House Passes Mobile Workforce State Income Tax Simplification Act (H.R. 1864).

More lucrative than the suicide thing:  Feds raid tax fraud suspect’s home with possible 9/11 connection (WTSP.com) 

No bias here! “Firms urge delay in IRS offshore tax dodger rules” (Reuters).  It would be more accurate to say “Firms urge delay in IRS attempt to wreck U.S. firms overseas finance operations.” 

Hak Ghun, will travel: 

A man who skipped town four years ago following allegations he spent millions of Navajo Nation corporate funds for personal use was indicted Tuesday on charges of federal tax evasion.

Hak Ghun, 61, the former chief executive officer of Biochemical Decontamination Systems Manufacturing Inc., a steel and fiberglass fabrication company based in Shiprock, is accused of spending more than $1 million of the company’s funds to pay his personal expenses, U.S. Attorney Kenneth Gonzales said in a prepared release.

Linda Beale brings us “Ten tax tricks (non-rich need not apply)” Much less here than meets the eye. For example:

9. IRS Monte Carlo (converting traditional IRAs to Roth IRAs, especially in sets so that you can take advantage of the 21-month “change your mind” period selectively as it benefits you)

This is a budgeting gimmick from Congress specifically designed to increase taxable income by having people pay tax now in hopes that it will help them avoid paying taxes later. It actually works best for the young and relatively poor, who are probably in lower brackets now than they will be at retirement. In any case, when people use this “trick,” they are making a bet on their future incomes and future tax law. They are also specifically doing what Congress hoped they would do.

American exceptionalism: Phil Hodgen searches in vain for another country that taxes its citizens abroad like we do.

William Perez: Tax Tips for Parents of New Graduates

Because they can?  Why is the IRS so slow to pay tax whistleblower rewards? (Kay Bell)

Anthony Nitti, Tax Court Decides First of its Kind Section 104 Issue.  Divorced spouse assigned ex’s disability payment doesn’t get to exclude it as compensation for personal injury.

The effect of the homebuyer tax credits, explained.  The Failure of Tax Policy Credits: Specific Evidence (Jim Maule)

That’s one way to make everyone rich: “Maryland to Increase Taxes on ‘Rich’ Residents Earning More than $100K Per Year?“ (Peter Pappas)

TaxGrrrl: Viral ‘Tax Loophole’ Video is Misleading: Taxpayer Fraud is a Much Bigger Problem

Robert D. Flach’s Wednesday Buzz is up!

Is there anything they don’t want to tax? Taxing the London Whale (TaxVox)

Longest books ever written:  Is This the Most Embarrassing Thing To Ever Happen to an Accountant at Work? (Going Concern)

You can look it up.  “Enrolled Agents Finally in the Dictionary! ” (Jason Dinesen)

If the Iowa tax law were a car, it would look like this.

When the legislature went home last week, we said that the end of the session inflicted no further damage on Iowa’s tax law.  We were wrong.

The last-day frenzy included a scaled-down version of the Governor’s capital gain exclusion for certain stock sales to ESOPs.  HF 2465, deceptively described as “Relating to state and local finances by making adjusting appropriations, providing for funding of property tax credits and reimbursements and for other matters pertaining to taxation,”  passed the Iowa House May 8, 90-7, and then got through the Iowa Senate the morning of the last day of the session 29-19.

The bill provides a 50% Iowa income tax exclusion of capital gains on the sale of employer stock to employee stock ownership plans, “to the extent not already excluded.”  This apparently means the bill requires taxpayers to choose between the elective federal Section 1042 deferral of gains rolled into publicly-traded securities and the 50% Iowa exclusion.  That makes it even more half-baked than the original proposal which provided a 100% Iowa exclusion.  The original bill would also appropriated public funds to pay ESOP consultants.

This bill further complicates an already hideous Iowa income tax.  By creating yet another special-interest carve out, it creates another constituency against base-broadening, rate-lowering reform for everyone.  It does nothing to help Iowa’s bottom-tier business tax climate.  It’s duct-tape and Bondo for a tax law that is falling apart.  It’s time to trade it in for a new model. 

Prior coverage: New Iowa ESOP break clears House committee

Supreme Court holds post-petition taxes in farm bankruptcy not discharged.  Roger McEowen has the background, including a discussion of the new decision.  Kay Bell has more.

He needs his Attorney Bernie: Wirth accountant Murry pleads guilty in tax-evasion case (reference explained here, last verse).

Huffington Post tells a story we’ve known about for a long time, but that the government seems strangely unable to move on: Tax Fraud: Thieves Steal Tax Refunds From The Dead Using Identity Theft.  The most infuriating part is they are getting their ID-theft information from official government releases.

HP loses $190 million tax case against IRS (Lynnley Browning, Reuters) (Via Going Concern)

Fear Taxmageddon, says former Treasury Secretary Snow.

AICPA presses for bill to ease compliance for employees working in diffenet states.  The bill, H.R. 1864, is a good start, but its failure to exempt low-salary entertainers, athletes and musicians is hard to justify as a policy matter. (Accountingtoday.com)

Tax Policy Blog: “Bring Jobs Home Act” (H.R. 5542) – Legislation in Search of the Facts

TaxGrrrl: All You Need to Know About IPOs, Going Public and Stock Options

Daniel Shaviro reviews “Progressive Consumption Taxation: The X-Tax Revisited.”, published today.

 David Henderson at Econlog has a counterintuitive view of his tax accountant:

I’m willing to bet–call it a hunch–that most people, if asked to name someone who they think is a humanitarian, would not put a tax accountant who makes a lot of money high on their list. But I’ve gotten to know this one over about 25 years and, with his careful thinking about how to make and keep wealth, thinking that he seems willing to share with those who will listen, my accountant is a true humanitarian.

But he has his reasons, which I of course find convincing, but you might too.

Foiled again!  IRS Attorney Advises Agents Not To Be Intimidated By No Trespassing Signs (Peter J. Reilly)

Don’t give Shulman any ideas: New Greek Bestseller: Serial Killer Murders Rich Tax Cheats (TaxProf)

Every nation in the world with the kind of welfare state we want for America pays for it by taxing a large majority of its citizens far more heavily than we do. To pretend we can do otherwise is to invite our countrymen to indulge a fantasy rather than call on them to make a serious commitment. Building the welfare state we need means most Americans are going to have to pay significantly higher taxes. No one likes such taxes, of course, but the reality is that they’ll fund an array of government programs that leave all of us better off than we will be with the rudimentary welfare state we’re forced to live with if we insist on a much lower tax burden.

Warren will never say anything of the sort, but that doesn’t change the math: either we spend less or everybody gets taxed more.  The rich guy isn’t buying.

Calendar Year 990s and 990-PFs are due tomorrow

Aside from avoiding U.S. compliance nightmares for the rest of his life, what are the real tax consequences to the Facebook guy for giving up his U.S. Passport? (TaxProf).  Plus a TaxProf roundup!

Phil Hodgen on Why the Facebook dude expatriated.  Also: “Only an elected official would fail to predict such events.”

John Tamney, Forbes: For De-Friending The U.S., Facebook’s Eduardo Saverin Is An American Hero (Via Instapundit)

Matt Welch, Reason: Facebook Co-Founder Eduardo Saverin Becomes Most Famous American to Renounce His Citizenship Probably for IRS-Compliance Reasons

TaxGrrrl: Facebook Co-Founder Won’t Escape All U.S. Taxes By Renouncing Citizenship

In other news, a little lamb has gone missing: Farmville physician pleads guilty to tax charges.  More from the Department of Justice.

Peter Reilly lets Robert D. Flach guest-post: Wandering Tax Pro On The Tax Aspects Of Divorce.  Robert also found time to post his Saturday Buzz collection of tax blog posts.

Roger McEowen rounds up the recently-ended Iowa legislative sesssion.

Kay Bell: More women now paying child support & alimony; take note of the tax implications 

But if you’re still married, Jason Dinesen covers Community Property Allocations for Same-Sex Married Couples

More than a Little Trouble for Michael Little: British Lawyer Charged in Swiss Bank Mess Related to UBS Account (5/11/12) (Jack Townsend)

Jim Maule:

Blaming dishonesty on complexity is totally off the mark. Complexity might enhance the temptation, but it does not create the noncompliant tax evader.

He’s wrong to let complexity entirely off the hook.  While most tax cheats aren’t doing it to avoid complexity (they usually end up making their lives far more complicated, because it’s hard to keep track of your lies), at some point staying in compliance can get so difficult that some taxpayers give up trying. 

 So do lots of thieves in Tampa: LifeLock CEO Offers Identity Theft Service to IRS (Accounting Today)

That’s exactly what happened to George Saadian.  In 1988 he loaned money to a “distant relative” who was a fellow member of the Persian Jewish Community in California, a Mr. Simantob.  The Tax Court takes up the story:

As it turned out, things did not go as planned. Mr. Simantob did not begin to make monthly payments as required under the promissory note until some point in 1990. From 1990 through 2000 Mr. Simantob made partial interest payments that ranged from $1,750 to $8,000 per year. Petitioner contacted Mr. Simantob for the first time around March 1988 and then several times between 1988 and 2004 to inquire as to why the interest payments were not being made as required by the terms of the note.

The record is unclear as to whether Mr. Simantob made any payments during 2001 and 2002. Mr. Simantob made a $4,100 interest payment to Mrs. Toufer in 2003, which was the last payment made on the promissory note.

Mr. Simantob died in 2004, and efforts to collect from his sons failed.  Mr Simantob deducted the loan as a non-business bad debt on his 2006 1040.  The Tax Court decided 2006 wasn’t the right year (my emphasis):

The note matured in 2000, six years before the year in which petitioner claims the debt to have become worthless. Although there is evidence that petitioner pursued collection of the debt with Mr. Simantob’s heirs after the death of Mr. Simantob, there is no showing that any formal claim against Mr. Simantob’s estate was made or that Mr. Simantob’s sons had any legal obligation to satisfy the debt. If the debt became worthless, it would seem that it did so before the year in issue.

The Moral?  If you have a troubled personal debt, deduct it as worthless sooner rather than later.  If the IRS questions the timing, make sure to file protective refund claims for subsequent years to keep the statute of limitations open.  Also, as Anthony Nitti notes, the Tax Court found the taxpayer’s collection efforts half-hearted, which hurt his case.  If you really want your money back, act like you mean it and sue for collection.

Cite: Saadian, T.C. Summary Opinion 2012-44

Vikings defeat taxpayers in 4th quarter

Bye-bye: Two Alabama ID-theft tax fraudsters get over 25 years each in prison.

Assume miracles and Social Security will be fine.  My latest at Going Concern.

Christopher Bergin:

 Our tax code isn’t about collecting revenue. It’s about taking care of political friends and being used as a campaign election issue to divide and conquer the electorate. The point of Washington is to get reelected. And “can-kicking” – which I define as avoiding any difficult tax policy decision — is an Olympic sport in Washington that our politicians excel at. That is why my answer to the question “When do you think we will get tax reform?” is now “Not until something really bad – and I mean really bad – happens.”

Read the whole thing.

David Brunori notices that “Politicians are willing to use a revenue source proven to be regressive and addictive to pay for services.”  He’s talking about gambling here, but he could be talking just as much about cigarette taxes.

Howard Gleckman at TaxVox: Will Obama’s Views on Tax Reform “Evolve” Too?  Not unless his campaign contribution bundlers take an interest in the issue.

TaxProf: The Kauffman Foundation and Thumbtack.com have released United States Small Business Friendliness.

Other states can be as gullible as Iowa: Cape Cod film maker convicted of fraud is sentenced to 2 to 3 years (Boston.com).  More from the LA Times, plus Tax Update film credit coverage here and here.

Hamburger-chomping moron update: Ex-IRS agent, whose case triggered the most epic comment ever seen on the Tax Update, has his tax crime sentence upheld by the 9th Circuit.  A taste of the comment:

The hamburger chomping, malleable morons of your ilk, no doubt, have been licking their fingers from the juicy tidbit you posted about the ‘rogue’ IRS agent, but a simpleton like you would not even deign, or has the mental acumen, to find or print the truth.

May you eat all of your hamburgers with small, dignified nibbles this weekend.

The 150 elected supergeniuses at the Iowa legislature weren’t shy about deciding what forms of energy production deserve your tax money, and they also invested tax dollars in a private baseball park in Dyersville.  Still, they at least avoided making taxpayers pay for other peoples “innovative” investments or ESOP consultants.

The legislature failed to pass the Governor’s highest priority, a reform of Iowa’s commercial property taxes, though they did vote to curb some of the worst abuses of TIF districts.

Bills that passed include:

• TIF Reform. HF 2460, the TIF reform, keeps taxpayers from diverting TIF receipts and requires audits of projects.  It’s a small step against local crony capitalism.
• Field of Dreams.  The legislature passed and the Governor signed a bill (SF 2329) to let an athletic complex built on the location of the Kevin Costner movie to keep sales taxes it collects.  The movie says “if you build it, they will come.”  The legislation says “If you lobby hard enough, they’ll vote for almost anything.”  Any bill passed for the benefit of a specific taxpayer is by definition bad policy.
• Tax Credits for green energy.SF 2342 provides “tax credits for the construction and installation of solar energy systems and geothermal heat pumps, modifying sales and use tax provisions related to property purchased for resale, and creating a sales tax exemption for certain items purchased for use in providing vehicle wash and wax services.”  Because the Iowa legislature knows better than you how you should heat your house.

Bills that died, mercifully:

• The misbegotten “anchor manufacturing” or “supply chain incentive” bill. (HF 2471)
• The extension of the Iowa Capital Gain break to certain sales to ESOPs (HF 2284) (UPDATE, 5/15: they snuck part of this in)
• A special break for executive stock bonuses (HF 2311)
• A 100% state tax credit for investments in the Iowa “Innovation Fund.” (HSB 648)
• An “Amazon Tax” (SF 2309) that would have enabled struggling Main Street retailers like Wal-Mart to compete on a more level playing field with internet behemoths selling stuff out of their basements.

It’s unfortunate that the legislature couldn’t agree on a way to improve Iowa’s awful commercial property tax, but maybe we’ll be better off in the long run making it an issue in the upcoming election.  It would be even better if they would take up the issue of tax reform generally.  I suppose an election over the merits of the Quick and Dirty Iowa Tax Reform Plan would be too much to hope for.

The Quad City Times has more coverage of the end of the session.

Fortunately, only very small dollars were involved: Tax cheats under microscope (The Australian)

Robert D. Flach wisely counsels taxpayers to “Check your finished return!”

Christopher Bergin on “fairness” in the tax law: “I don’t want to live in a country where all soccer games end in a 2-2 tie. “  You mean they end?

So the President has finally come as far as Dick Cheney on same-sex marriage.  It still could be a false move tax-wise, reports Peter J. Reilly.

Jana Luttenegger reminds us that you have to report all of your income, even if you don’t get a 1099.

 Sound advice: Learn To Say No (Trish McIntire)

Anthony Nitti: “S corporation Payroll Tax ‘Loophole’ lives to see another day.”

Paul Neiffer reminds us that when you want to give property to a trust and have the trust sell it, formalities are everything.

This tax credit proposal is a real dog (Jim Maule).  More from Kay Bell.

Finally, a chart from a new report on the future of Iowa’s transportation system (page 86):

Glad we’re getting so much for our investment in public transportation.

The fun never adjourns at the blog world’s finest gathering of tax-related posts.