When one thinks of the term “Acts of Loving kindness” [גמילות חסדים], one does not usually think of gruff males. Either our minds turn to images of self-effacing women or pious old men. Nonetheless, when I hear about “Acts of loving kindness, I think of to two men: one I never knew,  although saw on many occasions and the other I knew quite well and but is no longer with us. I would like to share my experiences with each of these men and the lessons they taught me about helping your fellow man.

For those of you who remember the old Jerusalem Central Bus Station there was a man that everyone encountered any time they were planning to ride an inter-city bus. As soon as you came into the entrance, he had a paper stand set up on a larger metal box piled with newspapers. He was not particularly friendly and maintained a fairly stern look on his face as you purchased your newspaper or magazine. I used to imagine his serious personality may have been a reflection of the fact that he was missing an arm, which was probably the reason he had the newspaper concession to begin with. Generally, you would pick up a paper, hand him some money and he would show quickness and dexterity in giving you your change. In any case, I never exchanged a word with the man other than to say “Thank You” and I never remember him responding anyway.

As many of you know for many years our office was on Sderot Herzl in Bet HaKerem. It was 20 years ago when even then I had to travel to Tel Aviv, and since we had one car and several small children, I took the bus. I don’t remember whom I was to meet in Tel Aviv, but I do recall it was important and I was running late. I looked at my watch and had no time to spare to catch the inter-city bus. As I entered  the bus station and approached the ticket seller I realized I had left my wallet at the office. There was no time to go back to the office  - i would be late to Tel Aviv. My first reaction was to look around for someone I knew (common in those days) , so I walked from one end of the bus station to another and unfortunately did not find anyone. So there I was in an obvious state of distress standing in front of the paper stand at the bus station. Suddenly the one- armed owner of the stand spoke to me and asked me what was wrong. I explained to him my dilemma, and without saying a word he reached under his table and opened up a cigar box filled with cash. He said take whatever you need and you will pay me back when you can. He did not ask me my name, ID or anything, he just said catch your bus. I was stunned by his willingness to help unconditionally and  I always took the opportunity to thank him whenever I passed his stand. I am not sure whatever happened to him, but I sense he was a part of Jerusalem that is quickly fading away.

The other man that comes to mind particularly at this time of the year is Eliezer “Laizer” Shor, who used to own the Nada Bakery on Emek Refaim. Laizer was a well known character and was known to have a gruff side. What was less known about him was that for many years he dedicated himself to collecting money for poor soldiers around Pesach time. I originally met him as  a fellow congregant in a small synagogue in Bet HaKerem.  Several weeks before Pesach, Laizer would go door to door to and ask for donations. One year, he climbed up to our third floor apartment and knocked on our door requesting some money; I did not realize that in fact he had something else in mind, he had come to recruit me to help him “make the rounds”. I had raised some money for Israel in college but I had never done anything like this. Over the years we would go around together collecting the money and bringing it to “Mahaneh Schneller” to an Army Rabbi who was in charge of passing out the funds to the needy soldiers. The stories we would hear after Pesach made us feel that our efforts were well worth it. Hundreds of soldiers were able to bring home food baskets that literally allowed their families to have food in their house for the Chag. Over the years I moved away from Bet HaKerem. We decided it was better for me to enlarge my circle of donors to my work colleagues and neighbors and leave Laizer going around to our old list in Bet HaKerem. This plan worked quite well for many years until Laizer succumbed to Alzheimers and soon could no longer remember his nearest and dearest as well as his beloved activity of collecting funds for soldiers from poor families. 

Two months ago China celebrated its New Year, the year of the Rabbit. The Rabbit is the fourth sign of the Chinese zodiac and is said to be a very lucky sign. While the Rabbit symbolizes looking forward to life getting better, the Chinese say you have to be pro-active and implement change to your circumstances.

There are many areas, I have found, in which I need to be pro-active to implement change. At Philip Stein & Associates, I am constantly seeking to invest in education and technology to improve not only how we do our work but to increase our knowledge base so that we can handle more of your questions and problems. I believe that not being pro-active in 2011 leaves a professional at a clear disadvantage and will lead very quickly to obsolescence. In addition, being pro-active usually brings improvement and satisfaction. If that is really what is behind the “Year of the Rabbit” then I wish all of you the pleasure and satisfaction that comes from improvement in whatever area you would like to invest in this year.

One area that one sees immediate improvement is when one invests their energies in running. It is no revelation that if one wishes to improve their ability to run, then one has to get out there (either outside or on a treadmill) and invest the time and energy to improve. In fact, I would say that there is probably no other activity that I know of where one can see as high a correlation between one’s investment in training time and one’s improved performance.

Walkman by Sony

I have had an over 25-year long relationship with running until this very day (I went out for a 3k run this morning). One of my earliest memories (I was probably about 5) was trying to avoid my father on a Chicago summer evening who was trying to get me to come into the house. While I was quite sure I had the agility and speed to avoid my father’s grasp, my behind soon discovered a 5 year old is no match for a determined 35 year old (who at the time I perceived as being a very old man). As I grew and matured I discovered I was actually quite fast and it contributed to a great deal of satisfaction in such sports as football, baseball and ice hockey; things did not work out so well in basketball because not only did I have to move fast, but my hand had to simultaneously dribble the ball (a problem of coordination for me). By the time I was well into my early 30′s I found I was no longer participating in competitive group sports and I began to jog. I can’t say I fell in love with jogging but with the invention of the Walkman, I could listen to music and not think about the stress on my joints and muscles. Soon I started to participate in races, of short length- 3k, 5, and at the most 10k, and found while I was never competitive, I enjoyed being part of an event and always loved eating snacks passed out at the end of the race.

As the running industry has developed, I have been a major consumer of shoes, socks, running shorts, hi-tech running jerseys, watches with embedded GPS, heart monitors, and various devices for listening to music. In other words, somehow running has become my hobby even though I have never been that good at it. The last few years I have run in many Tel Aviv events, but it has been a long time since I ventured to participate in a race in Jerusalem. I decided to “bite the bullet” this Friday and test my legs on the 10k route of the Jerusalem Marathon. Last night after I consumed a few glasses of wine at our Purim Seudah, I decided to go online and check out the route. Much to my shock I discovered there are several times where a runner has to climb over 60 meters in elevation, which is not something you ever encounter while running through Park HaYarkon (see one of my favorite things). So here I find myself not in the best running shape, signed up for probably the hardest 10k race in the world. Nonetheless, I will be out there on Friday with my best friend from childhood, Bernie, one of his sons who is studying in Jerusalem this year, and my daughter Gefen who is currently serving in the IDF. You are also welcome to follow us on twitter to get live updates from the marathon.

Heinz Ketchup

Now while the Jerusalem Marathon gives you a nice shirt to wear at the race, I will not be wearing the official running jersey. Rather, Bernie and I will be wearing a shirt promoting one of the best known products in the western world, namely Heinz Ketchup. The reason I have chosen to wear this shirt is because a number appears on the shirt that is connected to my birthday which falls on this Shabbat, the day after the race. If you happen to figure out the clue then I will treat you to a bottle of Heinz Ketchup this year as a reminder of the race. If you happen to be out at the race on Friday and see two middle aged men jogging (or sometimes walking at steep elevation) wave your hand and wish us Happy Birthday (Bernie’s birthday is a week before mine). We promise to wave back and wish you success and good luck on your journey. So while the Chinese may be celebrating the year of the Rabbit, I will be celebrating the year of the Ketchup, a product that always enhances what you are eating and adds to you satisfaction.May we all have a year that adds to our satisfaction that is based on pro-activity and performance.

Happy Birthday to all who were born in the “Year of the Ketchup”.

Philip

Philip talks about managing US offices & subsidiaries of Israeli companies

8.3.2011 @ Israeli Export Institute, Tel Aviv

Click here to view presentation

Podcast: Play in new window | Download

I may have shared with you in the past that as a young boy and teenager, I used to work for my grandfather of blessed memory, Nathan Hecht. He was in partnership with his brother, my great uncle Sam Echt in a wholesale poultry and egg business. My grandfather once told me that in 1940, the business had gross revenues of a $1,000,000 ($12,500,000 in today’s money) in the pre-large grocery chain age, even though its customers were small “Ma and Pa” grocery stores, butcher shops and restaurants. In other words, it was a substantial business once upon a time. However, by the time I came along to work as a child in the mid 60′s until the business closed in 1975 it was still serving those same small customers that were nearing their own extinction. My duties ranged from sweeping sawdust off the floor, loading small delivery trucks with cases of eggs and chickens, candling and grading eggs (a skill that is no longer needed; I will give you a lesson if anyone is interested), and accompanying the driver on his delivery route to help unload the truck and bring the merchandise in to the customers. As the business shrunk, there were less and less permanent workers hired. We did hire a great deal of daily or weekly workers who were generally from Mexico (most likely illegals or commonly known as “wetbacks”). In fact when I was 14 years old, I was assigned to supervise a work crew of 3 Mexican workers who did not speak a word of English. I always said I learned more Spanish in the two weeks of working with them than in four years of high school Spanish.

Nonetheless, through the entire 10 year period that I worked for my grandfather, there was one steady worker, named Charlie Mack. To this day, I am not entirely sure if his first name was in fact Charlie-Mac, but I assume Mack was his surname because he allegedly had 12 children (maybe more) from numerous women who were called Bobby Mack, Billy Mack, Johnny Mack, etc. Charlie was a large black man with huge hands who could throw a 70 pound wooden case of chicken filled with ice into the truck, as if it were a pillow. He was the driver, in fact the last driver in my grandfather’s business and I was often sent out with him to unload the truck, or to watch the truck while he went into a customer to collect some money or call my grandfather from a payphone about a problem that arose along the way (remember no cell phones in those days). In fact on one typical hot, Chicago summer day, I came to realize that here I was on a delivery route deep in what was called the “ghetto” and I was probably the only Caucasian (white) person for miles around. In other words, if I wandered around these parts of the city without Charlie Mack at my side I would probably not be around today to write this entry in my blog. In fact one time when I was “riding shot-gun” and guarding the truck while he went into one of our customers, a couple of tough looking guys walked up to me and started asking me what I had in the back of the truck. Since there was no air conditioning in the truck, the windows were wide open and a large stick shift prevented me from moving away from the window that these guys were sticking their heads through. Suddenly, I heard Charlie Mack’s booming voice and before I knew it these guys were running at full speed down the street, in fear of their lives.

In any case, I had not thought about Charlie Mack for a long time until the other day when I got off the train at the Haganah train station in Tel Aviv. I had about 20 minutes before an appointment on Rehov Rothschild in one of the fancier buildings in the banking and financial district and decided to enjoy the nice weather and walk through South Tel Aviv to get to my appointment. After about 10 minutes, I realized as I approached what is left of the old Tel Aviv bus station that I was in the midst of a neighborhood filled with refugees from Africa, principally the Sudan. In fact, I paused for a moment and looked in all directons and did not was see one Israeli, or person of white skin. At that moment I thought of myself driving with Charlie Mack through the ghetto, yet this time I experienced no fear (perhaps naively), despite being such a distinct minority at that moment in time. How ironic; in the old days back in Chicago I had no fear because Charlie Mack was by my side and yet today, I was in my own country walking alone and felt like I was walking down Rehov Ben Yehuda in Jerusalem.

 The above incident got me thinking how Philip Stein & Associates functions a bit like Charlie Mack for many of you at times. We are the ones that need to watch over you and keep you out of danger even in uncertain economic times. My staff recently discussed with a colleague from the US how the IRS is definitely going to increase its audits of Americans living outside of the US. We need to anticipate those audits and be diligent in protecting your interests by preparing the most complete tax return that we can. We continue to invest a great deal of time and energy in education which will help us defend your returns against any potential audits and avoid problematic high profile areas. While we hope those audits will be few and far between, I just wanted let you to know that we will be there to protect you. I may not have Charlie Mack around anymore to watch over me, but Philip Stein and Associates will be there to watch over YOU. And so I leave you with a classic performances by Frank Sinatra of one of the 20th century’s greatest songs written by George Gershwin.

I hope you enjoy it as I do.

I am writing this edition of my blog as I sit on the Amtrak train from Newark, New Jersey to Baltimore, Maryland. For the last 10 days I have been on a coast to coast journey mixing family, friends and business. I started my journey in Houston visiting my parents who are recent arrivals to Texas. Last Sunday I began the first stop of my Nefesh B’Nefesh speaking engagement in Los Angeles to potential olim. The following night I spoke in San Francisco but decided to spend the day touring the Napa Valley in search of a Kosher Winery. I am pleased to say that not only did I find the Hagefen Winery, but spent a delightful morning sitting with some fellow tourists sampling the wonderful array of wines that this winery produces. From there I made my way back to San Francisco for speech #2.

After my second speech I hopped into my car and drove due west to one of the icons of Americana namely, Yosemite National Park (a 4 hour drive). Early the next morning, led by a guide I hiked/snowshoed up a beautiful path to a place called Inspiration Point. From there I drove to Fresno California where I caught a flight to Chicago (my hometown) to give speech #3. After a few days of catching up with family and friends in Chicago I flew to New Jersey yesterday for speech #4.

During all of the above I was following with great interest the final phases of the Congressional battles over the Bush Tax Cuts that literally went down to the proverbial “wire”. I am happy to report that on December 17th President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

As a spectator extremely interested in the outcome, and definitely rooting for one side of the argument (I wanted the Bush Tax Cuts extended), I felt like I was watching a long football game. In fact yesterday there was an incredible football game played between the New York Giants and Philadelphia Eagles that is being referred to as the “Miracle of the New Meadowlands”. What made this game so unique was that despite the fact that the Giants were winning by 21 points with 7:18 to play they lost the game!!! This result is what inspired me to quote the famous Yogi Berra as the title of this blog that “It ain’t over until it’s over”. That statement reflects my feelings as I followed the political and legislative process the past year. I feel that comparing this process to a football game is very fitting. I would describe the game to get to the goal line (The tax cuts extended) as follows:

1. First Quarter- March 23rd President Obama hits the zenith of his powers as President and signs into law his health care bill. It appears that with both Houses of Congress in his pocket he can score at will and will not let the Bush Tax Cuts be extended. Momentum and lead with the anti-extenders.

2. Second Quarter- In May, unemployment ticks upward and the Democrats seem to be showing some weakness. We begin to hear the first arguments from economists that the government should not raise taxes if the economy is weakening. The extenders begin to score a few points. The anti-extenders are still clearly in the lead but the there is a glimmer of hope.

3. Third Quarter- Here is where things begin to get interesting. Vice President Biden comes out publicly that the White House may be willing to discuss a compromise. President Obama suggests the Bush Tax Cuts will only be extended for couples earning less than $250,000. Polls begin to show a growing dissatisfaction with the White House and Congress and Democrats are backing away from an all or nothing approach. Extenders gaining ground and momentum. The anti-extenders have moved to defense and they are not used to this role.

4. Fourth Quarter- The decisive blow comes with the November mid-term elections. The Republicans retake the House of Representatives and stun the administration. White House spokesmen and Democratic Senators start suggesting face-saving measures to appease the Republicans. Liberal columnists and commentators fight back and make a concerted effort to call the extension a windfall for billionaires. Finally, Senator Bernie Sanders from Vermont makes a final futile attempt to end the Bush Tax Cuts by filibustering for seven hours in the Senate last week. A comeback victory for the extenders, as time expires.

Several months ago a client asked me whether the tax cuts would be extended. I responded I wasn’t entirely sure, but he pressed for a definitive prediction, no hedging allowed. I took a short breath and said, “They will be extended”. Truthfully, I was not 100% certain, but I am glad that my 50 years of following politics and 35 years of following tax legislation allowed me to get this one right.
Just don’t forget these tax laws are only in effect until December 31st, 2012. So give me a call in 2 years and I will tell you what I think. We are attaching a summary of the highlights of the tax bill that we think you will be interested in.

All the best,

Philip

Actually I loved the sound of the title and although I returned from Prague on Tuesday night, I still wanted to use it for my blog. Today’s theme concerns Rahm Emannuael, Tweetie Bird, and the Chilean Miners. As we come to the end of October you may have forgotten the month opened with Rahm Emannuel’s  resignation from the Obama administration on October 1st;  mid-month we had the dramatic rescue of the Chilean Miners, and today we begin to close the month on the 81st anniversary of the great stock market crash on “Black Tuesday” October 29th, 1929. So what’s the connection between, Rahm, Tweetie and Chilean Miners?

One of coal mining’s earliest systems for warning of the presence of methane gas, the canary in the coal mine, though low-tech, was extremely effective and rather easy to read: if the bird died, miners had to get out of the shaft. As coal mines became deeper, so did problems of ventilation. Gas was an eternal problem in the mines, and it was known that without adequate oxygen in the air, the miners would die. The solution: taking canaries into the mine.

As the Obama administration seems about to be overcome by problems (not methane gas), I believe that Rahm Emannuel may in fact be the ultimate canary that gives off early warning signs. Take a look a his career for a moment:

Senior advisor in the Clinton Administration – 1993 until 1998:

These were the “golden years of the Clinton Administration and he decided to go into investment banking just before Monica Lewinsky and impeachment proceedings blackened Clinton’s legacy.

Investment Banker – 1998 until 2002:

Rahm was hired by Wasserstein Perella as an investment banker during the “dot-com” years. Despite the fact that he did not have an MBA or a degree in banking he managed to make $16.2 million dollars in 2 1/2 years!! After the tech bubble burst in 2000 Rahm had enough time to count his profits and head into politics.

United States Congressman – 2003 until 2008:

Rahm saw an opportunity to run for Congress when a Congressman named Rod Blagojevich  ran for governor of Illinois, creating a vacancy in a seat that had previously been held by the same Congressman for 50 years. Rahm served a few years learning the legislative side of Federal government and then jumped on to the next “gravy train”: the Obama “Yes We Can”  presidential campaign.

White House Chief of Staff – 2009 until October 1st 2010:

I sense that Rahm did not want to be around this November 2nd when the House of Representative and perhaps the Senate (not likely) go over to the Republicans. Rahm claims he had to make his move right now in order to run for Mayor of Chicago, one of the few times in the last 55 years that a Daley was not running for Mayor.

Following the above analysis, I believe Rahm is the canary of political and economic change. His timing and sense of the right trend are impeccable. I am certainly not sure whether he will be the next Mayor of Chicago, but I would not bet against him.

The media circus that surrounded the Chilean miners had not only continuous television coverage, but  was even able to coin a phrase “The Chilean Way”. The Chilean Way came to represent the right way to do something. The right way to manage a problem, people, and any surprises that pop up along the way. I felt this phrase was a real tribute to the people who managed this crisis both inside and outside the mine.  It was the best example of how human ingenuity and spirit can overcome serious problems.

So how does all of this relate to Philip Stein & Associates Ltd? My hope is that we can be your canary giving you an early warning of changes in the tax laws and allow you to take advantage of opportunities and trends that may arise.  In other words to get things right, to do things the “Chilean Way” when it comes to solving your problems. At this time of the year we are reviewing pending changes in the tax laws in order to see how you will be affected, as well as looking at ways to improve the way we serve you. There is some exciting technology out in the market which we hope to invest in to help serve you better. We are looking forward in the coming months to recharge our batteries, train our staff and hear from you about your concerns for the coming year.

I cannot close without wishing a happy 87th birthday to my father Leonard Stein, may he live and be well, now residing in Houston, Texas, and happy 104th birthday to my Aunt Belle, who is still going strong. Keep up the good work.

Philip

Last week, I travelled to an appointment in Tel Aviv and returned to my Jerusalem office for the day’s work. On the face of it, this is no big deal in 2010, with Highway #1 and Road 443, buses, cabs and cars allowing us to make the round trip in little more than an hour. What made the trip “down” to Tel Aviv unique was that I was given a ride in of the most famous sports cars in the world. The leather seats, perfect sound system and quiet, smooth ride was something I had never experienced before. However, for the second part of my journey, the ride “up” to Jerusalem, I departed from the Tel Aviv bus station and rode Egged #405 to the Jerusalem Central bus station. I could not help being struck by the contrast; one hour I am riding in a state-of- the-art sports car and drinking expresso at a meeting, and soon thereafter I am wandering half-lost through one of the most poorly designed and maintained bus stations in our country. As I boarded the bus, I had in my possession a cell phone, my Kindle, laptop and Itouch, causing me to wish/imagine that I could beam myself out of this mess and back to the lap-of-luxury travel. I found myself thinking of Roger Miller, a very famous country singer who had a chart-topping 1964 hit called “King of the Road” .  I had not heard or thought about Roger Miller and his famous song for a long time but the trip to and from Jerusalem starting me humming the melody.

“King of the Road” is about a man satisfied with his lot in life, even though according to the song he is living from “hand to mouth”. With Rosh Hashanah only a few days away, I think it is a time of the year when we reflect on the past year and think about how our lot is going to be in the coming one. Are we going to go down in a sports car or up in an Egged bus? In business terms, are we going to be distracted by our immediate surroundings and circumstances or are we going to pay attention to the essence of where we are heading. I think this is a major challenge for all us and not one easily mastered. We are so bombarded today by outside stimulii and pressures to respond, and we tend to lose track of where we are heading. I have seen many clients over the years with their businesses or investment portfolios melting away, yet  they ignore warning signs that could help them make critical changes to improve their lot. On the other hand, I have seen others with valuable assets or businesses, yet they sometimes miss the opportunity to profit at the right time. Some of my clients have stayed with a job too long while others leave a “good” job for the wrong reasons. Yes, “timing is everything”, but we need to have our eyes always open to know whether we are on the way up or down.

Speaking for all of us at Philip Stein & Associates Ltd., we are comitted to having our eyes open to follow which way tax legislation is headed, where the IRS is going to put its resources in the coming year, what issues are going to be subject to audits and whether the Israel/US tax treaty may to be amended, to name a few. We owe it to you, our clients, to be your eyes and ears when it comes to taxes. Once we get past the Chagim, we will be shifting our energies to see which way taxes are headed in order to insure that you can make the right decisions before the end of the tax year. We need to help you be aware whether taxes are going up or heading down in the coming year, and apprise you of the moves you can make to deal with those changes.

So as Rosh Hashanah approaches, I wish to extend to all of you one of the traditional blessings we say to each other. “May it be His will, that we be as the head and not as the tail”. In other words may we all use the powers in our head to make the right decisions (our brains), based on the right observations (our eyes), from words that we clearly hear (our ears), and we can always communicate to our families, friends and clients what they need to hear from us (our mouths). And finally to paraphrase Roger Miller, may all of us be satisfied with the blessings we receive in the coming year and feel like the “King/Queen of the Road”.

Shana Tova U’ Mtuka,

Philip

Many years ago, well before the Internet and CNN, the BBC had a weekly broadcast from the United States, hosted by their veteran correspondent Alistair Cooke. Every Sunday anyone in Israel could tune into the BBC radio signal and listen to Alistair Cooke’s view of America. While I have in fact been back in Israel for a week I would like to share with you some of my experiences and observations that I had in America over a 3-week trip as Alistair Cooke once did.

Any meeting I had or event I attended I was struck by the amazing impact of devices like the Iphone, Blackberry and Android. It seems that everywhere you look these devices (they are more than phones) are being used to make phone calls, send e-mails, browse the Internet, listen to music or just play games. In addition, there were no shortage of IPads and Kindles that were in use on planes, trains and park benches.

One of our stops was a place called Bethel Maine, which lies along Androscoggin River, in Southwestern Maine sitting in the shadow of Mount Washington. One evening while in Maine, we watched a charming movie called “You’ve Got Mail”. The title of the movie was based on the greeting one used to receive when getting e-mail on AOL. The movie came out in 1998 when AOL was at the peak of its popularity and told a story of how Tom Hanks, owner and manager of a fictional Barnes & Noble book chain, was putting out of business Meg Ryan’s neighborhood bookshop. The movie made a very strong point that the “mega-bookstore would determine how we would buy our books and music. How ironic that while I was in the U.S. the real Barnes & Noble is struggling and looking for a buyer or investor just to survive.

In other words, in just a decade, the devices I mentioned above are bringing the publishing, newspaper and music industry to their knees. The majority of people you see on subways these days are no longer reading newspapers but looking at their Iphones or Blackberrys. I sense that just like record stores have disappeared, (there is a Disney Store replacing the legendary Virgin Records in Times Square) so will bookstores and newspaper stands become an endangered species. While this may make you sad, I know I personally listen to more music (Itouch), listen to more Podcasts (Itouch plugged into my car radio) and read more books (courtesy of my Kindle).

As Bob Dylan wrote in his epic song “The Times They Are a-Changin”, we are witnessing this ourselves in the tax world. Congress has recently gone on a tear introducing new rules regarding foreign reporting (FACTA, more details to come in the next newsletter) and the IRS is bombarding us with new reporting requirements, while we have no clue what Congress will do with the Bush tax cuts that are about to expire.  I don’t remember a period in the last 20 years where so many aspects of our practice have to deal with so many changes.

I suppose this is the primary challenge of our times.  We need to identify the rapid changes we face, make the necessary adjustments to deal with these changes and then absorb those changes into our lifestyle.  This is not to say that every change is positive, but particularly in the tax world, it can be very expensive to pretend that one can ignore these changes. We at Philip Stein & Associates Ltd. are committed to tracking these changes and keeping you abreast of how to live with them without disrupting your lives.

While I have written above about a few of the changes we face nowadays, allow me to share with you one my American experiences, which I describe, as timeless. We spent the end of our trip in the “Big Apple” which is always a treat. I was travelling with my wife and several of my children and grandchildren. At the end of a very hot New York City summer day I met my family at the corner of 59^th and 5^th Avenue. I offered to relieve my oldest daughter of her very active 4-year-old son for a few hours. She readily agreed, and I had the privilege of walking with my grandson through Central Park (see my favorite things) from 59th and 5th   to 72^nd and Central Park West.  As we began our stroll I bought him a popsicle (“kartiv” in Israel), came across a small Luna Park at the site of the Wollman ice skating rink  where he went on several rides much to both of our delight. In one of the playgrounds in the park he scratched his hand and we found and old Ma and Pa Pharmacy where the pharmacist offered to clean and bandage his hand with a Spiderman band aid and finally we came across a kosher pizza store near 72^nd and Broadway where we bought pizza for the whole family. We finally arrived at our hotel on 76^th and Broadway hot, tired and sweaty, but I said to myself,  “What more could a person ask for in this world then a few hours like I just spent.”?  I did not need an iphone, ipad, or blackberry to enjoy the walk; I wore no headphone and even turned my cell phone off for a few hours. In other words all of these modern devices are not always necessary to “enjoy the moment”.

While many of us may feel we are riding a rollercoaster of daily changes I want to remind you not to forget how to identify and enjoy the simple pleasures in life.

Philip

As I prepare for my summer vacation I recall one of my classmates  turning to me on the last day of school and saying “I am absolutely miserable”. I asked him how could that be, we had waited all year for the last day of school and it had finally arrived. He said, “That’s the problem, there is nothing to look forward to now….!”  I was thinking about that remark the other day as we head into the saddest day in the Jewish calendar, it is a day that many people dread, and it marks not only the end of the “Three Weeks”, but actually the beginning of the fun part of summer.  So on the one hand we would prefer if the 9^th of Av would never come, on the other hand once the day has passed we can begin to enjoy our summer vacation. During the year we have many contrasts where we go from serious/sad to happy/joyous  in a short time frame ie; Yom Hazikaron/Yom Haazmaut, Tisha B’av/Tu b’av, Yom Kippur/Sukkot, Taanit Esther/Purim. I thought it would be interesting to share with you an article that my wife Judy (a practitioner of Chinese Medicine) sent to me today; I hope it will help you enjoy the happy times that much more.

Have a wonderful summer and hope to report back to you in 3 weeks.

5 Things That Will Make You Happier

By Clara Moskowitz, LiveScience Senior Writer

SAN DIEGO – The pursuit of happiness is sometimes easier said than done.

Some scientists have argued that happiness is largely determined by genetics, health and other factors mostly outside of our control. But recent research suggests people actually can take charge of their own happiness and boost it through certain practices.

“The billion-dollar question is, is it possible to become happier?” said psychologist Sonja Lyubomirsky of the University of California, Riverside. “Despite the finding that happiness is partially genetically determined, and despite the finding that life situations have a smaller influence on our happiness than we think they do, we argue that still a large portion of happiness is in our power to change.”

Lyubomirsky spoke here Saturday at the annual meeting of the American Association for the Advancement of Science. She and colleagues last year reviewed 51 studies that tested attempts to increase happiness through different types of positive thinking, and found that these practices can significantly enhance well-being. The results were published in the Journal of Clinical Psychology.

Here are five things that research has shown can improve happiness:

1. Be grateful – Some study participants were asked to write letters of gratitude to people who had helped them in some way. The study found that these people reported a lasting increase in happiness – over weeks and even months – after implementing the habit. What’s even more surprising: Sending the letter is not necessary. Even when people wrote letters but never delivered them to the addressee, they still reported feeling better afterwards.

2. Be optimistic – Another practice that seems to help is optimistic thinking. Study participants were asked to visualize an ideal future – for example, living with a loving and supportive partner, or finding a job that was fulfilling – and describe the image in a journal entry. After doing this for a few weeks, these people too reported increased feelings of well-being.

3. Count your blessings – People who practice writing down three good things that have happened to them every week show significant boosts in happiness, studies have found. It seems the act of focusing on the positive helps people remember reasons to be glad.

4. Use your strengths – Another study asked people to identify their greatest strengths, and then to try to use these strengths in new ways. For example, someone who says they have a good sense of humor could try telling jokes to lighten up business meetings or cheer up sad friends. This habit, too, seems to heighten happiness.

5. Commit acts of kindness – It turns out helping others also helps ourselves. People who donate time or money to charity, or who altruistically assist people in need, report improvements in their own happiness.
Lyubomirsky has also created a free iPhone application, called Live Happy, to help people boost their well being.

It has been over a month since I have added to my blog due to tax deadlines and writer’s block. Nonetheless, we are past the half-way point for 2010 and summer is definitely upon us. I once had a summer accounting job when I was a student. My boss was a rather large Irish Catholic, a former IRS agent who one day came out of his office after the July 4^th holiday and bellowed in front of all of the clerical staff, “We are now closer to next Christmas than last Christmas”. That was the extent of his communication to the staff that summer.

Back in the 1970′s before the break-up of AT&T, the phone number 411 used to be called “Information” as opposed to “Directory Assistance”. The reason that AT&T made that change was because people used to call 411 on Thanksgiving Day and ask “How long do I have to cook my turkey?”, or on Election Day someone would call and say, “Where is my polling station?” People assumed that if AT&T was offering a phone number called “information”, then all of one’s questions could be answered.

We are currently faced with a similar dilemma regarding questions about Form 90-22.1 (FBAR). Despite our best efforts to inform clients of the need to file by June 30^th, my staff reports being inundated with questions about filing FBAR’s late. We get questions such as:

1. “Can we file late”?
2. “Will we be penalized”?
3. “What is the penalty”?

The IRS has clearly stated the penalties for non filing of the FBAR:

The maximum annual penalties for failure to file are as follows: 

Civil Penalties:

• $10,000 for non-willful noncompliance.
• $100,000 or 50% of the amount of underlying accounts balance at the time of the violation if determined to be willful.

Criminal Penalties:

• $250,000 fine and 5 years imprisonment.
• $500,000 fine and 10 years imprisonment if in tandem with any other U.S. law.

Now these penalties are quite nasty and will be imposed according to the IRS if you “fail to file”. On the other hand if you do file and you declare all of the income in your foreign accounts on your U.S. tax return, it would seem you are no longer under the penalties listed above. It would appear if you file (even late) that a different set of penalties apply, that would fall under the Voluntary Disclosure Program, which are as follows:

1. Failure to file FBAR and to report foreign income and pay tax:

• File six years of amended or delinquent tax returns and FBARs.
• Pay all taxes and interest due for the six years.
• Pay a 20% accuracy penalty or 25% delinquency penalty.
• Pay a one-time 50% penalty in the year with the highest aggregate account balance.  In certain circumstances this penalty will be reduced.

    2.   Failure to file FBAR only:

• Assumes all income from foreign accounts has been reported and taxes have been paid.
• Taxpayer should file delinquent FBAR’s and attach an explanation for late filing.
• IRS will not impose a penalty (see Penalties for failure to file above) for the failure to file the FBARs.

It would therefore seem to appear that if you have been declaring all of your foreign income, than you only have to contend with #2 above. We would then recommend you write an explanation to the IRS why you have not filed FBAR’s on time.

If you fall into category #1 we suggest you seek legal counsel. In the end the IRS is not “showing its cards” on late filed FBARs, and we and all of our colleagues cannot guarantee how the IRS will ultimately process these late forms.

I certainly can understand your frustration assuming that we, like the old AT&T, should have all of the answers.  However, the IRS is not revealing at this time their new rules, and subsequently our answers may sometimes be “we don’t know”.  I can assure you we can help you file your FBAR returns and amend your income tax returns.  However, we cannot offer any guarantees of how the IRS will react.

As in my other blogs I like to end with something in the news and personal.  Many of you may have never heard of Slonim Hassidim, until the recent publicity surrounding an Israeli court decision. However, if history had been a little different I might have been one of those Hassidim protesting or being arrested a few weeks ago.

96 years ago this month, my mother’s family lived in a small town near Bialystok, Poland (it was actually part of Russia at the time) called Horoduk. My late grandfather of blessed memory was 12 years old at the time and his father had run out of educational resources for his young son in their small town. My great grandfather decided therefore to travel to Slonim to enroll my grandfather at the well known Yeshiva there, hoping that he would excel in Torah learning. The arrangements were made (not to my grandfather’s liking) and he was set to start his studies on Rosh Chodesh Elul, which would have been August 23^rd 1914. However something else was to happen in the world that August, namely the outbreak of World War I. My grandfather would never make it to Slonim, and our family took a different path that took them far away from that Yeshiva, but that is another story for another blog.

-Philip

Jack Brickhouse, a famous Chicago sportscaster used to say whenever a team failed to catch up and win a game: “A day late and a dollar short”. In other words, the team should have started their comeback earlier in the game and shouldn’t have waited until the last minute. I hope that my reference to Memorial Day on June 1st does not qualify for being too late. In Israel, Memorial Day or Yom HaZikaron is experienced much differently than Memorial Day is in the U.S., however the very name of day calls upon us to simply remember, principally those who have fallen in combat on behalf of the United States. We of course have everyday of the year to remember people, events or things that happened in our lives; we don’t need a special day in order to remember. Nonetheless, I have found in my practice that while there are certain things we may commit to memory, we should not rely on our memory in order to remember valuable information. I am constantly confronted with clients who fail to remember transactions, dates, events etc’. that are pertinent to their tax returns. I would suggest the following items should be saved on your computer or printed out and saved in a safe and secure place. This list is merely a suggestion and may certainly be expanded:

1. Purchase Price of Major Assets – These may be anything from your home to an investment in real estate or even a piece of artwork you acquired at an auction. I can tell you their are very few people that can even go back 10, 20, 30 or 40 years and remember what they paid for these things.

2. Inherited Assets – If you are an heir, ask for a copy of the will as well as the value of the assets you received on the date of the decedent’s death. If the decedents executor filed an estate tax return, then he can easily provide you with those values. If the executor did not file an estate tax return, then save a copy of the values of any securities on the date of the decedents death, or ask an appraiser to give you a value of a non listed asset.

3. Gifts – If you are the lucky recipient of a non cash gift, then be sure and ask what the donor paid for the item; his cost will determine your tax basis. If you are the donor; give the donee some documentation regarding what you paid for the asset.

4. Dates – Most people can remember birthdays and anniversaries, but it is sometimes very important to remember moving dates, whether in or out of a certain state, as well as the date you moved to Israel. We also urge you to save dates of option grants, bonuses and receipt of gifts from non U.S. citizens or trusts.

5. Stock Splits – Very often stocks that you have held a long time may have split; it is important to note those dates. In addition, if you ever change brokers, please keep track of the basis of the stocks before you transfer them, very often the new broker’s computer system will assume your basis is “zero”.

So go set up those archives and of course remember where you put them.

Before I end this weeks blog I wish to go back to where I started, writing about remembering. Whether one reads the obituary page of a daily newspaper as my father does, or scans the internet for famous and infamous people who have died, we are often affected in some way by the passing of people we never even met. I myself and many of my contemporaries were never the same after the assassination of President Kennedy. In the mid 70′s when I was a graduate student I remember feeling a great loss, hearing about the sudden death of Richard J. Daley, who had been the mayor of Chicago my entire life , and of course the murder of John Lennon in 1980 left me in a great funk. If any of you ever watch This Week on ABC, they end the weeks show with a segment called “In Memoriam” which looks back at famous people that died the previous week as well as active servicemen who died in combat, it is very moving. One of the people who passed away last week was a man named Art Linkletter, I am sure many people under the age of 40 never heard of him. However Art Linkletter was one of the pioneers of TV entertainment who appealed to kids, their parents and grandparents, it is the type of entertainment that would not be broadcasted today, but back then it was very amusing, I invite you to take a look, http://youtu.be/EBMOhM31EyM.

And finally, be sure and remember the birthdays of those dear to you.

- Philip

 
Back in the “old days”,  if you were an accounting student, the month of  May meant one thing only: the first time of the year that one could sit and take the CPA exam. Today there are multiple opportunities to take parts of the exam, but back then you only had two choices, May and November. In fact most students did not pass the entire exam the first time they sat for it, and usually exited the last day saying “I’ll be back in November”. Many years later my oldest daughter aka Zippora Zadok, Office Manager, Philip Stein & Assocates Ltd., had a favorite song that was called “Gone Till November”, I invite you to listen to that wonderful song  http://www.pstein.com/blog-and-networking/videos/tax-tips/. I in fact did have to come back in November to retake the auditing section of the exam; I may be the only person who related the song to the CPA exam. 
 
In any case today as we are experiencing the height of spring in the last half of May I invite you to take the time to organize your materials for your tax returns and FBAR filings while you still have time before the mad dash to the June 15th (tax return) and June 30th (FBAR) deadlines. Here is my short “top ten” checklist:
 
1. Collect your Form 106′s from your employers.
2. Make sure you have all of your 1099′s from banks and brokerages (today these can generally be downloaded on the Internet).
3. Call or stop into your Israeli banks/brokerage and ask for Form 867.
4. Review your Israeli bank statements and highlight the highest balance during 2009.
5. If you are a partner in a partnership or LLC, check with them if you have received all of your K-1′s.
6. If you are self-employed or have an Israeli corporation; ask your Israeli CPA for your end of the year financial statements.
7. Summarize your itemized deductions; charity, mortgage interest, real estate taxes, and other miscellaneous expenses.
8. If you have had a child born in 2009, please tell us about that, and make sure you have a social security number for your newest family member.
9. If you traveled and worked in the U.S. please give us the dates you were in the U.S.
10. Write or call your associate to ask about anything that I did not mention in 1 through 9.
 
If you take care of these things in the coming days, there is no reason that you need to call our office in “November”.
 
Now for the story behind the title of this weeks blog. In the final days leading up to the CPA exam, my roommates and friends became extremely protective of me. They made sure I had a room to myself in our apartment, they cooked the food and did not allow anything to distract me from my studies. My best friend from the Akiba Nursery School in Chicago, Bernie Dyme (please visit his company’s website) who was one of my college roommates generously offered me the keys to his car to drive myself to the exam. The exam was not on campus (University of Illinois in Champaign-Urbana) and getting there would have required taking a few buses; so his offer was not only thoughtful but a real time saver. Bernie had a snazzy new red Ford Maverick with a stick shift that would allow me to arrive at the CPA exam in style . The morning of the exam my roommates left for their respective classes and Bernie left the keys to the car on the kitchen table. All I had to do was get up on time, make sure I ate and drank something (no food or drink allowed in in the exam in those days) and have a bunch of sharpened pencils. With an hour to go before the exam I set out to the start the car and discovered that there was no gas!!! What was I  to do? No cell phones in those days to call a friend, no student would call a cab in those days and there was not a enough time to take the bus! There was only one thing left to do and that was get some gasoline from the gas station, however I did not have a gas can to bring the gas back to the car; what to do? I eyed a Mason Jar on the kitchen counter, that had held my late grandmother’s Pesach gefilte fish. I had just enough time to fill up the jar (about a liter) which would cost me about 10 cents and then pour it into the gas tank and make it to the exam.
 
Well the Mason Jar did the trick, the Maverick started up perfectly and I ultimately passed most of the exam back in the merry month of May, 1975.
 
Hope to hear from you all soon.
 
Philip

I have always been fascinated by numbers, particularly years, distances, quantities and of course the entire spectrum of financial references. Nonetheless,  I am surprised, amused and sometimes even moved by numbers. During any normal week I may review numbers on tax returns, IRS notices, brokerage statements, etc. However the last week I came across the following numbers that I want to share with you: 208,800, 158,000, 35 and 219. Before I reveal what these numbers mean I want to jump to some other numbers that I saw last week.
Almost every US citizen knows what 1040 stands for the number for the individual tax return; anyone who owns a corporation would know that 1120 is the corporate tax return. However I would estimate that probably 95% of US tax accountants and 99.9% of US citizens have never heard of Forms 926, 5471, 5472, 8865, 8621, 8858, 3520, and 90-22.1. Yet the IRS has come out with new rules that not only assess severe penalties for non-filing of these forms but suspends the statute of limitation of your tax return if most of these forms are not attached. In other words the IRS could show up at your door-step 10 years from now, long after you filed your tax return, to assess these penalties. Fortunately for you, we have great expertise in filling out these forms which, if filed in a timely fashion, will eliminate any penalties and start  the statute of limitations running on your returns. In order for us to help you, please let us know if you or any entity that you control owns any of the following:
1. Foreign corporation
2. Foreign partnership
3. Foreign bank or brokerage account
In addition please let us know if you:
1. Invested in a foreign corporation during the year
2. Established a foreign trust
3. Are the beneficiary of a foreign trust.
If anything listed above “rings a bell”, then please share with me or one of my associates which one of these items applies to you . Once we clarify what you have,  we can fill out the relevant form. In these times, the IRS being very aggressive regarding US citizens with assets abroad, I can not stress enough the importance of being aware of the forms that I mentioned above.
And now to the numbers I mentioned at the beginning of the blog.
1. $208,800 – That is the cost of a 4-year bachelor’s degree at Dartmouth College, a well known Ivy League school. I recently heard an interview with the current president, Jim Yong Kim. I was truly charmed by the way he extolled the  benefits of a great liberal arts education as well as living and learning away from the big city in Hanover, New Hampshire. He said that Dartmouth graduates earn more money in any field they eventually choose to pursue, including jobs on Wall Street! I found this particularlly interesting since the trend nowadays is to pick a very technical field and downplay a liberal arts education. I think if someone has the money, it sounds like a great investment.
2. 158,000 programmers – That is the number of people and/or companies that are writing “apps” for the iPhone, iTouch, and iPad from Apple. If you don’t have one of the devices, you don’t know what you are missing. I personally have 56 “apps” on my Itouch.  My “apps” are to name a few, a siddur (prayer book), a radio (can list to any Internet radio station), watch any baseball game, read the NY Times, convert measurements, check my altitude, play scrabble, etc. What is so fascinating is that Apple opened their device to anybody with an idea. Some “apps” are free, some are 99 cents, and some a few bucks. In any case anybody with a clever idea can sell his “app” at the Itunes Store to over 30 million iPhone/iTouch/iPad owners!!! Pretty cool! I guess this may be the easiest time in history to become a millionaire.
3. 35 years – This week was the 35th anniversary of the fall of Saigon. For those of us old enough who remember the sight of those helicopters carrying people off the roof of the US Embassy, it was a sad last chapter of a conflict where so many lives were lost. While I haven’t thought much about the Vietnam War lately, this anniversary did introduce me to a story about a woman named Betty Tisdale who served in Vietnam and is the key to my last number.
4. 219 orphans – Betty Tisdale saved that number of children from Saigon by her own determination in those final days of the Vietnam War. The Talmud (Masechet Sanhedrin) says “Saving one life is as if you saved the entire world”. I had trouble understanding that statement when I was young; too bad I did not see the following video clip from ABC News with Diane Sawyer that appeared last week. I invite you to watch this, it is quite moving, http://www.youtube.com/watch?v=ODQSRV-zPq8.
Finally, I wish to remind you that it is Mother’s Day this Sunday. Thought I would share with you one of my favorite songs about mothers http://www.youtube.com/watch?v=TcNL7W0vsF4.  Betty Tisdale was a mother to 219 children, in addition to those she adopted herself.
Happy Mother’s Day Mom….
Philip

I have read many articles recently and heard from a lot of clients regarding President Obama and taxes. I want to share with you some thoughts about this.

Let me start by telling you about one of my favorite places in the world – Ellis Island in NYC. If you have never had a chance to visit, I highly recommend it, even if you did not have an ancestor who passed through there. I have been there several times including last summer with my wife and several children. In fact, this time I was able to spend some time at one of the computer terminals and actually found the ship manifest of the voyage of my grandfather and great grandparents! In any case what is the connection between Ellis Island and taxes?

I am imagining a new immigrant to America in 2010, be it from India or China or even Israel. Let’s say the immigrant is single, hardworking and self-employed and he starts his life in New York City. He works 15 hour days and succeeds in earning a $100,000 profit. How much tax do you think he will pay in the land of opportunity? A whopping $42,595 or an effective tax of 42.5%!!  Out of what’s left let’s assume he spends another $3,000 on sales taxes; that gets him pretty close to paying almost 50% of his earnings in taxes. This does not seem to be a positive trend.

And let’s assume he really succeeds and manages to hit the top tax brackets in 2013, he will have the privilege of paying over 57% of his income in taxes, and that’s before sales tax. Are these the level of taxes that are going to continue to attract talent to the U.S.? Taxes are a definite determinant as to where capital and entrepreneurs end up, and it looks to me that the U.S. may be as my mother used to say “asleep at the switch”.

And yet it seems Uncle Sam has no other alternative but to get Americans used to paying higher taxes. The experts say there is no other alternative to close the deficit and pay for all of the entitlement programs ie; Social Security, Medicare and Medicaid.

It’s funny that last year everyone said Congress would never let the Estate Tax expire and yet our dysfunctional Congress did just that, and who knows if they will be able to reinstate the 2009 estate tax exemption next year?  I am concerned this precedent may lead to dividends being taxed at one’s top marginal rate next year. The proposal to tax dividends at 20% is only a proposal and Congress and the President need to get their act together to keep dividend income at 20%; let’s hope they see the light.

On a lighter note, I have come across a great Internet radio station called Boomer Radio (boomerradio.com); even if you are not a “Baby Boomer” you should find a genre of music you like; Itunes even has an “App” for the Iphone.

Also I was quite upset to see the Ministry of Communication’s reaction to the importation of Ipads. It reminded me of the “old days” when they would not let you bring a fax machine in from the states unless it was on an approved list, and I remember certain cordless phones were also blacklisted. I recall that smuggling these items through the “green line” became a national pastime. Thank goodness that the Israeli government modified their original order and is now allowing individuals to bring them in.  I would love to hear from any of you who are already a Kindle user on whether you are considering switching to an Ipad. I have seen one client stopping printing any documents and does all of his pleasure and business reading on his Kindle; certainly good for the environment.

Wishing you and the State of Israel a Happy 62^nd birthday.

Philip

Launching my blog is something I have wanted to do for some time and I am excited that it coincides with the launch of our new website.  I hope my blog gives you my insights as to what is going on in the world of taxes as well as other updates about me and my firm.

One of the hottest topics at the moment is the IRS’s frontal attack on those taxpayers who have claimed the child tax credit. These credits have been around almost a decade now. Apparently the IRS suspected that fraud was taking place with regard to the declaration of false amount of income. Last summer it was rumored that the IRS sent a task force to Israel in order to compare income that was reported on U.S. tax returns with income tax records that were reflected in Israel. Based on the results of those investigations, the IRS has taken a very tough approach on returns that have been selected for audit. In order to get a taxpayer’s attention, the IRS sends out a notice denying all exemptions, child credits and foreign tax credits. These changes cause a significant increase in tax, and then penalties and interest are tacked on. Our sources tell us that there are over 5,000 cases under investigation. Stay tuned.

We continue monitoring closely all changes in the FBAR issue and urge everyone to report on time this year, and that means June 30th. The IRS’s voluntary disclosure program has proved to be a big success in bringing a lot of offshore money back into the tax system. The IRS still allows people to make a voluntary disclosure, but they have not disclosed  if they will abate anything other than criminal charges. I have been told by several attorneys working in this area that Israeli banks are definitely on the IRS’s agenda in the coming year.

Finally, I want to share with you that I spent 9 wonderful days in Panama a couple of  months ago visiting a friend. Panama has a fascinating history and I highly recommend the book “Pathway to the Seas” about the building of the Panama Canal. Panama does not get the publicity that Costa Rica gets, but it is a next door neighbor and has a very strong Jewish Community (10 kosher restaurants and 2 kosher supermarkets in Panama City!!).

Looking forward to hearing from you.

Philip