Tax Roundup, 3/9/16: A College Savings Iowa contribution today can reduce 2015 Iowa tax. And: Shoot more jaywalkers!

March 9th, 2016 by Joe Kristan

csi logoYou can still make a College Savings Iowa 2015 contribution. While Section 529 plans provide tax-free earnings for college for taxpayers in all states, Iowans can get an extra tax break for them. 2015 contributions to College Savings Iowa or Iowa Advisor Sec. 529 plans can generate a deduction on Iowa state 1040s up to $3,163 per donee.

For the first time, Iowans can make their 2015 contributions as late as the April 30, 2016 due date of their 2015 tax return. In prior years you had to make the contribution by December 31 to get the deduction.

The $3,163 limit is per donee, per donor. That means a couple with 2 children can get four full deductions for 2015 529 contributions totaling up to $12,652. For a couple at the 8.98% top Iowa rate, that’s a savings of $1,136 on their Iowa return.

This is another of our occasional series of 2016 filing season tips. Collect them all!

 

Jack Townsend, Report on Remarks of AAG Tax and Practitioner Regarding Nonwillfulness and Foreign Account Enablers:

Ciraolo and Bryan Skarlatos questioned whether foreign account holders can remain nonwillful about foreign account reporting obligations at this stage.  The article quotes from her prepared comments (linked above) as follows:

After three very well-publicized voluntary disclosure programs, nearly 200 criminal prosecutions, ongoing criminal investigations and the increasing assessment and enforcement of substantial civil penalties for failure to report foreign financial accounts, a taxpayer’s claims of ignorance or lack of willfulness in failing to comply with disclosure and reporting obligations are, quite simply, neither credible nor well-received. 

This is so wrong. Something that is a big deal in the IRS enforcement bureaucracy can be invisible to a person going about their business, maybe taking a temporary position overseas or getting a U.S. green card.

People get in IRS trouble for having an interest in a foreign account they aren’t even aware of. One practitioner I know had to deal with an immigrant from India who paid thousands of dollars in penalties for not reporting an interest in a foreign bank account that her parents back home put her name on as a joint owner without her knowledge, and without her receiving any income from it. Others find themselves in hot water after get an inheritance overseas that they don’t learn about until after the reporting deadline.

The IRS remains clueless about how many people go through their daily financial lives without pondering whether there is an obscure form lurking to ruin them for non-compliance. The system is broken, but the only answer the enforcers have is to continue the beatings until morale improves.

 

20120906-1David Brunori speaks wisely: If You Need Tax Credits, You Shouldn’t Be in Business (Tax Analysts Blog)

Here’s what got me thinking. Iowa — no paradise when it comes to good tax policy — gave 186 companies tax credits worth more than $42 million last year. Those credits were handed out as an incentive to conduct research and development. There are other credits available for businesses. Oh, and the credits are refundable because, like with poor families receiving the earned income tax credit, R&D credits provide a critical safety net. All right, I’m being facetious.

Iowa’s biggest welfare recipient was technology company Rockwell Collins Inc., which received $12 million. Rockwell is a great company, but it has $5 billion in revenue. Giving money to Rockwell isn’t quite the same as giving money to a shoestring nonprofit feeding the homeless in Des Moines.

In all, 20 companies claimed more than $500,000 in R&D credits, including DuPont Co., Deere & Co., and Monsanto Co. I ask them, where is your pride? Do you really want a government handout?

For a full-throated defense of tax credit corporate welfare, today’s IowaBiz.com blogger, Brent Willett, offers Job creation fuel: R&D policy move is important for Iowa. Not surprisingly, the cost of paying these subsidies in increased taxes on less fortunate and less influential Iowa businesses never comes up. The “job creation” part is also weakly defended.

 

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Russ Fox, Online Gambling Addresses Updated for 2016. Russ performs a valuable service in gathering street addresses of offshore online gaming websites. Online gaming accounts at these sites are “foreign financial accounts” for FBAR purposes, and you need a street address to fill out Form 114. They can be hard to find. Hat’s off to Russ.

TaxGrrrl, Tax Season Proving Confusing (Again) For Taxpayers Affected By Obamacare

Kay Bell, Have you received your Obamacare coverage forms yet? “Recipients of the B or C versions want to hang onto these forms as verification that they did have ACA required coverage, which they tell the Internal Revenue Service about by checking the appropriate box on their 1040EZ, 1040A or long form 1040.”

Michelle Drumbl, The Automated Substitute for Return Procedures (Procedurally Taxing) “The ASFR assessment process takes into account all income reported as earned by the taxpayer, but it ignores reported items that would reduce taxable income.”

Robert Wood, Erin Andrews Wins $55M Peephole Verdict But Faces Heavy IRS Tax Hit

Jim Maule, Buying and Selling Dependency Exemptions for Tax Purposes. “It’s too bad Congress cannot be indicted, convicted, and punished for making a mess of the tax system, continuing to make it worse, and refusing to clean it up.”

 

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Annette Nellen, AICPA Advocacy on IRS Funding. It’s hard to see how the IRS gets more funding when it does such an awful job with the funding it has.

TaxProf, The IRS Scandal, Day 1035. “The IRS doesn’t know if its data backups are deleted or not created, and doesn’t test to ensure backups can be used if information is lost, even after a “significant” December 2014 incident, according to a Treasury Inspector General for Tax Administration (TIGTA) report.”

Alan Cole, Tax Policy Must Be Proportionate to Spending Policy (Tax Policy Blog). “This gets to the heart of one of the principles of good tax policy: your tax policy should actually be able to fund the government you want. One way or another, Donald Trump will have to assent to this principle.”

Elaine Maag, Complicated Families: Complicated Tax Returns (TaxVox):

The law is built on the idea that a child lives in a traditional family – married parents with only biologically related siblings. The tax unit it is presumed to include the adults supporting the child.

But increasingly, children live in arrangements that belie that traditional family; children move between homes of divorced or never-married parents in formal and informal custody arrangements; children live with unmarried, cohabiting parents; children live in multigenerational households. In short, children are supported by adults in multiple tax units.

But only one tax unit gets to claim the earned income credit for each child.

 

News from the Profession. Apparently Accountants Are Terrible on the Phone (Caleb Newquist, Going Concern).

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