Tax Roundup, 9/5/14: Obamacare tax credits get a reprieve. And: what’s $14 billion waste for a good cause?

September 5th, 2014 by Joe Kristan

The U.S. Court of Appeals for the D.C. Circuit will re-hear Halbig.  The full court will re-decide the decision reached by a three-member court panel that limited tax credits under Obamacare to policies purchased through state-established exchanges.  As 36 states have not established exchanges, the decision would have undermined both the employer and employee mandates, which are largely dependent on the tax credits.  Jonathan Adler has more.  Michael Cannon explains the politics behind the decision to re-hear the case.

 

EITC error chartLeslie Book, IRS Issues New Report on EITC Overclaims (Title A).  Leslie covers the recent IRS report on how much of the cost of this welfare program run through tax returns is misspent:

“As a result of the EITC program growth the total overclaims in the study are higher in the 2006-08 Report than in the past 1999 study, with annual overclaim estimates for 2006-08 at $14 billion (lower estimate) or $19.3 billion (higher estimate), compared to 1999 figures of $12.3 billion (lower estimate) and $14 billion (higher estimate).”

The report shows that the errors arise largely from misreporting of income and claiming ineligible dependents.  While some of the errors are attributable to complexity, the skewing of the errors to extra refunds points to widespread cheating.  Complexity errors would tend to be more equally split between overpayments and underpayments, but the vast majority of errors resulted in EITC overpayments.

All of this makes Arnold Kling’s proposal to roll all means-tested welfare programs into a single voucher grant with a uniform phase-out rate look wise.

 

haroldMore on the Iowa Film Credit Settlement with a Rhode Island filmmaker from Maria Koklanaris at Tax Analysts ($link):

The state admits no liability in making the settlement, according to the agreement. An accompanying letter from Adam Humes, a state assistant attorney general, to Joseph Barry of the state Department of Management, says that “the agreement will resolve all claims related to these film projects, and all claims in . . . the civil case in exchange for a cash settlement. After the settlement becomes final, the civil case . . . will be dismissed with prejudice.”

Joe Kristan of Roth & Co. PC of Des Moines said several civil suits arose after the state “slammed the brakes on everything” to do with the film tax credit scandal, which resulted in seven criminal convictions amid revelations that the state had issued $26 million in improper credits.

You gotta like her sources.

 

Sebastian Johnson, Big Oil Wins In Alaska, Hollywood Wins in California.  Because California has plenty of cash to shower on filmmakers…

Russ Fox, $1.25 Billion Attracts Tesla to Nevada

 

Kyle Pomerleau, IRS Aims to Tax Silicon Valley Workers’ Fringe Benefits (Tax Policy Bl0g).

“The IRS and U.S. Treasury Department last week included taxation of “employer-provided meals” in their annual list of top tax priorities for the fiscal year ending next June. The agencies said they intend to issue new ‘guidance’ on the matter, but gave no specifics about timing or what the guidance would say.”

The IRS believes that the regular free meals provided to employees are a fringe benefit and should be taxed like compensation.

You can make a good theoretical argument that a lavish Silicon Valley cafeteria results in taxable income for the employees. It’s much harder to make a good practical arguemnt for taxing that benefit.  There are serious measurement problems, and the amount of revenue at stake hardly seems worth it.

 

buzz20140905It’s Friday!  That means it’s Buzz day for Robert D. Flach, who buzzes from taxing frequent flyer miles to taxing marijuana.  However you get high, there’s a tax for that.

William Perez, How to Deduct Car and Truck Expenses on Your Taxes.  “To prove you are eligible to deduct your car and truck expenses, you should keep a mileage log.”

Paul Neiffer, Partner Must Have Basis to Deduct Loss. “The bottom line is if you show a loss from a partnership, make sure you have enough “basis” to deduct the loss.”

Kay Bell, New NFL players ready for football, IRS ready for their taxes

Peter Reilly, IRS Shows Serious Meatspace Prejudice.  “You would think with all the pressure that it puts on people to file and pay electronically that the IRS would have a forward looking view and a preference for cyberspace.  It does not seem to be that way  in the tax exempt division, where meatspace seems to be much preferred.”

 

Jack Townsend discusses an Article on Swiss Banks in U.S. DOJ Program.  He quotes from the article:

Caught in the crossfire of these strategies, however, are thousands of bank clients who are either innocent of tax evasion offences or were unaware of their reporting responsibilities.

These include US citizens living and working in Switzerland who cannot open bank accounts or take out mortgage loans. In some cases they have been expelled by their banks as involving too much unwanted paperwork and risk.

Well done, Congress.  Your FATCA makes everyday personal finance a miserable challenge for Americans abroad.

Tax Trials, IRS Updates Internal Revenue Manual for Streamlined Offshore Compliance

 

horse 20140905Annette Nellen, Shakespeare, building your vocabulary … and taxes.  She summons up a “parade of horribles” — well, a judge she quotes does.

TaxProf, The IRS Scandal, Day 484

 

Should I show this to my high school junior?  What Every High School Junior Should Know About Going to College (Bryan Caplan).  “College is a good deal for good students, a mediocre deal for mediocre students, and a poor deal for poor students.”

News from the Profession: EY Is No Longer Blocking Sports Websites Just in Time for Football Season (Adrienne Gonzalez, Going Concern)

 

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