Audit defenders can’t defend themselves. There is something deep in our DNA that enables us to believe in the supernatural, at least when it comes to taxes. Otherwise sensible people act as if they believe in a Tax Fairy who can wave a magic wand to make taxes go away. Operators offer themselves as intermediaries to the tax spirit world, taking real money to generate pretend tax breaks.
It had to take a real leap of faith to pay good money to the National Audit Defense Network. Members of this Nevada group were convicted in Las Vegas yesterday of tax charges that included an implausible tax credit scheme. They set up a “shopping” web site called Tax Break 2000 that was inaccessible to handicapped users. They would then sell Tax Fairy adherents a “modification kit” to make the web site handicap-accessible for $10,475 — 20% down, and the rest payable on a promissory note “when they had no expectation that the customers would make payments on the promissory notes.” They then told their clients that this generated a $5,000 tax credit.
How many Taxafarieans paid the $10,475 tithe? According to the indictment, they sold 21,610 kits. Assuming they collected 20% of the sales price, that grossed them $45,272,950.
Any attempt to commune with the Tax Fairy runs into snags. The first big snag here was a letter from their own internal “dream team” of tax advisors telling them this wouldn’t work. The indictment says the NADNers went opinion shopping and found accommodating attorneys who said it might work. Good enough!
They had more difficulty clearing the next obstacle: a permanent injunction against selling Tax Fairy access. But that’s the least of their problems now.
This case has attracted a little extra attention because of the involvement of a former NFL punter, who apparently decided to ignore his professional training and go for it. When trick plays fail, they fail badly, and the participants now may face long prison terms.
And there is no tax fairy.
No. Does Warren Buffett Practice What He Preaches? (Paul Neiffer) “The cost to Warren individually of raising his individual income tax bracket by 10% annually may cost him personally a couple of million or less, while his company saves over $400 million in tax by using energy tax credits. I would make the trade-off any time.”
TaxProf, The IRS Scandal, Day 384
Joseph Thorndike, Bad Ideas Are Like Bad Pennies (Tax Analysts Blog). He’s talking about private collection of IRS debts. Considering that the IRS isn’t exactly blemish-free in its debt collection practices, I don’t share the objections to private collection of undisputed tax debts.
Joseph also raises this point: “But it’s also expensive to pander, since every dollar invested in IRS collection can return up to $20 in new revenue.” I think that’s hugely unlikely as a marginal return, based on what I see in the field and the way the IRS misdeploys resources (preparer regulation, anyone?).
David Brunori, Taxing Togas and Keggers (Tax Analysts Blog). “States should consider ending the absurd practice of granting property tax exemptions to charitable organizations.”
Andrew Lundeen, The Economic Effects of Bonus Depreciation (Tax Policy Blog). “Permanently extending bonus depreciation would spur investment, lift wages, grow the economy, and increase federal revenue.”
Howard Gleckman, Turning Carbon Tax Theory Into Reality (TaxVox). Don’t hold your breath for this to be enacted, even if it would keep that carbon in your lungs.
Do you ever wonder why practitioners like to do the talking when the IRS gets involved? Yes, by all means stand up for your rights when dealing with the IRS. But there’s a line where you should stop. Going Concern tells us of a Mr. Calcione who went way over the line:
Three days after the agent left the voicemail, Calcione left a couple voicemails of his own. One of the messages contained a threat made by Andrew Calcione that if the agent called him again he would show up at the agent’s home and torture the agent, then rape and kill his wife and injure his daughter while the agent watched, before killing the agent. A second message left by Calcione requested that Calcione disregard the first message, which Calcione said was left in error.
Oh, you didn’ t mean my wife and daughter? Well, OK, then!
Mr. Calcione was convicted of threatening an IRS agent. Whatever tax problems he had before, that voice mail made things much, much worse.