Pay Up or Stay Home

Tax and Financial News for March 2016

Pay Up or Stay Home

If you’re looking to use your U.S. passport on your next international trip and you’re delinquent on your taxes, some recent changes to federal law may have you grounded.

When President Obama signed the FAST Act (Fixing America’s Surface Transportation Act) into law, he expanded the federal government’s ability to restrict who can obtain a new passport or renew an existing one. Previously, the Secretary of State was empowered to deny new and renewed passports for non-custodial parents if their state of residence informed the Department of State of a child support debt of more than $2,500. However, the FAST Act also empowers the Secretary of State to deny delinquent taxpayers the ability to obtain a new passport or renew an existing one.

This new law will require the Secretary of State to withhold issuing new passports and renewal requests for anyone who is a seriously delinquent taxpayer. Similarly, the Secretary of State also is allowed to invalidate and rescind any active passport held by a seriously delinquent taxpayer.

Under this FAST Act, taxpayers are considered delinquent when their federal tax liability exceeds $50,000, including penalties and interest and a lien or notice of levy is filed against the debt. Moving forward, the $50,000 threshold will be indexed according to inflation. An exception for the passport issuance or renewal may be made in certain cases: for taxpayers with federal tax debt that qualifies for an Offer-in-Compromise (OIC); for taxpayers who are eligible for innocent spouse relief; for taxpayers who have debt that is frozen due to an appeal for a collection due process (CDP) hearing; or for taxpayers who have worked out a collection agreement.

The question persists as to how to make sure that the innocent or exempted taxpayers can still exercise their right to travel internationally with a passport. This depends on the identification of seriously delinquent taxpayers by the Commissioner of Internal Revenue and verification by the Secretary of the Treasury. These individuals’ names would then be transferred for identification from the Secretary of the Treasury to the Secretary of State.

As part of the law, taxpayers whose passport privileges may be revoked if they don’t satisfy outstanding federal tax debt are first notified through the IRS’ standard mailed debt notices so they can address the issue. This is done to help taxpayers resolve their federal tax obligations and prevent passport suspension or revocation in the future. However, one potential pitfall of this method of notification is once a taxpayer sees their notification for tax debt, they may not always pay attention to the potential passport issue.

For those taxpayers who believe they are incorrectly assigned to the no passport list, the law allows for a “reversal of certification” provision. If the determination was made incorrectly or the federal tax debt is satisfied or no longer meets the threshold, the IRS must inform the Secretary of the Treasury who in turn will make the Secretary of State aware of the error. Additionally, since the corrective action to get removed from the list can be time intensive, taxpayers may petition the court to have their passport privileges restored while the administrative procedures are ongoing.



General Business News for March 2016

Most Common Startup Mistakes (and How to Avoid Them)

While there are many business successes, there are unfortunately many more business failures.

Various factors, including the type of industry or the age of a business, can contribute to its chances of failure, according to the Statistic Brain Research Institute. The research found that the older a business is, the more likely it will fail. While a 5-year-old business has a 55 percent likelihood of failure, a 10-year-old business has a 71 percent chance. Similarly, only 37 percent of information-based businesses failed after four years, compared to 58 percent of finance, insurance and real estate businesses during the same timeframe. In order to prevent the majority of failures, there are some ways that businesses can be proactive and reduce their chances of going under.

Not Being Social Enough

Not using social media at all; failing to use the right kind of social media; or not knowing how to use it effectively are some reasons startups fail. Whether it’s a lack of time or simply not keeping up with the most popular brands, lack of a presence of social media is one reason startups fail. Examples of positive social media use include using LinkedIn to search for new hires and using the company’s profile to advertise for employment. Twitter can be used to engage and have conversations with potential customers and future employees by showing recent work products and seeking community engagement. Showing your prospective customers photos, videos and links to authoritative websites will often provide your company with invaluable PR.

Not Being Insured Well Enough

Another thing attributed to startup failures, especially for those that have even a few employees, is lack of insurance. Even when an entrepreneur is working out of his or her home, insurance may be necessary if clients come and visit the home office. Similarly, business auto insurance may also be necessary if client meetings are necessary at a client’s place of work. Malpractice or errors and omission insurance may not be required, but even if a lawsuit is baseless, the money and time it takes to defend and dismiss a lawsuit can take away from an owner’s time, potentially reducing cash flow.

Poor Business Name Search

Picking a business name is a critical part of branding one’s company, but not performing a trademark search can result in lost money and even a complete business failure. Since a business name goes into the LLC or corporation filing paperwork, signage, a website, business cards and what potential customers see, it’s imperative that a thorough check is done on the name’s availability. If the name is already in use and trademarked, legal costs could become pricey.  

Not Using Enough Varied Marketing Techniques

A non-diverse marketing approach can make or break a startup; examples include the inability to scale product sales or attract investments from venture capitalists. Startups that leverage their advertising through social sales, word-of-mouth advertising and partnering with businesses in non-competing, complementary industries can increase the likelihood of sales.

Startup entrepreneurs who fail to be cognizant of their communication skills and styles can spell doom for their ventures. This is especially true if the startup is looking for Venture or Angel Capital funding. Meandering or looking down at the conference table instead of making eye contact does not convey confidence or display positive body language to potential investors.

For entrepreneurs who reduce or avoid these mistakes, the chances of their startup surviving and thriving are certainly increased. However, even the best startup can’t predict how its customer base or government regulations will ultimately impact its success.



What’s New in Technology for March 2016

Technology: What’s at Stake in the Apple vs. FBI Battle?

The encryption issue is not new. It started in the ’90s when encryption became more commonplace in consumer products, and has escalated to a full-scale, highly public debate between Apple – an industry leader in smart phone/mobile technology – and the FBI. Here is a concise look at what is at stake.

  • Technology companies have always developed and upgraded security methods to keep hackers from accessing private data. Since Edward Snowden went public with reports of government surveillance, these companies have changed their security protocols to protect users against government efforts to access private data.
  • Federal wire-tapping laws already give law enforcement access to data handled by phone carriers. This legislation doesn’t cover tech companies, and those companies are fighting hard to keep it that way.
  • Encryption is the magic that makes personal data safe. Once data is protected by encryption, the only way to access it is through the encryption key. No one – not even the manufacturer of the device or its software – can access the information without the encryption key.
  • Back in 2015, the FBI’s chief said the agency wanted back door access to encrypted data. When he did so, a howl of protest went out from security and technology professionals, as well as reporters and human rights activists, pointing out that doing so opened a virtual Pandora’s Box of problems – most particularly creating an enormous security risk as soon as a manufacturer weakened the water-tight nature of encryption. To the technology industry, the problems inherent in providing the possibility of such access far outweighed the advantage of doing so.
  • The FBI is not asking for Apple to help law enforcement break the encryption on iPhones. They want Apple to tamper with a security feature that makes it virtually impossible to guess the pin used to encrypt an iPhone. For this to happen, a backdoor would have to be built into the encryption protocol. Opponents believe that doing so would immediately open up a massive new opportunity for leaks or theft that potentially would give cyber-crooks and cyber-terrorists a chance to steal data at an unprecedented level. FBI supporters argue that such a feature already exists – a troubleshooting system that allows the company to update software without needing to know subscribers’ passwords. Industry analysts expect Apple to ramp up security on this particular feature in an effort to thwart the FBI’s proposal to highjack it for surveillance purposes.
  • The battle between big tech companies and the government is being fought in the media with both sides using emotional arguments to influence public opinion and obtain the solution they want. The FBI has chosen a public fight over access to a dead terrorist’s smart phone and has tapped the outrage of relatives of victims of the San Bernardino shootings to support its efforts to force tech giants like Apple and Google to make encrypted data accessible to law enforcement. On its part, Apple is running a hard-hitting PR effort, most recently evidenced by CEO Tim Cook’s open letter to customers, which appeared as paid commentary in prime media outlets.

The battle between the FBI and Apple has already reached the headlines and the law courts. Observers believe Congressional involvement will be necessary to resolve this issue in any meaningful way.