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

Image by Kelly Sikkema

July 2022 Newsletter

THE CBE GROUP has your number if you owe the IRS back taxes. This newly installed collection agency is repeating exactly what failed 20 years ago. At that time, they brought in an outside collection agency to deal with all their delinquent tax clients. Instead of paying them a percentage of the take which is the standard practice, they paid salaries and benefits. The agency was empowered to only discuss payment options with clients. It was closed out when Congress found what the cost was versus the poor results. A client recently received correspondence from these people. When I spoke to them, with a power of attorney, they devised a payment schedule based on my negotiation. When it came time for documentation, signature, and bank account information they advised me they could only talk about it, and that I needed to go back to the IRS to finalize the deal. Oh, my God! We could not get through to the IRS, to begin with, and that was why we were wasting time with these people. They are doomed to failure because they could only talk about the taxes but not do anything to close the deal. History has a bad habit of repeating itself with unlearned lessons.

CALIFORNIA IN THE NEWS over privacy matters. Everybody, even our clients, are required to sign privacy statements that the service you are requesting will respect your privacy and not sell or give your personal information away. On June 27th somebody in the California Department of Justice released [leaked] data on thousands of gun owners from the new Firearms Dashboard Portal to the public. The files contained full names, home addresses, DOB, race, and dates permits were issued. There were 2,890 people listed in LA County alone, so if you need to find where to find your judge, police officers, or other people who carry concealed weapons, this is the place to go. Like the Supreme Court discussions on Roe v Wade, which was leaked before final decisions were announced, there is no privacy in this government or its environs. Article compiled by

CALPERS REPORTS 6% FINANCIAL LOSS FOR THE FYE June 30, as reported in the Wall Street Journal last month. The giant investment pension house lost $60 Billion last year. This truly signals the end of the eleven-year favorable market. Benefits have always outpaced gains in the portfolio while most public pension plans average only 75% of the investment funds they need to utilize for actual benefits. Good times do not last forever.

CALIFORNIA INCOME TAX INCREASE will be on the ballot this November. The bill, titled Clean Cars and Clean Air Act will increase taxes by 1.75%. The high earners making over two million annually will not appreciate that the money will go towards electric car subsidies for low-income buyers. They will need it because Tesla raised the price of the basic Model 3 price by about $10,000 this year. California will pass New York City with the highest tax rate in the Country. Another first for the holders of a 100-billion-dollar surplus this year. Thank the WSJ for this article.

ENVIRONMENTAL AND GREEN NEWS is in the papers every day. The axiom of using fear to get attention seems to dominate the news. Unparalleled costs drive inflation and inefficiency in many green ventures. This leads to greenflation where costs do not matter if a specific earth-shattering objection is reached. An example of this is the zero- emission goal in the name of a pure green world. Low-cost synthetic fertilizer is made from natural gas and has recently been listed as a dreadful thing to be ostracized and outlawed. Even the nitrogen oxide and ammonia expelled from livestock has hit the bad forbidden list. If you think the January 6th riot in Washington was bad, how about 40,000 Dutch farmers demonstrating about a mandated 70-80% government-mandated reduction from their dairy herds. Or the Sri Lanka ban on synthetic fertilizer in April last year. Huge crowds of hungry and outraged citizens overran the presidential palace last month which forced the government to resign en masse after the president fled the country. This WSJ article stated that net-zero emissions globally by 2050 would cost every American over ten thousand dollars each year to accomplish. How is that for a consumption tax? Especially knowing that only part of the world would join in to decimate their economies to accomplish these foolish goals.

THE INFLATION REDUCTION ACT OF 2022 is in the works, and it is a little misleading. Firsthand, the half-trillion bill authorized $80 billion to the IRS is six times the annual budget for the most despised agency in the Country. The Act will increase corporate taxes but mostly depends on a flood of audits [especially small corporate and LLC businesses] for increased funding. Be prepared. Their inflation reduction will come from audits and that means a lot of people will be audited and it will suck money out of the economy because these people with small businesses are the lifeblood of the economy. Some of it is overdue because when there are currently no audits--like today, the thing runs away, and people take chances they never would if they had to be responsible. Less than 10% of the new IRS funding is to clear away the backlog of 21 million unprocessed tax returns. Or to answer the 90% of IRS phone calls that are unanswered. The agency is famous for auditing political enemies of ruling political parties, stonewalling political party opposition entities, and releasing personal income tax information of private citizens. All of Billy Clinton’s girlfriends were audited.

On the plus side, there will be huge new credits for buying electric cars since the cost is now prohibitive. Using taxpayer money to subsidize the purchase of cars which will be mandatory for ordinary people does not make economic sense. There will be hell to pay for the convenience of an out-of-control political appetite for spending and dictatorship. All of this under the misnamed title Inflation Reduction.

LASTLY, OPEN CARRY GUNS ALLOWED IN CHICAGO by an article in the Washington Enquirer. Yes, it is true. Although guns are not allowed in Chicago, like New York, San Francisco, and Los Angeles, they are allowed in Chicago. If a person is carrying a pistol in his waistband, the police will not stop him. Not to arrest him, not to see if he is going to kill you or somebody, not for any reason. That is considered dangerous because he will be let go and be waiting for you in a dark and private place afterward. So, by default, the criminals in Chicago have open carry to maintain their crime spree. Ordinary citizens cannot obtain permits because guns are dangerous. But this is the same case as in the other large cities run by criminal politicians in office.

One-third of our client list is now composed of new clients this year. Thank you for your business. We are available 24/7 for our clients and are proud to be here for you.

Phillip B. Chute, EA

Financial District

May-June 2022 Newsletter

FIRST, THE GOOD NEWS:  Our Insurance Annuities have done two incredibly positive things this year. They halved the penalty term from ten years to five years and the interest rate is now guaranteed from 4% to 5%. One annuity begins at 6 ½% for the first year. Think of it as a Certificate of Deposit earning interest that was once paid 20 years ago instead of 1%, banks and savings-loans now pay on long-term jumbo deposits. Keep in mind that there are no taxes on the income until withdrawn. After the first year, 10% of the principal or all the earnings can be withdrawn annually without penalty. Invested principal is always guaranteed.

NOW THE BAD NEWS:  Bitcoin is down 60% this year. Elon Musk bought a big position of the market and drove prices up. Now. he has unloaded and lost ½ BILLION on the gamble. Gasoline is up 63%. Nasdaq Composite is in Bear territory down 30%. S&P has joined the bears at negative 20% this year and the DJIA following at only negative 15%. All energy prices are up at least 30%. It is worth noting here that the S& P fell 55% during the last recession of 2007-9. Much of the recent stock market increase was simply replacing the lost value.

The DJIA closed on 7-5-2022 at $30,967. One year ago, it was 36,953. That is -15% in the last year.

Residential Real Estate values have completed their wonderful climb and are now turning down. Mortgages currently are 5.7%, fifteen-year mortgages are 4.9%- and a five-year ARM [Adjustable Residential Mortgage] today is 4.31%. Commercial property values [related to building lease % and rates] have been very uncertain from Covid-19 with many vacancies, and now expiring leases, with many professionals finding working at home more accommodating. Meantime, residential properties have broken their stall at the apogee   of the roller coaster and are now coming down. Zillow is three months behind the curve, but eventually the trends become real.

A client approached me with a life insurance program that will buy life insurance policies from seniors who desire to cash them in. He has also offered leveraged insurance programs.

THE COMING RECESSION: Interest rates on commercial loans and mortgages have been unusually low by historic standards resulting in a real estate boom of values exaggerated by a shortage of housing. It does not compare with the easy mortgage money which caused the boom and bust of the early 2000 years. But there is a common thread holding both together –

the forced availability of either artificially low interest rates or the artificial subprime lending activity. BOTH were connected directly to government financial policies. This is a dangerous economic era, and the payoff is inflation and recession.

CALIFORNIA IN THE NEWS:  A new agency, the Future of Abortion Council is, on the way to create another First Haven for California as the Abortion Capital Sanctuary of the USA. $125 Million has been requisitioned to pay for additional abortionists, recruitment and retention at clinics, patient travel and lodging. The overturn of Roe V Wade is seen as a surge of opportunity for California to outreach for more liberal business from other states. Yahoo News, the source of this article also commented that our Governor Newsome might be using the abortion opportunity to help position himself for a White House run in 2024.

ELECTION NEWS FROM CALIFORNIA:  A tax refund check of $350 to $1,050 will be sent to millions of Californians shortly before the coming November Election. This is a refund of sorts of the $100 Billion budget surplus from overtaxed stimulus payments flooding the economy these past two years. The WSJ calls this Street Money paid to get out the vote as inflation relief. Gasoline costs $1.40 per gallon more than the US average.

SHORTER WORK WEEK IN CALIFORNIA:  The WSJ published an opinion about a bill moving through the California Legislature to shorten the normal workweek to 32 hours from 40. Workers who put in more than 32 hours would be paid overtime. Working less hours is believed to increase morale and efficiency. Can Tesla manufacture as many cars in the missing eight-hour day?

A NEW FEDERAL TAX INCREASE: As the war on oil progresses a new Interior Department move has dramatically increased costs, taxes, and prices for crude oil. Oil drillers were required to pay royalties of 12.5% on the value of oil found and produced on federal lands now a 50% increase to 18.75% for the tax. Meanwhile, the moratorium on new leases on federal lands by President Biden remains in place

The silent tax increase is inflation that pushes taxpayers into higher tax brackets. This may have been caused by increased panic spending by the Federal government. The Federal Reserve is now increasing interest rates to slow things down. Meanwhile, the Biden Administration is still pursuing a $2.5 TRILLION increase in taxes. This could be deadly to all.

Finally, our inflation rate as of June 30 was 9.1%, the highest rate in 40 years, dating back to December 1980.

NEW MILEAGE RATES FOR BUSINESS TRAVEL: The new deduction for business travel will be $.625 per mile. That is up from $.585 for the first half of this year thru 6-30. and the higher rate from July 1st. If you have business auto travel, we will ask you to give us mileage for each half of 2022.

INSURANCE ANNUITIES:  Conservative investors and clients not inclined to invest in the stock or bond market at this time should consider short-term five-year insurance annuities. I will be available to meet with any clients who are interested in learning about why these investments are safe, tax deferred, principal guaranteed, and paying particularly good interest rates. Currently, four to five times the rate available at your local institution.

CLIMATE CHANGE EFFECTS: Everybody with a home periodically checks under the eaves or gutters for wasp nests. These things have an ugly sting and do not like to be disturbed. I remember blasting the nests with the hose and carefully stomping on the creatures when they hit the ground. I have not seen a wasp nest in years...until this week.

We were cleaning out the gutter on the side of the house which had a tree that deposited leaves there for many years. During the process, my helpers exclaimed that there were wasp nests in the debris. With the help of a CO2 fire extinguisher, we froze them and finished the job. The wasps have migrated to the top of the gutters instead of being sheltered by them under the eaves of the roof. A sign of global warming as it never rains any more in the Summer and the nests are no longer endangered. Beware: check and keep your eves clean because the missing wasps may be closer than you believe.

WHY WE BOUGHT TESLA SOLAR UNITS:  Yes, we did. The economics were twisted because the price of the panels declined but the overhead to install them increased. They still penciled out economically, but we thought the new units with excess capacity and a battery backup unit would satisfy our future demand for electricity. A recent Reuters News article predicted California will have a capacity shortfall of 1,800 to 5.000 MW in three years. Therefore, an annual price increase of 4-9% soon is expected. Let us hope there is no Enron in the future.

WORLDCAT CATALOGUE SERVICE: My granddaughter Sarah did a library search early this year to see if my first book, American Independent Business published in 1985, was still in circulation. She found out that there are 68 universities in the States and globally. These are the following 68 Universities that still have a copy available. Maybe, you went to one of these schools.

1} University of San Diego, Copley Library

2} University of California, Los Angeles

3} Arizona State University Library

4} Stanford University, Graduate School of Business

5} San Francisco Museum of Modern Art

6} Brigham Young University, Harold B. Lee Library

7} University of Utah, J Willard Marriott Library

8} Southwest Kansas Library System

9} University of Texas Libraries

10} State Library of Kansas

11} The University of Texas Rio Grande Valley

12} Lamar University, Mary & John Gray Library

13} Saint Cloud State University

14} University of Louisiana at Lafayette, Edith Garland Dupre Library

15} University of Northern Iowa

16} Illinois State Library, Gwendolyn Brooks Building

17] University of Mississippi

18} Eastern Illinois University

19] University of Illinois at Urbana Champaign

20} University of Minnesota Duluth, Kathryn A Martin Library

21} Birmingham-Southern College Library, Charles Andrew Rush Learning Center / N. E., Miles Library

22} Carmichael Library, University of Montevallo

23} DePaul University Library

24} Middle Tennessee State University, James E. Walker Library

25} Northeastern University Illinois University, NEIU Libraries; Ronald Williams Library; El Centro Library & Learning                     Center; CCICS Library

26} University of Alabama

27} University of Louisville, Belknap Campus, Edstrom Library

28} University of Notre Dame, Hesburgh Library

29} University of West Florida, John C. Pace Library

30} Vanderbilt University Library, Jean, and Alexander Heard Library

31} Auburn University

32} Georgia Institute of Technology

33} HathiTrust Digital Library

34} University of Georgia, University of Georgia, Main Library

35} University of Michigan-Flint, Frances Wilson Thompson Library

36} University of Rio Grande, Jeanette Albiez Davis Library

37}  Salem Libraries

38} Western University, Western Libraries

39} North Carolina AT&T State University, F.D. Bluford Library, Fernand Douglass Bluford Library

40} North Carolina State University, NC State University Libraries

41} Redeemer University Library, Peter Turkstra Library

42} University of Central Florida

43} University of North Carolina at Chapel Hill, University libraries, UNC University Libraries

44} University of North Carolina at Greensboro, University Libraries

45} Cornell University Library

46} Florida International University, Green Library, Modesto A. Maidique Campus

47} Library of Congress

48} Patrick Henry College Library

49} University of Baltimore Library

50} University of North Carolina Wilmington, William Randall Library

51} Newark Public Library, Main Library.

52} Rutgers University Libraries

53} Universite d’Ottawa

54} Central Connecticut State University, Elihu Burritt Library; Burritt Library

55} Fordham University, Fordham University Libraries

56} New York Public Library System

57} Pace University-Pleasantville, Edward & Doris Mortola Library

58} Harvard University, Harvard Library

59} Merrimac Valley Library Consortium

60} Acadia University, Vaughan Memorial Library

61} Erasmus University Rotterdam Leeskabinet, ISS Library, EUC Library, Sanders Law Library, Medical Library

62} Kokushikan University Library

63} Bibliothek der Freien Universlitat Berlin

64} IE University Library

65} Universitatsbibliothek Passau

66} De La Salle-College of Saint Benilde, Br, Fiudelis Leddy Center for Learning Resources

67}Ben-Gurion University of the Negev

68} Library, Dalat University, Thu’vien Truong Dai hoc Da Lat


At this time, I am writing a new book, “Trust Me” which hopefully will be out before year-end. This book is about an international fraud using the clients of a local savings & loan.

I am inviting those who have questions about taxes and investments to call for an appointment to our office. I offer a complimentary one-hour consultation on portfolio analysis or financial planning.

Phillip B Chute, EA

Flexible Payment Planning

April 2022 Newsletter

PAYROLL PROBLEMS AT THE PBC TAX OFFICE: The California Employment Development Division [Unemployment Office] finally completed their nine-month mail-in audit of our heinous payroll and business activities. I am certain that they were distracted from their investigation of the $20 billion dollar unemployment fraud which was conducted from the California Prison System after the recent benefits increased. At any rate, we are still in business, and they billed us $220 for the 1099 payroll problem they found. I wish them luck with the giant fraud which seems well-disguised that they could not even find their individual who authorized funds to 1,900 unemployment applications from the same name and address in prison. Or the employee who approved them. But they found us like sitting ducks doing what we do best, tax preparation with 2 ½ employees.

 VISIT CHICAGO AND STAY THERE: Last month the WSJ had an article about carjackings in Chicago. The Cook County Sheriff's Office rented a booth at the International Chicago Auto Show. It is a carjacking booth staffed by Deputies to warn attendees of the deadly dangers presented by the current wave of violent crime on Chicago streets. The carjackings are accomplished by motorists being ordered out of their cars and beaten or shot if they resist. One solution presented by the deputy was to install tracking devices so the vehicle can be located afterward. The most important solution presented here was the installation of BLEEDING CONTROL KITS in 269 public buildings. Each kit has enough medical supplies to accommodate up to eight victims until police or EMTs arrived.

Just today, the Cook County District Attorney tried to release a man who hammered another to death and dragged the body down three flights of stairs to hide him in a bush. The man, who was on parole for another violent act, was caught at the scene with blood all over him, the victim’s wallet in his pocket, and confessed the murder at the scene. Yet, the District Attorney tried to get the charges dropped. Ever wonder why there is so much crime in some cities?

NEW TAX FORMS IN THE MAIL: The IRS form 1099K will soon be more available for audits. This form is a year-end recap of monthly sales from Venmo or PayPal or other credit-debit card transactions. Before 2022, it took $20,000 or more than 200 business transactions to ring the bell to receive this form. Under our present Democratic Administration, effective this year, the threshold will be only $600. Accordingly, there will be millions of these things going out to everybody at year-end. Stimulus payments were a filing nightmare, but this will be worse because every 1099 form is a proposal for more taxation. Last year the Biden Administration proposed to have banks report aggregate deposits and withdrawals over $600 on 1099 interest forms, but the Republican Congress squashed it. It looks like they missed another one.

STIMULUS PAYMENTS AGAIN:  This tax season there were many problems with the stimulus payments which were electronically sent to your bank account or by a mailed credit card. The Treasury also mailed letters describing the amounts sent. We asked our clients to show the amounts received on our form at interview time. There were many errors here from the event a year prior. We posted the reported amount to the tax return and the IRS compared it with their data and adjusted the tax return according to whether you had underreported or overreported the actual amount. To compound the situation the Govt. was adjusting the amount to the income qualifications from the current return being filed. This situation was out of our control and resulted in various computer letters and tax changes.

CALIFORNIA NEWS:  National Enquirer reports that our governor has announced legislation for $20.000.000 funding to bring expectant mothers from other states to California for an abortion. If this becomes effective, will make our state the abortion sanctuary of the country and result in an increase of California abortion clinics to over 29% nationally.

LATEST INTEREST RATES FROM TODAY’S WALL STREET JOURNAL: Prime Bank lending Rate 4.0%, Long Treasuries 2.91%, 30-year Mortgages 5.6%, New Autos 4.34%, Money Market .7%, Five-year CDs .9%. The IRS is now paying 4% on refunds which are delayed over 45 days. These are huge penalties for being slow and late processing tax returns. This past year, the Treasury paid over $3 billion of delinquent charges.

In a time of official 8.5% inflation and a declining stock and bond market, it is obvious that the Good Old Days [GOD] of high-interest rates are far from recovered. The years of spiraling double-digit earnings reached the apogee last year-end. This first quarter S&P equities are off -4.6%, along with Bloomberg bonds also down -5.93%. Government and private pension funds are also under pressure to reverse their losses currently. We have certainly recovered from the crash of 2008-9 with new highs and then some.

REAL ESTATE VALUES:  After a booming sales market with prices skyrocketing all over the country, things have leveled off. My real estate appraiser client advised me that four months ago, after the interest rates rose, prices had begun to slow down. I like to look at Zillow for their Zestimate, which is three months behind the curve, and was aware of the slowdown. This month I noticed that the prices have started moving from inching up to slightly down. There is a huge problem of affordability between the soaring prices and higher interest rates. This was my observation. My prediction is that prices will stay high, but level off throughout most of the year and will fall off sharply with the coming recession.

LATEST COMMODITY PRICES: Crude oil barrel $103- with futures well above $100-, Silver troy ounce $22.50, Gold troy ounce $1,857-, Platinum troy ounce $949.80.

LATEST BATTERY EV METALS [COMPOUNDS tons]:  BMI Lithium Carbonate $72,175-, Lithium Hydroxide ton $72,775, BMI Cobalt Sulphate $17,100-, BMI Nickel Sulphate $6,916-, BMI Flake Graphite $730-. All from China. Note that an electric auto has 400 pounds more aluminum and 150 more pounds of copper than a conventional auto. And that does not include the cobalt, lithium, and stainless steel. Lithium prices are up 1,000%, copper and aluminum 200%, nickel 300%, over the past two years, and the age of electric cars and more new [mandated] all-electric houses have barely begun.

PERSONAL EVENTS:  We were subjected to a new experience with our Rock & Roll Murder book being counterfeited. The fraudsters copied the whole book and gave it a new name, author, and cover. It is now in the hands of the Library of Congress, Amazon, and the FBI. At least somebody likes it.

WHERE TO PARK YOUR FUNDS and INVESTMENTS FOR SAFE & GOOD EARNINGS:  Preservation of capital and guaranteed earnings to offset inflation are now important. We offer insurance annuities with shorter terms and guaranteed principal and high earnings. We have one insurer offering 3.95% for a five-year contract, another offering 4.3% for a six-year contract, and another 5.05% for a seven-year contract. These different insurers all offer 10% penalty-free withdrawals, no taxes until disbursed, full account paid on death. Compare that to bank CDs or money market savings at 1% or your broker accounts which all charge administrative fees of 1 ½% annually.

Sorry about the late letter this month. We added 100 new clients this year and were absolutely buried for a while. Now we are working our way through the extensions before our vacation later this month.

Please do not hesitate to contact us if there are any problems or appointments for annuities [which are currently in extremely high demand].

Best wishes to all my friends and clients.

Phil Chute, EA.

Financial District

January 2022 Newsletter

IRS News: The filing deadline is back to April 15, where it used to be.  There will be no change on filing dates unless officially announced. Because we have less time than before and have been receiving a tidal wave of new complex returns [we turn some down], please inform our office ahead of time if you would like us to file extensions for you. We prefer that you send us a note via email or regular mail of your request for extension attaching either your W-2 or pension form. We will be unable to file an extension if we do not have any of these forms or a check payable to IRS if you believe you owe taxes.


The IRS recently warned us of new scam e-mail attempts to steal Electronic Filing ID numbers [EFINs]. You must not respond to “Verifying your EFIN before e-filing.”  I recently briefly intercepted a 7am call from a scammer who claimed to be the IRS.  Always call us if there are any questions about a possible scam by phone or e-mail.


The third round of Economic Impact Stimulus Payments received last year must be reported.  You should receive IRS letterform 6475 to remind you of the amounts paid. Advanced Child Tax Credit payments should also be reported.  IRS letterform 6419 will show the amounts received.  Both amounts must be reported on the 1040 tax returns and the IRS will compare the actual amounts paid.


Lastly, If you retired before age 60 due to Covid related illness, your 10% retirement pension distribution penalty can be waived.

Out of State filers: Many clients have moved out of state these past years.  We do taxes for all 50 states and try to retain client relationships with all our distant neighbors.  Besides appointments, we have been completing taxes received by FedEx, E-mail, Priority Mail, and dropped off at the front door.  Every physical and electronic method works fine.  All states accept electronically filed returns so our services work for everybody everywhere.  Credit cards are now accepted so payment is not a problem.  We welcome your business and friendship anywhere in the world.

Federal Reserve Governorship:  This agency controls the money supply in the country.  According to recent WSJ reports, the current directorships are in play for new members and the Administration has forwarded applications for radical leadership.  The political attitude is for money distribution and control by banks to force them to finance more green energy in minority communities and steer capital from fossil fuels. They do this by allocating capital toward sustainable investments that do not depend on carbon and fossil fuels. An example would be a favorable approval for solar panel financing while gas stations would run out of gas because gasoline deliveries halted when the bank denied the truckers’ new tanker truck loan. The Feds should not be subjected to political pressure for lending restrictions but to remain independent.

Social Security & Medicare: The current system originated during Great Depression under President Franklin Delano Roosevelt.  It has worked relatively well over the many years since its inception and is the main source of retirement income for most Americans.  Over the years because people now live longer, remain retired longer, and are overall older than before, the funding dynamics are radically changing.  For many years there was an annual surplus of funds into the system which was invested in special Treasury securities.  The interest has averaged about 2 1/2 % which is low but reflects the fact that present ten-year Treasury notes earn less than 2% today.


In 2021 for the first time, there was a drain on the Treasury reserves.  People were drawing more funds than had been contributed from wages during the year.  The beginning of the year there were $2.9 trillion of outstanding reserves to draw on.  The fund earned $70 billion in interest this past year. But the SSA spent $120 trillion more than it collected in taxes.  This is a trend that will continue in the future The CBO anticipates a cumulative trust fund deficit of $2.3 trillion by 2030 to offset the balance forward from 2020.  After that, they continue to anticipate 78% of benefits received to cover payments for the future.

Medicare, a separate fund, began with $303 billion in 2020 reserves and dropped $30 billion last year.  It has been given a very short actuarial life.

The Congressional Budget Office anticipates all their pension and trust fund reserves to be exhausted by 2030 and the Covid-19 economic disruptions are not part of their historic data yet.  The promises, not law, made are to continue payments.


An observation is that the Treasury reserves for these funds are a Federal liability.  They are not shown as part of the $30 Trillion ballooning national deficit.  Accordingly, if the Government draws a Trillion to cover a shortage of wage funds to cover payments, they must borrow another trillion to offset the liability. There is no liquidity.

As the stock market flounders and cryptocurrency becomes a roller-coaster fantasy, we still offer solid insurance annuities which guarantee initial contributions and continuing earnings.  They are ideal for retirement and pensions which require long-term planning.

Please make your appointments early or arrange to send your work in because it will be a short tax season for all. Also, fill in the attached form and include it with your tax documents when you visit or send your paperwork to our office.

Best wishes.

Phillip B Chute, EA & Staff

Stock Market Quotes

December 2021 Year-End Newsletter

First the Good News: Gold bullion is now cheaper. The WSJ reported at year-end that the futures for gold were $1,827, down from $2,050 two years ago. With inflation at 10% it will be affordable in a few years. Please note that the dealers buy your gold at bullion prices but sell at a 5% markup. If gold bullion was at $2,000 per troy [31 grams] ounce, they would buy your Eagle Pure ounce coins at $2,000 or sell them at $2,100. Accordingly, Gold will get 15% cheaper annually if the price continues to decline with inflation. Platinum is cheaper than gold now and will be much cheaper in the future because electric cars do not need the precious metal in catalytic converters.

The IRS Story: At this point, we are back to the April 15th filing deadline. That is unless Congress passes retroactive tax legislation which has happened in the last few years. As of December 18th, the IRS said it was finally on schedule opening their mail. They had processed all returns which didn’t require special processing received by April last year. That left a backlog of 6.3 million returns received afterward and 2.3 million amended returns unprocessed. “The pandemic has created unique challenges for the IRS,” the IRS spokesperson noted. The March 2021 Stimulus payments must be reported on the 2022 returns to be matched by the IRS computers and if you had not received a payment, will be refunded with your returns. The new Advanced Child Tax Credit received last year must also be reported and will be matched, as well. We have included a Questionnaire form with this newsletter. Please complete and bring it with you when you make your tax appointment.

Another Identity Theft scheme reported by a client: Recently a client received a letter from Ally Bank stating that his new account opened on 12/16/2021 online had been “Restricted” due to “unusual activity” on 12/20/2021. What new account? The client had never heard of the bank. Someone had opened the account online and had the client’s correct name, old address, and correct Social Security number. The client notified all his financial and credit sources that someone had fraudulently accessed his Social Security number. Watch out for anything from any bank you do not recognize!! Do not give your phone number and your SS number out except when absolutely required and keep it out of your wallet. It would be wise also to shred all documents that may contain personal information such as account numbers and SS number.

More on the subject: Somebody stole my wallet stolen ten years ago. A year later I received a call from a car dealer in Oceanside about a credit question. Somebody was buying a car under my

name and with the old address which was on my CDL when the wallet was stolen. The dealer actually qualified the fraudulent buyer without my Social Security number and was able to produce a preliminary credit report from Experian. I never got the whole story from the dealer who may have been part of the plot. This shows what lengths the fraudsters will go to access credit based on good victims. Very scary, indeed.

New Year Tax Changes: The terrifying part of the New Tax Year is floating around the Democratic Halls of Congress or rather their side of the House of Representatives. Everything is hung up, but it will come down on us later this year. Many tax deductions and exemptions are inflation-adjusted for the new year. No need to expose all that data now. It lives in our computers for the number-crunching time.

The new charity deduction without itemizing is now $300. Non-cash donations are not accepted here. Business meal deductions of 100% are allowable if you find a good restaurant to go to. Very many local favorites did not supply the government shutdowns.

Environmental News: A disturbing graph showed up in the WSJ lately shows the downward spiral of oil demand, per global policy scenarios, to arrive at net demand in 25 years at only one-quarter of today’s usage. Meanwhile, the stated policy arm of the graph is up over the same years. This is imagination versus the real world. Meanwhile, Biden is now investigating local major oil companies for oil prices based on foreign imports and present control of the markets. After he shut pipelines/oil/gas/fracking production as much as possible.

Solar energy residential panels: A new huge change in the buyback of excess solar energy to Edison companies to cover transmission overhead costs will shift the upfront cost recovery of the installation from seven to eleven years. The pay rate per KWH will shift from 17-44 cents to 3-4 cents. In the past, the overhead was borne entirely by the other 85% of residential clients.

Coal usage increases: Coal usage in the world increased only 6% last year, mostly in China and India. They use coal to generate electric power, especially for energy-intense solar panel production, computer chip production, and now Tesla electric cars in China. We still use coal when we run out of electricity.

California environmental news for the new year: Our pork will be more costly, but the porkers will have a better lifestyle due to a new law which grants them more living space. The same

rules have improved lives of chickens in the past which resulted in higher poultry and egg costs. Everything has a cost.

The California electric problem: After the big San Onofre nuclear plant outside Carlsbad shut down operations prematurely several years ago; two gigawatts of electric power was removed from the grid. Now another large nuclear plant up north, the last remaining in California, will be shut down prematurely this Summer. The costs are enormous because they cost immense amounts to build. Now that the gas-fired 19 electric Peaker plants are shut down, we now have power shortages which result in us firing up and restarting old oil-burning facilities in Huntington Beach and importing power from out of state [remember Enron?]. What will happen with the transition to all-electric motor vehicles?

Hydrogen Fuel Burns Clean: So, goes the mantra. Burned hydrogen exhausts heat and water vapor. There is no pollution. Simple. When the electrons from other non-existent sources such as coal, wood, oil, and natural gas are not here we will turn to hydrogen gas. Really simple? Water is oxidized hydrogen so just reverse the process and you get hydrogen to burn. The solution is so simple that even the politicians are talking about it. All you must do is take a source of pure clean water [H20], put the anode in one end of the pot and a cathode in the other and turn the switch. The switch will bring direct electric power to the pot and hydrogen gas will flow off one terminal and oxygen off the other. Only one problem remains; the amount of electrical energy required to release the gasses is exactly equal to the amount of energy that will be produced by burning the hydrogen gas. Turn the switch to start the process and you will get nothing [-0-], nada, because there is no power to draw on. A trip to nowhere, like the fast train North from Bakersfield.

Alarming California Tax Legislation : Proposed legislation ACA 11 dated January 05, 2022 is a new Constitutional Amendment creating Comprehensive Health Care coverage for Californians. The cost would be borne by an increased personal payroll tax add-on, a levy on gross sales receipts for businesses, and a surtax on taxable income. The sum of these three additional taxes would be $183 Billion, which is the same as taxes already collected this last year which resulted in a large surplus. Yes, it DOUBLES STATE TAXES!!

World-wide News from China: Evergrande, the gigantic construction firm is in default. The firm mostly subsidized by the Chinese Government, built thousands of high-rise apartment-condos all over China to support recent huge manufacturing and economic growth. Whole cities were constructed by them with abandonment of building codes and normal construction practices. To start this New Year right they were ordered to abandon a man-made resort city island for environmental purposes. The default on the empty city put the firm in catastrophic financial condition because like their other unfinished projects, many of the units had already been sold. The Chinese stock market Hang Sen dropped 5% in one day this week.

Remember that we offer safe insurance annuities which have up-front bonuses to offset early cashing in penalties. All investments have costs except annuities unless you are a day trader. The principal is guaranteed, and interest rates are now rising. Bitcoin dropped 8 ½% this week and that is guaranteed to be a volatile portion of any other portfolio.

Please call soon for appointments because this will be a compressed filing season and we have added many new clients from last year.

Last but not least, we hope you have survived the Covid 19 epidemic unscathed. Many people recently have been ill, probably with variations of the virus, but are doing well with their vaccinations.

Best wishes for a BETTER New Year!

Phil Chute, EA & Staff


October-November 2021 Newsletter


                                 November 25, 2021 is the Celebration of the survival of the voyager Pilgrims at Plymouth, Mass. They arrived in 1620 during the Winter and lived on their little ship until Spring 2022 when it departed for Holland. Only half of the hundred devoted passengers had survived the bitter Winter. Game was plentiful and the native Indians assisted them with planting food in the rocky sandy soil. The first year of settlement after they harvested the crops, a three-day feast was prepared and shared by their Indian friends who helped them survive the terrible winter and successful encampment. This was the true beginning of America, a time of friendship and abundance shared by all. Many countries celebrate the end of the annual harvest and onset of Winter, but this Celebration was from a group of Puritan Christians who had escaped England and Europe to begin their own country with freedom of religion and personal goals. It would take another 155 years before the bloody Revolution wrested the future 13 Colonies from England and the journey was finalized.

                                     We all have a lot to be thankful for and hopefully not lose our freedom and prosperity with excess greed and politics. We were the most powerful and generous country in the world and have now lost our position. The entire world is affected by our downfall.

                                    This newsletter covers both October and November. My wife and I took a week away on vacation to New England. It was very peaceful especially since the resort in the Berkshires was closing for Winter.

                                     MONETARY THEORY: Unlimited debt supports this Democratic Party theory that the money supply is supported by debt which never needs to be repaid. Endless spending bills have been steamrolled through the House and Senate this year. The panic of the Covid virus is behind us but endless spending is now the norm. The current monetary policy of cheap money is fueling the economy as well as the endless supply of it. We now have inflation approaching ten percent and nobody is addressing it by raising interest rates and cutting spending. All the recessions of the past have been successfully ignored but the price will be paid.                                    

                                    TESLA: The premier electric auto manufacturer has announced a new battery for their automobiles. Beginning next year with their battery partner Panasonic, the new battery, about double the size of a D cell, which will replace a smaller 18650 rechargeable battery. It is a more practical size so should be more economic and much more powerful. It is truly remarkable that Tesla was assembling hundreds of small batteries to power each of their cars.


                                    SOCIAL SECURITY: This affects most of us. It is a mandatory payroll investment equal to about 15% of total payroll and is divided between Medicare and pension benefits. For most people 85% of the pension benefits are Federally taxed as ordinary income if the total income including SS is more than the poverty threshold of income [$35,000 joint]. The surplus funds paid in over past years earns 2% interest from special Federal security [or note] issued to the fund in return. At this time benefits are first paid from general SS taxes received, and the deficit payout is covered by redeeming the debt. The payouts are now considerably more than the taxes collected.

                                    There is about $3 trillion in Federal funds belonging to the Social Security and Medicare currently to cover the lifelong difference between beneficiaries. The Social Security-Medicare reserves represent a $95 trillion deficit based on future benefits promised versus actual reserves to cover demands and obligations. Unlike private pension plans, there is no plan to account for future benefits. This is three times the publicized National Debt. The future of Social Security, without the new House proposals to expand the benefits for all, is insolvency in 2033 or sooner. The insolvency points for Medicare without further expanding benefits as proposed, is sooner, by 2026.

                                    Social Security benefit payments are scheduled to increase by 5.9% beginning next year. This is the biggest bump since 1982. That was 50 years ago and if I remember correctly, it was corrected when President Nixon instituted a complete wage freeze throughout the country to force inflation, which was over 10%] back down.


                                    CHINESE FORCED ORGAN HARVESTING: This came into view when the principal director of the Qingdao University Medical School Hospital, Dr Zang, a liver transplant specialist, who had won awards as The Nation’s Distinguished Doctor, committed suicide. One of the hospitals he worked at was the Tianjin First Central Armed Police General Hospital. He was one of five doctors who committed suicide from organ transplant surgeries.

                                    This hospital went from donor shortage limited production from only 1,570 annual transplants a year to 20,000. The changing element was the CCP persecuting the Falun Gong religious sect. International investigations have revealed that their forced organ harvesting from live humans were crimes against humanity. Currently, it is hard to believe of an assembly line of political prisoners strapped down on gurneys, given a shot of anesthesia to stop screaming, and ripping his/her kidney out for the patient in the next room. The Aztecs did it for your heart but never bothered to transplant it. That would come later. Thanks to Epoch Times for the article.

                                    BITCOIN: This has been recognized by El Salvador as legal tender. Their new law says that the government guarantees “Automatic and Instant Convertibility” to dollars. This Wall Street Journal article further states that the government will be able to move money outside normal international protected SWIFT banking dollar systems, more like Argentina, especially since the non-currency moves up and down more than a roller coaster.

                                    MARKET NEWS: Andy Kessler wrote a WSJ article recently about market fundamentals. A fundamental is simply value of a business measured by sales, profits, and equity. Today, we are in a stock market which is valued simply by the value of shares issued times market price. That makes some fantastic comparisons and a bit of speculation. Some examples were GameStop which peaked at $135 and now delisted at $.30 per share. Beyond Meat, made with pea protein is worth more than the global market for peas eaten. An Italian artist auctioned an invisible statue for $18,000. It was an empty box the artist claimed was a space full of energy. Today’s negative real yields do not reflect reality. The Fed has warned it plans on tapering bond and mortgage purchases later this year. The compass may stop spinning soon. Until then and always stick to the fundamentals.

                                    TALIBAN GIFT of $64,000,000 was made by the administration to the Taliban at the time of our exodus at the airport. The gift was for humanitarian aid. It was debated that it was really for a ransom to get the remaining Americans out of the country. It appears that if that was the real goal the Taliban have defaulted because the money is gone but the remaining American family hostages are not gone.

                                    Zero taxes by Biden are promised to offset all his spending proposals. Without going through all the stuff [see December newsletter when the big one is passed or failed], the efforts of 85,000 new IRS agents auditing every American citizen, your bank statements in hand, for back unreported taxes, will certainly be an event to remember. Checks to aliens without Social Security numbers are another historic event and a final one is jobs for only Union members. What is suddenly evident now with the collection process of emptying your pockets for indirect benefits, is two letters received by clients recently: One was for non-filing of a LLC business tax return. The penalty letter of $2,500 was dated the month after the extension deadline, both this year. This is a new penalty sent as soon as they could mail it, for new penalties on the books but never enforced. Beware. The other penalty was for $600 for a client sending off 1099 forms late at $50 each. This is the first time I have seen this one, ever. A third was evident last year when they reinstituted the 20% negligence penalty for underreporting taxes owed when the computer found some income missing from a 1099 comparison. This penalty used to be in force [on the books] for many years and disappeared about ten years ago because it was so hated and assumed negligence on a common matter. We are entering the era where everybody must fear the IRS with their automatic power of penalties and such awful recourse with tax liens and interest on penalty amounts [and nobody on the phones when you make the call]. We also have a client in US Tax Court where all collections are supposed to be put on stay until settled. Meanwhile the client is still receiving notices indicating tax liens on his bank accounts if he does not pay immediately.

                                     FROM SUNNY CALIFORNIA: Governor Newsome, after surviving a recall attempt, has inked more legislation to prove his loyalty to those 2/3 of the voters who still love him. A new law effective January 1, 2024 will phase out gasoline powered small engines including those used in landscaping, power generation, and recreation. That gives all of us two years to wear out the lawnmowers and edgers and to redesign the backup power generators that run of gas. Since the generators will not run-on electricity either, these expensive units will have to be reconditioned to run on propane. Most [all the ones I have had] of the electric mowers suck. They eat the extension cords or have terrible batteries and cost more at the store. Performance on my last battery mower was that it was good for only half of the lawn and the little battery cost as much to replace as the mower originally cost. The lithium battery units will not still cost twice as much as gas and have bigger batteries by then. But do not count on it. Back to shopping in nearby states.                                   

                                    FINALLY, FROM THE PRESIDENT: During my vacation this Fall, regular gasoline prices were $3.40 per gallon, and everybody was complaining because it was only $2.40 a year before. Restless California at this time was only $4.40 and the White House said they were temporary. They were right because California, with the help of sales tax on the fuel, is over $5.00 for regular. I would not be surprised if all the grades of fuel will be retailing at $6 by year-end. Recently White House Press Secretary Jen Psaki claimed there was an upside to high gas prices. “The need to accelerate the development of renewable “clean” energy sources. Essentially soaring prices are good.” This has led to a new language abnormality to explain economic abnormalities, CLIMATE JUSTICE. Sounds like Animal Farm where meanings are opposite of statements. What costs too much is good for you “because it costs too much.”

                                    BIDEN AND NOTHINGNESS: From the WSJ comes a great article on doublespeak from Washington. Jen Psaki said the evacuation of Kabul could not be called anything but a success. She is becoming expert at reordering reality and transforming from believing what is real to believing what we are told is real. In Chicago reality resets when the Cook County State’s Attorney declined to prosecute the gang members who staged a shootout in a residential neighborhood. The reasons for not bringing charges were that the gangs were engaged in consensual “mutual combat” like in the movie “Fight Club.” President Biden has stated that we have a Closed Border. If we have a closed border how are armies of immigrants able to cross them? Project 1619 purports to reframe history which is displacing a proven reality with mere assertions.

                                    THE TRILLION DOLLAR COIN minted by the Treasury was proposed to avoid a debt ceiling and a shutdown of the government. What a fantastic simple solution. This WSJ article suggested a Chewbacca neutral face on the coin to keep politicians out of trouble. It should be portable, and not the size of another coin like the Susan B. Anthony dollars vs quarters. How could you get change for it? What if the motel canned soda machine eats it without spitting out an orange soda? The commotion of extracting justice from the machine would be awful. A government shutdown is also a nightmare, but so is not getting an orange soda, per Jason Gay.

                                    INTEREST RATE INCREASES are predicted for an increased Fed benchmark interest rate and a maneuver to pull back on the massive support it has been providing by buying back $120 billion monthly in bond purchases. Their threshold of 2% inflation has been exceeded and the elasticity of the difference between the threshold amount and the real world will adversely show very soon. Lastly, when the record low of 0% to .25% goes up, like all boats on the ocean at high tide, it will affect ALL interest rates that are not fixed. Like bank loans, credit cards, and future mortgages.

                                    FUTURE ANNOUNCEMENTS will be made a month from now when we have the two huge phony tax increase bills cleared and will detail the changes applicable to our business and clients.

                                    At this time, we reiterate that we are still here to help you with your taxes as required. Our only problem with the returns completed this year was with the stimulus payments received vs IRS records.

                                    Enough for now. Two months of economic news is deadly to the soul. December news will be strictly tax info.

See you after year-end.

Phillip & Nenita


We have completed a new Instagram site. Please visit us at our new Instagram

Also, we need a boost from Yelp. I am requesting a few clients to give us a positive Yelp review if you are satisfied with our service. Thank you.

Stock Market Quotes

September 2021 Newsletter

First, the good news:  We successfully placed all of our client data on the Cloud.  This included client document copies with the relevant tax returns for additional security.  The processing involved three steps and we have accomplished handling over a million documents for the last four years of both current and non-returning clients.  As you know, all of our tax work has been conducted through Drake Software, which is the biggest on-line Tax Practitioner provider in the country. All of our completed tax returns are available through Drake but we had a garage full of copies including the input documents we had photocopied to process the returns. Drake has fantastic security for the millions of returns they process every year. We eliminated three filing cabinets from my garage in the process and provided about 50 bags of shredded and diced material, now disposed.

Then the bad news:  Some sophisticated people got through to our contacts by way of AOL and sent a stupid HELP message from me.  Fortunately, they did it on September 21st at 10:30 am in the morning and five minutes later we were online to block and halt the further usage.  If you received this silly message just delete it.  Many clients have called us in response. These data thefts are used to solicit other data from clients, so simply delete and ignore. Our entire contact section from our AOL account was missing afterward.  Our contact section generally does not include phone numbers, mailing or physical addresses, or SS numbers.  Just a name and e-mail address.  There simply is no connection to the tax business or Drake files in any way.  It was a real headache, and we changed all passwords and related data immediately afterwards.

WARNING!  These bad people are everywhere, copying letterheads, official computer sites, invoices & statements, everything.  Be aware. Best way is to look for spelling errors or especially the sender’s e-mail address. These are dangerous times as we get more integrated with computer usage and capabilities. Your turn may be next!

Of public interest:  Electric cars will be mandatory in just a few years.  The biggest problem is where to find enough electricity as the existing power plants are systematically being shut down.  Next will be the big car batteries.  I looked into solar panels and Tesla is the cheapest.  Problem is that they work best with a battery during blackouts and after the sun goes down.  Tesla recently repackaged their solar panel + battery deal.  Somehow the battery price went up 20% from six months before.  They must have found that cheap panels are good to find clients and the battery prices at $12,000 are hugely profitable.  Best to buy the panels and wait until someone else makes panels at a reasonable price [they don’t need to be as compact as a car battery].  That is Capitalism.

I have data in front of me which shows the ingredients of electric car batteries required to produce the 75KW of juice for a new car battery.  They will each require a total of 325 pounds of nickel, manganese, cobalt, and copper.  This does not include the lithium, just all the other metallic elements. There will also be huge quantities of rare earths to make the superalloy magnets for the electric motors driving the cars. Where will all of this metal come from?   Has anybody really thought it out in the crusade to eliminate nuclear and carbon-based electric sources?  Is there an end to the game?

Current tax legislation is too complex to quote yet as it is still being brewed in the Democratic House.  I am afraid it will be more like Obamacare when we see the final product.  Remember all the money it was supposed to save and that you could keep your family doctor with the changes?  Also, that the bill was too big and lengthy to discuss on one read before the required signature and that there would be no surprises? What they didn’t tell about was the huge co-pays that emerged from the policies.

            Well, the new bills are supposed to require no new taxes.  The 85,000 new IRS auditors they are hiring are supposed to bring in most of the money to cover the social welfare and union dominated Infrastructure Bill by auditing mostly small businesses. This is exactly a new business tax.  The bigger companion Reconciliation Bill leaks daily rumors which mention a new $1 a pack for cigarettes [because it is a sin and not good for you to smoke], higher capital gains taxes, higher surtaxes, higher death taxes, higher income taxes, additional new highway taxes based on distance traveled-not fuel consumption, higher estate taxes, investment taxes based on appreciation-not sales, dramatic Subchapter S corporate changes, etc...  These are to cover the social giveaways to buy the next vote. Accordingly, I will wait for the bills to pass the House and then we will learn the names and doses of the poisons. Maybe the 11% of the bill actually earmarked for infrastructure [including trains to nowhere] will do some good.

California EDD problems:  There is a pall of silence over the $30 Trillion of Unemployment insurance claims. paid to phony employee claimants but lots of action on the small business front.  Our little business with seasonal 2-3 part-time employees is now subject to a field audit by the regulars of the EDD audit staff.  I guess that they go for the easy marks first because nobody would miss $30,000,000,000 but maybe spending $2,000 to audit and supervise a small household tax preparation business is lucrative for them, especially if it resulted in additional taxes and penalties of only $1,000 three years ago when they first tried it.  Maybe they have also forgotten about the added expense of two appeals to settle.

About Audits:  We had an IRS audit of a Los Angeles County employee who was required to drive his car to various school and County facilities to repair their equipment.  The dedicated employee kept fine records of his trips and mileage.  All he needed to close the IRS audit was a letter from his bureaucratic supervisor to state that it was important for his job to drive to these additional locations to do his work.  He did not get the letter and is now subject to non-deductible expense of travel with additional penalties and interest.  I advised him to retire or get a real job.

 Another audit went to Tax Court: This was the case where the IRS ignored the 125 pages of documentation which was finely referenced and indexed with the cover letter and the IRS request for same.  We are waiting for a response which is slow compared to prior years where there was someone to answer the phone and mail. We are waiting for a trial date and hoping it isn’t another trial by mail like the last one which was a complete faceless fiasco.

I pity the results of 85,000 new auditors in a non-responsive environment as important as the income portal of the U.S. Government.  If this continues, I have the opinion that we might become a third world country sooner or later.

I have scads of things to write about but will close to mention that we have only two weeks left of the extension deadline.  There simply is no further extension possible and a tax return filed on October 16th or later is subject to 25% penalties of the amount owed, interest expense from May 15th, and a non-filing penalty.  From both the Feds and Franchise Tax Board. And they backdate the interest on the penalties to the first filing date without the extension.

            Finally, I invite you to check my author website at

            Facebook link

            Instagram link

            And for our tax website:

Best wishes to all and hope to see you again in a few months.

God Bless America

Phil Chute EA & Staff.

Financial Analyst

August 2021 Newsletter

Good news from the IRS: Because of the coronavirus, all the amounts shown for meals as ordinary and necessary business expenses will be deductible this year. In the past and future, because this is a temporary measure, only half of the meal expenses were deductible.

Bad news from the economy: Most of the family restaurants that were closed, off and on, this year and last, have gone out of business. Good news from the U.S. Department of Agriculture: The Food Stamp's Food Basket has increased to $835 monthly for a family of four. This compares to only $537 average four-person household expenditures last year. Work requirements for recipients have been waived until the public health emergency is over, which may be never.

California housing costs: Los Angeles reached a new high for individual homeless shelters, An 8'X 8' storage shed B4 square feet about the size of most laundry or bathrooms, has fetched a cost of $130,000 when installed with plumbing. This is a great price for sheds without lawns or garages, However, it is still a bargain, as the LA Times reported last year that it cost $531,000 on average to build a single unit of housing for a homeless person. One project cost $746,000 per unit after installing underground parking lots to satisfy zoning restrictions.

Estate and death taxes are facing reviews: The Federal estate tax exclusion is currently $1 1,580,000 and very few people pay the 40% tax beyond that figure. The proposed new $3-5 triilion spending package has offered a drop on the exemption to $3-5 million per person. An additional tax increase would also tax stepped-up unrealized capital gains with a million-dollar exclusion upon death. This means that the family home, business, farm, or portfolio would need to be sold to pay the huge tax bill. A study by Texas A&M Agricultural Center found that 98% of farms in their 30-state database would be impacted with average additional tax liabilities of $726,000 per farm. This proves you can,t take it with you, and maybe your family as well.

Death taxes are another matter: Instead of taxing the estate, the death tax extracts funds from the beneficiaries. So, Uncle Ahab passes and leaves his estate to his only heir, Young Ahab. Maybe there is no estate taxes due to the small size of the estate, but in Ahab's state, there is a new death tax which taxes recipient heirs based on age, relationship, and amount. This has been kicked around the halls of statehouses recently as a back door estate tax. These people are most creative when backed against the big spending wall.

National oil prices are rising: The While house national Security advisor Jake Sullivan, recently prodded the Arab Oil OPEC Cartel to increase production to keep world prices in line with increasing demand for oil. That is a strange note from the U.S. because we were the largest producer of oil in the World before the last election and the new government crushed oil production. OPEC now controls world production and prices as a result of being the new [old] swing producer. Both U.S, crude and Brent benchmarks are up 40% in 2021.

Black Lives Matter: This national movement had meaningful origins because of the deadly treatment of black prisoners by police officers. Now it appears to be a political crutch for anti-nationalistic radicals. The only reason I mention it here is that the White House State Department advised all our embassies and consulates overseas to fly the BLM flag at their posts. There is only one flag to be flown for this country and people who don't honor it or debase it should leave, in my opinion. Recently the BLM Marxist organization supported the Cuban repression of protests erupting across Cuba and that the US was to blame. Shame.

Medicare benefits expansion: current proposals are floating around Congress to increase the benefits paid to Medicare recipients to include dental, eyes, and hearing. As we grow older, we all need assistance and these items have always been a personal expense. The proposals also include lowering the age of Medicare recipients below 65 for benefits. As you probably know, many people need good care including the above items and everybody usually puts off the expense as long as possible. There is a problem, however. The Medicare program, which most of us paid into all our lives, is slated to be bankrupt within the next five years and probably sooner after the Covid virus. lf the benefits are expanded or the eligibility age lowered for this program, the impending BK will be greatly shortened, Eventually, going to medical school will not be the fastest road to become a professional millionaire. According to today's Wall Street Journal, Sept 2nd, Social security is now expected to be illiquid alter 2033.

Chinese position as a world power: The Chinese have remarkably provided material goods and services to the rest of the world these past years. That has placed them in a formidable position as a World power as they have recently discarded their defensive military posture with the addition of a new ICBM offensive complex under construction. The use of slave labor is also controversial but not new to many countries who used political and military prisoners to do the dirty work in mines and factories during the Second World War by the Germans, Russians, Japanese, and other parties. China and North Korea presently use people in this manner.

Recall election: This month we will have a chance to eliminate a Governor who appears to be from another planet, There are many choices for his replacement. I will not tell you who I voted for, but it was for a change. We should keep in mind that as a European newspaper stated, "the future of our country depends not on the actions of the elected Prince of fools, but the supporting electing fools", He was referring to the debacle in Afghanistan where another fool presides.

Our tax practice: We have been busy scanning and shredding our old records; over a million copies handled, to the Cloud somewhere in a "computer room in the sky", We have finished the transition and are now ready for the many extension clients who have delayed or procrastinated their way to the end of the extension period of October 15th for personal returns. There is a month to go and please, if you are one of these, do not wait until October.

China Long, our neighboring paralegal: she is still available for many legal form filings, she is also a notary, and this may be the time to review your legal documents. Her number is 951-694-4460 and her fees are very reasonable, She can meet with you in our office.

Please visit or call if you have any tax questions or wish to buy a book, we still handle insurance annuities for those conservative folks who need them.

Best wishes, Phil Chute, EA & Staff.

Financial Consultation

July 2021 Newsletter

Good news from the Social Security Administration: The Govt, unofficially announced that based on recent July economic data showing 5.4% inflation in consumer prices over the past year, that the year-end benefit payments will probably reflect that huge increase. They have also stated publicly that the current inflation is temporary. Just remember that the next time you gas up your car or truck.

Bad news about Social Security Taxation: The proposed American Family's Plan will increase taxable Social Security benefits from the current 85% taxable to 100% taxable. That means double taxation because the involuntary contributions to the plan were already taxed in payroll or self-employment. Other normal pensions are taxed only on earnings as distributed with the employee contributions exempt from taxes.

The Family Plan would also double the Federal capital gains rates to 39.6% plus the current California rate to 37.1% would equal 56.7%. Doesn't leave much for sales tax on the new electric car.

At least we are still higher than the New York state tax by 2.4%.

Proposed increases in Social Security/Medicare taxes will subject Subchapter 1120-S passive earnings to active income and cancel the exemption, Two other related deductions for an offset

deduction for self-Employed Social Security contributions and the Medical Insurance deduction for Self-Employed people are also endangered.

Good education news from California: The California Board of Education voted to postpone a new mathematics framework that incorporates ethnic and social justice. This would replace current match curriculum which replaced failed New Math blend of algebra and arithmetic that was impractical to use.

Bad news on the Gross National Product: The June financial data on the sum of economic activity for the Nation was $22.3 trillion. The National Debt at that time was $27.5 trillion. That is now more than a year's total economic activity which still would not pay the debt which will hit over $32 trillion by year-end with proposed spending. And the axiom is that increased taxes slow investment and the economy.

Bad tax increase from California: This year we saw a new tax locally which is not fair at all. A $1,500 levy was added to the tax returns for people who didn't have Obamacare or other medical insurance. A penalty which has replaced the federal penalty which was dropped last year. A disgrace from a state which is boasting about great budget surpluses.

IRS Audits: The Administration is proposing an $80,000,000,000 [billions] to increase the IRS audit budget over the next ten years. The story goes that a lack of audits allows businesses to leave a trillion dollars annually on the table each year. This is told as an investment, not a tax increase.

Another issue is the proposed link between your business bank account and the IRS. Yes, they want your bank statements online so they can pick out the data for your next audit. That act will also present a financial challenge to the banks and savings institutions for programming and people expenses.

Bad news from Chicago: lt is hard to resist an inclusion from our favorite City where cosmetic surgery is a fringe benefit for most Govt. workers. To aid their underfunded pensions the city planners proposed a megaresort with all kinds of amenities to include hotels, casinos, and whatever Las Vegas had or still has going for it. The multi-billion-dollar expansion would have an effective tax rate of 70% if funded. That includes state fees of $30,000 for each and every slot machine and seat at a table game. An additional revenue fee would yield M80,000,000 over the first three years as well. lt appears that nobody in the gambling industry was interested in the deal, and it folded.

California and other major cities shoplifting problems: ln 2014 a ballot was passed here to make stealing items valued at less than $950 a misdemeanor instead of a felony. This was to keep petty thieves out of jail. lt worked so well that convenience and drug stores have been invaded by people taking advantage of it by raiding stores with duffel bags and all kinds of containers to exit without incident. An example of the results is that Walgreens Drugs in San Francisco have closed 17 stores since the Act passed.

Debt economics at the Federal level: There are new economic theories abounding that the economy thrives on debt. The more debt you have, the better the economy works. lt is a simplistic justification of buying votes by handing out more money to everybody and throwing it around like a drunken sailor. Complete unaccountability. I disagree and believe that nobody is too big to stay out of Bankruptcy Court, sooner or later the debt and accompanying interest must be paid. Remember Russia, Argentina, Venezuela, and Bernie Madoff.

Files, paper, and otherwise: Much has been said about, "how long do I need to keep records? The truth is that the longer the better. But we must all be practical so start with the longest such as birth certificates, real estate purchases, all legal documents such as wills, trusts. Others include tax returns, especially if there is a capital loss or net operating loss which can carry forward many years. save the

first year the loss was incurred and all the intervening years until used up. Rental income tax returns must all be saved because the depreciation values, improvements, and unused losses carry forward.

ln our little practice my garage was filling with filing cabinets. This year we decided to put the practice on the "cloud." For a whole month, we have been ripping tax return hard copies apart, scanning and shredding them. of course, they are on the computer the whole time and we keep ten years there. But the workpapers, notes, copies of client documents needed to be saved with the extra copy. Audits are only three years, and we were saving four years in files, so we cut it back to four years on the cloud, oldest 2017 tax year no-shows shredded, and our whole filing system revised and shrunken, Another reason for the Cloud is the liability of keeping all those records available where they could be burned, stolen or damaged. Besides, I didn't want to be the only guy in the business who hasn't done the cloud yet.

Last but not least: Your business returns are due in a month, the middle of September presuming you or we filed an extension. The individual return extensions are good to October 15tn. Time is running out and please don't rush us with these complicate returns in the last month due.

lnsurance annuities: Are a very conservative investment with cash sign-up bonuses, guaranteed principal, and many other great features. Hard for us to sell lately with the runaway stock market. One day everything will change, and we will still be here to help you.

Paralegal China long: is available for most simple legal matters at reasonable fees with serious long-time experience working for the lawyers. Give her a call at 951-694-0608.

IRS or FTB correspondence: requires immediate attention. Please send us a copy asap and we will review it for you.

Best wishes

Phil Chute, EA & staff

Financial Advisor

June 2021 Newsletter

Federal good news for parents with Child Care Credit [CTC]: The child tax credit advance payments are scheduled to begin on July 15th and will continue through the end of the year. Payments will be paid through direct deposit, paper check or debit cards. Since the monthly payments will provide only half the year’s credit, taxpayers can claim the remaining amount on their 2021 tax return when they file in 2022. Please keep records of all credits received as they will need to be reported on your 2021 tax return. No action is required if you want to receive the advance credits, they will be sent automatically. However, if you prefer to receive the entire tax credit on your 2021 tax return, you must OPT OUT using the portal on the IRS website. For additional information, or to OPT OUT of advance payments, please visit the IRS website:

Investment news: A recent WSJ article noted that non-taxable municipal bond yields have fallen from 4% this year to 1% as many investors have left the securities markets for safety, at the cost of below inflation yield. In other words, it is better to lose money on earnings than lose more money on principal. Since advisory fees are always over 1%, these investments will lose money both ways.

Washington issues: The gigantic American Family Plan will be on hold as Congress fights over the rubbish connected to increasing the national debt by another two or three trillion. It is currently connected to the trillion-dollar Infrastructure Plan which is in limbo because of the problems with the initial Plan. The Infrastructure Plan would be financed by increased funding to the IRS for massive increases in audits. The audits are expected to fund the entire Plan without further tax increases.

IRS audits: We had two IRS audits this past year. One was to justify the homeowner exemption from taxation of real estate property sales. The client had been renting out most of her home to roomers but fortunately also lived there the whole time. If she had rented the whole house out, she would have had a taxable gain on the property as a commercial capital gain. As it was, because she had lived there while renting most of it, she was able to qualify the property as her residence. That voided the tax bill of over $100,000 for a no change audit.

The other audit was for a person who drove a delivery car night and day for over 50,000 business miles during the year audited. It was a mail audit, like all of them these days, and we responded to the audit letter with a USPO Priority Mail package of documents weighing over 1 ½ pounds. A week later, our client looked up the delivery on his computer and printed out the confirmation that it was delivered and signed by an IRS employee. Three months passed without a response from the auditors and the client was shocked to find a notice in the mail one day that the IRS “decided against him because he had not responded to their documentation request”. In other words, they never received his mail. Our response was to re-mail copies of our audit response documents with a letter and USPO confirmed delivery receipt copyback to the auditor. That was a month ago, so I expect we will be off to Tax Court because of the internal IRS delivery problem.

Future IRS Activities: It should be noted that the IRS is being instructed (with billions of additional appropriations) to increase audits to offset the trillions of increased Federal debts shoveled out by Congress these past and future years. The politicians do not consider this a tax increase to recover “Trillions of dollars in tax fraud.” Their idea of tax fraud, as presented publicly, is millionaire citizens hiding wealth from taxes which affects all of us. Yet it is the ordinary people, as in the examples above, who are being audited. The IRS will also be given better control over ghost preparers who do not sign returns and unregulated preparers who are not Enrolled Agents, Attorneys, or CPAs. That is really good news, but it means that the regulated preparers, like me, will be inundated with audits and tax work from the interaction of more audits and less people preparing returns.

Recent IRS interactions: This past month I spent three days calling the IRS to settle an installment agreement and when I finally got through, they trashed my power of attorney form and hung up on me. I cannot imagine over 100,000 new auditors on those phone lines, if you can get through. It appears that their job only covers answering the phone, not resolving tax issues.

California Secretary of State vs Franchise Tax Board: We had a client who organized a church of his strong religious belief. We handled the documentation, and he was to find a storefront or other suitable location, then people would come to his meeting place. After two years of paperwork and lost Sundays the client decided this was not his calling and it closed. Now, after two years we have finalized the closing of the tax exempt 501-C3. It appears that there is an estranged relationship between the tax collector (Franchise Tax Board) and the formal organization agency the (Secretary of State). We had been sending letters to one or another and they, four to six months later, would refer us to the other agency. At last, we have settlement papers from the SOS and can close the case for the client.

Our insurance annuities: Many clients have happily found security and reasonable earnings with some of our insurance products. If you believe the bank interest rates are too low and that the stock market will not peak out forever, then please call us for more information or a proposal.

California in the news: A recent article from Epoch Times reported that the current administration has restored the Bullet Train $1 Billion grant that was revoked by the prior administration. Maybe some long day in the future you will be able to zip from Bakersfield to the IRS Regional office in Fresno at Bullet speed.

Good news! After a very long tax season we have adjusted our hours to fit the needs of the business from July through year-end. We will maintain business hours on Tuesday, Wednesday, and Thursday for the regular staff. They will have many long weekends while Nett and I plan a few for us, as well. Meanwhile, I will be here as usual to answer phones and mail and schedule an appointment or two. My lawn needs mowing in the back too!

We are here for you all year: Be sure to call for advice or drop us an email. We have sent dozens of digital tax returns to mortgage brokers and do not charge for this extra service.

Best wishes for a happy and safe Independence Day!

Phil, Nett, Leslie, Erin, Sarah

Accountant at Work

April-May 2021 Newsletter

First, the good California news: Governor Newsome has declared that by the middle of next month we will be mostly free from Covid-19 mask and spacing requirements. This follows the recent federal government declaration that people who have had their Covid vaccinations no longer need to wear masks in public places. Since most people have been vaccinated by now, it is safe to say that the Covid Coronavirus has moved on to manageable levels. Surviving restaurants and other businesses will rejoin the land of the living to the joy of all of us remaining.

Other California news: Governor Newsome announced that the state of California is expected to go from a ($50,000,000,000) [billions] deficit this year-end to a massive surplus of $75.7 Billion. That is a huge shift of $125 Billion in income. This was partly due to the great increase in property taxes from hot real estate sales. The other part was from the Biden American Rescue Plan which allocated $500+ Billion of the $1.9 Trillion additional debt to the states for educational and other purposes. The other purposes are a California stimulus check for $600 to $1,200 for low-income individuals including illegal immigrants, homeless living quarters (at over a million each for two-car garage-sized spaces), electric busses and other electric state vehicles, and especially the wonderful Bullet Train from Fresno to Bakersfield. The train from nowhere to nowhere has failed to generate any construction bond sales from public or bankers due to phony ridership and income data provided by the state agencies.

IRS news: The IRS is a great user of office supplies due to their massive size and function. The Covid virus, this past year, caused the IRS great delays and closed offices which resulted in a very backlogged tax season for all. They also had budgetary and severe personnel shortages in most categories or departments. The IRS has an increased workload, handling Stimulus checks and retroactive software changes to exclude $10,000 of unemployment benefits from 2020 taxation.

An example of their plight is a recent report released this month which stated, “The contract for supplies and service of our printers ended in September 2020. 69% of our 164 devices used by the submission processing functions were not usable as of March 30, 2021.” They were out of printer ink.

Stimulus payment reporting: This year we were required to report all stimulus checks received for both the past Winter and this Spring. Upon receiving your tax return, the IRS matches the amounts reported with their disbursements data and will change the 2020 net tax to issue a refund or to note a liability if overpaid. Some clients have already received letters notifying them of these adjustments.

California EDD Unemployment: Recent headlines stated $31 BILLION dollars wasted on frivolous and felonious UI claims. This was easy to do by allowing 1,700 claims paid to one address, $45,000 payments paid to prison inmates, and a Northern California woman who collected over $200,000 in unemployment benefits, $21,000 of it was from using Senator Diane Feinstein’s name and social security number. There are thousands of claims filed and paid without examination adding to the huge tally. This is borrowed federal money, although California has a huge surplus this year. The remaining employers in this Golden State will pay it all back from increased payroll tax levies. This info was from the Epoch Times News.

Meanwhile, we have the privilege of being audited by the famous EDD this month. Our huge firm of 2 ½ employees is being audited. They would rather harass a small seasonal firm than go after the big bucks. This is their comfort zone. Several years ago, they audited our business with two employees, wasting our time perusing the past three years, to arrive with a $10,000 bill. Three months later the bill was beaten down to $1,000 because of one person who worked out of her house for a big fraud audit on her own time and direction. The billing went through my firm, so they reclassified her as an employee, instead as a 1099 person even though she had a professional bachelor's degree in accounting. I figured that with their audit time and re-audit time lost on our two appeals the EDD lost $5,000 to $10,000 for wasted effort.

Insurance Annuities vary in complexity but the annuities we handle guarantee the investment principal and interest earnings or an alternate investment index tied to Standard & Poor. They also allow all funds to be withdrawn as needed and are backed by considerable reserves required by California’s strict standards. A 6% bonus is credited with the initial application. Annuities are the preferred safe conservative pension investment available in these turbulent times. A free investment review is offered to all our clients. I am a retired Stockbroker-Registered Principal-Investment Advisor.

Paralegal China Long has returned from an extended vacation and is available to provide legal assistance with many legal necessities from trusts to adoption. She will meet with you in the privacy of my office. Her fees are reasonable and her phone number is 951-694-0608 for appointments. She has many years of experience working with attorneys, on the same matters, and if a simple matter becomes complicated, she can arrange a meeting with a proper attorney.

Illegal immigrant children, at the rate of thousands weekly, are being delivered to cities and towns all over the country for resettlement by Foster Care Agencies. Only the Feds and immigrants benefit from this action which shifts total financial liability to local taxpayers. According to the article in the Epoch Times, there is a backlog of 30,000 American Children already in the LA County foster system waiting and hoping for placement. This makes no sense at all.

More California legislation: The California Unsafe Handgun Act enacted in 1999, and updated in 2007, has been refined again. This law requires a firing pin on automatic weapons to micro-stamp a mark on the cartridge primer by July 1, 2022. This is intended to leave an audit trail at crime scenes. Since no device has been invented to implement the Act, no compliant handguns have been sold in California to date. And certainly, none will ever be sold after that deadline.

Child Care Credits were increased from $2,000 per child under 17 to $3,000 per child ages 6-17 and $3,600 for children under the age of six. There are income phaseouts similar to the Stimulus payment restriction. There was a big change on the payment of the credit whereas instead of waiting to file a tax return to get the credit, a periodic monthly payment equal to 1/12 of the total per family will be mailed on the 15th of every month thru December with the other half to be refunded with the 2021 tax return afterward. Please keep track of all monthly payments you receive, as the advance credit will need to be reported on your 2021 taxes.

IRS Audits in the future: Due to declining appropriations amid increasing workload, the IRS literally quit auditing in recent years. I remember one year when we had ten corporate audits. It was a corporate audit training year, and they got every corporate client we had. Then, there was the year we had three gambling winning-loss audits and it was another example of IRS training and gathering statistics on these clients who had big winnings (one client won an auto) which we successfully offset with losses. This resulted in three no-change audits that year.

Now, we have a government hurling towards bankruptcy. One of the questions emerging is how to handle the increasing debt interest as well as increasing debt? Will the investors back off buying Treasuries and force the interest rates even higher to unsustainable levels? How much debt is saleable? Only a few months ago the interest rates on Treasuries doubled when the new issue stumbled at auction.

New tax increases are in the works, all over the place. But that will not be enough to keep up or reduce (you’re kidding) the debt. Accordingly, along with a huge increase in funding for the IRS is a plan to avoid some tax increases. The Government simply will fund the IRS to get caught up and be the tax collector it used to be. They calculated that an auditor costs only 25% of the increased taxes he generates from his work, with an auxiliary benefit of people becoming more careful about what they put in their returns after the word is out.

This will, in addition to the planned tax increases, have a crushing impact on the economy. The proposed legislation also includes regulations of tax preparers and penalties for ghost preparers who do not sign returns for pay. That will be good news from unfortunate but necessary legislation.

Memorial Day is the day I finished this newsletter, and I am greeted with three new events which will shape our future:

The first is that the Federal mortgage agencies, which buy most of the real estate mortgages, have notified all the mortgage brokers and originators that they have severely tightened income proofing and disclosures to restrict self-employed applications. Almost all mortgage applications are based on their ultimate acceptance, so this is a far-reaching negative change on the people who survived the Covid. This is also the first indicator of a recession and will help it happen.

The second item is data of 4.2% inflation over the prior year. That is twice the prior April figure, and the year is still young. I predict a minimum of 5% to 10% inflation before this calendar year is over. This is the most mismanaged economy I have ever experienced, and it is still developing.

The third is the article I discovered in the Epoch Times about Second World War Navajo Indians. There was a picture of President Trump with three elderly Navajo Code Talkers. Thomas H. Begay, who was wearing a special Congressional Silver Medal awarded to the man, among others, uniquely contributed to successfully apply their native language skills to the Marine Corps. This beautiful medal outshines all the challenge coins I have. One of my clients was a Code Talker. He was Harry Gus, my only client with two first names. A peaceful gentle man, he would visit my office in the slow times and play his guitar to sing a song to me. At his military funeral many years later, I learned that he practiced his language skill during combat in the Aleutian combat as a Marine, a cold, fearful God forsaken place. He had never mentioned his military duty although he attended college through the GI Bill afterward to become a teacher at the Riverside Indian School. His son, Larry, another person with two first names, is a professional photographer, a very free-spirited man.

God bless all my clients this Memorial Day!

Phil, Nett, Leslie, Sarah, Erin

Financial District

March 2021 Newsletter

IRS News: 

1.    The new stimulus checks are in the mail. There was a report that all of the Social Security records of people still alive had been sourced for the first wave of stimulus checks.  The amounts are greater than before and will help bring our national debt to $30 TRILLION.

2.    The IRS has completed a computer program to check all the tax returns filed which reported unemployment payments.  Because these payments were taxable income, a Presidential Executive Act created a $10,200 exclusion retroactive to tax year 2020 which caused great confusion but helped correct a real problem for the unemployed to receive a tax bill after losing work.

3.   At this time, the IRS is six months behind reviewing amended returns and other information on paper-filed documents.  Automation has helped with the current filing system, but the rest of the system is in shambles.

4.   Dealing with the IRS over the phone or dealing with correspondence in any way has become a nightmare.  They are dysfunctional and have procedures to dump the callers who wait hours to get through, which cause the callers to…guess what… call again and again afterward.  The employees must be reimbursed per call, not for doing their job which is to resolve the caller’s problems. 

5.   Audits are scarce because of a shortage of auditors.  We have seen two audits this past year, one was a tax return correction which resulted in no taxes due or owed. The other was a completed audit from a new client which required days of wasted time trying to deal with the IRS, not to question the audit but to arrange an installment agreement [see item 4 above]. It took three days of calling the IRS before we could speak to someone capable of resolving the issue over the phone.

6.  The IRS recently approved an extension for individual tax returns until May 17th this year. This automatic extension requires no application submission.  It extends the tax payment due date but does not extend the first quarterly estimate due April 15, 2021.

National News:  The American Rescue Plan, a Covid-19 blowout of $1.9 trillion includes a proposed child tax credit of $3,000 (ages 6 to 17) to $3,500 (age 5 and under) per child, payable beginning July (or later) this year based on filed 2020 returns by May 17th, the new extended filing deadline. This additional stimulus benefit will be made by monthly $250-$300 payments.  There is an income phaseout beginning at $75,000 for single earnings and $150,000 for married couples. The huge spending bill includes $100 million to help fund a new subway system link for San Franciscans traveling to the Silicon Valley.  A welcome relief for rush hour vehicular traffic from navigating around the thousands of homeless, their shelters, and people doo everywhere.

Tax Increases:  Massive tax increases are on the way.  Proposals include increases in corporate taxes (from 21% to 28%), raising the income tax rate on individuals earning more than $400,000, expanding estate taxes, and a higher capital-gains tax for individuals earning at least $1 million annually.

Legal Assistance:  China Long, our local paralegal and notary, has been visiting clients at our office.  She arranges her own appointments and has been involved in creating living trusts and real estate trust deeds.  Our clients are very pleased with her work, which is typically 1/3 to 1/2 the prices charged by the attorneys where she works on a per diem basis.  If she gets involved in something unusually complicated such as a by-pass or complex trust, she has attorneys to complete the task.  She also handles other routine legal matters but don’t expect to see her in court [alone]. If you would like to schedule a meeting with China, please call our office.

Residential Matters: Mortgage interest rates have bottomed out at 3% and are edging upwards.  On a bigger scale Federal Treasuries moved from a historic low rate almost a full point higher to just less than 2% last month. Last week, the Wall Street Journal noted that there were more active real estate agents than houses for sale.  Yes, the housing shortage is so dire that some houses locally have sold on the first day out of the gate. Affordability does not appear to restrain price increases, but rising interest rates will have a telling effect this summer if they keep climbing.  I expect prices to level with the dearth of resale and new housing costs will continue holding prices up.

Life Settlement Insurance Policies:  Policy owners frequently outgrow the usefulness of their life insurance.  Many believe the only options are to let the policy lapse or surrender the policy to the insurance company. You can actually turn your policy into cash with a life settlement.  You can also retain a portion of your policy coverage without further premium payments. Please contact us to see if your policy qualifies or for additional information.

Insurance Annuities: If you have changed occupations or been unemployed you should do something with your pension portfolio.  We can review your IRA, pension, or 401-K to explain how your investment portfolio is working or to answer related questions.  I spent 20 years as a Registered Stockbroker, Registered Principal, OSJ, and Registered Investment Advisor before I retired from the business. There is no charge for a consultation appointment.

We currently sell an insurance annuity for a large company with billions in portfolios.  This highly rated firm offers a 6% sign up bonus, no advisory fees ever charged, no income taxes on non-qualified plan earnings until withdrawn, and guaranteed principal.  They are highly rated for conservative pension plan investments. If you fear the stock market is in a bubble, as I do, this is a good place to take advantage of the market peak to park your savings in a safe place with reasonable earnings for the future.

Medicare Taxes:  There is another congressional proposal to lower the age threshold for Medicare benefits.  These benefits are part of the Social Security System and a person needs to be age 65 to participate.  It is a good plan and has been paid by employers and workers over the years.  The new proposals are to lower the age by five years to age 60 to initiate benefits.  This would certainly benefit many people who would appreciate coverage for a small monthly payment of about $150 monthly.  Only problem is that even if the age was left at 65, the plan will be bankrupt in a few years from people living longer and medical cost escalation.  People simply live much longer than before, and many great medical procedures simply didn’t exist many years ago.  A change of this five-year magnitude would be suicide for the plan which would cut benefits for all.

The National Debt Need Never Be Paid: This is the prevalent philosophy in Congress.  We are now at $30 trillion with another five or more Trill in the works with pending legislation.  The interest rate on the debt was 5% only five years ago.  Now it is less than 2%. Excess spending will cause inflation (we already have increasing housing prices, fuel, lumber, and many other items we buy or need).  Inflation goes hand in hand with interest rates which must be more than inflation. The ultimate consequence is for the government to appropriate your property when the taxes don’t cover the shortages of cash after people don’t buy Treasuries, national securities, or bond debt anymore.  The word is default, renegotiate terms, or bankruptcy.  

Business As Usual:  Thanks for visiting this year; it is truly the highlight of the year for all of us to visit together.  

Best wishes,

Phil, Nett, Leslie, Sarah, and Erin

Accounting Documents

2020 Tax Season update


The Internal Revenue Service and the Franchise Tax Board have announced that the federal and state income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021.

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest, and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

You do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. If you need additional time to file beyond the May 17 deadline you can call our office to request a filing extension until Oct. 15. We will file a Form 4868, which will give you until October 15 to file your 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to quarterly 2021 estimated tax payments that are due on April 15, 2021. These payments are still due on April 15.


If your modified adjusted gross income (AGI) is less than $150,000, The American Rescue Plan Act of 2021 excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable.

We are holding all 2020 returns that have unemployment benefits until we receive our software updates.

For returns that have been filed with these items, we advise that you hold off on filing amended returns until the IRS provides official guidance. As soon as we receive information on how to proceed, we will contact you.

NOTE: Please verify the amount of employment benefits received on your 1099-G. Scammers took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information. If you receive an incorrect Form 1099-G for unemployment benefits you did not receive you should contact the EDD to request a revised Form 1099-G showing you did not receive these benefits.

Please contact our office if you have any questions.

Best wishes


Phil, Nett, Leslie, Erin, Sarah

Image by Kelly Sikkema

February 2021 Newsletter

Local news: Our new book Stocks, Bonds & Taxes has won three awards this year. The Book Authority named it Best Tax Law Book, it received a N. N. Light Book Award for Best Nonfiction book, and it won the Feathered Quill Informational Book Award for 2021.

China has accepted our application to sell the Stocks book there. The official directory shows it as “DF 432.2 Regulations for the Implementation of the Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment; F83 financial, banks.” No Chinese language copies are planned or intended. We have had scattered sales internationally.

Northern California News: A recent announcement provided information that San Francisco had solved part of their homeless problem by building low-income affordable units and taking people off the streets, especially in Pershing Square. The 450 sq. ft. single family units only cost $1,200,000 each to build including land costs. Their local School Board has disowned most of our former Presidents, Thomas Jefferson, Daniel Webster, and Paul Revere. They are currently renaming the 44 schools, which remain closed indefinitely. They have a new City wealthy executive income tax rate to cover costs.

Sacramento State News: The latest in increased taxes, fostered by the outflux of people moving out of state, was a proposal called Hotel California. This proposal would tax people who stay in the state for 60 days in a year for that year and elsewhere for the next decade. You can check out anytime but stay here for taxes. A new bill calls for hiking the top rate to 16.8% for wealthy residents. We have lost many clients these past years, but they are rarely millionaires. Just ordinary people who need affordable living. I do believe that Texas, once a high-tech destination, will no longer be on the list after the electricity shortage that brings memories of the Enron fiasco locally some years back.

Environmental News: Our new government has shut down the Keystone pipeline again and stopped oil/gas drilling on Federal lands which is half of the energy producing land. Now, the oil from Canada will continue to arrive by tanker train, trucks, and barges. Coincidentally, with the election results Saudi Arabia curtailed oil production and is again the dominant world producer of crude oil. Gasoline prices this year have risen from $3 per gallon to over four and will continue to $5 by summer’s end.

World Paris Climate Accord: This year we have rejoined the WPCA to eliminate global warming.

Unfortunately, the US has already reduced fossil fuel emissions with the substitution of gas for coal and oil and now windmills and solar. China was awarded a waiver and has been increasing coal burning electrical generating plants at a rate exceeding two new plants per week. If everybody else completed the proposed reduction of emissions, there would be no overall change because of China.

Now, Tax Season: This year was off to a slow start in February. The IRS has had people problems because they were home avoiding COVID-19, short staffed because of Stimulus reprogramming, with mail stuck in truck trailers from lack of people to handle them. After shutting-down facilities [entire offices closed] and Congress cutting back funding after the politization of the non-profit sections near Washington, they have had problems in every administration from compliance, processing, and audits.

At this time, they are now processing old returns and problem filers from the 2019 tax year. The 2020 electronically filed returns are flawlessly handled but anything else such as amended returns, problems with matched data, and fraudulent returns require human intervention. Many of the senior auditors have retired and I will miss them because they knew what they were doing. Many new auditors are in training now and will be difficult to work with for years to come.

We had a fraudulent 1099 G for last year Unemployment Insurance payments. A $40,000 form was received by a client who was not unemployed and didn’t receive any UI benefits at all. There is a huge billion-dollar California nightmare unfolding which will affect many people. Please check any forms you receive to be sure the amounts are really yours because it is taxable income.

A client received a phone call from his prior tax preparer who had just been released from prison. Some years back this preparer took his client’s tax returns, created tax credits, changed the deposit address to his bank and filed away. IRS audits large refunds and sends their CID people out to arrest him. He was smart enough to manipulate tax returns but not smart enough to know not to call the same people back to do their taxes.

Our returns are taking longer to prepare, and we also have a checklist for signature. The stimulus payments are part of this form because the IRS is matching payments to income. The first stimulus was based on old 2019 filed data. The turn of the year second stimulus will be matched to the 2020 returns. People who didn’t receive one or the other distributions will have a second chance when the returns are matched in the IRS’s computer system. Other items are Obamacare health insurance, foreign bank accounts, and cybercurrency. All of these items have penalties for preparers and clients if ignored or not prepared correctly. We have raised many of our fees accordingly.

California has a new Obamacare penalty [political word for tax] for people who should have been covered. IRS did away with the unpopular tax several years ago, but California didn’t get the word. The IRS wouldn’t accept returns until February 12th this year, but California took until the end of the month to complete their software revisions.

We are very busy and hope for an extension to mid-year but if not, please make your appointment ASAP so we can tackle the work. It is truly wonderful to meet with my clients and friends again at this time.

Best wishes,

Phil, Nett, Leslie, Erin, George, Sarah

Financial District

January 2021 Newsletter

LOCAL NEWS: I found the solution to why we have two Route 79 state highways. One, as you know, is Winchester Blvd. in Temecula which winds and doglegs from the I-15 freeway to Beaumont I-10 freeway. The other is Temecula Parkway, which begins at the I-15 and gets lost in the desert near Mexico after Warner Springs. I used to wonder, what fool would create two roads with the same name and number and get away with it? Well, it’s really the same road. Once upon a time the famed Route 79 wound around Southern California from San Jacinto to Warner Springs. During the journey, it passes through Temecula from NE to SW. Then came the new Route 15 on the same Temecula path truncating old 79 at Winchester in the North and Temecula Pkwy in the South side. So, Route 15 replaced part of the old 79 and can be located with little 79 signs along the sides of the I-15 freeway in between. Now you can quit worrying.

TAX NEWS: Our tax software has some new questions this year relating to Stimulus payments, foreign income, virtual currency, and California health care. To streamline our procedures, we have attached a simple questionnaire for everybody to complete and return, either at their appointment or when they mail/email/drop off their tax documents. This will keep us from asking the same questions and hopefully prevent unnecessary delays while you gather the information.

MORE FROM THE RON PAUL FESTIVUS REPORT: $3,452,234 was spent by the National Institutes of Health (NIH) to ascertain if social media messages will get mothers to stop young daughters from using indoor tanning salons. No results were ever published but the 10% Obamacare tax resulted in closing half of the salons in the country.

Another article from the Agency for International Development (USAID) which spent $37,500,000 to deal with truant Filipino youth. Questions were raised about supporting the huge school truant dropout of children in America instead of in foreign countries.

Lastly, $896,994 was spent by the National Institutes of Health (NIH) at Brown University to test adolescent reactions to various levels of cigarette nicotine. This was accomplished by studying smoking habits of kids assigned cigarettes on a daily basis. When I was a kid, we called cigarettes addictive cancer sticks. They were just proving the point before Vaping became popular and the wheel began to turn all over again. Kids have always rebelliously smoked, and it was illegal to sell them to children before this study.

THE GOOD NEWS: We have established complementary relations with a local paralegal, China Long, to update our clients with their wills, trusts, and other paralegal matters. This will benefit everybody because she charges only half of attorney fees when she does the same work for their clients. She has 26 years of experience working independently, as well as assisting attorneys. She will come to our office to meet with you and we have attached a list of her activities and fee schedules. I have searched for years to find someone qualified to work with my clients and we will all be very pleased with her many years’ experience, and work. Ms. Long is a member of the California Association of Legal Document Assistants.

MORE GOOD NEWS: We are happy to announce we are now accepting payment for your tax preparation fees by MasterCard, Discover, or Visa. As always, we also accept cash or checks.

INTERNATIONAL NEWS: Our Chinese Military friends have exposed a new level of combat discipline. At this time, some of their frontline troops stationed in Tibet are wearing a new helmet with a self-destruct control terminal worn on the soldier’s arm. In a tight situation, instead of surrendering to the enemy, the soldier just pushes a button, and his head is blown off and away. I am not inventing this; it was published in a national newspaper. They are also equipped with a radio headset so they can talk to their commander. In a compromised situation, the commander can push the self-destruct button himself. This is so much easier than the old method of harassing soldiers until they go AWOL.

INTERNAL REVENUE SERVICE NEWS: The last time we had an audit the auditor advised us that most of the experienced auditors, like him, were retiring which would result in very few business audits. They had held up a $40,000 refund on my realtor’s tax filing. After the field audit in my office, my client received the full refund plus interest.

This winter, the IRS has been hiring many new people for business auditor training. The elimination of Schedule A Miscellaneous expense deductions has already cut audits way down. This was the section where job expenses, moving expenses, gambling losses, travel, tax, and legal fees, and other items were deductible subject to a 2% haircut. Now, there has been a dearth of audits altogether, with business Schedule C and corporations not being audited at all. Well, that will be corrected when Spring comes, and the new auditors have finished their training. They have traditionally audited a year back and will probably begin auditing 2019 Schedule C business tax returns this Summer. Those are easier than the corporate audits, which require BS degrees in accounting for auditors, so that will come later. I expect to see face to face audits again when they are reinstated. These are the best audits because it is hard to argue or compromise by mail to the local IRS office in Ogden, Utah.

ABOUT OUR PRACTICE: We still offer investment and financial planning without charge after tax season but will limit the meetings to one session. We still offer insurance annuities which pay from 4% to 7% income depending on investment options. They are ideal for pensions and lifetime income. No taxes are paid on earnings until withdrawn. No investment losses will affect the guaranteed principal in any case.

Free 2021 Calendars are available to all clients until supplies run out.

We had no IRS audits last year although there were some SC 2000 letters which needed responses. We are here all year to answer your questions or fire off tax return copies to mortgage brokers. Call now for early appointments but note that the IRS is not accepting e-filed returns before February 12th.

No new books this year after the superhuman effort on Stocks, Bonds, and Taxes with the textbook edition. My initial book, American Independent Business, sold in 1985, is in 66 libraries nationwide.

Five of my books are available when you visit for your taxes.

Take care and keep in touch.

Phil, Nenita, Les, Sarah

Inside Business

End of the year 2020 Newsletter

Local news from California: The Wall Street Journal just reported that California legislators, in addition to banning sales of new gasoline or diesel cars in 2035, will be adding the caveat that these new cars, “must cease to be visually interchangeable.” They want them to change their aerodynamic shape and form to all be distinguishably different from model to model.  This must mean back to finned cars again.  Or maybe paint flames or decorations on them so they can be identified easier.  Like fighter aircraft and bombers of old. They will be known as California Models and easy to spot on the freeways, especially when they leave the state.

Recently Governor Newsome signed bill AB 979 which requires publicly held corporations to employ at least one director from an “unrepresented community” on its board this year and up to three “underrepresented-community board members by the end of 2022.  The bill further lists these new directors as racially or sexually defined individuals.  This is illegal because businesses are not supposed to become racist.  Also, no mention that these people have anything to offer the business world besides their political affiliation.  The matter is in the courts now where it belongs.

For those folks who are employed by small businesses, there is a new CalSavers retirement savings program. This state managed program provides an exemption if the firm has less than five employees.  The mandatory plan was designed to provide retirement savings for people who could not afford to buy IRA plans on their own.

More local news from the Franchise Tax Board:  Applications will be accepted for grants from the California Competes Tax Credit program.  This program helps new businesses get started.  Need tax credits for the new restaurant you planned for your early retirement?  January and March are the next months to apply for the $80 million of credits. 

National news from Washington:  The Festivus Report for the 2020 year is now published.  The detailed contents are found at Dr. Ron Paul’s website  This report outlines the wasteful projects the Federal Government has spent for us for this past year.  It totals $55 Billion dollars, which is an additional $10,006 per taxpayer added to the National Debt of almost $28 Trillion.

Some juicy details: The Cares Act sent $1.4 Billion on stimulus checks via the IRS to dead people. An Act was passed afterward called the, “Stopping Improper Payments to Deceased People Act,” which will take effect three years from now.   

A federal district judge has now ruled that the $1,200 stimulus checks should have also gone to members of the penal society.  Accordingly, $2.6 billion of unallocated money will be sent to those people in state and federal jails and prisons.  Since their room and board is taken care of, it is assumed the money will help fund the black market, which specializes in drugs, within the penitentiary system.

Grants totaling $1.3 million were issued to Colorado State U, Wisconsin U, and Michigan U to test 20 healthy adults on muffins and shake with and without ground-up crickets. The students were not advised what they were eating.  These environmental purveyors stressed Green New Deal issues to include flatulent cow extinctions.  The results were not favorable.  Meanwhile, the public was already eating protein substitutes for meat at McDonalds, Carl’s Junior, and other restaurants and paying for it.

Fifty lucky participants at the Oregon U helped spend $2 million for a study to determine if spending time in a hot tub for three times weekly relieves stress.  What do you think?

The National Science Foundation spent $1.3 million to subsidize an insect ranching company’s operation. The company dubbed itself as, “Insect Entrepreneurs” and used the money to study Maximum yield of mealworms for protein feed and to figure out what causes them to die.

The best one had a picture of Cheech and Chong with the spending of $3.1 million in a San Francisco Baby Boomer study about edible cannabis use.  They found that the users drank coffee to combat a high that becomes too much.  No wonder there are so many street people there.

Last but not least is the military one which shows a real Abrams desert camouflage tank flying an ISIS flag.  This is where some of the $715 Billion of lost equipment showed up in Syria.  A complete paper trail of equipment turned over to Friendly Syrian and Afghan forces created a vacuum for the military black market in our best equipment.

This stuff goes on and on for 200 pages of waste and graft.  Now I know why we need a bigger government, so we can spend more.  I cannot continue the list because I am an accountant and need facts, not to know about more college students, PhD candidates, bureaucrats, or military people doing these things with our public money or debt.

On a local matter:  Real estate property values have moved upward inversely to interest rates, so this is a great time to refi the mortgage or buy a house with cheap money.  The rates vary today at between 2½% to 3% and a 30-year mortgage will last a lifetime.

Now, about taxes:   A new $300 deduction is allowed on the federal returns.  It allows you to deduct this maximum paid to charities without itemizing.  Works the same as the $250 deduction for credentialled school teacher/educator expenses.

If you’re self-employed, an independent contractor or a freelancer, in prior years you received Form 1099-MISC from businesses to which you provided more than $600 in services.  Starting with the 2020 tax filing season, you’ll be receiving Form 1099-NEC instead.  The Form 1099-NEC is used exclusively to report nonemployee compensation. You may still receive a 1099-MISC if your income is derived from rents, royalties, fishing boat proceeds, health care payments, payments in lieu of dividends or interest, crop insurance proceeds or gross proceeds paid to an attorney.

If you have been newly divorced since 2018 and are paying alimony, the rules have changed.  Before then, the party paying the alimony was allowed a deduction, same as spousal support, for amounts paid.  The receiving spouse or ex-spouse would report the amount as income.  Now, no deduction or reporting is allowed. Since these matters last many years until the receiving party remarries or dies, the old rules are still in place for divorces adjudicated before the 2018 date.

There is a check box for Cryptocurrency this year.  If you have bought or sold Bitcoin or any other cybermoney we need to check the box for you.  If you have sold or exchanged any cybercurrency during the last year, you need to determine and report any profit from the transaction with appreciated cyber coin values. 

There is another checklist for foreign bank accounts or money in trusts.  If you had $10,000 in foreign accounts at any time last year, we need to file a FBAR report to the Gov. This is how they know what you are up to under the guise of terrorism financing and money laundering.  I have seen fines as big as $20,000 for not reporting.

Many businesses have received Federal funding under the Paycheck Protection Program PPP this past year because of the economic pandemic shock.  The IRS has ruled that if the loan is forgiven, the expenses paid with the loan [now a grant-refund of tax monies] are not deductible.

Minimum Required Distribution (MRD) withdrawals has been changed from age 70 1/2 to 72 years beginning with last year (SECURE Act).  Your pension administrator should notify you when this affects your account.

Gift taxes are exempted on the first $15,000 paid out each year per person, same as before. 

The federal estate tax exemption per person (X 2 with spouse) has been raised from $11.58 million last year to $11.7 million this year.  At this time there is no California estate tax.  Beware however, the discussions on estate taxes are that the big exclusions may vanish with the new administration.

Mortgage interest deduction is limited by initial financing loan balance of not more than $750,000 maximum value.  Refinancing and second trust deed equity loans can affect deductions.  Remodeling expenses can be used for additional financing, not to exceed the $750,000 limit. Second homes must be included in the $750K.  Best to see what is on the 1099 forms from mortgage companies this year and do some good guesswork.

New exceptions apply for pension withdrawals (up to $100,000) normally subject to underage withdrawal penalties, if the owner had COVID virus infection.

New IRS collection guidelines are eased for COVID virus-affected tax liabilities and installments.

Security wash sales (selling a security and replacing it for tax purposes) are a year-end phenomenon whereas people sell their portfolio in December to take advantage of tax losses and replace it in January.  The rule is that it is a wash sale (loss not applicable) unless the replacement securities must have been purchased at least 61 days afterward.

The SECURE ACT also allows retired people to continue to fund IRAs as long as there is earned income to offset it. The old age of 70 ½ limit on contributions is now history. 

Good news about inflation: the official inflation rate for last year was only 1.4% thanks to oil prices and the pandemic. An increase is on the way for Social Security patrons, less a larger Medicare deduction.

Final 2020 tax estimates are due by the 15th this month.

If you are considering an insurance annuity see us and we will find one that suits your needs.

Last but not least.  Betty Chute, my prior spouse passed away in May 2020.  She was 82 years old.  Many of my older clients will remember her as the little lady helping us put the tax returns together or on the phone during our Riverside years.  May she RIP.

Happy New Year!  We hope you had a great holiday season.  We appreciate your business and look forward to assisting you during the upcoming tax season.

Best wishes,

Phil Chute, EA & Staff

Conference Room

November 2020 Newsletter

We hope you all had a wonderful Thanksgiving. It is important for us to remember that there is much to be thankful for, even in these turbulent times.

November was the 400th anniversary of the Pilgrims landing at Plymouth on November 9, 1620, on Cape Cod in Massachusetts. Their course was the Virginia Colony, but storms blew the Mayflower off course with only 102 passengers including their companion craftsmen. After a terrible cold Winter, only half survived. (That was 12 years before my ancestor, Lionel Chute, landed at Boston to settle in Ipswich, Mass.) Massasoit and Squanto Indian tribes helped them to grow food, find game and to fish, otherwise none might have survived. Thanksgiving was a day proclaimed the following year to celebrate survival with their Gods, friends and saviors, the Indians, in attendance.

Another Historic event preceded the landing near Plymouth. The settlers had escaped a brutal English Society to establish a new country, a New Israel, as they hopefully called it. A land of freedom and hope for the individual. They gathered one day on the stormy seas to agree for a compact to settle disagreements between the Pilgrims and the other passengers. The agreement became the Mayflower Compact which was in writing, a promise to each other to form a government of consent. Its laws would bind them all without religious or political discrimination. They were all bound by one and subservience to the government. At the conclusion of signing this compact, which they were not compelled to sign, they elected their first Governor. They had created the first experiment in consensual government in Western history between individuals with one another and not with a monarch (such as the Magna Carter in 1215). This was the first step away from English governance and the giant step towards the Declaration of Independence and the US Constitution.

A second historic event taking place in November was the prophetic vision of George Washington, during the desolate winter at Valley Forge of 1777-78 with the Revolutionary War going very badly. He was alone at his quarters when a beautiful angelic luminous being appeared. As he gazed at her, Washington felt as though he was dying or dissolving. Her voice said, “son of the Republic, look and learn.” Washington then saw a shadowy angel and visions of war and heard the groans and cries of his countrymen. (Josiah Chute was there and later wounded at the Battle of Monmouth.) Then the clouds disappeared, and towns and cities sprung up all across America. This was the Revolutionary War.

Again, the mysterious voice spoke, “Son of the Republic, the end of the century cometh, look and learn.” The dark angel appeared again and a specter from Africa approached and the people armed themselves and battled against each other. (William Chute was in the Southern Union Army with General Sherman and in the Grand Review in Washington afterward.) As the fighting raged a bright angel appeared, carrying the American flag, and wearing a crown of light that bore the words, Union”. She planted the flag and said, “Remember ye are brethren.” And instantly the fighting stopped. This was the Civil War.

Again, the voice spoke: “Son of the Republic, look and learn.” Washington saw the shadowy angel blow three blasts on a trumpet and storm clouds formed over Europe, Asia, and Africa. Hordes of armed men, who moved with the cloud, marched by land, and sailed by sea to America. The armies devastated the land. Then the voice again said, “Son of the Republic, look and learn,” and the dark angel blew the trumpet. “Instantly a light as of a thousand suns shone down from above me and pierced and broke into fragments the dark cloud which enveloped America,” and the bright angel with crown and flag descended with “Legions of white spirits” who joined the nearly defeated Americans, giving them new strength to fight. The shadowy angel sprinkled more ocean water on America, and the dark clouds carried away the invading armies. This is the coming war.

The mysterious voice told Washington: “Son of the Republic, what you have seen is thus interpreted: Three great perils will come on the Republic. The most fearful is the third, but in this greatest conflict the whole world united shall not prevail against her. Let every child of the Republic learn to live for his God, his land and the Union.”

We must all look beyond the internal political stresses tearing our country asunder to remember the greatness of the American Union must be saved. It has always been fought for and many people have died to save our country. “Children of the Republic, look and learn.”

May God bless all of us, the people of America who would fight to preserve it and the Constitution.

The December Client Newsletter will cover tax events and changes for the new year.

Phil Chute, EA, Nett, Leslie, and Sarah

Analysing Data

October 2020 Newsletter


SOCIAL SECURITY: There is some good news to report. Social Security will post a modified CPI increase of 1.3% for all beneficiaries effective for January 2021.  The bad news is that the real inflation this year will be closer to 5%, especially with housing and food costs going up.  Fuel costs are down as an offset but most Senior Citizens do not usually drive to work and tend to stay home more.  The increased Medicare fee will offset more than half of the average increase, to net less than $10 per month.  

FEDERAL STIMULUS PAYMENTS: $1.8 billion will now be paid to 85,000 State and Federal prisoners who were not budgeted into the Cares Act. How the money is used is debatable. How the $30,000,000,000 federal deficit will be repaid is also debatable.

CALIFORNIA INCOME TAXES: The Golden Grizzly Bear State has proposed bill AB 1253 to increase the top 13.3% tax rate to 16.8% RETROACTIVELY to January 1 this year.  This new rate would affect only millionaire’s taxes and would be inflation adjusted annually.  The worse news is that State taxes are not deductible on the Federal returns if over $10,000. U Haul and moving services are absolutely overwhelmed from moving people out of state now.

NEW CALIFORNIA EXCISE TAXES: Cannabis excise taxes are now based on 15% of the mark-up (retail sales price) rate.  This is determined every six months and paid by the distributors, same as liquor, beer, and wine.  It is worth noting (client rumors) that illegal marijuana may now be cheaper.

FEDERAL TAXABLE FIND: In ancient times everything belonged to the King.  He would dispense forests and estates to the loyal and political supporters with an occasional bequest to war heroes.  In our country, a democracy, the Federal government will allow people to profit from their efforts as long as they pay taxes on it.  Even if it is minerals from Federal or State lands and the Spanish treasure ships.

About 100 years ago a volcanic diamond-bearing site was discovered in Arkansas.  The De Beers people who owned and operated the South African mines cartel found out and tried to take it over.  They were repulsed because it was on State land.  They lobbied that if they couldn’t have it, the output would destroy the value of diamonds everywhere and a compromise was reached whereas the location would become the Crater of Diamonds State Park and it would not be commercially mined.  Visitors to the park have been allowed to dig around and keep any diamonds they find.

Recently, a 9 carat diamond was found and the stone is currently being appraised.  It might be a surprise to all that the value, when determined, will be taxable under the Cesarini vs. US tax case that ruled that all TREASURE TROVES found are taxable income.  Unfortunately, the finder will probably have to sell the beauty to pay the taxes. Noteworthy, is that a 16 carat diamond was found there in 1975.

CALIFORNIA PROPOSED REAL ESTATE PROPERTY TAXES: The coming election will probably toss out Proposition 15 which limited property taxes to a cost basis when purchased and a 2% annual increase until it is sold or inherited. This will affect commercial properties and will bring in another $12 billion annually to pay for the huge costs of pensions and administration.  These taxes will be paid by consumers and businesses through triple net leases and increased prices. I am sure it will pass because the Temecula citizens passed an increased sales tax increase a few years ago (no SWAT team here) and a majority of Californians passed the huge fuel and transportation tax increase recently.  Californians love spending and taxing.

I once had a medical doctor client who lived very high.  He would spend exactly twice whatever he earned, which was very substantial.  Eventually he lost his contract to provide medical services with the State for overbilling, and went downhill forever afterwards.  Reminds me of California State and municipalities with no limits on spending and none on new taxes.

FEDERAL FOREIGN ACCOUNTS AND ASSETS: An FBAR report must be filed annually when the tax returns are filed.  Please inform us if you or your spouse had an aggregate value of foreign accounts of at least $10,000 at any point during the tax year.  It is a question on the tax returns. I once represented a client on a FBAR penalty case involving a Canadian investor who actually filed the reports and I had to deal with a SOB IRS lawyer who thought his job was to read instruction manuals, not to look up the case on his computer. 

REAL ESTATE:  Although real estate values have increased 6% in the past year there are problems looming.  Federal mandates for landlords forbidding evicting non-renting tenants, and forbearing mortgage payments have pushed a $15 trillion dollar liability into the next year.  Some people will be capable of negotiating rent or mortgage repayments into the next year when everything must be resolved.  The others will move because of unemployment or inability to pay.  This will induce a crash of foreclosures and a glut of houses for sale.  Beware, it could affect your finances or ability to move. Best to complete refinancing now before interest rates or prices affect your deal.  This is the best of times.

ANNUITIES:  We still offer an insurance annuity which features a 6% sign-up bonus, averaged 6% earnings for the past ten years, guaranteed principal with no loss years ever, and no fees.  We believe it will outperform most portfolios based on the current economy and the near future.  If you are interested and would like to discuss your investment portfolio, please email me or call to schedule an appointment.

Best wishes for the coming Holidays.  We hope to see you again next year and pray that the COVID-19 virus is whipped forever.

Phil Chute, EA, Nett, Leslie, and Sarah

City Center

September 2020 Newsletter



With barely a fortnight left to the election, I would like to pray only for an honest election.  Everybody knows the opponents for the Presidency by now so let the true wishes of the real voters be known.  If it is connived, duplexed, or rigged then we will have a Constitutional crises which could result in bloodshed before it is decided.  Whatever you do, try to vote for the future of the country and flag, not short-term personal gain, and do your best to insure it is done honestly.


There have been government loans, grants, one-time stimulus payments extra unemployment benefits, and deferred payment mortgage plans like never before to offset the tragic effects of the pandemic and a shutdown economy.  The tax effects on these plans are all different.  On a deferred mortgage loan, the principal and accrued interest on missed payments are added back to the loan and will be repaid from the longer term which is not a taxable event.  Grants are not taxable because they are a return of taxes gifted by the federal government.  Loans for business performance and hiring are not taxable if the conditions are compiled with. One-time stimulus payments to most all taxpayers are grants and not taxable. There will be no audits except for sparse reviews of multi-million dollar loans and grants.


When analyzing client’s portfolios I have noticed that many clients are invested in High Yield mutual funds.  Unknowingly or simply unadvised, the brokers should be telling them, especially senior citizens, that they have been investing in High-Risk Bond funds.  They usually pay very high dividends and earnings [interest and capital gains] but the risk is always there.  The risk equation is that higher risk equals the higher interest rates. There is a huge amount of foreign debt in some of them and foreign stocks or bonds in this case are not audited and vetted/certified as they are in America.  Sometimes sovereign foreign bonds, such as with Russia in the 1990s, were greatly discounted.  A $10,000 bond would be sold for $7,500 with the mutual fund buyer showing it at full value and receiving full interest payments.  Upon maturity the bonds would be cashed in and the investors would make a huge profit.  Problem was that the Russian bonds went south and became insolvent with the crash of the Empire during the 1990s.  One of my clients, who was retired, lost 1/3 of her portfolio from one day to the next. I never sold high Yield funds again.  They are also not recommended risk-wise for senior citizens unless they have a very large portfolio.

Also, Enron bonds were in play for some time until they took everybody out.  It was like a roller coaster with everybody climbing on board for a great ride uphill until the thing spun out of control to insolvency. Beware of risks which are in direct relation to gain or loss.

Noticeably are the high interest rates paid for California Municipal Bonds.  The average interest rate was 5% which would have an after tax equivalent of 8% compared to ordinary taxable interest bonds.   The broker had paid a premium to buy the bonds with the extra-high coupons.  Accordingly, a $10,000 bond with a higher than usual interest rate would command a sales premium depending on the life left on the bond.  The broker for this portfolio had paid premiums of thousands to buy many bonds.  Accordingly, the client would see he had received the 5% dividends but not notice the other line of the distribution that showed it was offset with amortized expense charges for the premium paid.

And then there were the high advisor fees cleverly hidden in the back of the statements. These range from 1.5% to 2% of the portfolio value and are charged quarterly. 

Lastly, one of the portfolios was heavy in energy stocks ranging from utilities to oil and gas.  These are falling out of favor with the California/New York initiatives to ban gas and oil in the future while forest fires are raising the utility rates like crazy.  Just because lack of maintenance by the utility company high-tension lines helped start fires in the Northwest this past year, they shouldn’t be responsible for all of the magnitude of unmaintained public forests which burned out of control.

Overall, the portfolios I saw had earned less than 2% year-to-date and the year is closing.  This year I expect to see 5% inflation and I expect many portfolios to actually lose principal due to inflation and poor earnings.  Next year could be a repeat.


One other item written in the financial news recently is the invasion of foreign securities in our Stock Exchanges and other agencies.  Especially China with their long-term goals of world domination militarily and economically. First, our greedy International firms traded their technology transfers and trade secrets to do business in China. Woe to them to find themselves facing their products in international markets afterward with Chinese names on them.

Then comes the Chinese Belt and Road initiative to place huge segments of the world under China’s influence.   They loan infrastructure loans to Asian and African countries and build airfields and highways to them. They now enslave one to two million Uighur Muslims laborers in Xinjiang concentration camps. This is the Communist Chinese equivalent of the Russian Communist Gulag.

Their Capitalistic trend is to go public with many of their quasi-public entities.  I have read that up to 1/3 of Public retirement pension accounts are now invested in foreign accounts, mostly Chinese.  Many of them are merely shells of government subsidized companies formed to attract American dollars for trade and expansion. 


Speaking of funding our state and municipal pension accounts; the Public pensions nationally earned only 3.2% this past year ending June 30, 2020. Low interest rates invite high risk in other hedge funds and securities. Most public pension accounts are greatly underfunded from paying higher benefits than earnings.  One fund in Chicago was only 23% funded and they had already sold off future sales tax receipts.  We should expect to see some Chapter 9 Municipal bankruptcies before the year is over.  Most cities have a municipally built and funded sports stadium which operates in the red every year.  More so this year though with the Coved virus keeping fans away.


On to the good news: We have access to hundreds of insurance annuities which have a large range of very low interest rates for the most conservative investor but have averaged around 6% in the indexed options.  No taxes on earnings are paid until withdrawn from the account.  EquiTrust offers a 6% up front bonus so if you worry about early withdrawal fees, then that would take care of them.  Long term investments are what annuities are all about and this is perfectly safe for pensions and IRAs.  There is also a no loss clause in case the insurance company takes a crash on investments because of uncontrollable economic situations, the owner of the insurance annuity does not suffer any loss against his/her principal investment balance.  He/she merely has no earnings for the bad year.  In our proposals of actual earnings, the 2008 year was the only year without earnings.  No fees are charged against your earnings or portfolio, ever.  This is the safest and best investment I know of, and I have seen them all from my 40 years in tax practice and 20 years as a securities broker-principal executive.


Last but not least is the political trend to shut down normal energy sources such as fracking and transporting gas/oil by pipeline.  This ties in with the Green initiatives and mandates to close the 20 electricity generating peaker plants and all nuclear power plants in California which resulted in blackouts and brownouts this past year for the first time since the Enron fiasco. They have resumed buying power from out of state, just like when Enron was involved. The State Government recently announced the mandate for only all new electric vehicle sales from 2035 [autos] to 2045 [trucks].  The substitute for gas/oil fuels will be electricity.  Electric power from where? The latest proposed solution was to use the electric car [batteries] as a reverse plug-in mode to feed power BACK into the grid during peak periods.  I can see it now, “Honey, don’t go shopping after dinner because the State is draining our Tesla batteries. But we can recharge them after midnight tonight from the windmills.” During the power cutoff this summer, Governor Newsome of California told us the solution was to use less electricity. Reminds me of the Express Train from Nowhere to Nowhere.

Best wishes for a less stressful remainder of the year.  Call or notify us if you should receive any IRS or California notices or communication on your taxes.  We are also available for free investment portfolio reviews and estate planning.

Phil Chute, EA, Nett, Leslie, and Sarah in the publishing background

Glass Buildings

August 2020 Newsletter


First the good news.

The Corona Chinese virus appears to have made a pass and slowed down to a manageable level. This highly contagious virus has affected everybody in many ways.  Now, our many clients who were afraid to leave their home may begin to go on with their lives.  Social activities will be restricted and masks with social distancing will be the norm at least until the year is over. This is the new norm.

Good news from Congress.

A recent bill has passed to allow deductions for up to $300 for charitable contributions without itemizing.  It will be treated the same as the school teacher credits for 2020 returns.

Good news from the California Secretary of State.

For our senior citizen drivers over 70.  You now have an extra year from the expiration date (if from March to December 2020) to get your CDL license renewed.  The SOS mentioned Covid-19 but I think it takes an extra year to find parking and get through the line in Temecula.

The IRS is in trouble again.

The IRS recently admitted that they have trailers full of unopened mail which contain payments relating to tax returns which were timely electronically filed.  The process that recorded the tax return data has already been sending past due notices for the missing payments, most of which are in these trailers.   At this time the 12 million pieces of unopened mail have resulted in millions of past due notices with attendant penalties which the IRS will need to reconcile by going back to the post date on the envelopes, after opening them. Let’s hope they are post dated.

California is now a third world country.

According to the Wall Street Journal article titled “California’s Green Blackouts.”  This month there have been recurring electric energy brownouts and shutdowns of air conditioners because of continuous hot weather, after decommissioning the two nuclear power plants at San Onofre and some fairly new gas powered peaker plants throughout the state.  The nuclear plants could have operated safely for many years at half-power but the State Energy Commission decided they didn’t like nuclear power, while the gas plants are also supposedly environmentally unfriendly because they aren’t clean renewable energy produced by windmills or solar. Governor Newsom said he remains “committed to radically changing the way we produce and consume energy.” True statement. Especially when the Governor waived the emission standards for privately held gasoline, natural gas, and diesel electricity generators to power up to replace some of the missing energy. “The solution,” as officially stated, “is to reduce electrical usage.”

Now the bad news from California.

Prop 15 is on the ballet for the fall and will destroy the original proposition 13 which limited property taxes.  If you think the taxes on your house or property are not high enough, then go for it.  Although it appears to affect only commercial real estate, the door will open and guess who ends paying for real estate taxes, the public users for everything we do.  There is a companion Prop 19 which appears to lower taxes.  Sadly, the attached financial economic report showed the opposite effect.  Like the old switcheroo of the last election for a massive tax increase which had people voting no to become a yes vote by structuring the proposition to read backwards. The Attorney General had denied his wording is biased.

Because we have a proposed budget deficit of over $60,000,000,000 [billions] for the year in California, the land of the bear, there will be many new tax proposals in the fire.  The first is a 25% increase in the maximum State income tax, which is now the highest in the Nation. Others will crawl out of the darkness of Sacramento political chambers after the coming

election. When I was a stockbroker I sold California Tobacco Bond securitized future settlements as interest tax-free bonds. 

This was the money allotted for 20 years due to the collective lawsuit loss of the tobacco companies to the States. Now it has been spent and we are paying interest on it as it amortizes.

Some tax info you might not be aware of:  Because fees are not taxes requiring voter approval, there has been steady fee increases appearing in California over the past years.  The nature of the fees are usually a twist in the law such as sales taxing a person on the full price of an item purchased in Costco, before applying the sale discount.  Note that it is not priced net but shown at full price for tax purposes and the discount is shown separately.  Then there are the other little sneaky taxes such as the 1% tax on lumber and wood products in addition to the sales taxes when you leave Home Depot. And when you buy a new car there is the tire fee-tax for “disposal” of all tires including the donut spare and a separate fee-tax on the lead balancing weight used because lead is bad for you.  And there is the additional fee-tax when the garage takes the worn tire off the car, which is another disposal tax, in addition to the tax on the new replacement tire.  But don’t forget the sales tax on shipping [postage] and handling of taxable items bought on line.  Meanwhile, the new one dollar tax the State added to my business license fee has now increased to three dollars this year. And so it goes on and on.

More bad news from California

On July 30th, the California Senate voted 33-3 to create a commission to study the impact of Confederate States slavery before the Civil War affecting Californians and to award reparations for descendants.  Since there is a Democratic Supermajority and Governor, whatever they decide may become law without a public vote.

Now the National bad news.

The shutdowns of businesses, all schools, low economic activity, and accompanying disruption of everyday life in America has wrought a terrible toll on the economy.  Our national debt has gone from $21 trillion to over $30 and the numbers are still rolling. All the big states want the Feds to borrow money to bail their losses out by digging into the pockets of the small states that better manage their economies.  This is to avoid borrowing more money to cure their own problems.  This is simply redistribution of wealth on a national scale.  No matter who wins the next election, there is a monster national debt, worse than at the end of WW II, to be paid with interest when due.  To increase it any further after the recession would be a crime because it forces the debt on future generations. Tax increase proposals from both political parties is a certainty.

Insurance Annuities

Yes, we still have insurance annuities.  Our favorite has a 6% sign-up bonus and historically has averaged 6% as an indexed investment. Guaranteed earnings are less. No losses or fees ever. Proposals on request.

We still offer a free financial review of all your pensions, investments and taxes, free of charge.

About Stocks, Bonds, & Taxes

Because most of our clients purchased our new book, attached is our first official review by a national reviewer.  There have been two additional 5-star reviews but they didn’t comment in detail.

Last Notes

Thanks for the privilege of working with you this past year.  As always, contact us immediately if you have any questions about your returns, receive a California correspondence form or a SC2000 inquiry letter from the IRS.

Best wishes to all.

Phil Chute, EA and Staff

July 2020 Newsletter

Dear Client:

This newsletter is to inform you of current events that can affect you economically.

The new stimulus bill is being refined in the Senate and it appears 90% likely that it will include the following provisions:

First, it will include another round of direct $1,200 payments to many Americans with AGI under $75,000

if single and twice that if married, plus $500 for each dependent regardless of their age.

Second: An extended stimulus unemployment benefit will be enacted at a lower rate of $200 per week

instead of $600.

Third: The ban on evictions from Federal backed mortgaged properties will be extended.

Fourth: More testing funds will be available for senior facilities, schools, and child care centers.

Fifth: The proposed bill will restrict lawsuits in coronavirus related cases.

Sixth: There will be additional aid to schools and universities.

The bill will be finalized and publicly announced in the final form Monday next week.

We have offered free financial planning for our clients included in our tax fees. I have been, or am currently, licensed in securities as a Registered Principal, taxes as an Enrolled Agent, and fire, casualty, life & disability insurance agent.

This past week we reviewed the finances of a client and found, although he had good investments, that

his ex-spouse was still the beneficiary of his huge pension. The client was notified and is very grateful. Another client had property above the tree line of the San Gabriel Mountains where it is nice and cool.

The recent fires in Northern California in the past year resulted in a huge increase of mountain residential property casualty rates. The client left his policy information with me. I noticed that he had a good rider to cover the increased costs of replacement construction from damages but the property values were wrong. His property, with a FMV of $350,000, was insured for almost twice the amount. The client saved half of his renewal premium by realistically adjusting the amount of the property of his policy, resulting in no real loss of coverage.

A widowed client was worried about the roller coaster effect of the stock market on her pension. She agreed to buy an insurance annuity through us which will protect her investment.

Another client showed us his considerable inherited investment portfolio which was 100% invested in California tax-free bonds. The wealthy relative had bought them to avoid taxes while she lived in California. The problem was that the client had moved to another state and now all the interest income would be taxable. His broker never advised him. An additional problem is that the bonds are paying high-risk interest dividends because they were rated lower than in the past. This was before California announced a current deficit of over $60 PLUS Billion for this fiscal year (before the new shut-down).

Now the bad news which most financial professionals have been expecting. The following information was gleaned from the Wall Street Journal and my personal client interactions and expectations.

After a market shock earlier in the year when the DJIA dropped over 2,000 points in a single day, the market has responded magically. Tesla Motors and gold both hit $1,900 per share and troy ounce setting new records. Equities are up 25% in five months, setting a new record. Silver rose unexpectedly to $23 per troy ounce. NASDAQ and S&P Indexes are up 40% from February. New records break again. Wonderful performances, as the DJIA rallied about a thousand points monthly since the first quarter corporate earnings were announced earlier.

The perfect storm is coming. Economists now estimate the GNP has contracted by 32%, about one third, in the second quarter this year. The virus lockdown continues with the worst contraction on record. While 60% of all closed restaurants will never recover, the financial markets and real estate sales have been defying gravity. Interest rates have been held at artificial lows by the Federal Reserve Bank. Thursday,this week, the Federal Economic Agencies will release their official data.

One other issue on the way in the next two months will be the results of corporate second-quarter earnings. They will reflect the continued exposure to the economic nightmare we have all experienced. The results should be much worse than the news that dropped the Dow from $27,000 to $20,000 earlier this year. We will learn if the recent market contradiction of exuberance versus reality will sustain.

We offer insurance annuities which are guaranteed to never lose principal, offer a 6% sign-up bonus, and honest earnings.

Best wishes and good health to all. Call for financial planning appointments or to buy my new book,Stocks, Bonds, & Taxes, which is all about financial information and estate planning.


Phil Chute, EA & Staff

Modern Office Building

Second Quarter Newsletter 2020

Dear Client:

This has been a tumultuous year with the Coronavirus and widespread social disruptions of lives, work, and business. Many of us have been affected in various ways and we hope that as Americans, we will endure and look back in prosperous years ahead to review these times. Our hearts go out to those folks who have contacted the virus or been otherwise affected by it. Like the 1918 virus which helped stop the carnage of WWI, it is worldwide and caught the entire world unprepared.

Meanwhile, back at the big home-office, we improved our breathing environment early in the year to protect our family, employees, and clients. We installed an IQ Perfect MERV-16 filter with ultraviolet treatment for the main air conditioner/heater unit. This huge box of filters and electronics constantly wipes the air clean of all particles and viruses. It also helps people with allergies to anything airborne. Our tax season has been very mild with more returns sent by post or email. I am sure that the July 15th extension of the filing deadline gave everybody twice the time to prepare and complete the complex task of our annual filing obligations.

My new book, Stocks, Bonds, and Taxes, a huge prolonged affair, has been finalized with a second edition; a college textbook. We continually edited and reformatted the previous edition and now have an improved third printing of the original book which matches the textbook except for the 330 problems and answers in that text. We sent 200 review copies to different California colleges that offer business courses for the fall semester.

You must have read about the Rapid train from nowhere to nowhere [Bakersfield to Fresno] that has become a dinosaur living in Sacramento. A real high-speed train is in the works between Las Vegas and Apple Valley with extensions proposed to Rancho Cucamonga. This is privately funded and construction will begin next year.

We have insurance annuities for our conservative clients. Some offer a sign-up bonus up front to 6%, lower penalty terms for early termination, guaranteed earnings, exposure to the equity market through the insurance company investments with a no-loss guarantee, no advisory fees, and finally, very secure high reserve ratings required for California approval.

As always, we are here year-around for questions, interviews over tax situations, investment choices, and estate planning. If you should receive any tax communications by mail please fax or email a copy (both sides) to us and we will respond to you immediately.

We hope you liked the 2020 Calendar we put together for your use.

Wishing you the best of the remaining months of the year. Let us all stay safe and healthy.


Phillip Bruce Chute, EA, Nenita, Leslie