Real Estate, The Economy, and News

Tuesday, May 19, 2015

IRS to Undergo Changes Regarding "Structuring"

2/13/15 - The Internal Revenue Service (IRS) is responsible for making sure people pay their taxes. As such, the IRS has many procedures they follow to uphold federal laws. Unfortunately, some of these procedures are flawed in that they can lead to unfair treatment of law-abiding taxpayers. In a recent Los Angeles Times article, the process by which the IRS deals with a practice called “structuring” is addressed.

Under federal law, all bank transactions over $10,000 have to be reported to the IRS. This law is meant to help federal officials catch drug dealers and money launderers. However, it is possible to avoid reporting all transactions to the IRS through “structuring,” by which large deposits are split up in such a way that less than $10,000 is deposited at any given time. The reason structuring is illegal is the assumption that the only people who would need to hide their income from the IRS are those earning money through illegal avenues. It is this practice on which the IRS has been cracking down in past years.

If a trend in your financial history shows many such deposits, which seemingly correspond to a structuring scheme, the IRS has the authority to seize your accounts, with no charges filed, for years on end in some situations. It hardly seems fair.

According to IRS Commissioner, John Koskinen, 60% of the 200 or so cases per year are not pursued by the owners of the seized accounts. This leads many to conclude that those individuals were in fact involved in illegal money practices, which could show that the practice is successful in some respects. But, what about the other 40%?

The problem with the current system is that the IRS doesn't need any proof. They don't have to know that the account holder is doing anything illegal. They just have to see that many deposits of less than $10,000 have been made in any given account. In many cases, there is very little for the law-abiding account-holder to do in response, to try to get their money back.

Some deposit smaller amounts into their accounts so as to not carry around large amounts of money between their place of business and the bank. Others simply make deposits at given times, and happen to deposit less than $10,000 at any given time. No matter what the reason, under current IRS practice, accounts can be seized under mere suspicions of possible wrongdoing. Some victims of the system eventually get their money back, but not after plenty of wasted time, stress, and legal fees.

Although the current way in which structuring is addressed has its major flaws, Koskinen assures the public that changes will be made. Congress and the IRS are working together to make sure that taxpayers are treated fairly, and to make sure that accounts will no longer be seized as long as the money in those accounts was earned legally. Although the changes may take some time to fully come to bear, it appears that when these changes are complete, the IRS will have lost some of its ability to seize money without reasonable cause.

***************************************************************************************************

Find out more about us at www.sepulvedaescrow.net. Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on Facebook, Twitter, LinkedIn, and Google+.

***************************************************************************************************

Hackers Gain Access To Anthem Database

2/6/15 - Over the past year, several major retailers, including Target, Home Depot, and Michael's have been victim to the cyber-attacks of hackers. The most recent target on a lengthy list of such data breaches was Anthem Blue Cross, a major health insurance provider. Chad Terhune discusses the consequences of this hack in his article in the Los Angeles Times.

While Anthem states that hackers did not gain access to credit card information and health records, they were able to access much more. From name to date of birth to Social Security number, it appears that these hackers now know most of the personal information belonging to up to 80 million individuals who have health insurance through Blue Cross.

The sheer amount of personal information gathered by the hackers is enough to be quite certain that identity theft is a likely outcome. The personal information could be used by the hackers or others to open new lines of credit, or possibly even to access and empty existing accounts. Anthem warns any who have had coverage in the past and any who are currently covered by Blue Cross to keep a watchful eye on their financial accounts, in case identity theft is the main goal of these hackers.

One of the more upsetting parts of this situation for many is the fact that the stolen information wasn't even encrypted. It's bad enough that the databases got broken into, but a lack of encryption on the stored information means that cyber-criminals have easy access to the data within those databases. In fact, Anthem was even forced to pay a fine of $1.7 million in connection to allegations by the federal government that a weakness in their security left clients' personal information open to attack. Why hasn't Anthem learned its lesson?

Anthem, along with many other companies, need to develop better safeguards and protection mechanisms to make sure that only authorized parties are able to access personal information. For a company as large as Anthem to have left data unprotected multiple times in less than two years is just irresponsible. Sure, there are hackers that can make their way past any defenses, but better protections will at least slow them down, maybe even enough to stop some of them altogether.

This is a crucial time for Anthem, due to the thousands of people trying to enroll in coverage under the Affordable Care Act. They will have to be very careful dealing with this issue, in order to convince their clients not to look elsewhere for a health insurance provider. While Anthem has dealt with the attack through the proper channels, by contacting the FBI immediately, most people would still be more comfortable trusting the large company with their information if Anthem underwent a massive overhaul of their security systems. Such a project could prevent future breaches and make all involved parties much happier.

***************************************************************************************************

Plunging Gas Prices May Not Last Long

1/30/15 - Drivers throughout the state and the country have noticed the recent decline in gasoline prices and are hoping that this trend continues for as long as possible. While gasoline was over $3 in most areas a year ago, the cost of gasoline is now at $2 or even less, a nice change for everyone filling up at the pump. Unfortunately, says Don Lee, in his article in the Los Angeles Times, these low prices are unlikely to last long. In fact, he predicts that they will begin to climb within the next few months.

Lee first addresses the main question: why did the oil prices fall in the first place? One of the main answers involves development and usage of new technologies. A somewhat new process called hydraulic fracturing, also known as “fracking,” has become increasingly prevalent in the industry for use in forcing extra oil out of otherwise dry wells. Furthermore, the development of shale oil techniques, which allow for the conversion of organic matter within rocks into synthetic fuels, helps to increase supply.

Following the laws of supply and demand, the increased supply will likely lead to increased demand. This increased demand can give producers of gasoline a reason to increase their prices, which is why Lee expects the price of crude oil to be back on the rise before the year is half-over. Lee does admit, however, that it is possible for prices to stay low, if oil production continues to increase. Otherwise, waning supplies would force prices higher, just as they have done in previous years.

Reduced gasoline prices could have dramatic effects on economies around the world. Countries that produce and export oil, like Iran, Russia, Venezuela, and Nigeria, are likely to suffer because reduced prices mean less income. On the other hand, countries that don't rely on the export of crude oil, like the United States, Japan, South Korea, and China, are predicted to benefit because they pay less for the crude oil they import. Also, their citizens will pay less for gasoline, and will have more money to contribute to the economy in other ways.

Some states in the U.S. Will benefit more than others. Similarly to the situation in the global setting, oil-producing states like North Dakota and Texas will be harmed by low prices, while other states, and the companies within those states, will be unhurt. In fact, the low prices could even lead to an boost in job growth. Even with increases in employment, lowered gas prices could be disastrous in the long run. A lowered price of gas could lower prices for all commodities, which could force the Federal Reserve to increase interest rates. Inflation is a huge risk when dealing with drastic price decreases.

Lee concludes that the huge quantities of oil being produced in Saudi Arabia, which is another factor in the price decrease, may be an attempt by the Organization of Petroleum Exporting Countries (OPEC) to force the United States out of the picture. If Saudi oil prices stay low enough for long enough, it could become economically illogical for the United States to continue producing via shale and fracking. Whatever the true reason for the decline in prices, people are enjoying it for however long it may last.

***************************************************************************************************

Each Year, Thousands Mistakenly Declared Dead

1/23/15 - How would you feel if the Social Security Administration and the world's top credit reporting companies proclaim you dead? Well, about 1,000 people per month are mistakenly declared dead by such organizations, leading to a great amount of stress and wasted time in order to reverse such decisions. In his L.A. Times article, David Lazarus describes the tale of George Sledge, a 58-year-old man who has been forced to file a lawsuit in an attempt to force the credit reporting companies to bring him back to life.

While many of the mistakenly listed individuals on Social Security Administration's “Death Master File” are there due to typographical mistakes and other such human errors, a sizable number could be avoided by simple fact-checking on the part of the credit reporting companies. Besides the amount of time you might spend convincing and arguing that you're is still alive, there are much worse consequences.

One such consequence is in regards to your credit score. When anyone is marked as dead, their credit score is automatically set to zero. While this helps to prevent identity theft, it also makes it impossible for a someone like Sledge to get a loan or sign up for a credit card, or even, in some cases, get a job. Furthermore, credit reporting companies have databases full of information that they sell or share with other companies. When someone has been declared dead in one database, it is almost as if they have been simultaneously declared dead in all other databases.

So, even if a person like Sledge were able to get a single company to take him off of the “Death Master File,” all of the other companies would still have him marked as dead. To go through the same rigorous process with every possible company would be straining, if not completely impossible. So, what could an individual in Sledge's position do?

Lazarus suggests that everyone should keep a close eye on their credit information. There are ways to report incorrect information, and if such information is found, you should take care of it sooner rather than later. Most of all, though, Lazarus states that these errors would happen much less often if companies would do their due diligence. A simple phone call might be enough to prevent a living person from being mistakenly marked as deceased, and that could make all the difference.

***************************************************************************************************

Where Have All the Workers Gone?

1/16/15 - Unemployment rates have been found to be decreasing throughout the country. The labor force participation rate, on the other hand, which shows the number of people working or not working, rather than just those classified as “unemployed,” has also been shown to be on a downward slope. So, what causes the seeming paradox between these two measurements. According to Michael Hiltzik, in his Los Angeles Times article, this discrepancy is due to a significant number of “missing” workers: those workers who are not working, and at the same time are not considered “unemployed.” Where have these so-called “missing workers” really gone?

How is it possible for both participation rates and unemployment rates to go down? Some economists believe that this phenomenon is due to a lack of effectiveness in current governmental policies meant to create and fill necessary jobs. Such economists theorize that the extreme difficulty many people are having in finding work has led them to stop searching altogether, to drop out of the labor force completely. Hiltzik, on the other hand, disagrees with this conclusion, preferring an alternative explanation.

Hiltzik presents sources in the article that seem to show that up to three-quarters of the perceived decline in participation rate is actually due to such factors as the retirement of baby boomers and the enrollment of workers in universities and other institutions of higher learning, both of which have little to do with the state of the economy. Over the past few decades, participation rates have been steadily declining, for both men and women. Statistics show that as the economy improves, the participation rate should improve as well.

Whatever the reason for the current employment trends, it is evident that the economy needs to get better. Hiltzik concludes his article as such: while the participation rate is declining, there is still room for it to recover. Workers may be out of the labor force due to the Great Recession, or lowering wages, or a variety of other possible reasons, but as the economy improves, workers should return.

***************************************************************************************************

Holiday Shioppers Spending Confidently

1/2/15 - According to a retail analytics firm called ShopperTrak, the biggest shopping day of the year is the Saturday before Christmas. But, what is the second-biggest shopping day? Statistics show, at least for 2014, that the second-biggest shopping day of the year is not Black Friday, as some might expect, but rather the Friday following Christmas. As stated in an article by Tiffany Hsu, Andrew Khouri, and Ronald D. White, of the Los Angeles Times, a combination of post-Christmas sales, optimism regarding the slowly-recovering economy, and even the calendar's placement of Christmas on a Thursday, come together to make the day after Christmas the perfect time to shop.

Christmas falling on a Thursday can have quite an impact on retail sales. For many, this turns into a four-day weekend, which could give consumers a full three days to shop. Such a “blockbuster” weekend could end the year with a bang, ensuring the National Retail Federation's prediction that this season's revenue would pull in approximately $616.9 billion.

Even more effective than the holiday's placement on the calendar, though, is the slowly-returning faith of the general population in our local and national economies. With a lowering of gas prices and a slow increase in employment, people find that they have more money to spend on those items they want, not just what they need. Consumers are beginning to have more faith in the continuity of their employment; they feel a good degree of job security. With that sense of job security comes increased spending, as consumers are more willing to make purchases when they feel sure of a steady income.

Retail stores have done well in predicting the amount of inventory they need this year. Instead of purchasing too little inventory and running out, or purchasing too much and having to cut into their bottom lines, it appears that the retailers have done well with their inventory, thus maximizing revenue. Online retailers have improved their on-time deliveries, compared with previous years, thus giving consumers more confidence in ordering gifts through the internet.

The days following Christmas are great for gift card redemption. Knowing this, retailers provide extra discounts, hoping that such gift cards will be used to purchase excess inventory. Store prices are down after Christmas, and wallets tend to be fatter, both of which prod consumers to spend. People seem to be happier with the current direction of the economy, and that is helping the economy even more.

While current discounts will certainly bleed over to the next year, retailers are accepting it as a positive trade-off. The first quarter of the coming year may not bring in as much money as retailers would like, but sources show that the second and third quarters are quite likely to bring great improvement for the economy in the coming year.

***************************************************************************************************

Labor Force Participation Rates Declining

12/19/14 - To the average observer, it would appear that California’s economy is steadily recovering. Unemployment rates are down, and new jobs are being introduced at a constant pace. Yet, in Tiffany Hsu’s L.A. Times article, it is revealed that the labor force is much smaller than it may seem.

Unemployment rates are measured based on the number of people receiving unemployment benefits from the government, not necessarily based on the number of people actually without work. Once someone has given up and stopped looking for work altogether, they are no longer considered “unemployed,” since they no longer qualify for unemployment benefits. So, “unemployment rates” tend to be quite misleading.

According to Hsu’s sources, the more accurate measurement of the labor force’s stability is the “labor force participation rate” – the number of people working or actively looking for work in proportion to the number of working-age individuals in the population. This, compared to the “unemployment rate” is more accurate in that it takes into account individuals who have given up on finding employment. The currently falling labor force participation rate has dramatic implications on the state of the economy.

A drop in the participation rate could mean that the jobs available are not the jobs people need. For many with college degrees and experience in well-paying fields, a plethora of jobs in the fast food industry means very little. Even for those who are willing to “lower their standards” and accept jobs for which they are “overqualified,” like a barista or salesperson, such positions have so much competition that the odds of gaining employment are slight. In the end, many individuals simply prefer to stay unemployed rather than risk losing such government benefits as Supplemental Security Income or Social Security Disability Insurance.

No matter what the reason, a decrease in the participation rate can’t be a good thing. With more seniors continuing to work well into their sixties and seventies, and new graduates looking for work straight out of school, only so many positions are available to recently laid-off workers. If higher-paying positions are unavailable in California, job-seekers will look elsewhere for employment, and that can have consequences.

While a decline in unemployment rates may seem like a positive sign, Hsu shows why this positive impact is limited. Statistics are misleading, but the bottom line is this: we need to get people back into the labor force. The state has been creating new jobs, but mainly in lower-paying fields. Workers, especially those with college degrees, want to work in jobs “worthy” of their skills. Thus, to bring the workers back in, the creation of better jobs must be a priority.

***************************************************************************************************