After a two and a half year legal battle, Colin Kaepernick’s collusion grievance against the NFL has been settled. While it is speculated that Kaepernick will receive an estimated $60-80 million before taxes, the official number is unknown since both parties are bound by a non-disclosure agreement. Like other windfall events, the large payout presents Kaepernick with equally as large tax implications. With the IRS constantly updating laws, there are a few ways a tax advisory expert can coach Kaepernick on understanding the tax game and help him avoid unnecessary fumbles.

In Kaepernick’s situation, the money he receives as part of the settlement would be counted as lost earnings and therefore treated like ordinary income on his tax filings. The only exception to this rule would be in cases involving personal physical injuries from accidents or illness that would be tax-free thanks to Section 104 of the tax code. In 1996, the IRS differentiated “personal injuries” and “personal physical injuries” meaning cases related to emotional distress, sexual harassment, and defamation are no longer included in this tax-free category.

Additionally, with recent tax laws on gross recoveries, individuals’ payments are taxed in full regardless of what lawyers may retain. If your lawyer is receiving half of your settlement, you will still be liable for income taxes on the total amount which finds many people unprepared. For professional athletes and average people alike, laws are increasingly preventing and complicating deductions both above and below the line. Understanding these complex regulations, especially during a windfall event, is one of the biggest challenges facing many today. With comprehensive knowledge of current laws, tax expert advisors offer financial, tax and legal insights needed to call the best plays.

Talley LLP offers a broad spectrum of services to fulfill the needs of professional athletes, high net worth individuals, and entrepreneurially driven companies and their owners. Whether you are considering an M&A transaction or experiencing a financial windfall event, the professionals at Talley LLP can make the most of both your earnings and winnings.

After almost two years of facing off, Cristiano Ronaldo’s match with the Spanish government has ended with a guilty plea to four counts of tax fraud. The soccer star has agreed to pay a $21.7 million fine and serve a 2-year probationary period in lieu of jail time. Like his fellow fraudulent footballers Lionel Messi, Neymar, and Samuel Eto’o found, tax authorities will continue to demonstrate that celebrity athletes are not above the law.

In mid-2017, Spanish tax authorities launched an investigation into Ronaldo, alleging that he underreported his financials related to his image or likeness rights’ deals. As arguably the most famous soccer player in the world, a huge chunk of his earnings derives from his appearance and brand. As #3 on Forbe’s list of the World’s Highest Paid Athletes and #5 on the World’s Highest Paid Celebrities, it’s not a shock that Ronaldo’s finances would undergo a rigorous investigation by Spanish authorities to uncover any wrongdoing.

High net worth individuals and celebrities will continue to face increased scrutiny by tax authorities, both domestically and internationally. Seeing as U.S. celebs such as Mike “The Situation” Sorrentino from “Jersey Shore” and Teresa Giudice from “The Real Housewives of New Jersey” have faced harsher sentences, serving actual prison time, Ronaldo may have got off easy.

With over 30 years’ experience consulting with industry-leading companies, we understand the challenges facing individuals with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

It is no secret that failure to report crucial financial information on your tax returns can result in hefty fines and legal repercussions with the IRS, but some people still try to hide their earnings overseas. A United States schoolteacher was caught with over a million dollars in funds unreported in her United Bank of Switzerland account that resulted in a hefty $803,530 fine. Unsurprisingly, The Court of Federal Claims deemed her willfully and recklessly guilty after she tried to contest her punishment in court.

In 1999, Mindy Norman opened a foreign UBS numbered bank account allowing her to hide her financial information from the IRS. A year later, in 2000, she also waived her rights to invest in U.S. securities to further conceal her account. Later in 2008 when UBS implemented a New Business Model that informed its clients that it would soon be assisting the U.S in finding fraudulent individuals, Norman closed her UBS account and moved her money to Wegelein and Co., a now-defunct Swiss bank.

In 2009, The Offshore Voluntary Disclosure Program (OVDP) was enacted to urge the owners of offshore accounts to disclose their banking information at the promise of more lenient FBAR fines. If properly communicated and approved by the IRS, the standard fine of 50% of the unreported account balance could be reduced to 20%. Norman and her accountant opted for an alternative form of reporting called “quiet disclosure” for 2009 which included amended FBARS and tax returns for 2003-2008. Taxpayers including Norman are informed that filing this way could be risky as it could result in examination/prosecution of statements for applicable years.

Seeing as she taught both government and economics with a total of at least seven subjects, the court concluded her claims to have never read documents related to her accounts invalid. Additionally, her consistently changing testimony further shot down her arguments attempting to make her appear to have no knowledge of tax implications. Her case was dismissed, and the fine was upheld losing her half her earnings, a risky lesson to those attempting to evade the IRS.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you. For more information, contact us today.

It’s not uncommon for billionaires to give up some of their money to charity, but some give a lot more than others to causes close to their hearts. The Giving Pledge, championed by Warren Buffett and Bill & Melinda Gates, invites the world’s wealthiest to pledge more than half of their wealth to charitable causes either during their lives or in their wills.  As of this year, 186 ultra high-net worth individuals have joined the effort, with many promising to allocate more than 99% of their wealth to philanthropy. 
Last year, the 5 most generous individuals and couples gave away a combined $14.7 billion. Here are some of the more notable pledgers and what causes they support.
Microsoft cofounder Paul Allen, funds invaluable scientific research through the Allen Institute for Brain Science. Allen established the Allen Institute for Brain Science, which studies the genetic causes of brain diseases and disorders. As of 2015, Allen has donated $2 billion to charity.
Warren Buffett pledged to give away more than 99% of his riches and has already donated over $21.5 billion. Buffett noted in his pledge letter that “about 20% of my shares (in Berkshire Hathaway stock) have been distributed” to various charities and he will continue to distribute another 4% of his stock every year.
Bill and Melinda Gates are champions in eradicating preventable diseases. Bill Gates and his wife Melinda gave away more money than anyone else last year, donating $4.8 billion, according to Forbes. The Bill & Melinda Gates Foundation funds initiatives and programs around the world that support agricultural development, emergency relief, urban poverty, global health, and education. They are particularly devoted to fighting diseases that, with treatments like vaccinations, are easily preventable.
Facebook founder and CEO Mark Zuckerberg and his wife Priscilla Chan are fighting Ebola and improving San Francisco Bay-area public schools. Mark Zuckerberg was one of the first individuals to join the Giving Pledge and donated $2 billion last year. 
No matter the amount, your generosity in gifting time and money to worthwhile causes can have a significant impact on your tax liability. While tax considerations should never drive your charitable giving, it makes sense to structure your gifting to maximize the tax benefits. If you have questions regarding your gifting or estate plan, please contact Talley LLP today.

The U.K. said it will move ahead with plans to introduce a first-of-its-kind tax on locally generated revenue by large technology firms, representing the most tangible attempt yet by an industrialized nation to transition its tax code into an increasingly digital era.

Britain’s chancellor of the Exchequer, Philip Hammond, on Monday unveiled a 2 percent tax on the revenue that big search engines, social-media platforms and online marketplaces earn in the country.

Such taxes, which are separate from corporate income taxes many companies already pay, are generally known as digital taxes and could add billions of dollars to companies’ tax bills. They seek to impose levies on digital services sold by global companies in a given country from units based outside that country.

As large tech firms have grown into global, digital consumer-service giants, governments outside their home jurisdictions have struggled with the digital nature of their wares in coming up with an appropriate level of local tax to levy.

Big American tech firms have been criticized for reporting relatively little of their profit in local jurisdictions, opening them up to scrutiny. An international effort among rich nations to help standardize how and where to tax these digital services has been progressing slowly. The U.K. on Monday said it could no longer wait. As part of its annual budget, it said it was moving ahead with a plan to begin a digital tax for large tech firms by 2020.

The new digital U.K. tax puts pressure on other big countries, including the U.S., to speed up the global effort. The Organization for Economic Cooperation and Development, a forum of wealthy countries, has been leading the international digital-tax talks.

Only broadly experienced tax advisory professionals can provide a truly global perspective so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. Talley welcomes the opportunity to discuss with you the current opportunities available to you and your family. For more information, contact us today.

As part of the Tax Cuts and Jobs Act (TCJA), there have been changes to the treatment of certain business-related expenses, including travel, business meals, and entertainment. On Wednesday, the IRS released guidance on the business expense deduction for meals and entertainment in the wake of the TCJA, which was supposed to eliminate deductions for expenses pertaining to activities generally considered entertainment, amusement or recreation.

The TCJA did not change the definition of entertainment. Where things get murky, though, is whether providing food and beverages might be considered entertainment, especially if food and beverages are tied to an activity considered to be entertainment.

Under prior law, the rule was that you could deduct up to 50% of entertainment expenses directly related to the active conduct of a trade or business or, amusement, or recreation expenses directly related to your trade or business. That changed, however, with the passage of the tax code overhaul last December.

The IRS said taxpayers can still deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the business) is present at the meal, and the food or beverages aren’t considered to be “lavish or extravagant.” The meals can involve a current or potential business customer, client, consultant or a similar business contact. Food and beverages provided during entertainment events won’t be considered entertainment if they’re bought separately from the event.

The Treasury Department and the IRS plan to publish proposed regulations that will make clear when business meal expenses are deductible and what constitutes entertainment. Until those proposed regulations take effect, taxpayers can rely on guidance in Notice 2018-76, which the IRS issued Wednesday in conjunction with the announcement.

Whether you are considering the new tax treatment of M&E expenses for 2018 or evaluating how tax reform will affect your overall tax situation, consult with the tax experts at Talley LLP today.

There is nothing quite like winning a prize, so one can imagine the amount of excitement contestants on the popular show “The Price is Right” are subjected to after winning such rewards as brand name appliances, trips to exotic locations, and brand new cars. But what happens to the contestants after their glorious fifteen seconds of fame? Here’s a hint: You don’t drive off the back lot with the brand new car you won, and you might find yourself unprepared for the hefty taxes coming your way before you can even get your fingers around your new set of car keys.

One particular contestant, Andrea Schwartz, found out the hard way when she amassed $33,000 worth of prizes. including a brand new Mazda 2 compact car, a shuffleboard table, and a pool table. Before she could claim her prizes, she first had to pay the California state income taxes in the amount of $2,500. If she had not arranged the paperwork, paid the taxes and picked up her car all within 10 days she would have forfeited her prizes.  When all was said and done, Schwartz had to scramble to come up with the funds or risk forfeiting the prizes she won.  

While it is nothing new that people pay taxes on winnings (in most cases), Schwartz’ experience on “The Price is Right” provides a valuable lesson when dealing with any windfall event you may experience in your own life. Winning the lottery, receiving an unexpected inheritance, cashing out a retirement plan. These financial events can be a welcome occurrence in your financial life, but the fact of the matter is, each of them raises serious financial questions that you have to deal with -and quickly. 

As in the case of any sudden windfall event in life,  the tax professionals at Talley LLP can make the most of both your earnings and winnings.

Under the new tax law, small and medium-sized companies may need to consider cutting back on entertainment expenses.

Under the prior law, so long as an expense was directly related to the active conduct of a trade or business, you were allowed a deduction for an activity generally considered to be entertainment, amusement, or recreation. The limit was up to 50% of the expense. Starting in 2018, the cost of many types of entertainment expenses will no longer be deductible.

Additional IRS guidance on this subject is expected, however, below are a few examples of how the Act may impact businesses and their employees:

  • Cost of taking a client to dinner before a baseball game would not be deductible. Prior to the Act, the expense would be partially deductible.
  • Cost of employee lunch on premises will be partially deductible, subject to the fifty percent threshold. Prior to the Act, the expense was fully deductible.
  • Cost of providing parking passes to employees at garages near their office would not be deductible. Prior to the Act, the parking cost would have been fully deductible.

Write-offs for business-related meals with clients haven’t changed; they’re still 50% deductible. Which may mean more dinners, and fewer experiences, for business developers wooing prospective clients. Yet businesses still need to be careful: Going to an expensive restaurant or venue with live music could, for instance, fall under entertainment.

While many businesses will continue to attend events with their clients even if these types of expenses are no longer 50% deductible, the cost of doing business just went up.

Whether you are considering the new tax treatment of M&E expenses for 2018 or evaluating how tax reform will affect your overall tax situation, consult with the tax experts at Talley LLP today.

Tax Freedom Day, the day where Americans as a whole have earned enough money in order to pay the nation’s tax burden fell on April 19 this year. The nation’s total tax bill for 2018, taking into account all federal, state, and local taxes stands at nearly $5.2 trillion, representing 30 percent of national income. This figure represents 30 percent of income. It took 109 days to pay off this year’s bill.

Of course, our personal tax freedom days vary depending on where we live, as well as our income, investments, and other holdings. For example, Californians will celebrate tax freedom day several days later, on April 23. And based on individual factors, the day may come even later (or earlier) in the year for each individual.

Most people are interested in reducing the number of days it takes to reach their own personal tax freedom day. For individuals with straightforward tax profiles, this might be accomplished in the weeks leading up to April 15 by looking for ways to maximize deductions and help score the biggest refund check. For high-income earners, business or property owners, estate beneficiaries or holders, and anyone with multiple tax positions that are intricately connected, this short-term, narrowly targeted approach can actually do more harm than good.

In these cases, personal wealth, business portfolios, and long-term investments are all complicated moving parts to take into consideration months and years before tax day. Otherwise, someone may be minimizing their taxes for any given year, but by doing so expose themselves to greater taxes over the long term. Therefore, a holistic approach may help you lessen your tax burden a substantial amount over the long term.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you, your family and business. For more information, contact us today.

The Internal Revenue Service announced last week it will begin to ramp down the 2014 Offshore Voluntary Disclosure Program (OVDP), closing the program on Sept. 28, 2018. By alerting taxpayers now, the IRS is encouraging any U.S. taxpayers with undisclosed foreign financial assets use the OVDP before the program closes. 

Everyone knows the scrutiny given to Cayman Island banks, as well as the hidden accounts revealed by the Panama Papers. But “offshore” in the Internal Revenue Service’s eyes means any location outside United States boundaries. The IRS certainly knows about all these places where U.S. taxpayers stash their cash. And they do all they can to find the money and get the taxes due.

US tax and Report of Foreign Bank Accounts (FBAR) filing requirements for Expats

In addition to employing traditional enforcement actions against offshore accounts, the IRS has used a voluntary program since 2009 to encourage foreign account owners to report their offshore holdings to Uncle Sam at a reduced penalty rate as well as avoid criminal charges.

That option, however, will end in September.

Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. All told, those taxpayers paid a total of $11.1 billion in back taxes, interest, and penalties. The number of taxpayer disclosures under the OVDP peaked in 2011 when about 18,000 people came forward. The number steadily declined through the years, falling to only 600 disclosures in 2017.

Tax Enforcement

The IRS notes that it will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, Whistleblower leads, civil examination and criminal prosecution. Since 2009, IRS Criminal Investigation has indicted 1,545 taxpayers on criminal violations related to international activities, of which 671 taxpayers were indicted on international criminal tax violations.

Streamlined Procedures and Other Options

A separate program, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations, has helped about 65,000 additional taxpayers come into compliance. The Streamlined Filing Compliance Procedures will remain in place and available to eligible taxpayers. As with OVDP, the IRS has said it may end the Streamlined Filing Compliance Procedures at some point.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you and your family. For more information, contact us today.

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