Taxpayers hit with fewer audits

NEW YORK (CNNMoney)

The agency audited 1.4 million people last year, down 5% from 2012 and the lowest number of audits conducted since 2008, according to IRS statistics released Friday.

The IRS blamed its shrinking budget for the drop-off, saying "an ongoing decline in appropriate funding presented challenges."

Related: 10 tax audit red flags

Since 2010, the agency's budget has been reduced by almost $1 billion and around 10,000 employees have been cut. Under the 2014 budget, the IRS will receive $11.3 billion -- nearly $2 billion less than the White House had requested for the agency and a $526 million drop from 2013.

Meanwhile, government spending cuts last year forced the IRS to furlough workers without pay for three days, making it even harder for the agency to keep up with its workload.

To cut costs, the IRS has been conducting more audits by mail than in person. Last year, more than three-quarters of examinations were correspondence audits, and the rest were field audits -- meaning they were conducted at an IRS office or a taxpayer's home.

Related: Quiz - 7 surprising 2014 tax facts

And while the overall number of audits was low, at around 1% of all taxpayers, there are still certain groups that aren't getting a break.

One of those groups is the rich: About 9% of taxpayers with income between $1 million and $5 million were audited last year, and that rate rose to 16% for those with income between $5 million and $10 million. For the nation's top earners, with income over $10 million, the audit rate was 24%.

Business owners are also more likely to be audited, and so are taxpayers who claim a home office deduction or the Earned Income Tax Credit. Reporting -- or failing to report -- a foreign bank account could also lead to additional scrutiny, as the IRS continues to crackdown on people hiding offshore income.

Related: Tax season unleashes cyberscams

In addition to being unable to conduct as many audits, the agency's taxpayer assistance has been deteriorating, the National Treasury Employees Union said in a statement Friday.

"We are seeing the results of these reductions in staffing, particularly in customer service, all across the country," NTEU president Colleen Kelley said. "Both taxpayers and employees are frustrated by the lengthy lines at Taxpayer Assistance Centers and the long telephone hold times for those who call the IRS with a question."

First Published: March 21, 2014: 4:58 PM ET

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Are Netflix users ripping off the rest of us?

Reed Hastings says Netflix is "reluctantly" paying for faster connections to broadband networks.

NEW YORK (CNNMoney)

Hastings sounded off Thursday on the likes of Verizon (VZ, Fortune 500), Comcast (CMCSA, Fortune 500) and others, accusing them of "sacrific[ing] the interests of their own customers" in demanding fees to ensure quick delivery of content from Netflix (NFLX) and other data-intensive services.

The dispute flared up earlier this year following news that Netflix streaming speeds for customers of major ISPs were slowing, as these firms attempted to extract a fee from Netflix in exchange for connecting directly to their networks and resolving the issue.

Netflix announced an agreement with Comcast last month under which it will indeed pay for a connection, and has been in talks with Verizon as well.

Hastings said his company was engaging in these talks "reluctantly." He accused the ISPs of abusing their market power and short-changing customers.

Related: New chapter begins in net neutrality fight

But the ISPs tell a very different story. They point to the fact that Netflix generates a massive amount of data consumption -- around a third of traffic online during peak hours -- while sticking them with the ever-increasing delivery costs.

The National Cable and Telecommunications Association says just one percent of broadband subscribers -- primarily heavy streaming-video users -- consume nearly 40% of bandwidth going into homes.

Other big tech companies, including Microsoft (MSFT, Fortune 500), Google (GOOG, Fortune 500) and Facebook (FB, Fortune 500), already have paid-connection deals with big ISPs. Comcast vice president David Cohen said in response to Hastings that these arrangements "have been an essential part of the growth of the Internet for two decades."

Dan Rayburn, an industry analyst at Frost & Sullivan, says it's not clear that the ISPs are to blame for customers' lagging Netflix speeds. In a blog post Friday, he noted that Netflix has the option of rerouting the traffic it sends to ISPs when congestion occurs at one connection point.

The heart of the problem is that high-speed Internet networks are extremely expensive to deploy. There aren't many companies with the resources to do it, and there isn't enough competition in most regions to push ISPs to quickly upgrade their infrastructure.

Paid-connection deals like the one between Comcast and Netflix are part of the way the broadband industry wants to address this issue. But Hastings says this cost-sharing doesn't make sense if the ISPs aren't also willing to share subscription revenue.

"When an ISP sells a consumer a 10 or 50 megabits-per-second Internet package, the consumer should get that rate, no matter where the data is coming from," Hastings wrote in his blog post.

Related: Court strikes down net neutrality rules

ISPs have accused Netflix of "dumping" data onto their networks, a characterization that Hastings rejected.

"Netflix isn't 'dumping' data; it's satisfying requests made by ISP customers who pay a lot of money for high speed Internet," Hastings wrote. "If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future."

Going forward, broadband providers would like to move to a tiered pricing structure for customers depending on how much data they consume, similar to those offered by mobile carriers.

"[I]t's unfair to ask lighter users to subsidize super-user activity," the NCTA says.

But part of that formula will likely involve letting content providers subsidize consumer data consumption that goes toward their services. AT&T announced this kind of "sponsored data" program earlier this year for the mobile Web. The worry with this system is that it favors established companies that can pay up for speedy delivery of their content, putting smaller firms at a disadvantage and potentially stifling innovation.

"On a tiered Internet controlled by the phone and cable companies, only their own content and services -- or those offered by corporate partners that pony up enough 'protection money' -- will enjoy life in the fast lane," the advocacy group Free Press says.

First Published: March 21, 2014: 5:34 PM ET

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No winners for $1 billion NCAA challenge

NEW YORK (CNNMoney)

The $1 billion prize for a perfect NCAA bracket that his Berkshire Hathaway (BRKA, Fortune 500) was backing will go unclaimed.

None of the fans who signed up for the perfect bracket challenge sponsored by Quicken Loans and Yahoo Sports made it out of the first round of 32 games played without at least one mistake. The two firms would not say how many fans entered the free contest.

Buffett sold an insurance policy to Quicken Loans and Yahoo (YHOO, Fortune 500) which would have compensated them if they had to pay out the 10-figure sum.

One estimate puts the odds of picking a perfect bracket at 9.2 quintillion to one -- an awkward, rarely-used number that can also be thought of as 9.2 billion-billion. Those odds are longer than the likelihood of winning Powerball and Mega Millions in the same weekend.

Related: College basketball's real billion dollar winner

But the 9.2 quintillion estimate assumes each team has a 50% chance of winning every game, which is probably not the case. Others have put the odds at a marginally better 7.4 billion to 1. That's 42 times worse than your chance of winning Powerball.

"There is no perfect math...There are no true odds, no one really knows," Buffett told CNN in January when the challenge was announced.

The odds became even longer with upsets this week. In Thursday's opener, 84% of fans picked Ohio State to win, only to see the University of Dayton upset its rival. Then on Friday upstart Mercer University knocked off perennial powerhouse Duke, which was the choice of 98% of fans with Yahoo brackets.

The tournament is so popular partly because of the history of first-round upsets that play havoc with fans' brackets.

Related: More billionaires pledge to give away fortunes

CBS Sports, which runs one of the bigger bracket challenges, says that in the past two years its final perfect brackets were eliminated in the 22nd and 23rd games of the tournament, or about two-thirds of the way through the first round.

ESPN reports that of the roughly 30 million entrants it's had over the 13 years, no one has come close to a perfect bracket, and that only one person has had a perfect first round in the last seven years.

"I don't want to say it's impossible, but it's basically impossible," said John Diver, director of product development for ESPN Fantasy.

First Published: March 22, 2014: 9:51 AM ET

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Taxpayers hit with fewer audits

NEW YORK (CNNMoney)

The agency audited 1.4 million people last year, down 5% from 2012 and the lowest number of audits conducted since 2008, according to IRS statistics released Friday.

The IRS blamed its shrinking budget for the drop-off, saying "an ongoing decline in appropriate funding presented challenges."

Related: 10 tax audit red flags

Since 2010, the agency's budget has been reduced by almost $1 billion and around 10,000 employees have been cut. Under the 2014 budget, the IRS will receive $11.3 billion -- nearly $2 billion less than the White House had requested for the agency and a $526 million drop from 2013.

Meanwhile, government spending cuts last year forced the IRS to furlough workers without pay for three days, making it even harder for the agency to keep up with its workload.

To cut costs, the IRS has been conducting more audits by mail than in person. Last year, more than three-quarters of examinations were correspondence audits, and the rest were field audits -- meaning they were conducted at an IRS office or a taxpayer's home.

Related: Quiz - 7 surprising 2014 tax facts

And while the overall number of audits was low, at around 1% of all taxpayers, there are still certain groups that aren't getting a break.

One of those groups is the rich: About 9% of taxpayers with income between $1 million and $5 million were audited last year, and that rate rose to 16% for those with income between $5 million and $10 million. For the nation's top earners, with income over $10 million, the audit rate was 24%.

Business owners are also more likely to be audited, and so are taxpayers who claim a home office deduction or the Earned Income Tax Credit. Reporting -- or failing to report -- a foreign bank account could also lead to additional scrutiny, as the IRS continues to crackdown on people hiding offshore income.

Related: Tax season unleashes cyberscams

In addition to being unable to conduct as many audits, the agency's taxpayer assistance has been deteriorating, the National Treasury Employees Union said in a statement Friday.

"We are seeing the results of these reductions in staffing, particularly in customer service, all across the country," NTEU president Colleen Kelley said. "Both taxpayers and employees are frustrated by the lengthy lines at Taxpayer Assistance Centers and the long telephone hold times for those who call the IRS with a question."

First Published: March 21, 2014: 4:58 PM ET

14.44 | 0 komentar | Read More

Are Netflix users ripping off the rest of us?

Reed Hastings says Netflix is "reluctantly" paying for faster connections to broadband networks.

NEW YORK (CNNMoney)

Hastings sounded off Thursday on the likes of Verizon (VZ, Fortune 500), Comcast (CMCSA, Fortune 500) and others, accusing them of "sacrific[ing] the interests of their own customers" in demanding fees to ensure quick delivery of content from Netflix (NFLX) and other data-intensive services.

The dispute flared up earlier this year following news that Netflix streaming speeds for customers of major ISPs were slowing, as these firms attempted to extract a fee from Netflix in exchange for connecting directly to their networks and resolving the issue.

Netflix announced an agreement with Comcast last month under which it will indeed pay for a connection, and has been in talks with Verizon as well.

Hastings said his company was engaging in these talks "reluctantly." He accused the ISPs of abusing their market power and short-changing customers.

Related: New chapter begins in net neutrality fight

But the ISPs tell a very different story. They point to the fact that Netflix generates a massive amount of data consumption -- around a third of traffic online during peak hours -- while sticking them with the ever-increasing delivery costs.

The National Cable and Telecommunications Association says just one percent of broadband subscribers -- primarily heavy streaming-video users -- consume nearly 40% of bandwidth going into homes.

Other big tech companies, including Microsoft (MSFT, Fortune 500), Google (GOOG, Fortune 500) and Facebook (FB, Fortune 500), already have paid-connection deals with big ISPs. Comcast vice president David Cohen said in response to Hastings that these arrangements "have been an essential part of the growth of the Internet for two decades."

Dan Rayburn, an industry analyst at Frost & Sullivan, says it's not clear that the ISPs are to blame for customers' lagging Netflix speeds. In a blog post Friday, he noted that Netflix has the option of rerouting the traffic it sends to ISPs when congestion occurs at one connection point.

The heart of the problem is that high-speed Internet networks are extremely expensive to deploy. There aren't many companies with the resources to do it, and there isn't enough competition in most regions to push ISPs to quickly upgrade their infrastructure.

Paid-connection deals like the one between Comcast and Netflix are part of the way the broadband industry wants to address this issue. But Hastings says this cost-sharing doesn't make sense if the ISPs aren't also willing to share subscription revenue.

"When an ISP sells a consumer a 10 or 50 megabits-per-second Internet package, the consumer should get that rate, no matter where the data is coming from," Hastings wrote in his blog post.

Related: Court strikes down net neutrality rules

ISPs have accused Netflix of "dumping" data onto their networks, a characterization that Hastings rejected.

"Netflix isn't 'dumping' data; it's satisfying requests made by ISP customers who pay a lot of money for high speed Internet," Hastings wrote. "If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future."

Going forward, broadband providers would like to move to a tiered pricing structure for customers depending on how much data they consume, similar to those offered by mobile carriers.

"[I]t's unfair to ask lighter users to subsidize super-user activity," the NCTA says.

But part of that formula will likely involve letting content providers subsidize consumer data consumption that goes toward their services. AT&T announced this kind of "sponsored data" program earlier this year for the mobile Web. The worry with this system is that it favors established companies that can pay up for speedy delivery of their content, putting smaller firms at a disadvantage and potentially stifling innovation.

"On a tiered Internet controlled by the phone and cable companies, only their own content and services -- or those offered by corporate partners that pony up enough 'protection money' -- will enjoy life in the fast lane," the advocacy group Free Press says.

First Published: March 21, 2014: 5:34 PM ET

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Obamacare: Some may have more time to finish applications

The administration may let some people finish their Obamacare applications after March 31

NEW YORK (CNNMoney)

Administration officials have repeatedly said they are not extending the open enrollment deadline. But they are now considering giving those who start applying for health insurance by month's end additional time if they run into technical trouble during the application process. A similar grace period was put in place in December to allow applicants to sign up in time to obtain coverage by Jan 1.

"As was the case for the December deadline, we're going to want to make sure that people who are already in line can finish their enrollment," Press Secretary Jay Carney said Friday.

Back in December, some people who missed the deadline on the 23rd were given an extra day if they had started their applications but couldn't pick a plan because of technical issues. The federal exchange saw record-high traffic on Dec. 23.

Eligible applicants were directed to the federal exchange call center for instructions on how to obtain coverage in the new year. The 14 states running their own exchanges instituted their own extensions, some beyond the 24th.

"We are preparing for a surge in enrollment, and if consumers are in line on the 31st and can't finish, we won't shut the door on them," said Dept of Health and Human Services spokeswoman Joanne Peters.

"To be clear, if you don't have health insurance and do not start to sign up by the deadline, you can't get coverage again until next year," she said.

Administration officials have said they expect a similar last-minute crush to exchange websites as the March 31 deadline approaches.

Some states running their own exchanges are already giving applicants more leeway. The Nevada Health Link board decided Thursday to create a special enrollment period for people who are not able to complete the process by month's end. Those who apply online, by phone or through paper forms but run into technical issues have until May 30 to finish signing up.

Americans who don't have insurance this year will face a penalty of $95, or 1% of income, whichever is greater.

More than 5 million people have picked plans, with more than 800,000 signing up in the first half of March alone. The administration and consumer advocates are doing a final outreach push before the final deadline.

-- Additional reporting by CNN Senior White House correspondent Jim Acosta

First Published: March 21, 2014: 4:37 PM ET

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10 things about the Moto 360 smartwatch

NEW YORK (CNNMoney)

Motorola chief designer Jim Wicks sat down to discuss some of the Moto 360's guiding design principles and offer up a few new bits of info on the forthcoming product. Here are 10 things from that talk we found particularly interesting.

It's big. Judging from the appearance of the watch on the wrists of the two hosts, you can pick any statement piece from your favorite luxury watch brand and you'll have the right idea of how big this thing will be.

The round face is for your comfort. According to Wicks, Motorola picked the round watch face design to avoid having corners that jab into your wrist. Moto also welcomes the conventional watch metaphor for its tradition, history and familiarity. (And probably because it's easier to build.)

Moto 360 will be one size fits all for now. There are no plans to make a smaller watch for smaller wrists, but the bands will be customizable as a consolation.

It can be worn on your left or right wrist. No matter how you flip the watch, the screen will orient itself to be readable.

It will work with all phones running Android 4.3. Unlike Samsung's Galaxy Gear, the Moto 360 will work with any Android phone whose software has been updated in the last 6 months.

Price is TBD. So is battery life. If we had to guess, this thing won't be cheap. If we had to guess again, we'd expect that Motorola would like to get a full day's use from a single charge.

Many of the same ideas and technologies used in the Moto X are implemented in the Moto 360. Many of the things that made the Moto X special - the contextual awareness, the excellent battery life, the ability to always listen for a voice command - will be present in the Moto 360. One particularly nice example is being greeted by the time, or whatever information is most pertinent, everytime you lift your wrist and not having to push or tap anything.

The charging technology is a secret. The Moto 360 has no usb ports or openings of any kind. It says it very much looks like a watch in every way. Motorola won't reveal how the watch charges, but we're betting it will use some combination of solar, magnetic induction, and kinetic charging technologies.

It's water resistant. Again, Motorola wouldn't divulge how water resistant the Moto 360 was, but it promised to discuss this more in the future.

Global rollout will happen eventually. We know Motorola plans to launch the Moto 360 in the US this summer. If you don't live in the US, Motorola also plans to offer the Moto 360 in your region...someday.

First Published: March 19, 2014: 5:15 PM ET

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Starbucks CEO backs minimum wage raise

Howard Schultz applauds Obama for taking stance on minimum wage.

NEW YORK (CNNMoney)

"I applaud the President for taking a stance on raising the minimum wage," he told CNN's Poppy Harlow in an interview.

But Schultz, known to donate to Democratic candidates, stopped short of saying whether or not President Obama's push to raise it to $10.10 is the right number. And he warned of "unintended consequences" of a hike.

"Would we have to raise prices? I don't think so," Schultz said. He also wouldn't say whether or not Starbucks (SBUX, Fortune 500) would cut jobs if the federal minimum wage was raised significantly. "I would hope not," he said.

All of Starbucks' 200,000 employees make more than $7.25, the current federal minimum wage. Many receive health care and retirement benefits.

Related: Oprah Chai Tea comes to Starbucks

"We may not be able to afford to provide all the benefits if we had to go to $10 an hour," he said.

Obama has signed an order mandating that any businesses with federal contracts pay workers at least $10.10 an hour starting in 2015 and has urged Congress to do the same for all workers. Many states and cities have taken matters into their own hands and increased minimum wage at the local level.

About 1.6 million workers earn $7.25 today, according to the Congressional Research Service. Advocates say a minimum wage hike could reduce income inequality but critics say it could raise prices and lead to job losses.

"I do think there ... is a larger gap between the haves and have-nots in America," Schultz said.

First Published: March 19, 2014: 8:29 PM ET

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Sony orders first original TV series for PlayStation

NEW YORK (CNNMoney)

The company said Wednesday that it had ordered 10 one-hour episodes of "Powers," a drama based on the comic book series of the same name. It will be produced by one of Sony PlayStation's corporate sisters, the Sony Pictures Television studio.

Sony (SNE) first signaled last summer that it would pursue original TV programming for the PlayStation Network. The strategy mirrors that of its biggest video game console rival, Microsoft (MSFT, Fortune 500), which started to experiment with TV-style programming for Xbox Live subscribers years ago and has increased its investment in the space lately. One of the shows that Microsoft is developing is based on the Xbox game franchise "Halo."

Both Sony and Microsoft want their consoles to be known for delivering video as well as games. Apart from a project like "Powers," Sony is exploring the creation of a cablelike television service that would be distributed via the PlayStation Network and could challenge existing TV providers like Comcast (CMCSA, Fortune 500) and DirecTV (DTV, Fortune 500). A number of other companies are also pursuing so-called "over the top TV" ideas.

Related: Get ready for 'over-the-top' TV

With "Powers," Sony is hoping to differentiate PlayStation Network from its rivals and make it more valuable to subscribers.

The series title is a reference to the supernatural abilities possessed by some of the characters. "It overlays extremely well with the demographics of the PlayStation," Michael Lynton, the chief executive of Sony Entertainment, told the Wall Street Journal, which broke the news about the series order.

A Sony spokeswoman confirmed the order but was not able to provide any information about a premiere date.

Sony Pictures Television, which produces shows for networks like NBC, is also working on a 13-episode drama for Netflix. The Journal said that the PlayStation Network would only have the U.S. rights to "Powers," and the international rights could be sold to other distributors, including traditional television networks.

First Published: March 20, 2014: 2:57 AM ET

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Billionaire buys $201 million life insurance policy

NEW YORK (CNNMoney)

Guinness World Records, which announced the policy, said it is the largest ever issued.

Neither the record keeper nor the issuer would say who is covered by the massive policy.

Dovi Frances, the adviser who arranged the policy, would only say it went to a well-known technology billionaire from California.

Related: How to choose a life insurance policy

The wealthiest of the wealthy buy life insurance for several reasons.

Primary among them are tax purposes, Frances explained.

A wealthy estate is hit with a hefty tax bill, and there may not be enough cash to cover it, since many millionaires and billionaires hold their wealth in investments, he said.

Related: The ultimate guide to retirement

The $201 million policy is more complicated than most. It's underwritten by 19 different insurance companies, each with a slice of less than $20 million, he said. If a single lender took the whole policy, Frances said, "they would go into bankruptcy if the insurance policy is called."

And a big plan comes with a big cost. Frances said the price is "in the low single-digit millions."

First Published: March 16, 2014: 5:21 PM ET

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