Friday, December 19, 2014

'Tis the Season for...Taxes? 7 Tips to Prepare for the Inevitable

12/11/2014 Portland, Oregon - Pop in your mints…
It's that time of year once again, fellow taxpayers.  Time to listen to the endless drone of Christmas music, time to fret over what to give whom, time to blow fuse or two on your home's electrical grid trying to outdo the neighbor's light show, time to see if you will trigger the AMT this year.
Yes, the Holiday Season is upon us once again, and, as if we didn't have enough on our plates (both literally and figuratively), the remaining 20 days of December represent the final countdown to a manmade deadline for making and executing any personal and corporate decisions which may have a direct impact upon how much tribute one wishes to voluntarily report and render to their local and federal tax farm.
What might those decisions entail?  Or, more precisely, what can I do (within the confines of the income tax code, of course) to lower my 2014 income tax burden?
Is the IRS on your Christmas list?
The answers to the above questions are truly personal, as tax advice, like medical advice, depends entirely upon the individual's history, present circumstances, and future plans.  Here at The Mint, we highly recommend consulting with a qualified income tax professional that can sit down and give one a proper assessment of their situation and help them plan now in order to take the proper steps to help minimize their current and future tax burden.
Here are 7 tips to help you and your tax professional prepare your 2014 income tax return and, more importantly, estimate your tax liability while you are still in 2014 and can theoretically do something about it:
1.  Gather state and federal returns from the prior two years:  This will give your tax professional a baseline, if you will, of your income tax situation and let them know, often at a glance, what steps can be taken to help minimize your liability.
2.  Think about any life changes you have had in 2014:  Did you get married? Have a baby?  Send a child off to college?  Sell or refinance a home? Relocate for work?  All of these actions, and many more, may have an impact on your tax bill.
3.  Gather documentation to support income and deductions:  This may seem basic, but why not prepare for a potential IRS audit before it happens?  Maintain any W-2s, 1099s, Investment account statements, and documentation related to deductions such as charitable donations, mortgage interest statements, and child care expenses and keep them in a file along with the corresponding tax returns.  Viola!  Should the IRS call you, you at least have something to back up your numbers.
4.  Know the basis of your stocks:  If you own corporate or mutual fund shares, a very important data point in terms of tax preparation is how much was paid for it.  As many people hold shares for relatively long time horizons, it is best to keep a running file that is updated with each purchase.  Your broker should be able to get this information for you if you have not kept track of this to date.
5.  Measure your home office:  The home office deduction is taboo in some circles as it is seen as a red flag for audits.  However, if you legitimately have a home office, you could be leaving a decent amount of money on the table if you do not take it.  Better yet, if you don't want to tally receipts, the IRS now lets you take a flat $5 per square foot of home office space up to a maximum of $1,500.  For more on the safe harbor home office deduction, click here.
6.  Contribute to qualified retirement accounts:  If you have extra money and sense that you may be staring a tax liability in the face, consider funding an IRA or contributing more to a 401(k) plan before year end.
7.  Consult a trusted tax professional:  As we stated before, everybody's situation is unique when it comes to income taxes.  While everyone has to file income taxes, we each have our own, unique financial fingerprint.  A trusted tax professional can help you not only catch missed deductions now, they can help you to plan for future events that, if not properly planned for, could trigger large income tax liabilities.

In the midst of overeating, overspending, and generating outrageous electric bills in the name of the Holidays be sure to take a moment to consult a trusted tax professional.  Who knows?  Making a few of the right moves now may just pay for some of those Holiday bills come April.

Tuesday, December 16, 2014

Thomas Friedman’s Brief Theory of Everything

12/15/2014 Portland, Oregon - Pop in your mints…
At the closing session of the 2014 AFP National Conference, New York Times columnist and three time Pulitzer Prize winner Thomas Friedman gave a great discourse related to the biggest trends in the US and indeed the world today.  For those who are unfamiliar with Friedman’s work, suffice it to say that he is one of the more influential voices on the planet via his post at the New York Times.  As his discourse will reveal, he writes on foreign affairs, globalization, and environmental issues.
Thomas Friedman By Charles Haynes (Charles Haynes' flickr account) [CC BY-SA 2.0 (], via Wikimedia Commons
Thomas Friedman By Charles Haynes (Charles Haynes' flickr account) [CC BY-SA 2.0 (], via Wikimedia Commons
Friedman is also a bestselling author, and many of his working hypotheses can be found in his 2005 International Best Seller, The World is Flat:  A Brief History of the Twenty-First Century.  In the book, Friedman lays out 10 “flatteners,” or things that he points to that are enabling the trend of leveling the global playing field.
On the afternoon of November 4th in Washington, D.C., Friedman shared a number of interesting insights with our audience of Finance leaders, among them is his own recognition of the effects that the forces he describes have on his own ability to influence American and global thought.  As he puts it {with a slight paraphrase to add context}, “Thirty years ago, James Reston, my predecessor would ask himself every morning, ‘I wonder what my seven competitors are going to write today?’  Today, I sit in my office and ask myself ‘I wonder what my 70 million competitors are going to write today?”

While we may not agree completely with Friedman’s ideologies at base, it cannot be denied that he is compelling to listen to.  His voice is inquisitive and familiar, and his depth of experience in the idea realm gives his opinions, whether one fully agrees with them or not, a strange authority of their own.  You can listen via the link below to one of the finest discourses we have ever had the pleasure of listening to:

The Next Phase of Globalization
Below are some of the most interesting points Friedman brings up, along with their corresponding time stamp on the above recording:
At 2:40 Is the US’s OODA loop broken?  Friedman expresses concern about the US Government’s ability to Observe, Orient, Decide, and Act using a metaphor from the US Air Force.
At 4:25: – As Historians look back at our times, Friedman believes that they would identify as the most important things happening in the early 21st is that the three biggest forces on the planet, The Market, Moore’s Law, and Mother Nature, all went into hyper growth at the same time.
At 5:50: – The story of the Chessboard brought up in the book The Second Machine Age.  The Chessboard parable is cited as popular in Silicon Valley, and the morale is that, when you double something 63 times, you get 18 quintillion of whatever it is.  Friedman cites the Chessboard analogy a number of times in the discourse.  He believes that the world is in the “Second half of the Chessboard” in terms of the velocity of change with respect to The Market, Moore’s Law, and Mother Nature.
At 8:00: – The 2004 Thesis of The World Is Flat is that the convergence of four factors, the PC, the Internet, Workflow Software, and Search capabilities, that were melding together to form a platform that was allowing for large scale collaboration on a level never before experienced. {Editor’s Note: We closely observed this trend as an MBA student in Barcelona and it has continued to transform the way we live and work today, 10 years on. }
At 11:07 – In the past 10 years, with the advent of Facebook, Twitter, Skype, and the like, the world went from connected to hyper connected, and from interconnected to interdependent.  We are in the second half of the Chessboard with regards to globalization.
At 13:45 – Friedman begins to speak on the Environment, what happens when Mother Nature enters the second half of the Chessboard.  He cites the fact that the amount of carbon in the earth’s atmosphere is increasing 100 times faster today than it was at the end of the last ice age.  He also observes that the population of the earth has doubled in his lifetime, from 1959 to 1999, from 3 billion to 6 billion people.
At 21:00 – Friedman brings up the drought in Syria between 2006 and 2010, the most severe in modern history, as the cause of the revolution that rages there today.  One million Syrians, who had previously dedicated themselves to agriculture in the countryside, flocked to the cities, overwhelming the infrastructure.  Here, he also highlights the fact that Sao Paulo, Brazil, may become the first major city to run out of water due to a combination of a prolonged drought and the effects of deforestation of the wetlands and watersheds of its major water sources.
At 22:30 - What does it mean?  This is a great world to be a consumer, a maker (Entrepreneur), and a breaker (here Friedman cites ISIS’s use of social media as its command and control system).  It is a terrible world to be a leader (every leader is in a two way conversation).
At 30:10 – Average is over for countries as Mother Nature, The Market, and Moore’s Law enter the second half of the chessboard.  Developing countries are stressed, and weak countries are failing and entering disorder.
At 32:52 – This is perhaps Friedman’s most important insight Average is over for every worker.  Every worker must identify their unique value add.  “When I graduated from college, I had to find a job.  When you graduate from college, you will need to make your job.”  Every middle class job is being pulled up, out, and down.  The high wage, middle skill job, is over.  There are now only high wage, high skill jobs.
At 36:31 – Friedman speaks of the effects of Globalization on his own job.  Thanks to the internet, he now has 70 million competitors whereas his predecessor, James Reston, had 7.
At 39:30 – The three tiers of work, the first tier was non-routine, second tier was routine; the third tier was non-routine, local work, are being rattled to the core.  The second tier is being crushed, and the wages of the third tier non-routine depends upon the quality of the first tier non-routine.  Further, the first tier, non-routine must also be “creative” non-routine.
At 42:00 – You need more than the three R’s: Reading, Writing, and Arithmetic, you need the four c’s:  Creativity, Communication, Collaboration, and Critical Thinking, and the “M”:  Self-motivation.
At 44:07 – Now that the digital divide is gone, the good news ceilings and walls are gone; the bad news is that so are the floors.  For example, as an employer, Google doesn't care what you know because it knows everything, but what you can do with it.
At 45:30 – Friedman’s five pieces of advice for his children, 1) Think like an immigrant, be a paranoid optimist, we are all new immigrants to the hyper connected world, 2) Think like an artisan, make what you make special, give it an extra effort, carve your initials into it, 3) Always be in beta, in Silicon Valley there is only one four letter word, Finished.  Always be in beta.  Literacy today is the ability to learn and relearn, 4) pq + cq > iq.  Perseverance/passion quotient + curiousity quotient is greater than a high intelligence quotient5) Think like an Entrepreneur:  Friedman paraphrases this as “Think like a pancake waitress,” do your best with those things under your control, and where you can, add value.
At 51:12 - Friedman fields a few questions from the audience and shares his thoughts on what needs to occur in the realm of politics.  The comments are timely as they come on the date of the 2014 US midterm elections.
This is one of the better discourses that we have been privileged to attend.  It is clear that Friedman is a deep thinker and has learned the art of expressing himself.  He is not especially clairvoyant, but he is deeply in touch with the times.  Evidence of his hypotheses is literally surging from every corner of the globe.
What will be your value add in the brave, new, flat, hyper connected world that is fast coming upon us?
Stay tuned and Trust Jesus.
Stay Fresh!
David Mint
Key Indicators for December 15, 2014