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Entries in Taxes (142)

Tuesday
Jan312012

Obama Urges Congress to Act On Small-Business Tax Breaks

Official White House Photo by Pete Souza(WASHINGTON) -- President Obama on Tuesday urged lawmakers to act quickly on bipartisan legislation to expand tax cuts for small businesses and unlock capital for startup companies.

“My expectation and hope is that they will get a bill together quickly, that they will pass it and get it on my desk. I will sign it right away. And I would like to see that bill signed this year,” the president told reporters at the start of a Cabinet meeting at the White House.

Earlier Tuesday the president sent Congress his “Startup America Legislative Agenda,” which would eliminate taxes on capital gains in investments in small businesses and provide a 10 percent income tax credit on new payroll to promote hiring, among other measures.

Calling for an “all-hands-on-deck approach” to promote small business growth, the president also directed the members of his Cabinet to put forward their own initiatives to “enhance the ability of entrepreneurs to get up and running.”

Obama also noted a new face at Tuesday’s meeting. SBA Administrator Karen Mills was in attendance for the first time as a new official member of the Cabinet.

“It is a symbol of how important it is for us to spur entrepreneurship, to help startups, to move aggressively so that we can assure more companies that create the most jobs in our economy are getting a leg-up from the various programs that we have in our government,” Obama said.

Copyright 2012 ABC News Radio

Friday
Jan272012

Best, Worst States for Business, Tax-wise

iStockphoto/Thinkstock(WASHINGTON) -- A new ranking of states by their “tax-friendliness” to business finds Wyoming the most-friendly and New Jersey the least.

The annual ranking is produced by The Tax Foundation in Washington, D.C., a nonpartisan, pro-business research group that has been following and reporting on U.S. federal and state tax policy since 1937.

The 10 friendliest among the 50 states are Wyoming, South Dakota, Nevada, Alaska, Florida, New Hampshire, Washington, Montana, Texas, and Utah.

[ READ THE FULL REPORT HERE ]

The 10 states with the most bilious tax policies, in descending order, are:  Iowa, Maryland, Wisconsin, North Carolina, Minnesota, Rhode Island, Vermont, California, New York, and New Jersey.

New Jersey, says the group, owes its standing to its having the third-worst individual income tax rate, the fifth-worst sales tax, the 13th worst corporate tax and the second-worst property tax.

Ranking the 50 states isn’t easy, Tax Foundation reps admit. For each state, its tax index takes into account 118 different variables in five major areas of taxation: business taxes, individual income taxes, sales taxes, unemployment insurance taxes and property taxes. The combination gives a state its overall ranking.

Copyright 2012 ABC News Radio

Wednesday
Jan252012

Warren Buffett and His Secretary Talk Taxes

ABC News(WASHINGTON) -- In a week when taxes and tax returns have dominated the headlines, billionaire investor Warren Buffett jumped back into the political debate and showed his returns exclusively to ABC News’ Bianna Golodryga, adding, “I have never had it so good....What has happened in recent years, we were told a rising tide would lift all boats, but the rising tide has lifted all yachts.”

Buffett’s secretary since 1993, Debbie Bosanek, sat next to her boss just hours after being invited by the president to the State of the Union address, where the president made her the face of tax inequality in America.

Bosanek pays a tax rate of 35.8 percent of income, while Buffett pays a rate at 17.4 percent.

“I just feel like an average citizen. I represent the average citizen who needs a voice,” said Bosanek. “Everybody in our office is paying a higher tax rate than Warren.”

During Tuesday night’s State of the Union address, President Obama, for the first time, put a minimum-percentage figure on the amount of taxes the ultra-rich should pay -- 30 percent -- an idea that has been referred to as the “Buffett rule.”

“The question is what is fair when you have to raise multi-trillions to fund the United States of America,” said Buffett.  "[Raising taxes] will not change my behavior. I have paid all different kinds of rates and I’ve always been interested in making money. I believe this should be a defining issue. Debbie works just as hard as I do and she pays twice the rate I do.”

Buffett, a Democrat and Obama-supporter, had one question for Mitt Romney: “Do you think the tax system should be perpetuated?”

He doesn’t blame the former Massachusetts governor or any of the ultra-rich for paying lower tax rates than most Americans and challenged Congress to make a change.

“I don’t pay hardly any payroll taxes,” Buffett said. “Gov. Romney hardly pays any payroll taxes, Newt Gingrich hardly pays any payroll taxes. Debbie pays lots of payroll taxes.”

He lashed out at assertions from many Republican leaders that the “Buffett rule” is class warfare.

“If this is a war, my side has the nuclear bomb,” Buffett said. “We have K Street....We have Wall Street. Debbie doesn’t have anybody. I want a government that is responsive to the people who got the short straw in life.”

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\Copyright 2012 ABC News Radio

Monday
Jan232012

Top 8 Overlooked Tax Deductions

iStockphoto/Thinkstock(NEW YORK) -- "Every year taxpayers are leaving money on the table by not claiming all the credits and deductions to which they are entitled," says Kathy Pickering, executive director of The Tax Institute at H&R Block. By some estimates, taxpayers unnecessarily forfeit more than $1 billion every year. To be sure you're not one of them, don't overlook these credits and deductions:

1. Hobby Losses

You may be able to claim hobby-related expenses as deductions, says Mark Luscombe, principal analyst for tax and accounting for Riverwoods Illinois-based CCH. Let's say you're into model railroading, and that last year you bought $400 worth of miniature mountains, trees and gandy dancers. You can deduct some or all of that, plus some or all of the $250 you spent to attend the Little Railroaders of America convention. How much depends on whether your hobby qualifies as a business (it has to have showed a profit in three of five consecutive years). Even if fails to qualify, expenses still can be deducted up to the amount of hobby income.

2. Credit for Dependent Care

Most people think of this credit as applying only to, say, costs of daycare for children whose parents must work outside the home. But it also can apply to the cost of a child's day camp or to after-school programs and babysitting, provided these are related to the parents' need to work, says CCH's Mark Luscombe. But remember: You cannot claim the credit unless you have the proper documentation. You'll need the Social Security numbers of the people providing daycare, or the tax ID number of, say, the summer camp.

3. Animal Rescue

If your charity takes the form of rescuing animals, a 2011 tax court decision is good news for you, says Larchmont, N.Y., tax attorney Julian Block. Jan Van Dusen of Oakland had claimed a deduction of $12,068 for money spent to rescues of feral cats. The IRS at first denied her claim, arguing in part that the expenses were personal because she kept the cats at home. But Van Dusen prevailed. Jonathan Lovvorn, senior vice president of the Humane Society of the United States, says the case establishes that you can claim deductions for rescued animals cared for in your home, provided you can distinguish between expenses on them and expenses for your personal pets (keep separate receipts). You should also get a letter from an authorized non-profit confirming your home charity is under their auspices.

4. Forfeited Bonuses

Let's say your employer gave you, at the time you were hired, a signing bonus contingent on your staying with the firm two years. Or perhaps, as a salesperson, you were given bonuses with the same proviso. If you didn't stay the minimum time and were forced to forfeit, you can deduct the bonuses, says Eric Lammert, a tax research specialist with the National Association for Tax Professionals. If the total forfeited is under $3,000, you can claim them as an itemized deduction. If it's more, you have a choice, he says: you can either take it as an itemized deduction or you can go back to the year you reported them as income, and re-run your return for that year minus that income, whichever is more advantageous to you.

5. Points, Old & New

Jeff Schnepper, author of How to Pay Zero Taxes, says many taxpayers who've refinanced a mortgage don't appreciate that they can deduct old points as well as new. Any points you pay to refinance your home, he says, can be deducted over the life of the new loan on a monthly basis. But you can also deduct, in the year of a new refinancing, all unamortized points from an old refinancing. His example: You refinanced on June 1, 2010. You then refinanced again a year later. On your 2011 return you can deduct any points remaining from the 2010 loan.

6. Job-Hunting Expenses

If you're out of work and searching for a new job, says Jeff Schnepper, any search-related expenses are deductible, including postage and phone bills. If you find a job but have to move to take it, you may also be eligible to deduct some of your moving expenses, provided your new job is at least 50 miles farther from home than your old job. But you can only write off the expense if the job you're seeking is in the same field as the job you last had. Says Eric Lammert of the National Association of Tax Professionals, "Today, lots of people are getting laid off and going into a different profession. But expenses related to a job search in a new profession are not deductible, only ones related to your search for a job like the one you had." What was Congress' intent here? "I don't know what Congress had in mind when they drafted that," he says, "maybe keeping the slaves in their places?"

7. Energy Conservation/Hybrid Vehicle Credits

Kathy Pickering, executive director of the Tax Institute at H&R Block, says the tax credit for hybrid vehicles has expired. Taxpayers may still, however, claim a credit for 2011 purchases of plug-in electric drive vehicles, such as the Chevy Volt or Nissan Leaf. Although state and federal credits for certain energy-conservation home improvements expired Dec. 31, tax expert Brent Hunsberger says credits may still be claimed for certain devices under the Residential Energy Efficiency Property Credit. The list includes heat pumps, home electricity-generating solar and wind systems and fuel cells. Installation and preparation costs are covered, he says, and only the credit for fuel cells is capped.

8. Tax Prep

This last one isn't a deduction, but it can save you money. You can get your tax return done for free through the IRS Free File program, designed for taxpayers who file electronically by the IRS in partnership with some 15 private software developers. It's open to anybody with an adjusted gross income of $57,000 or under. That's about 70 percent of all taxpayers, according to the IRS. For more information, go to irs.gov/freefile. Seniors, military and the poor may also be eligible for free tax prep provided at libraries, military bases, shopping malls and other sites by Volunteer Income Tax Assistance. To find the location nearest you, call 800-906-9887.

Copyright 2012 ABC News Radio

Wednesday
Dec212011

'Stupid Projects' Cost Taxpayers $6.5 Billion Last Year

Ryan McVay/Photodisc/Thinkstock(WASHINGTON) -- Most Americans don't have a clue as to where most of their tax dollars are going.  If you're one of them, a new report by Sen. Tom Coburn is bound to make you feel a little ill -- or more than a little furious.

The Oklahoma Republican claims that $6.5 billion was wasted on so-called "questionable initiatives" during the 2011 fiscal year ending last Sept. 30.

Coburn says his study, "details 100 of the countless unnecessary, duplicative, or just plain stupid projects spread throughout the federal government and paid for with your tax dollars this year that highlight the out-of- control and shortsighted spending excesses in Washington."

According to the lawmaker, post-death improper payments are among the most egregious instances of waste that have totaled over $600 million during the past five years. Coburn points to the example of one former government worker's son who cashed his dead dad's checks for 37 years, stealing more than a half a million dollars from taxpayers.

The study also lists a $113,000 federal grant to preserve the history of video games and another $130,000 for robot "dragons" to help preschoolers learn language skills.

Through it all, Coburn points to the real culprit, stating, "There was no bigger waste of the taxpayers’ money in 2011 than Congress itself. The dismal nine percent approval rating, the lowest ever recorded, would indicate the vast majority of Americans would agree."

Copyright 2011 ABC News Radio

Monday
Dec122011

Boehner Urges Democrats to Support GOP’s Economic Package

Chris Maddaloni/CQ-Roll Call(WASHINGTON) -- As Congress wrestles over a slate of outstanding issues to settle before the end of the year, House Speaker John Boehner Monday urged Democrats to join Republicans in passing an economic package that would extend a number of expiring measures, like unemployment insurance and the payroll tax credit.

“I do believe that [the Middle Class Tax Relief and Jobs Act] is going to pass with bipartisan support, and when it comes to jobs the American people can’t wait,” Boehner said. “We’re going to take action.”

The Ohio Republican would not reveal whether he would dismiss lawmakers once the House concludes its business, but he said it is “important” that Congress pass the extensions to help Americans desperate for relief.

“We’re going to have to wait until later on in the week to see what the Senate does,” Boehner said. “All I can do is report to you about what the House is doing and I’m confident that we’re going to move the bills that we need to move this week, and then the Senate can do whatever the Senate has to do.”

The GOP’s proposal would extend the payroll tax credit for one year, reform and extend unemployment insurance, and implement a “doc fix” to protect Medicare physicians from large reimbursement cuts. It also accelerates a presidential decision on the Keystone XL energy pipeline, which Republicans say will create tens of thousands of jobs but Democrats have decried as a poison pill in the Senate.

Boehner said he believes the GOP’s bill will pass with bipartisan support when it comes to the floor Tuesday, citing an endorsement by Blue Dog Democrat Rep. Dan Boren, who called on Congress Monday to “come together in a bipartisan way to pass this legislation.”

But many Democrats and President Obama point to the controversial pipeline project as justification to oppose the package. Nevertheless, Boehner said he still believes there’s a “good shot” that the Senate will pass the measure with the provision included.

Boehner would not comment on the prospect of further negotiations if the House passes the bill but the Senate rejects it.

“The House is going to do its job, and it’s time for the Senate then to do its job,” he said.

Aside from the payroll tax credit, unemployment insurance and SGR/Doc Fix, which are all set to expire Dec. 31, the House must also pass an omnibus appropriations bill to fund the government before the current continuing resolution runs out on Friday. That bill is expected to be introduced as soon as Tuesday morning, with a vote in the House as early as Thursday.

Copyright 2011 ABC News Radio

Thursday
Dec082011

8 Tax Breaks Set to Expire

Ryan McVay/Photodisc/Thinkstock(NEW YORK) -- Valuable tax breaks are set to expire at year's end. While Congress might act to extend some or to re-instate others, the savviest consumers, tax experts say, will exploit them now. The list of soon-to-vanish breaks includes these eight:

1. Higher Education Expenses: After 2011, the above-the-line deduction for qualified higher education expenses won't be available, so you'd better claim it now. Taxpayers with adjusted gross incomes of up to $65,000 for singles and $130,000 for couples can claim the maximum deduction: $4,000. The deduction applies to fees and tuition paid by students enrolled in an institution of higher learning during 2011 or during the first three months of 2012.

2. Mortgage Insurance Premiums: Before year's end, homeowners with joint adjusted gross incomes of less than $109,000 can deduct the cost of their mortgage insurance. Afterwards, they can't.

3. Adoption Credits: Under a program that expires Jan. 1, parents of adopted children can claim a credit against their federal income tax of up to $13,360 for each adopted child (for qualified expenses). If the expenses have been paid for by an employer, they can exclude up to $13,360 form their gross income.

4. Sales Tax: Planning to buy a big-ticket item? Buy it now, if you're somebody who doesn't have to pay state and local income taxes (a retired public employee, for instance). Up to now, such people have had the option of deducting sales taxes to reduce their federal income tax. After the new year, however, they won't.

5. Classroom Materials: Are you a K-12 teacher, instructor, principal or aide? Have you worked in a school for at least 900 hours during the school year? If so, you can claim an above-the-line deduction of up to $250 for any expenses you have paid out of pocket for books, computer equipment, supplies or supplementary materials used in the classroom. Next year, however, you won't be able to: The deduction vanishes.

6. Energy Efficiency Upgrades: Taxpayers who improve their home's energy efficiency can claim a credit of 10 percent for the cost, up to a maximum of $500. You can, for example, add insulation to your attic, install insulated windows or buy an energy-efficient air conditioner or furnace. You should retain the receipts and any certification by the manufacturer that your property meets the requirements for the credit. Be advised: This is a one-time deal: If you claim credit for an upgrade this year, you won't be able to claim it next.

7. IRA Contributions: People 70 1/2 years old (or older) can get a special break for charitable giving, but only if they act before the break expires Dec. 31. Senior donors who have a traditional IRA (or other tax-deferred retirement plan) can give their distribution -- up to $100,000 -- to a qualified charity, excluding it from income. By so doing, they will have satisfied their distribution requirement without owing taxes. The move is especially advantageous, tax experts say, for seniors who don't itemize.

8. AMT Patch: This break, which expires annually, was created by Congress to save taxpayers from having to pay the Alternative Minimum Tax (AMT), a flat 28 percent rate imposed on high-earners. The AMT dates back to the Nixon era, when the Treasury Department, to its horror, discovered that many of the wealthy were paying nothing.

Under the AMT, anyone earning more than a set amount was forbidden from claiming certain deductions and was potentially subject to the 28 percent rate. Problem is, there was no provision made for adjusting that set amount for inflation. As a result, decades of inflation have put more and more people of relatively modest means into the 28 percent bracket.

Rather than change the law and peg the AMT's threshold to inflation, Congress has opted every year to raise the threshold. This re-adjusted amount is the so-called patch, the latest of which is now due to expire at the end of December. It's $72,450 for a married couple filing jointly, and $47,450 for a single filer.

To determine what the threshold means to you, says CPA James Smith, managing director of Smith, Jackson, Boyer & Bovard in Dallas, start with your net taxable income after itemized deductions. Then add back certain permitted deductions, including state and local taxes and other items listed on IRS Form 6251. If the resulting number exceeds the patch's number, everything above it will be subject to the AMT's 28 percent.

Smith says Congress almost certainly will enact a new patch for next year, because to do otherwise could be politically suicidal: the threshold would automatically drop to what it was in the 1960s, catapulting millions of Americans into the higher bracket, not a good move in an election year.

What can you do to avoid the AMT? In the long run, Smith says, nothing. But if your calculations show that you're in danger of exceeding the patch this year, you can take steps to defer the tax bite to the next.

You could, for instance, defer payment of some of your state or city taxes until next year: your property taxes, say. Likewise, you could defer income until next year. Doing either could keep you below the threshold.

But you'll almost certainly be subject to the AMT next year. "You can run," Smith said, "but you can't hide."

Copyright 2011 ABC News Radio

Wednesday
Nov302011

Payroll Tax Cuts: Will They Bankrupt Social Security?

Comstock/Thinkstock(WASHINGTON) -- The Democratic winds of high-income taxation are picking up and the Republican thunderheads of off-setting spending cuts are rolling in as Capitol Hill braces for yet another partisan thunderstorm.

This time the battle is over payroll taxes, which fund Social Security, and whether to end, extend or expand the 2 percent cut that is set to expire on Dec. 31.

The one-year cut to Social Security’s funding stream decreased federal revenues by $112 billion in 2011, but the already-dwindling trust fund for Social Security remained untouched because the government borrowed extra money to fill the gap, adding instead to the $1.3 trillion deficit.

“On paper [the payroll tax cut] does nothing to Social Security,” said Andrew Biggs, a resident scholar at the American Enterprise Institute.  “It is just as solvent as it was before.  But that’s not the sort of bookkeeping that you would do in the private sector.”

Senate Democrats want not only to extend the current tax break, but further reduce it from the original 6.2 percent to 3.1 percent.  The Democrats' proposal also cuts employers’ share of the payroll tax in half, down to 3.1 percent on the first $5 million paid in wages.

Congressional Republicans, who are wary of even extending the cut at its current 2 percent level, are unlikely to support the expanded cuts that Democrats are pushing for.

“The problem here is that the payroll tax doesn’t go into general revenue, it supports Social Security,” Sen. Jon Kyl, R-Ariz., the number two Republican in the Senate said on Fox News Sunday.  “And you can’t keep extending the payroll tax holiday and have a secure Social Security.”

Biggs, the former principal deputy commissioner of the Social Security Administration, said Social Security is already running on a deficit.  Even without the payroll tax cuts, revenues cannot keep up with the flood of baby boomers who are retiring at the rate of about 10,000 per day, he said.

“In the short term the government can make up the difference in the lost payroll taxes,” Biggs said.  “Social Security benefits will continue to be paid.  The real question is: are we undermining the financing of a program whose finances are already precarious?”

When the tax cut was enacted as part of the 2010 stimulus package, it was intended to be a one-year, short-term break for middle-income Americans.   A family earning $50,000 per year saved about $1,000 on their taxes in 2011 because of the cut.

“If it doesn’t [get extended] every paycheck in the country will go down on Jan. 1,” said Chuck Marr, the director of federal tax policy at the Center for Budget and Policy Priorities.  “It’s real money.  Every person you see every day has a thousand dollars less money, and that’s a lot of bucks.”

Copyright 2011 ABC News Radio

Tuesday
Sep202011

Warren Buffett Rule: Class Warfare or Tax Fairness?

Pixland/Thinkstock(WASHINGTON) -- In proposing the "Buffett Rule," President Obama is invoking a name synonymous with success to raise taxes for the wealthy in what political analysts are saying will be a tough sell to Congress.

The chairman and chief executive of investment company Berkshire Hathaway is widely known to have friends on both sides of the aisle, including former Treasury Secretary Henry Paulsen and Federal Reserve chairman Ben Bernanke -- both Republicans.  Of course, he is known for being a billionaire businessman who lives rather modestly in Omaha, Nebraska.

In opposition to the Buffett Rule, Republicans have attacked the president's proposed tax hikes, crying "class warfare."

"Class warfare will simply divide this country more.  It will attack job creators, divide people and it doesn't grow the economy," Rep. Paul Ryan said on FOX News Sunday.  "Class warfare may make for really good politics, but it makes for rotten economics."

Joseph Stiglitz, Nobel Prize winner in economics and professor at Columbia University, said he disagrees.

"It's not class warfare to ask everyone in the country to pay their fair share.  To say the wealthy have taken advantage of their political position and have not paid their share of taxes is not class warfare.  It's a statement of fact," Stiglitz told ABC News.  "The fact is they are paying lower taxes and most Americans think this is unjust and unfair.  Tax loopholes don't just appear out of thin air.  They are the result of big political investments that rich people have particularly made to get tax preferences."

In an ABC/Washington Post poll in July, 72 percent of those surveyed supported raising taxes on people with incomes of more than $250,000 a year to help reduce the national debt, while 55 percent supported it strongly.  That was the most popular of nine different debt-reduction approaches tested and the only one to win majority "strong" support.  The next closest was raising the amount of income taxable for Social Security purposes.

Stiglitz said there is "no justification" why hedge funds should be taxed at a lower rate than workers.  He said it is possible that raising taxes by 0.5 percent, particularly with millionaires, could raise gross domestic product (GDP) by 1 to 1.5 percentage points.

"This could make a significant contribution to the country, especially if we spend it well," he said.  "So from an economic point of view, the current tax system is a distortion and this is a partial fix for that distortion."

Buffett and billionaire George Soros have also said if the wealthy make certain sacrifices, it could be a sign of national solidarity.

Copyright 2011 ABC News Radio

Tuesday
Sep132011

Tech Mogul Traveled the World, a Step Ahead of Taxman

Stockbyte/Thinkstock(NEW YORK) -- New court documents provide revealing details about the peripatetic life of William H. Millard, founder of California technology retail chain ComputerLand, who left the U.S. two decades ago for exotic locales while amassing tens of millions in back taxes.

Mallard, 79, was recently found by private investigators in the Cayman Islands, touching off a flurry of court filings in an attempt to collect his back taxes. Once named one of America's wealthiest businessmen by Forbes, the tech mogul was worth an estimated $480 million in 1985.

Millard faces an outstanding tax bill of more than $59 million in Saipan, where he settled to pursue business opportunities before moving on to such places as Singapore, Hong Kong, Ireland, and, finally, Grand Cayman Island.

The tax fugitive's retail company once conducted an all-time high of $1.4 billion of business in 1984, according to a Forbes magazine article dated that year. He resigned as chairman of ComputerLand after a series of entanglements with investors in 1986, The New York Times reported.

After the sale of his retail chain in 1987 for nearly $250 million, Millard relocated with his family to Saipan, according to a commonwealth filing in federal courts in the U.S.

Authorities in Saipan allege that thanks to an elaborate network of shell companies, bank accounts, family-owned entities and trusts in Florida, California, Canada and the Cayman Islands, Millard stowed his assets and traveled the world at will.

"This is one of the most sophisticated and complicated cases of offshore asset structuring that we have ever seen," Michael Kim, a prosecutor representing Saipan's case, told The Wall Street Journal.

Although commonwealth officials were able to trace Millard's movements in Singapore, Ireland, Brussels, Hong Kong and the Cayman Islands, authorities were never able to pinpoint his exact whereabouts. Millard also relinquished his U.S. passport and acquired Irish citizenship, according to the Wall Street Journal.

But eventually Millard's love of globetrotting caught up with him.

In 2010 Saipan hired law firm Kobre & Kim and private investigators to track down Millard, who was found in Orlando, Fla., during the Christmas season while visiting his children.

Millard was later followed by investigators to the airport, where he departed on a flight to the Cayman Islands and was unknowingly trailed by investigators to his home.

Michael Kim, a prosecutor representing Saipan, and James R. Stump, assistant attorney general of the Northern Mariana Islands, did not return requests seeking comment.

No court date for the case against Millard has been set.

Copyright 2011 ABC News Radio

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