Is it better to cheat on business taxes than to be out of business? A British researcher says much of the UK economy is only possible through tax evasion. From FastCompany.com:
As he and colleagues argue in a recent paper, the informal economy isn’t just for shady figures looking to squeeze out as much profit as possible; in large measure, it’s inhabited by entrepreneurs whose fledgling businesses might simply fail if they played strictly by the rules.
As taxes and regulations get more complicated and difficult to comply with, more businesses will fall on the wrong side of the law (never a good idea, by the way). The politicians who make compliance prohibitively difficult and expensive will then blame “greed.”
That’s why they are called plea “bargains.” From the Newport Beach Patch:
A 52-year-old woman who pleaded guilty in 2009 in connection with a $2.5-million tax fraud and money laundering scheme that included two Newport Beach properties and was later allowed to withdraw her plea was convicted today following a jury trial.
Safieh Fard had struck a plea bargain in May 2009 with federal prosecutors that recommended a 30-month prison sentence. Now Fard could face up to 20 years in prison, her attorney Correen Ferrentino said.
Sadly, prosecutors can overcharge to force a plea bargain. Even when a defendant thinks she is innocent, the risk of a long prison sentence can make it hard to keep fighting. It will be interesting to see how long the sentence turns out.
Really? Not all tax prosecutions are justified? No. Tax Analysts today carries an appalling story from New York State (unfortunately available for now only to subscribers) where a small businessman was falsely accused of evading taxes on $1 million of income. The indictment was based on shockingly lazy investigation; a close reading of the taxpayer’s return alone would have cleared the taxpayer.
It was almost as though the prosecution believed that once the department demonstrated that Monsour had received the money deposited into his accounts, the burden had somehow shifted to Monsour to prove that the receipts were not taxable income. That approach might have applicability in a civil tax audit, but it has no place in a criminal prosecution. In a criminal case, it is always the people’s burden to prove every element of the offense, whether before the grand jury or at trial, and in this case the people had to show that Monsour knowingly and fraudulently filed a false return that misrepresented his income. Showing that he had received money without also showing that the money received was taxable income was not enough, and the prosecution would have known that mistake if Monsour had been alerted to the investigation before he was indicted.
The taxpayer had borrowed money and sold property (reporting the sales properly on his return), accounting for the bank account deposits that led to the indictment. Those calling for ever-harsher punishment and looser prosecution standards for tax crimes ought to be the first to experience it.
Tom Harkin, cliff jumper. From thefiscaltimes.com:
In a recent call with reporters, Democratic Sen. Tom Harkin of Iowa signaled he was willing to let the country topple over the fiscal cliff unless President Obama and Congress strike a deal to force wealthy Americans to pay more in taxes and that protects Medicare and Medicaid from deep cuts.
“No deal is better than a bad deal, because things will change after Jan. 1, the positions will change,” Harkin explained. “Quite frankly, if we don’t get a good deal, we’ll just take it up in January or February.”
TaxProf, Should the Top Marginal Income Tax Rate Be 73 Percent? Short answer: no.
Martin Sullivan, Should CEOs Lobby for a Carbon Tax? (Tax.com) They might as well lobby for an oxygen tax, for all the good it would do.
Jim Maule, Is Grover Norquist Singing a New Tax Tune?
Maybe not: Members of Congress Appear Ready to Break With Anti-Tax Pledge As Norquist Doubles Down (TaxGrrrl)
Peter Reilly, S To LLC As A Fiscal Cliff Acceleration Strategy ? That means paying tax on all of your built-in gains now, but at a 15% rate. It’s a strategy only for taxpayers with cash reserves to pay taxes now. It makes the most sense if a sale is likely in a few years anyway, but at a higher tax rate. The biggest risk is that the value of the business will go south before you sell the business, and you pay tax on gain that won’t be there when it’s time to cash out.
Howard Gleckman, What Happens if Congress Extends Tax Cuts for Those Making $500,000? (TaxVox) It just changes where the harmful and futile policy begins.
That’s one way to use the $5 million lifetime gift exemption before it goes away next year. Lindsay Lohan gets $100,000 gift from Charlie Sheen to pay toward IRS bill; Sheen now faces estate, gift tax issues (Kay Bell)
Jack Townsend, The Cheek Defense in IRS Disbarment Proceedings. Tax protest guru and former IRS agent Joe Banister is barred from practicing before the IRS; he was unable to convince the Ninth Circuit that his belief in the silly “Section 861 argument” is reasonable.
News you can use: SWANS ARE EXPENSIVE! (Robert D. Flach)
I would have read the article, but I decided not to risk it. Optometrists warn: Don’t stare at your computer screen too long (Radio Iowa, via The Beanwalker)
Tags: tax policy, maule, tax crime, TaxProf, Kay Bell, Robert D Flach, TaxGrrrl, Paul Neiffer, Martin Sullivan, Radio Iowa, Howard Gleckman, Jack Townsend, Grover Norquist, Peter Reilly, The Beanwalker, Fiscal Cliff