Posts Tagged ‘Andrew Mitchel’

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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Tax Roundup, October 22, 2012: can houses have cowl lamps? And why Iowa tax reform will be hard.

Monday, October 22nd, 2012 by Joe Kristan

20110119-1.jpgIt’s the housing version of “cowl lamp violations.”  A few years ago an Iowa county prosecutor ended up in hot water over the practice of rewriting serious traffic offenses, like drunk driving, down to “cowl lamp” violations, sometimes in exchange for contributions to charities or government agencies.  Cowl lamps are something your great-grandpa’s car might have had.

That may have given the Iowa Civil Rights Commission an idea.  From Reason.com:

The Des Moines Register reports that for five years ending in February 2011, the Iowa Civil Rights Commission shook down landlords for “voluntary contributions” in exchange for dropping discrimination complaints. The Register obtained copies of 27 settlement agreements involving about $20,000 in contributions. Unlike money from fines, which end up in the state’s general fund, the donations went directly to the commission, creating “the impression that justice is for sale,” as state court administrator David Boyd puts it. The commission ended the practice after Winterset attorney Mark Smith questioned its propriety.

Creates the “impression?”  Creates the fact.   Instapundit explains:

I think that all revenue collected by all agencies should go to the general fund.  Otherwise, it doesn’t just give the impression of corruption, it’s corrupting. 

 

Why Iowa tax reform will be hard.  The politicians will no longer get articles like this from Radio Iowa:

State economic development officials approved financial help for six companies Friday. The Iowa Economic Development Authority awarded tax benefits to Alfagomma America to move its stainless steel tube production from its plant in Italy to its only U.S. plant in Burlington.

The company is investing 1.3 million dollars and is expected to create 14 new jobs.

With a non-corrupt system where everybody is treated the same, there would be no more press releases.  The state economy would be much stronger, but the politicians wouldn’t get to cut any ribbons.

In a more just world, the economic development bureaucrats would have to call a press conference any time a business closed or fled as a result of Iowa’s whimsical, byzantine and sometimes punishing state tax system.

 

Crime doesn’t pay, but turning state’s evidence might.  The ex-wife of a Minnesota real estate magnate gets three months after cooperating in the case against him.  He got 4 1/2 years.

 

That won’t stop them for a minute?  “Do education tax benefits produce more educated Americans? Congress has no idea.”  (Marie Spirie, Tax Analysts – subscriber link)

 

Andrew Mitchel,  Repatriate Now? (Before the Bush Tax Cuts Expire).  “There may never be another opportunity for individuals to pull cash out of foreign corporations at such a low U.S. tax cost.”

Roberton Williams,   Understanding TPC’s Analysis of Limiting Deductions (TaxVox)

Anthony Nitti,  Tax Court: Spec Home That Was Never Built Was Not A Trade Or Business

Jim Maule,  The Expensing Deduction is an Expensive and Broken Idea

Peter Reilly,  Beware Of Partnership Status Sneaking Up On Your Business Venture

Alisa Martin,  Things That You Can Do To Get Ready For Tax Season (Guest post at the Missouri Tax Guy)

TaxGrrrl,  Gun and Ammo Tax Proposal Draws Fire.  Yes, that will put Chicago’s violent criminals out of business…

The weekend Buzz from Robert D. Flach.  This part is very true: “In my 40+ years in ‘the business’ I have found that IRS notices are more often than not incorrect (and state notices even more so).”

And I’m eight feet tall!   Maryland Governor O’Malley Says State Has Third Lowest Taxes in the Country! (Joseph Henchman,Tax Policy Blog).

Going Concern,  Arthur Andersen’s Bones Still Have Some Meat on Them.  Not very tasty by now.

Fortunately, the election will be over in about two weeks.  Smelly, destructive bug entering Iowa (TheBeanwalker.com)

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Tax Roundup, 10/8/12: Ottumwa gets a Ponzi scheme. Also: Service, it’s in our name.

Monday, October 8th, 2012 by Joe Kristan

“Inheritance investment?” Are you serious?

Ottumwa man pleads guilty to tax charges in connection with Ponzi scheme.  Known to TV viewers of a certain age as the home of Radar O’Reilly, Ottumwa, Iowa now also has its own Ponzi scam.  CBSNews.com reports:

An Ottumwa, Iowa investment manager is likely heading to prison after pleading guilty to charges of wire fraud and tax evasion stemming from a $1.1 million Ponzi scheme.

John Francis Holtsinger pleaded guilty Friday during a hearing in federal court in Des Moines as part of a plea agreement with prosecutors.

The plea deal says that Mr. Holtsinger told people that he would invest their money, and he instead spent most of it.  On what?  Things that might be sold to recover funds for the investors?  The indictment doesn’t offer much hope for recovery (my emphasis):

Of the $493,000 in funds received from investors, only $155,000 was transferred to an investment account at Interactive Brokers.  The remainder was deposited into accounts controlled by Holtsinger and used by him to further his scheme and for his personal use including, but not limited to, legal expenses, cas withdrawals, payment of living expenses, trips, accessing web-based “dating” sites, and other purposes different than he represented to investors.

Interesting scare quotes around “dating.”  In any case, it’s not an investment likely to produce anything that his victims would want.

The indictment and plea deal together show that there were warnings to his investors.  He wasn’t a registered investment advisor, for starters.  And this from the indictment should have triggered BS detectors:

After conducting trades on behalf of investors for a short period of time, Holtsinger offered and sold investments to the investors in the form of promissory notes.  He represented that the notes would yield high returns with no risk including, but not limited to, what he called an “inheritance investment” that would be invested through his mother and pay out upon her death.  The “inheritance investment” required a $20,000 deposit and was to pay annual returns of 9% with automatic liquidation and payout if the investment dropped below 3% of its initial value.

The “high returns with no risk” fairy is the Tax Fairy’s evil twin sister.   When she shows up, it’s time to back away quickly from whoever brings her into the room.  Other red flags:

– When he couldn’t come up with cash, he came up with excuses, like “informing investors… that their funds had been frozen as a result of actions taken by state or federal authorities.”

– After learning he was being investigated, “…he attempted to convince investors to lie to law enforcement and under oath regarding the purpose of the funds they had given to him.  The defendant instructed these individuals to describe their payments to him as ‘interest-free loans,’ when in reality they were investments.  The defendant also threatened that anyone who cooperated with law enforcement would not be repaid.”

Unfortunately, the not getting repaid part was already true.  The plea deal says that Mr. Holtsinger faces a four-to-seven year sentence.

 

Service: It’s in our name.  Victims of Identity Theft Get Little Help From IRS

Service: It’s in our name (II):  Report Fraud to the IRS? Watchdog Says IRS Flubs Over 100,000 Tips Annually (Robert W. Wood,Forbes).

They can take it, but they can’t dish it out.   Indiana Public Officials Indicted for Tax Fraud and Other Offenses  (FBI press release)

Andrew Mitchel, Form 1099 for Payments to Foreign Contractors for Services?

One question that often comes up is how a domestic U.S. business should treat payments to a foreign contractor for services performed outside the U.S.  Is a Form 1099 required?  Is withholding required?

As long as the foreign contractor is not a U.S. person and the services are wholly performed outside the U.S., then no Form 1099 is required and no withholding is required.

Jason Dinesen,  Connecting Strange Baseball Rules to Taxes   The infield fly rule is involved.

Martin Sullivan,  Ways and Means Chairman To Cut Corporate Interest?

Russ Fox,  Gillette Decision Upheld, But Beware.  Important news for taxpayers with California activity.

Kay Bell,  Pastors’ tax break for housing under renewed fire

TaxGrrrl,  WWJD*? Pulpit Freedom Sunday Likely to Bring Slams Against Obama, Romney

Anthony Nitti,  Crunching Numbers on a Hypothetical Cap on Deductions

William McBride,  More on How to pay for Romney’s Tax Cuts

Trish McIntire,  EFTPS Changes

Daniel Shaviro,  Follow-up on the financial transactions tax

Jim Maule,  Say One Tax-and-Spending Thing, Do Another

Robert D. Flach has a new Buzz tax roundup.

The Tax Update is so awesome, our comment trolls have Pulitzers.

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Tax Roundup, 9/5/2012: Laying it on thick for the fertilizer plant. Math is hard. So is tax, even with TurboTax.

Wednesday, September 5th, 2012 by Joe Kristan

Governor Branstad’s administration is making a big push to promote STEM education: Science, Technology, Engineering and Math.  This headline in the Des Moines Register today shows how badly we need math education, especially in Iowa’s “Economic Development” bureaucracy:

165 jobs, $110 million in aid

Officials mull boosting incentives to keep $1.3 billion fertilizer plant project in Iowa

This is the worst kind of smokestack chasing, which is always the preferred approach of “economic development officials.”  Never mind that Iowa already has competing fertilizer plants — as Sioux Citian Debi Durham, Iowa chief official economic developer, surely knows.    Never mind that Iowa and Illinois are getting played shamelessly by Orascom, the fertilizer company.  Never mind that the money comes from taxes paid by existing competitors, and by thousands of unsubsidized businesses like ours, and our employees.  Never mind all that — it’s about buying a ribbon-cutting, not about making the state a good place for everyone to do business Unless, of course, Roth & Company gets a nice state check for $21.3 million for the jobs we have already created.

At least some folks are catching on to the game.  From the article:

Orascom has attracted a diverse group of opponents, from parents, environmentalists and liberal groups such as Iowa Citizens for Community Improvement and Iowa Policy Project, to conservative groups such as Public Interest Group, Lee County Tea Party and Americans for Tax Reform.

So there’s agreement from left to right that it’s a bad idea for the state.  But if politicians think it’s a good idea for them, it will go through.

Related: Taking your wife’s purse to buy drinks for the girls and  LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION

 

Who catches the identity thieves?  Hint: it’s not Doug Shulman’s IRS.  From the Bradenton (Florida) Patch:

Det. B. Pieper from the police department’s gang unit put together the case by paying close attention during a routine drug bust…

Pieper was one of several detectives watching traffic coming to and from a house where police suspected drugs were sold. He said he and his partner watched a car leave the house and then run a stop sign. When they pulled over the car Brydson was in the passenger seat with a laptop and a bag of marijuana on her lap.

Brydson quickly closed the laptop, which made Pieper suspicious. When he searched her purse, he said he found several TurboTax debit cards with different names on them. He also noticed a 60-step instruction sheet on how to perform tax fraud through TurboTax.

So local cops have to do the IRS’s job of stopping the thieves who take $5 billion of our taxes annually while the IRS is busy building a new preparer regulation bureaucracy at the behest of the national tax prep firms.  Priorities!

 

 Courtney A. Strutt Todd: Congratulations on Your Scholarship. Don’t Forget to Pay Uncle Sam (Davis Brown Tax Law Blog)

TaxProf, Tax Planks in Democratic Party Platform

Andrew Mitchel, Partnership Definition

Martin Sullivan, The Effects of Interest Allocation Rules in a Territorial System (Tax.com)

Linda Beale, Romney and Private Equity’s Questionable Schemes for Paying Very Little Tax

Kay Bell, Tax moves to make in September 2012

Robert D. Flach has a new Buzz roundup of tax blog posts.

Jim Maule offers A Peek at the Production of Tax Ignorance.  It’s booming.

I think spending less than you earn works even betterDo Mandates or Tax Subsidies Do a Better Job of Boosting Savings?

Have a nice dayCBO: Federal Healthcare Spending Will Exceed Discretionary Spending by 2016 (William McBride, Tax Policy Blog)

GIGO: it’s Tax Court Doctrine!  From a case rejecting a taxpayer’s use of TurboTax as an excuse for a bad return:

It is apparent that a portion of the information petitioner entered into the TurboTax program was incorrect; hence the mistakes made (which resulted in the underpayment) were made by petitioner, not TurboTax. TurboTax is only as good as the information entered into its software program. See Bunney v. Commissioner, 114 T.C. 259, 267 (2000). Simply put: garbage in, garbage out.

Tim Geithner, call your office.

Cite:  Bartlett, T.C. Memo 2012-254.

Related:  Reason #17 to Hire Me: Blaming Turbo Tax Can Not Protect You From Penalties (Anthony Nitti)

 

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Tax Roundup, 8/7/12: sales taxes, Olympian taxes, California fever dreaming.

Tuesday, August 7th, 2012 by Joe Kristan

Iowa’s sales taxes are right in the middle, per this map from the Tax Policy Blog:

 

Roger McEowen: 2012 Drought Raises Questions About Deferring Crop Insurance, Livestock Sales and Cash Forward Grain Contracts 

California ponders suicideCalifornia’s Proposition 30 would raise top income tax rate, sales taxes  (Kay Bell)  California already has one of the highest tax burdens in the nation, but the bill would raise the top marginal rates to 12.3% on income over $500,000 — with no deduction for state taxes.  In a state where over 12,000 public employee retirees have pensions over $100,000, the problem probably isn’t that taxes are too low.

Brian Strahle, Texas “Fresh Start” Amnesty Program Ends August 17, 2012 – What Should You Do?

TaxGrrrl, President Obama Supports Tax Exemption for Olympic Athletes.  It’s too bad that the expats and others victims of the current jaywalker-shooting policy of enforcing offshore reporting requirements never learned to run fast, do gymnastics, or play basketball.   Andrew Mitchel reports that 189 U.S. citizens expatriated in the second quarter of 2012.  No doubt IRS harassment was behind some of these.

TaxTV: The Truth on Taxation of Olympic Gold Medals

Dan Meyer, “And Uncle Sam and his IRS Revenue Agent Buddy Step to the Podium”

Is there a gold medal for this? The Title of Most Awful Accountant in the World Is Spoken For (Going Concern)

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Quick hits

Wednesday, March 21st, 2012 by Joe Kristan

There’s much good stuff out there on taxes that I would to spend all day reading and posting about.  Tax returns pay better, though, so here are links to better reading for those of you with more persistence and longer attention spans:

Finally, Andrew Mitchel shows how voluntary expatriations have soared in the wake of the IRS foreign compliance pogrom, with this chart:

http://intltax.typepad.com/.a/6a00e54fb13f5188340168e8ff8a37970c-pi

Courtesy Andrew Mitchel

When you fire into the crowd, the crowd will scatter.

 

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Jaywalkers flee the gunfire

Thursday, February 2nd, 2012 by Joe Kristan

From Andrew Mitchel’s International Tax Blog:

In 2011, the total number of expatriates was 1,781, a 16% increase from 2010. Last year had the highest number of expatriates since at least 2004 (when I started keeping these records), and perhaps the most in any year in U.S. history.
According to the I.R.S., an estimated five to seven million U.S. citizens reside abroad. Many of these individuals have never lived in the U.S. and never expect to live in the U.S. However, these U.S. citizens must annually file U.S. tax returns.
For example, I spoke with a Canadian the other day who was born to two U.S. citizen parents in Canada. This individual therefore is a U.S. citizen. However, he has never lived in the U.S. and never expects to live in the U.S. Despite that he has never lived in the U.S., he will have to file U.S. tax returns for his entire working life.

The IRS hits people like these — many of whom had no idea they were supposed to be filing — with severe financial penalties. Meanwhile, it provides relatively cushy deals with actual criminals through its OVDI program, because you have to shoot the jaywalkers to really slap the wrists of the serious offenders. No wonder the jaywalkers don’t want to play anymore.
Update: The TaxProf has more.

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Flight of the jaywalkers

Thursday, August 18th, 2011 by Joe Kristan

The dedication of the IRS to shooting jaywalkers in their foreign account compliance programs is yielding impressive results. From Andrew Mitchel:

The number of Published Expatriates for the second quarter of 2011 was 519. This is the second highest number of quarterly Published Expatriates during the past seven years. The only higher quarter during this time was the second quarter of 2010, with 560 Published Expatriates.
If current trends continue, the number of Published Expatriates for 2011 will exceed 2010 by 30% or more. The following graph shows the quarterly average number of Published Expatriates since 2004.


It’s a tribute to the sensitive and judicious IRS handling of trivial violations of the foreign account reporting rules.

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Big news for Americans in the UK:

Tuesday, August 16th, 2011 by Joe Kristan

London may be burning, but there’s one piece of good news for Americans across the pond. Andrew Mitchel explains the new IRS Rev. Rul. 2011-19.

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Hot video: the Big Busted 351 Transaction

Thursday, June 30th, 2011 by Joe Kristan

Is tax geekery suited for video? Andrew Mitchel, proprietor of the International Tax Blog, means to find out. He has posted a YouTube video on failed tax-free incorporations. Check it out for yourself.

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Foreign accounts: IRS relaxed some deadlines for old years, but not for this year.

Friday, June 17th, 2011 by Joe Kristan

From Andrew Mitchel’s International Tax Blog:

In Notice 2011-54, the I.R.S. has provided an additional extension for persons having signature authority over, but no financial interest in, a foreign financial account in 2009 or earlier calendar years for which the reporting deadline was extended by Notice 2009-62 or Notice 2010-23. These persons now have until November 1, 2011, to file FBARs with respect to those accounts. The deadline for reporting signature authority over, or a financial interest in, foreign financial accounts for the 2010 calendar year remains June 30, 2011.

LInk: Notice 2011-54
Other coverage:
Federal Tax Crimes Blog: Pre-2010 FBAR Filing Extension to 11/1/11 for Signatories Only

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Mechanics of carried interests

Monday, May 16th, 2011 by Joe Kristan

“Carried interests” of hedge fund and private equity fund managers remain a political hot potato. They are a form of “profits interests” in partnerships. Andrew Mitchel LLC has put up a great chart explaining the mechanics of how these things are taxed.

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Jaywalkers flee the gunfire

Monday, March 7th, 2011 by Joe Kristan

I have likened the government’s brutal penalties for trivial failures to report offshore bank accounts to “shooting jaywalkers.” U.S. Citizens posted abroad for work or living abroad find penalties in the tens of thousands, or even hundreds of thousands of dollars, for failing to file the “FBAR” Form TD 90-22.1. The IRS is proposing these penalties even for taxpayers who attempted to come into compliance in the 2009 “amnesty” for FBAR penalties.
Now Andrew Mitchel reports that renunciation of U.S. citizenship is soaring:
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The FBAR rules require U.S. citizens to file an FBAR report whenever they have a foreign bank account with a balance that rises over $10,000 in a year. Penalties can be up to half the account balance for each year the account is not reported. Americans who have move abroad after getting married, or who have taken overseas jobs, have found themselves in violation of a rule that many had never heard of. No wonder many Americans abroad have decided that it’s just too risky and expensive to remain U.S. citizens.
The IRS is conducting another FBAR amnesty. We can only hope this one is better-run than the last one. Meanwhile, an organization called American Citizens Abroad is collecting FBAR horror stories in an attempt to change government policy towards minor FBAR violators.
Update, 3/10/2011: The TaxProf has more.

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Wait – you want me to withold on interest I pay to my broker?

Thursday, February 24th, 2011 by Joe Kristan

If you have an offshore margin account, you just might have to withhold and remit U.S. taxes on interest paid to your stockbroker. Andrew Mitchel explains.

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IRS adjusts housing cost allowances for overseas taxpayers

Thursday, February 3rd, 2011 by Joe Kristan

The IRS has adjusted the housing exclusion numbers for overseas residents (Notice 2011-8). Andrew Mitchel explains.

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Digging to the bottom of the stocking

Monday, December 20th, 2010 by Joe Kristan

Mom knitted us all giant Christmas stockings — so big it seemed like we could always find another piece of chocolate down there somewhere.
The new tax law signed last week is sort of like that. We’ll be finding goodies for weeks, probably. Unfortunately, it’s like a stocking with a few scorpions in the bottom too.
For payroll providers, the first challenge will be dealing with the 2011 2 percentage-point reduction in employee (but not employer!) FICA. The IRS has issued guidance (IR-2010-124), including an option for employers who can’t get their systems updated in time for their first 2011 payrolls to withhold at the old rates and refund the overpayment during the first quarter.
Meanwhile, the tax blog world is digging down into the stockings:
Roger McEowen summarizes the thing, as does Robert D. Flach.
Peter Pappas covers the payroll tax relief provisions.
Roni Deutch compares the FICA tax break to the now-defunct “making work pay” credit.
Kay Bell explains the choices available to people who die this year — well, to their executors.
Linda Beale calls for death to the fascist insect who preys on the life of the working people.
Andrew Mitchel reminds us that the rule that allows controlled foreign corporations to not treat interests, dividends, rents and royaltes received from another CFC as foreign personal holding company income.
You can find our discussion here.

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Don’t be an international scam victim

Wednesday, November 3rd, 2010 by Joe Kristan

Nobody is really going to come to you from across the ocean with a risk-free opportunity to make a bunch of money. Sadly, the belief in financial unicorns leads many to grief, as Andrew Mitchel notes:

I don

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What price citizenship?

Thursday, October 28th, 2010 by Joe Kristan

Sobering statistics from international tax attorney Andrew Mitchel show that Americans are turning in their passports in record numbers.
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It could be just a coincidence that this increase occurs as Treasury steps up its shoot-the-jaywalkers approach to international tax compliance, but I doubt it.
Related: FBAR est FUBAR

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