Posts Tagged ‘Andrew Mitchel’

Tax Roundup, 10/27/14: IRS visits Arnolds Park restaurant, tips itself.

Monday, October 27th, 2014 by Joe Kristan

20120703-2IRS Commissioner Koskinen likes to say there is nothing wrong with the IRS that a bigger budget can’t cure. A story out of Arnolds Park, Iowa might cause one to question that. The New York Times reports:

For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.

The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.

Banks are required to report “suspicious” deposits under $10,000 because they might be done to evade a required IRS filing. As they get in trouble for non-reporting, they are likely to overreport. And in these cases, that’s all the IRS required before stealing the cash. The victims have legal recourse, but it requires them to sue the federal government, owner of the largest law firm in the world; legal bills routinely run into tens of thousands of dollars.

So, without any evidence, or even suspicion, of a crime, the IRS uses some of its allegedly precious and constrained enforcement resources to steal money from a little Iowa restaurant. The story cites other cash seizure nightmares. One involved an Army sergeant saving for his daughters’ education. Others involved legitimate but cash-intensive businesses.

If this is what the IRS accomplishes with insufficient resources, imagine how much they could steal with full funding.

(via Instapundit)

Related:

Tax Justice Blog,  New Movie Aims to Scare Public by Depicting IRS as Jack-Booted Thugs. Where would anybody get that idea?

Dan Mitchell, Another Example of Government Thuggery – and another Reason Why Decent and Moral People Are Libertarians

Russ Fox, SARs Leading to Forfeiture: The IRS Oversteps

 

20141027-2Jason Dinesen, How Non-Residents or Part-Year Residents Report Federal Refunds on Iowa Tax Returns. One more complication from Iowa’s deduction for federal taxes.

Robert D. Flach, DON’T TRY TO BUY A HOUSE OR CONDO WITH ONLY 5% DOWN!. And don’t try to subsidize that either.

William Perez, Self-Employed Retirement Plans, “If you have self-employment income, then you can take a tax deduction for contributions you make to a SEP, SIMPLE, or a solo 401(k) retirement plan.”

Tony Nitti, The Top Ten Tax Cases (And Rulings) Of 2014: #9-Tax Court Further Muddies The ‘Dealer Versus Investor’ Issue

 

TaxGrrrl, Fundraising Campaign Ends For ‘Ebola Free’ Nurse, Donors Encouraged To Contribute To Charity

Jana Luttenegger, 2015 Retirement Plan Limits Announced (Davis Brown Tax Law Blog)

Paul Neiffer, 2015 Social Security Wage Base Increases to $118,500

Kay Bell, 6 year-end tax tips for small businesses

Stephen Olsen, Summary Opinions (Procedurally Taxing). Recent cases on whistleblowers, interest abatement, and art valuation.

 

 

Andrew Mitchel, 2014 Third Quarter Published Expatriates – Third Highest Ever. FATCA and the IRS holy war on Americans abroad takes its toll.

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TaxProf, The IRS Scandal, Day 536

 

David Brunori on the inherently corrupt nature of corporate welfare tax incentives, like those so popular with Iowa politicians ($link):

I have no doubt there are more instances of companies contributing to politicians and getting economic development payouts. I’m not naïve. Corporations donate money to governors and lawmakers and expect a return on their investment. While the governors cited above were Republican, corporations and business interests don’t discriminate. Indeed, Lockheed Martin donated lots of money to Democratic governors.

We likely won’t find a smoking gun e-mail reading, “Dear Governor, your check is in the mail, please process my multimillion-dollar handout. Your friend, CEO.” Politicians and business leaders are too smart for that. But growing evidence of tax incentives being granted by politicians who receive money should give everyone pause. It’s unlikely to be a coincidence.

But, jobs! For the middlemen, fixers and lobbyists, anyway.

 

Joseph Henchman, Michigan Senate Advances Film Tax Credit Extension Bill (Tax Policy Blog). Because Detroit has no greater need than to give money to Hollywood.

 

News from the Profession. Meet the Guy Who Prefers Falafel Over PwC (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 8/7/14: Imitation and Flattery edition. And: How to get California to want your $800.

Thursday, August 7th, 2014 by Joe Kristan

20130819-1You might be surprised just how easy it can be to get sucked into tax in another state.  Cara Griffith explains how easy it is to get California to come after you for their $800 minimum return fee in Doing Business in California (Tax Analysts Blog):

The California Franchise Tax Board recently issued Legal Ruling 2014-01, which addresses when a business entity with a membership interest in a limited liability company is required to file a California return and pay applicable taxes. The ruling comes while a case is pending on that very issue.

The case is Swart Enterprises Inc. v. California Franchise Tax Bd. (Fresno County Superior Court, Case No. 13 CE CG 02171 (July 9, 2013)). Swart operates a farm in Kansas and provides farm labor contractors. The company is incorporated in Iowa, has estimated annual revenues of $280,000, and has three employees.

Swart has no physical presence in California. It doesn’t have employees in California and it doesn’t own real or personal property there. Swart did, however, own a 0.02 percent interest in a California limited liability company that invested and traded in capital equipment. Swart was not the manager of the fund and was not involved in the management or operation of the fund. Yet its status as a member is enough for the FTB to allege that Swart is doing business in California. 

The post explains that California would have let Swart off the hook if they owned in interest in a limited partnership, rather than an LLC.  So if your business sneezes in the general direction of California, make sure you stick an old-fashioned limited partnership in the ownership chain somewhere, or California will shake you down for $800, or maybe a lot more.

This should especially make businesses wary about buying interests in publicly-traded or broker marketed LLCs.  Most of these have at least a little bit of California income, and they might just make a California filer out of your LLC or corporation.  And it’s not just California — wherever the LLC might be, so might you be also.  It can mean increased state taxes, not to mention increased tax return prep fees.

 

TaxGrrrl, Son Of Powerful Congressman Charged With Bank & Tax Fraud.

Howard Gleckman, Does Congress Really Care About the Deficit? Not When It Comes to Vets and Highways (TaxVox).  The answer would have been correct if it stopped after the first two letters.

Annette Nellen, Push for state film credits from Congress.  They don’t care about state solvency either.

 

Peter Reilly, FAIR Tax Abolishes IRS – Then What?

Paul Neiffer, Another Conservation Easement Tax Court Case – Mostly in Taxpayer’s Favor:

When valuing a conservation easement, you must determine the value of the property before the easement and the value after the easement.  The difference in value becomes the charitable deduction amount.  In the case of the Schmidt’s, their apprisal determined the before easement value was $1.6 million and the after easement value was $400,000 for a net contribution deduction of $1.2 million…

The IRS appraiser valued the property at $750,000 for the before easement value and $270,000 for the after easement value for a net deduction of $480,000. 

The deduction came down a little, but the IRS lost its bid for penalties.

Me, Obamacare mandates: What’s a taxpayer to do? (IowaBiz.com, where I discuss what the Halbig decision on tax credits for policies purchased on federal exchanges means now for taxpayers subject to the individual and employer mandates.

TaxProf, The IRS Scandal, Day 455

 

There’s a new Cavalcade of Risk.  This edition of the venerable roundup of insurance and risk-management posts is up at The Population Health Blog. Among the worthy posts is Hank Stern’s Rideshare Tricks – An Update, on the insurance implications of participating in ride-share services like Uber.

 

nra-blue-eagleBut Mr. President, imitation is the sincerest form of flattery!  Accounting Today reports on yesterday’s presidential press conference in Obama Blames Accountants for Inversion Trend:

During a press conference Wednesday following a summit with African leaders, Obama said, “You have accountants going to some big corporations—multinational corporations but that are clearly U.S.-based and have the bulk of their operations in the United States—and these accountants are saying, you know what, we found a great loophole—if you just flip your citizenship to another country, even though it’s just a paper transaction, we think we can get you out of paying a whole bunch of taxes.”

Wherever would anyone get the idea to do such a thing?  Well, Accounting Today points to a suspect: Obama Aides Let Delphi Avoid Taxes with Tactic President Assails:

 President Barack Obama says U.S. corporations that adopt foreign addresses to avoid taxes are unpatriotic. His own administration helped one $20 billion American company do just that.

As part of the bailout of the auto industry in 2009, Obama’s Treasury Department authorized spending $1.7 billion of government funds to get a bankrupt Michigan parts-maker back on its feet—as a British company. While executives continue to run Delphi Automotive Plc from a Detroit suburb, the paper headquarters in England potentially reduces the company’s U.S. tax bill by as much as $110 million a year.

One might almost get the impression that this whole inversion panic isn’t really a serious policy effort, but instead a desperate diversion by a foundering politician and his partisans.

Kay Bell, Walgreens decides to keep U.S. tax residency

 

The problem might be the tax system, not wobbly patriotism.  Record Numbers of Americans Are Renouncing Their U.S. Citizenship (TaxProf).  Paul Caron links to Andrew Mitchel’s report on the latest quarterly numbers of published expatriates, which includes this chart:

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Our worldwide tax system makes it difficult, dangerous and expensive to be a U.S. taxpayer abroad.  Rather than impugning their patriotism, the President ought to try to make it affordable.

 

Bob McIntyre of the Tax Justice Blog makes perhaps the worst appeal to authority ever seen in the tax literature: Woody Guthrie on Corporate Tax Inversions.  Woody Guthrie’s economic gurus weren’t exactly cutting-edge .

 

The Iowa State Fair Starts today!  

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If you show up on Saturday, look for me at the Sertoma booth at the Varied Industries Building from 1-5; I will be distributing educational hearing safety info and ear plugs, and you may even be able to get a free hearing screening from a trained audiologist.  And you might want some music to fire you up for a really big show!

 

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Tax Roundup, 5/21/14: Practitioner Pitchforks and Torches edition. And: math remains hard!

Wednesday, May 21st, 2014 by Joe Kristan

20140521-1The new identification rules for remote signatures aren’t going over well.   (See update below.)  At a CPE event yesterday former IRS Stakeholder Liaison Kristy Maitre outlined the new e-filing identity match requirement we are supposed to meet (now!  for extended 2013 returns!).  These include “third-party verification” of identities of our long-time clients if they don’t visit the office.  The ones that visit, we only need to see their papers.

The 250 or so practitioners present didn’t appreciate the joke at all.  They asked the obvious question: how do we even comply with this?  It’s not at all clear how we get “third-party verification.”  I can pretty much guarantee that nobody is complying with that requirement now, because few are aware of it, and the ones that are don’t know where to start.

While the requirements are supposed to be part of the IRS war against identity theft, this effort is like responding to the attack on Pearl Harbor by bombing Montreal.  Identity thieves don’t waltz into tax prep offices and pay us to prepare fraudulent refund claims.  They prefer TurboTax.

Yet, there may be a method to the madness, suggested by one practitioner.  What if some outfit is gearing up to provide third-party verification services — say, one of the national tax prep franchises?  And the IRS has quietly created their revenue stream with this absurd rule?  You might say this preparer is cynical; I say he’s been paying attention.

So let’s fight.  Kristy is collecting comments and questions to send to her erstwhile IRS colleagues to try to stop this nonsense.  Send your comments to ksmaitre@iastate.edu.  I believe the IRS will back off if we brandish the electronic torches and pitchforks.

Update, 11:30 a.m.  I received a call from an IRS representative this morning saying that they have been getting phone calls as a result of this post (well-done, readers!).  She tried to reassure me by telling me that the third-party verification doesn’t apply to in-person visits.  I knew that.  I told her that as I read the rules, there are either “in-person” or “remote” transactions, with no third category of, say, “I’ve worked with this client for many years and they’re fine.” She didn’t disagree, though she still thinks I’m overreacting.  She did say IRS field personnel are  “elevating” the issue and seeking “clarification” from the authors of these new rules, including what “authentication” means for in-person visits and what a “remote transaction” is that would require third-party verification.  Keep it up, folks!

Related:

Russ Fox, Yes, Mom, I Need to See Your ID

Jana Luttenegger, Updated E-Filing Requirements for Tax Preparers

Jason Dinesen, Hold the Phone on the IRS E-file Outrage Machine 

Me, Welcome back, loyal client. IRS says I have to verify that you aren’t a shape-shifting alien.

 


20140521-2TaxProf, 
The IRS Scandal, Day 377.

News from the Profession.  Crocodile Injured By Falling Circus Accountant in Freak Bus Accident (Going Concern)

Kay Bell, National Taxpayer Advocate joins fight to stop private debt collection of delinquent tax bills.  I’d rather she fight to keep the IRS from implementing its ridiculous e-file verification rules.

TaxGrrrl, Congress, Ignoring History, Considers Turning Over Tax Debts To Private Collection Agencies

Jim Maule, It Seems So Simple, But It’s Tax.  “People are increasingly aware that the chances of getting away with tax fraud are getting better each day.”

Missouri Tax Guy,  NO! The IRS did not call you first.

 

Tax Justice Blog, Legislation Introduced to Stop American Corporations from Pretending to Be Foreign Companies.  How about we just stop taxing them?

Kyle Pomerleau, Tom VanAntwerp, Interactive Map: Where do U.S. Multinational Corporations Report Foreign Taxable Income and Foreign Income Taxes Paid? (TaxPolicy Blog).  Holland does well, as does Canada.

Howard Gleckman, Tax Chauvinism: Who Cares Where a Firm is Incorporated?

So we are left with a sort of financial chauvinism. It is important to some politicians to be able to say that a company is a red-blooded American company. But when it comes to multinational firms in a global economy, why does that matter? 

Because, ‘Merica!

 

Andrew Mitchel now has some online tax quizzes for your amusement.  If they are too tough, the next item might restore your self-esteem.

 

20120905-1If you can’t answer these questions, taxes are the least of your problems.  Tackle these quizzlers (via Alex Taborrok):

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow.

More than $102. Exactly $102,. Less than $102? Do not know. Refuse to answer.

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, would you be able to buy.

More than, exactly the same as, or less than today with the money in this account? Do not know. Refuse to answer.

3. Do you think that the following statement is true or false? ‘Buying a single company stock usually provides a safer return than a stock mutual fund.’

T. F. Do not know. Refuse to answer.

I won’t give away the answers, but I shouldn’t have to.  Sadly, most people find these questions hard.  From Alex Taborrok:

Only about a third of Americans answer all three questions correctly (and that figure is inflated somewhat due to guessing). The Germans and Swiss do significantly better (~50% all 3 correct) on very similar questions but many other countries do much worse. In New Zealand only 24% answer all 3 questions correctly and in Russia it’s less than 5%.

At least that helps explain Vladimir Putin’s popularity.

 

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Tax Roundup, 5/2/14: Film credit trial remake edition. And: Senator Otter, taxwriter.

Friday, May 2nd, 2014 by Joe Kristan


harold
An Iowa appeals court this week threw out the conviction of TV-show producer Dennis Brouse
on charges arising out of the Iowa film tax credit scandal.  The court ruled 2-1 that unclear jury instructions rendered the guilty verdict untenable.  From the decision:

After examining the jury instruction and finding it so confusing, we conclude that it was not possible for the jury to find sufficient evidence to convict pursuant to a general verdict that implicated the joint criminal conduct instruction. 

The case was remanded to the trial court.  I believe the state can appeal this decision to the Iowa Supreme Court.  I am not sure whether the state can retry Mr. Brouse if the ruling stands.  The reversal would leave Wendy Weiner-Runge as the only person hit with serious prison time in the scandal.

In any case, the real offenders in this case will go free.  No charges will be filed against the legislators who voted overwhelmingly to create a cash-filled pinata for out-of-state filmmakers.  The Governor who was to oversee the program will never have to answer for appointing a former drugstore film clerk to run it.  The clerk’s immediate supervisor faces no charges for letting the clerk run wild, committing taxpayer dollars by the millions virtually without documentation or control.

The real crime is that the 150 legislative supergeniuses feel competent to take money from taxpayers and give it to people who convince them they will use it better.

Other coverage: KCCI.com

Cite: State v. Brouse, No. 12-1076  [3-1192]

 

 

 

Andrew Mitchel, 2014 First Quarter Published Expatriates – Second Highest Ever:

 

Chart by Andrew Mitchel LLC

Chart by Andrew Mitchel LLC

Considering how poorly the U.S. tax system treats Americans abroad, it’s no surprise.

 

Jason Dinesen, On Tax Refunds and “Not Owing Tax,” Part 1  “Just because you got a refund it doesn’t necessarily mean you didn’t owe taxes.”

Kay Bell, Tax moves to make in May 2014

Peter Reilly, IRS Chief Counsel Checks 1986 Committee Reports To Give Break On Foreclosed Real Estate   

TaxProf, The IRS Scandal, Day 358

Russ Fox, Once Again, Bring Me the Usual Suspects: 2014 Small Business Tax Index.  Iowa does poorly.

Robert D. Flach brings your Friday Buzz!

 

Kyle Pomerleau, It Takes 175 hours for a U.S. Business to Comply with U.S. Taxes (Tax Policy Blog).  For bigger businesses, that’s way low.

Howard Gleckman, The Tax Extenders: Yes, Virginia, They Really Are Tax Cuts (TaxVox).

 

 

Not Senator Wyden

Not Senator Wyden

 Senator Wyden, meet Animal House.

Otter: ” But you can’t hold a whole fraternity responsible for the behavior of a few, sick twisted individuals. For if you do, then shouldn’t we blame the whole fraternity system? And if the whole fraternity system is guilty, then isn’t this an indictment of our educational institutions in general? I put it to you, Greg – isn’t this an indictment of our entire American society? Well, you can do whatever you want to us, but we’re not going to sit here and listen to you badmouth the United States of America.”

Senator Ron Wyden:At the same time, the potential misconduct of a small group of IRS employees should not tarnish the overwhelming majority of hard working agency employees who do play by the rules.”

 

I did not have tax with that state, New York.  Bill Clinton: ‘I Thank God Every Day That Hillary and I Live in NY and Pay the Highest Aggregate Tax Rate in America’  (TaxProf)

 

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Tax Roundup, 2/7/14: Love it or leave it edition! And: Coralville tax scam.

Friday, February 7th, 2014 by Joe Kristan


20140207-1
Making America a better place to leave.  
2013 Expatriations Increase by 221% (Andrew Mitchel):

We do not believe that the primary reason for the increase in expatriations is for political purposes or for individuals to reduce taxes.  Instead, we believe that there are likely three principal reasons for the recent increases in the number of expatriations:

  1. Increased awareness of the obligation to file U.S. tax returns by U.S. citizens and U.S. tax residents living outside the U.S.;
  2. The ever-increasing burden of complying with U.S. tax laws; and
  3. The fear generated by the potentially bankrupting penalties for failure to file U.S. tax returns when an individual holds substantial non-U.S. assets.

The increase in expatriations may also be partly due to a 2008 change in the expatriation rules.

When a foot-fault can break you, you might not want to play the game anymore.  When they start shooting you for jaywalking, you might not want to be on that street at all.

 

20140106-1It’s never too cold for a tax scam.  From CBS2Iowa.com:

Coralville police say they’re receiving more reports of a telephone tax scam. CBS 2 News first told you about the scam last month. The IRS says the scam targets taxpayers, especially recent immigrants. A caller claims to be an IRS agent and says the victim owes money. The victim is told to repay the money using a preloaded debit card or a wire transfer. If the victim refuses, the caller threatens to arrest or deport them or suspend his or her drivers license. The scammer uses a fake name and fake IRS badge number. The caller has found a way to make caller IDs show the number as the IRS toll-free line. To appear more legitimate, the scammer may also send a fake email or recite part of the victim’s social security number. After threatening the victim, the caller may hang up. A second scammer may later call the victim, pretending to be from the local police department or DMV.

It sounds like the scam described in this IRS web page.  If they haven’t sent you a letter first, the IRS isn’t going to call you.  Nor will they contact you via e-mail.  The IRS gives this advice:

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
  • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add “IRS Telephone Scam” to the comments of your complaint.

Paying taxes you actually owe is enough fun without sending extra to scammers.

 

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Fiduciary Income Tax Blog, 65-Day Rule — 2014:

Fiduciaries of estates and complex trusts have the option to treat certain distributions as having occurred last year. An election can be made with respect to distributions made within 65 days after the end of a tax year. The 65th day of 2014 is Thursday, March 6.

Think of it as a trust mulligan.  With the 3.8% Obamacare Net Investment Income Tax applying at around $12,000 of trust income, many trusts will want to use the 65-day rule to get the income to beneficiaries whose income is under the thresholds.

 

William Perez, Understanding Personal Exemptions

Jason Dinesen, Financing a Small Business: 4 Items to Remember.  “Don’t spend money just to get tax deductions.”

Kay Bell, Federal itemized deduction claims state-by-state

TaxGrrrl, Looking For Your Tax Refund? What You Need To Know So Far For 2014 

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Christopher Bergin, New IRS Commissioner Wants to Move Forward – We Should Let Him (Tax Analysts Blog):

Koskinen needs the time and space to do what everybody agrees must be done: Fix the IRS. The investigations must continue. But the new commissioner needs to move forward as well. That means not avoiding the problems, but going at them in a positive, not in a negative way. That’s what good leaders do. We should give the man a chance to show us he is one.

He could hardly be worse than the last one.

Howard Gleckman, Individual Income Taxes May Soon Generate Half of All Federal Tax Revenue (TaxVox)

CBO explains much of the rise in individual income taxes by expected increases in real incomes produced by a recovering economy, including higher wages, salaries, capital gains, and income to owners of pass-through firms, who report their taxes on their individual returns. CBO also expects a significant increase in distributions from retirement accounts for at least the next few years, driven in part by higher asset values.

Two other reasons: Higher tax rates for upper-income households (including the surtax in the Affordable Care Act) and the phenomenon known as real bracket creep. Tax brackets are adjusted for inflation but not economic growth. For at least the next few years, CBO figures incomes will grow faster than those inflation-adjusted brackets.

Oddly, these projections assume the expiring provisions actually expire.  Not likely.

Joseph Henchman, Response to Jesse Myerson’s Land Tax Idea (Tax Policy Blog).  Nice effort, but I’m not sure you need to respond to somebody who says Communism gets a bad rap.

TaxProf, The IRS Scandal, Day 274

Jack Townsend, Another Swiss Bank Enabler Indicted in SDNY

J. Richard Harvey, Jr., Surprising Statistics on Corporate Disclosures of Uncertain Tax Positions (UTP) (Procedurally Taxing):

 

The Critical Question: Does the NFL Need a Billion Dollar Subsidy Annually from Taxpayers? (Tax Justice Blog)

Career Corner.  Protip to Government Accountants: If You’re Into Kiddie Porn, You Probably Shouldn’t Watch It At Work (Going Concern)

 

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Tax Roundup, 1/21/14: Weaponizing the IRS. And: whither Section 179?

Tuesday, January 21st, 2014 by Joe Kristan
Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The new, “weaponized” IRS is a focus of Glenn Reynolds, the Instapundit, in a USA Today Column:

Since then, of course, the new “weaponized IRS” has, in fact, come to be seen as illegitimate by many more Americans. I suspect that, over time, this loss of moral legitimacy will cause many to base their tax strategies on what they think they can get away with, not on what they’re entitled to. And when they hear of someone being audited, many Americans will ask not “what did he do wrong?” but “who in government did he offend?”

This is particularly true since the Obama administration is currently changing IRS rules to muzzle Tea Partiers.

While I don’t think it’s that bad yet, it’s headed that way if things don’t change.  And, as Glenn points out, it’s not changing:

Meanwhile, the person chosen to “investigate” the IRS’s targeting of Tea Party groups in 2010-2012 is Barbara Bosserman, a “long-time Obama campaign donor.” So the IRS’s credibility is in no danger of being rebuilt any time soon.

I think this is a terrible and shortsighted mistake by the Administration.  So much of its agenda, especially Obamacare, depends on effective IRS administration, but as the recent budget agreement proved, the GOP isn’t going to fund the IRS when it thinks that’s the same as funding the opposition.

The USA Today piece makes broader points about the effect of the loss of faith in civil servants as apolitical technocrats; read the whole thing.

Via the TaxProf.

Andrew Lundeen at Tax Policy Blog has two new posts on tax reform.  In Tax Reform Should Simplify the Code and Grow the Economy, he says:

We need to eliminate the biases in the code against savings and investment, so individuals have the incentive to add back to the economy, and businesses have the capital to buy new machines, structures, and equipment – all the things that give workers the ability to be more productive and earn higher wages. And we need a tax code that is simple and understandable, so taxpayers know exactly what they pay and why. 

Max Baucus

Max Baucus

We’ve been going the wrong way now for 27 years.  In Responses to Senator Baucus’s Staff Discussion Drafts, he curbs his enthusiasm for the tax reform options offered by outgoing Senate Finance Committee Chairman Baucus:

Generally speaking, we found that the tax reform proposals in these drafts go in the wrong direction. Our modeling shows that they damage economic growth, hurt investment, and, in many instances, violate the principles of sound tax policy: simplicity, transparency, neutrality, and stability.

The post links to a point-by-point examination of the Baucus proposals.

 

 

TaxProf, Martin Luther King, Jr. and the IRS:

This past year, much ado was made about the so-called “IRS-Gate” and concerns that the Obama administration may have used the agency to target Tea Party and other right wing groups. … [W]hat often is not stated during the Martin Luther King Holiday weekend is that King, early in his leadership of the Southern Christian Leadership Conference (SCLC), was routinely subjected to IRS audits of his individual accounts, SCLC accounts as well as accounts of his lawyers, first starting during the administration of President Dwight Eisenhower and continuing through the Kennedy administration.

If you audit me, I shall become more powerful than you can possibly imagine…

Kay Bell, IRS abuse of power, now and in MLK’s day. “Overall, the IRS is paying for its operational indiscretions by receiving less money and more restrictions on how it does spend what funds it has.”

 

Paul Neiffer, Section 179 Update (or Not):

 Here are my official updated odds on when we might know what the actual 2014 Section 179 amounts will be:

By Memorial Day 10 Billion to 1

By Labor Day 10 Million to 1

By the November Mid-Term elections 500 to 1

Between the November Mid-Term Elections and December 15, 2014 25 to 1

After December 15, 2014 and before January 1, 2015 1 to 1

After December 31, 2014 5 to 1

I give about 5 to 1 odds in favor of the current Sec. 179 deduction being extended to $500,000 for 2014, and I think that Paul is right that it is most likely to occur during the lame-duck session.  I think odds are about 50-50 on an extension of 50% bonus depreciation. It’s too bad the Feds have closed Intrade, as this would be a betting market I would like to follow.

 

HelmsleyTaxTrials, Leona Helmsley, Angry Employees Strike Back:

Their mistreatment of employees and squabbles over bills are the stuff of legend and left prosecutors rife with eager witnesses when it came time for trial.

Helmsley was just as arrogant about her taxes, famously telling her housekeeper: “We don’t pay taxes, only the little people pay taxes.”  Helmsley participated in several schemes to avoid paying millions of dollar in income and sales taxes.  

Sometimes that sort of thing comes back and bites you; read the post to see how it bit Helmsley.

 

William Perez on an important topic: Tips for Securely Sending Tax Documents To Your Accountant.  First, don’t send anything with your Social Security Number in an unencrypted email.  Like many firms, Roth & Company offers a secure upload platform to send sensitive information.  If your tax firm has one, use it.  They are the safest way to transmit confidential information and files.

 

Phil Hodgen wonders whether there is a Delay in approving renunciations at State Department?  It’s harder to shoot jaywalkers when they are running away.

Missouri Tax Guy goes back to basics with An Introduction to the Double-Entry Bookkeeping System.  Just remember, Debits are on the door side.

Andrew Mitchel has posted a New Resource Page: 2013 Developments in U.S. International Tax

 

Kay Bell, $4 billion more tax breaks for Boeing from Washington State. Taxing you to give money to folks with good lobbyists.

Jim Maule is appropriately annoyed by the use of the term “IRS Code.”  It’s the Internal Revenue Code, and it’s written by Congress, not the IRS.  Remember that when you vote.

Keith Fogg, Qualified Offers – Is it meaningless to offer what you think a case is worth? (Procedurally Taxing)

Jack Townsend, The New Provision for Tax Restitution and Ex Post Facto

 

The Critical Question: Is Kent Hovind A Tax Protester?  It doesn’t seem like a more promising career path for him than his forays into evolutionary biology.

TaxGrrrl, Hot Tub Tax Machine: News Anchor Takes Plea In Scandal.

 

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Tax Roundup, 12/6/2013: Fools Gold Edition. And: corporations can have their identity stolen too!

Friday, December 6th, 2013 by Joe Kristan


20131206-1
We’ve all had narrow misses with bad ideas.  For example, the general manager of the Yankees and Red Sox owner went out drinking and negotiated a trade of Ted Williams for Joe DiMaggio, only to call it off in the light of day.  Think of the time you almost went into business with your brother-in-law.  Fortunately, we usually think better of it in time to avoid disaster.

Not Robert Kahre.  He got this great idea to pay employees in gold and silver coins, which are worth far more than their original face value, while reporting the income and paying taxes at the face value.

Kahre met John Nelson (Nelson), who authored books and taught classes about the IRS and the monetary system, and Nelson’s ideas influenced Kahre to develop the payment system at issue.

According to Kahre, he developed his gold payroll system because the United States government had debauched the national currency and utilized inflation to confiscate the wealth of U.S. citizens. Kahre relied on court cases and the Gold Bullion Coin Act of 1985 that approved gold coins as legal tender. Kahre devised the independent contractor agreements to reflect that the IRS was a foreign agent for the World Bank and the International Monetary Fund (IMF). In Kahre’s view, by collecting taxes for the IRS, employers illegally served as foreign agents for the World Bank and IMF. Kahre relied on several federal statutes, regulations, and “Presidential Documents” in the process of developing his payroll system to avoid the collection of taxes on behalf of foreign agents.

How do you suppose that worked out?  Well, the above description comes from a federal appeals court decision upholding a 190-month prison sentence for Mr. Kahre, if that’s any indication.   More from the decision:

Appellants contend that the district court erred in denying their motions to dismiss the indictments because they did not know that their use of gold and silver coins for payroll payments was illegal under the tax laws. Appellants specifically maintain that the district court’s tax valuation predicated on the fair market value of the gold and silver coins unfairly imputed criminal intent to their unknowing actions.

A footnote helps show why the court wasn’t persuaded (citations omitted, emphasis added.):

Appellants contend that gold and silver coins are statutorily valued at face value. However, this appeal does not really concern the statutory value of gold and silver coins when utilized as legal tender. Instead, this appeal addresses Appellants’ payment of wages in gold and silver coins in a scheme to avoid payroll taxes, as evidenced by the facts that Kahre’s employees were required to immediately return the coins for cash and, that if an employee retained the coins, his wages were reduced by the fair market value of the coins.

Oops.

The moral?  The tax law isn’t required to believe every ridiculous thing you read, and there is no Tax Fairy.

Cite: Kahre, CA-9, NO. 09-10471

 

TIGTAIt’s not just individual identity theft.  TIGTA: IRS Issues $2.3 Billion/Year in Fraudulent Tax Refunds Based on Phony Employer Identification Numbers. (TaxProf). Considering this, and the identity theft epidemic, and their worsening taxpayer service, their wish to devote resources to regulating preparers is hard to take.

 

Now there’s a shocker.  Democrats, liberals pan Gov. Terry Branstad’s flat tax idea (Jason Noble).  If you can’t get the cooperation you need to pass even a half-way plan, you can at least change the terms of the debate by going bold.

 

Jason Dinesen, Stock Losses and Taxes:

Beware of “wash sales.”  A wash sale occurs when you sell stock at a loss and then buy the same stock within 30 days before or after the sale.  (Example:  you sell Stock A at a loss on August 1 and then re-purchase Stock A on August 15.  This is a wash sale and the August 1 loss is not currently deductible but instead adjusts the basis of the stock you purchased on August 15.)

Year-end loss sales are a common tax planning move, but you need to be willing to do without the shares for 30 days.

 

Kay Bell,  Low corporate tax rates don’t guarantee more jobs.  No, but you won’t convince anybody that high corporate taxes help.’

Kyle Pomerleau, New Report on Corporate Income Taxes and Employment Doesn’t Come Close (Tax Policy Blog).  “Their conclusion is akin to blindly picking two jellybeans from a bag of 1,000, getting two red ones, and then concluding that the rest of the jellybeans in the bag must be red.”

 

Dueling cronyism.  Missouri Lawmakers to Washington: We’ll See Your $8.7 Billion, And… (Tax Justice Blog)

William Perez,  Year End Deduction Strategies for the Self Employed

 Andrew Mitchel,  New Resource Page: Monetary Penalties for Failure to File Common U.S. International Tax Forms.  They’re quite ugly.

 

Elaine Maag,  Analyzing Taxes and Transfers Together (TaxVox)

Keith Fogg,  What is a return – the long slow fight in the bankruptcy courts (Procedurally Taxing)

Jack Townsend,  Economic Substance Uncertainty in Civil Cases

Tax Trials, Supreme Court Adopts IRS Position on Jurisdiction and Application of Partnership Penalties

 

Courtesy Gateway Pundit.

Courtesy Gateway Pundit.

Fiduciary Income Tax Blog,  Valuation of Indirect Ownership Through a Trust

Brian Strahle,  UDITPA REWRITE NECESSARY, BUT WILL STATES LISTEN?

TaxProf, The IRS Scandal, Day 211

 

Robert D. Flach has a meaty Friday Buzz!

TaxGrrrl,  Flushing Out The Toilet Paper Tax Exemption   

News from the Profession.  Former CPA and Procrastinator Ordered By the State to Get Around to Removing “CPA” From All Her Stuff (Going Concern)

 

Happy St. Nicholas Day!

 

 

 

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Tax Roundup, 11/6/13: Relief for the road warrior? And the futile state corporation income tax

Wednesday, November 6th, 2013 by Joe Kristan
Flickr image courtesy Tom Hilton under Creative Commons license

Flickr image courtesy Tom Hilton under Creative Commons license

Relief for the traveling employee?  Tax Analysts reports ($link) that the “Mobile Workforce State Income Tax Simplification Act of 2013″ (S. 1645) was introduced yesterday.  The bill would make the tax lives of employers and employees who cross state lines much easier by preventing states from taxing folks, other than athletes and entertainers, who are in a state for less than 30 days.  From the Tax Analysts:

The bill is “a modernization of everything,” Maureen Riehl, vice president of government affairs for the Council On State Taxation, told Tax Analysts. It is “about supporting the mobility of an economy that has people moving around a lot more often than when the income tax laws went into effect in the states back in the ’30s and ’40s,” she said.

Who would oppose such sensible simplification?

The Federation of Tax Administrators does not share Riehl’s enthusiasm. Deputy Director Verenda Smith said the bill “does not strike an appropriate balance between administrative simplification and necessary tax policies.”

Smith took issue with the safe harbor provision, saying the 30-day threshold “is beyond a level necessary to deal with the vast majority of individuals who would be temporarily in a jurisdiction.”

The states want to tax you on their whim if you sneeze in their jurisdiction.

Still, they should have one more threshold: no state tax if you earn less than some threshold amount in a state, maybe $5,000.  That way they can still pick LeBron’s pocket when he comes to town from his tax-free home in Florida, but a carload of struggling musicians couch-surfing from town to town would be saved the hassle of filing a tax return in every state where they have a gig  — or more likely, saved the need to ignore the filing requirement.

 

Peter Reilly,  Mobile Workforce Act Good Idea But May Need More Limits  “Over the years I have studied the rules for what invokes state income tax withholding requirement.  It varies substantially from state to state.”

 

Elizabeth Malm, Richard Borean, Map: Share of State Tax Revenues from Corporate Income Tax (Tax Policy Blog)

 20131106-1

Notice that it’s a relatively paltry part of Iowa tax receipts, even in a good year, and even with the highest rate in the nation.  Better to repeal it as part of the Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

David Brunori, Feckless Legislators and Corporate Welfare (Tax Analysts Blog)

If I ran a big corporation in Illinois, I would have my lobbyists asking for tax breaks daily. Why not? The tax incentive racket is a profit center for most corporations in Illinois. Is it blackmail? Sure. But it is cold, calculated, rational blackmail.

…if once you have paid him the Dane-geld

You never get rid of the Dane.

 

Tax Justice Blog,  Let’s Face It: Delaware and Other U.S. States Are Tax Havens

 

Paul Neiffer, Crop Insurance Deferral Options.  “When a crop insurance claim relates directly to a drop in price, those claims cannot be deferred to the next year.”  Paul explains what the choices are if the recovery relates to a yield loss.

Tony Nitti, Shareholder Computes Basis In S Corporation Stock Incorrectly, $1.5 Million Loss Becomes $2 Million Gain

 

Jana Luttenegger, Interactive Form to Assist in Applying for 501(c)(3) Status (Davis Brown Tax Law Blog) 

The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

William Perez, CBO: Marginal Tax Rates Faced by Low- and Moderate-Income Individuals.  Helping the poor stay that way.

Andrew Mitchel, 2014 Inflation Adjustments for Individuals in the International Tax Arena

Roger McEowen, Inflation Adjusted Amounts for 2014

TaxProf,  The IRS Scandal, Day 181

TaxGrrrl, Bayern Munich Keeps Winning Even As Their Chief Faces Trial For Tax Evasion.

 

Brian Mahany,  More Guidance on Taxation of Same Sex Marriages

Jack Townsend,  Should You Opt Out of OVDI/P?.  He examines Robert Wood’s discussion of opting out of the IRS “amnesty”

Phil Hodgen’s Exit Tax Book: Chapter 7 – Taxation of Deferred Compensation 

 

Joseph Thorndike, Forget Carried Interest–It’s All About Taxing Capital Gains (Tax Analysts Blog).   He’s right when he says “The only issue that really matters is how we tax capital gains.”  Then he goes off the rails in so many ways.  Read Joseph, and then read Steve Landsberg.

 

A Wednesday Buzz from Robert D. Flach!

May you have this problem.  The Tax Treatment of Olympic Gold Medals (TaxProf)

News from the Profession.  Recruiting Season: Salaries and Offers for the Public Accounting Class of 2014 (Going Concern)

 

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Tax Roundup, 8/9/2013: Another international tax enforcement milestone. And don’t count on the ex for a character reference.

Friday, August 9th, 2013 by Joe Kristan

Andrew Mitchel,  Number of Expatriates Skyrockets Again (Second Quarter of 2013):

The number of published expatriates for the first two quarters of 2013 (1,809) has already exceeded the highest number of annual published expatriates ever (1,781 in 2011).  Thus, 2013 will clearly be the year with the highest number of published expatriates ever.

 

Chart by International Tax Blog.
Chart by International Tax Blog.

Another triumph for the IRS offshore enforcement program.  If you make being an American abroad a tax nightmare, people will stop being American.

 

TaxProf, The IRS Scandal, Day 92

Phony Scandal Watch: IRS agent: Tax agency is still targeting Tea Party groups. (Washington Examiner, Via Instapundit):

In a remarkable admission that is likely to rock the Internal Revenue Service again, testimony released Thursday by House Ways and Means Committee Chairman Dave Camp reveals that an agent involved in reviewing tax exempt applications from conservative groups told a committee investigator that the agency is still targeting Tea Party groups, three months after the IRS scandal erupted.

We did nothing wrong, it was just a few rogue agents in Cincinnati, and we don’t do it anymore.  Oh, and it’s phony.

TaxGrrrl,  DEA Passed Secret Data, Tips For Covering Up To IRS.   That’s reassuring.

 

Tax Analysts fights the good fight.  Transparency: Worth Fighting For  (Christopher Bergin).  They’ve done more than anyone else to fight the growth of secret tax law, known only to insiders and cronies.

 

Howard Gleckman, Beware of Tax Reform That Promises Deep Rate Cuts.  I worry more about tax reform that doesn’t promise rate cuts at all.

 

Tax Justice Blog,  Politicians Use Tax Breaks to Subsidize Manufacturing. What Could Possibly Go Wrong?  Everything, of course, though the Tax Justice Blog’s solutions would be no improvement.

 

Kyle Pomerleau, Cities, States, and Obamacare’s “Cadillac” Tax (Tax Policy Blog).

No, they shouldn’t. Cheating and Visibility on Taxes: IRS Efforts to Regulate Tax Return Preparers Should Continue (Procedurally Taxing):

Nonetheless, I believe that the IRS’s approach to the return preparer issue, with uniform identification requirements, reasonable competency testing and ongoing education requirements, will greatly enhance visibility in the return preparation process.

This is one of the better arguments I’ve seen for preparer regulation, but it is still not very good.  The preparer regulations impose restrictions on honest preparers that the cheaters will ignore.  It will raise the costs of preparation, causing many taxpayers to self-prepare and others to drop out of the system entirely. The real way to stop cheating is to remove the worst opportunities to cheating, especially refundable tax credits, and to make the law simple enough and the rates low enough that cheating is harder to hide and less attractive.


Watching the watchmen. NYPD cop faces hard time for tax fraud and identity theft. (New York Daily News):

Jonathan Wally, 34, was moonlighting as a tax preparer while working in the 34th Precinct that serves Inwood and Washington Heights. The 10-year NYPD veteran, who resigned upon entering his plea, admitted in Manhattan Federal Court to using bogus Social Security cards to list fictitious dependents.

I’m sure that with a little ethics training from the IRS, he would have turned out differently.

 

Paul Neiffer, Don’t Forget Your Retirement (Plan)!

Brian Strahle, CALIFORNIA:  HOW SHOULD YOU “SHAVE” (FILE YOUR 2012 INCOME TAX RETURN)?

Trish McIntire, Health Insurance Wizard for Business

Russ Fox,  While I Was Out…, where he discusses my post from yesterday, where the Tax Court required an S corporation $877 in taxable income to impute $31,000 in salary income to the owner to incur payroll taxes:

 I do agree with Joe’s conclusion: “When advancing and withdrawing funds from an S corporation, be sure to generate the appropriate prissy paperwork.”  If you have a loan, make it look like a loan: Charge interest and record it!  It’s possible that with good paperwork the owner wouldn’t have received such a ridiculous result.

The more I ponder this Tax Court decision, the more I dislike it.

Freakonomics Blog,  How Much Tax Are Athletes Willing to Pay?

Boxing is particularly interesting because it allows a participant to choose where he performs. If you are a pro golfer or tennis player, you might be inclined to skip a particular event because of a tax situation, but you generally need to play where the event is happening. A top-ranked boxer, meanwhile, can fight where he gets the best deal. Which is why it’s interesting to read that Manny Pacquiao will probably never fight in New York — primarily, says promoter Bob Arum, because of the taxes he’d have to pay.

Yes, tax rates matter.

 

Going Concern, After His Open Victory, It Appears Phil Mickelson Is Doing Some Tax Planning at the PGA Championship.  Yes, taxes are lower if you miss the cut.

 

I hope he didn’t solicit this character referenceA 64-year old Florida executive won’t get to enjoy a golf-course retirement for awhile.  TBO.com reports:

John D. Stanton III stalled an Internal Revenue Service audit for four years, promising he would submit corporate tax returns for his company while secretly diverting tens of millions of dollars to himself.
 
The deception caught up to him Thursday, when a federal judge sentenced him to 10 years in prison for tax evasion.

His ex-wife spoke up for him, pleading for leniency.  Yeah, sure:

The family drama emerged when a letter by ex-wife Susan Stanton was read aloud. In the letter, Stanton called her ex-husband “devious” and said he should be given the maximum prison sentence allowed. John Stanton III fled Tampa in December 2011, the letter said. An arrest warrant on a contempt of court charge was issued, stemming from a divorce case where Stanton defied an order to pay more than $6 million to his ex-wife. “He fled and stayed in $240-a-night hotels,” Susan Stanton wrote. While he was on the run, John Stanton III fathered a child with a 32-year-old woman, the letter said.

Other than that, the break-up was amicable. Now Mr. Stanton gets to spend 10 years in a federal prison, where any money he managed to hide isn’t much use.  When he gets out, assuming his health holds up, he will still have the government ready to seize any hidden cash that slips out.  It seems like the results would have been a lot better if he just had filed his returns.



A note to readers:  I have learned how to embed links to items within longer “Tax Roundup” posts.  I won’t use it for every item, but I will use them for some items that you might want to point out to someone.  There are two that you will find in this post, and they look like this:

No, they shouldn’t.

and

I hope he didn’t solicit this character reference.

Maybe I should just post these things as their own posts, but there you go.

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Tax Roundup, 6/24/2013: Officially summer edition. And: catching up on the IRS scandal.

Monday, June 24th, 2013 by Joe Kristan
Former IRS Commissioner Shulman, showing how many times he visited the White House.

Former IRS Commissioner Shulman, showing how many times he visited the White House.

As the world slows down for summer, so does the IRS scandal.  The TaxProf has only a half-dozen items in yesterday’s daily roundup of IRS scandal stories.  Where are we at?

There’s no smoking gun, like an e-mail from President Obama to Doug Shulman telling him to thwart the Tea Party.  The mystery now appears to be the level of involvement of IRS personnel in Washington, who appear to have closely monitored the handling of the Tea Party 501(c)(4) applications, while  left-leaning applications flew through the system.  While some folks are in a hurry to bury the issue, there are plenty of remaining issues, as Eliana Johnson recounts:

Who at the IRS, for instance, developed the intrusive and exhaustive  questions that were sent to the tea-party groups? Why did so many of those groups have to wait years for their applications to be processed, and why are many more still waiting? Who specifically were the IRS officials in Washington directing the Cincinnati agents targeting the tea-party organizations?

It’s also become clear that the political culture of the IRS was hostile to Tea Parties at the top levels.  IRS defenders have pointed to Doug Shulman’s status as a Bush appointee as evidence of IRS neutrality, but it turns out that he has a long left-side political historyThe same goes for Holly Paz, a high-ranking IRS lawyer who had a key role in overseeing the non-approval process.   The best argument that can be made on behalf of the agency is that because the political culture was so far to the left, they didn’t realize how biased they were being — they actually could have believed Tea Party applications were political, while “progressive” ones were just good people trying to do good things.  That hardly inspires confidence.

While former Commissioner visited the IRS a lot — the exact number of visits isn’t clear, but it was more than Shulman could precisely remember — it appears his t0p aide went to the White House 2 or 3 times weekly.  It’s hard to imagine that slow-walking Tea Party applications would require that level of Administration involvement, but it does show a disturbing level of day-to-day administration involvement with the workings of the tax agency.  It best, it reflects how the IRS has become a multi-portfolio superagency stretching across the government, which is a terrible thing by itself.

 

Andrew Mitchel,  Mandatory Electronic Filing for FBARs Coming Soon.  Remember, they are due this week.  The Treasury (inexcusably) says the timely-mailed, timely-filed rule doesn’t apply to foreign financial account disclosure filings, so you should mail them by today to beat the June 30 deadline.

Roger McEowen, U.S. Tax Court Says that CRP Payments Are Subject To  Self-Employment Tax In the Hands of a Non-Farmer

- In a  stunning reversal of course, the U.S. Tax Court  has agreed with the IRS that  the signing of a CRP contract coupled with compliance with the contract  provisions (whether personally or via an agent) results in the party signing  the contract being in the business of participating in the CRP and engaging in an “environmentally friendly farming operation.”  The result was  that the CRP payments were subject to self-employment tax.

Paul Neiffer, Your CRP Income May Be Subject to SE Tax: “Under the ruling of this case, it appears that almost any farmland enrolled in CRP will be subject to SE tax (at least in the Eighth Circuit) unless the case gets appealed and overruled which may take a
couple of years to resolve.”

 

Jason Dinesen, Commentary on the IRS’s E-Services Decision:

The IRS says few practitioners are using E-Services (I think they said only 10% of power of attorney requests come through that system).

Still, in the year 2013, it seems more logical to encourage more practitioners to use E-Services instead of closing it down and taking away the electronic option completely.

Yet another bad IRS decision.  Meanwhile, TaxGrrrl reports that  Defying Directive, IRS Set To Pay Out $70 Million In Employee Bonuses.   Priorities.

Russ Fox, Onwards and Upwards into the 20th Century!

Christopher Bergin, Another Bad Day for the IRS (Tax Analysts Blog)

William Perez, Small Business Week: Deducting Health Insurance Benefits

Peter Reilly, Tea Party Patriots — Federalist Papers — Really ?

Tax Policy Blog, Tanning Tax Not So Hot

Tax Justice Blog, A Reminder About Film Tax Credits: All that Glitters is not Gold

Kay Bell, Amazon heading to Florida, leaving Minnesota

Kim Reuben, Andrew Cuomo’s Lesson in What Not to do With Rising Tax Revenues (TaxVox)

Robert D. Flach, TAX RETURN ERRORS:

Using a tax preparation software package is no substitute for knowledge of tax law.  This applies to paid preparers as well as individual taxpayers.  I sometimes wonder how many alleged tax professionals, especially those employed by the “fast food” tax preparation chains, are really nothing more than data entry clerks. 

Garbage in, garbage out.

 

The Cubs losing ways:  IRS Continues Its Scrutiny Of Leveraged Partnerships: 2009 Sale Of Chicago Cubs Finds Itself In Service’s Crosshairs   Fortunately for Cubs fans, it’s the seller’s problem.

Good luck with that. Billionaire Seeks $186 Million Tax Refund, Claims IRS Biased By ‘Politically Charged Atmosphere’ (Janet Novack)

Gee, who saw this coming?  Governor signs bill paying off Honey Creek Resort debt.  Operating resorts is one more thing the State isn’t very good at.

 

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Tax Roundup, 6/3/2013: Annals of Crime and Redemption Edition.

Monday, June 3rd, 2013 by Joe Kristan

20130603-1How to make Zumba popular with men.  From The Guardian Express:

Zumba instructor and prostitute Alexis Wright has been convicted in an Alfred, Maine courtroom of prostitution, conspiracy, tax evasion, and theft by deception.

Wright used her Zumba training facility as a front to run a prostitution  ring.  She has been sentenced to ten months in jail.  She will also have to repay $57,280 for accepting welfare funds of more than $40,000.  It is believed that she netted more than $150,000 from prostitution.

The story has gotten some extra mileage because it happened in Kennebunkport, a picturesque and posh seaside town where George Bush the Elder maintained a place.  She also videotaped her private exercise sessions and had a client list including “prominent members of the seaside community.”

According to the story, the Zumba entrepreneuress has turned over a new leaf:

Now that her life of prostitution, conspiracy, and tax evasion has ended, Wright promised a change in her life after her release.

“It’s my intention to stand up for what is right. When I’m out, I’m going to pursue helping people fight through situations that are similar to mine. I’m optimistic that something good will come out of this,” Wright said Friday, according to the AP.

An inspiration to us all.  To pay our taxes, at least.

 

Speaking of misplaced inspiration, a Tennessee man who claimed the power to “decode” the tax law apparently misplaced his decoder ring.  Knoxnews.com reports:

 U.S. District Judge Thomas Phillips sentenced David Miner, 61, to an 18-month prison term for plotting a campaign to impede and harass IRS agents in a bid to help his paying clientele to avoid paying taxes and failing to file his own tax returns.

For $1,200, Miner sold a program to “decode” via an IRS manual a client’s Individual Master File, or IMF, which uses computer codes to document a person’s tax history, point out errors and write letters demanding the IRS fix those problems.

Assistant U.S. Attorney Frank Dale argued for a harsh sentence:

“Miner has written a book and other documentary materials, operated an Internet website, and spoken at various meetings, presumably on subjects related to defying the tax system,” Dale continued.

Not just a website, but an internet website!  Which is still up, oddly enough.  It’s full of tax protester nonsense, but I can’t argue with this assertion there:

We can’t help you convince your family and friends that you are not crazy or Satanic or destined for jail.

I’ve been trying for a long time, but my family and friends are convinced that some or all of these things are true about me.

How did the defendant justify himself?

Miner insisted that he believed his IRx-Solutions Inc. firm was not selling a scam. He said he was inspired by Joe Nelson Sweet, a Florida man currently serving a 10-year prison term for a similar venture.

The moral: when seeking inspiration, don’t look to folks serving ten-year sentences.

 

Debit cards don’t confer tax exempt status either.  A North Carolina man has pleaded guilty to tax crime charges:

William Robert Hupman Jr., pleaded guilty today to corruptly endeavoring to obstruct or impede the due administration of the internal revenue laws, the Justice Department and the Internal Revenue Service (IRS) announced today.

According to court documents, Hupman managed and controlled Security Concepts LLC.  a security alarm company based in Mebane, N.C.  Instead of receiving a salary from Security Concepts, Hupman received income by using a Security Concepts debit card to pay his expenses.

That sort of brazen skimming is likely to get caught eventually in any case, but the man may have done a little extra to attract IRS attention:

Despite the fact that employment taxes were withheld from the wages of Security Concepts employees, Security Concepts has not paid employment taxes and filed the required tax form since the third quarter of 2009.

The IRS notices that sort of thing pretty quickly.

 

Andrew Mitchel, U.S. Government Continues to Pursue Taxpayers Committing Tax Fraud, a roundup of recent tax crime news.

Jack Townsend,  Reminder on FBAR Filing for 2012 Year – Must be Received by June 28, 2012

 

Paul Neiffer,  The Advantages of Commodity Contributions

Brian Strahle, “SUBJECT TO CHANGE”:

If something bad has happened in life, or with your company’s state tax position, the good news it is probably temporary.  There is most likely a practical and effective way to mitigate the risk, exposure or liability. 

TaxGrrrl, June A Busy Month At IRS For Taxpayers and Tax Pros.   FBARs, second quarter estimates, and more.

 

Kyle Pomerleau,  Another Study Confirms: U.S. Has One of the Highest Effective Corporate Tax Rates in the World

Trish McIntire,  Fiscal Cliff-Kansas Style

Peter Reilly,  NFL As Tax Exempt Less Than Meets The Eye ?

Tony Nitti, Raising Capital Gains Rates In the Name Of Tax Reform

 

TaxPro, The IRS Scandal, Day 24

Getting ahead of the game. IRS issues preemptive apology for tax conference excesses(Kay Bell) But boy, they can dance!

Megan McArdle, IRS White House Visits: Less Than Meets the Eye

Russ Fox, The Answer Is in Washington

 

Robert D. Flach,  AND YOU WONDER WHY I DO NOT USE TAX PREPARATION SOFTWARE.  Robert passes on a tax software horror story, which we all have.  Yet for all of its flaws, there is a reason most practitioners use tax software.  It saves an enormous amount of duplicative work, avoids the vast majority of math errors, and enables you to get much more done.  But you don’t want to cheap out on your software — you get what you pay for.

Robert is welcome to his hand-crafted returns, but I’d quit rather than do a 20-state 1065 by hand.

 

Not strictly tax-related, but when people get nostalgic for how wonderful things were back in the day, remember that back then TV makers actually competed on how easy it was to fix them when they broke.

 

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Tax Roundup, 5/13/2013: Modified limited hangout edition. And a tax blog hijacking!

Monday, May 13th, 2013 by Joe Kristan

20130419-1If the IRS hoped Friday’s “apology” for giving extra special attention to tax-exemption applications of right-side groups would settle things, they’re very disappointed this weekend.  The Washington Post reports that the Treasury Inspector General for Tax Administration will soon issue a report saying Friday’s apologizer, IRS Director, Exempt Organizations, knew this was going on in 2011.  Meanwhile, in 2012 IRS Commissioner Doug Shulman was still testifying that IRS was not picking on the Tea Party.

So not only was the Shulman era at IRS grasping, incompetent and casually cruel, it was dishonest.

The Tax Prof has a fresh roundup, The Deepening IRS Scandal.

Another Washington Post story has this:

At various points over the past two years, Internal Revenue Service  officials singled out for scrutiny not only groups with “tea party” or “patriot” in their names but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution, according to documents in an audit conducted by the agency’s inspector general.

The documents, obtained by The Washington Post from a congressional aide with knowledge of the findings, show that the IRS field office in charge of evaluating applications for tax-exempt status decided to focus on groups making statements that “criticize how the country is being run” and those that were involved in educating Americans “on the Constitution and Bill of Rights.”

Yes, we sure need to keep an eye on those wingnuts who want to educate people on the Constitution and Bill of Rights.  Dangerous lunatics, they are!

There is so much blog coverage of this that I won’t even try to round it all up.  A few links from our blogroll:

Megan McArdle,  Why Did the IRS Target Conservative Groups?

Going Concern, Footnotes: Tea Party Patriots to IRS: Drop Dead

TaxProf,  Schmalbeck on the IRS ‘Targeting’ of Conservative Groups, where an academic gives a “nothing to see here” take, one that is already largely overtaken by events.

 

And some other coverage:

Connor Simpson,  Why the IRS Abruptly Apologized to the Tea Party  (via Instapundit):

The report doesn’t shay whether or not Shulman was informed about the Tea Party questioning, but it does show the IRS’s chief counsel was. It’s standard procedure for the counsel and commissioner to discuss this  sort of thing before a Congressional hearing.

If so, The Worst Commissioner Ever can only plead incompetence instead of lying to Congress.

Reason.com has a bunch of posts at their Hit and Run blog, including  Matthew Feeney,  IRS Scrutiny Extended Beyond Tea Party Groups (Reason.com); Jesse Walker,  A Brown Scare at the IRS?; Matt Welch,  NY Times: IRS Targeting of Tea Party Only Proves Republicans Are Desperate  “It’s the inability to see discrete news events for what they are, rather than what they might mean for the neverending scrum between Teams Red and Blue.”

Jonathan Adler,  IRS Scrutinized Teaching the Constitution (Volokh Conspiracy)

Professor Bainbridge, Wider Problems Found at IRS – Twisting slowly in the wind

William Jacobson,  IRS anti-Tea Party scandal gets real — senior IRS officials aware of targeting (Update – Chief Counsel knew and targets expanded to groups “educating on the Constitution and Bill of Rights”)

Katrina Trinko, Rubio: IRS Commissioner Should Resign Immediately (The Corner)

Ann Althouse has more.

And here’s my take from Friday, if you missed it:   Look at a celebrity return?  You’re fired!  Harass a Tea Party outfit?  Carry on.

 

In other news:

Nina Olson, IRS Taxpayer Advocate, has an article in Tax Analysts (via the TaxProf) affirming her support for taxpayer regulation.  Ms. Olson has done much good work as Taxpayer Advocate, but her support for increased preparer regulation is economically uninformed and hopelessly wrongheaded.

 

Russ Fox,  IRAs and Owning a Business Through an IRA and  What Can Go Wrong?  Nevada Democrats Want to Give Tax Breaks to Movie Industry

Peter Reilly,  Brooklyn Grandmother Wins On Dependency Exemption.   Just in time for Mothers Day!

TaxGrrrl,  IRS Set To Close Next Week.  Bad news: it’s only temporary.

 

Trish McIntire,  Max and Dave Looking for Reform

Nick Kasprak,  Do Tax Cuts Pay for Themselves?

Patrick Temple-West,  Falling deficit alters budget debate, and more

Linda Beale,  Orrin Hatch on tax reform at the ABA–a predictable right-wing rant

 

Andrew Mitchel,  Barnes Group – Structured Repatriation Was a Dividend.  In spite of the best efforts of national tax firms.

Phil Hodgen,  Decline of American Civilization, Form 8938 Edition.  “Let’s just bury the world in useless paperwork, shall we?”  That does appear to be the plan.

 

Kay Bell,  IRS reports gains in criminal tax, other financial investigations

Jack Townsend, Cheating is Cheating, Except When Offshore Accounts Are The Means, followed up with More on Conviction Rates in Tax Cases.

Janet Novack,  Independent Contractor Enforcement: There’s More Than The IRS To Fear.  Plenty of state rules and taxes also come into play.

Jim Maule,  The Complexities of Tax: Is This Really Necessary?  “A recent IRS private ruling, PLR 201318003, illustrates how the special low rates for capital gain adds layer upon layer of complexity to the tax law.”

 

I’d like to report a hijacking.  It looks like somebody at Tax Analysts forgot to renew their ownership of the  tax.com domain name.  Going there this morning gets this:

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Tax.com is (has been?) home to the great group blog featuring, among others, David Brunori, Christopher Bergin, David Cay Johnston, Martin Sullivan, Cara Griffith and Clint Stretch.  I hope this is only a temporary hijacking.

 

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Tax Roundup, 4/19/2013: IRS agents charged with scamming jobless benefits. And post-4/15 thoughts

Friday, April 19th, 2013 by Joe Kristan

More20130419-1 evidence that preparers are out of control and need IRS employees to keep an eye on them:  24 IRS Employees Indicted for Theft of Government Benefits (TaxProf).

24 current and former employees of the Internal Revenue Service have been charged for crimes relating to fraudulently obtaining more than $250,000 in government benefits.
          
          Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare, and housing vouchers. All thirteen, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits.

They may have been right about being unemployed, just wrong about the timing.

 

We have to show the government our returns, so it’s only fair:  Iowa Gov. Branstad plans to show income tax returns to reporters (AP)

Howard Gleckman,  What Ever Happened to State Tax Reform? (TaxVox)

Kay Bell,  Obama’s 2012 effective tax rate was 18.4 percent; Now what do your members of Congress pay in taxes?  Make them do their returns on a live archived webcast, with a rolling comment bar.

Peter Reilly,  How Not To Care About IRS E-mail Snooping

 

William Perez,  IRS Provides Penalty Relief Due to Boston Marathon Explosion and Storms in South and Midwest

Patrick Temple-West,  Tax extension after Boston attack, and more (Tax Break)

Russ Fox, RS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same

TaxGrrrl,  So You Missed Tax Day, What Next?

 

Andrew Mitchel,  Code §911 Foreign Earned Income Exclusion – Adverse Conditions

Freakonomics Blog, The History of Taxes

Megan McArdle,  Our Tax Code is Too Complicated. Here’s How to Simplify It. “Get rid of the corporate income tax. It’s not worth it, and there are better ways to collect the money.”

Janet Novack,  Tax Geeks: Make Tax Filing Easy, Kill The Mortgage Deduction, Tax  CPAs

Jim Maule, Tax Compliance and Non-Compliance: Identifying the Factors

Trish McIntire,  You Need the Numbers Before You Do the Return

Scott Drenkard,  Perry Calls for Reforms of Texas’ Margin Tax (Tax Policy Blog).  It could use it.

Christopher Bergin, It Just Isn’t Fair (Tax.com):

The headline producing data  in the report was that revenue loss – about $181 billion – from corporate tax expenditures in 2011 was “approximately the same size as the amount of corporate income tax revenue the federal government collected that year.” That makes a headline grabber; here would be my version: “Corporations Got More in Tax Breaks Than They Paid in Taxes, Government Says.”

It’s almost like the tax exists only so the politicians can carve loopholes for their friends.

 

Indeed.  It’s Rarely a Good Sign When a Tax Prep Business Closes Its Doors Three Days Prior to April 15th (Going Concern)

Just plead “miseducation” and leave it at that.  Lauryn Hill asks judge for leniency in  upcoming tax evasion sentencing claiming she failed to file taxes due to threats and withdrawal from society (dailymail.com.uk)

Tony Nitti,  Girl, You Know You Better Watch Out: Singer Lauryn Hill To Be Sentenced On Tax Evasion Charges

Jack Townsend, Bank Frey Executive and Swiss Lawyer Indicted

Can you blame them?  U.S. Taxpayers Buy a Lot of Weapons  (Jeremy Scott, Tax.com)
“The sum of the square roots of any two sides of an isosceles triangle is equal to the square root of the remaining side.”  Your tax filing stress probably made you smarter (Kay Bell)

How I spent April 15.  (Marketwatch, via Going Concern).  I approve of the comment at the bottom of the GC post.

Me too.  Tax Season 2013: Mostly Unpleasant, And I’m Glad It’s Over  (Jason Dinesen)

Robert D. Flach returns!  THAT WAS THE TAX SEASON THAT WAS 2013

Me: Back to work.

 

News you can use.  Hone your corporate tax evasion skills (Boston.com)

 

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Tax Roundup, 2/14/2013: Happy Valentine’s Day! Oh, and tell me more about your illegal tax shelter, honey!

Thursday, February 14th, 2013 by Joe Kristan
Wikipedia image

Wikipedia image

The TaxProf Reports: IRS Whistleblower Office Issues Annual Report to Congress.  It looks like ratting out tax cheats could be lucrative.  Changes requiring the IRS to issue more awards were enacted in 2006, and it appears that the whistleblowers have done well.  In 2012, for example, 128 awards were paid totalling $125,355,799, according to the report.  That works out to nearly $1 million each.

Awards may well be one of the most effective ways to enforce the tax law, as well as one of the most creepy.  They make every disaffected employee a potential IRS mole.  Sure, it may make employment awkward for the whistleblower, but $1 million cash can be very consoling.

But before you go racing to the IRS, consider this sobering news from the report: From 2008 through 2012, whistleblowers reported 33,064 cases to the IRS, but awards were paid only 630 times.  That means about 1 in 50 claims cashed out.  Because the IRS collection process is slow, some more of those claims will get paid out, but the great majority won’t.

The moral?  If you have a Valentines Day date, be careful how much of your tax life you share.  Love is one thing, but cold hard cash is something else entirely.

 

I’ll start that diet right after I finish this cheesecake:

Treasury nominee Lew calls tax reform top priority (Reuters)

Obama Proposes Tax Incentives for Manufacturing (Tax Analysts, $link)

If tax reform is a top priority, you don’t start the process by adding more gimmicks to the code.

 

You mean not all appraisals are trustworthy?  Ohio Federal Court Bars  Appraiser of Historic-Preservation Easements. From a Department of Justice press release:

A federal court in Cleveland has barred MAI-designated real estate appraiser Michael Ehrmann and his firm, Jefferson & Lee Appraisals Inc., from preparing property appraisals for federal tax purposes, the Justice Department announced today. Judge Dan Aaron Polster of the U.S. District Court for the Northern District of Ohio signed the civil injunction order against Ehrmann and Jefferson & Lee Appraisals. The defendants consented to the injunction without admitting the allegations against them. 

Federal law allows a taxpayer in certain limited circumstances to claim a charitable deduction for the value of a conservation easement donated to a qualified organization. The easement’s value must be determined by a qualified appraiser. According to the government complaint, Ehrmann’s appraisals repeatedly overstated the value of conservation easements placed on historic properties, including the Book Cadillac Hotel in Detroit and the Powerhouse Building in the Flats District of Cleveland.

The tax law is very touchy about the rules for appraisals.  The obvious potential for abuse shows why.

 

A sad story from Buffalo.  A tax preparer scammed his own clients, reports buffalonews.com:

Elizabeth Wopperer lost everything. She lost her business. She lost $40,000 in cash. And by the time it was all over, she found herself filing for bankruptcy.

On top of all that, the IRS now wants the money that was stolen from her.

The man she blames is going to federal prison for up to 30 months, but that won’t return the cleaning business she was forced to sell or pay the taxes she now owes because of his fraudulent actions.

What happened?

Mangione, the operator of a North Tonawanda payroll and tax preparation business, was supposed to pay federal income taxes on behalf of his clients but didn’t.

He chose instead to pocket some of the money, which means Schunke, Wopperer and several others are still on the hook for those taxes.

There’s no reason to give money to your preparer to pay your taxes.

 

Gene Steurle, Why Tax and Transfer Programs Often Discourage Work and Savings (TaxVox):

 The tax code also is loaded with disincentives to work, save, and study.  They include PEP and Pease (reductions in tax allowances for personal exemptions and itemized deductions), child tax credits, and the earned income tax credit. These implicit taxes combine with explicit taxes to create incentives for many households that are often inefficient and inequitable, to say nothing of strange and anomalous.

That’s why proposals to increase the earned-income credit are pernicious.  The phase-outs of the benefits as incomes rise punish taxpayers for improving their lot.

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But I thought nobody moved because of state taxes! Two Dozen Companies Announce California Departures, Citing Higher Taxes (Joseph Henchman, Tax Policy Blog).

Cara Griffith, Income Redistribution Has No Place in State Tax Systems(Tax.com) The goal of taxes should be to finance operation of the government.  The tax commissioner is not Handicapper General.  When states try to soak the rich, they’ll rinse them right across the state line.

 

Kay Bell, Mistakes on child tax credit form are delaying some returns

Paul Neiffer, Don’t Forget the “Magic Blurb” on Donation Acknowledgements!  A cancelled check by itself doesn’t get you a charitable deduction over $250.

Missouri Tax Guy, Maximize your Travel & Entertainment Benefits.

TaxGrrrl, The Cost Of Health Care Insurance, Taxes and Your W-2

Patrick Temple-West,  Vital New York City property taxes lost, and more (Tax Break)

Andrew Mitchel, 48% Decrease in Number of Expatriates for 2012

Jack Townsend,  Interview of R. J. Ruble, A Tax Lawyer Incarcerated for Tax Shelter Crimes.  Sobering.

 

Say, what time is it?  Madness Time. (Christopher Bergin, Tax.com)

If you are thinking of proposing tonight, check out An Updated Marriage Bonus and Penalty Calculator for Valentine’s Day from Roberton Williams at TaxVox before you commit!

News you can use. The SEC is Developing an Army of Robots to Replace You (Going Concern)

 

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Tax Roundup, 1/28/2013: Should Iowa rebate its budget surplus? And PTIN limbo.

Monday, January 28th, 2013 by Joe Kristan

20130117-1Iowa is collecting more tax money than it is spending.  Iowa House Republicans propose to give the money back as a one-time tax credit.  The Des Moines Register reports:

The proposal would capture the state’s estimated $800 million budget surplus, divide it equally among the state’s income tax payers and issue an income tax credit to every taxpayer for his or her share. Senate Republicans said last week the credit amounts to $375 for individuals or $750 for couples who file jointly.

That means, for example, if a married couple’s state income tax liability was $1,000, they would receive a $750 tax credit, reducing the amount they were actually required to pay to $250. If a payer’s burden was less than $375, he would receive a credit equal only to his actual bill.

It’s a simple plan that treats the surplus as a non-recurring event.  Unfortunately, there is nothing simple about Iowa’s tax law otherwise.  I’d prefer to see it returned as part of a tax reform plan.

House Democrats prefer to spend the money, and the Governor wants some of it to fund his education reform plan.  ISU economist David Swenson says the money should be run through the government:

Drawing on a statistical model that predicts economic impacts, he said  $780 million in government spending could support roughly 2,000 more jobs than the same amount of spending by households.

Yes, the magical power of the government to transform your money into jobs.  If we just gave the government infinite money, we’d get infinite jobs.   If that worked, you’d think we’d have more jobs than ever, considering that Federal and state governments are spending more money than ever.

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Link: Text of HF 1.

 

Tax Notes, Preparers in Limbo as IRS Shutters PTIN System After Loving Decision ($link):

     Tax return preparers who just recently were rushing to get their preparer tax identification numbers from the IRS before it starts accepting 2012 tax returns on January 30 are in limbo after a federal district court enjoined the Service from enforcing requirements under the registered tax return preparer (RTRP) designation.

     The IRS’s online PTIN system appears to be unavailable. People familiar with the system are uncertain why the IRS took it offline and what its unavailability means for the hundreds of thousands of potential PTIN registrants.

     “From a practical point of view, [the IRS] has already shut the [PTIN] system down,” said Dan Alban of the Institute for Justice and the lead attorney for the plaintiffs in Loving v. IRS, No. 1:12-cv-00385 (D.D.C. 2013)  “Whether they are legally required to do so is the question.”

Well done, IRS!  Preparers are required to have a PTIN.  The IRS apparently tied it’s PTIN software to the preparer regulation system overturned earlier this month.  Another triumph for tax administration.

TaxProf,  What’s FATCA Got To Do With It? Tina Turner Renounces U.S. Citizenship.  It’s always easier for the wealthy to avoid the ridiculous paperwork the tax law imposes on Americans abroad.  It’s the little jaywalkers that get shot to ensure the serious money-launderers get slapped on the wrist.

Andrew Mitchel has posted two videos explaining Form 5471.  Think that sounds dull?  If you fail to report your interest in a foreign corporation, the $10,000 fine will make it interesting.

Martin Sullivan, UK Conservative Policies in Trouble (Tax.com)

Brian Mahany, Tiger Woods and Tax Migration – The Wealthy Flee High Tax States (tax planning post)

Patrick Temple-West,  Republican governors open new front in tax debate, and more

Paul Neiffer,  AMT Causes a Few More Capital Gains Tax Rates!

Robert Goulder, The Pepperdine Papers: Advice for Obama’s Second Term (Tax.com)

Kay Bell, Deducting sales tax on your new car … or boat or airplane or home

Jim Maule,  Tax Planning: A Chore That Never Sleeps.  I think it works better if it does.

Trish McIntire,  Who Do You Believe?.  If your tax advisor contradicts your bar buddy on a tax issue, go with the tax advisor.

Dan Meyer, Will Tax Benefits Later Cost You Now?

Robert D. Flach,  THE RESIDENTIAL ENERGY CREDIT IS BACK FOR 2012 (AND 2013)!

Joseph Henchman,  Municipal Bankruptcies Since 1988. (Tax Policy Blog).  He lists about 43.

Russ Fox,  Cash and Carry Doesn’t Work for Strip Club Owner.  I don’t think it’s allowed for the patrons either.

Worth a try.  Shop Till Your Taxes Drop  (TaxGrrrl)

 

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Tax Roundup, 1/2/2013: Yay, we didn’t fall off the cliff! Too bad we’re still doomed.

Wednesday, January 2nd, 2013 by Joe Kristan

So tax season can go on.  The IRS will have to activate some of the “reserved” boxes on its forms, but with the passage of HR 8 yesterday, filing season should be able to continue without catastrophic disruption.  I summarized the key pieces yesterday here.

So what did they accomplish?  They permanently “patched” the alternative minimum tax, and that is a real accomplishment.  Far better to repeal a deeply dishonest tax, but at least now they have stopped placing a time bomb in the tax law set to go off every year or two.

They raised the top marginal rate on “the rich” to something over 40%, with a stated top rate of 39.6% and the dishonest phase-outs of itemized deductions and personal exemptions.  They redefined “rich” as single filers with incomes over $400,000 and married taxpayers over $450,000.

They raised the top dividend and capital gain rate to something over 24%, taking into account the 3.8% Obamacare levy, the 20% rate on the rich, as newly defined, and the phase-outs of deductions and personal exemptions.  In doing so, they left the top rate at 15% (or 18.8%) for other taxpayers.

They delivered another kick in the teeth to successful entrepreneurs.  Taxpayers who operate successfully as pass-through entities represent much of the income hit by the new tax rates, and much of business income in general.  They have that much less after tax income to take chances on new locations, new employees, new products.  That means there will be less of all of these.

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Source: Tax Foundation, “Putting a Face on America’s Tax Returns: A Chartbook

Most people don’t realize just how big a part of the economy pass-throughs run by “the rich” are.  This might give you an idea:

201130102-1

Source: Tax Foundation, ‘Putting a Face on America’s Tax Returns: A Chartbook”

This isn’t exactly going to help hiring.

They once again passed the dishonest batch of “expiring provisions.”  These provisions, from the windmill subsidy and research credits to special breaks for speedways, are passed with annual expiration dates, enabling the politicians to pretend that they are temporary so they don’t have to face the real costs of these breaks for their freinds.

What they failed to accomplish is just as important.  They failed to pass the wretched ideas of dollar caps on itemized deductions or a limit on the rate benefit of the deductions.  They failed to apply the top rates to incomes of $200,000 and up, which was their initial plan.

Most importantly, they utterly failed to address the ongoing fiscal catastrophe.  The new revenues will barely touch the $1.2 trillion annual deficit.  It’s not clear whether there will even be any deficit reduction when all of the pieces of the deal are added together.  That means we careen almost immediately to a new debt-ceiling battle and ultimately to a confrontation with arithmetic.

Perhaps that will ultimately be the benefit of this deal, though not one that is intended.  The President finally got his tax hikes on “millionaires and billionaires,” and they won’t do a thing to deal with the fiscal crisis.  If people finally realize that the choice is between bringing spending and entitlements under control or higher taxes on everybody, there might actually be some value to this mess.  After all, the rich guy isn’t buying.

 

Fiscal Cliff Notes

TaxProf, House Approves Fiscal Cliff Tax Deal

Tyler Cowen, Ross Douthat asks

If a newly re-elected Democratic president can’t muster the political will and capital required to do something as straightforward and relatively popular as raising taxes on the tiny fraction Americans making over $250,000 when those same taxes are scheduled to go up already, then how can Democrats ever expect to push taxes upward to levels that would make our existing public programs sustainable for the long run?

Greg Mankiw, President rejects his bipartisan commission

Stephen Entin, Measuring the Economic and Distributional Effects of the Final Fiscal Cliff Bill (Tax Policy Blog)

Howard Gleckman, Congress Kicks the Fiscal Can off the Front Stoop (TaxVox)

William Perez,House Approves the American Taxpayer Relief Act of 2012

Journal of Accountacy, Congress passes fiscal cliff act

Andrew Mitchel, Senate Fiscal Cliff Bill Includes Retroactive Reinstatement of CFC Look-Thru Rule

Kay Bell, House passes tax bill to avoid fiscal cliff

Paul Neiffer, Some Major Tax “Goodies” in Senate Bill For Farmers!

Robert D. Flach, SURPRISE! SURPRISE! SURPRISE!

Joseph Thorndike, Is Obama the Worst Legislative Negotiator of the Last Century?

Finally, this from Daniel Shaviro, a tax man of the left, on the fiscal cliff and the larger budget picture:

The biggest problem, as others have noted, is that Obama appears to be a once-in-a-generation lame and inept bargainer, who can take even a strong hand and not get all that much, because he is so predictably ready to fold.  But again this is not mainly an issue about the New Year’s Eve deal itself, which is more or less defensible as a one-off solution.  Rather, it’s about the debt ceiling crisis to come in a few weeks.

That is the one that really counts.  I think the Administration should play that, not merely as hard as they are saying they will now, but about 20 levels harder.  I would not just refuse to negotiate, but would have Administration officials use words such as treason, sabotage, and terrorism.

Mr. Shaviro is a very bright man.  He knows that the present fiscal course is unsustainable.  The solutions are some mix of spending less or taxing more.  If a guy that smart is ready to equate “spending less” with “treason, sabotage and terrorism,” the debate will get very ugly.  Maybe we aren’t far behind Argentina and Greece.

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Tax Roundup, 12/14/2012: I want to lose weight. And I want more dessert!

Friday, December 14th, 2012 by Joe Kristan

Flickr image courtesy seriousbri under Creative Commons license.

Cause and effect: the Iowa Chamber Alliance can’t quite put them together.  The umbrella group for Iowa’s chambers of commerce has issued its 2013 legislative agenda.  The Des Moines Register reports (my emphasis):

TAXES: Iowa’s tax system is among the highest for businesses, the alliance contends, and commercial and property tax relief are needed. In addition, the group supports addressing unfunded mandates, public employee pensions and other measures to help offset rollback effects on local governments. The alliance also supports efforts to simplify and reduce corporate income taxes, and to streamline the personal income tax code.

So far, so good.  But then:

ECONOMIC DEVELOPMENT: The Iowa Economic Development Authority needs money for flexible incentives to compete for investments and jobs, the allliance said. It backs a variety of tax credits to retain, grow and attract investments in Iowa, including restoration of the $185 million cap on economic development tax credits.

Let’s spell this out: Iowa’s tax code needs simplification because it is larded with “economic development” provisions, including dozens of “economic development tax credits.”  The rates are high because if they weren’t, the special breaks would keep it from raising any revenue.  To say you want lower rates, a simpler tax code, and economic development credits is like saying you want to lose weight and you want some more cookies.

There is a better way: The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

Fiscal Cliff Notes

Tax Offer for Firms Pits Big vs. Small (Wall Street Journal):

If ideas proposed by the White House take hold—a long shot—rates for big companies likely would fall next year while those paid by many small-business owners through the individual tax system would rise.

That potential gap could encourage more companies to organize as corporations. For now, the prospect is strengthening alliances between Democrats and big-company CEOs on the one hand, and Republicans and small-business groups on the other.

It’s Warren Buffett and Goldman Sachs vs. the entrepreneur — influence and pull vs. the rest of us.

Patrick Temple-West,  Tax offer pits big companies against small, and more (Tax Break)

Martin Feldstein,  The Tax Hike Canard (via Mankiw)

Janet Novack,  Will Your Retirement Be Thrown Off The Fiscal Cliff?

Howard Gleckman,  Why the Senate’s Tax Bill is No Way Out of the Fiscal Impasse

 

IRS reminds taxpayers of “Savers Credit” (IR-2011-121)  This non-refundable credit matches as much as 50% of taxpayer contributions to their IRA or 4o1(k) accounts.  It works on joint returns with incomes up to $57,500 and single filers with incomes up to $28,750.  Savings made when young can do great things when compounded over a career, and this credit makes it painful.  Giving your recent grad starting out in the world some cash to fund an IRA can help build a nest egg and net a nice tax refund.

 

Andrew Mitchel,  Doctrine of Constructive Receipt.  You can’t avoid the income this year by waiting until next year to cash the check.

Kay Bell,  Reindeer year-end tax tip games 2012: Dasher says use up your FSA funds

Paul Neiffer,  Some Interesting Ag Cooperative Facts.  Iowa leads the nation with total co-op sales of $22.4 billion.

Jason Dinesen,  This Accountant’s Idea for Eliminating Kickoffs in the NFL.  Without kicking, where does the “F” in NFL go?

The Critical Question:  When a Tax Argument is Nonsense, Why Not Say So? (Jim Maule?

Why not?   The 2012 Holiday Kitchen Gift Guide (Megan McArdle)

I can quit any time.  I just need six more drinks.  Wind Energy Association Says Industry Can Survive Without Tax Credit” (Tax Analysts, $link):

The wind energy industry could be self-sustaining over the long term if its primary federal incentive is renewed in 2013 and then gradually phased out over six years, the industry’s trade association said December 12.

Because the last 20 years of the tax credit just weren’t enough for a good buzz.

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Tax Roundup, 11/28/2012: Did you report that 1099-K income? Also: tax deductions and giving levels.

Wednesday, November 28th, 2012 by Joe Kristan

IRS starts data-mining the 1099-Ks.  From Tax Analysts ($link):

     A new IRS compliance program aimed at finding underreporting of gross receipts by taxpayers who receive Form 1099-K information returns from credit card companies or third-party transaction networks launches this week, a senior IRS official confirmed November 27.

     Ruth Perez, deputy commissioner of the IRS Small Business/Self-Employed Division, told Tax Analysts that the first notices under the program will be sent out later in the week of November 26. “Our initial footprint in this area is going to be small while we learn,” she said, adding that the initiative will touch a variety of businesses of different sizes.

If prior matching programs are any guide, many of the notices will be incorrect, giving gray hairs to compliant taxpayers.  Even so, it’s likely to smoke out some eBay entrepreneurs who haven’t bothered to report their income.  If that sounds like you, now is a good time to get into compliance.

 

Learning From a Wrongful Criminal Tax Prosecution.  Tax Analysts has made available to nonsubscribers a great piece by a New York attorney who defended a business owner from a baseless state tax prosecution that was later recanted by the district attorney.  It’s the piece I mentioned earlier this week; kudos to Tax Analysts for making it more widely available.  Sobering reading for practitioners and entrepreneurs.

 

Via the TaxProfThe Millionaires Who Pay the Highest Tax Rate:

 The more your make, the more taxes you pay as a percentage of your income. According to new data from the IRS, people who make $1 million or more had an average tax rate of 20.4% in 2010. Tax filers who earned $30,000 to $50,000 paid an average rate of 4.8%, while those who made between $50,000 and $100,000 paid 7.7%. Those making under $30,000 had a negative effective rate, meaning they paid no federal income taxes after deductions and credits. Put another way, millionaires pay a rate that’s more than four times that of the middle class.

The millionaires pay a higher rate than Warren Buffett’s secretary, I’d wager.

 

Kay Bell,  Would a limit on tax deductions mean less charitable giving?  Of course it would.  The only question is how much.

The guy quoted by Kay doesn’t think it would have a big impact.  I think it would, especially for bigger gifts.   We can’t know for sure, but a paper in the December 11 National Tax Journal estimates that capping the rate benefit of contributions at 12% would reduce individual giving by 5.8% to 14.2%.  A hard deduction cap would reduce the tax benefits of large gifts much more drastically than the 12% credit.

 

Patrick Temple-West,  On ‘fiscal cliff,’ both sides lay groundwork, and more

Wall Street Journal, Dividends Come Early to Avoid Fiscal Cliff:

Faced with a possible tax increase on dividends next year, boards are approving bigger payouts and cutting checks faster to avoid 2013 rates.

On Monday, retailer Dillard’s Inc. and casino operator Las Vegas Sands Corp.  LVS -0.26% said they would pay new, one-time dividends next month. Dillard’s also broke with long practice to pay its regular fourth-quarter dividend in December after paying it in the new year for at least a decade.

Wal-Mart did the same thing last week.  (Via Tax Break)

 

Jack Townsend,  Daugerdas Denied Access to Funds Subject to Forfeiture.  Mr. Daugerdas, whose conviction on tax charges was thrown out based on juror misconduct, says he needs the money to pay for his defense in his retrial.

Jason Dinesen,   Are Donations to a 501(c)(4) Deductible? (No.)

Tax Trials,  Tax Court: Legal Fees Not Deductible for Conduct of S Corp. Sole Shareholder.  This is a great case that I plan to write up in the next few days.

Both?  Education Foundation Or Estate Tax Dodge – Remains To Be Seen (Peter Reilly)

 Jim MauleTithing and Taxing: What is (Gross) Income?

Andrew Mitchel,  Summary of Form 8938 Filing Thresholds

Joseph Henchman,  Connecticut Revenue Commissioner Admits that “Amazon” Tax Has Raised Zero Revenue

In other news, Wednesday ends with “y”:  Another South Carolina Politician Guilty of Tax Charges (Russ Fox)

 

David Brunori, Fetal Craziness:

The recent craziness in Michigan illustrates all that is wrong with tax policy in America. A group of Republican lawmakers have proposed (HB 5684 and HB 5685) a tax credit for unborn fetuses of 12 weeks gestation. What is wrong with such a measure? Everything. First, Adam Smith, who I doubt was pro choice, said that the tax laws should be used to raise revenue. They should not be used to make political statements.  Why do we know this is political statement? Because only a nincompoop would think the tax laws could be administered in such a manner.

I suspect the miscarriage rate would go through the roof, at least as reported on tax returns.

 

A 529 plan would have worked better:  Attorney Disbarred For Submitting Falsified Tax Returns For Financial Aid (TaxGrrrl)

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Tax Roundup, 11/15/2012: Austerity: I don’t think that word means what you think that means. Also: Harleys!

Thursday, November 15th, 2012 by Joe Kristan

Scott Hodge, President’s $1.6 Trillion Tax Bid Lowers GDP, Wages, Living Standards (Tax Policy Blog):

According to this morning’s Washington Post, President Obama’s opening tax offer in his negotiations with Congress over the Fiscal Cliff is the $1.6 trillion in new taxes that were the centerpiece of his FY 2013 budget. Recently, Tax Foundation economists used our Tax and Macroeconomic Model to simulate the long-term economic impact of the President’s proposals – specifically, his proposals to increase taxes on high-income taxpayers [full report here].

In short, the model results indicate that the President’s plan would not only lower GDP and capital formation, but it would reduce after-tax incomes for every household – not just families hit by the higher taxes.  

No, we’ll just sink the rich guy’s end of the boat!

 

Linda Beale,   Calling all Americans: we face an “austerity crisis” not a fiscal “cliff”; we need a piecemeal solution, not a “grand bargain”.  Austerity?  Really?

Source: Heritage Foundation

If that’s austerity, I’d hate to see what free spending looks like.

 

We’ll never know, will weWould Mitt Romney Have Wanted to Raise Taxes Too? (Ed Krayewski, Reason.com)

Going Concern,   The Fiscal Cliff: As a CPA, People Expect You to Know this Crap

Anthony Nitti,  More On The Fiscal Cliff.

Patrick Temple-West,   Essential reading: Senate Finance chair sees flexibility on Bush tax cuts, and more (Tax Break)

Paul Neiffer,   No AMT Extender May Prevent Farmers From Filing on March 1

Daniel Shaviro,   Obama’s reply to the Republicans on closing income tax “loopholes”

Andrew Mitchel,   I.R.S. Rules that Mexican Fideicomiso is Not a Trust.

This ruling has broad implications for many taxpayers owning real estate in Mexico.  Taxpayers for years have had questions about whether Mexican fideicomisos are trusts.  Some if these taxpayers may have even entered into voluntary disclosure programs and paid significant penalties over the fear that they may be subject to various penalties.  However, if a Mexican fideicomiso is not a trust, then it is not a foreign trust, and no Form 3520 or Form 3520-A would be required to be filed.

Of course, private letter rulings are directed only to the taxpayer requesting it and they may not be used or cited as precedent. However, Rev. Rul. 92-105 is a ruling on which taxpayers can rely and can cite as precedent.  Because there can be huge penalties for failing to file Forms 3520 and 3520-A and because the terms of each fideicomiso will vary, taxpayers should be cautious in determining whether they need to file Forms 3520 and 3520-A for Mexican fideicomisos.   

Let’s hope the IRS provides more guidance so we can know what needs to be filed.

 

When “thank you” doesn’t cut it:

When a charity receives a gift, it needs to say more than a simple thank you.

The Internal Revenue Service requires that a donor produce a record from the charity to show a gift over $250 had no strings attached. A thank you note can be a good enough record, as long as it includes the magic words: “No goods or services were received in exchange for the contribution.”

Without the magic words, you get no deduction, even with a cancelled check.  Arden Dale explains in the Wall Street Journal (Via Tax Break)

 

Robert D. Flach,  LOCK IN 2012 MEDICAL DEDUCTIONS.  “… did you know that beginning with tax year 2013 the AGI exclusion increases to 10% for taxpayers under age 65?”

Kay Bell,   Zero capital gains tax rate set to disappear on Jan. 1, 2013

Russ Fox,  FTB Appeals Gillette Decision.  This is a big deal to any multistate business with California taxes.

TaxGrrrl,  Janeane Garofalo Finds Out She’s Been Married… For 20 Years.  Tax hilarity ensues.

 

IRS, vintage Harley Dealer. The IRS will be auctioning a bunch of antique motorcycles in Elkmont, Alabama on December 1, including this “1946 Flathead”:

 

Details here.

 

Isn’t it immoral to send money to the tax man that should be going to the shareholders?  United Kingdom M.P., Margaret Hodge, has an odd moral code.  She thinks that it is immoral to — I don’t know?  Not leave a tip after you compute your tax bill?   She thinks that Starbucks should give the State more of their cash. From Rachel Moran at Reason.com:

In the past three years Starbucks has paid no corporation tax in the UK. Amazon has paid £1.8m, despite bringing a total revenue of £200m in the UK in 2011. Starbucks global chief financial officer Troy Alstead insists the company remains “an extremely high tax payer globally” but, as UK profits have been far from substantial, claims, “respectfully, I can assure you there is no tax avoidance here.” Similarly, Matt Brittin, the head of Google’s northern European operation, defends the company’s practices. “Like any company you play by the rules [and] manage costs efficiently to offer fair value to share holders.”

Google‘s Brittin told the committee that “we comply with the law in the U.K.” and “it would be very hard for us to pay more tax here based on the way we are required to structure by the system.” ABC News reports that Hodge responded by saying that the committee was “not accusing you of being illegal, we are accusing you of being immoral.”

If we are going to start talking about morality, let’s start with the morality of forcing people to hand over their money to politicians so they can buy votes with it.  If I ever have an IRS exam where the agent offers no change to the return but says I’m a bad person, my client won’t be too upset.

 

Not just any Tom, Dick or Terry.  “In a story Nov. 14 about a wind energy tax credit, The Associated Press misidentified Iowa’s governor. He is Terry Branstad, not Tom Branstad.”  (Associated Press story).

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Tax Roundup, 11/1/2012: IRS walks away from defined-value fight.

Thursday, November 1st, 2012 by Joe Kristan

IRS withdraws appeal of non-charitable defined value gift case.  The IRS hates “defined value” charitable gifts of property.  These gifts specify that a donee will receive a certain amount of property; if the IRS successfully challenges the gifts, the donor agrees to give more property to make up the difference, so the charitable deduction stays the same and the IRS gets nothing for its efforts.  This result has been upheld in three different circuits.

But what if you have a non-charitable donee?  Then you would want to make the donee pay back part of the gift if the IRS challenges the value to avoid an increased gift tax.  The Tax Court upheld the concept in the Wandry case.  Now the IRS has withdrawn its appeal, reports Tax Analysts ($link).  Does this mean you can use a defined-value clause to limit gift tax exposure safely?  The article says it may be premature to think so:

“Practitioners will not be comfortable with the Wandry clause until at least two circuits have approved it, or at least one circuit and the full Tax Court,” said estate planning consultant Howard M. Zaritsky. “I feel that a Petter-style defined value clause, with a charitable residuary gift, is very safe, after the Tax Court and three circuits have approved it. I simply do not have that same degree of comfort about Wandry,” he said.

Stay tuned.

Related:  IRS loses another ‘defined value’ gifting case

 

Who says you can’t make money in your vacation home in the off-season?  A North Carolina couple found a lucrative use for their cottage while the neighbors were away.  From the Asheville Citizen-Times:

A Western North Carolina couple pleaded guilty to an elaborate scheme in which they filed some 1,000 false tax returns, bilking the government out of more than $3.5 million.

 Senita Birt Dill and Ronald Jeremy Knowles used tax preparation software programs and fraudulently obtained personal identification information to obtain refunds, according to a criminal complaint.

They rented a home on a lake surrounded by vacation homes in Polk County and used neighboring addresses on the fraudulent tax returns, then surreptitiously collected government checks from mailboxes.

Sure, we’ll pick up your mail while you’re away!  There must have been a flaw in their cunning plan, as both face potentially long prison terms for tax fraud and identity theft.

 

Just another hard-working public servant.  If you ever think a municipal income tax would be a great idea, this story from the Washington Examiner might give you pause:

An employee at the District’s Office of Tax and Revenue pleaded guilty Wednesday to filing more than a thousand fraudulent tax returns that netted more than $4 million in unwarranted refunds from D.C. and the federal government.

Kimberle Y. Davis, a “control technician” at the OTR, pleaded guilty to conspiracy to defraud the government and first-degree theft through her part-time job at a District-based tax service. She’s at least the third employee in Chief Financial Officer Natwar Gandhi’s 12-year tenure to be caught stealing, prompting Mayor Vincent Gray to press Gandhi for plans to overhaul the tax office.

It is apparently against the rules at OTR to have a tax-prep job.  I can’t imagine why…

Sacrebleu — More French Taxes.  David Brunori notes that the barbarians have crashed the gates in Paris:

 It is bad enough that the French have a 75 percent top marginal tax rate. Now the Socialists in power want to raise the tax on beer.

Because beer is apparently a big problem in France?

 

Brutal Assault on Reason Watch: 

TaxProf, Fleischer: The Winners and Losers Under Romney’s Tax Plan

 

TaxGrrrl,  Helping Out After Hurricane Sandy

Daniel Shaviro,  Post-storm update.  He lives in Manhattan and remains without power.

Trish McIntire,  Sandy Adjustments

Andrew Mitchel,  Expatriates for the Third Quarter of 2012

Robert D. Flach,  A YEAR-END TAX PLANNING RERUN – AVOIDING AN UNDERPAYMENT PENALTY

Kay Bell,  Happy Halloween tax breaks!

RIP: Remembering the DECEASED Iowa Pumpkin Tax (Joseph Henchman, Tax Policy Blog)

Going Concern, Dumb: Iowa Once Tried to Implement a Pumpkin Tax

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