Tax Roundup, 10/14/15: The return’s not joint without that Jane Hancock. And: Iowa supplies rule advances.

October 14th, 2015 by Joe Kristan

1040 signature blockSignatures matter. A Tax Court case yesterday reminds us that even though they seem like an afterthought, the IRS cares whether you sign your paper return.

A busy executive mailed the family’s 2000 1040 near the October 15, 2001 extended due date. Possibly through a miscommunication, his wife failed to sign the return before he took it to the office to mail near the deadline. The Tax Court takes up the story (citations omitted):

Sometime after the Andover Service Center received the original 2000 return, respondent returned it to petitioners. The Internal Revenue Manual (IRM) requires the examining agent to perform certain actions before sending a return back to a taxpayer. The examining agent must attach certain forms explaining to the taxpayer why the return is being sent back, what needs to be done with respect to the tax return, and when is the deadline to comply and resubmit the return.

Petitioners claim they received a date-stamped original 2000 return with some red ink marks on it but did not receive any attached correspondence. The date on the stamp was October 15, 2001.

They never signed or re-submitted the return, and it apparently didn’t occur to the taxpayers to ask their CPA why they got it back:

[The husband] explained that he was not alarmed to have received back the original tax return with some red ink marks on it because he requested copies of his tax returns from time to time for various business reasons.

That doesn’t sound right. They had a tax preparer who would normally keep copies of client tax returns. Why would anyone go through the hassle of getting one from the government when you can call your tax man?

The tax year came up for audit, and the taxpayers tried to get 2000 dismissed on the grounds that the 3-year statute of limitations had expired. The statute only starts to run once a return is filed, and the IRS said that with only one signature, there was never a legitimate joint return. The Tax Court discussed and rejected two taxpayer arguments on why the return should count: the “substantial compliance doctrine” and the “tacit consent” doctrine. The first one was easy: filing with only one signature is not “substantial compliance” when both are required.

The “tacit consent” doctrine is more interesting. Again from the Tax Court:

At the outset of our discussion of the tacit consent doctrine, we note that courts generally apply this doctrine when one spouse signs a joint return for both spouses and it is later shown that the other spouse has tacitly consented to the joint return filing.  Most of the cases that petitioners cite follow this general pattern.

This happens in real life more than I care to think about. But Judge Laro ruled that it didn’t fit here where there is no second signature at all:

Extending the application of the tacit consent doctrine to cases such as the current case has the potential of creating an exception that would swallow the rule. We believe sufficient administrative mechanisms are already in place to deal with such situations. Existing procedures described in the regulations and the IRM provide how to handle documents when one of two required signatures is missing. At the very least, a nonsigning spouse who did not intend to file a joint return may be alerted that something is wrong.

Decision for IRS.

The Moral? It’s always best to get both signatures. Better still to not run to the deadline, where it’s easy to miss one. Best of all is to e-file, so the IRS has no manual signature issues in the first place, and your signed e-file authorization is safely in the hands of your e-file originator.

Cite: Reifler, T.C. Memo. 2015-199

 

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Iowa rule on sales tax of manufacturing supplies passes first test. The legislative rules committee yesterday split 5-5 on a party-line vote on a Democratic objection to the rule. The split vote allows the rule to go forward, and probably means it will become final, according to this report by O. Kay Henderson.

The rule would flesh out the definition of consumable manufacturing supplies that are exempt from Iowa sales tax. This has been a contentious issue for years, one that has been a large portion of disputes at the Iowa Department of Revenue. Good tax policy favors a broad definition, as good sales tax policy doesn’t tax business inputs in the first place. But it turns out that the people who most benefit from tax receipts — state employees — don’t care for things that deprive them of their cash flows. From the report:

“I don’t believe it’s ever been done, to use the rule-making process to cut taxes. That seems like a heck of a precedent,” says AFSCME Council 61 Danny Homan, head of the union that represents the largest share of state workers.

He says all 150 legislators should vote on the proposal and Homan accuses Branstad of abusing executive power to try to cut taxes for corporations.

“After, on July 2, the governor vetoed $55 million in one-time appropriations for schools and vetoed funding for the MHIs in Clarinda and Mount Pleasant,” Homan says. “It seems like he’s got money to reward his friends, but he doesn’t have money for education and he doesn’t have money for folks that are suffering from mental illness.”

There is so much wrong with the idea that all of this money is the Governor’s to give out, and that the only problem is that he isn’t giving it to state employees. It’s a great example of why public employee unions as bargaining units are an awful idea.

 

William Perez, Do Your Home Improvements Qualify for the Residential Energy Tax Credits? “Homeowners who install solar panels or make other energy-efficient improvements to their home may qualify for a federal tax credit.”

Jason Dinesen, Are Tax Preparers Who Operate on Volume Doomed? It would be a blessing, actually.

Peter Reilly, A Twisted Tale Of New Jersey Use Tax,

TaxGrrrl, Losers Like Me: Fantasy Sports Sites Like FanDuel Attract Billions And Scrutiny As Popularity Grows

Tony Nitti, Tax Geek Tuesday: Daring To Take On The Section 263A Adjustment. A key part of the 1986 tax reform process, it is a monument to the baneful tax policy consequences of the tax revenue scoring process.

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Scott Greenberg, NY Times Reporter Casts Doubt on Financial Transactions Taxes (Tax Policy Blog). They are an awful idea.

Howard Gleckman, How A Carbon Tax Could Have Prevented The Volkswagen Diesel Scandal (TaxVox)

TaxProf, The IRS Scandal, Day 888. Today’s link discusses a GAO report on how the IRS has failed to enact safeguards against continued political bias in IRS operations.

 

And finally: With first Wrigley clinch, Cubs move on to NLCS.

 

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