don’t tell. 27
No participating in any way in the giving of false/misleading info to the Department of Treasury or any officer/employee thereof. Includes: ◦ Testimony ◦ Federal tax returns ◦ Financial statements ◦ Applications ◦ Affidavits, declarations, and any other document or statement, written or oral 28
Willfully assisting, counseling, encouraging, suggesting to a client/prospective client: ◦ Any illegal plan to evade Federal taxes or payment thereof ◦ Violation of any Federal tax law 29
“ It’s not rocket science. Hong Kong has 95% tax compliance, because it’s code is only 4 pages long with a 15% flat tax. ” Ziad Abdelnour CEO of Blackhawk Partners, Inc. a NY based private equity firm. 30
Summary ry: www.congress.gov/bill/113th- congress/house-bill/5771 Complete te Act: www.gpo.gov/fdsys/pkg/BILLS- 113hr5771enr/pdf/BILLS-113hr5771enr.pdf 31
Passed by the House on December 3, 2014. Passed by the Senate on December 16, 2014. Provides 1 year retroactive extension for over 50 tax benefits and incentives that expired in 2014. The extension is only for 2014, and does not apply to 2015. Estimated to cost approximately $42 billion over 10 years. (http://taxfoundation.org/blog/congress-approves-tax-extenders-2014). 32
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Teachers in grades K – 12, were allowed a deduction from gross income in arriving at AGI, for up to $250 of teaching expenses incurred. The ACT reinstates this provision for 2014. 34
Energy-efficient home improvements qualify for a tax credit up to 10% of the purchase price of qualified products, up to a maximum of $500. The ACT reinstates this provision for 2014. 35
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