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June 2023



Some good news from the IRS: A client reported that the IRS responded to their distress phone call, and finally got an appointment with a field Revenue Agent in San Diego. Because the auditor was professional and experienced, they got a detailed response from him on how to manage their problems. This indicates that the IRS has some particularly good people. It also indicates that they have no active office auditors available.


The sad news from the IRS: The same client was expecting a large refund check. A year later, they received an IRS notice stating they owed thousands instead. Their complicated returns required paper filing instead of e-filing. The tax return was processed manually, but somehow it suddenly acquired a business schedule with a big profit. The above-mentioned IRS agent advised the client to file an amended 1040X return with the original information and an explanation about the IRS error. We e-filed the forms, which contained the information that was originally rejected a year before. This issue has become common because of poor processing and lack of checking computer input by IRS.


Pension Plan woes: State and municipal pensions have been shifting their investments away from fossil fuels to climate control objectives in recent years. This includes not only divesting energy stocks and bonds but also banning investment managers who do not agree. New York City employees, Teacher, and Education pensions amount to $150 Billion. They all filed suit against the City because the portfolios were losing money big time [$40 Billion] while the energy sector rose 58% in value last year. The essence of the suit is that the fund managers have a fiduciary responsibility to earn money for the employee’s benefit, not to lose it for climate change goals. This is not the only big City to experience these problems.


New York City, despite an annual revenue deficit, has created the Office of Asylum Seeker Operations to allow undocumented migrants community college gratis while their asylum claims are being adjudicated. Being in a Sanctuary City certainly comes with great benefits. This is one way to attract new residents to replace the thousands of residents who have fled the city for other states in the recent past. The request of the Mayor Eric Adams to the Mayor of El Paso to send their migrants to NYC at the Authority Bus Terminal in Manhattan has helped.


Summer air conditioning solutions: An interesting WSJ article appeared last month about window air conditioners. Older houses and apartments lack central air conditioners. If you own an old house, even in southern California where the sun shines all the year, except in the winter, there was always a basement with a huge octopus vented furnace to heat the place during the winter. It traditionally occupied half of the basement and would burn coal or wood until the event of fuel oil and oil tanks replaced the coal bin.


The summer solution was electric window air conditioners which blotted out half of the window to provide noisy expensive air blowing into the room for relief. The article explored recent modern alternatives for more efficient cooling of individual rooms and spaces. The window is still important but the new window conditioners have a big slot down the top and middle of the unit to keep the noise insulated by the window itself, outside the room. The units are engineered more efficiently using a variable-speed inverter compressor to use much less electricity instead of the old ugly model. The only problem with is availability because the manufacturers have had trouble keeping up with the demand.


Tax returns and record retention: Businesses which have depreciable equipment should keep the purchase documents for the term of the asset life. That would be 27 ½ years for real estate escrow closing statement, and up to ten years returns and purchase statements or contracts for most other equipment. If Code Section 179 depreciation or accelerated depreciation is used, the equipment should still be continued on the books for the original term and the equipment sold or disposed. The accumulated values of depreciation are essential for all sales. For corporate businesses, the equipment should be continued on the books as assets until the useful life is expired, even if fully depreciated years before.


Capital losses are limited to offsetting capital gains every year and can only offset up to $3,000 of other taxable income each year. Accordingly, the tax returns and source documentation of large capital losses should be kept available beyond the normal statute of audit limitations.


The normal statute of limitations for audits is three years for most tax returns and back-up documents. For fraud there are no limits although the IRS computers do not search for data after ten years. Refunds are not made available after four years’ filing periods.


When in doubt call us or hang on to the returns or documents just in case. Man-made Lab-grown diamonds are now fashionable, according to a big article in the WSJ. The one-carat and over diamonds at one time sold for the same as the same price as the ones dug out of the ground. Now they retail for one quarter of naturally mined diamonds. Smaller stones used to be grown only for industrial uses but now, because they are perfect copies, they are more accepted for weddings and bling.


It takes a long time to grow one in a laboratory, about 600 hours after a diamond seed is placed in a sealed chamber to grow one carat under intensely high pressure. Methane gas provides the carbon atoms to bond in a lattice to the seed. That is a month each. Some day they will grow robots instead of manufacturing them.


Accountant profession is overworked: The WSJ reported an accountant shortage because young mathematically inclined students are rejecting the boring but demanding career work of 70-80- hour weeks. My son, Brian, was right when he rejected my option for many years ago. He added that the hourly pay was lousy but only made up for longer working days.


Mark Cuban from the Shark Tank is in the WSJ news: His firm is now offering the biosimilar version of Humira for 10% of the original drug price. Arthritis therapy is now available without the intermediary in the pricing structure now that the original maker has generic drug competition. This is truly a welcome concept for the people who need it the most…eliminating the medical wholesalers.


Homeowner and auto insurance: Most insurers in California are facing increasing policy costs because of the cost of doing business, especially with all the big forest fires these past few years. Major insurers State farm and Allstate quit selling policies to new clients. State regulators have struck down rate increases which have resulted in losses on homeowner policies. WSJ article. As an insurance licensee I was notified by the Calif department of insurance to advise clients to trim the wild bushes near their houses to alleviate the next forest fire.


Other news from California, the gold-colored State, shows the current annual deficit running more than $32 billion.


The Bakersfield to Merced Train to Nowhere has now a proposal for an energy source of 525 acres of solar panels to power the thing. It will never be built to require these impossible energy needs.


Finally, for Washington State, by Washington, DC: Comes a proposal that the lower four dams on the Columbia River should be torn down to protect the spawning salmon and eliminate electricity produced by the dams. Because the Columbia River system is the top wheat export gateway in the nation carrying 80 million bushels annually to the ocean, all this cargo will be forced on the roads and rails. Robert Jackson from Stanford University argued that Americans should be content to live on a quarter of the energy they do now. Living on less would make us healthier and happier, while contributing to a more equitable world. We will soon find out.


For our extension clients: Please move your filing appointments from October 15 to a month or two earlier to help in the slow times and for us to take a break, too.


Be sure to let us know if you need advice or receive federal or state correspondence on your tax matters. We will respond as soon as we get them. As noted above, the IRS is creating their own problems with paper-filed returns.


On another note, we apologize for the inconvenience of calling our office while we transition to a new phone system called “Ring Central” and upgrading our internet service.


Best wishes,


Phillip B Chute, EA

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May 2023

First the California good news:  The California Department of Justice has announced the creation of a Housing Strike Force to advance housing access across the state. This is the result of CDOJ disagreeing with the city of Elk Grove over a low-income housing project in a part of the city where commercial properties had storefront businesses at street level and residential above. The DOJ wanted the project to be higher density with units straight up. The City Planning Department lost, and City zoning laws were tossed. Beware if the new agency comes to your town. Thanks to AG Bonita for the lovely picture of him and Biden.


Second, are the Bank Holidays: A bank holiday happens when you go to the bank and follow the line to the front door sign that says it is closed. Then you race home and electronically try to transfer your funds from your bank to your other bank or savings and loan. No, bankers do not get special days off for holidays, they simply cannot cover the exodus of bank accounts to cash in a brief time without selling assets such as Treasury notes they are required to hold because they were so highly rated for collateral and uninvested reserves. The problem is that a lot of older Federal Reserve Notes only pay 1% interest. Because the market this year is up to 4% interest, it will cost the bank 15% to unload the old Treasuries in a hurry without waiting years until maturity. This was the problem at Silicon Valley Bank, Signature bank, and the local Pacific West bank. All these banks had exceptionally large depositors and when they pulled out the banks folded, were. salvaged by being bought at a huge discount by other banks, or lastly, in banking purgatory with the FDIC.


The banks had many factors in their favor. The Silicon Valley bank gave 70 million dollars to social justice causes like BLM, ESG, and other woke causes. They went without a Chief Officer for risk management for eight months last year but still received a clear audit report a month before closing. KPMG also gave the Signature bank a clean slate although none of the banks had adopted basic risk-managed hedging interest rate risk techniques. Thanks to Newsmax.


Another bank, the First Republic has also failed [taken over by the FDIC] and is in the process of being acquired by JP Morgan Chase, or PNC Financial Services Group. If they are fortunate, they will have a new name over the door next month. The panic of bank failures is a virus that spreads from one bank to another.

The ultimate solution is not the usual $250,000 in FDIC guarantees which covers normal small businesses or individuals. The solution was for President Biden to throw the FDIC guarantee away because it only covered small accounts while the bank paid fees for their limited coverage. Biden used the insurance reserves and the FDIC to cover all the big uninsured depositors. He stated that,” there will be no losses borne by the taxpayers.” “The money will come from the fees that banks pay into the FDIC Fund [which were not paid to cover the large depositors].” Accordingly, there is now a two-tier system of little people and businesses who have paid to be insured and those large financers and businesses who were covered by never paying for insurance [by the banks]. Somebody will pay but it is never the guilty party, (WSJ 3/14/23).


Other federal agencies are also entrapped by the interest rate changes. A recent WSJ editorial noted that the Federal Reserve Bank is now losing $7 Billion daily because it holds trillions of dollars that yield only 2% but their cost of funds is now 4.6%. The rapid increase in interest rates has cornered financial entities everywhere. I do not believe our current interest rates will come down as most people believe. It was really an abnormality for the Government to decrease rates so much in the first place. Now we will all need to adjust to the new norm, which is really a misplaced old norm.


Note to all my clients: There are scads of tax articles and an IRS operations review which I wish to print but had so many economic events rolling in that I needed to separate my information into two lots called May and June. Currently, we have another crisis coming due in June if there is no budget agreement. And I will continue with this true but deep understanding of the financial crisis we are experiencing.


The Federal Debt Ceiling was breached earlier this year and is short over two trillion dollars. The debt is now 31 trillion and the debt ceiling, which is a House-Congressional agreement, must be raised to continue borrowing more money to keep up with the runaway spending habits of the Government. Here is a discussion from the usual WSJ about constitutional issues such as the 14th Amendment which states that the “validity of the public debt of the United States, authorized by law…shall not be questioned.”  This means that the Treasury cannot repudiate debt held by the public as issued in Treasury bonds and notes. What it does not allow is for the President to issue new debt without the consent of Congress. The President cannot issue spending or forgive Federal loans without Congress’s statutory approval. These are some of the laws of the nation with the checks and balances which are ruled by the Supreme Court. Meanwhile, next month will be the month when federal spending will exceed federal tax revenue. They MUST prioritize paying interest on Treasuries and retire debt principal when due. Social Security is a separate fund and should not be affected by the threatening rhetoric from the parties. Student loans are not forgiven, just thrown about for more votes.

                                    Today there was a WSJ article about the coming U.S. default which included a neat graph of our largest debt holder China. It showed the biggest drawdown of our Treasuries by their holding .5 trillion dollars in 2008 to peak at 1.3 trillion in 2020 and declined to .8 trillion today. There was also mention of recent large corporate bonds replacing maturing Treasury notes in the U.S. For the second time in history the debt of the U.S. is about to be downgraded and higher risk means higher interest rates for all. If they can be sold.


Good news from Asia:  Cargo containers 40-foot standard box shipping rates from Asia trans-shippers to our Pacific Coast have fallen from $14,000 to only $1,500. This is because weaker demand for apparel, furniture, and electronics has cut shipping. Great news for retailers and consumers here alike. Because this is an aftershock of the Pandemic worldwide disruption, the prices are expected to rise as the shippers are now losing money, (WSJ 3/14/23).


Mixed news about natural gas prices:  Now that the Winter is past and the storage tanks are full, Germany and Europe have absorbed as much as they could manage without a dire emergency, and prices here are well back to normal. Oil is another concern, especially in California where pump prices are about $2 per gallon more than the rest of the nation except Alaska and Hawaii. After we shut down the pipelines and limited oil production, OPEC is running the show again. Before the last election, we had become the largest producer of oil in the World which made us the swing producer on pricing. This kept the prices decent for years after the great oil crisis of the 1970s when OPEC limited oil production to keep prices over $100 per 42-gallon barrel. Currently, OPEC is now limiting production again to raise prices. Contrary to news from Washington that oil usage is declining overall, worldwide demand is up over 10% in the past three years and a 2-million-barrel daily shortage is expected this fall, (WSJ 3/14/23).


            Our current Administration, which helped create the shortage, sold off half of the strategic petroleum reserve stockpiles in November last year to temporarily offset rising fuel prices. The Strategic Reserve which held almost 700 million barrels of oil from the shock of the Arab embargo before, is now down to only 350 million barrels. Meanwhile, the Administration will need to refill the Reserve with more expensive oil from the same people who caused it. Vaporware learning curve, (WSJ 3/14/23).


          The Bidenesque approach to a solution for the shortage was to loosen the sanctions on the brutal Maduro Communist Venezuela Government which expropriated all the American owned oil production and shipping facilities. They lost a 10-billion-dollar international lawsuit over the matter and now Biden has resurrected the nightmare of being in business with them again. ConcoPhillips was awarded a license to be allowed to load, transport, and sell Venezuela’s oil in the U.S. on behalf of PdVSA. Conco hopes to recover the loss of their nationalized debt from the country. The heavy oil will be processed in the US for City Gas stations on the East Coast. To make the production part of the deal work Chevron Corp was issued a license to restart oil production and exports under the PdVSA. Currently production has fallen due to inadequate maintenance and sanctioned parts. The Venezuelan Maduro Corruption Party was famous for managing all sales of materials and supplies to the former oil producers and by using Communist pricing methods. A $10 copying machine ink toner cartridge would change hands for $100 as they controlled everything used as a state company store. This is an example of when your worst enemy becomes your worst friend. The trauma will surely continue, (WSJ 3/14/23).


The EPA solution to clean energy: All coal-fired power plants and gas-fired electric generating plants must use a modern technology called carbon capture and storage [CCS] and reduce greenhouse-gas emissions by 90% by 2035. That is coincidentally the same year all autos sold will be electric. The alternative is to shut down, which happened to the only commercial coal plant which tried CCS and shut down for economic reasons. This will result in the loss of 60% of all U.S. electric generation, (WSJ 3/14/23).


             The EPA is pushing Green Hydrogen for trucking. Green Hydrogen is simply undistilled water--not really, it is water molecules that are separated by solar, or wind generated electricity. When it is burned in truck engines it becomes water again. Clean, but expensive subsidized process if we can get past where to put all the solar cells and windmills. And it is priced by the liter and shipped in refrigerated tanks. The subsidies will amount to at least half of the fuel price like a reversed gas tax. Welcome to the future.


                                    New U.S. Energy Department rules for air conditions and heaters. To make your HVAC units more efficient the new rules will bestow a 25% increased cost for a new or replacement unit. Units must also be replaced if the old coolant needs to be replaced. The new rules are effective from January 1st this year so be prepared to pay thousands more, (Veteran’s Choice ad).


A major change in office space vacancies: The Pandemic kept office workers at home for a spell and they liked it. They also adjusted to the lifestyle of living with pet dogs, cats, and the lack of driving time and expense. At this point firms are fighting with employees to return to the office at a time when large firms are downsizing their employee populations due to the coming economic downturn. Elon Musk let 80% of Twitter employees and many fringe benefits go. Leases are always expiring which has become an opportunity to lease less space and shut down marginal branches. For-lease signs are everywhere including the vacant malls and strip shopping centers. Many property owners have recently found the best way to lose a tenant is to raise the rent after the Pandemic. Rents are falling, and the economy will be much leaner when the coming recession is over. As a stockbroker I sold many Real Estate Trust [REITS] which are specialized tax investments featuring a distinct type of investment such as shopping centers, office buildings, etc. The things would go public when they grow big [billions of dollars]. They were extraordinarily successful then the markets would change, and the real estate roller coaster would roll again, (WSJ 3/14/23).


Californian News:   Governor Gavin Newsom has signed a $50 million contract with a nonprofit generic manufacturer Civica Rx, to produce insulin with the goal of selling a 10-milliter vial for $30. “This is a big deal, folks,” he said to a press conference implying that no other state has ventured into the pharmaceutical complex drug business. Other drug companies will cap their price at $35 per month. Diabetics typically use two to three vials monthly. So, California’s branded insulin would cost patients only $25 to $55 MORE monthly IF Civica can produce it at the $30 price. Like the Train to Nowhere, that is an exceptionally long shot. Somebody forgot that California is now on track for a $31-billion deficit this year. Interesting number because if you multiply it by 1,000 you get the National Debt, (WSJ 3/14/23).

                                    The Slavery Reparations story:  Last year Gov. Newsome created a committee of nine to study reparations for people descended from slaves. California was never a slave state but felt guilty about the evils that may have befallen the victims. There was no mention of American Indian reparations for lands stolen from them. Or for the Japanese internment of Californians during WW 11 when they lost all their property and freedom. Or rewarding the Chinese who built our railroads. The recent summary of the group of nine’s findings was that there were about 2 million people affected and that it would cost upwards of $1.2 million each to pay for them. Total cost about $800 billion. A bill was created for this purpose and sent to Gov. Newsome who promptly vetoed it. Yes, Gov, you need all the votes you can get, (WSJ 3/14/23).

                                    Governor Newsome purchased [state money] media ads on Florida TV stations urging Floridians to move to California:  They cited Floridian legislated abortion limits, ban on critical race theory and the moratorium on discussions of sexual orientation and gender identity until fourth grade. Newsome signed laws transforming the Golden State to a Sanctuary State for abortion and transgender rights. The Freedom State he called California. Where super high taxes, illegal immigration is encouraged, bans on gas stoves and cars will be enforced, and where homelessness and soft-on-crime prosecutors thrive. Also, where the most drastic Covid-19 restrictions were imposed. If this state is so popular, then why did it lose $29 billion in Adjusted Gross Income in 2021? On the other hand, Florida gained $39 billion from new residents. Which is freedom?


                                    Labor Secretary in California Ms. Julie Su was a union activist:  Created the famous AB5 law which reclassified independent contractors as employees. This was aimed at taxi drivers and truckers who own their own vehicles. This entailed many other occupations and many of my professional clients left the state or jobs over this. She also supported the Fast Act which empowered an unelected board to arbitrarily impose restaurant work rules and a minimum wage as high as $22 hourly. There were also issues about including tips in the tab as wages for employees. She issued $30 billion in fraudulent jobless benefit payments during the Covid Pandemic. When the U.S. Labor Department repeatedly warned California that it needed to improve its fraud protection, Ms. Sue’s department sent out checks faster. She now works as Deputy Secretary in Biden’s Labor Department Cabinet. He recently proposed that she is his choice to run the Department of Labor. She would be typical of his Administration, which has no real focus on economics or the people, (WSJ 3/14/23).



Thanks for reading. Forward to taxes and IRS operations in June newsletter.


Best wishes,


Phil Chute, EA, and Staff

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April 2023



We are caught up on this last day of April with all tax returns which can be completed, and only 25 still on extension [that we know about]. I wish to apologize for our slowness at times while a tidal wave of new clients arrived. We did turn some away [more on this later] but there are so many hours in the day to complete all of them without battle fatigue, which causes making clumsy errors at the end of the day or evening. Like a forest fire defense by the crew of one my clients, who would make a slow burn to offset the big fire as a containment measure, we have set aside a few complex-difficult clients for further attention later this Summer.


News from the California Franchise Tax Board. A letter was received this month on audits. I still remember the days when there were IRS auditors and their computer would indicate abnormalities in tax returns, especially with phony audacious deductions, Schedule C businesses with gigantic losses and little or no income, and business entities with the same. The audits would nail the client to the wall and extract great tax benefits with no real defense. Then, several months later, the FTB would send their collections billing based on the results of the Federal audit. Yes, they are married. Two audits for the price of one. Well, the IRS has been on audit vacation for several years now, and many people are taking advantage of the lack of diligence, and many have gone crazy with pseudo businesses, not make money, but to make tax losses. Accordingly, with huge deficits of $21 billion YTD this year, the California bear collector for the FTB is hungrily missing those audit results. We received the letter this month From the FTB who announced a cloaked threat that [not really because they do not have auditors], they will send letters to people with obvious discrepancies that they should correct them immediately. They even suggested amending returns. It was nice of the FTB to let us know they are still in business, sort of.


We turned away many new clients this year when we found their businesses accounts announced, “Please Audit Me.”  I am perfectly aware that nobody is auditing this year. But next year, 87,000 new IRS people with new and better software will be auditing this year’s tax returns for Hobby limitations, loss extravaganzas, lack of capitalization, corporate businesses with no shareholder wages, and frauds. At least they will not be my clients and auditors, except the few we advised to get on payroll in a hurry because they had genuine business.


To clear up a point about the IRS hiring guys with guns. The IRS Special Agents do carry guns, make house calls, and can arrest people for criminal tax avoidance. The few Special Agents I knew at our low level were there for payroll trust fund payment avoidance. Businesspeople have a special responsibility when handling funds withdrawn from employee’s paychecks and if a person fails to make tax deposits or fails to file payroll reports or files fraudulent reports, they can get quick special handling by the IRS. This money is not theirs to mishandle, and that is why the report funds are named Trust Funds. In God we trust. But my treasury bills say, “with the full credit and safety of the US. Treasury. How could that be if they are $32 trillion in debt? How could a debt secure a debt?


About the new IRS funded regime. A great comment was made by a reader who said, “So the IRS wants $80,000,000,000.00 so they can find more ways to take our money. “That is a true statement because President Biden introduced the measure by stating he wanted to ‘close the gap between collections and the true amount of tax obligations.’  He also mentioned balancing the National Debt with the huge increase in funds exceeding the costs of compliance. Imagine what would happen to the economy if this were true. There would be a rush of cash to the Treasury to cover the $80 billion AND the deficit, which would cause economic life to cease to exist in America. They keep talking about Auditing people who earn over $400,000 annually and big corporations. Well, those people, some of my clients as an Enrolled Agent and the big corporations are all managed by the big audit firms which spend hundreds of hours each year on each client with very highly specialized people on these complex returns. I would imagine they would require five to ten years’ experience for entry level degreed accountants to even touch on a big corporate audit. As it is, to audit even a small business requires at least five years, which is the IRS entry level for the internal Enrolled Agent audit certification. So how is Biden supposed to reap audit results from the taxpayers without managing a tax school for five to ten years? They will train for the first year [now] and next year audit the hell out of everybody who deserves to be audited, and many others as well.


We have been focusing on the Inflation Reduction Act of 2022. This is a lie because inflation is not the old song about prices chasing scarce goods. Much of our inflation was caused by environmental costs forced on businesses. That and political Costs such as limiting oil and gas production and usage, shutting down nuclear plants ahead of scheduled life, restrictions on all life and the materials of this age. And wage increases pressed on many businesses with most government construction done by unions, schoolteachers unions spending $20,000 per student year to uneducate kids in many schools. These costs will go up, not down. The current administration will subsidize and print money until the drunken sailor goes back to the ship.


 A gigantic computer chip plant is being built in Arizona to pull the chip business back to America where it started. But the business went overseas for cheaper labor, while the labor costs for the new business will be extravagant with wonderful employee benefits. I imagine the costs will be so bloated that production will still go overseas again even with huge Federal subsidies. And all the recent discussion about clean hydrogen fuel for trucks. All current proposals are to subsidize over 50% of the actual fuel costs as they now do with synthetic fuels. And the whole deal is contingent with finding solar and wind power and finding places to get the electrical energy to break down the water to make hydrogen. How can inflation fall back with the government subsidizing and restricting natural economic processes?


The spectacular San Francisco Central Subway is finished. The engineering miracle of 1.7 miles opened in January at a cost of $1.95 Billion, three times as much as initially estimated. Ridership is severely lacking, however. Probably because riders need to walk 900 feet to the nearest connection and take three escalators to reach platforms 12 stories underground. Nancy Pelosi got credit for championing the project. Thanks to WSJ 4/3/23. Besides, it is still a long drive to Merced, the new stop for the Superfast Bullet Train to Bakersfield. Who wants to go to San Francisco these days? How do they get to Merced? Merced means mercy in Spanish but how could the founders have known about the Bullet train? The latest estimated cost of the 500- mile Golden Bullet is only $128 Billion, four times the original estimate. Sorry about the 171-mile Merced to Bakersfield stop. It is estimated it will be under construction for the next ten years. WSJ again.


About Real Estate. The Federal appeals court ruled that the outright ban on new gas stoves in Berkeley, California violates the Congressional Energy Policy and Conservation Act. San Francisco, San Jose, and Los Angeles also have unconstitutional bans on installing gas appliances. Next, they will try to ban water or gasoline. Thanks, Washington Examiner.


Los Angeles passed a new tax on real estate sales. It is a 4% sales tax on homes priced between 5 million to ten million and 5.5 % for all above. Imagine, a sales tax on home sales! What took them so long?


The Federal Housing Finance Agency [aka FHA] is the ultimate destination for most mortgage applications and qualifying demands. This brings to mind the 2008 collapse of the real estate market after the Feds kept demanding looser financing standards so everybody would qualify for a house. In the credit risk World water does not run uphill. Now, new costs have been legislated to socialize mortgage-lending risk. Firsthand, the director Ms. Thompson said the new policy would not impose fees and ALL ELSE EQUAL. Like the pigs explaining their exclusiveness to the other animals in the Animal Farm story, “WE ARE ALL EQUAL BUT SOME OF US ARE MORE EQUAL THAN OTHERS.”  Buyers today with FICO scores of 720 or 739 with 15-20% down payments will pay increased interest rates of .75% [3/4 of 1%]. Borrowers who put down 20-25% will pay only .5% [1/2 of one percent] more. Most had previously avoided the PMI penalty. The default rate for these prime borrowers is only 4.2% to 8.8%.


The mortgage change for the winners of the poor credit qualifications are reduced fees for all borrowers with credit scores below 680 and all borrowers who have a down payment of 5% or less. The borrowers with less than 4% down payment and credit scores between 620 and 639 default from 39.3% and 56.2%. What a short memory this Administration has! Thanks, WSJ again. Tougher times for buyers and realtors.


Last, but not least, we have available short-term five-year annuities paying 5.5% interest. Interest compounded daily. Unlike bank CDs, no taxes until maturity or withdrawals. Safer than banks from Silicon Valley [not kidding]. Highly rated by California DOI.


It appears that because of the automatic extension we will be busy all year through 10/15. We are open from 9-5 weekdays. It has been wonderful to see my returning clients and so many new ones. I also added over 20 new challenge coins to my military and civic collection.


Thanks, from Phil, Nette & Jocelyn

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March 2023


Wonderful News for all:  The Spring weather has brightened our lives after the recent rains.  Three feet of rain this year, three times as much as last year, has leached lawn sprinkler salt out of the soil resulting in Spring flowers and weeds galore! It is now time to relax and clear the dead plants and trees to renew the green landscape we all enjoy in Southern California.  My small banana grove is blackened by the frosts but will recover after this year has lapsed.  Other plants and trees harmed by the drought will be removed and one day soon the sprinklers will enable the garden and lawn to survive the coming heat.


Extension Tax News: April 18 is the original filing date for most returns by the IRS and FTB.  The deadline has been automatically extended to Monday, October 16th for the citizens of Southern California and most of the other Counties experiencing flood disasters this year.  The extensions do not change the quarterly estimates for those who owe taxes on a regular basis.  If a taxpayer owes money on last year's taxes, interest [now at 7%] will be charged from the original filing deadline until the date received by the IRS.  There are still penalties to be added to the interest if the amount owed is considerable.  Returns from out-of-state taxpayers and the few small Counties not covered by the automatic Flood Disaster extensions, will still be subjected to the 5% per month late filing penalties.


In all cases, we will gladly file extensions for any clients requesting them. Please keep in mind, sending money for last year's taxes will require an extension to deposit it correctly for the 2022 tax year.   


Last, but not least, is that IRS now makes unannounced house calls on taxpayers: The March 28, 2023 WSJ had an article on the First Amendment about Freedom of Speech [and the press] which noted an unannounced invasion of the residence of Journalist Matt Taibbi for researching Twitter internal communications and publicizing the results.  There had also been demands by the Federal Trade Commission targeting Twitter to “Identify all journalists granted access to Twitter files”.  The files had exposed an actual FBI office in the headquarters which politically controlled the user listing.  This is reminiscent of when I was in the Airborne and the NCO’s would listen in to private conversations in the evening barracks and if they heard something they didn’t like they would summarily sentence the soldier to battery punishment. Freedom of speech remains our most precious gift.


We have been very busy and hope everybody returns this year.  It is always a wonderful experience to meet again with clients, many who have gone a long way to visit. Please call for an appointment to have all your returns filed or a physical extension if you wish.  Many people now mail or electronically send their work to avoid driving or the inconvenience of visiting. 


Best wishes from Phil & Staff.                            

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Book of Laws

February 2023



Great News from both the IRS and FTB: The Counties of Riverside, Los Angeles, Orange, and San Diego have been officially declared Federal Disaster areas.  Not for economic disaster but for flood damage. The object of this proclamation is that automatic extensions for residents and businesses in these areas [and some others] will be extended without application until October 15, 2023.  Amounts due by March 15 for business returns, or April 15th will still be due with an extension form.  Estimates for 2023 will still be due for the current year at the regular quarterly intervals or made up with later deposits.  


Other California Good News: The California gas refund checks we received a week before the last election [Gavin Newsome’s picture was missing] was declared taxable by the IRS late last year.  After heated sessions in Washington several weeks ago the status was changed to non-taxable, the same as the refund received a year before.


          Immigration Help from the US Department of Health and Human Services:  In 1921 the US Department of Health and Human Services awarded the Vera Institute of Justice $168,000,000 more to provide free legal services to help illegal immigrants avoid deportation. They have been awarded 1.1 billion to date. According to the “Festivus Report” on your tax dollars at work. There are now 5.5 million illegals in the country.


        Another gift from the Feds to make new mortgages more appealing:  It was exactly 15 years ago when the housing and real crash occurred.  The major cause was the Feds goal of financing houses for everybody with unaffordable mortgages which were available with no income verification, no down payments deferred payments and reduced interest rates. It worked for a few years until the mortgages were reset to the real world of defaults and foreclosures. The crash went far beyond the mortgage lenders with the stock market crashing 50% along with real estate prices and the government bailing out financial firms to sustain liquidity in the economic collapse.  Now, we have a new crisis growing with a forgotten element, the PMI.  Most everybody knows This is the extra insurance assessed to new mortgages with no or low-down payments.  This is a risk assessment which insures the mortgage lender for the inherent risk of loss from a bad mortgage loss.  The Biden Administration last month announced that the Federal Housing Administration is now reducing the annual premium on FHA insured mortgages 35% from .85% to .55% for new mortgages.  The people in Washington have a very short political memory.


         Federal Restaurant tip changes: The tax people are worried about people tipping too much at restaurants, money they somehow may have missed with their levies on tip income they already include in wages.  Their excuse is that some people may be working at less than the federal minimum wage [only $7,25 per hour] when tips reduce their wages.  No matter how it is calculated or reported it will probably result in restaurants charging higher prices and paying employees more to cover the tips. More restauranteur time and energy to satisfy the taxers and the purpose of the tip will hardly satisfy the good or bad tippers.


        Now, local news: The best part is that this coming week will bring us up to three times the rainfall as last year.  I am still replacing trees and plants from the droughts from the past and am thankful to Mother Nature to provide abundant rain, which is a five-year occurrence in these parts.

        We cannot miss the worst part of receiving both natural gas and electricity proposals to increase price notices in the mail this month.  Everybody has experienced huge increases in their bills these past few months. Problem with this occurring budget-tearing experience is that the WSJ last month noted Natural Gas prices plunging and drillers scaling back.  Much electricity is made with natural gas and now coal since the nuclear plants are shutting down. It appears that our gas and electricity costs are really based on high European fuel costs from shipping our precious fuels to offset Russian closure of pipelines.  We have internationalized our energy costs, especially since we are now importing oil again after shutting down pipelines all around the country and slow-walking permits for the oil and gas industries. The gas price request covers four years at only 4.7 billion dollars. You are invited to attend a public forum to protest.  Be careful though because the FBI is now invited to find terrorists in the crowd speaking out against proposals here or at public schools.


        International News:  The economic giant of Europe, Germany, after slow-walking military aid to the brave Ukrainians, finally authorized a brigade of tanks to them after Biden conceded a brigade of Abrams [31 tanks], with the caveat that it would take two years to make them.  With 5,000 tanks in storage and after our Marine Corps giving back to inventory all of their Abrams, you would think they could scrounge up a few tanks for the people fighting the Western War against the Russians.  They can never win the war without these, more, and old reconditioned obsolete F16 fighters.  It is obvious that our and German allies want Russia to win, otherwise the excuses don’t pan out at all.


        Now, the very best news is that Mark Cuban, the Shark TV show millionaire has started a generic prescription, “Mark Cuban Cost Plus Drugs Company.”  This is real. In thirteen months [only a year] they have over two million subscribers. They have over 1,000 generic drugs listed. I experienced huge asthma inhaler costs some years ago and it was about $450 for a month through Kaiser with Medicare paying a hundred of it.  I used to go through the Canadian Pharmacy for half the cost.  It was made overseas by the same American Drug company that developed it. [Now, the generic version is only $10 through Kaiser Pharmacy].  The price through is their cost plus 15% markup, a $3 pharmacist fee and $5 shipping.  That is incredibly cheap and eliminates a lot of middle-people who float prices all over the landscape.  This is truly a public service announcement for my people. Thank you Mark and the Washington Examiner.



One last thing. My Author’s Instagram site [] has over 1,200 followers and I would like you or your family to follow the wisdom of this old guy with Sarah, my granddaughter’s assistance.

Please call for appointments or e-mail. We are booking solid for a week in advance now with many new clients.


Best wishes to all!


Phil Chute, EA & Staff

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Leather Briefcase

January 2023



GOOD NEWS FOR A CHANGE:  Our client who was lost in the U.S. Tax Court maize finally received a check back from the IRS with a NO CHANGE conclusion of our 27-month-old petition after his audit results.  It was a combination of great record keeping by the client who had completed and correctly filed his tax returns five years ago, and endless endurance. The IRS audited and disallowed the many miles he drove as an Uber driver to earn a living.  Here was a case of an ordinary taxpayer who was treated with malice and incompetence. IRS was hoping he would pay the big bill [$30K with penalties and interest] and disappear.  The client and I hung on by answering the repetitious telephone inquiries and responding to their demanding communications until we finally won our case.  A thousand hoops and whistles to get through the circus of needless bureaucracy.  During the whole period, we never met a human behind a desk or telephone, ever. We communicated with people in at least six states. It is a faceless and mindless experience.


First, the auditor ignored our documents which were sent certified mail with required signature.  How could they not receive a 125 pages carefully prepared set of documents which was referenced and summarized in the attached response letter?  They had trashed it. We sent another and they refused it. Instead, they sent the bill with a 90-day letter. We petitioned the U.S. Tax Court in Washington, D.C. as a Small Tax Court Case. The venue was shuffled to the Court in San Diego.   After a year the Tax Court somehow failed to put a stay on the collection from the audit. The IRS kept ignoring and sending threatening letters while we were in proceedings. The client paid the full amount to save his credit and property to get them off his back.  There should have been no need to do this if the IRS had followed the law and waited for the conclusion and settlement.  It took 18 months to win the case, and almost another year to return the funds the client overpaid to the IRS.  I hate to think of this as an example of what to expect with 87,000 INEXPERIENCED new hires coming on board this year.


This was our seventh U.S. Tax Court Case and another winner.


We are aware of tax preparers who now prepare tax returns without ever meeting their clients.  And we know there are services overseas which prepare those taxes.  It may not be a good experience because many of these are ghost preparers who are not legally authorized to do returns.


This is the main reason why all these years, our practice is to face the clients in an interview to first get to know them and input their data correctly in the computer. We get better answers to questions and a good way of knowing our clients better.  We become personally accountable, too. Then, for later years, if they wish, they can just send their data by mail or computer. I have always preferred the one-on-one interview each year unless you now live out- of-state. When I was a Stockbroker-Principal the first law of the N.A.S.D. was to know your client.  It still works well.




  • Charitable contributions for non-itemizers were eliminated.

  • The dreaded new 1099-K form annual threshold of $600 from third-party payors has been put on hold until next year.  The old limit of $20,000/200 transactions are still applied.

  • The maximum amount of childcare expenses is now $3,000 for one and $6,000 for two or more qualified persons. This phases out when AGI exceeds $15,000.

  • The maximum refundable Additional Child Tax Credit amount is now $1,500 per child.

  • The Nonbusiness Energy Property Credit now renamed Energy Efficient Home Improvement Credit, has been extended to property placed in service thru 12/31/2011. It appears that we have a very insecure bureaucracy dedicated to changing the names of all past legislation and popular human beings.

  • The Residential Energy Efficient Property Credit renamed Residential Clean Credit is upped to 30%.

  • Child Tax Credit age limits reverted from age 18 to under 17 and the amount changed to $2,000 per child.  Phaseout begins when M.A.G.I. exceeds $2,000/$4,000 joint.

  • Pension Required Mandatory Dividends, aka R.M.D., changed from age 72 to 73 beginning 01/01/2023.

  • Mileage rates for charitable driving remains a lousy $.14 per mile. Mileage for business beginning January 1 thru June 30 is $.585 per mile and from July 1 thru 12-31-2022 is $.626.  Mileage for medical or moving is $.18 for the first half of the year and $.22 for the second half.

  • Section 179 for business use of new sports utility vehicles must not exceed cost of $27,000.  If you can find one.

  • Subchapter S corporations can now apply for the Qualified Plug-In Electric Drive Motor Vehicle Credit [aka QPIEDMVC] subject to the newly debated laundry list of qualifications.

  • Taxpayers who are employees cannot deduct unreimbursed employee expenses unless they are one of the following:

*Armed Forces reservist.

*Qualified performing artist.

*Fee-based state or local government official

*Employee with impairment-related work expenses.

Exceptions for home office do not exist and will cause audits.




The latest minimum wage effective January 1st this year is $15.50.  The Federal minimum is only $15.00 but California is always at the top for everything. Wrong because New York City taxes added to their state beat California to become the highest taxed state in the nation.


Northern California produces most of the water supplies in the state from rain and snowfall during the Winter season.  Unfortunately, 95% of storm water is flushed into the Pacific Ocean due to a lack of storage reservoirs to store runoff and prevent flooding.  The state has authorized 8 water bonds since 2000 for water projects totaling almost $27 Billion, with most of the money going to ecosystem restoration and pet environmental clauses.  No new dams have been built since then.


Meanwhile, 531,000 acres were left unplanted in the Great Central Valley due to bad or lacking water concerns.  California State reimbursed the farmers $2,500,000 to leave the fields fallow. The Valley is also known for very high unemployment.


California’s New State Council Law to dictate wages, working conditions, and benefits for the benefit of the Service Employees International Union took effect on January 01, 2003.  A referendum, Save The Local Restaurants, petition has now gathered over a million signatures to qualify for the November election.  The state legislature has allowed the law to take effect, instead of holding the action, by declaring the votes must be verified first. This new law allows triple damages for lost wages and benefits, plus attorney’s fees for discrimination for workplace complaints.  That would be lawyer’s paradise. The law also allows mandated pay raises to $22 hourly which would be worker’s paradise.


California, Never a Slave State, Considers Reparations:  A State Reparations Commission discovered that slavery is the real issue of black poverty.  To settle accounts, they determined that California taxpayers owe each of their black neighbors $223,000. A method of collection was not given. [Wall Street Journal article.]


Governor Newsome’s New California Budget: This addresses shortfalls of $20 to 40 Billion (your city/county) dollars this coming fiscal year. Many social programs will be shifted to local accountability.  But Medicaid to all eligible residents, regardless of immigration status, and universal preschool, social safety net spending, will be maintained and reinforced.  What shortfall?


Other Miscellaneous Investment Concerns: The Biden’s Labor Department has a new rule that will permit pension money managers to play politics with trillions of retirement fund savings.  They want environmental, social, and governance investing instead of securing high returns on worker’s lifetime savings. “Simply put, retirement savings will be used as leverage to force companies to reduce their carbon emissions and establish racial and gender quotas and other social justice fads. [from the Washington Examiner] Big Brother has spoken.


Gas-fired stoves, water heaters, and home heating are under fire by the overseers of California Air Resources Board. A federal appeal won a case with the Ninth Circuit Court over resistance to the Berkley’s ban on gas usage which stated, “It is a hidden hazard.”  “Cities and states should be able to exercise police powers to prohibit the use of dangerous or unsafe items.”


New hookups for residences and some businesses are now not approved in many counties.  For some unknown reasons natural gas is detrimental to our health and we must send it all overseas to Europe which had been shut down from Russian supplies. A recent WSJ article reported that the Biden appointed Consumer Product Safety Commissioner recently announced that “Banning gas stoves are in the works because of public health harm.  They are a hidden hazard and products that can’t be made safe can be banned.” Same for gas-powered autos in the future. A new gas increase notice was just mailed to state residents recently to cap the whole situation.  At least we can lead the nation in home gas prices again.


Lastly, Education News: Fairfax County Virginia High School gives us the latest War On Merit aka W.O.M. article.  The National Merit Commended Students in the top 3% of their high school sent certificates of honor students to the Superintendent’s Office on 9/16/2022.  Their cover note asked that the letters of commendation should be presented ASAP since it is the student’s ONLY notification.  The Administration held the certificates and did not notify parents until over a month had passed and the time for students to apply for colleges had passed.  When they finally were, the Superintendent’s Office issued the statement that “There was a plan for equal outcomes for every student, without exception, with equitable grading, giving students 50% for just showing up.”  An administrator later admitted that the honors were hidden on purpose stating, “We want to recognize students for who they are as individuals, not focus on their achievements.  They don’t want to hurt the feelings of kids who don’t get the award.”  Equal outcomes over academic excellence sounds like perverted Communism. [The City Journal has provided this information over Twitter.] Are we all created equal?


Best News of All:  The IRS is now accepting electronically filed tax returns and we have added additional staff to cope with the business this year. At least we have survived another year and will be happy to see old friends and clients returning.

Best regards to all,


Phillip B Chute, EA & Staff

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December 2022



Breaking news from Sacramento:  AB 156 Act was just passed to insure wage and hour law, equal pay, between sheep herders [AKA a shepherd] and goat herders {a goatherd}.  No kidding.  This came up at a recent California tax seminar.  Equality for all is the motto.


A serious matter from Washington: The recently legislated American Rescue Plan [ARPA] requires 1099-K reporting of $600+ per year of credit card settlement with [TPSO] organizations such as PayPal, Venmo, etc. That means that all sales made beginning January 1, 2023, through these organizations and any others who collect funds from incidental sales and small business sales that clear through them, will be tracked for tax purposes.  The ARP does not offer a rescue plan from their plan.  The idea is to sweep more taxable hidden income to pay off the $31 TRILLION National Debt. Many gig workers will need a rescue plan when they get the form in the mail thirteen months from now.


The Good News:  Is that a parallel bill for all banks or financial institutions to report total annual deposits of $600 or more directly to the IRS was defeated by the Senate this past year.  Imagine everybody’s bank sending your bank statements to the IRS monthly for audit?  No wonder they need 80,000 more auditors. Especially if they would try to reconcile all of them for us!


Escheat to the State: This is an English Feudal Law which devolves property to the Crown when there are no heirs to inherit.  This has been modernized in California to become the Unclaimed Property Disclosure Program whereas any business domiciling unclaimed property which is over three years old is subject to horrendous fines and interest at 12% of the value.  These are gift cards, deposits on items held for future purchase, and unredeemed prizes.  Even unclaimed tax refunds [Calif] or estimates escheat to the State. And certainly, by default due to unclaimed heirs to the estates or tract houses.


The California Middle Class Tax Refund:  Has arrived and been spent for the Holiday Season by most.  There will be a 1099 form to follow because this one will be taxable on the Federal returns.


Another California Middle Class or Lesser Refund:  Has been promised by our generous Governor, Newsome.  He promised that his investigation of why California’s ruthless overcharging for fuel costs upset him and that massive excess profits fines for refiners and sellers will result.  These monies will be refunded to Californians afterward.  And gasoline will be reduced by $2 per gallon afterward, the same as the rest of the country.  Hurrah!  Normal gas prices at last and another great refund.  Lock up all the gas stations and put their owners in jail!  Then, with no fuel, people won’t be able to leave California.


Great News from the Green People: Green Hydrogen, the perfect fuel made from water or expensive natural gas, got a boost from Air Products Company which also produces the oxygen for acetylene in familiar green tanks, and other hospital and space rockets. They are building a four-billion-dollar plant in Texas to Manufacture hydrogen by hydrolysis for auto fuel and fertilizer.  What will they do to make it?  Build gigantic windmills and solar farms to generate the electricity to break down the water to produce it. You see, it takes more energy to produce it than it produces when burned in an engine or used as fertilizer.  The basic cheapest production cost for Hydrogen gas is now $1 per kilogram [2.2 pounds].  The new production cost will be $5 per kilogram.  A new Federal subsidy will pay Air Products the $5 per kilogram production costs.  This will enable the company, and others, to operate the gigantic wind and solar plant for zero costs, enabling users to get it Scott-free without even the usual gas taxes at the pump!  This will be even better than the mandatory green jet fuel quota the airlines use at $9 per gallon. The magic of government economics will prevail.


California Surplus News: The WSJ, reported this month that Federal tax receipts were off 20% in the past two months compared to the last year.  They also predicted that California would go from a $100 billion surplus to a 25 billion deficit this year.  Expect more tax increases all around.  At least California is still second in the Country for highest taxes.  New York is still number one.


Harvard University, the first in the nation, where a neighbor kid friend of mine turned his pigeons loose and went to school there to be an anthropologist, has announced that they now have 7,153 students but 7,024 administrators.  One for each student.  I wonder what they do for a living. This appears to be a bad pattern nationally as the Public-School administration has increased 88% in the last ten years while the population of both students and teachers has increased only 10%.  Bigger is not better here.


Controversy over the trading of Russian prisoners: The Merchant of Death Victor Bout international arms smuggler traded for Brittney Grinder, a celebrity lesbian for committing a minor drug misdemeanor, who hates America has met a lot of controversy.  Paul Whelan an ex-Marine in jail for years for doing nothing but being in Russia at the wrong time would have been a better choice. They should have left her there to rot, not to celebrate as a political heroine.


Well, the good news is that we will soon be over with the Christmas Holiday [official Government label is “Holiday Shopping Season”] and are looking forward to a bright new year. I truly hope it can be a better year for all my clients and we personally look forward to seeing you again. 


Merry Christmas and a Happy New Year!!


Phil, Nette, and Jocelyn

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Finally, Winter weather is here, and we have had our second rainstorm. This place looks like Arizona after the drought. Last year I measured the rainfall during the winter, and it was twelve storms averaging one inch of water each--total of one foot for the season. This October we had our first storm of one inch but the last one, two weeks ago, was a wonderful four inches over three days. Let us hope we get more heavy rain to fill the dams and aquifers.


This has been a remarkably busy tax season with over 100 new clients. We have shut down our expensive successful Yelp ad which moved our position around from the back to the front with our five stars [same as Google]. At this time there are still returns on my desk to be completed and continuing education to be finalized before we start again. Most of our new clients are overly complex and range from Newport Beach to Beverly Hills. We always welcome new clients but need to smooth out the practice in the future so I will get to know everybody and have more time to complete the tasks. I also need some time to finish my TRUSTME bank fraud book which is completed and needs judicious editing.


Many thanks to those lifetime clients who have followed our trek from Riverside where we once completed 2,200 returns in our biggest year, to Temecula in five moves. We hope our new clients, who are from all over, but especially the Temecula-Murrieta-Fallbrook area, will settle in and become long-term clients as well.


We have an oversized 48-star American flag over the front of the house. I found it in an estate sale and replaced our torn thin Costco flag that had worn out. It is truly too big to be in front of our house, but I still love it.


 Serious California Local News: Independent Contractors now have the ABC test to pass before they can be considered non-employees of their clients.

  A] The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

  B] The person performs work that is outside the usual course of the hiring entity’s business.

  C] The person is customarily engaged in an independently established trade, occupation, or business of the same nature in the work performed.

But this does not exempt the person from a 1099 form at year-end.


California Unemployment Benefits:  The EDD collects withholding and State Disability taxes while the Feds collect unemployment taxes [FUTA] from employers based on wages paid. When they have a recession or giveaway disaster from politicized pandemics, the UI trust fund runs short of funds and borrows from the Feds. The latest California UI Fund shortage from the Covid-19 exercise is now $19.3 Billion at the end of 2022. The fraud and normal Pandemic unemployment benefits have created our very own enviable State colossal debt to be proud of.                  


Good mortgage news for Californians: Jumbo mortgages which are typical mortgages for most of California have been raised from $970,800 to max out at $1,089,300 by Fannie Mae and Freddie Mac who buy these mortgages from mortgage brokers. The new 7% interest rates will create a pricy mortgage for those few qualified buyers or refinancers. And bigger returns for those Government bond portfolios the stockbrokers will be selling afterward.


The Hot Summer gave us Californians something to think about this year. Sacramento was at 114o on September fifth, and up to 116o the next day. The State got to practice various Energy Emergency alerts for rolling blackouts, imminent blackouts, and controlling electric usage in the crisis. The future is here. If your solar panels do not have a back-up battery it would be a good idea to get one, so your lights do not go out when the sun sets.


National Energy news item from the WSJ: Because of labor abuses in China [children and slaves are used to manufacture solar panels] about 4,000 containers of these things are stuck in U.S. ports from customs problems. Now, there is a solar panel shortage in the U.S. of A. This is bad timing because these panels are supposed to create the energy required to replace the carbon fuels that are becoming outlawed by the current administration. At this time, it is becoming socially illegal to own stocks in oil companies while new gas stations [which also are becoming electric car charging stations] cannot get permits to open, and natural gas hookups for new homes are not allowed. One day soon, due to Central Planning Green dictates from our leaders, we will flick on the light switch and the place will remain dark.


Santa Claus, AKA President Biden, appears to have lost his election payoff to cancel student loans. To counter the threat to his generosity, the Administration is now considering changing the Bankruptcy Code to allow students to file BK and shed their student loans. They were specifically excluded because it would be a disaster for kids to graduate college, declare insolvency, and wash out the cost of the education. So, the wheels are turning to declare students experiencing economic stress BK before they get employed. This way they could get a clean start without the loans they signed for. Not a bad deal in the Santa Clause irresponsible economy.


Misuse of the EA name endangers people, like me, who are Enrolled Agents of the U.S. Treasury. I hope the people dedicated to Effective Altruism for charitable purposes have learned that making a quick buck on FTX trading is a quick economic death. Giving money away is even hard for Biden, not just speculators.


World News is in the air with the Ukrainians bombing three Russian airports hundreds of miles inside the Russian border. Uniquely, the Tu-141 jet drones used for the one-way mission were designed by the Russians, first manufactured in Ukraine way back in the 1970s. Now the innovative Ukrainians have responded as necessary for the drone and missile attacks on their country and infrastructure.


Biden Loves to Manipulate Oil in The Remaining Free World Economy: Chevron Oil Company is receiving a license to pump oil from Venezuelan neglected oil fields. Friends of Biden have arranged to release three billion of frozen dollars as a good will measure which ignores the cost of expropriating the oil fields in the first place. The thawed assets would be released for “Humanitarian programs” there instead of paying off the stack of debts from the nationalization of foreign assets. Again, in the face of shutting down American oil drilling and transportation, this is a new rescue plan for a Communist enemy. Now, who is the real enemy?


Last, but not least is the grain problem: The Russians have been shipping Ukrainian grain through the back door by feeder vessels and mixed in world trade to provide money for the war with the people they stole the grain from. They have been trucking and railing the Ukrainian harvest and grain stored in silos through Russia to ships in the Black Sea and transshipped all over the world with impunity to any sanctions. Ukraine is the breadbasket of the world and Russia is profiting directly from the bold theft from their occupied territory.

Finally, the Russians have seized over 400,000 acres of Ukrainian farmland and turned them over to their business and political elite as “spoils of war”. The land has been expropriated by Russian fiat, not by any law.

They destroy everything they touch and leave desolation behind. That is the real Communism which we are now embracing innocently here in the U.S. of A.


The above information comes on top of a loss of the mid-term elections by the Republicans. Trump is out, and it is time to find more successful political types to carry the Party forward in 2024.


There are lots of prayers being made this Christmas. I hope Santa Clause is one of them and Peace on Earth with Christ is another.


Best wishes, and great Holidays heralding in another New Year full of hope and passion.



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October 2022


GOOD NEWS: When the Russians invaded Ukraine President V. Zelensky called Elon Musk and asked for help. Two hours later, a deal was struck between the two resulting in over 20,000 Starlink terminals connected to low-level satellites over Ukraine, thus, providing communications for the beleaguered nation. Elon hurriedly dispatched the internet terminals and satellite dishes, at no charge. Such marked a pronounced military communication previously blocked by the Soviets when the war started. Reinforced authority on the Ukrainian military delegates to act and change course resulted in quick decisions and mobility at combat level instead of the, yes sir, no sir, military communications which I experienced in the past while in the Army. The Russians are also hidebound in the decision-making process, which roadblocks the changes required of fluid tactical moves on the ground. Speed is essential in fast-moving combat in today’s world.

FEDERAL STUDENT LOAN DEBT FORGIVENESS: On August 24, 2022, the trillion-dollar before election gift by Executive fiat in a federal emergency by President Biden was unveiled. Loan forgiveness which falls under the Bad Debt Cancellation of Indebtedness rules make it taxable in California and normally under the Federal unless bent and broken. “The Lord giveth and taketh.”

CALIFORNIA NEWS: The Labor Department has determined that the Consumer-price index in the U.S. rose 8.2% compared with September a year before. To offset the 8.7% increase in Social Security benefits beginning January 2023, the Social Security tax will increase from maximum earnings of $147,000 to $160,000 while the 1.45% Medicare taxes have no cap, and the employer must match the employee deduction.

Last year, legislation attempted to throttle the GIG economy with a list of restrictive requirements. It forced many of us to be on payroll instead of self-employed. An example was a client who did marketing script writing for many businesses. Under the new guidelines, she was expected to be on the payroll for each of her clients even though the freelance work was created while working out of her house. Consequently, she promptly moved out of state to avoid shutting down her little business. That was one of the thousands of people influenced by nasty legislation.

Like California, President Biden has also declared war on the gig economy with his new proposed Labor Department rule reclassifying 20 million independent contractors as employees. Behind the move is the Labor unions wanting them to become employees so that they can become union members, with the Labor Board controlling overtime and benefit rules. The noose continues to tighten on the self-employed with strangulation by regulation laws and rules.

CALIFORNIA MIDDLE-CLASS TAX REFUNDS: The election is coming up in a week and it is time to prime the ballot box with money from nowhere. Well, it is really from the billion-dollar surplus in overtaxed California, a response to ultra-high gasoline prices. Although the amount is not stated, one thing sure is, it will be Governor Newsome’s signature. A one-time payment to provide RELIEF to suffering Californians is supposed to be issued between October 2022 and January 2023. This is not taxed in California; however, a Federal 1099 Form will be issued if the amount received is $600 or more.

The relief check received by Californians last year was not federally taxable so we will see if the rules will change. To save you a call to our office, check your eligibility or payment status by going to and looking for middle-class tax refund. Middle-Class Tax Refund has now an acronym MCTR.

CALIFORNIA RULES THE COUNTRY: If California goes, so goes the nation, a known adage. Now the pigs are in trouble. Several years ago [in 1918 through a ballot initiative] chickens were made more comfortable in this state from the new farming rules that expanded the cage size of these animals. Consequently, many farms closed and those farms that are out of state had to follow the mandated new rules to ship chickens to California causing the prices to go up in the stores.

Now, the new minimum confinement standards are also applied to adult female pigs to be housed in large group pens, contrary to practice which is to raise them in separate pens to prevent diseases from spreading. What is unique about this law is that less than 1% of the pigs consumed here are raised in California. The FCC rule is an attempt to regulate hog farmers who are in business out of state versus local consumers. The law violates Federal Commercial Clauses to control commercial conduct beyond the boundaries of the State. CA also violated a clause imposing excessive burden on interstate commerce. Now hams are sold locally in our supermarkets ONLY during Holidays! This is another ruling to enact more social and moral codes on our citizens. The effects are always contrary to the proposal’s intentions.

DRUG USERS ARE NOW ALLOWED TO FLEE JAILS: The President has decided to pardon thousands of people convicted of marijuana possession. The pardon is like Prohibition where people could always find alcohol although denatured alcohol cost many lives afterward. The problem with marijuana is that only 6/10,000 of the federal prison population is locked up for possession. All the others are there for violent crimes.

IRS AGENT RECRUITING: A client in the wholesale gun and ammo business mentioned that the IRS has placed huge orders for new guns and ammo. According to him, the ammo has been delivered and guns backordered. Caliber and specific data were omitted. No word on the number of agents signed up but hopefully, they do not look like the jokers in the phony movies with double holsters and extra magazines so they can keep shooting all day long. The gun-toting Revenue Agents I have encountered were nice people but that was some years back and we have a new regime in office now.

The latest count of non-processed paper-filed returns is 17 million. The $79 Billion in new funds will take a year to hire, train, and implement new people and it is HOPED by all outside that the backlog is cleared up first. Audits will not happen until then and I expect the first returns audited with these new people would be for the tax year 2020. Uniquely, the IRS first estimated a return of $5-9 for each dollar expended. New data from IRS has now pegged a new number of $2.50. And you know how optimistic that figure must be. They are not anticipating much productivity from the new hires.

2022 TAX YEAR: We compiled many tax return data for the year and worked for 100 new clients. At least 125 tax returns were completed in addition to the old faithful returning people. It has been a wonderful tax season meeting new clients and old friends. My challenge coin collection has grown to 35 coins, and they are a display to behold. Many thanks to those professionals and military who exchanged theirs with mine.

We were terribly busy this tax year with new clients. Half of them overloaded us in the office so I decided to eliminate advertising for the next tax season. We welcome new clients, but it normally requires more computer work and proofing, not to mention the cost of advertising. I can get some time off instead of working through weekends all the time. Besides, I also have a new book to finish, although business always comes first. By next tax year, these new clients automatically become returning clients in our computer and will be easier to process. Our five-star Yelp and Google will always bring us good clients to replace others who pass or cannot drive or are gone forever. That will be the basis of the practice from now on. Gone were the days when we did 2,200 manual returns one year in Riverside.

FINALLY, thank you for being our clients. We feel honored to work for all of you. We appreciate the new clients this year, as well as the many lifetime clients who for many years, have been following us from office to house with many moves.

Friendly reminder: We have an election coming up in a week and I would say to vote with your brain, not with the propaganda that has been in the air and media.

Best wishes until we see you again.

Phil B Chute, EA & Staff

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September 2022

Most often, I get the question of what the EA acronym next to my name stands for and what it means. It stands for Enrolled Agent, a tax professional licensed by the federal government and it means that as an Enrolled Agent with IRS, I am authorized to appear in place of the taxpayer at the Internal Revenue Service. Further, unlike attorneys or CPA’s, Enrolled Agents like me specialize in taxation. My expertise in the tax law over the years of practice makes me an effective representative when the IRS audits taxpayers.


Twenty years ago, I got a bad taste of investment people cancelling good insurance policies to illegally sell another policy for commissions. Because of this, I decided to get licenses to benefit my clients. I sat for Series 7, General Securities, Series 24, Registered Principal to manage my own branch, and Series 63 to be a Registered Financial Advisor. I simply managed securities and pensions for clients until a principal at a firm got in trouble and inherited a branch as OSJ of many his people in Orange County. I am retired now but kept my insurance licenses which include Fire and Casualty, investment annuities, life, health, and disability.


We did some advertising this year and added almost 100 new clients who many had gone to CPA firms before or did their own returns, and as a result received notices from IRS and FTB. Setting up new clients requires more work on the computer and could be overwhelming in terms of level of difficulty as we try to make amendments or corrections in their returns. The solution for the next year will be to drop the advertising and quit working ten- hour days for six months straight through the year. We should all be ahead, and I will get to know my clients better.


Now the Bad News: My old BMW license plate has three sevens, and it has been a good luck car, and with quick handling I was able to evade a house sized motor home that wanted my road on the freeway once. Yet, we have two sevens in the recent economy worth noting. The first is that the Residential Mortgage rate has climbed past 7% and will keep going as the Federal Reserve raises their funds rate again. The other is a new tax from the Cap-and-Trade Program which has resulted in sky rocketing fuel prices in California. Another first from California that I saw $7.00 at two gas stations on my way to get my high octane at Costco [which used to be $5.99.]   California has a special GREEN gasoline formula and because of local refineries closing will have lost 20% of capacity by the end of next year.


Federal news at last:  The 16 billion of unemployment fraud figures reported before were wrong. The figure announced this week from Inspector General of the Labor Department was $45.6 billion. The bean counters had not noticed that Organized Crime had worked all 50 states with the same applications. Whoa! They did an excellent job of finding another $30 billion of fraud that nobody had noticed. No wonder the National Debt now at $31 Trillion is equal to 137% of the year’s Gross Domestic Product.


Our Strategic Petroleum Reserve Plan [SPR]:  In 1975 the Organization of Petroleum Exporting Countries [OPEC] decided to embargo and cut off oil shipments to the USA. A huge reserve of oil, 300 million barrels [90 days of imports] was established for future problems. President Biden has publicly promised to ‘end fossil fuels’ as he did when he shut down the Keystone XL Pipeline project. Yet, he has made new demands on the SPR reserves and brought them down to about 50 days supply at this time. That is a serious matter to promise ending production while they drain off the important reserves.


Back to oil production: From a WSJ editorial the substance of a meeting when Democrat Rashida Tlaib asked the director of JP Morgan Chase if the conglomerate bank had a policy against funding new oil and gas products. Mr. Dimon answered, “Absolutely not, and that would be the road to Hell for America.”


“Yeah, that’s fine Sir, you know what, everybody that got relief from student loans [who] has a bank account with you should probably close their account.”


This testimony highlighted the extent to which climate-obsessed lawmakers and regulators pose a greater threat to the economy and financial system than changes in the climate. Proposing a bank run to protest an institution’s fossil-fuel investments is certainly extreme.


China’s Coal Power Boom:  The Paris Agreement allowed China to increase their emissions for electrical generation, while the U.S. of A has cut decreased its coal capacity by 1/3 by 80 gigawatts, China is increasing their coal burning capacity for electricity by 100 gigawatts. Two thirds of their electric energy is from coal generation. John Kerry did not get through there at all, but he sure gets through in Europe and the U.S. of A.


New Credit Card controls:  Gun Control Advocates have won a new merchant category for firearms retailers. A new four-digit number, [a MCC] will designate and monitor sales made for firearms sales. Another computer item for the ultimate gun recalls by this Government.


California’s Union Whopper:  The Fast Recovery Act is now law and gets a Black star for establishing the first State Council to establish minimum wage standards for an entire industry. The new Council could raise wages from $15.50 on January 1st next year to $22 and mandate many new social benefits for employees such as more paid vacation and paid days off for “protest days”. It is utterly amazing that this new Recovery bill has such good cash benefits for the fast-food industry which hires mostly teenagers and recent High School kids who do not go to college.


California Progressive Mind Over Matter:  The Air Resources Board moved this week to ban gas space and water heaters by 2030 AND proposed that all big rig trucks must go electric. The sale of gas furnaces by 2030 is now in effect. Old furnaces breaking down will need to be refitted with electric only units. Several weeks ago, Californians, during a heat wave, were told not to run large appliances or charge electric, cars in peak hours. Blackout warnings are expected this coming Winter. Hot water and heating will be next on the prohibited shortage list and the wave of electric cars has not hit yet.


Biden’s Union Whopper: President Biden broke up a proposed railroad operating engineers’ union strike by granting all union demands for a 24% increase in labor costs.


The Blue Chips stock market: On October 1st, the DJIA was off 20% this year and with the S&P becoming a BEAR market. All good things have their challenges. Hang on to your hat or if on TV, your wig!


Gold:  Has quit climbing into the sky for investors as the sellers broadcast daily. It is still a haven, not to hold forever without losses but as has plummeted from $2,050 per troy ounce in April this year to $1,678 last week. The Bear is also visiting here.


Oil and gas leases:  Social Costs, which are found from staring at the sun too long, are a new element of the Biden Administration stranglehold on energy production. The first 19 months of this administration have leased a mere 126,228 Federal acres for oil and gas production. The least under any President since World War 2.


This is all folks. Remember, October 17, Monday is the final date for tax extension. Our office will recess the week after for a tax seminar. We will make sure we get lots of candies for the Halloween when we come back.


Best wishes to all.


Phil Chute, EA & Staff

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


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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

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