October 25, 2021

Washington Memo: Torches and Pitchforks for I.R.S. but Cheers for Apple

Armed with a blistering report that said Apple had avoided paying billions of dollars in taxes, senators this week had choice words for the company’s chief executive, Timothy D. Cook, when he appeared before the Senate’s Permanent Committee on Investigations on Tuesday.

They called him a “pretty smart guy” and praised the “incredible legacy” his company had left. They gushed over his products, calling Apple “a great company” that had managed to “change the world.”

True, Senator John McCain, Republican of Arizona, and Senator Carl Levin, Democrat of Michigan, vigorously attacked Mr. Cook over tax gimmicks. But the overall mood of the panel was summed up by Senator Claire McCaskill, a Democrat from Missouri, who declared, “I love Apple!”

It was considerably different for the officials of the Internal Revenue Service, whose presence was also “requested” by lawmakers to face accusations that the agency had improperly targeted conservative Tea Party groups for special scrutiny.

On Wednesday, Lois Lerner, who leads the I.R.S.’s division on tax-exempt organizations, prompted angry denunciations from lawmakers by proclaiming her innocence and then quickly invoking her Fifth Amendment right to refuse to answer questions. Representative Tim Walberg, Republican of Michigan, marveled at the “amount of ineptitude” at the I.R.S. and proposed that Ms. Lerner’s refusal to answer questions from the committee suggested “there’s some concern about criminality” regarding what happened at the tax agency.

Representative John Mica, Republican of Florida, accused Ms. Lerner’s former boss, Douglas Shulman, of having “closed down or gagged” I.R.S. employees from telling the truth.

In short, Wednesday’s I.R.S. hearing felt like an inquisition — unforgiving, angry, prosecutorial.

Mr. Cook, by contrast, took his hot seat in front of senators who seemed halfhearted in their desire to beat up on the rich guy who makes their iPhones, and whose products are far more popular than they are.

“With him, they were just not going to go up against an American success story,” said Neil Eggleston, a veteran Washington lawyer who has prepared many government officials to face a grilling at the hands of lawmakers.

But Mr. Eggleston said Ms. Lerner and the other I.R.S. officials never had a chance at changing the narrative of their hearing. Before such sessions, Mr. Eggleston said, he is honest with his clients: “You are going to get beat up. You are going to get yelled at. There’s no way to turn the tide in your favor.”

The hearings of Mr. Cook were in striking contrast to those 15 years ago of Bill Gates, the chairman of Microsoft, who was skewered by lawmakers and his rivals over using monopoly power to run over his business rivals.

Mr. Gates was disdainful of Washington and politicians when he arrived from Seattle for his first Capitol Hill appearance in 1998. That did not serve him well. Microsoft’s Windows — highly crash-prone at the time — along with irritants like “Clippy,” the obsequious talking paper clip who popped up on computer screens offering to help write letters, hardly endeared Mr. Gates to consumers.

Not so Mr. Cook and Apple. Even the often-cantankerous Mr. McCain, who as recently as 2008 still used an old-fashioned flip phone, concluded his questioning with a jocular tech support query. “What I really wanted to ask you is why the hell I have to keep updating the apps on my iPhone all the time,” Mr. McCain said, prompting guffaws from the dais and the audience.

Public relations experts who help witnesses survive Capitol Hill hearings say the tenor of the sessions is often set well before the witnesses take their seats. How much the witnesses subsequently are pummeled often depends on whether they are able to tap into any reservoirs of good will on their issues among the public.

As an example, when lawmakers created a spectacle in 2005 by demanding the testimony of the nation’s top baseball stars during an investigation into steroid use, the questioning got rough. But the players were still heroes to millions — certainly more so than most of the lawmakers. (After the hearings, congressional staff members crowded around the sluggers, asking for autographed baseballs.)

In contrast, lawmakers pilloried the top executives of the auto companies in 2008 after they admitted to flying on corporate jets to Washington to beg the government for as much as $25 billion in help. Their appeals, though, came in the middle of an economic crisis and were roundly denounced by an outraged public.

This week, Mr. Cook tapped into the public’s good will to defuse the congressional anger. The I.R.S. officials had no such luck.

“This just shows the trust deficit that the I.R.S. has with the American public,” said Kevin Madden, a veteran Republican strategist who advises corporate clients on communications strategies. “The only thing that the American public hates more than the Congress right now is the I.R.S.”

There is always the possibility that a witness can change his or her fortunes by saying just the right thing at a congressional hearing.

Mr. Cook was well prepared, observers of his testimony said. During the hearing, he appeared to know as much about tax policy as the lawmakers asking him questions. (Mr. Cook might also have been helped by the “reality distortion field” that journalists often joked surrounded his predecessor, Steve Jobs, during rollouts of the latest “magical” iPhone or iPad.)

But Mr. Madden and others said the I.R.S. officials could hardly have said anything to defuse the anger, especially among Republicans eager to keep the issue alive.

Perhaps that was part of Ms. Lerner’s calculation when she decided to make an opening statement — and then shut up.

“I know that some people will assume that I’ve done something wrong,” she said. “I have not. One of the basic functions of the Fifth Amendment is to protect innocent individuals, and that is the protection I’m invoking today.”

Kitty Bennett contributed reporting.

Article source: http://www.nytimes.com/2013/05/23/business/torches-and-pitchforks-for-irs-but-cheers-for-apple.html?partner=rss&emc=rss

Budget Office Says Obama Plan Would Cut Deficit by $1 Trillion

But the proposal, which was released just last month, has already been mostly forgotten in Washington. Senate Democrats and House Republicans have not agreed to come to the table to split the difference between their budgets, either. After two years of knock-down, drag-out fights over taxes and spending, the budget has been put on the back burner, at least for now.

In part that is because the gap between spending and revenue has started to shrink substantially, in response to earlier tax increases, spending cuts and a strengthening economy. Earlier this week, the budget office sharply cut its estimate of the current fiscal-year deficit by more than $200 billion, on higher-than-anticipated tax receipts and big payments to the Treasury from Fannie Mae and Freddie Mac, the mortgage financiers. Were Congress to do nothing and the economy avoid running into a ditch, the deficit would fall to just over 2 percent of economic output in 2015.

It is also because the series of automatic cuts, ceilings and self-imposed crises have for the most part ended. The so-called fiscal cliff was avoided when at the beginning of the year Congress managed to pass a more-moderate package of tax increases and cuts. The $85 billion in cuts to domestic and military programs known as sequestration has already hit, with lawmakers doing little to change them.

That has left nothing on the horizon to force Congress’s hand until it needs to raise the debt ceiling, a statutory borrowing limit. But because of strong tax receipts and the sequestration spending cuts, it might not need to tackle that issue until October or even later.

Separately, lawmakers and the White House have focused their attention on other priorities, particularly gun laws, immigration reform and a series of scandals. This week, for instance, it was a fracas over the revelation that Internal Revenue Service employees targeted conservative groups seeking tax-exempt status.

But some members of Congress, along with President Obama, are still vowing to tackle the country’s long-term deficits even though there is no imminent threat. Without Congressional action, the deficit, as measured as a proportion of economic output, could start rising again in the latter half of the decade, the Congressional Budget Office warned again this week. If health care spending starts rising again sharply and debt payments soar as interest rates rise, many experts fear that those costs will eventually crowd out financing for the government’s other priorities.

“It is encouraging to see that the president’s proposals would indeed begin to reduce the debt, and to lower levels than originally thought,” said Maya MacGuineas of the Committee for a Responsible Federal Budget, a budget watchdog, in a statement responding to the new budget office estimate. “Regardless, additional reforms will be needed over the long-term, especially to slow the growth of health care programs and shore up Social Security,” she said.

On some issues, Republicans and Democrats are closer than their heated rhetoric might let on. For instance, Mr. Obama included in his budget proposal cuts to Social Security and Medicare that are anathema for many Democrats, showing a willingness to spread the political pain as part of a larger budget deal in a bid to encourage Republicans to bargain. One major change would alter the calculation used to ensure that Social Security payments kept up with the pace of inflation, providing less money to seniors over time.

His proposal also includes almost $1 trillion in tax increases, by further limiting the deductions and exclusions high-income families can claim, increasing taxes on tobacco and introducing the so-called Buffett Rule, a new minimum tax on income over $1 million. Republicans have refused to consider changes to increase revenue, arguing that money raised from closing loopholes should be used to bring down overall tax rates.

Mr. Obama’s proposal would widen deficits slightly in the fiscal years 2013 through 2015, the budget office said, but trim them later on. Starting in 2014, his tax increases would lift revenue gradually from about $27 billion to $155 billion a year. Spending would increase by as much as $142 billion a year until 2018, when it would decline beneath the levels indicated by current law.

The two parties are principally at odds over priorities like infrastructure, science, agriculture and education, and on Medicaid, the health care program for the poor and disabled.

In 2023, the House Republicans plan would put the level of Social Security and Medicare spending very close to where the White House would — about 8.7 or 8.8 percent of economic output, according to an analysis by Douglas W. Elmendorf, the director of the budget office. Mr. Obama is calling for modestly smaller military spending, at 2.4 percent of economic output, compared with the House Republicans’ 2.7 percent.

The White House would spend 7.7 percent on everything else, including housing programs, unemployment insurance, Medicaid, health insurance subsidies and education. The House would spend just 5.2 percent.

The Congressional Budget Office does not analyze Congressional budget resolutions. The House and Senate budget committees put forward revenue and spending estimates of their own plans based on Congressional Budget Office data, but both plans lack a lot of detail.

When it released its plan, the Obama White House claimed that it saved $1.8 trillion over 10 years. The divergence between its estimate and the budget office’s stems from the fact that the White House assumed the $85 billion in automatic budget cuts would be repealed or replaced with a new policy. The budget office did not.

Other than that, the independent office’s assessment of how the budget proposal would affect spending and revenue differs only marginally from the White House’s own.

Article source: http://www.nytimes.com/2013/05/18/business/obamas-budget-would-cut-1-trillion-from-deficit.html?partner=rss&emc=rss

Bucks Blog: If You Need More Time to File Your Tax Return

Tax Day is next Monday. If you haven’t filed your taxes yet, should you be considering filing for an extension?

It’s easy to file for an automatic six-month extension on your federal tax return. Just fill out Form 4868 and file it by April 15. (You can also file it electronically). You don’t have to give a reason for seeking the extra time. You’ll then have until Oct. 15 to complete your tax return.

Last year, the Internal Revenue Service received roughly 10.7 million extension forms. (There are roughly 140 million tax filers each year.) Filing for an extension lets you avoid a late-filing penalty, usually 5 percent a month based on your unpaid balance.

But even if you file for an extension, that doesn’t mean you have an extension on paying any taxes you may owe. You must, in effect, make your best estimate of what you owe on the extension form, and pay it. If you don’t, you risk paying penalties and interest on what you owe.

Generally, you should file your taxes on time if you can, but there are valid reasons for seeking an extension, said Ed Mendlowitz, an accountant and partner with Withum Smith Brown in South Brunswick, N.J., who blogged about this topic recently.

For instance, perhaps you didn’t receive certain important forms, like a Schedule K-1, showing your share of profits or losses from a partnership. Or you have a complicated tax situation and want your tax preparer to have more time to complete your return in an unhurried manner. Or perhaps you are self-employed and want to establish and finance a Simplified Employee Pension Individual Retirement Arrangement — a retirement plan for business owners and their employees — but you don’t have the cash on hand. If you file for an extension, you can wait to set up the plan and put the money in by the extended filing deadline.

Mr. Mendlowitz said it was not true that filing for an extension would increase your chances of being audited. Indeed, he said, if you wait until October to file, you may slightly reduce your chances of being audited, because the I.R.S. is generally selecting returns for audit in late summer and early fall.

It’s important to note, he said, that requirements for an extension on your state tax return may be different. Some states, for instance, won’t grant extensions to file if you owe money and don’t pay at least a proportion of it by April 15, so you should check the rules for the state where you are filing.

Have you filed for an income tax extension? How did it work for you?

Article source: http://bucks.blogs.nytimes.com/2013/04/10/if-you-need-more-time-to-file-your-tax-return/?partner=rss&emc=rss

Bucks Blog: A New Variation of a Costly Tax-Time Offer

Tax refund anticipation loans, which are short-term advances made at tax time at high interest rates, are far less prevalent now partly because of a federal crackdown on banks that had been making the loans, according to a new report.

But consumers may not be aware that similar tax-time financial products can also be costly, according to the report, from the National Consumer Law Center and the Consumer Federation of America. Some tax preparation firms, like Liberty Tax Service and Jackson Hewitt, continue to make the refund anticipation loans using nonbank partners.

Some firms also offer a related item called refund anticipation checks. While these checks are not as expensive or risky as the tax anticipation loans, they can represent a high-cost loan for the tax preparation fee, the center said, an issue because many of the taxpayers who sign up for these products have low incomes.

The checks work like this: a bank opens a temporary account, and the Internal Revenue Service deposits a refund into it. Fees for the refund anticipation check and for tax preparation are paid out of the account, and the customer then gets a check, or a prepaid card, for the balance. The bank then closes the account. Firms may work with outside banks or, in the case of H R Block, its own affiliate bank, said Chi Chi Wu, staff attorney at the consumer law center.

Refund anticipation checks aren’t any faster than a direct deposit of a refund into a bank account, but they allow customers pay for their tax preparation fee out of their refund, instead of paying it upfront.

The checks are a costly option. Banks typically charge $30 to $55 for a refund anticipation check, and tax preparers add on their own fees, ranging from $25 to hundreds of dollars.

Plus, the process can make it difficult for consumers to comparison shop for tax preparation fees since they are often lumped in with other fees. “Clearly, there is a need for reforms in the disclosure of tax preparation fees,” the report said. “Tax preparers should be required to provide a clear, simple disclosure of tax preparation fees to consumers before beginning the process of tax preparation.”

The fees can be significant for the lower-income consumers who tend to use refund anticipation checks. About half receive the earned-income tax credit, a refundable tax credit aimed at helping low-wage workers.

And the report noted that the cost was “still pricey” for what is “essentially a one-time-use bank account.”

This year, for example, the report said, HR Block charges $24.95 for a refund anticipation check delivered on its Emerald Card; $34.95 if delivered by direct deposit to another bank account; and $54.95 if delivered by paper check. Both Jackson Hewitt and Liberty Tax charge $29.95, the report said.

With less availability of refund anticipation loans, more consumers may be shifting to the checks, the center said. In 2011, the center said, the number of taxpayers getting the checks rose to about 18.3 million, up from 12.9 million in 2009.

Have you ever used a refund anticipation check? How did it work out for you?

Article source: http://bucks.blogs.nytimes.com/2013/03/27/a-new-variation-of-a-costly-tax-time-offer/?partner=rss&emc=rss

Bucks Blog: What to Do if Your W-2 Is Missing

Most workers have received their W-2 forms from their employers by now. Companies are required to provide the forms to employees, showing their annual income, tax payments and other deductions, by Jan. 31.

But what if you haven’t received one yet, and you’re anxious to file your taxes because you’re expecting a refund? Kay Bell, contributing tax editor at Bankrate.com, says there are alternatives if the form hasn’t arrived in your mailbox.

First, she suggests that you doublecheck your e-mail inbox. Many employers now make W-2s available electronically, often using systems that require users to log on to a separate Web site. So if you tend to ignore certain e-mails, you may have overlooked this one.

If it’s not there, contact your employer to make sure it has have your correct address. Maybe it just got behind sending out the forms, or maybe it put the form in the mail on Jan. 31. In that case, you’ll have to be a bit more patient. The Internal Revenue Service generally advises waiting until mid-February. “Some employers are just slow,” Ms. Bell said.

But what if your employer has gone out of business and hasn’t made provisions for providing the necessary tax documents to former employees? All is not lost, she says. First, contact the I.R.S. They may be able to locate representatives of the company and persuade them to send the documents.

But if that doesn’t work, you can create your own version of the W-2, using your last paycheck stub, if you have it. Otherwise, you’ll have to estimate. You can fill in the information on a substitute document from the I.R.S. on Form 4852.

Attach the form to your tax return when you file. The downside is that your refund will probably be delayed while the I.R.S. attempts to verify the information on the form.

If you do file with a substitute form and your actual W-2 shows up, you should amend your return.

Have you ever had to file a substitute W-2 form? What happened?

Article source: http://bucks.blogs.nytimes.com/2013/02/06/what-to-do-if-your-w-2-is-missing/?partner=rss&emc=rss

Bucks Blog: Wednesday Reading: Your Disney Questions Answered

January 30

Free Tax Preparation Software Available

For those with income of $57,000 or less, free tax preparation software is available online from the Internal Revenue Service.

Article source: http://bucks.blogs.nytimes.com/2013/01/30/wednesday-reading-your-disney-questions-answered/?partner=rss&emc=rss

Wealth Matters: Explanations and Advice For Those Hit Hardest By New Tax Increases

Many millionaires are certainly paying at least 30 percent of their income in taxes, a goal President Obama set out in last year’s State of the Union address. But they’re more likely to be doctors, lawyers and people working in the financial services industry who get the bulk of their earnings in the form of paychecks.

Partners in private equity firms and hedge fund managers, on the other hand, earn much of their money as a share of their funds’ earnings. And that income gets preferential tax treatment as so-called carried interest.

A similar special tax treatment still holds true for Mr. Buffett as long as the bulk of his income comes from his investments and not a paycheck. The long-term capital gains rate for incomes over $400,000 is 23.8 percent, including the Medicare surcharge. That’s a far cry from the top marginal tax rate on income above that amount of 40.5 percent, which includes a 0.9 percent Medicare surcharge on earned income.

How are people going to react to all of this? Here is advice and observations from some experts in wealth management:

INCOME ISSUES This year, income taxes are going up for almost everyone, even if the taxes go by different names. Greg Rosica, a tax partner at Ernst Young and a contributing author to the firm’s tax guide, laid out five tiers where taxes are increasing.

The bottom one includes everyone who receives a paycheck and is affected by the 2 percentage point increase in the payroll tax. In the top one are couples making more than $450,000 a year, who will pay higher rates on income and investments, be subject to the Medicare surcharges of 0.9 percent on income and 3.8 percent on investments and lose some portion of their itemized deductions and exemptions.

Using assumptions on wages and deductions from Internal Revenue Service statistics, Mr. Rosica calculated that a person making $500,000 a year would pay $9,124, or 7 percent, more in taxes in 2013. A couple earning $1 million a year in wages and business and investment income would pay $53,350 extra, or 20 percent more in taxes.

“It’s hitting every line item of income,” he said. “It’s phasing in all the way up the scale.” This has made strategies that defer income more attractive than they were in the years when George W. Bush was president and tax rates were historically low. “At the base level, it’s 401(k) plans. Or, for the self-employed person or person who sits on boards, they can defer into a SEP I.R.A.,” a retirement plan for the self-employed, or into one’s own defined-benefit plan, said Christopher Zander, the national head of wealth planning at Evercore Wealth Management. “That’s very attractive. Even if income tax rates are higher later, I think the tax deferral” makes up for that increase.

There are risks, though. People could defer too much into a qualified plan, like an I.R.A., and end up having to pay a penalty if they need the money before they turn 59 1/2 years old. Or they could put too much into a company-sponsored deferred-compensation plan and face two problems. The company could go bankrupt, as Lehman Brothers did, and they could lose that money, or the payout schedule they selected when they put the money in — say 10 annual payments at retirement — may end up providing them with too much or too little income.

CARRIED-INTEREST CONUNDRUM At the very top of the income ladder, the group for whom the changes in the tax code will not hurt as much includes people like hedge fund managers and private equity partners whose earnings come in the form of carried interest. The income for these people comes from the fees they charge, and that income will continue to be taxed at a lower rate than ordinary income.

“Carried interest rules are helpful for hedge fund managers, but they’re incredibly helpful for private equity guys,” said Richard A. Rosenberg, a certified public accountant and co-founder of RR Advisory Group, which advises hedge fund and private equity partners. “Private equity funds typically get the stronger treatment because there is less turnover and the holding periods of the funds are longer.”

How the partners’ share is taxed depends on how the underlying investments are taxed. In the case of private equity, many of the investments are held for longer than a year. Through last year, the distributions would have been taxed at the long-term capital gains rate, which was 15 percent. Even now, the rate is still a relatively low 20 percent for an individual earning above $400,000.

Article source: http://www.nytimes.com/2013/01/12/your-money/taxes/coping-with-the-new-tax-law-even-for-the-richest-of-the-rich.html?partner=rss&emc=rss

Bucks Blog: Answers to Your Questions About Student Loans, Part Two

This week, two New York Times reporters and Geoffry Walsh, an expert on student debt and bankruptcy at the National Consumer Law Center, are answering questions about ways to avoid default, pay off student loans or try to expunge student loans through bankruptcy court. Along with questions, some readers proposed their own answers. The first set of answers is here, and the second set is below.

The reporters, Ron Lieber and Andrew Martin, recently wrote articles about the difficulties of paying back student loans as part of The New York Times’s series Degrees of Debt, which examines the implications of soaring college costs and the indebtedness of students and their families.

I am supposed to start paying loans in November and signed up for the income contingent payback plan but haven’t gotten any paperwork nor have I been asked to provide proof of my income. How do they decide what I’m paying per month? Christy Maier Dorfler

You should have received the forms by now, so you may want to contact your loan servicer and ask them to resend the forms. If that doesn’t work, try the Department of Education directly. According to Mark Kantrowitz, publisher of finaid.org, a Web site devoted to college financial aid, your payment will be based on your previous income. As a consequence, you will be asked to fill out a form called the alternative documentation of income form, and a form that permits the Department of Education to gain access to your tax returns through the Internal Revenue Service.

If you file for bankruptcy, can you add your student loans? Mike Reynolds

If you file for bankruptcy, you have to list all of your debts including your student loans. But student loans won’t be discharged unless you file a separate lawsuit as part of the bankruptcy case and win, which is not easy, according to Geoffry Walsh, a lawyer at the National Consumer Law Center. Essentially, you will be required to prove to a judge that paying your student loans is an undue hardship. As my colleague Ron Lieber recently wrote, it’s a difficult process that can be tough on your self-esteem.

The way to do college is, after high school (if you have no money) to get a full-time job. Then after work, go online and get a degree online from a university. Live meagerly, save 10 percent, pay for the online courses and use the rest for rent and food and expenses. It may take 10 years or more to complete, but at least by the time you are in your late 20s or early 30s you are set and debt free. You will have another 30 years to reap the rewards for your efforts and have a family, house, cars and vacations. Those without the money to do it in four years need to think in much longer terms. NewsDogReports

This isn’t a bad idea, but not all online classes are created equal. Some online classes are surprisingly expensive and carry little weight with employers, so there are few rewards to reap. Having said that, many of the nation’s top universities, including Stanford and the Massachusetts Institute of Technology, are moving aggressively into free online classes, and it is only a matter of time before there will be many more rigorous online programs. It is hard to know, however, when, if ever, employers will consider online degrees the same as those from brick-and-mortar colleges.

How do I really get my student loans reduced? Do I call and tell them, “Hey, I want my repayment to go to a certain part of the loan?” For example, perhaps the interest on it, give more than they ask. Jorge Aguilar Cruz

If you have federal loans, you should look at the different repayment plans that are available, including income-based repayment. The Web site studentaid.gov explains these programs in some detail. However, if you extend the term of your loan, you may reduce your monthly payments but pay more interest over the life of the loan. If you have private student loans, call your servicer and ask them to explain what types of repayment options are available.

Thank you to all fellow Americans who helped me with student loans. I have payed them off, and that has helped my credit history. Thomas Doran

Thanks for posting this. Despite the sobering number of borrowers in default, nearly six million, it’s important to remember that most students pay off their student loans and find the investment well worth it.

I’ve been deferring my loans for almost two years now. I can’t afford to pay them. But the interest just keeps growing. Is filing bankruptcy possible yet? Tim Weiskopf

As I stated previously, you can try to file a petition with the court to discharge your student loans. But initially, a better option may be to apply for income-based repayment, if you have federal loans. If you decided to follow through with trying to discharge your student debts in bankruptcy, it will help prove undue hardship if you have tried to exhaust your repayment options, Mr. Walsh says. He also suggests seeking out a bankruptcy lawyer with experience in student loans. The National Association of Consumer Bankruptcy Attorneys Web site may be a good place to start.

Is it smart to double-pay all loans at once or to take that extra income and put it all toward one loan so I can knock them out one at a time? Gaber Zua

The best approach is to apply the extra money to the loan with the higher interest rate, Mr. Kantrowitz says.

I have private loans. Even though I’m still a full-time student (Ph.D.), my deferment has expired and I was rejected for forbearance. My bank — Citibank — says it will not work with me. It’s pay or default. What are my options? And how is this fair? Banks were bailed out, the auto industry, I need help, too! Cari Varner

Your best option is to call Citibank and try to work out an affordable payment plan. If you can’t do that, then unfortunately you don’t have many choices. As for fairness, I suggest you read the comments that accompanied my story on Sunday about student loan defaults. While many readers believed that the student loan system was broken and in need of reform, at least an equal number had little sympathy for borrowers who were struggling to pay off their loans. Sure, the banks got a bailout, but the idea of bailing out citizens — whether for mortgages or student loans — is deeply unpopular and unlikely to happen in any major way.

Should I consolidate or continue to pay the four loans separately? There are a few federal (Stafford) and private. The highest rate is a fluctuating one at 6 percent currently. O.K., thanks! Madelyn G

Like many borrowers, you have both federal and private student loans. Unfortunately for you, federal and private loans cannot be consolidated, Mr. Kantrowitz said. You can consolidate your federal loans, but it won’t reduce your interest rate because the rate will be the weighted average of your existing loans. Under consolidation, however, you may be able to extend the length of your loan, which may reduce your monthly payment even if it increases the amount of interest you will pay over the term of the loan.

Article source: http://bucks.blogs.nytimes.com/2012/09/13/answers-to-your-questions-about-student-loans-part-two/?partner=rss&emc=rss

DealBook: U.S. Tax Evasion Case Touches Julius Baer

Julius Baer's headquarters Zurich.Peter Frommenwiler/Bloomberg NewsJulius Baer’s headquarters Zurich.

PARIS — A tax evasion investigation in the United States has reached Julius Baer, a spokesman for the Swiss lender confirmed Wednesday, a day after the government charged two advisers with conspiring to help clients evade American taxes on more than $600 million hidden in offshore accounts.

Preet Bharara, the U.S. Attorney for the Southern District of New York, and Charles R. Pine, an Internal Revenue Service investigator, announced the indictment of Daniela Casadei and Fabio Frazzetto on Tuesday, without identifying the bank by name. Martin Somogyi, a Julius Baer spokesman, confirmed that “one current and one former employee” had been indicted, but said he could not comment further.

Julius Baer “is one of a number of Swiss financial institutions supporting the ongoing negotiations between the U.S. and Switzerland and is cooperating with the U.S. government investigation,” the bank said.

An attempt to reach the two through Julius Baer’s Zurich headquarters was unsuccessful. A call to the switchboard was transferred to a woman who, declining to identify herself, said the two were not available to speak Wednesday and declined to comment further.

According to the indictment, Ms. Casadei and Mr. Frazzetto “allegedly advised U.S. taxpayer-clients to open undeclared accounts under code or fictional names.” The two defendants “also allegedly advised clients not to worry about U.S. law enforcement authorities,” the indictment states, because the bank “no longer had offices on U.S. soil.”

Preet S. Bharara, the United States attorney in Manhattan.Daniel Barry for The New York TimesPreet S. Bharara, the United States attorney in Manhattan.

The Justice Department has targeted a number of banks over tax evasion in recent years, most notably UBS, the largest Swiss lender. UBS agreed in 2009 to pay $780 million and hand over some client names to end criminal proceedings. The department’s offshore compliance initiative currently has ongoing criminal investigations at eight banks, according to an apparently inadvertent disclosure last month.

Julius Baer, though dwarfed by institutions like UBS and Credit Suisse, has a large international presence, particularly in Asia. Its deals mainly with wealthy private clients, family offices and asset managers.

The indictment Tuesday alleged that the two advisers helped to conceal their clients’ ownership of bank accounts collectively holding more than $600 million by opening and managing them under fictional names or under the name of non-U.S. relatives or sham corporate entities.

Ms. Casadei and Mr. Frazzetto, both residents of Switzerland, according to the indictment, face up to five years in prison and fines of $250,000 or more if they are convicted of the charges.

Article source: http://feeds.nytimes.com/click.phdo?i=231d3775f8b061f1cc491cd2a207e992

I.R.S. Loses Tax Case Against Lay of Enron

The United States Tax Court rejected a bid by the Internal Revenue Service to collect $3.9 million from the estate of the former Enron chief Kenneth L. Lay and his wife.

The case was related to transactions among Mr. Lay, his wife, Linda, and Enron that were executed on Sept. 21, 2001. The Lays sold $10 million in annuities to Enron as part of an agreement for him to retake the chief executive position, under the stipulation that the annuities would be returned to him if he worked a 4 ¼-year term. The company did not survive that long, and it filed for bankruptcy protection in December 2001.

The I.R.S. contested the Lays’ assertion that the annuities had been sold to Enron. In 2009, the I.R.S. filed a notice of tax deficiency for $3.9 million, arguing that the Lays should have reported the $10 million as income in 2001. Instead, they reported that they sold the annuities to Enron at their cost basis for no gain.

Judge Joseph Goeke of the tax court said in the decision that the agency’s position was incorrect and ruled for Mrs. Lay and for Mr. Lay’s estate. The transactions, he wrote, were legitimate, and neither of the Lays nor the estate received any distributions or death benefit from the annuity.

Mr. Lay, who died in July 2006 at age 64, was convicted in May of that year by a federal jury in Houston. He and the company’s former chief, Jeffrey K. Skilling, were found guilty of deceiving shareholders about Enron’s financial condition by hiding debt and losses in a series of off-balance-sheet entities.

More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when the world’s largest energy trader plunged into bankruptcy in December 2001, after revelations of widespread accounting fraud.

Mr. Lay’s convictions were later thrown out because he did not have a chance to appeal the cases before he died.

Enron’s creditors, the government, Mr. Lay’s estate and Mrs. Lay have been involved in a variety of lawsuits since the company’s demise.

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