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Financial District

August 2022 Newsletter




In life, we explore our expectations and gifts to hopefully find one that is satisfying enough to become a career and to be happy doing the work we love.


A new client was from the Midwest and was always around horses. It is a pleasure for farm boys to work or play around horses because one becomes attached to the magnificent creatures the same as your dog following you around the house or watching you through the screen door at home. As a young man, he encountered a horse that was unhappy and mean. There seemed to be no way to please the animal who was perfectly healthy. One day he was feeding the horse when he noticed that something was different about the way he chewed. The animal had problems chewing that other horses did not have. The boy studied the horse and a few days later realized that the horse had a toothache. A profoundly serious medical problem that was beginning to impair his feeding and weight. He got help from his family and a horse veterinarian to investigate. They put the horse to sleep [not down, like elderly cats and dogs] and found he had lived with the problem for a long time with many of his teeth infected. The horse vet commented that it may have been a genetic weakness, but then that many people never check their horse mouths for infections unless there is a fever. As the vet treated the horse the boy assisted her and found something he loved to do. He befriended the vet and arranged to meet with her on some of her calls, to assist her, especially when teeth were the subject. He learned that vets did not particularly like working on these diseases because they were usually very severe before their owners made the call. Afterward, the child never went to college to become a vet but over the years became a horse dentist specialist in horse mouth diseases and treatment. He loved the work and helping the animals. This became his lifetime career, collaborating with vets and horse mouth dental work. Now, after retirement, he still receives calls from vets and is still visiting them and troubled horses all over the Western States because he loves his work and his horses.


 Another new client had a great voice and loved square dancing. Many years ago, the social event of every town [and in Canada where my parents were born] was the local square dance. It was usually the ONLY social event in town and a wonderful place for boys to meet girls. He took an interest in helping call the text when the caller needed a break. He was quick to learn the lines and the breaks which led to him professionally calling the dances. He became popular because he was good and has the magnificent voice which needs to level over the small band behind him, and the boots on the floor in front of him. Besides, he loved the cowboy dress of jeans, big hat, boots, and fancy shirt with mother of pearl buttons on the pockets and front. It became his life and lasted many years. Now, newly retired, he still travels all over the country to continue with his career. Living proof that if you love your work, it will reward you and carry you through with your life.



Several years ago, we had a nasty review from a new client who had a tax problem. His Offer in Compromise to settle his IRS debt was not accepted and the IRS agent would not give us the reason or explanation so we could correct or adjust the application. The agent closed the case over the phone and demanded we file an appeal instead. Other times OICs would work if the agent were sincere about the situation to advise about the objection so we could solve it in a day or two. This guy hung up on us. The client wanted to do the appeal himself and promptly lost it. Then he filed the nasty review on our Yelp reference source. We had always had a five-star Google & Yelp review average until them.


Accordingly, we ask new customers to give us a positive review if they care, and this summer we are now back to five stars again. Thanks to the clients who cared enough to do this. We work extremely hard to please all our clients but out of the ten-hour days, there was never enough time to thank you individually. Most of our new clients are from these two sources and it has resulted in many new clients this year. Thanks again.



There is great political pressure for the nation to achieve net-zero greenhouse gas emissions by 2050. That is the equivalent of the statement made by President Biden that we had net-zero inflation last month because the price of gas declined slightly. It is simply unachievable but ungodly costly to attempt to achieve. It would be like the 2035 deadline for all new autos to be only electric vehicles. The entire world is chasing Moby Dick to go down in the sea with him. At this time most of the nations which shut down coal-burning electric generating plants AND shut down their nuclear plants, are looking for more coal to get through the coming winter. Like Captain Ahab, we all go down together.



The bright spots in new lithium availability are a new mine in Nevada, and the mining of lithium in the Salton Sea [which is still in California]. Australia has also expanded its mining; it is reported that a new lithium mine takes up to nine years from start to production. China has a chokehold on refining the stuff because we give all our dirty work away so we can work for them later and we pay dearly to get refined metal back. The biggest source of lithium in the World is the vast Atacama Desert in the high Andes of South America. Currently however, the countries there are nationalizing the mining because they smell money from the shortage coming up. Problem is nationalism in most countries is a death threat to productivity. The WSJ had a wonderful article recently which stated lithium prices are up 750% since the start of last year. An all-electric transportation mode would create an interesting conundrum of demand outlasting or shutting down car and truck sales and production. The Journal stated that Latin America specializes in killing golden geese.


Bolivia is the latest example of Nationalism which created a state lithium company and spent $900 million beginning in 2008 to extract lithium from a salt flat resource. Production at this time after 14 years of activity is virtually nonexistent as last year, they produced only 540 tons of ore. Their recovery rate is 9% from the brine while China extracts 50% from their efficient operations. State-run firms have a history of corruption and nepotism.


A new private mine in Chile was set to open when a wave of protesters got in the way and drove the management away permanently. The mine never opened. Most of the productive mines in South American are under huge pressure to void agreements and turn more or most of the profits over to the governments. Venezuela is a notable example about how to drive oil companies away from prime productive developed oil properties.



It will be hard to hide the annual 2,000,000-person immigrant invasion, mostly let over the border to drift anywhere they desire. Texas and Arizona have decided to unload some of their unwanted visitors by bussing then to New York City and Washington DC.  This takes them off local Social Services welfare and distributes the load where it belongs. As the concept gains traction, a bussing shortage will surely develop.



Every new tax law, like Obamacare, consists of thousands of pages and summaries. The information on the new Inflation Reduction Act of 2022 is no exception. We get information from a hundred sources on what it is, how it works, and what to expect from the authors. I will not cover all the details yet in this letter because I have not seen enough of it to have all the answers. I will cover points relating to it, however. The Devil will be in the details.


The Washington Examiner posted that, “On Capitol Hill, the belief in the medieval art of alchemy remains strong.”  Since the new tax credits on electric vehicles will favor current EV buyers, who earn over $100,000 annually, the credits along with the increased recent prices averaging $10,000 is really an income transfer scheme from workers at major manufacturers to the EV manufacturers and more affluent white males. The practice of alchemy is alive and well in Washington.


An example of the bloated trillions of dollars uncollected by the IRS, and the philosophy behind the Government is found by a change in the statements issued on Collection letters. Where they once imposed 20% penalties on “missing data and Negligence” in corrected tax returns, the front page of the letters now state “Civil Penalties” as if it is now a crime, such as a traffic ticket or fine. This takes it out of the realm of collecting taxes owed and puts it as a Civil [government & civilians] crime deserving to be punished. The penalties are automatic. Penalties and taxes on the first collection letter arrive from unfiled tax returns where they recalculate collected data, and from tax returns which have failed computer matching information standards and are recalculated.


A client this year did his own taxes a year ago and failed to report the sale of his residence properly. He recently received an IRS correspondence letter advising him that he owed $250,000. We corrected the problem and was able to send documentation directly with the letter to the address shown. We also amended his California returns to correct what would have been reported to them by the IRS. He will owe nothing on the sale of his residence, but that number is typical of what the client owes the IRS and the Trillion-dollar figure until it is washed out.


The IRS is currently hiring 87,000 auditors to audit mostly everybody in the country. A key requirement for Criminal Investigation Special Agents is for applicants to be legally allowed to carry a firearm, and major duties include carry a firearm and be willing to use deadly force, if necessary and be willing and able to participate in arrests, execution of search warrants, and other dangerous assignments, according to the job posting Reported by American Liberty News.


There is a great controversy over the number of people to be audited. The IRS and President Biden have publicly construed their statements that the same rate of people will be audited. With an emphasis that only rich people making more money will be the victims. Now, everybody thinks that only rich people will be audited. Yet the RATE of people being audited by Congress’s Joint Committee of Taxation estimates the 78% to 90% of the money the IRS would raise from unreported income would come from taxpayers making less than $200,000 per year and only 4% to 9% would come from those earning more than $500,000 annually. THE AUDITS WILL TARGET SMALL BUSINESS ENTITIES. That is most of my clients. They estimate that most people will accept audit results and settle with the IRS rather than fight and endure the unendurable.


Included in the bill is $15 million to study an Elizabeth Warren idea on the feasibility of the IRS running its own free direct e-file tax return system. Senator Warren wants to create what would be a federal H&R Block that assesses tax liability for taxpayers who would have to appeal if they disagree, and who knows how long or how much money that would take. They are currently only 12,000,000 unprocessed returns behind. Thanks, WSJ.




The Treasury Inspector General for Tax Administration [TIGTA] officially reported their recent findings:

  • $19 billion or 28% of earned income tax credits claims were improper in fiscal 2021.

  • $15.6 billion or 67,000 claims for low-income housing tax credit from 2015-2019 lacked or did not match supporting documentation due to reporting errors or non-compliance.

  • $1.9 billion of the opportunity educational credits were improper in 2021.

  • $541 million of Obama Care credits were improper in 2019.

  • $5.2 billion or 13% of enhanced child tax credits were improper in 2021.

  • $574 million was spent implementing the Foreign Account Tax Compliance Act, which resulted in drumming up only $14 million of compliance revenue.

  • The Small Business Division strategy beginning in 2010 to 2021 targeting exams on high-income individuals, resulted in 73% of the audited returns below $200,000 income [middle class].

  • And it is noted that the IRS only picks up 10% of their incoming phone calls.

Best wishes to all. Hope to see our extension clients in the next month.

Phil Chute, EA

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