TaxKilla: Tax Strategy For The 99 Percent, Taken From The 1 Percent / TaxKilla.com

Emily Cohn for the HuffPost writes: The 1 percent find ways to save on their taxes. Why can't you and I?

A new website called TaxKilla.com says we can, and encourages the 99 percent to follow Mitt Romney's lead.

How would you like to deduct the cost of gas from your taxable income? Or perhaps write-off your new laptop?

TaxKilla says the trick to doing this is understanding the tax code, which of course is complicated. But thanks to the site's founders -- two former Wall Street insiders -- navigating the ins and outs just got a lot easier.

TaxKilla won't tell you how to set up an offshore bank account, or offer instructions for making your work wages look like capital gains, but it does suggest we "remove [ourselves] from the slaughter line of wage earners" by creating a business entity, in order to write off certain costs and make our tax bills cheaper.

"The 1 percent have been doing this for years," Jen Powers, a co-founder of the site, told The Huffington Post. "We're not reinventing the wheel."

Powers and her ex-husband Fred Buddemeyer, who both worked on Wall Street in '80s, founded TaxKilla as their way to take part in the Occupy Wall Street movement. They figured the best way to do that was to help others turn a passion into a cash-saving mechanism.

With a name fit for a hip-hop song, TaxKilla gives examples of what types of activities can qualify as a business entity:

Say for example that you like to travel frequently. If you blog about your journeys and add an advertising network to your blog you now have a travel business. Its deductible expenses are a share of your travel costs, your computer, your internet connection, your camera, etc.

Could any hobby, like travel blogging, qualify? Well, no. You'll have to convince the IRS you're actually in it for the money. If your "hobby" is profitable three out of five years, the IRS will consider it a business. But the IRS will get suspicious if your entity is only taking losses.

Once you do establish a business entity -- according to the TaxKilla website that should take about two days -- fill out a Schedule C tax form and deduct work-related expenses like computers, cars and business lunches from your income.

Mitt Romney’s Schedule C form showed his speaker fees in 2010 earned him a $48,756 deduction for expenses.

Powers and Buddemeyer consulted with a lawyer before launching the site who told them TaxKilla wasn't providing any new information not already available on the IRS website. TaxKilla, Powers says, is only repackaging that information in a way that is readable for the 99 percent.

While the tactic is legal, a recent New York Times article described running your own business as "the easiest way to cheat on your taxes."

Greg Kyte, a Utah C.P.A., told the Times:

You can look through your receipts for the year and say, ‘Here’s some stuff I bought at Home Depot,’... The I.R.S. would have no idea if I bought that for my house or for my business.

What are the chances the IRS will come a knockin' if they think you're doing something fishy? That depends on how much you make. If you're making more than a $1 million, you have more than a one in eight chance of being audited. Overall, only 1 percent of individuals were audited in 2011.

Powers was adamant that what they're encouraging is not illegal.

"What I want to make clear is tax dodging is not our intention at all," she said. "We want people to file and pay but to be smart about how they do it."

If you have a hobby you think qualifies as a business entity, you'll have to jump on this fast, as the deadline for filing income tax returns is April 17. If you think you'll need more time to complete your taxes, be sure to file an extension with the IRS.

Tax Deductible fees for services

Barry Dolowich writes: Question: Early this year, I was fortunate enough to come into a substantial amount of money which I invested in a managed brokerage account. I have and will be paying large quarterly investment management fees. I also paid my attorney and accountant for estate and income tax planning. Are these fees deductible and if so, how do I deduct them?

Answer: You may deduct your payment of fees charged for the services listed below, subject to the 2% adjusted gross income limitation for miscellaneous itemized deductions:

Preparing your tax return or refund claim involving any tax; preparing and obtaining a private Internal Revenue Service ruling, including filing fees; representing you before any examination, trial, or other type of hearing involving any tax. The term "any tax" includes income, gift, property, estate, or any other tax, whether the taxing authority be federal, state, or local; legal expenses related to your job as an employee or to investment activities; an allocated portion of legal fees paid to an attorney to press a claim for disputed benefits, such as disability and Social Security benefits;fees related to the tax planning portion of your estate planning; allocated legal fees incurred in connection with disputes or actions to increase or maintain taxable alimony by the alimony recipient; investment fees and related investment expenses.

Certain legal and accounting expenses incurred in connection with business and rental activities may be deducted directly and  without limitation on their respective tax return schedules, and not as miscellaneous itemized deductions.

For example, if you are operating a business as a sole proprietorship reporting your business income on Form 1040, Schedule C, then you would be able to deduct legal and accounting expenses incurred in connection in the reasonable and ordinary operation of your business directly on Schedule C. Furthermore, if you hired an attorney to evict a delinquent tenant of a Schedule E rental property, the fees incurred would be deductible directly on your Schedule E.

Planning tip: If appropriate, deductible fees may also be allocated throughout various tax return schedules. For example, tax return preparation fees may be allocated among Schedules C and E (without being subject to adjusted gross income limitations), and Schedule A (miscellaneous itemized deductions subject to limitations).

Freshbooks launched its new iPhone app / gives freelancers and small business the capability to create invoices and document expenses, fill out time sheets, organize expenses, and process payments on the go.

John Koetsier for VentureBeat writes: Cloud accounting service Freshbooks launched its new iPhone app yesterday. To celebrate, the company is giving 160 entrepreneurs a little treat.

The app gives freelancers and small business people the capability to create invoices and document expenses, fill out time sheets, organize expenses, and process payments on the go. But it’s safe to say that most business expense reports don’t include parachuting — or pedicures.

To promote the app, Freshbooks has launched a “new 4 Ps of marketing” promo. It’s a take-off on the old Ps: price, product, promotion, and place. These new Ps, however, have nothing to do with anything but spoiling entrepreneurs.

The first 40 people who log expenses for pancakes, parking, parachuting, or a pedicure via the new app will have it paid for by Freshbooks. The contest starts September 1 and runs through to the September 21.

Little tip?

Parking and pancakes are easy — meals are common expenses. And 40 pedicures could be soaked up pretty quickly. The P that may last longest is parachuting. So if you’ve ever had a dream of jumping from a perfectly good airplane, here’s your chance to get someone else to pay for it.

All you have to do? Treat yourself and expense it via Freshbooks.

Full contest rules are on FreshBooks’ Facebook page.

Cloud Accounting Firm Xero Moves into Online Marketing

Mark Devlin for ImpactPR writes: 

Xero the Online Marketing provider? It is not a phrase that companies may have expected to hear. Impact PR explains why this marketing strategy is a very wise move for the cloud accounting software brand.

 Xero today signalled an interesting move announcing to its customers 

by way of regular update that it intends to launch an online marketing directory.

Aside from being a great added value service for its burgeoning customer database, this development offers a fascinating insight into the future strategic direction of the international Software as a Service (SaaS) provider.

No longer content with helping us SME’s keep our books in order, Xero has indicated it wants to help us get more customers by providing a rudimentary online directory service.

This new service offering is the type of marketing tactic that you as a business owner should be paying close attention to.

From the customer’s perspective the marketing directory provides a reason to subscribe to Xero – it offers a free online platform to post our company profile. The service has a high level of credibility and, as it is not Xero’s core business, the directory service is likely to be free of the advertising menagerie that clutters many other directory sites.

From Xero’s perspective the directory is essentially an online advertisement for their brand. It provides the company with excellent SEO advantages, offers public relations benefits (in that every one of their customers displayed in the directory is tacitly endorsing Xero). In addition, it provides Xero with the opportunity to directly recruit new customers by linking through to their signup form on every page.

The real magic in this marketing strategy is the fact that it costs Xero relatively nothing to create this marketing machine!

Customers will add and maintain their own data via a Xero template, much of the data is already there so customers don’t have to expend significant energy to add to their profile. Xero uses their existing pool of developers to create the profile template – thereby extending the use of existing data to their own benefit.

With an this remarkable example of shrewd online marketing in front of us, the question before New Zealand companies is “what resource do I already own that can be turned into a marketing tool with little resource and effort on my part?”

For more information on how you can mine your business for more marketing wealth, contact online marketing specialists Impact PR today.

Aplos Software launched its QuickBooks Buy Back program to provide nonprofit organizations that trade in their QuickBooks Pro or QuickBooks Nonprofit software up to $300 towards their new Aplos Accounting subscription. Aplos Accounting is a web-based nonprofit accounting software designed to for nonprofits and churches to perform true fund accounting.

Aplos Software, LLC today began offering their new competitor software exchange program, QuickBooks Buy Back. With this program, new Aplos Accounting subscribers can trade in their QuickBooks desktop software and receive a credit for Aplos Accounting, anonprofit accounting software. In addition to the special discount, Aplos Software will provide free import assistance to convert their old accounting data into their new Aplos Accounting.

According to the 2011 “Nonprofit Accounting Solution Report” by Campbell Rinker, 76 percent of the responding nonprofits that made less than one million dollars in revenue each year reported using QuickBooks for their nonprofit, including versions designed for small businesses such as QuickBooks Pro or QuickBooks Online. It is valuable to compare nonprofit accounting software features, because there can be significant differences. Nonprofits have very specific accounting needs that these small business editions don’t provide, including fund accounting, tracking designated giving, and issuing annual giving statements. Churches also often have additional unique needs to tracking finances for multiple churches, organizations or special fundraising campaigns and can benefit from a church accounting software.

“Nonprofits often invest time and money into QuickBooks, only to discover it really isn’t designed to meet their unique needs,” said Tim Goetz, CPA and co-founder of Aplos Software. “We are offering our QuickBooks Buy Back program because we don’t want their investment in their existing software to be a barrier to doing simple, accurate fund accounting for their nonprofit or church.”

Aplos Software’s QuickBooks Buy Back program addresses the special fund accounting needs of churches and nonprofits while not requiring them to lose their investment in their old software. To participate in the QuickBooks Buy Back program, organizations can visit http://www.aplossoftware.com/quickbooks-buy-back.jsp to learn more and sign up for a no obligation, 15-day free trial of Aplos Accounting. If their old desktop accounting software was purchased in the past 12 months, Aplos Software will issue a credit of $300 to be applied towards the organization’s Aplos Accounting subscription. If the software was purchased in the past 13 – 24 months, they will receive a credit of $200.

Aplos Accounting, a fund accounting software designed specifically for nonprofits to do simple, accurate fund accounting, is web-based and can be accessed anywhere, at any time online. There are no downloads required to get started or to receive software updates and data is automatically backed-up. The base fund accounting software includes fund accounting, a contact database to track vendors and donors, and professional reports and starts at $11.99 per month for one user. Pricing increases as the number of users increases. Additional Aplos Accounting apps are also available that include contribution management, budgeting, bank reconciliation and check printing. Apps range in price from $1.99 per month to $4.99 per month. Churches and nonprofits can register for a 15-day free trial of Aplos Accounting at http://www.aplossoftware.com/nonprofit-accounting-software.

About Aplos Software

Founded in 2009, Aplos Software develops nonprofit and church software that makes it simple for any organization to manage their finances. Since their founding, over ten thousand users have signed up for Aplos Software. In addition to Aplos Accounting, the company also offers Aplos Oversight, an enterprise accounting software to easily manage the finances of multiple nonprofits or churches that subscribe to Aplos Accounting. Aplos Software is also an authorized IRS e-file provider that has success fully filed IRS Form 990-N (e-Postcard) and IRS Form 990 EZ for thousands of nonprofits. For more information, visit http://www.aplossoftware.com or call Aplos Software at (888) 274-1316.

Warren Buffett's Supersized Tax Deduction

Robert W. Wood for Forbes writes: Warren Buffett is one of the world’s richest and most benevolent men. The uber- billionaire has now donated approximately $2.6 billion to the Bill and Melinda Gates Foundation and four other charities. See Buffett Donates $2.6B In Berkshire HathawayShares. He did it with stock, of course. He handed over stock in his company, Berkshire Hathaway,donating 22,870,529 shares of his class B common stock. At the time of the donation, they were trading at about $115 per share.

According to his filing with the SEC, Buffett converted 14,000 class A shares to 21 million class B shares July 5 to complete the donation. Despite the gift, he is still worth over $59 billion. That is up from $53.5 billion in March, due to appreciating Berkshire Hathaway stock.

The bulk, 17,458,431 shares or about $2 billion, went to the Gates Foundation. The balance was split between the Susan Thompson Buffett Foundation, named for his late wife; and his children’s charities, the Howard G. Buffett Foundation, the Sherwood Foundation and the NoVo Foundation.

Famously, Buffett pledged to give away 99% of his fortune. In 2012 he gave $1.5 billion to the Gates Foundation. In the same year he pledged $3 billion of stock to his children’s foundations. According to Forbes, Buffett has donated at least $11.5 billion in Berkshire Hathaway shares to the Bill & Melinda Gates Foundation.

When someone donates stock, what is the tax effect? The donor gets a charitable contribution deduction based on the fair market value of what is given. Value and basis are different things and that means a big tax advantage.

Mr. Buffett donates at the market value of the shares but doesn’t have to pay income tax on his gain. That makes it far better than selling the stock, paying tax on the gain, and donating the cash. Giving appreciated property is the kind of wise tax planning you would expect from Mr. Buffett.

Facebook FB +3.12%’s CEO Mark Zuckerberg did the same thing in December of 2012. Mr. Zuckerberg donated $500 million of his Facebook stock to the Silicon Valley Community Foundation. Zuckerberg made his donation in the form of 18 million shares, translating to a $500 million tax deduction. The Facebook IPO price was $38 a share. They price dipped below $20 but then rose by more than 25% by the time of Mr. Zuckerberg’s December 2012 donation.

Donating appreciated stock is a much better tax move than selling it and donating the sales proceeds. By donating the stock, the gain the donor would experience on selling it is never taxed. The donee organization can hold or sell the stock. But since it is a tax-qualified charity, if it sells the stock it pays no tax regardless of how big the gain.

Like Mr. Buffett and Bill Gates, Mr. Zuckerberg wrote that he and his wife Priscilla have signed the Giving Pledge, committing to give away at least half of one’s fortune during his or her lifetime. Big donations yield big tax benefits.

Donations go on Schedule A to Form 1040, so you must itemize. You can only take a deduction for up to 50% of your adjusted gross income for most charitable contributions (30% in some cases). If your donations entitle you to merchandise, goods or services, you can only deduct the amount exceedingthe fair market value of the benefits you received. If you pay $500 for a charity dinner ticket but receive a dinner worth $100, you can deduct $400, not the full $500.

Make sure the donee organization is qualified. You cannot deduct contributions to individuals, political organizations or candidates. The IRS maintains a list of all charities. To check whether particular organizations are on the IRS list, click here. It’s unlikely that any of us will make it to Warren Buffett‘s level. Still, properly planned charitable contributions can be tax efficient and do good works too.

United States v. Windsor: a new direction in planning for same-sex couples

Shari A. Levitan, Edward "Ed" Koren, Christine, Quigley, Jenny L. Johnson, Lisa M. Lukaszewski and Guinevere M. "Gwen" Moore for  Holland & Knight LLP write: 

On June 26, 2013, the U.S. Supreme Court in United States v. Windsor¹ overturned Section 3 of the Defense of Marriage Act ("DOMA"), which had defined marriage as a union between a man and a woman.²As a result, married same-sex couples who live in a state that recognizes their marriage are now treated as married under federal law.³ Windsor does not, however, require that all states permit or recognize same-sex marriage.⁴ Further, the language of the decision suggests it does not apply to couples who are parties to a civil union or domestic partnership, nor to couples who reside in a state that does not recognize same-sex marriage. In addition, because the Court found Section 3 unconstitutional as of its enactment in 1996, the effective date of the resulting legal changes remains uncertain. In spite of these unknowns, Windsoroffers enough guidance to dramatically shift personal and tax planning strategies, both for same-sex couples and for third parties who wish to provide for them.

What Has Changed

Provisions of federal law applicable to married persons now apply equally to married same-sex couples living in a jurisdiction that recognizes their marriage. With respect to tax and estate planning issues, some of the most significant changes for these couples include the following:

1. Federal Income Taxes

Married taxpayers who are not separated must file their returns as "married" persons.⁵ Before Windsor, married same-sex couples were required to file federal income tax returns as either "single" persons or as "head of household." Post-Windsor, the married couple must file income tax returns either as "married filing jointly" or "married filing separately." For couples with a disparity in income, this may result in substantially lower taxes, but dual high-income couples will likely pay more tax. Couples for whom filing as "married" results in income tax savings may amend recent tax returns. An amended return that makes a claim for refund can be filed within three years of the date of filing the original return or two years from the date the tax was paid, whichever is later. Significantly, however, there is no obligation to file amended returns, and taxpayers should be aware that filing amended returns may subject the returns to further scrutiny regarding income and deductions reported.⁶

2. Estate and Gift Tax Planning

Couples who fall within the Windsor class of married couples now enjoy the favorable federal transfer tax benefits afforded all married couples for wealth transfer planning, but also are subject to the restrictions applicable to planning for related parties:

• Marital Deduction Planning. The federal gift and estate tax unlimited marital deductions are now available to these couples. Previously, gift and estate tax would have been imposed on the transfer of assets between the spouses as though they were unrelated persons. Assets can be transferred between them, outright or in trust, effectively deferring transfer tax to the death of the survivor.⁷ This allows the couple to rearrange ownership of assets to minimize transfer taxes, obtain creditor protection and plan appropriately for the survivor's liquidity needs.
• Portability. Portability permits a surviving spouse to use the predeceasing spouse's unused federal estate tax exclusion to make additional gifts tax-free or reduce the survivor's estate taxes upon death.
• Community Property Interests. Couples in community property states that recognize same-sex marriage will now receive a full step-up in basis for income tax purposes on community assets at the first spouse's death.⁸
• Disclaimers. A surviving spouse may disclaim certain property interests while retaining other interests in the same property, unlike other beneficiaries, who cannot retain any interest in disclaimed assets. Particularly with trust planning, disclaimers are a useful post-mortem planning tool.
• Spousal Election. Prior to Windsor, a surviving spouse could take advantage of a state level right of election (a right to receive a share of the deceasing spouse's property) in some states, but could not take advantage of the associated federal estate tax benefit from the marital deduction. After Windsor, the spousal election may provide appropriate planning for the surviving spouse without a potentially disastrous estate tax impact.
• Insurance Planning. The availability of the marital deduction and portability may impact life insurance planning, as the burden of the estate tax can now be deferred until the surviving spouse's death. Consequently, "second-to-die" policies may now be more appropriate than single life policies.
• Lifetime Gifting. Windsor impacts couples who contemplate lifetime gifting. Married couples now may "split gifts" to third parties. Previously, if one spouse had significantly greater wealth, he or she was limited to the annual exclusion and unified credit, without the ability to use the spouse's exclusions and credit.
• Generation-Skipping Tax Planning. Post-Windsor, there are additional options to maximize the generation-skipping tax planning for the remainder beneficiaries by fully applying both spouses' exemptions to the trust planning. This is especially valuable if one spouse has significantly more assets than the other.⁹ A reverse-QTIP election can be made with respect to a marital trust for the surviving spouse, and the surviving spouse can allocate GST exemption to the non-exempt marital trust.
• Grantor Trust Planning. Irrevocable trusts that include the spouse as a beneficiary are treated as grantor trusts for income tax purposes, with the result that the donor continues to be legally responsible for the income recognized by the trust. The donor's payment of taxes is a tax-free gift, as trust assets are not diminished by income taxes, nor are the beneficiaries burdened by the tax. After Windsor, there are additional opportunities for planning with grantor trusts for same-sex married couples. Conversely, those who have already created irrevocable trusts naming a spouse as trustee or as a beneficiary should confirm that grantor trust status is not inadvertently created because of Windsor.
• Previous Planning with Techniques Not Available to Related Parties. Prior to Windsor, same-sex couples could take advantage of estate planning techniques not available to couples treated as married for federal tax purposes. Popular techniques to transfer wealth included residence trusts, common law GRITs, loans without adequate interest and shareholder agreements that did not comport with the requirements of §2703. These techniques should no longer be used for couples who fall within the Windsor decision. For domestic partners and married persons living in a state that does not recognize their union, these techniques should not be used until further guidance is received from IRS.

3. Marriage & Divorce: Prenuptial and Postnuptial Agreements and Property Settlements

• Amendments to Prenuptial and Postnuptial Agreements. Many agreements governing the relationships of same-sex couples incorporate provisions to address the prior unavailability of certain income tax benefits in unwinding their legal relationships. Some agreements may require amendment if the change in tax laws results in unintended consequences.
• Alimony and Property Settlement on Divorce. Federal recognition of a couple's marital status provides clarification of the treatment of certain payments:
  • alimony may now be deductible to the payor spouse and taxed as income to the payee spouse, or may be treated as a non-income producing event at the election of the parties
  • lump sum property settlements may now be made without recognition of gain, so long as they meet the other requirements of the Code
  • Qualified Domestic Relations Orders (QDROs), which divide retirement benefits on divorce, are now available

Working Through the Uncertainty

Windsor's narrow application leaves several practical questions for same-sex couples, regardless of whether they live or own property in a jurisdiction that recognizes their marriage, civil union or domestic partnership. The IRS promised additional guidance in the following message on June 27, 2013:

We are reviewing the important June 26 Supreme Court decision on the Defense of Marriage Act. We will be working with the Department of Treasury and Department of Justice, and we will move swiftly to provide revised guidance in the near future.

Until then, Windsor's application beyond its narrow holding is uncertain. On its face, the Windsor decision turns on state law recognition of marriage, and is limited to marriage. According to the decision, the definition of "marriage" between a man and a woman was always unconstitutional. These points raise numerous questions, including:

• Whether a married couple would no longer be treated as married upon moving to a jurisdiction that does not recognize same-sex marriage, resulting in a "musical chairs" approach to taxation.
• Whether a couple that has entered a civil union or domestic partnership is deemed "married" under federal law, particularly if the state statute provides that those parties are afforded the same legal benefits as spouses. There are indications the IRS may take an expansive view for the sake of uniformity. In private guidance, the IRS indicated pre-Windsor that parties to an Illinois civil union, for example, are "not precluded from filing [income tax returns] jointly."¹⁰Similarly, the IRS has ruled that California registered domestic partners should each report their income as would a married couple living in that state.¹¹
• Whether third parties who make gifts to spouses of their descendants might be making generation-skipping tax transfers, depending on whether the spouse is recognized as a spouse or not. It is not clear whether the law of the state of the donor (i.e., the creator of the trust), the donee or the trust would apply for this determination. Furthermore, it is not clear whether the determination would be made at the time the interest is created or at the time of a trust distribution.
• Whether those who would have been entitled to federal benefits in the absence of DOMA may claim them retroactively and, if so, what that process will be.

What to Do Next

Although many questions remain, Windsor does provide an initial framework to guide same-sex couples and their families in the planning process:

• Those couples to whom the case clearly applies should file their income tax returns as married taxpayers and, if appropriate, may amend prior returns. Other same-sex couples may file separately and file a concurrent protectiveclaim for refund, notifying the IRS that they may claim a refund pending changes in tax law or other legislation. The same is true for gift and estate tax returns where the interest transferred would qualify for the marital deduction.
• All same-sex couples should revisit estate planning documents for marital deduction planning to the extent appropriate, and in particular, to review clauses governing the source for payment of tax.
• Windsor does not automatically recognize all same sex partners as spouses. Families who wish to provide this recognition in their estate plan must incorporate explicit language into their relevant instruments. While this will not change the tax impact of the plan, it will ensure that those who are intended to be beneficiaries will receive their share of the estate.
• Consider the need for amendment of prenuptial or postnuptial agreements. Even if tax considerations suggest the benefit of amending prenuptial agreements or creating a postnuptial agreement, the couple may be unwilling to reopen such discussions limited to tax issues. In addition, the requirements for such agreements are heavily dependent on state law.

Windsor is widely regarded as a landmark case. Its practical application will become clearer over time. In addition to the changes discussed in this alert, the decision affects retirement benefits, social security benefits, immigration status, veterans' or military spousal benefits, and multiple other federal laws and programs.

The Real Facebook Tax Outrage Isn't Eduardo Saverin

Josh Barro for Forbes writes: Eduardo Saverin, Mark Zuckerberg’s co-founder at Facebook, has sparked outrage by renouncing his U.S. citizenship as an apparent tax-avoidance strategy. Saverin, who lives in Singapore where there is no capital gains tax, stands to save about $67 million by giving up his U.S. citizenship.

This is a Bright Shiny Object that has Washington in a frenzy. Senate Democrats have rushed out a bill aimed at imposing a sort of exit tax on people who renounce their citizenship for tax reasons. Chuck Schumer declared on the Senate floor that Saverin’s “social network is about to get a lot smaller.”

But Saverin’s tax savings are small potatoes compared to the favoritism our corporate tax code shows to Facebook and other high tech companies. An NYU study of 2009 federal tax returns foundthat Internet companies tended to pay just 5.9 percent of their profits in federal income tax, while computer software and service firms paid 10.1 percent. That is, Facebook shareholders are already likely to see a big tax advantage before they even decide on a personal income tax strategy.

There’s a popular impression that corporations generally use loopholes and preferences to pay very little tax, but in fact that behavior varies widely by industry. Over the last 10 years, the federal government collected about 22 percent of corporate profits as measured by the Bureau of Economic Analysis in corporate income taxes. That means somebody must be paying a healthy amount corporate tax.

Tech firms have a few advantages that make them especially able to exploit loopholes in the U.S. corporate income tax. One is that a lot of their income comes from intellectual property. Firms can use strategies to shift the ownership of U.S.-developed IP into subsidiaries located abroad, thus treating the income it generates as foreign and not taxable in the U.S. Our corporate income tax also has generous credits for research and development; since a large share of tech firms’ expenditure is R&D, that preference benefits them.

There’s a nod to the former loophole in the Facebook S-1 filing, which notes “Our effective tax rate in the future will depend on the portion of our profits earned within and outside the United States, which will also be affected by our methodologies for valuing our intellectual property and intercompany transactions.” That is, it will depend on how much IP-driven profit Facebook succeeds in stuffing into the “abroad” box.

If tech companies are big winners under the U.S. corporate tax, who are the losers? Generally, they’re firms whose assets are mostly tangible and must be located domestically. Retailers pay high effective tax rates: one review found Target paying 37 percent, Home Depot 35 percent, and Wal-Mart 33 percent. Transportation firms and health insurers also tend to face high tax rates.

The reason we need corporate tax reform is that high tax rates like these are damaging to the economy and make the United States uncompetitive. But to make fiscal room to give relief to companies like Target, we need to tighten up the corporate tax code to make sure companies like Google and Facebook pay income tax on a reasonable measure of their U.S. profits. That means easing up on the R&D subsidies and cracking down on the abuse of international transactions with subsidiaries.

Strategies to tax the income of non-citizen non-residents like Saverin are likely to be ineffective, and don’t hold the promise of raising that much money anyway. People who repudiate their citizenship for tax reasons are pretty rare. It’s likely that the Attorney General will bar Eduardo Saverin from ever entering the United States again, a penalty which makes lots of billionaires inclined to hold on to their citizenship.

But abolishing corporate tax loopholes and preferences like the ones that benefit Facebook and Google could raise tens of billions of dollars a year, money which could go toward reducing the deficit and cutting the uncompetitively high tax rate we charge corporations that aren’t so fortunate as to be able to avoid American taxes. As the Facebook IPO approaches, that’s where Congress should invest its tax reforming energy—if it can take its eyes off Eduardo Saverin.

Helping Settle a Risk-Tolerance Dispute

Austin Kilham for the Wall St. Journal writes: The clients were a wealthy couple in their early 60s. He was a retired financial consultant who was comfortable taking a lot of risk in his investment portfolio. But his wife had a very low risk tolerance for her retirement account.

Their opposing views had caused tension and arguments between the two when discussing how to best manage their retirement savings. As a result, they had settled on a compromise that neither was happy with: Both spouses allocated about 40% of their retirement savings to equities.

So they turned to their adviser, David Frisch, for help crafting a better solution. Mr. Frisch is the president and chief executive of the Melville, N.Y.-based Frisch Financial Group, which manages $275 million for 350 clients. "My main concern was getting them on the same page and working together," he says.

The couple's assets were split between a savings account and their two separate retirement accounts. The husband was withdrawing about $10,000 a month from his accounts to cover their living expenses. Meanwhile, the wife was reluctant to withdraw any of her money for fear that it would hurt her ability to accrue interest and grow her savings.

Mr. Frisch didn't think it was wise to draw from only one partner's account. So he developed a strategy to put both of them at ease with the amount of risk in their accounts, and make each amenable to contributing equally to their monthly expenses. "I came up with a plan that sounded so simple to me, yet they had never thought of it in 40 years of marriage," he says.

Mr. Frisch suggested that they adopt separate investment strategies to balance the risk between the two accounts, giving the husband a riskier portfolio and the wife a more conservative one. Under the new plan, the 55% of the husband's portfolio would be allocated to equities, while the wife's portfolio would hold on 10%-15% equities.

This approach allowed the husband to take on some riskier investments--including individual stocks of his choice--while reducing the wife's concern about volatility in her own portfolio. Although each portfolio was slightly off balance from what Mr. Frisch would normally recommend for clients their age, the two portfolios balanced each other. As part of the new arrangement, Mr. Frisch also recommended that each spouse draw $5,000 a month from their accounts to contribute to household expenses.

The adviser also wanted to use the two portfolios to maximize their tax efficiency. The husband's portfolio included a large individual retirement account, where Mr. Frisch placed higher-growth assets that would otherwise generate higher taxes. He then placed more tax efficient vehicles, like municipal-bond funds, in the wife's taxable investment portfolio.

The couple was happy with the new compromise. They have agreed to monitor performance in those accounts and shift the amount each partner contributes if one portfolio is significantly down compared to the other, says Mr. Frisch. And the new, customized asset allocations are likely to provide the combination of growth and stability needed to help them live comfortably into retirement.

"The wife is comfortable knowing that her statements are only going to change slightly from month to month, and the husband knows that they have enough exposure to fast-growing investments to provide income throughout their retirement," says Mr. Frisch.