Posts Tagged ‘Ben Harris’

Tax Roundup, 11/19/13: Sub-zero edition! And the dark side of non-recourse debt forgiveness.

Tuesday, November 19th, 2013 by Joe Kristan

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Tax Court says you can’t go below zero.  At least not in computing penalties.

A taxpayer filed a return showing no tax, but claiming refundable tax credits that generated a refund of $7,327.  That’s why refundable credits are such a sweet deal — you can get a refund of taxes without ever paying them through withholding or estimated taxes.  They are really a form of welfare.

The IRS issued the refund as claimed, but then thought better of it.  The IRS recomputation was that the taxpayer should have showed a positive tax balance of $144.  That meant the taxpayer was supposed to repay the $7,327 refundable credit plus the $144 tax due, for a total of $7,471.  The IRS assessed the difference, plus a 20% penalty on the $7,471 “underpayment.”  The taxpayer didn’t think refunding the refundable credit counted as an “underpayment, and the case went to Tax Court.

The tax imposes an “accuracy related” penalty on deficiencies, based on how much the taxpayer underpays the “tax required to be shown on the return.”  The IRS said the underpayment was the whole $7,471.  The Tax Court said that refundable credits can’t take the tax below zero for this purpose, so the “underpayment” is only $144 for computing the penalty.

 

This seems wrong.  Refundable credit fraud — especially Earned Income Tax fraud — is a multi-billion-dollar problem.  If there is no monetary penalty for claiming bogus credits, the only deterrent for gaming the system is criminal penalties, and given the limits on the IRS ability to prosecute EITC fraud, it’s an empty threat.

The Tax Court seems to agree:

We note that our conclusion breaks the historical link between the definitions of a deficiency and an underpayment; however, it was Congress that made that break.

If the case holds up on appeal, Congressional action is all that can fix it.

Cite: Rand, 141 T.C. No. 12.

 

Peter Reilly, IRS Letter To Senator Boxer On Short Sales Not Good News For Everybody

I hate to spoil a nice celebration, but I am going to risk it.  The position that the IRS outlined in the ruling is probably good news for most people affected by it.  It may not be good news for everybody, though.  In order to understand why you have to understand the IRS reasoning.  Here is the deal.  When debt is secured by property, it is either recourse or non-recourse…

The effect of that section is to make just about all California home mortgages non-recourse…  There are various exceptions to recognizing debt discharge income, such as the insolvency exception.  These will no longer be available.  

When you give up a house for non-recourse debt, you are considered to sell it for that amount.  That can be a bad thing.   If you don’t qualify for the residential gain exclusion — say, because you haven’t used it as a residence long enough to qualify, or you bought the house to rent — you can have taxable gain, no cash, and no available debt forgiveness exclusion.

 

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.

 

Alan Cole, High Implicit Marginal Tax Rates Make Life Difficult for the Poor (Tax Policy Blog):

The CBO did a great study on this a year ago. It found that the implicit marginal tax rates on some poor folk are frequently above 50%, and sometimes above 80%. That is to say, that when they figure out how to increase their income by a $100, they lose $50 or more in new taxes or lost benefits. 

That’s exactly the sort perverse effect that results from the increase in Iowa’s earned income tax credit, which by itself can put low income taxpayers in a 50%+ bracket.  Take away other benefits and you can see how it could get to 80% or more.

 

Sioux City Journal, Branstad declines to issue a gas tax veto threat.  Probably because he’d like a higher gas tax, even though he likes being re-elected too much to push for one.

 

Ben Harris,  Sorting Through The Property Tax Burden (TaxVox):

Using self-reported American Community Survey data, we find that residential property taxes tend to be close to $1,000 per year, with a small share of households paying substantially more, especially in Connecticut, New Jersey, New York and New Hampshire. In recent years, 48 percent of homeowners paid between $750 and $1,750 in property taxes. About one-third—31 percent—paid less than $750 and 21 percent paid more than $1,750.  Just 3 percent paid more than $4,000, with a miniscule share of homeowners (0.2 percent) paying more than $8,000. 

That seems low, but my clients probably aren’t a representative sample.

 

Jason Dinesen, Missouri Guidance on Same-Sex Marriage

 

Kay Bell, Missouri recognizes same-sex marriages for tax filing only20130121-2TaxGrrrl, Black Market Tax Preparers Continue To Defy IRS :

The solution for tax preparers who didn’t want to register and pay the fee? They simply don’t sign the returns.

And yes, that’s against the rules. But a number of paid tax preparers do it anyway. They are referred to in the business as “black market preparers” or sometimes, “ghost” tax preparers.

And that will happen no matter what regulations the IRS imposes on honest preparers.

 

William Perez, Tax Provisions Expiring at the End of 2013

Tony Nitti, House Republicans Put Tax Reform On Hold To Revel In Obamacare Struggles

I really don’t expect to receive tips from clients–it’s not the norm for tax preparation. I definitely don’t expect to receive $1,458,905 in such gratuities.  

I can’t say I expect that either.  But I would be OK with it!

TaxProf, The IRS Scandal, Day 194

Robert D. Flach brings the Tuesday Buzz!

 

The Critical Question: Are Jamaican Credit Unions The Next Tax Haven?  (Brian Mahany)

AOL? Prodigy? Attorney’s License to Practice Law Is Suspended for Failing to Maintain an Email Account  (TaxProf)

 

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Tax Roundup, 6/6/2013: Omaha Beach edition. And if you like new taxes, you can have Christmas all year!

Thursday, June 6th, 2013 by Joe Kristan

Just in case you’re having a bad day…  They hit Omaha Beach 69 years ago today.

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I don’t know about you, but I’m pretty sure nothing I face today will be hard compared to that.

 

TaxProf, The IRS Scandal, Day 28.

Washington Post,  Two IRS officials put on administrative leave for accepting gifts at Calif. conference.  One is the “director of implementation and oversight”  for Obamacare implementation, so maybe he can say it was just an oversight.  But Going Concern notes “It was $1,100 in free food. Just freaking sayin.”

Robert W. Wood,  Lavish Expenses Are A No-No, Unless You’re The IRS

Kay Bell asks “Can the IRS be saved?”   It would be a lot easier if it functioned only as a revenue collection agency.  Now it is a superagency in charge of health care, industrial policy, historic preservation, welfare… as if just figuring taxable income weren’t enough of a challenge.

 

So what about the things IRS is supposed to be doing?  Jason Dinesen gives us a hint in Taxpayer Identity Theft — Part 15:

I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name.

The IRS still has not processed Brian and Wendy’s final joint tax return for 2010. Wendy is owed a refund from that tax return and we’re still waiting for that refund to be paid.

Good thing they have that line-dancing thing down.

 

Janet Novack,  Don’t Let Fear Of Taxes Or IRS Audits Destroy Your Wealth.  TaxGrrrl is quoted:

“Don’t let the tax tail wag the dog.” In other words, you should think about taxes when you invest, but “don’t be so paralyzed by the tax consequences that you miss out.” That goes for selling, too–don’t keep holding an asset you should get rid of just because you hate paying capital gains tax.

Wise.

 

Ben Harris,  What Changes in the Mortgage Deduction Would Mean for Home Prices (TaxVox):

By contrast, completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied.  Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee.

That seems high to me.

 

Cara Griffith, States’ Misuse of Unclaimed Property Laws (Tax Analysts Blog): “Unclaimed property laws were never meant to be a major revenue raiser for states or a major headache for businesses.”  Unfortunately, politicians think that everything defaults to them.

Brian Strahle,  State and Local Tax Challenges with Leases of Equipment and Other Assets – GUIDE / WEBINAR

 

Peter Reilly, Conservation Easement No Deduction For Hypothetical Vineyard

In other news, bears poop in the woods.  Social Security Still Deep in the Red (Kyle Pomerleau, Tax Policy Blog).

social security fund deficit

William McBride,  Contra Every Major Study, EPI Claims Corporate Tax Does Not Affect Growth (Tax Policy Blog)

Tax Justice Blog,  CTJ Report: Apple Is Not Alone.  Amazing that other companies also want to use legal means to reduce their taxes.

Patrick Temple-West, Calculating Apple’s true U.S. tax rate, and more

TaxGrrrl, As Senate Debates Immigration Reform, Worries Grow Over Tax Amnesty Provisions

 

Christmas in June?  They’re trying to restore the Christmas Tree Tax (Roger McEowen).

 

 

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Tax Roundup, 4/2/2013: Your corporate welfare is my wise economic development incentive. And what’s a vampire, anyway?

Tuesday, April 2nd, 2013 by Joe Kristan

20130117-1Not your corporate welfare.  Just ours.  Iowa Senate taxwriters have been eloquent in criticizing the corporate welfare famously doled out to fertilizer companies over the last year.  It turns out, though, that not all corporate welfare is bad, to them.  Just that proposed by the other party.  The Senate Ways and Means Committee advanced a set of its own welfare programs yesterday, including:

SF 238, which would provide a 30% tax credit (subsidy) “for persons who construct, install, and place in service an electric vehicle facility or a natural gas vehicle facility.”  So if you buy a Chevy Volt, Senate Ways and Means wants to pay 30% of the cost of installing special plug-ins.

SSB 1240, which “increases to $50 million from $45 million the amount of historic preservation and cultural and entertainment district tax credits.”  These are a cash cow for well-connected developers and rehabbers.

SF 205, which opens up an existing program to divert withheld employee taxes “to create economic incentives that can be directed towards business.”  The bill “removes the requirement that an employer…be located in an urban renewal area.”  In other words, it makes it just another “incentive” slush fund to pay people to be our friends.

So it’s not a principled opposition to business subsidies.  They just want different ones.

Far better to get the state out of the subsidy business and make the tax system good for everyone — not just those with the pull and the consultants to game the system.  Far better to enact The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Related:  New Jersey corporate tax breaks surge, but economy lags: study

 

The courts haven’t been kind to the IRS preparer regulation power grab, but some preparers welcome our new preparer regulation overlords.  An example is Three reasons why the IRS will persist in its mission to regulate tax return preparers (Jim Buttonow)

The article takes for granted that the costs the regulations will impose will exceed the benefits:

Knowledgeable  tax return preparers—who are reminded each year through education requirements to  conduct effective due diligence on small businesses—can have a much greater  impact on compliance than IRS auditors.

That makes an unwarranted assumption: that the IRS can create “knowledgeable tax return preparers.”  It can’t.  It can make people fill out paperwork, go through the motions of paying for CPE, and take meaningless open book literacy competency tests, but it can’t make anybody competent.

The IRS has limited resources.  Semi-literate South Florida grifters are stealing billions through fraudulent refunds.  Yet the IRS seems to think its problem is honest preparers.

 

Smoke ‘em if you can afford ‘em. Monday Map: State Cigarette Tax Rates, 2013 (Nick Kasprak, Tax Policy Blog).

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Ben Harris, Hiking Dividend Taxes to Pay for a Corporate Rate Cut (TaxVox):

Finland will lower the corporate rate to 20 percent in 2014, down from the current rate of 24.5 percent (and 26.0 percent in 2011)…

Finland plans to pay for part of the rate cut by boosting the effective investor tax rate on dividends paid by companies listed on the Finnish stock exchange.

Why not instead create a full dividends-paid deduction.  It would eliminate the need for a rate preference for dividend inocme while eliminating the destructive double-tax on corproate earnings.

 

Russ Fox,  Bozo Tax Tip #9: Foreign Trusts

Paul Neiffer,  The Two Week Check List

Missouri Tax Guy,  Residential Energy Tax Credits 2012

William Perez,  Tips for SEP-IRA Contributions

 

Kay Bell, Tax Carnival #115: Final filing crunch 2013

Jeremy Scott, Tim Johnson, Kristi Noem, and the Importance of Moderates to Tax Reform (Tax.com)

The Myth of Crumbling Highways (David Hartgen).  A useful counterpoint to the construction interests lobbying for higher gas taxes.

Peter Reilly, Taxpayer Beats Idaho On Domicile But Loses On Community Property

 

Going Concern had fun yesterday for April Fools day.  This one puzzled me, though: Twilight Remake to Feature Auditors Instead of Vampires.  Isn’t that like saying the Daytona 500 will feature automobiles instead of cars?

 

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Tax Roundup, 3/22/2013: IRS makes it easy for many taxpayers to pay late. And Beavers at the end of the pond.

Friday, March 22nd, 2013 by Joe Kristan

20130322-1IRS waives late payment penalties for returns containing delayed forms.  If you can’t file or pay taxes on time, it’s always better to extend your return while you round up the information or the cash.  The penalty for filing a late unextended return is 5%, plus an additional 5% for every additional month of late filing.  The penalty for paying late on a timely extended return, in contrast, is only 1/2%, plus 1/2% per additional month.

  While penalties will be waived, the IRS will charge interest on amounts paid after the deadline.

The notice has a complete list of forms that allow taxpayers to qualify for the late payment exception.  The most commonly-seen ones are probably Form 4562, for depreciable assets and the section 179 deduction, and  Form 8582 for passive activities.

By issuing this notice early, the IRS has also given taxpayers a planning opportunity.  If you have a big balance due on April 15, and you have one of the qualifying forms, you now are eligible for what amounts to a low-interest loan for up to six months, until the October 15 extension deadline.   Many taxpayers accelerated income into 2012 to beat the 2013 tax hikes, and they loan might come in handy.  The current IRS interest rates:

  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments

But if you have the cash, you probably want to pay up on April 15.  There aren’t many places left where you can get a 3% after-tax return on your money for six months.

 

In a just world, they could sue Congress and the IRS.   TurboTax, other Intuit products, now OK to use in Minnesota; H&R Block facing lawsuits over filing snafu, refund delays (Kay Bell)

The tax law is still broken, though.  Minnesota Revenue Department Announces TurboTax Problems Have Been Fixed (William Perez)

 

William McBride, UK Dropping Corporate Rate to 20 Percent, Half the US Rate (Tax Policy Blog).  It makes a difference.

Peter Reilly, International Flight Attendant Does Not Score As Well As Sergio Garcia In Tax Court

Ben Harris,  Automatic Retirement Saving Inches Forward (TaxVox)

 

Roger McEowen, Another Development In The Tax Implications of Insurance Company  Demutualization

Janet Novack, New Study Using IRS Tax Data Shows Rich Are Staying Richer, Poor Poorer

Jim Maule,  So How Does This Tax Plan Add Up?

Howard Gleckman,  Why the Tax Cuts in the Senate Budget Don’t Add up (TaxVox)

David Cay Johnston, Level Playing Fields Under Attack(Tax.com).  Because we don’t want Wal-Mart to be at the mercy of some guy selling stuff from his basement.

Patrick Temple-West, Senate votes on tax hikes in budget, and more (Tax Break)

TaxGrrrl, You Are Not Alone: R. Kelly Joins Taxpayers Who Have Lost Homes Due To Foreclosure.  I’m sure that makes other foreclosed folks feel better.

 

The road not taken.  I left a national accounting firm to start a new firm.  A (purported) alumna of the same firm took a somewhat different path. (Going Concern)

Guilty.  Dam Guilty. Beavers Convicted: Loans Require Payback  (Russ Fox).

 

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Tax Roundup, 2/18/2013: Your tax dollars at work for somebody else.

Monday, February 18th, 2013 by Joe Kristan

 Why don’t some big companies complain about Iowa’s highest-in-the-nation corporation tax rate?  Because they are on the receiving end.

20130218-1The Department of Revenue last week issued the 2012 list of recipients of of the Iowa Research Activities Tax Credit over $500,000.  Like the Earned Income Tax Credit for the working poor, the Research credit is “refundable.”  If a recipient doesn’t actually owe tax, the state will send a check for the amount of the credit anyway.

For the working poor, the EITC is unabashedly a welfare program.  For the corporate recipients, the credit is touted as “economic development.”  I’m sure EITC recipients feel the same way about their government checks.

The report shows that about $34.2 million of the $50.5 million claimed in research credits was refunded — about 2/3.  The biggest recipient of the credit was Rockwell Collins, which received $13.8 million in credits.    The report doesn’t say how much credit was refunded for each large recipient; If 2/3 of the Rockwell Collins credits were refunded, that means Iowa taxpayers gave the company $9.2 million

I don’t believe Rockwell Collins, or anyone else, should pay Iowa corporation income tax.  It is a bad tax whose repeal would make life better for Iowans.  But that’s a long way from saying that taxpayers should actually cut annual welfare checks to corporations doing business in Iowa.   While I don’t blame them for taking the checks — who turns down free money? – don’t try to tell me that it’s good for me.

Repeal of giveaways like the refundable research credit and the “economic development” credits given to the big fertilizer companies would go a long way towards paying for repeal of the corporation income tax for businesses lacking the lobbyists and wire-pullers needed to hit the corporate welfare jackpot.  Maybe some day we’ll demand the legislature replace the tax-some, pay-others Iowa tax system with something better, like The Quick and Dirty Iowa Tax Reform Plan.

Speaking of Iowa Tax Reform, I have posted my analysis of the proposed Iowa 4.5% optional flat tax.

 

Dislike.  The left-wing high-tax advocacy group Citizens for Tax Justice is scandalized that Facebook isn’t paying income taxes on its 2012 income (via the TaxProf):

Earlier this month, the Facebook Inc. released its first “10-K” annual financial report since going public last year. Hidden in the report’s footnotes is an amazing admission: despite $1.1 billion in U.S. profits in 2012, Facebook did not pay even a dime in federal and state income taxes.

Instead, Facebook says it will receive net tax refunds totaling $429 million. Facebook’s income tax refunds stem from the company’s use of a single tax break, the tax deductibility of executive stock options. That tax break reduced Facebook’s federal and state income taxes by $1,033 million in 2012, including refunds of earlier years’ taxes of $451 million.

So why are “executive stock options” deductible?  Because they are taxable to the recipients as W-2 income.  They are reported as taxable income on the executives 1040s at the same 35% top rate that the corporation pays.  In other words, CTJ is upset because the executives, rather than the corporation, write the checks to the IRS.

There is no actual tax reduction.  In fact, the government actually gets more income from the options than if Facebook had not issued the options and just paid 35% tax. Because they are also subject to the 2.9% medicare tax (3.8% starting in 2013), the option exercises actually generate additional revenue for the IRS.  Presumably CTJ would want the executives to pay tax with no deduction on the other side.  That seems unjust.

 

Another victory for Citizens for Tax Justice!  After Illinois Tax Increase, State Farm Reportedly Moving Operations to Texas (Joseph Henchman, Tax Policy Blog).

 

Peter Reilly, Married Same Sex Couples – Windsor Decision Requires Action This Tax Season

Kay Bell,  Sign up now to pay your federal tax bill via EFTPS.  With the ongoing disintegration of the postal service, it’s good to have a secure and sure way to get your taxes paid on time.  I’m signed up.

Tony Nitti,  Former San Diego Mayor Gambles Away $1 Billion; What Are The Tax Implications?

Martin Sullivan, Taxation of Intangibles: Still Hazy After All These Years (Tax.com)

Roberton Williams, A New Marriage Penalty for High Earning Couples—and a Bonus for Some (TaxVox):

Our new Marriage Bonus and Penalty calculator, despite all its  Valentine’s Day finery, ignores the new 0.9 percent Medicare payroll tax hike buried in the 2010 health law. The extra levy affects only a few high-income couples but in very different ways. Lucky couples will collect marriage bonuses of up to $450. But those less fortunate—if anyone making $250,000 can be considered less fortunate—will incur marriage penalties of as much as $1,350 in additional Medicare tax.

Just another example of the whimsical and poorly-conceived nature of the Obamacare Net Investment Income tax.

 

Brian Mahany, IRS Wins Tax Shelter Case – Will Claims Of Accounting Malpractice Follow?

Jack Townsend,  New Plea Agreement Involving Israeli Banks

Robert Goulder, Jack Lew, the Cayman Islands & FATCA (Tax.com)

Ben Harris, Five reasons Why the Sequester’s Automatic Spending Cuts are Bad Policy (TaxVox).

Yeah, that’ll work.  Newtown Lawmaker Proposes ‘Sin Tax’ On Violent Video Games (TaxGrrrl).

 

Traverse City!  I will be speaking at a Farm Income Tax, Estate and Business Planning Seminar in Traverse City, Michigan June 13-14.  The seminar is co-sponsored by the Iowa State University Center for Agricultural Law and Taxation.  Other speakers include Roger McEowen and Paul NeifferRegister now!

 

Chicago! Jackson’s Fall Includes Tax Charge (Russ Fox):

The last three governors of Illinois all went to prison (and it’s equal opportunity corruption: both Republicans and Democrats).  Joining them will be former Congressman Jesse Jackson, Jr. and his wife, Sandi (a former Alderman in Chicago).

Mr. Jackson resigned last November from Congress; Ms. Jackson resigned in January from the Chicago City Council.  Both are pleading guilty: Mr. Jackson to conspiracy and Ms. Jackson to filing a false tax return.  They pleaded guilty on Friday.

The scheme apparently had them using “business” credit cards (here, business is their re-election campaign) for personal expenses.  As this blog has highlighted numerous times in the past (and will likely do numerous times in the future), you can’t put personal expenses on a business return.  And we’re not talking nickel and dime purchases; the total is $582,772.58.  Add in filing false campaign reports and you have problems.

When people complain about the need to turn power over to government instead of “greedy corporations,” there is an implied assertion that the government and its operatives are somehow less vulnerable to avarice and self-dealing.  Against all evidence.

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Tax Roundup, 1/15/2013: Branstad not leading on income tax reform. And: Cage Fight! CPAs vs. RTRPs!

Tuesday, January 15th, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

Might the Iowa legislature lead on income tax reform?  If it’s going to happen, they will have to, as Governor Branstad only wants to talk about property taxes this year.  O. Kay Henderson reports:

During a recent interview with Radio Iowa, Governor Branstad made it clear he is focused on cutting property taxes.

“Sure, I’d like to see the income tax reduced, too, but in terms of my priority — and I’ve been working on this for a couple of years and we’re really trying to perfect it — our focus is going to be on significant property tax reduction and replacement,” Branstad said a month ago.

Some legislators are more ambitious, reports Henderson:

Representative Tom Sands, a Republican from Wapello, is the chairman of the House Ways and Means Committee that writes tax policy.

“I think there is some pressure building from Iowans to cut both income taxes — look at some reform as well as a cut to the individual income tax,” Sands says. “We’re hearing from corporations as well, on the income side.”

I doubt anything good will happen with income taxes this session.  The Iowa Chamber Alliance even wants to to go the wrong way, pushing more tax credits for the well-connected.  No organization seems to be pushing for the rest of us.  But The Quick and Dirty Iowa Tax Reform Plan is ready to go if the legislature needs some ideas.

 

Russ Fox, Estimated Tax Payment Deadline Is January 15th.  For 1040 and 1041 filers. Kay Bell has more.

 

Nick Kasprak, Monday Map: State Gasoline Tax Rates, 2013 (Tax Policy Blog):

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Robert D. Flach, CHOOSING A TAX PREPARER.  I suppose I should be upset by this:

Contrary to the popular “urban tax myth” perpetuated by uninformed journalists, just because a person has the initials “CPA” after his/her name does not mean that he/she knows his arse from a hole in the ground when it comes to preparing 1040s.

But I’m not.  It’s true, if roughly stated.

Robert goes astray in his next paragraph:

Only those individuals who possess the “EA” (Enrolled Agent) or “RTRP” (Registered Tax Return Preparer) designations have demonstrated competency in 1040 preparation by taking an IRS-sponsored test, and are required to remain current in 1040 law by taking a minimum number of hours in continuing professional education (CPE) in federal income taxes each year.

False.  The RTRP test is open book.  It demonstrates that somebody can read.  It’s a literacy test, an empty exercise to justify the IRS power grab over the preparer industry.  It’s different with Enrolled Agents, like Jason Dinesen and Russ Fox,  who have to meet much stricter standards than RTRPs.    One of the underreported nasty consequences of the RTRP designation is that it damages the EA brand.

I also disagree with the implied conclusion that CPAs who prepare returns are less competent as a group than EAs or RTRPs.  Some are incompetent, no doubt, but many tax CPAs are highly-skilled.    I think the competency curve for non EA preparers vs. CPAs would look something like this:

http://www.rothcpa.com/misc/20110118-2.png

Substitute “RTRP” for “unenrolled preparer.”

There are excellent non-CPAs and there are incompetent CPAs.   Still, I think as a group the CPAs who do tax for a living will tend to be more competent.

My rule of thumb for choosing a preparer: buy as much preparer as you need, but no more.  Many taxpayers who only have wage and investment income and routine itemized deductions will do fine with an RTRP (and would have done fine with an unenrolled preparer without the new IRS preparer regulations).  If you have business income, a multistate return, or a complicated financial life, your needs go up; you need a high-end RTRP like Robert, or an EA, or a CPA. As your business gets bigger, you are more likely to want to hire a good CPA.  And when Robert gets to the bottom line of his post, I think he agrees.

But be careful which one you hire: Lawyer, Accountant Implicated in Estate Fraud Case (Brian Mahany)

 

Trish McIntire, Preparer Conflict of Interest

 

Jack Townsend, The Big Boys Get Better Treatment in Our Tax System Than Do Minnows.

I speak again on the basic relative unfairness of the treatment of many, if not most, in the IRS’s offshore voluntary disclosure initiatives.

They have to shoot the jaywalkers so they can slap the real offenders on the wrist.

 

You pay more in taxes this year than last year.  How do you like your tax cut? At Tax.com, Jeremy Scott tries to convince us that we just got a tax cut:

 The income tax rates, the estate tax, and the alternative minimum tax  patch are all here to stay.  And, according to the Tax Policy Center’s (TPC’s) preliminary study on distributional effects, the act essentially provided a big tax cut for almost everyone.

Funny, everybody’s taking home less.  How does that work? My emphasis:

Using the Congressional Budget Office’s old baseline (which assumed that  the Bush tax cuts would expire for everyone) and looking at the effects of the tax cut in 2018, the TPC says that the average taxpayer will receive a $2,335 tax cut under ATRA

I see.  Because the tax increase could have been bigger, we got a tax cut.  I’ll see if I can cut staff accountant pay and convince them they got a raise because we didn’t cut more.

Janet Novack, Obama Vows Republicans Won’t Collect ‘Ransom’ For Raising Debt Limit.  No, they’ll ultimately let the President continue the insane spending pace.

 

Paul Neiffer, We Wonder What the Investment Income Tax Form Will Look Like

Avoiding Excess Credit Card Interest Should Not Be A Taxable Event.  But it can be, if you get the bank to forgive unpaid interest that would be non-deductible.

IRS Releases Additional Inflation-Adjusted Figures for 2013

Robert Goulder, Taxes & Corruption: Another Greek Tragedy (Tax.com)

TaxGrrrl, Ask the taxgirl: IRS Delayed Tax Filing Season Applies To Everybody

Martin Sullivan, IRS: Women At Work (Tax.com):

According to the latest IRS Data Book  60,623 of the agency’s 104,402 employees in 2011 were women. That 66 percent is far more than the 44-percent figure for government’s total civilian labor force and the 47-percent figure for the overall US civilian workforce.

 

Ben Harris, Should Louisiana Dump Its Income Tax for a Bigger Sales Tax? (TaxVox)

News you can use.  FYI: Attorneys Think Auditors’ Legal Confirmation Letters Are a Giant Waste of Time (Going Concern)

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