September 12, 2014

Pacquiao Scores Tax Knock-Out in First Round Vs. Philippines

World-champion boxer Manny Pacquiao is definitely no stranger to pummeling opponents in the ring, but the famous boxer is going for the knockout in a long-running tax dispute with the Philippine government. The fighter is in a battle with the Philippine tax authorities over 2.2 billion pesos ($50.3 million) they claim the national icon owes for his 2008 and 2009 earnings from bouts held in the U.S.

Pacquiao and his managers say he paid the taxes he owed to the U.S., and that because of a treaty agreement between the two countries, he isn’t subject to double taxation. The boxer is neither a U.S. resident or citizen, but the U.S. has special regulations requiring foreign athletes who work in the U.S. to file taxes. That U.S.-based work can entail anything from participating in a tournament to taking part in endorsement deals.

According to the Philippine tax office, Pacquiao has not provided them the official, certified paperwork it requires to demonstrate proof of his U.S. tax payments. Meanwhile, the fighter’s promoters, Las-Vegas-based Top Rank, say the documents have been requested but just haven’t come through yet.

Prior to the recent Supreme Court ruling, the Philippines Bureau of Internal Revenue issued a warrant to 36 banks to seize Pacquiao’s assets, some of which included his wife’s accounts. Based on the news report on the latest Supreme Court ruling, the Philippine government also threatened to take the money owed by selling off the assets it seized. Later the tax court agreed to lift the asset freeze on the condition Pacquiao posted the cash bond equivalent to their claim to back taxes and interest.

There’s still a long way to go before Pacquiao, who also happens to be a congressman representing the Sarangani province, takes home the championship belt on this one. But with the new Supreme Court ruling on his side, he said in a statement, “For now, I am just glad I will be able to concentrate on training for my upcoming bout.”

Pacquiao’s relief is expected. Having to resolve a tax dispute with the authorities, Philippine or U.S., can divert precious attention from athletes trying to stay on top of their game and business owners who have daily operations to manage. The paperwork and back-and-forth communications can take weeks, months or years to clear, all of which requires time, patience and specialized expertise even the most knowledgeable business leaders are unlikely to have. Having an experienced tax advisory team in the ring with you should you be subject to a tax inquiry can be a life saver to this otherwise brutal experience. Just don’t wait for a letter from the IRS before you put your team together.

September 5, 2014

Kids Cost More Than Ever to Raise—Here’s How Much

If you ever had the distinct impression that your kids were costing you a fortune, you can feel good knowing that you were right. According to the USDA’s annual Expenditures on Children by Families report, a child born in 2013 will cost the average middle-income, two-parent family more than $245,000 to raise until the age of 18, representing a 1.8 percent increase from 2012. Adjusted for projected inflation, that number is more like $304,000.

If you make more, you’re also probably spending more. The report estimates that high-income households, or those earning over $106,540 in before-tax income, spend about $408,000 per child. For a two-child household, that’s between $21,330 and $25,700 per kid every year, depending on the age of the child. (You may have already have guessed this, but annual expenditures generally increase as the age of the child does.)

The more kids a family has, the less they spend on each one. Families with three or more kids spend 22 percent less per child than those with two kids, and families with one child spend an average of 25 percent more on the only child than those with two kids.

Where does all that money go? The largest share of total child-rearing expenses across all income levels in the USDA’s calculations is housing. For high-income earners, housing represented 33 percent of total child-rearing expenses. Where you live matters, too, since housing costs vary across the U.S. Those in the urban Northeast spend the most to raise a child ($282,480), and those in the urban South the least ($230,610). The urban West, which includes California, runs somewhat down the middle ($261,330). The second-largest expense for high-income households was child care and education, coming in at 23 percent. Generally, the higher the income, the greater the expenditure was in this category.

The USDA’s report also accounts for food, healthcare and transportation, among other things. What it doesn’t include are expenses incurred during pregnancy or those incurred after the age of 18, such as college. Add those into the mix and sure enough, there’s plenty of proof that raising kids isn’t cheap.

Thankfully, the joys that accompany parenthood far exceed their costs in mere dollars and cents. These numbers simply remind us that the arrival of a new child or grandchild into our lives can mark a pivot point to how we manage our finances. From the moment they’re born, new considerations and opportunities arise that should involve your tax and legal advisory team. For example, you may decide to re-strategize your tax position, initiate or make changes to life insurance and estate plans, or open up a college savings plan.

To be certain you’re taking advantage of as many savings opportunities as possible, meet regularly with experienced tax and financial professionals as your children grow and your family’s needs do, too.

August 29, 2014

More People Than Ever May Relinquish Their U.S. Passports This Year

The Treasury Department just published its latest quarterly report revealing the names of people who have given up their U.S. citizenship or long-term residency. On the list were 577 individuals, bringing the 2014 total so far to 1,577. This mid-year total puts us on pace to exceed last year’s numbers, which hit a record-breaking 2,999 individuals, already a 221% jump from 2012.

Short of asking them outright, we can’t know why those on the list chose to leave, but we might infer that taxes could have been at least one of the factors calculated into their decision-making process. That’s because the U.S. requires citizens and green-card holders to file tax returns no matter where they live. So depending on where expats reside, they may be required to pay taxes in the country in which they live and work while also paying the U.S. government.

The Foreign Account Tax Compliance Act could also be influencing some taxpayers to leave their passports behind. The law took effect this year and requires foreign financial institutions to report account information to the U.S., both for U.S. citizens and green-card holders living in the U.S. and abroad.

In 2012, Facebook co-founder Edward Sevarin was one of the recognizable names who renounced his U.S. citizenship. He headed for Singapore before the Facebook IPO, a move that undoubtedly reduced his tax bill since Singapore doesn’t impose a capital gains tax and has a low 18% tax rate. In 2013, American music icon Tina Turner was also on the list, though she has already been living in Switzerland for the last two decades with her boyfriend and now-husband Erwin Bach, a German music producer.

Individuals aren’t the only ones looking to expatriate. Walgreens, the largest pharmacy retailer in the U.S., considered an inversion from U.S. to Swiss corporate citizenship to cut down on tax obligations. But in this month’s announcement of the company’s decision against it, Walgreens’ chief executive Gregory Wasson told analysts the change “included potentially putting the company in a significantly worse position than if we had not inverted at all, such as a protracted controversy with the IRS.” He also acknowledged the risk of “consumer backlash and political ramifications,” referring to boycotting threats by consumers and the potential loss of almost a quarter of the company’s sales derived from Medicare and Medicaid.

The decision to expatriate should never be taken lightly, and taxes should never be the sole factor in consideration. There are not only indirect costs to giving up residency in one of the world’s greatest nations but direct ones as well, including the exit tax. Fortunately, there are many, many strategies for reducing personal and corporate tax liabilities. By planning well ahead of tax day and working strategically with experienced professionals, we can all save money on our taxes without having to give up our citizenship or green cards. 

August 22, 2014

Late Actor Robin Williams Took Measures to Help His Children Inherit Responsibly

Robin Williams was a beloved comedian, actor and entertainer who won over legions of fans by bringing some of the most eccentric characters to life, including Mork from Ork, Mrs. Doubtfire, and Peter Pan. Media outlets describe Williams as a deeply compassionate person, always helping to make his fellow actors feel at home on the set and lifting the spirits of friends through humor, including his former college roommate Christopher Reeve after his debilitating accident.

His fans will miss him dearly, but like most famous talents, those closest to him, including his three children Cody (22), Zelda (25) and Zachary (31), will likely feel the most profound loss from his passing. Williams expressed his love for his children and their positive impact on his life in many interviews. According to documents obtained by TMZ, he also took care to ensure his children came into their inheritance responsibly.

The documents obtained show that, at one point, Williams established a trust in which each of his children received one-third of their share of the principal at the age of 21, half at 25, and their full share at 30. Though Williams’ publicist has since stated that these documents are outdated, they still serve us in bringing to mind important questions many affluent families contend with: how and when to distribute assets to their beneficiaries.

Williams chose to provide his children with their inheritance during his life. Families that decide to follow this path can help provide financial guidance and impart wisdom to their children to encourage thoughtful decision-making with the money gifted to them. Doing so also allows benefactors to enjoy the rewards of seeing what opportunities these gifts make possible. And, not to be forgotten, there can be significant tax advantages to making gifts in your lifetime. Even so, creating a trust that distributes money to beneficiaries before one’s death isn’t always preferred or feasible, especially if the assets are needed in your lifetime. Every family is different.

Like Williams, you may decide that the best option for your family is to set up staggered payments based on a beneficiary’s age. This approach has its upsides, including the chance to help protect children from making one poor decision with financially permanent consequences. No matter what distribution scenario you choose to define in a trust, leaving money without providing the proper education for its conscientious use is never a good idea.

If you are interested in knowing more about different ways to set up a trust or if you have established one for your heirs but haven’t reviewed it recently, make time to attend to this important task. Divorces, the arrival of children and grandchildren, a beneficiary’s readiness for financial responsibility, and shifts in your own financial position all signal important times to review your plan and ensure it best meets your family’s needs. Talley and Company can help.

August 1, 2014
Former Microsoft CEO Steve Ballmer’s $2 billion bid for the Clippers looks to be a gross over-valuation, at least according to the bid book of sale put together by Bank of America. Reporters from ESPN.com got hold of the valuation numbers through documents introduced in the trial determining whether Shelly Sterling has the right to sell the team without Donald.
The bid book showed Ballmer’s $2 billion offer for the Clippers is 12.1 times the expected 2014 revenues of the team. Purportedly, Bank of America also showed the average of teams sold over a five-year period was 3.4 times total revenue, and that no team has been purchased for more than five times its total revenues.
In the case of the Clippers, revenue alone might present an under-valuation if the team’s alleged years of mismanagement were to be taken into account. The Clippers also have a pending national TV deal that could be a slam dunk to raising the franchise’s popularity and profits.  
Of course, Ballmer’s serious bid is probably about a lot more than him just wanting to make another profitable business deal. Among the billionaire set who have most of what money can buy, we expect there’s immeasurable enjoyment and prestige to owning one of 30 teams that besides their exclusivity, hardly ever go up for sale. For this alone, any team on the NBA is a statistical anomaly in the world of business dealings. Like any near-priceless objet d’art up for auction, the emotional value of ownership can be equal to, if not greater than, the investment value.  
Outside of these outliers, most buyers looking to acquire a business, whether as a singular investment or a complement to an existing company, are more likely to focus on the financial returns they can expect to get for their purchase price. B2B valuation and legal advisory professionals, including those at Talley and Company, can provide comprehensive data and due diligence in these situations to enable decision-makers to make the most profitable investment choices. 
Before entering into any buy/sell agreement, Talley & Company can help you determine both optimal deal pricing and structure to achieve your goals from an ROI and tax perspective, accounting for factors that include revenues, future opportunities and contracts, industry trends, and market share. Of course, if you just plan to make a must-have power bid like Ballmer, at least you’ll know what you’re getting into and how far from the baseline to overshoot.
July 25, 2014
Crowdfunding is helping thousands of businesses acquire much-needed capital and build a core fan base. Businesses of all kinds and for many funding purposes are using crowdfunding platforms, from yoga studios looking to grow into larger spaces to tech innovators wanting to bring new gadgets to market.
If you’re considering a campaign to launch your business, expand a product line, or fund a special project, scheduling a few minutes with Talley and Company’s advisory team can ensure your campaign is set up properly from the start to avoid obstacles from a tax and legal perspective. (There’s nothing worse than obtaining hard-earned funding only to discover that federal and state tax obligations may keep you from fulfilling your vision.)
For businesses, there are two main avenues for crowdfunding, and depending on which you choose, the tax and legal implications will differ greatly. In the rewards-based approach, supporters are typically offered a chance to earn tiered rewards for different contribution levels. These can be anything from a branded T-shirt to pre-ordering a product still in development. Kickstarter and Indiegogo are two popular platforms.
With this option, the income you derive from your campaign will most likely fall under one or more of four categories: revenue, sales, investment or gift. In most cases, the money you earn from a campaign will have to be included as gross income for your business. If you’re offering a product or service in exchange for donations, you may also need to pay sales tax from customers in the state that you’re registered. The expenses you incur for fulfillment of rewards, products or services may be deductible against the income you earn. In some cases, funders will request nothing in return other than the joy of knowing they helped bring an ingenious idea to life. With meticulous records, these may be claimed as gifts. Just keep in mind that the IRS has stricter definitions for what falls under this category than you or I might.
In the equity-based approach, investors get a financial return or an ownership stake in the company for their support. Crowdfunder is one of the platforms in this newly developing category. If you’re using this option, the tax and legal obligations are a different animal entirely, since now we’re talking about investment money and not revenue. In fact, the laws in this area are still undergoing changes, so keeping in close contact with your legal team right from the beginning is essential.
No matter which option you choose, a successful campaign involves a lot of forethought, time and planning to reach funding goals and generate priceless media attention for your big idea. If you’d like to see the creative strategies and executions used by the most highly funded companies, check out the Top 100 Crowdfunded Companies
If you have been involved in the business world in the last 30 years, you have most likely had some experience with Microsoft Excel. Excel is the most common software program used for creating spreadsheets that businesses often use for tracking their financials. However, these same characteristics also make Excel a potential crutch for the entrepreneurially run business. In today’s fast-paced business world, business owners have become far too comfortable relying on Excel as an effective business solution.
So, how does this affect my business?
Excel leaves the creation of spreadsheets and the input of information in the hands of the individual tasked with maintaining key management metrics. Often, these spreadsheets are not reviewed for accuracy by someone else. Any auditor will tell you that this leaves the door open for serious errors in reporting, which can lead to costly fines or, in the worst case, the demise of your business. If this scenario applies to your company, stop and ask yourself two questions:
  1. If the individual assigned the management of your business’ metrics had to leave work unexpectedly, how would that affect your reporting mechanisms?
  2. What is the probability of error within your reporting due to manual input?
If your answers to either of these questions makes you nervous, rest assured there are automated reporting solutions available to give you back control of your key management metrics.
At the end of the day, who has control of your business’ metrics? What is it worth to you to have complete control of your financials and key performance indicators? Talley & Company and its affiliates have helped clients integrate their systems with automatic software solutions that help reduce the likelihood of reporting errors and provide reliable key performance indicators.
March 28, 2014
Earlier this week, the last contender for the $1 billion prize offered by Warren Buffet and Quicken Loans for the perfect March Madness bracket was eliminated. Considering the odds of winning per the contest’s own fine print were 1 in 9.2 quintillion (a trillion multiplied by a million) this comes as no shock to anyone.  
But the battle wages on for millions of others who’ve placed friendly bets in pools that carry much better odds, though of course for much smaller amounts of money. Everyone from the overly-excited guy in the office next door to the President has been excitedly cheering for their teams. Yet we’re willing to wager that few (if any) of them have been thinking about how winning would impact their taxes. Of course, here at Talley and Company, you know we do just that. That’s because whether there’s $1 billion at stake or $100, March Madness bets are classified as gambling, and gambling is taxable. 
Like with any day at the track, outing to a casino or purchase of a lottery ticket, cash and non-cash winnings from March Madness bets are taxable. All winnings should be reported on Form 1040 as “Other Income” (line 21). In addition, you may be required to pay an estimated tax on your gambling winnings.  
Special paperwork comes into play only if your winnings are over $600 or 300 times the wager (lucky you, if that’s the case). Gambling winnings in excess of $5,000 could also be subject to a tax withholding requirement before the winning payout is made to the recipient. If luck wasn’t on your side, take heart-some gambling losses can also be deductible if you itemize and keep good records.
If you enjoy the entertainment of a game like Keno periodically in the year or, in the rare instance that you make a living as a professional gambler, detailed win-loss records are a must.  
As for the Buffett/Quicken contest? Not all is lost. While the $1 billion prize is off the table, the contest will still award $100,000 to 20 eligible contestants with the top-performing brackets. To be eligible, you must have…well…entered the contest. Unfortunately, the gentleman who made it furthest along in the battle for the perfect bracket never did. To him we say, better luck next year. To you, we say, don’t forget about your taxes, and Talley & Company is here to help answer any questions you may have. 
March 21, 2014
As fans of the hit show “Shark Tank” can attest, it’s not easy securing funding for your small business.  Since debuting in August of 2009, millions of viewers have watched entrepreneurs try to convince one of the five “sharks” to invest in their business, not just financially but also with advice for long-term growth.  To quote head-“shark” Kevin O’Leary, “Building fast-growing, globally competitive companies is tough.”
In each episode small business owners make their pitch to the five sharks, all well-known millionaires who started out as entrepreneurs themselves, including Mark Cuban (owner of the NBA’s Dallas Mavericks) and Daymond John (founder of the FUBU clothing line), to convince at least one of them to invest their money and time.  But that isn’t easy.  Like all investors, the “sharks” have heard it all – from failures like the Life Caps Survival Pill (a vitamin and mineral pill that allows you to live without food for up to two weeks) to successes such as Ava the Elephant (an effective medicine dropper for children). Many contestants on the show get eaten alive by the “sharks” for the same reasons entrepreneurs outside of the reality TV show, by not having their financials in order or having a well-thought-out business plan.  As one “shark” put it, “Just because you have a hobby, doesn’t mean you have a business.”  This is a reality show that really is, well, real.
Whether you’re appearing on “Shark Tank”, seeking angel investors, or acquiring financing, you’ll need to do your research and be prepared. Talley & Company can assist you throughout the entire process.  From reviewing and preparing financial statements in a way that interests potential buyers/investors, to uncovering value from areas financials alone won’t reveal, the experts at Talley & Company are here to help your business ventures succeed.

March 17, 2014

Since January 1, when Colorado’s marketplace for the legal sale of recreational marijuana first opened, all eyes have been on the state to see what consequences unfold. Already, early estimates are showing tax revenues from pot sales to be far exceeding expectations-from the $70 million provided to voters to $98 million recently predicted by Colorado governor John Hickenlooper for the next fiscal year. 

Until recently, processing money from marijuana sales put federally insured banks at risk of drug racketeering charges. But just weeks ago, the Obama administration gave the “ok” for banks to lend to pot sellers, at least with a complicated list of due diligence requirements and over 20 red flags that must be reported to ensure business legitimacy and compliance with federal law. FinCEN, the Treasury Department’s Financial Crimes Enforcement Network, has a vested interest in helping to keep cash off the streets since it writes the rules that banks follow to mitigate money laundering and the financing of terrorism.

Yet many banks are reading the new guidelines as more of an outline to all the risks of doing business with pot sellers than a green light. The American Bankers Association says the new regulations simply aren’t enough, since they don’t change the fact that marijuana sales are still illegal under federal law. That means property used as collateral for loans would potentially be subject to federal drug-seizure laws. According to The Denver Post, Colorado’s two largest banks, Wells Fargo Bank and FirstBank, aren’t offering new loans to landowners with pre-existing leases with pot businesses.

You don’t have to be selling marijuana to run into obstacles with a financial institution, particularly when it comes to getting a loan or line of credit. If you’re seeking to obtain financing for cash flow and daily operations, growth plans or other needs, Talley & Company’s team and relationships with lending institutions can help. Our advisors can present and prepare your company’s financials in ways that increase favorability with lenders, helping to make sure your efforts don’t go up in smoke.