The TaxProf Reports: IRS Whistleblower Office Issues Annual Report to Congress. It looks like ratting out tax cheats could be lucrative. Changes requiring the IRS to issue more awards were enacted in 2006, and it appears that the whistleblowers have done well. In 2012, for example, 128 awards were paid totalling $125,355,799, according to the report. That works out to nearly $1 million each.
Awards may well be one of the most effective ways to enforce the tax law, as well as one of the most creepy. They make every disaffected employee a potential IRS mole. Sure, it may make employment awkward for the whistleblower, but $1 million cash can be very consoling.
But before you go racing to the IRS, consider this sobering news from the report: From 2008 through 2012, whistleblowers reported 33,064 cases to the IRS, but awards were paid only 630 times. That means about 1 in 50 claims cashed out. Because the IRS collection process is slow, some more of those claims will get paid out, but the great majority won’t.
The moral? If you have a Valentines Day date, be careful how much of your tax life you share. Love is one thing, but cold hard cash is something else entirely.
I’ll start that diet right after I finish this cheesecake:
Obama Proposes Tax Incentives for Manufacturing (Tax Analysts, $link)
If tax reform is a top priority, you don’t start the process by adding more gimmicks to the code.
A federal court in Cleveland has barred MAI-designated real estate appraiser Michael Ehrmann and his firm, Jefferson & Lee Appraisals Inc., from preparing property appraisals for federal tax purposes, the Justice Department announced today. Judge Dan Aaron Polster of the U.S. District Court for the Northern District of Ohio signed the civil injunction order against Ehrmann and Jefferson & Lee Appraisals. The defendants consented to the injunction without admitting the allegations against them.
Federal law allows a taxpayer in certain limited circumstances to claim a charitable deduction for the value of a conservation easement donated to a qualified organization. The easement’s value must be determined by a qualified appraiser. According to the government complaint, Ehrmann’s appraisals repeatedly overstated the value of conservation easements placed on historic properties, including the Book Cadillac Hotel in Detroit and the Powerhouse Building in the Flats District of Cleveland.
The tax law is very touchy about the rules for appraisals. The obvious potential for abuse shows why.
A sad story from Buffalo. A tax preparer scammed his own clients, reports buffalonews.com:
Elizabeth Wopperer lost everything. She lost her business. She lost $40,000 in cash. And by the time it was all over, she found herself filing for bankruptcy.
On top of all that, the IRS now wants the money that was stolen from her.
The man she blames is going to federal prison for up to 30 months, but that won’t return the cleaning business she was forced to sell or pay the taxes she now owes because of his fraudulent actions.
Mangione, the operator of a North Tonawanda payroll and tax preparation business, was supposed to pay federal income taxes on behalf of his clients but didn’t.
He chose instead to pocket some of the money, which means Schunke, Wopperer and several others are still on the hook for those taxes.
There’s no reason to give money to your preparer to pay your taxes.
Gene Steurle, Why Tax and Transfer Programs Often Discourage Work and Savings (TaxVox):
The tax code also is loaded with disincentives to work, save, and study. They include PEP and Pease (reductions in tax allowances for personal exemptions and itemized deductions), child tax credits, and the earned income tax credit. These implicit taxes combine with explicit taxes to create incentives for many households that are often inefficient and inequitable, to say nothing of strange and anomalous.
That’s why proposals to increase the earned-income credit are pernicious. The phase-outs of the benefits as incomes rise punish taxpayers for improving their lot.
But I thought nobody moved because of state taxes! Two Dozen Companies Announce California Departures, Citing Higher Taxes (Joseph Henchman, Tax Policy Blog).
Cara Griffith, Income Redistribution Has No Place in State Tax Systems. (Tax.com) The goal of taxes should be to finance operation of the government. The tax commissioner is not Handicapper General. When states try to soak the rich, they’ll rinse them right across the state line.
Paul Neiffer, Don’t Forget the “Magic Blurb” on Donation Acknowledgements! A cancelled check by itself doesn’t get you a charitable deduction over $250.
Missouri Tax Guy, Maximize your Travel & Entertainment Benefits.
Patrick Temple-West, Vital New York City property taxes lost, and more (Tax Break)
Andrew Mitchel, 48% Decrease in Number of Expatriates for 2012
Jack Townsend, Interview of R. J. Ruble, A Tax Lawyer Incarcerated for Tax Shelter Crimes. Sobering.
Say, what time is it? Madness Time. (Christopher Bergin, Tax.com)
If you are thinking of proposing tonight, check out An Updated Marriage Bonus and Penalty Calculator for Valentine’s Day from Roberton Williams at TaxVox before you commit!
News you can use. The SEC is Developing an Army of Robots to Replace You (Going Concern)
Tags: Andrew Mitchel, Cara Griffith, Christopher Bergin, Gene Steurle, Going Concern, Jack Townsend, Joseph Henchman, Kay Bell, Missouri Tax Guy, Patrick Temple-West, Paul Neiffer, Roberton Williams, tax crime, TaxGrrrl, TaxProf, whistleblower rewards