Tax Planning

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#Windfall

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Psychologists agree that the ability to concentrate is key to achieving our goals. But today's high-tech world is full of distractions, from thousands of cable TV channels to millions of internet sites, with smart phones constantly within reach. Some experts say our attention span is actually shrinking. So should it be any surprise that Americans have fallen in love with Twitter, the online social networking and "microblogging" site that lets users send and read "tweets" limited to no more than 140 characters?

Twitter attracted confusion (and no small amount of scorn) when it debuted in 2006 — co-founder Jack Dorsey admitted that the service is "a short burst of inconsequential information." But there are now more than 200 million "monthly active users" posting more than 500 million tweets per day. Singer Katy Perry currently has the most followers, at 46.8 million. She's trailed by

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Voting With Your Feet

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It's safe to say that people don't like paying taxes. America was born out of a tax rebellion, and Americans have resisted every variety of tax ever since. Some of them even go as far as renouncing their American citizenship to avoid the tax man.

Expatriation sounds like an awfully big step just to pay less tax. But more and more Americans are doing it. In 1994, Campbell's Soup heir John T. "Ippy" Dorrance III saw greener pastures in Ireland, trading what was then a 55% estate tax for Ireland's 2%. And just last year, Facebook founder Eduardo Saverin "defriended" Uncle Sam and the IRS after moving to Singapore, potentially saving hundreds of millions in tax. Americans who give up their citizenship pony up an "exit tax" on the value of their assets when they leave, essentially paying as if they had sold everything the day before surrendering their passport. But that doesn't stop the determined from leaving — in the second quarter of this year, 1,131 Americans bid bon voyage to their citizenship.

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Story Problems for Grownups

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Back in grade school, you did all sorts of math problems. You started out with drills to learn your basic addition, subtraction, and multiplication. You learned long division (ugh). You moved on to fractions. And all along the way, as part of your teachers' efforts to convince you that it all matters here in the "real world," you did "story problems." Remember those?

Well, now you're all grown up, so here's a grownup story problem to ponder:

You're an IRS auditor, toiling away to protect the government's revenue base. Then you decide to leave "the dark side" and start your own practice. Things start off great, but you want more. So you mock up some fake tax returns, tell some clients they owe $11 million, and have them make payments into a bogus "trust account." Then you take the money for yourself, make some home improvements, buy a beach house in Mexico, pay to use a private plane, pay $2 million on your personal credit cards and loans, and make some investments. It's good to be rich, isn't it? But now there's a teensy-weensy little problem. The IRS is on to you, your clients are hopping mad, and two of them are scheduled to testify against you! What do you do?

Well, if you're Steven Martinez of Ramona, California, you send your limousine driver (!) to offer a hit man $100,000 to take out the clients. But you don't just whisper some names in his ear and slink back home. Oh, no. Because you're an accountant

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When 20 > 20.1

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Labor Day has come and gone, and, while fall isn't "officially" here, it's time to put away those summer whites. Never mind that the mercury is still hitting 100 degrees in parts of the country; forget about those pennant races still heating up in the AL West and NL Central. This weekend, the National Football League kicks off regular season play! This week's season opener is just the first step on the road to Super Bowl XLVII, to be played outdoors on February 2, 2014, at the Meadowlands in New Jersey. (If you look hard enough on ESPN, you can find pre-game coverage starting early next week.)

Earlier this year, Baltimore quarterback Joe Flacco won MVP honors in Super Bowl XLVII and signed a new six-year contract worth $120.6 million. It makes him the highest-paid player in the game, just ahead of New Orleans quarterback Drew Brees. But in a surprise twist that NFL statisticians would love, Brees will actually take home more money than Flacco.

How can that be? Taxes, of course — why else would we be talking about it?

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Are you sitting down?

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Let's start by saying that no one likes getting audited. But the average income tax audit isn't the end of the world. For tax year 2012, the IRS audited just 1,481,966 returns out of over 143 million filed, or barely one in a hundred. And according to the IRS Databook, the average "deficiency notice" demanding more tax was just $10,331. That's nobody's idea of a party, of course. But it shouldn't bankrupt anyone who makes enough to owe that much extra tax.

Things are a little different when it comes to estate taxes. For starters, the tax applies to the value of your assets, not the income they produce. It doesn't kick in until your taxable estate after all deductions tops $5.25 million ($10.5 million per couple). But the tax itself is 40%, which is higher than the top income tax rate. With so much more at stake, the estate-tax audit percentage is naturally far higher than the percentage for income tax — for 2012, the IRS audited 3,762 out of 12,582 estate tax returns filed, or nearly one in three. As for the average deficiency, well, here's hoping you're sitting down — it's a whopping $305,529!

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Hotties and Notties

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Junior high school is a difficult time for parents as well as students. It's a time when boys start to discover girls, and girls start to discover boys. (Reports differ on exactly which group discovers the other first, but it's equally terrifying for most parents.) One of the very first things junior high boys and girls start doing when they discover each other is rating each other — usually on a scale of 1-10. The 9s and 10s form cliques to congratulate each other on their good fortune, while the 3s and 4s learn to tell jokes, plan on making money, or learn to get by with a "great personality." (In case you've forgotten, junior high school can be really cruel.)

It turns out, though, that junior high kids aren't the only ones rating the world around them. Now comes news that two German economics professors