Posts Tagged ‘Branstad tax policy’

Tax Roundup, 6/29/15: Congratulations, newlyweds, here’s your tax bill! And windy subsidies, IRS stonewalling, more.

Monday, June 29th, 2015 by Joe Kristan

Welcome to the marriage penalty. The Supreme Court has spread Iowa marriage law nationwide. That means more same-sex couples will tie the knot and learn about the sometimes surprising tax results of matrimony. In general, if only one member of the couple has income, it’s a good tax deal, but not so much for two-earner couples. The weird complexity of the tax law means there are lots of exceptions.

The Tax Foundation has an excellent summary of these issues, Understanding the Marriage Penalty and Marriage Bonus. It includes this wonderful piece of abstract art illustrating how marriage can help and hurt a couple’s federal income tax liability:

Marriage penalty tax foundation chart

 

The chart has two axes: the percentage of income earned by each spouse, and the income level. Blue is good, red is bad. If combined income is just short of $100,00, it’s all good, but there is lots of room for tax pain at the top and bottom of the income spectrum for married couples.

Other coverage:

Jason Dinesen, Tax Implications of Friday’s Ruling on Same-Sex Marriage:

This ruling should not have an impact on federal tax returns because couples in same-gender marriages have been able to file as married on their federal tax returns since 2013. This ruling affects state tax returns in states that had bans against same-gender marriage.

Jason, an Iowa enrolled agent, was an early expert in same-sex marriage compliance.

 

TaxProf Blog Op-Ed By David Herzig: The Tax Implications Of Today’s Supreme Court Same-Sex Marriage Decision (TaxProf) “Same-sex couples will now be able to inherit, file joint state tax returns, possess hospital visitation rights and all other state marriage rights as heterosexual married couples.”

Kay Bell, Marriage equality means tweaks to tax code, tax forms. “Sen. Ron Wyden (D-Ore.), the ranking minority member on the Senate Finance Committee, is already working on getting the new nomenclature on the books.”

TaxGrrrl, SCOTUS Legalizes Same Sex Marriage But Questions Remain For Religious Groups & Tax Exempts

 

Wind turbineWindy Subsidy Signed. Governor Branstad has signed HF 645, which establishes a tax credit for wind energy. The credit is 50% of the similar federal credit, up to $5,000. It takes effect retroactively to 2014, giving a windfall to people who bought qualifying systems already. It will do nothing for the environment, but it will do wonders for companies selling wind energy systems.

 

 

 

Christopher Bergin, Why We Just Sued the IRS – Again (Tax Analysts Blog):

For more than two years the IRS has played its old game of hide the ball regarding requests to release Lois Lerner’s e-mails — e-mails that would teach us a lot about what actually went on during the exempt organization scandal. Many of those requests came from the United States Congress: the elected officials who control the IRS budget. The IRS’s stalling tactics have run the gamut from eye-rollingly comical to downright disturbing.

Through this and and other worrisome developments, one thing is clear: the IRS is now in desperate trouble. Most of that trouble it created itself. It would be unfair to call them the gang that couldn’t shoot straight, because when it comes to shooting itself in the foot the IRS is an expert marksman. The IRS is an agency whose initial reaction to almost anything is secrecy.

The IRS needs a big culture change, one starting with a new Commissioner.

 

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Associated Press, Ex-Rep. Mel Reynolds indicted on tax charges. Can you believe a Chicago politician who would sleep with a 16-year old campaign worker would also cheat on his taxes?

 

Russ Fox, A Peabody, Massachusetts Tax Preparer Gives an Unwitting Endorsement for EFTPS:

Mr. Ginsberg operated a traditional payroll service. It’s fairly easy to check on your payroll company if you use such a service: Enroll in EFTPS. Using EFTPS you can verify that your payroll company is making the payroll deposits they say they are. That’s a good idea–trust but verify. The DOJ Press release notes:

To cover up his scheme, Ginsberg falsified his clients’ tax returns, which he was hired to prepare, indicating that the clients’ payroll taxes had been paid in full, when they had not. When asked by clients about their mysterious IRS debts, Ginsberg gave them a litany of false excuses, including blaming the IRS and his own staff.

None of those excuses work hold up with EFTPS. Today, payroll tax deposits with the IRS are all made electronically. Is it possible for one to get messed up? Yes, but it’s very unlikely. Indeed, most payroll companies just make sure the deposits are made from your payroll bank account.

If you outsource your payroll tax, insource regular visits to EFTPS to make sure your payments are made.

 

Peter Reilly, SpongeBob SquarePants In A Tax Case!

Tony Nitti, Sloppy Drafting Saves Obamacare – Supreme Court Upholds Tax Subsidies For All. I think it was more sloppy judging than sloppy drafting that did the trick.

Keith Fogg, Aging Offers in Compromise into Acceptance (Procedurally Taxing).

Jack Townsend, Rand Paul and Expatriates to Sue IRS and Treasury Over FBAR and FATCA. They want both to be declared unconstitutional. Unfortunately, it seems like a anything the IRS wants is constitutional anymore.

TaxProf, The IRS Scandal, Day 779Day 780Day 781. Still trying to shake out the “lost” emails after 781 days. You’d think they were stalling or something. And efforts to impeach Commissioner Koskinen. It’s not going to happen, but if he had any shame, he would have resigned long ago.

Richard Auxier, Michigan, out of ideas, might ask poor to pick up transportation tab (TaxVox).

 

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Quotable:

The pledge, the brainchild of Grover Norquist, president of Americans for Tax Reform, is a terrible idea for several reasons. First, no leader should promise never to raise taxes because, frankly, there are times when it is necessary. Over 50 Kansas legislators and Brownback, who have signed the pledge, found that out last week. I agree with Norquist philosophically; less government is good. But the pledge only leads to more debt at the federal level and gimmicks in state governments.

David Brunori, Tax Analysts ($link)

 

Career Corner. EY Employee Has Eaten So Many Hours, He’s Gone on Hunger Strike (Caleb Newquist, Going Concern).

 

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Tax Roundup, 4/28/15: Iowa flunks another business tax study. And: on to Belfast and Edinburgh.

Tuesday, April 28th, 2015 by Joe Kristan

20121226-1Programming note. I will be riding the magic flying chair across the ocean tomorrow on my way to the TIAG Spring Conference in Edinburgh, U.K. It will be the first conference since Roth & Company became a member of the TIAG worldwide alliance of independent accounting firms, and I am excited to meet representatives of our sister firms from Canada, China, the U.K. and elsewhere.

I will first stop off in Belfast to attempt to extend the family tree by a branch or two, and to do some sightseeing in County Tyrone, where my mom’s ancestors lived before heading to Ontario, and then to Illinois, in the mid 19th century. Any tips for using the facilities of the Public Records Office of Northern Ireland are welcome and appreciated.

With the travel, posting here will be variable based on time, internet connections, computer functionality, and jet lag. But there will be posts, and there will be pictures, so stop by. Full posting should resume May 8 or so.

 

20130117-1Iowa does it again! Our fair land between the rivers shows up near the bottom of another survey of state business tax systems — this time in 45th place in the Small Business & Entrepreneurship Council Best to Worst State Tax Systems for Entrepreneurship and Small Business. Iowa scores especially poorly for its high corporation tax rate and corporate capital gain rates.

Worse, neighboring South Dakota ranks #1. They have no corporation income tax at all. Repeal of the corporation income tax is a key part of the Tax Update’s Quick and Dirty Iowa Tax Reform Plan. Right now Iowa relies on the highest corporation tax rate in the country, along with 31 (and counting) special interest tax credits, to grow businesses. I think South Dakota’s idea makes more sense.

Related: What an Iowa income tax might look like with a fresh start.

Liz Malm, North Dakota Cuts Income Taxes Again (Tax Policy Blog). They were 15th on the SBE survey before this.

 

Meanwhile, Iowa’s General Assembly ponders a sales tax increase, reports the Des Moines Register:

A late-session bid to raise Iowa’s sales tax by three-eighths of 1 percent to generate $150 million annually for natural resources and outdoor recreation programs has gained some traction in the Iowa Legislature, but it remains a long shot.

Cash is fungible, and like highway “trust fund” dollars, the politicians will divert “targeted” revenues to their pet projects sooner or later.

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Roger McEowen, It Ain’t Over Until the FBAR Report is Filed (ISU-Calt Ag Docket): “You trigger a filing requirement whenever you have a an interest in or signatory authority over a foreign financial account with a value over $10,000 at any time during the calendar year.”

William Perez, How to Get Your Tax Withholding Just Right

Kay Bell, Wrong tax refund amount? What now?

Andrew Mitchel, Recognition of Losses on Dispositions of PFICs

 

20140826-1The Buzz is Back! The Wandering Tax Pro, Robert D. Flach, comes back from another tax season with a fresh roundup of tax blog posts presented with his hand-crafted perspective.

‘Moose’ declined comment. ‘Squirrel’ Threatens To Bomb IRS Building (TaxGrrrl)

Robert Wood, Ten Facts About Fighting IRS Tax Bills.

Peter Reilly, Is IRS Targeting Drunkards? Well, somebody has to work there.

Jack Townsend, The Stored Communications Act and Emails: An Overview

 

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TaxProf, The IRS Scandal, Day 719 “IRS Attacks Conservative Groups But Silent on Clinton Foundation.” And Media Matters, and…

Howard Gleckman, A Small But Important Change in Retirement Savings Rules (TaxVox). “The proposal would exempt those who have $100,000 or less in retirement savings from having to take required taxable distributions from 401(k)s, IRAs, and the like starting at age 70 ½.”

 

Government is just the name for things we do together. IRS Seeks To Tax $50k Raised From GoFundMe For Cancer Treatment For Car Crash Victim (TaxProf).

 

 

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Tax Roundup, 3/31/15: Stopping travelers in Iowa for fun and profit. And: more tax credits!

Tuesday, March 31st, 2015 by Joe Kristan

20120703-2Highwaymen with badges. The Des Moines Register is running an excellent series describing the worst public finance innovation in recent decades — civil asset forfeiture. That’s a fancy name for police stealing money from travelers and using the proceeds to fund their own operations, on mere suspicion of wrongdoing by the travelers. The victims have to sue to get it back, and they have to prove they aren’t criminals — turning the normal burdens of proof upside down. That’s expensive and difficult. The result is a terribly-designed tax on the unlucky and the intimidated.

This creates a horrible incentive system. Police can always gin up an excuse to confiscate some traveler’s cash to buy new toys (“scented candles, mulch and tropical fish“) for the department. They then send the travelers on their way, a dead giveaway that they aren’t really fighting crime. Most travelers will be intimidated and drive away without fighting. Even if the traveler wins, nobody is punished for the unjustified seizure.

Today’s installment also shows how this system leads to corruption:

Former Dallas County Sheriff Brian Gilbert was convicted of felony theft for taking $120,000 in cash seized during a 2006 traffic stop.

More recently, Altoona resident Vicki Wharton’s car and some of her money was seized in 2012 by Polk County deputies working with the Mid Iowa Narcotics Enforcement team in a case involving her son.

She fought the forfeiture and managed to get both her car and most of her cash back — minus a few hundred dollars that seemingly disappeared.

Some people assume that anybody traveling with large amounts of cash is up to no good, but there are plenty of horror stories of travelers losing their life savings to thieves with badges to show otherwise. Other cases involve seizure of homes or businesses because, for example, a son was arrested for drug use or a customer used a hotel room for a crime.

While asset forfeiture is likely to be more catastrophic for the victim, it is kindred to highway speed cameras as a corrupt use of law enforcement powers for revenue. It is an inherently unethical, unjust, and third-world way to raise revenue. If you aren’t willing to fund your local Sheriff with property taxes, you shouldn’t ask him to fund himself from passers-by.

Other stories in the Des Moines Register series:

Iowa forfeiture: Forfeiture spending questioned in Iowa, elsewhere

Iowa forfeiture: A ‘system of legal thievery?

 

20120906-1Des Moines Register, Branstad: Iowa ‘blessed’ to have Hy-Vee; defends tax credits.

Gov. Terry Branstad is defending the state’s decision to award $7.5 million in state tax credits to Hy-Vee Inc. at the same time one of the grocery company’s chief competitors in the Des Moines market has closed its doors because of bankruptcy.

I shop at Hy-Vee, and I like them just fine. Still, they are a 100% ESOP-owned, presumably through an S corporation, meaning they pay no income taxes. Do they need tax credits, too? Their competitor Dahl’s won’t get this credit — they died. Iowa-based Fareway isn’t getting this sweet subsidy — let alone Price Chopper, Aldi, IGA, Super-Valu, Target, Trader Joe’s, Whole Foods…

 

William Perez, How to Get a Federal Tax Credit for the Cost of Child Care

TaxGrrrl, As Tax Day Nears, Don’t Panic: File For Extension. Far better to extend than to amend.

Robert Wood, Ten Things You Should Know About IRS Form 1099. “Before you file taxes, collect all your IRS Forms 1099 and pay attention to each one. The IRS sure does.”

Peter Reilly, Exelon Subsidiary Denied Tax Breaks On Three Mile Island Purchase.

Jack Townsend, Swiss Bank Enablers Get Unsupervised Probation and Relatively Light Fines. We need to shoot the jaywalkers so we can wrist-slap the real criminals.

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Kay Bell, It’s clear that all tax exempt categories need to be re-evaluated. Scientology is today’s topic.

Clint Stretch, Who Should Pay for the Mess We’re In? (Tax Analysts Blog)

Renu Zaretsky, Just the Facts, Ma’am: On Filing and Reform. Today’s TaxVox headline roundup covers whether the Rubio-Lee tax plan includes refundable personal credits and the trade-offs of public pension reform.

TaxProf, The IRS Scandal, Day 691. He links to Robert Wood discussing the reflexive strategy of obstruction and lies that has become standard operating procedure in the executive branch.

 

And: Tomorrow we start our run to the end of filing season with our 2015 filing season tax tips. Collect one, collect them all!

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Tax Roundup, 2/13/15: Gas tax advances, tax system declines.

Friday, February 13th, 2015 by Joe Kristan

Accounting Today visitors: click here for the post on the updated auto depreciation limits.

 

IMG_1284It looks more likely that I was wrong in predicting no gas tax increase. Subcommittees in both the House and Senate Ways and Means committees approved a 10-cent per gallon increase this week, advancing the increase to the full committes. KCRG.com reports:

A group of top lawmakers from both parties and Gov. Terry Branstad have proposed the 10-cent gas tax increase, which is expected to generate more than $200 million annually.

Supporters say the gas tax is the most fair and equitable way to generate funds for road construction.

At least it looks like my backup bet — that a gas tax increase would indicate that Governor Branstad won’t run for another term — is looking better.

 

taxanalystslogoChristopher Bergin, Reform What? (Tax Analysts Blog). It has a great teaser line: “Yes, it sure is fun thinking about tax reform. And doing nothing about it could be fun as well. We might get to watch this colossal structure collapse soon.”

Christopher goes on to explain:

But all this talk has me thinking about other things, too. Which tax system will we reform – or at least start with? Should it be the one most of us are struggling to comply with -– the one that about half of us “regular” taxpayers still have to pay taxes under? You know, the one with deductions for charitable contributions that we’d make anyway — the one that discriminates between people who own a house and rent a house. The one that’s so confusing, many of us just turn our taxes over to a paid preparer or a paid-for program to figure out. Let’s not forget that if you’re doing well under this tax system, you win a prize: the alternative minimum tax (which is sort of a booby prize).

Or maybe we should start by reforming the IRS, which has become so broke and inept that it can’t afford to help your grandmother find the line on her Form 1040 for the dependents she can no longer claim. That’s the agency that is also supposed to enforce the law so that none of us “regular” taxpayers are the true suckers in all this. (How’s that working out for you?)

Lots of that sort of cheerful stuff. In some ways the system is already collapsing before our eyes. A system that wires $21 billion annually to thieves — and it’s getting worse quickly — isn’t built to last.

 

Des Moines Register, 16 companies claim 82 percent of Iowa’s R&D tax credits. “In all, 265 companies claimed about $51 million in credits for research and development last year, the report shows. Of that, 16 companies claimed $42.1 million.”

My coverage of the story from yesterday is here: The Federal $21 billion thief subsidy; the Iowa $37 million corporation subsidy.

 

William Perez, If You Drive for Uber, Lyft or Sidecar, These Tax Tips are Just for You

20150105-2Kay Bell, IRS drops some features in latest app upgrade

Jim Maule, Self-Employment Income Not Offset by NOL Carryforward

Carl Smith, The Eight Circuit Gives Both Sides a Hard Time on What is a “Separate Return” for Section 6013(b) Purposes (Procedurally Taxing). ” Does the limit on changing from a “separate return” to an MFJ return after filing a Tax Court petition only apply where a taxpayer initially filed an MFS return (as the taxpayer argues), or does it also apply where a taxpayer initially filed a “single” or HOH return (as the government argues)?”

Robert Wood, Nine Habits of Exceptionally Tax-Averse People. Numbers 5 and 6 are key.

TaxGrrrl, Are You Insured? Obamacare Deadline Quickly Approaching

Tony Nitti, Republicans, Democrats Agree On Tax Issue; Winter Storm Warning Issued For Hell. Tony, gang truces are more common than you’d think.

Jack Townsend, Structuring 20150119-1Forfeitures Again in the News (my emphasis):

After taking considerable heat on which we reported before, the IRS has hunkered back to a policy that generally (that’s a fuzz word) will allow seizure only where the IRS has proof of illegal income.  So, under the new law, generally the innocents (meaning those without illegal income) can intentionally violate the structuring law without being subject forfeiture and presumably without being subject to structuring prosecution. It seems to me that Congress should change the law rather than have the IRS not enforce the law as Congress wrote it or to signal to citizens that they can violate the law with impunity so long as they do use illegal funds.

I think Jack gives too much credit to the IRS, as if they have only been taking money when there was “intentional” structuring. The news reports have shown there are plenty of reasons to make deposits before you have $10,000 on hand, including insurance policy restrictions and the common sense idea that you don’t leave too much cash sitting around. But IRS didn’t inquire as to whether there was any actual intent to keep deposits low; they just took the money.

While the IRS has plenty to answer for in its seizure policy, I agree that Congress is just as guilty, passing laws allowing asset seizures without barely a nod at due process and without a hearing.

 

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TaxProf, The IRS Scandal, Day 645

Amber Erickson of Tax Justice Blog boldly makes The Case for Keeping the Medical Device Tax,

Health insurance providers, pharmaceutical companies, and the medical device industry are all expected to gain from the ACA by earning greater profits as more people enter the healthcare marketplace. The tax is intended to reciprocate those benefits by tacking on a small flat rate to a firm’s revenue.

But that tax is only on the medical deveisces, not “health insurance providers,” the big winner, and not on pharmaceuticals. It really isn’t on the device industry; it is on the people who need them.

 

Eric Cedarwell, Senator Bernie Sanders’s New Deal for America (Tax Policy Blog).

 Inspired by Roosevelt’s New Deal in many regards, Senator Bernie Sanders (I-VT) recently outlined his vision for America, featuring expansionary government spending policies. A major federal jobs program, a hike in the minimum wage to at least $15, expansion of Social Security, Medicare, Medicaid, increased regulation of Wall Street, and protectionist trade policies are examples of initiatives Sanders emphasized. However, Sen. Sanders provided little information on how he might finance his vision.

In other words, a reprise of the policies that put the “great” in the Great Depression.

Howard Gleckman, Lawmakers Talk Tax Reform But Keep Pushing New Tax Subsidies (TaxVox). Of course they do.

 

Caleb Newquist, When Is the Right Time to Start Your Own Accounting Firm? (Going Concern). December 19, 1990 worked for us. I think it was about 8:30 am.

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Tax Roundup, 1/29/15: Iowans, fill ’em up now. And: lessons from the Obama Sec. 529 retreat.

Thursday, January 29th, 2015 by Joe Kristan

dimeFill me up. ‘Overall consensus’ toward 10-cent hike in state gas tax O. Kay Henderson reports:

 Key legislators say a 10-cent increase in the state gas tax has a good chance of passing the legislature in February and going into effect as early as March.

“I think the overall consensus is to go 10 cents now…We’re so far behind that we need to implement it right away,” Senator Tod Bowman, a Democrat from Maquoketa who is chairman of the Senate Transportation Committee, said this morning.

At the opening of this session of the General Assembly, I guessed that there would be no gas tax boost. It’s looking more likely every day that I was wrong. I asked a few legislators and lobbyists about it when I attended the Iowa ABI Legislative Reception, and they all said a 10-cent gas tax boost was a done deal.

That would test my alternative forecast – that if there was a gas tax boost, it meant Governor Branstad will not run for a seventh term.

 

csi logoAlan Cole, President’s Plan to Tax 529s Was Not a Distraction (Tax Policy Blog):

While the issue was, perhaps, a distraction from the administration’s priorities on community college, it was not at all a distraction from the administration’s priorities on tax policy. It is deeply philosophically consistent with virtually every tax policy proposal, proposed or enacted, from the administration.

The administration’s proposals all tend to follow a particular blueprint for tax policy: simply put, that when Americans save by investing in some kind of asset, that they should be taxed at ordinary income rates on both the initial value of the asset and all the future returns on the asset. (For example, with 529 plans, the initial investment is taxed, and the Obama Administration’s proposal is to tax the returns as well.) This view is mistaken, in that a financial asset’s value is precisely in its future returns. The value of the financial asset, then, is taxed twice. 

The difference here is that the administration has dressed up its tax grabs by saying only “the rich” would have to pay. That’s never really true, but it was so obviously wrong here that even the President’s allies couldn’t support it with a straight face.

 

IRAJoseph Thorndike, What Obama’s 529 Flip-Flop Says About Your Roth IRA (Tax Analysts Blog):

The bursting of the 529 trial balloon should serve as an object lesson for anyone hoping to rein in other tax preferences. In particular, proposals to scale back Roth IRAs – popular among liberal analysts – seem hopeless in the extreme.

I think the dumbest thing was pairing the elimination of a tool to enable people to save for education costs with the unwise “free” community college proposal. That was pretty much saying those who want to pay their own way through college without government grants are chumps.

TaxProf, The IRS Scandal, Day 630. It has become an issue in the hearings for the Attorney General nominee.

 

Jason Dinesen, What I’m Asking My Clients Regarding the ACA. Pretty much what we are asking our clients.

TaxGrrrl, Form 3115 Adds Confusion & Cost – But May Be Required For 2015. “Since there’s no user fee – and virtually no risk – I tend to agree with those who suggest that businesses owning real and/or tangible property err on the side of caution and file form 3115 to obtain automatic consent.”

Robert Wood, Missing A Form 1099? Why You Shouldn’t Ask For It “Nevertheless, if you don’t receive a Form 1099 you expect, don’t ask for it. Just report the income.”

Tony Nitti, Super Bowl XLIX Tax Tale Of The Tape: Who Ya’ Got? Meh. My football rooting interest ended in Seattle. But for socially-awkward tax nerds (but I repeat myself) who are going to Super Bowl gatherings, Tony has a lifeline.

 

20140512-1Peter Reilly, Don’t Use The IRS To Address Koch Political Spending. Whether it’s Tom Steyer, George Soros, or the Brothers Who Must Not Be Named, the government has no business telling them what causes they can fund.

Russ Fox, Caesars Wins Round One: Chicago, not Delaware. Caesars Entertainment’s bankruptcy litigation, that is.

Carl Smith, Unpublished CDP Orders Dwarf Post-trial Bench Opinions in Uncounted Tax Court Rulings (Procedurally Taxing). Insight on what Tax Court judges do that those of us who don’t do that sort of litigation for a living don’t see.

Jack Townsend, Unreported Offshore Accounts Remains on IRS Dirty Dozen” List

Kay Bell, Illinois shoppers to start paying state sales tax on Amazon purchases on Feb. 1; federal online tax bill still stalled

 

Tax Trials: Georgia Tax Tribunal Rules that Electric Utility’s Machinery and Equipment Used in Transmission and Distribution System Not Exempt from Georgia Sales & Use Tax. Bad tax policy all over. Business inputs should not be subject to sales tax.

Cara Griffith, Tax Appeal Reform May Be a Possibility in Washington State (Tax Analysts Blog)

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David Brunori, Regressive Taxes Are Neither New Nor Good (Tax Analysts Blog): “States should also broaden the sales tax base to tax things rich folks buy, while lowering the tax rates on the things the poor consume the most. But the rich will remain rich.”

Steven Rosenthal, Is Obama Closing Retirement Savings Loopholes or Just Curbing Congress’ Generosity? (TaxVox). How about another choice – he’s just looking to increase taxes on “the rich” any way he can get away with?

Richard Phillips, Congress Should Pass the Stop Tax Haven Abuse Act to Combat International Tax Avoidance. (Tax Justice Blog). I have a better idea: a less onerous tax system that would make international tax avoidance less attractive.

 

Career Corner. The Public Accountant’s Definitive Guide to Disclosure of Past Convictions (Adrienne Gonzalez, Going Concern)

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Tax Roundup, 1/14/15: Education credits to delay refunds? And: it’s not volunteering when you’re paid.

Wednesday, January 14th, 2015 by Joe Kristan
Kristy Maitre

Kristy Maitre

If your tax refund this year seems to take forever to arrive, education credits might be involved. The invaluable Kristy Maitre, former IRS Stakeholder Liaison and now with the Iowa State University Center for Agricultural Law and Taxation, has leaned that the IRS may delay refunds on returns claiming the “American Opportunity Credit.” From an e-mail she has distributed:

If your client is getting the American Opportunity Credit this year you need to be aware of a possible “refund hold” on the credit to verify attendance at the college. At this time we “assume” only that part of the refund will be held and the other part of refund not related to the American Opportunity Credit will be released.

At this time we are not sure who this will impact, IRS appears to want to keep it a BIG secret. Our concern is that the tax preparer will be blamed for the delay of the refund and overall it would make the preparer look bad as well as having to deal with an upset client due to the issue. I was able to find some criteria in a new IRM, but we need more information from IRS.

Your client should be  informed by IRS of the reason the refund is being held and that once the 1098-T from the accredited institution is verified the refund will be released,  or they will receive a Letter 4800C to inform them if further documentation is required to allow the education credit…

The AOTC is a “refundable” credit; if the credit exceeds the tax computed, the IRS will pay you the excess. Given the high incidence of refund fraud involving refundable credits like the AOTC, it’s understandable that the IRS would want to verify eligibility before issuing a refund.

The income tax, the Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The income tax, the Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

Unfortunately, this verification will come from matching 1098-Ts issued by colleges and universities. These forms, which purport to show tuition paid, are notoriously unreliable. The inevitable matching errors will leave some taxpayers trying to get their refunds fixed well into the summer.

This highlights the unwisdom of using the tax law as the Swiss Army Knife of public policy. It’s hard enough to get taxable income right. Congress also assigns IRS education policy, health care, social welfare, industrial policy, campaign finance regulation, you name it. Like with the Swiss Army Knife, you can only add so many functions before you make it bad at being a knife.

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Commissioner Koskinen wants us to blame cuts in his budget for tax refund delays. In a memo to IRS employees, he outlines the dire effects of the cuts in his agency budget, including:

Delays in refunds for some taxpayers. People who file paper tax returns could wait an extra week — or possibly longer — to see their refund. Taxpayers with errors or questions on their returns that require additional manual review will also face delays.

It’s foolish of Congress to pile work onto the IRS and then cut its budget. That said, Mr. Koskinen has brought a lot of this on himself with his combative and tone-deaf response to the Tea Party scandal.

Also, there’s a bit of the Washington Monument Strategy in his memo, by making cuts in areas that inflict pain on taxpayers. I would be more convinced that the IRS is really committed to making taxpayer service a priority if his list of budget adjustments included sending to the field, or laying off, the hundreds of full-time IRS employees who do only union work. He would be more convincing if he said the “voluntary” preparer regulation initiative was on ice until funding improves. Instead, the Commissioner puts the National Treasury Employees Union and his own power grab ahead of processing refunds.

 

No Walnut STVolunteering. I don’t think that word means what you think it means. From Governor Branstad’s 2015 Condition of the State address:

 In addition, I am offering legislation creating the Student Debt Reorganization Tax Credit. This tax credit allows individuals to volunteer for worthy causes within Iowa’s communities and in exchange have contributions made toward their student debt.

There is so much wrong with this, beyond the idea that it’s “volunteering” when you get paid for it. It’s one more random addition to an already ridiculous mishmash of distortive and unwise education subsidies. It’s one more incentive for students to take on debt they can’t otherwise afford. And it misplaces human capital from productive for-profit enterprise to the black hole of the government and non-profit sector.

Iowa Form 148 already lists 32 different tax credits. The Governor thinks adding some more is the solution to Iowa’s problems. I think the credits are a big part of the problem, as they help make the Iowa tax law the complex high-rate mess that it is.

 

William Perez, How Soon Can We Begin Filing Tax Returns?

Kay Bell, Reducing your 2014 tax bill using exemptions, deductions

Jason Dinesen, H&R Block Doesn’t Really Have ACA “Specialists” On Staff. A bold charge, but a convincing one.

Peter Reilly, Can Walgreen Stance On Property Tax Hurt Income Tax Position Of 1031 Investors? Thoughts on getting too cute in analyzing the value of a real estate interest.

Leslie Book, Can IRS Change Taxpayers from Procrastinators to Payors By Drafting Letters that Make Taxpayers Feel Bad? (Procedurally Taxing). Usually people feel bad when they get a letter that says “notice of levy,” but that’s not what he’s talking about.

Robert Wood, Citizenship Renunciation Fee Hiked 422%, And You Can’t Come Back

Jack Townsend, Another UBS Depositor Sentence; Consideration of the Role of Potential Deportation

 

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David Brunori, Using the Poor for Fixing the Roads (Tax Analysts Blog):

The Michigan Legislature passed a bill that would significantly increase the state’s earned income tax credit. Some 800,000 Michigan families will see tax relief. I think that is a good thing. But the change won’t go into effect unless voters approve a sales tax increase from 6 percent to 7 percent.

I don’t share David’s enthusiasm for the EITC, but I do appreciate the absurdity of the sales tax link.

Kyle Pomerleau, Representative Van Hollen Releases New $1.2 Trillion Tax Plan.  “Unfortunately, most of Representative Van Hollen’s tax plan would move the U.S. further away from having a competitive, modern tax code.”

TaxProf, The IRS Scandal, Day 615. This installment covers a Tea Party group that has been waiting five years for Lois Lerner’s old office to approve their exemption application.

 

Career Corner. Age and accounting as a second career (Caleb Newquist, Going Concern)

 

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Tax Roundup, 1/12/15: They’re back! Gas tax boost, maybe; tax reform, not likely as 86th Iowa General Assembly convenes

Monday, January 12th, 2015 by Joe Kristan

20130117-1Same Governor. Same split party control in the legislature. So why would we expect different results? I expect no big tax cuts, tax increases or tax reforms. When you mix the same ingredients and put them in the same oven, expect the same thing to come out of the oven.

They will be legislating for the next few months, so they will talk, and who knows? Something might happen. But that’s not the way to bet.

The Des Moines Register today covers 10 key issues facing Iowa Legislature in 2015. Six of them are tax items. I think only one of them is likely to result in legislation. Let’s go down the list.

ROAD FUNDING/GAS TAX. The state gas tax isn’t inflation adjusted, and the Department of Transportation says it needs more money. As gas taxes are close to a fee on road use, you can make a policy case for an increase. It’s a lot harder to make a political case, which is why the Governor and the legislature are so deferential to one another in this area. The fracking-induced fall in gas prices may give them the legislature the excuse they need to do what they clearly want to do — raise the 10 21-cent per gallon tax. The governor may push it through if he has decided this is his last term. But most likely they’ll be saying “after you” right through adjournment.

If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

INCOME TAX CUTS.  The Register conflates tax cuts with tax reform here. They aren’t necessarily the same thing. Iowa’s income tax could bring in the same amount of revenue without the highest corporation rate in the developed world by eliminating the dozens of special interest tax credits and carveouts and tax credits for the well-connected. As long as Michael Gronstal remains in control of the flow of legislation in the Iowa Senate, anything that cuts rates for “the rich” goes nowhere. In any case, the Governor doesn’t seem to mind a tax credit system that gets him invited to all the cool ribbon cuttings.

That’s too bad. Iowa has a bottom-ten business tax climate that favors those with good lobbyists while making South Dakota look attractive for everyone else. Something like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan, which would wipe out the corporate tax, cut individual rates, and get rid of Iowa’s byzantine maze of special breaks, is long overdue.

20120906-1BROADBAND EXPANSION. This is the sort of small-ball legislation that has passed in recent years, and this seems like the most likely to get through, probably as a tax credit. Of course, every new tax credit means a puppy dies Iowa’s tax law is just a little worse and a little harder to fix. Never mind that the real obstacle to broadband expansion is in Washington, not Des Moines.

LOCAL OPTION SALES TAXES. The municipalities want to be able to drive out businesses by increasing sales tax without help from surrounding communities. Same ingredients, same cake.

BANNING TRAFFIC CAMERAS. It’s about the money, and Senator Gronstal will prevent any anti revenue camera legislation from advancing.

SALES TAX INCREASE. This proposal to increase sales taxes for natural resource funding died in the Senate last year. If you can’t get a tax increase out of the Iowa Senate, you sure aren’t getting one out of the GOP House.

Other coverage: Sioux City Journal, Iowa Legislators see limited budget room for tax cuts this session

Related: Tax States of the States: Mixed, Murky and Sometimes Mercurial (Renu Zaretsky, TaxVox)

 

IMG_0923Russ Fox, FTC Sponsors Tax Identity Theft Awareness Week

Tony Nitti, Four Things Sure To Destroy Your Tax Season. Three of them stem from Obamacare.

 

William Perez, What You Need to Know about Reporting Payments Using Form 1099-MISC

Annette Nellen, HR 30 – Defining full-time worker for ACA has costs. A story of unintended consequences.

Peter Reilly, Dressage Riding Physician Convinces IRS On Hobby Loss Audit But Loses To Massachusetts

Keith Fogg, Tenth Circuit Ups the Ante on Late Filed Returns (Procedurally Taxing)

Robert Wood, Bill Gives IRS Power Over Tax Prep, But Should It? No.

Kay Bell, St. Louis says no added taxes for new NFL Rams stadium. But the one they have is 20 years old, darn it!

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Kyle Pomerleau, Government Cost $4.5 Trillion in 2014 and We All Paid Part of It (Tax Policy Blog).

Robert Goulder, China’s Fiscal Roadmap: Tax Like America (Tax Policy Blog). If you are worried about China achieving economic domination, you can rest easy now.

TaxProf, The IRS Scandal, Day 613

News from the Profession. Judging By This List, Accountants Aren’t Marriage Material (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 12/5/14: Senate just too busy to pass extenders? And: grumbling about incentive tax credits.

Friday, December 5th, 2014 by Joe Kristan

lizard20140826Is the Senate just too darn busy to vote on the House-passed extender bill? Lame Duck Senate Majority Leader Harry Reid says it just might be, says a report in The Hill:

Majority Leader Harry Reid (D-Nev.) said Thursday night that the Senate might not be able to pass the House tax extenders bill before the end of the year.

“Everyone knows we have to do a spending bill. Everyone knows we have to do a defense bill,” Reid said on the Senate floor. “Everyone knows that we’re trying to do some tax extenders. We’re trying to do that but we’ll see.”

I hope he’s not serious. Given the stakes to individual and business taxpayers and to the IRS this filing season, I think Senator Reid coud fit an up-or-down vote into his busy, busy day.

This passive-aggressive foot-dragging could be an attempt to get some concession out of Senate Republicans while Senator Reid still is majority leader. Perhaps it’s a mere gesture to save face after his humiliation at the hands of the President, who shot down a compromise he had negotiated with House GOP taxwriter Dave Camp. Or maybe it’s just a poke at the GOP, which will take over the Senate next month.

The bill  (HR 5771) would extend 55 provisions that lapsed at the end of 2013 through the end of this month retroactively. The Lazarus Provisions include the $500,000 Section 179 limit, 50% bonus depreciation, the research credit and the five-year limit on built-in gains. It also includes individual provisions like the exclusion for IRA donations for charity and the deduction for educator expenses.

I still expect the Senate to pick up the bill soon. Accounting Today reports that the Senate is likely to vote on the House-passed “Extender” bill as soon as next week. Still, it is an unwelcome turn in the extenders melodrama, leaving taxpayers and the IRS hanging just a little longer.

Prior coverage: House passes extenders; Senate alternative appears dead. And: Gas tax fever!

Paul Neiffer, House Passes HR 5771 Tax Extender Bill

 

20120906-1Will corporate welfare tax incentives be an issue in the next Iowa legislature? A report by Iowa Public Radio’s Joyce Russell hints that it might be:

State assistance to attract Google, Microsoft, and Facebook to Iowa is under scrutiny by a statehouse committee.

The panel is looking at tax incentives the state hands out to attract industry, including the big datacenters which are making more than three billion dollars in capital investments in the state.

It appears chief Iowa Senate taxwriter Joe Bolkcom is involved:

“We need a better handle on the money being spent and the jobs being created,” says Iowa City Democrat Joe Bolkcom.

Officials with the Department of Revenue say the companies’ tax records are confidential . Lawmakers may sponsor legislation to get around that.

“Taxpayers have a right to know the exact cost,” Bolkcom says.

That’s the wonder of corporate welfare tax credits. Because tax returns are confidential, we can’t know exactly how much taxpayer money is thrown at any company. All we see are the phot0-ops and ribbon cuttings by the politicians who are being generous with other people’s money.

Senator Bolkcom says Iowa’s tax credits have doubled in four years. That’s true, though they are still below the $342 million record set in fiscal year 2007. The most recent Iowa Tax Credits Contingent Liabilities Report shows $248.5 million tax credits were issued in the last fiscal year.  The report attributes the decline to caps imposed on the credits in the wake of the Film Tax Credit Scandal.  That amount is expected to rise to $402 million for 2016. That compares to $428 million collected by the entire Iowa corporation income tax in 2013, according to this report (page 6).

I have an idea for a compromise. Get rid of Iowa’s highest-in-the world corporation income tax and all of the incentive tax credits. Enact The Tax Update’s Quick and Dirty Iowa Tax Reform! That should make everyone happy, right?

 

20140826-1Robert D. Flach has some fresh Friday Buzz. It looks like I won’t have my extended comments on his thoughts on tax preparer civil disobedience until next week. Dang extenders.

Keith Fogg, Litigating the Merits of a Trust Fund Recovery Penalty Case in CDP When the Taxpayer Fails to Receive the Notice (Procedurally Taxing)

Robert Wood, Recovered IRS Emails Can’t Be Revealed Because Of Privacy…That Was Already Breached,

Kay Bell, NYC’s high cigarette tax blamed for Eric Garner’s death.

TaxProf, The IRS Scandal, Day 575 (TaxProf)

 

Career Corner. Ex-Crazy Eddie CFO’s 10 Tips for Advancing Your Accounting Career (Adrienne Gonzalez, Going Concern). Always trust a felon!

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Tax Roundup, 12/3/14: House voting on extenders today. Are Senate, White House on board?

Wednesday, December 3rd, 2014 by Joe Kristan

20130113-3The House will likely pass one-year extender bill today. Will the Senate and White House go along? Multiple reports say that the House of Representatives is expected to approve HR 5771 today, reviving 55 perennially-resurected tax breaks through 2014. The breaks, which include bonus depreciation, the $500,000 Section 179 deduction, and the research credit, all expired at the end of 2013.

While the fate of the bill in the Senate and the White House are not entirely clear, I expect the House bill to pass, given the lack of alternatives.  The Wall Street Journal reports:

Senate Finance Committee Chairman Ron Wyden (D., Ore.) used a weekly Senate Democratic luncheon Tuesday to push for an alternative that would extend expiring tax breaks through 2015.

But his Republican counterpart on the committee, Utah Sen. Orrin Hatch, brushed that aside, saying time was running out. Mr. Hatch—on whom Mr. Wyden frequently relies when crafting deals—came out in favor of the short-term fix, saying the only alternative he would support at this point was the one worked out between Senate Majority Leader Harry Reid (D., Nev.) and House Ways and Means Committee Chairman Dave Camp (R., Mich.) and drew a White House veto threat last week. If the Senate advanced a new version, “there will be no bill” because “the House is going to leave,” Mr. Hatch said.

The full text of Sen. Hatch’s statements can be found here.

The Hill reports that the White House appears ready to go along with the House bill. Given the way the White House threatened a veto of the House-Senate deal that would have extended some of the breaks permanently, I think the lack of a veto threat means the President is likely to sign this version. While there appears to be some unhappiness with the House bill — Senator Grassley is not a fan of the one-year approach —  I expect the lame-duck Senate to pass it anyway. Unfortunately, it’s not clear when the Senate will act.

Congress has for years passed these provisions for one or two years at a time because Congressional budget rules allow them to pretend they are less expensive than they really are. Unfortunately, that often leaves taxpayers uncertain as to what the tax law is for the year until the year is almost over — or, in 2012, until the year was over. That makes it hard to evaluate the economics of important fixed-asset decisions. The abortive House-Senate deal would have ended this game for several key provisions, but the White House chose scoring cheap political points over an improved business tax environment.

Related:

Paul Neiffer, Is an One-Year Extension of Section 179 all we get?!

Howard Gleckman, How To End the Tax Extender Drama: Stop Calling Them Extenders—And Make Congress Pay For Them

Kay Bell, Tax extenders compromise: OK expired breaks for 2014 only

 

20121108-1Peter Reilly, Repair Regs – A Hellish Tax Season And Refunds Of Biblical Magnitude. Peter discusses the need, or not, for massive filing of useless accounting method changes to implement the new “repair regulations.” He also touches on a potential boon for owners of commercial real estate.

Robert D. Flach, TAKING ADVANTAGE OF THE 0% TAX RATE

William Perez, What You Need to Know about the Premium Assistance Tax Credit

Russ Fox notes A Rare Piece of Efficiency from the IRS

Tony Nitti, The Top Ten Tax Cases (And Rulings) Of 2014: #4-IRS Rules on Self-Employment Income Of LLC Members.

 

Robert Wood, What IRS Calls ‘Willful’–Even A Smidgen–Can Mean Penalties Or Jail

TaxGrrrl, Feeling Spendy This Year? ’12 Days Of Christmas’ Slightly More Expensive

 

microsoft-appleSound Advice. David Brunori offers Advice for the New Republican Legislative Majorities (Tax Analysts Blog). It’s full of sound advice, but I especially like this:

Republicans should become the party of virtue, courage, and honesty when it comes to taxes. They should fight crony capitalism, as there is nothing more abhorrent to the free market than the government picking winners and losers. Yet state governments do just that all the time. The proliferation of tax incentives represents horrible tax policy. That politicians can decide economic policy through tax incentives is more akin to a Soviet five-year plan than to Adam Smith’s invisible hand. True conservatives should fight attempts to use tax policy to further economic objectives. Broad-based taxes and low rates will always serve the conservative cause better than the existing nonsensical tax laws. Standing on principle to ensure a broad tax base is hard — and neither party has been able to do it. But it is a stand worth taking.

That would be wonderful advice here in Iowa, but our newly re-elected GOP governor has been up to his mustache in crony tax breaks to chase high-profile businesses. Meanwhile Iowa’s home-grown businesses don’t get the big subsidies. They are dragged down by the highest corporation tax rate in the developed world, baroque complexity, and a bottom-ten business tax environment.

A real pro-business tax reform in Iowa might look something like The Tax Update’s Quick and Dirty Iowa Tax Reform.

 

TaxProf, The IRS Scandal, Day 573.

 

lizard20140826Leslie BookH&R Block CEO Asks IRS To Make it Harder to Self-Prepare Tax Returns and Why That is Good for the Tax System.  “Yet, as I explain here, I think the changes he proposes would likely be good for the tax system because they could enhance visibility and accountability, principles the IRS should emphasize with issues that tend to have sticky error rates.”

H&R Block has been trying to pad its income for years on the backs of retail taxpayers. Its former CEO authored the illegal tax preparer regulations system the IRS tried to force on the industry — a system that would have run many of Henry and Robert’s competitors out of the buisness. Now they want to force the lowest-income earners through their doors.

I think the right approach to advice from an outfit that so shamelessly promotes its interests at the expense of taxpayers may be to carefully note it, and to do exactly the opposite.

 

Stephen Entin, No Mystery that Investment Slump Hurts Workers, Lowers Productivity and Wages (Tax Policy Blog)

 

News from the Profession. Why Is Everyone in Public Accounting Obsessed with Sports? (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 11/10/14: DOL nixes many employer health reimbursement setups. And: Sheldon!

Monday, November 10th, 2014 by Joe Kristan

Good morning from beautiful, if frigid, Sheldon, Iowa, where I am on the Day 1 panel of the Iowa State University Center for Agricultural Law and Taxation Farm and Urban Tax School. A good crowd has braved the brisk north winds and forecasts of snow — so now it’s up to us to make them glad they did.

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Elections are over I. Branstad says Iowa road funding a top priority, raising fuel tax on the table (Omaha.com)

Elections are over II. FAQs about Affordable Care Act Implementation (Part XXII) The Department of Labor has issued new guidance on small-employer plan arrangements. The guidance, issued just after the election, puts strict limits on the ability of employers to bypass group plan rules by reimbursing premiums or using Health Reimbursement Arrangements under Section 105. As plans doing that have been marketed to small employers in Iowa and elsewhere, this could be an expensive development for employers; violating these rules carries a $100 per day penalty for each affected employee.

The FAQ discusses premium reimbursement arrangements: (my emphasis):

My employer offers employees cash to reimburse the purchase of an individual market policy. Does this arrangement comply with the market reforms?

No. If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer’s payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Therefore, the arrangement is group health plan coverage within the meaning of Code section 9832(a), Employee Retirement Income Securi20121120-2ty Act (ERISA) section 733(a) and PHS Act section 2791(a), and is subject to the market reform provisions of the Affordable Care Act applicable to group health plans. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will violate PHS Act sections 2711 and 2713, among other provisions, which can trigger penalties such as excise taxes under section 4980D of the Code. Under the Departments’ prior published guidance, the cash arrangement fails to comply with the market reforms because the cash payment cannot be integrated with an individual market policy.(6)

This means that employers cannot have employees submit their insurance bills for reimbursement; doing so is considered a disqualified group insurance plan. The closest the employer can do is give an employee a raise without restriction, giving the employee the option of buying insurance.

The FAQ pretty much embalms Sec. 105 plans as substitutes for group plans.

A vendor markets a product to employers claiming that employers can cancel their group policies, set up a Code section 105 reimbursement plan that works with health insurance brokers or agents to help employees select individual insurance policies, and allow eligible employees to access the premium tax credits for Marketplace coverage. Is this permissible?

No. The Departments have been informed that some vendors are marketing such products. However, these arrangements are problematic for several reasons. First, the arrangements described in this Q3 are themselves group health plans and, therefore, employees participating in such arrangements are ineligible for premium tax credits (or cost-sharing reductions) for Marketplace coverage. The mere fact that the employer does not get involved with an employee’s individual selection or purchase of an individual health insurance policy does not prevent the arrangement from being a group health plan. DOL guidance indicates that the existence of a group health plan is based on many facts and circumstances, including the employer’s involvement in the overall scheme and the absence of an unfettered right by the employee to receive the employer contributions in cash.(12)

DOL LogoSecond, as explained in DOL Technical Release 2013-03, IRS Notice 2013-54, and the two IRS FAQs addressing employer health care arrangements referenced earlier, such arrangements are subject to the market reform provisions of the Affordable Care Act, including the PHS Act section 2711 prohibition on annual limits and the PHS Act 2713 requirement to provide certain preventive services without cost sharing. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will violate PHS Act sections 2711 and 2713, among other provisions, which can trigger penalties such as excise taxes under section 4980D of the Code.

It is difficult to determine the policy reasons behind this. As best I can tell, it seems to be that the DOL wants employees to be covered either under traditional group plans set up under the small business exchanges, or on individual plans purchased through the regular exchanges. Whatever the policy justification, it’s bad news for any employers using such arrangements, as the rules are already in effect for 2014.

Paul Neiffer has more at DOL Plays Hardball (Don’t Shoot the Messenger)!

If you are dealing with any vendor offering Section 105 plans that are attempting to make payment of health insurance premiums for more than one employee deductible by the employer and exempt from payroll taxes, be extremely careful.  As you can see from this Q #3, the DOL takes a dim view of these arrangements.

One last area of concern that was not addressed by the DOL is what happens with S corporation shareholders who have health insurance premiums reimbursed.  Under the self-employed health insurance deduction rules, there is a requirement for reimbursement; under the DOL Q&A, these reimbursements may run afoul of the ACA requirements.  If we get further clarity on this, we will let you know.

I understand this as restricting S corporation 2% owners to group plans, without a reimbursement option, but I suspect clarification is forthcoming.

Additional coverage from ISU-CALT: Updated! Heal.th Reimbursement Plans Not Compliant with ACA Could Mean Exorbitant Penalties.

 

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Sheldon scene, 2013. It’s slightly less cold this year.

William Perez, What You Need to Know about Reporting Payments Using Form 1099-MISC

Kay Bell, IRS taxpayer service outlook, short- and long-term, is bleak

Robert Everett JohnsonIRS Seizure of Assets Using Anti-Structuring Laws (Procedurally Taxing). It is a guest post by an attorney for the heroic Institute for Justice, which is defending the Arnolds Park, Iowa resturaunteur whose cash was stolen by the IRS.

TaxGrrrl, IRS Warns Taxpayers To Be Diligent As Identity Thieves Add New Twist To Phone Scam.

Russ Fox, Since the Dead Vote, Why Can’t They Get Tax Exemptions? “Cook County has begun to make sure that seniors are truly alive when taking the exemption.”

 

TaxProf, The IRS Scandal, Day 550. Todays links hit heavily on the failure of the agency to even look for the missing Lois Lerner e-mails in its servers or backup tapes. Yet Commissioner Koskinen just doesn’t understand why Republican appropriators don’t want to entrust him with a bigger budget.

Career Corner. Gentlemen, If Your Firm Offers Paternity Leave, Take All Of It (Caleb Newquist, Going Concern). Yes, it gives you lots of time to interview for that new job you’ll be needing.

 

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Tax Roundup, 9/10/14: Another campaign season, another Iowa tax credit proposal. And: a property tax appeal goes very badly.

Wednesday, September 10th, 2014 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

How Iowa’s tax law gets worse and worse, episode 7,433.  From TheGazette.com (my emphasis):

Gov. Terry Branstad and his running mate, Lt. Gov. Kim Reynolds, traveled to college campuses Tuesday offering their plan for making higher education affordable and reducing student debt.

The GOP team proposed offering fixed-price degrees or $10,000 bachelors degree for popular major at public universities to cut costs for al limited number of in-state students and tax credits for being volunteers in qualifying community activities during stops at Iowa State University in Ames and Drake University in Des Moines.

Say that again, slowly: “tax credits for being volunteers in qualifying community activities.”  Paid volunteerism.  What a wonderful concept, like non-alcoholic whiskey.

To reduce debt that is among the nation’s highest for college students, Branstad and Reynolds said they would work with the Legislature in 2015 to create a state tax credit that would allow students to reduce debt by participating in volunteer activities within their community through a qualified Student Debt Reduction Organization.

Details and specifics of the tax credit would be worked out so it would encourage community volunteerism while also maintaining the strength of other successful tax credit programs, such as the Student Tuition Organization Tax Credit, [campaign spokesman Tommy] Schultz said.

Bluto20140910It’s something cooked up to sound good in a re-election campaign.  Well, cooked-up may be too strong a term, when it is admittedly only half-baked (details and specifics to be worked out).  You would give the Department of Revenue a new job of supervising “Student Debt Reduction Organizations.” These organizations would be set up by non-profits and government agencies to spend state money.

Can you think of any way this will end well?  Does anyone really think the “volunteer” time will be well used? Or that these local communities will have useful projects for all these “volunteers?”  And does anyone doubt that local politicians will find ways to use these “volunteers” to help them get re-elected?

But it sounds good. “Promote civic involvement.”  And the Iowa tax law gets another barnacle.

Another fallacy of the Governor’s plan: the idea that the reason college isn’t “affordable” because there aren’t enough government programs and tax credits to subsidize it. Yet every few years there is a new subsidy or tax credit, on top of the old ones.   Pell Grants, student loan subsidies, Lifetime Learning Credits, HOPE Credits, American Opportunity Tax Credits, student loan interest deductions…  all touted as making college “more affordable.”  Yet somehow tuition keeps outpacing inflation.  It should be obvious by now that higher education just raises prices to soak up the subsidies.  More subsidies and tax credits are the problem, not the solution.

 

Why you might want to hire somebody to handle your property tax appeal.  From the Des Moines Register:

An Iowa man angry about his property taxes was fatally shot during a public meeting Tuesday after he pulled a gun from a briefcase and pointed it at the county assessor, law enforcement officials said.

Francis Glaser, a former Maquoketa city manager, had become agitated and vocal about his property taxes going up during a weekly meeting of Jackson County’s board of supervisors in Maquoketa, a town about 30 miles south of Dubuque.

It apparently involved a tax incentive.

 

Paul Neiffer, Will Tax Inversion Debate Yield Permanent Section 179

Peter Reilly, Andrew Kay Passes – Helped Accountants Abandon Pencil Pushing:

 I never knew who he was, but the machine that his company made had a profound influence on tax and accounting practice , at least in my neck of the woods.  Mr. Kay was responsible for the Kaypro.

I never used a Kaypro, but I am probably indebted to Mr. Kay. With my penmanship, I could never have survived in accounting without computers.

 

20140910-1Richard Auxier, Nearly All States Play the Lottery, But None Are Big Winners (TaxVox). “Playing the lottery can be fun. But politicians selling lotteries as a panacea for education spending are just as disingenuous as lotto advertisements promising big wins. And states pushing instant and electronic games on their poorest residents are doubling-down on a bad bet.”

Russ Fox, New Jersey Tries Hail Mary on Sports Betting; Will IRS Intercept?

Kay Bell, Will Tax Inversion Debate Yield Permanent Section 179

David Brunori, The Good, the Bad, and the Ugly — Florida Governor Rick Scott’s Tax Ideas (Tax Analysts Blog)

Matt Gardner, Wisconsin Contemplates Property Tax Shift from Business to Homeowners. (Tax Justice Blog). Business don’t ultimately pay taxes. They merely collect them on behalf of customers, employees and owners.

 

Kyle Pomerleau, New Earnings Stripping Bill is Fundamentally Unserious (Tax Policy Blog).  Of course it is. That doesn’t mean it won’t pass someday.

TaxProf, The IRS Scandal, Day 489. Today’s roundup includes this from the Washington Post about Commissioner Koskinen’s duplicity in handling the scandal:

Internal Revenue Service Commissioner John Koskinen testified this summer that he played no part in spreading word of the agency’s controversial missing e-mails to the Treasury Department or the White House. But one of his closest advisers apparently did.

And he wonders why Congress doesn’t want to give him all the money he asks for.

 

Career Corner.  How Failing the CPA Exam Might Actually Help You Succeed (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 6/12/14: Tax Credits run for governor. And: bad day for IRS in CRP tax case?

Thursday, June 12th, 2014 by Joe Kristan

20120906-1Crony tax credits have become an issue in Iowa’s race for Governor, reports The Des Moines Register:

The Republican Governors Association is out today with another TV ad attacking Jack Hatch.

The new ad accuses Hatch of sponsoring legislation to increase the availability of development tax credit while applying for tax credits for a real-estate project in Des Moines.

“Jack, isn’t that a conflict of interest?” the narrator asks.

It’s true that Mr. Hatch has been a successful player in the tax credit game.  It may be the merest coincidence that an awful lot of tax credits go to political insiders like Mr. Hatch and the spouse of Governor Branstad’s opponent in his first election.  But that’s not the way to bet.

While I’m all for anything that spotlights the inherent corruption of targeted tax credits, the Republican Governors Association may be inadvertently bringing friendly fire uncomfortably close to its own man.  For starters, the Governor is a five-term incumbent. If the system is set up to be played by political insiders, the Governor has had plenty of time to do something about it.

More importantly, political insiders can benefit richly from crony tax credits without claiming them on their own tax returns.  They benefit by claiming credit for the “jobs” generated by well-connected businesses that play the system to get the tax credits.  The Governor has played this game tirelessly.  Just off the top of my head

The $80 million+ in tax breaks for fertilizer companies.

The sales tax giveaway to the NASCAR track in Newton.

The rich tax breaks for data centers.

MP branstad

Governor Branstad, pre-mustache

In deals like this, the politicians claim credit for the jobs “created,” with no regard whether the lucky recipients of the breaks would have behaved differently without them, or for the jobs lost by other companies who compete with the winners for resources and customers, or for the jobs that would have been created had the funds been left with taxpayers to use without direction from politicians.

So yes, Governor, by all means call down the artillery on crony tax credits.  Just be sure to keep your helmet on.

Related:

The joys of cronyism

LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION

Governor’s press conference praises construction of newest great pyramids

 

20130114-1Roger McEowen, Eighth Circuit Hears Arguments in CRP Self-Employment Tax Case. “It would appear that the oral argument went well for the taxpayer.” 

Jana Luttenegger,  IRS Releases Taxpayer Bill of Rights.  “ These rights have always existed, but now the IRS has put the rights together in a clear, understandable list to be distributed to taxpayers.”  If they’ve always existed, they sure haven’t always been respected.

Peter Reilly, Your Son The Lawyer Should Not Be Your Exchange Facilitator.  Peter talks about the case I mentioned earlier this week, including another issue I left out.

 

Tax Justice Blog, Reid-Paul “Transportation Funding Plan” is No Plan at All:

Instead of taking the obvious step of fixing the federal gas tax, Reid and Paul propose a repatriation tax holiday, which would give multinational corporations an extremely low tax rate on offshore profits they repatriate (profits they officially bring back to the United States). The idea is that corporations would bring to the United States offshore profits they otherwise would leave abroad, and the federal government could tax those profits (albeit at an extremely low rate) and put the revenue toward the transportation fund.

Yeah, not a real fix.

Scott Hodge, Likely “Solutions” to Highway Trust Fund Shortfall Violate Sound Tax Policy and User-Pays Principle (Tax Policy Blog)

 

No Walnut STAndrew Lundeen, Higher Marginal Tax Rates Won’t Improve the World (Tax Policy Blog). “The Upshot and Dave Chappelle may be right that for someone with a $100 million that next dollar might not means as much as the first dollar. But that money doesn’t sit collecting dust. It is invested in the broader economy.”

Howard Gleckman, Did Multinationals Use a Foreign Earnings Tax Holiday To Burnish Their Financials Rather Than Reduce Taxes? (TaxVox)

Keith Fogg, Supreme Court’s Decision on Monday in Arkison Could Impact Kuretski Case and Constitutionality of the Removal Clause for Tax Court Judges (Procedurally Taxing)

Jack Townsend, BDO Seidman Personnel Sentenced for B******t Tax Shelter Promotion 

Kay Bell, NBA beats NHL in this year’s jock tax championship 

 

TaxGrrrl, Waffle House Refuses To Allow Waitress To Keep $1,000 Tip   

 

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Tax Roundup, 5/16/14: Iowa Alt Max Tax resurfaces. And: Alimony madness.

Friday, May 16th, 2014 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

The Iowa Alternative Maximum Tax Trial Balloon rises again.  From O. Kay Henderson, ‘Flat tax’ likely on GOP legislators’ agenda in 2015:

The top Republican in the Iowa House says if Republicans win statehouse majorities in the House and the Senate this November, one item on his wish list for 2015 is a “flat” state income tax. House Speaker Kraig Paulsen, a Republican from Hiawatha, spoke early this morning at a breakfast meeting of central Iowa Republicans.

Paulsen and his fellow House Republicans endorsed a “flat” tax proposal last year, but it was not considered in the Democratically-led Iowa Senate. The proposal would have allowed Iowans to continue filing their income taxes under the current system or choose the alternative of a 4.5 percent flat tax on their income, with no deductions.

I call this an “alternative maximum tax” because taxpayers will compute the tax both ways and pay the smaller number.  That contrasts with the alternative minimum tax, where you compute taxes two ways and pay the higher amount.  It has the obvious drawback of adding a new layer of complexity to the current baroque Iowa income tax.

20120906-1The proposal is likely an attempt to enact a lower rate system in a way that doesn’t upset fans of Iowa’s deduction for federal income taxes — particularly the influential Iowans for Tax Relief.  Because the deduction would rarely provide a better result than the alt max tax, support for the old system would wither away, maybe.

I’m probably too much of a tax geek to read the politics correctly, but I’m not convinced adding a new computation to the Iowa 1040 will fire up the electorate.  I think something like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would be easier to run on.  Eliminate all the crony tax credits and well-intended but futile tax breaks.  Get rid of the job-killing, worst-in-the-nation Iowa corporation income tax.   Drastically lower rates, increase the standard deduction, and limit the role of the income tax to funding the government.   This would get my vote anyway, and it would at least be awkward to argue instead for the current system that sends millions to some of Iowa’s biggest corporations as subsidies on the backs of you, me and small businesses.

Related: The Iowa flat tax proposal: a good deal for middle class and up, but not for lower incomes.

 

I always thought enforcing the tax rules for alimony would be about the easiest job the IRS could have.  When you pay alimony, you get an above-the-line deduction, but only if you list the name and social security number of the recipient ex-spouse.  Just match the deduction with the income and generate notices when they don’t match.

This information systems problem is apparently too much for the IRS.  Peter Reilly reports:

According to the TIGTA report there were 567,887 Forms 1040 for 2010 that had alimony deductions.  The total claimed was $10 Billion.  When they compared the corresponding returns that should have recorded the income, there were discrepancies on 266,190 returns including 122,870 returns that had no alimony income at all reported.  There were nearly 25,000 returns where the income recognized was greater than the deduction claimed which produced a bit of an offset ($75 million).  On net, deductions exceeded income by $2.3 billion.  In her piece “Alimony Tax Gap is $1.7 BillionAshlea Ebeling goes into more details on the report, so I’m going to get a little more into what I see as the big picture here.

While I’ve never been a huge fan of the IRS, over my career I had developed a grudging respect for the organization’s competence and professionalism.  That’s been mostly drawn down over the last few years.

 

taxanalystslogoChristopher Bergin, A Warning About the IRS That We Should Heed (Tax Analysts Blog):

As I wrote almost a year ago, the IRS is in trouble. Punishing it will do no more good than ignoring what has happened over the last year. The former seems to be the plan of House Republicans; the latter appears to be the White House plan. We need to fix it, and that is harder than either of the above two approaches.

This is correct.  Unfortunately, the IRS became a partisan organization in the Tea Party scandal, and it’s proposed 501(c)(4) regulations only make that official.  The impasse won’t be broken until the IRS does something to reassure Republican congresscritters.  Withdrawing the proposed rules is probably a necessary start.

 

Kay Bell, Johnny Football’s Texas residency can cut his NFL income tax.

Lyman Stone, The Facts on Interstate Migration: Part Five (Tax Policy Blog):

On the whole, these high-inward migration states tend to have lower tax burdens. North Carolina and Idaho have periodically had higher than average tax burdens, but most, like Tennessee and Nevada, have consistently low tax burdens. Again, this doesn’t conclusively prove that taxes drive migration, as no doubt other living costs are lower in these states too: but it does suggest that taxes cannot be discounted out of hand.

 

Jason Dinesen, Glossary of Tax Terms: Asset

TaxGrrrl, Tesla Continues To Roll Out Tax Strategies For Consumers .  An auto company with a marketing pitch built around tax credits seems like a bad thing to me.

Stop by Robert D. Flach’s Place for a solid Friday morning Buzz!

 

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Howard Gleckman, Are Multinationals Getting Tired of Waiting for Corporate Tax Reform? (TaxVox).  They seem to be taking a do-it-yourself approach more and more.

Tax Justice Blog, States Can Make Tax Systems Fairer By Expanding or Enacting EITC.  I think this is wrong, at least the way the earned income tax credit works now.  Arnold Kling has a much-more promising proposal that would replace the EITC and other means-tested welfare programs.

Kyle Pomerleau, Flawed Buffett Rule Reintroduced in Senate (Tax Justice Blog).  Of course, that’s the only kind.

 

Cara Griffith, In Search of a Little Guidance (Tax Analysts Blog). “If informal guidance is the only guidance available to practitioners and taxpayers, can they rely on it?”

TaxProf, The IRS Scandal, Day 372.  Guess what?  It wasn’t just a few rogues in Cincinnati.

 

News from the Profession.  Alleged “Touch It For a Buck” Creeper CPA Got His License Revoked For Felony Creepiness (Going Concern).

 

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Tax Roundup, 5/14/14: Earned income credits, still busted. And: extenders advance.

Wednesday, May 14th, 2014 by Joe Kristan
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.

Nope.  Still busted.  From WashingtonExaminer.com comes an update on what some call America’s most successful anti-poverty program:

The Treasury Department has released its latest report  on the fight against widespread fraud in the Earned Income Tax Credit program. The problem is, fraud is still winning. And there’s not even much of a fight.

“The Internal Revenue Service continues to make little progress in reducing improper payments of Earned Income Tax Credits,” a press release from Treasury’s inspector general for Tax Administration says. “The IRS estimates that 22 to 26 percent of EITC payments were issued improperly in Fiscal Year 2013. The dollar value of these improper payments was estimated to be between $13.3 billion and $15.6 billion.”

Wait.  Didn’t the President sign a bill in 2010 to fix all this?

The new report found that the IRS is simply ignoring the requirements of a law called the Improper Payments Elimination and Recovery Act, signed by President Obama in 2010, which requires the IRS to set fraud-control targets and keep improper payments below ten percent of all Earned Income Tax Credit payouts.

Whatever the EITC does to help the working poor, it is a boon to the Grifter-American community.  Fraudulent EITC claims are a staple of ID theft fraud and low-tech tax cheating in general.

It’s worth noting that the high rate of improper EITC payouts has not gone down in spite of the ever-increasing IRS requirements for preparers who issue returns claiming the credits.  This should give pause to folks who think IRS preparer regulations will stop fraud, though it won’t.

It’s also notable that Iowa recently increased its piggyback EITC to 15% of the federal credit — increasing the annual cost of the credit by an estimated $35 million.  Assuming Iowans are just as honest as other Americans, that means about $8 million of additional stimulus to the Iowa grifter economy.

Finally, the phase-out of the EITC functions as a hidden high marginal tax rate on the program’s intended beneficiaries, the working poor.  The effective marginal rate in Iowa exceeds 50% at some income levels.  Combined with other income-based phase-outs, the EITC becomes a poverty trap.

 

Related: Arnold Kling,  SNEP and the EITC. “My priors, which I think are supported by the research cited by Salam, is that trying to use a program like the EITC for social engineering is a mug’s game.”

 

 

Extenders advance in Senate.  Tax Analysts reports ($link)

Legislation that would extend for two years nearly all the tax provisions that expired at the end of 2013 cleared a procedural hurdle in the Senate May 13.

Senators voted 96 to 3 to invoke cloture on the motion to proceed to H.R. 3474, a bill to exempt from the Affordable Care Act’s employer mandate employees with healthcare coverage through the Veterans Benefits Administration or through the military healthcare program TRICARE.

The bill is the legislative vehicle for the tax extenders. It will be amended to include the text of the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act of 2014 (S. 2260) and likely that of the Tax Technical Corrections Act of 2014 (S. 2261), both of which the Senate Finance Committee passed April 3 via voice vote.

The bill that passes will probably look much like the Senate bill.  The House has advanced bills to make some of the perpetually-expiring provisions permanent, but the President, pretending that they won’t get passed every year anyway, says permanent extension is fiscally irresponsible.

Among the provisions to be extended yet again, mostly through 2015, are the research credit, new markets credits, wind and biofuel credits, bonus depreciation, and increased Sec. 179 deductions.  The five-year built-in gain tax recognition period is also extended through 2015.

Related: TaxGrrrl, Senate Moves Forward To Extend Tax Breaks For 2014

 

20120906-1O. Kay HendersonKnoxville Raceway ceremony for state tax break of up to $2 million:

Governor Terry Branstad went to Knoxville today to sign a bill into law that gives the Knoxville Raceway a state tax break to help finance improvements at the track.

“This is a great facility,” Branstad told Radio Iowa during a telephone interview right after the event. “Last year, in 2013, they attracted 211,000 visitors, so it’s a big tourism attraction and it’s a good investment and it’s great for the state to partner with the community for a project of this magnitude.”

Here’s how that partnership works: the racetrack will charge sales tax to its customers, and keep the money.  Only two other businesses are special enough to get this sweet deal.  Tough luck for the rest of us who don’t have the good connections and lobbyists.

 

Walnut st flowersJana Luttenegger, Updated E-Filing Requirements for Tax Preparers (Davis Brown Tax Law Blog).  “The handbook is not exactly clear.

Jason Dinesen, Things Tax Preparers Say: S-Corporation Compensation.  “But too many business owners — and their accountants — treat S-corps like a magic wand that can just make taxes disappear completely.”

Kay Bell, IRS fight to regulate tax preparers officially over…for now

Peter Reilly, Can Somebody Explain Tax Shelters To Thomas Piketty?  In the unlikely event that the Piketty recommendations are ever enacted, Peter notes that “there will be a renaissance of shelter activity.”  Peter provides a “Cliff Notes” summary of this year’s big forgettable book I’ll never read, which I appreciate.  Also: Peter uses the tax-law-as-Swiss Army Knife analogy that I am so fond of.

Robert D. Flach, STILL MORE CLIENTS SCREWED BY THE TAX CODE.  “The list of taxpayers screwed by our current Tax Code is not a short one.  Today I add taxpayers with gambling winnings.”

 

20130110-2Howard Gleckman, How “Dead Men” Fiscal Policy Is Paralyzing Government (TaxVox).  He reviews a new book, Dead Men Ruling, by Gene Steurle:

“We are left with a budget for a declining nation,” Gene writes, “that invests ever-less in our future…and a broken government that presides over archaic, inefficient, and inequitable spending and tax programs.”

All this has happened due to a confluence of two unhappy trends: The first is what the late conservative writer Jude Wanniski memorably described almost four decades ago as the “Two-Santa Theory.”

The Santas are the two parties, each of whom pick our pockets to fill our stockings.

 

Alan Cole, The Simple Case for Tax Neutrality (Tax Policy Blog).  “When states give preferential rates of sales tax to certain goods, the most visible result is the legal bonanza that follows from trying to re-categorize goods into the preferred groupings. ”

David Brunori, Repealing the Property Tax Is an Asinine Idea (Tax Analysts Blog). “Public finance experts are almost unanimous in their belief that the property tax is the ideal way to fund local government services… Most importantly, the property tax ensures local political control.”

William McBride, What is Investment and How Do We Get More of It? (Tax Policy Blog).  “Full expensing for all investment, according to our analysis, would increase the capital stock by 16 percent and grow GDP by more than 5 percent.”

 

TaxProf, The IRS Scandal, Day 370

News from the Profession.  AICPA Tackling the Important Issue of Male CPAs Wanting It All (Going Concern). 

 

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Tax Roundup, 4/29/14: Funding what we do anyway edition. And: the real IRS crisis.

Tuesday, April 29th, 2014 by Joe Kristan

Remember, Iowa 1040s are due tomorrow!  They extend automatically, with no need to file an extension, to October 30 if you have at least 90% of your 2013 tax paid in.  If you need to pay in some more, use Iowa 1040-V.

 

Via Wikipedia

Via Wikipedia

O. Kay Henderson reports on a New state tax break proposed for Iowa parents who adopt:

The legislature has voted to establish a new tax credit for Iowa parents who adopt a child. If the governor signs the bill into law, Iowans could claim a credit of up to $2500 per child for adoption-related expenses.

The bill would allow the credit for expenses like legal fees and the medical bills for the birth mother.

So the legislature is boldly addressing the lack of available parents wanting to adopt children by subsidizing the process.  Except there is no lack of willing prospective adoptive parents.  In fact, the high cost of adoptions is largely driven by the lack of U.S. babies available, forcing parents wanting to adopt to pursue expensive overseas adoptions.

Adoptive parents do a wonderful thing, taking a stranger’s child into their house as their own.  But all good things don’t necessarily need their own tax break.  This break pays people to do what they are already doing.  If the tax law needs to encourage something, is this the most important thing to do?  Should it instead encourage something people wouldn’t do otherwise?  Should people choose what to do without tax law involvement?  Is it really worth making the Department of Revenue an overseer of the adoption process?  Nobody cares, apparently, as HF 2468 flew through the Iowa Senate 48-0, and the Iowa House, 95-1.  Governor Branstad will come out against farmers before he vetoes this one.

 

I’m sure they are.  Iowa Renewable Fuels Group Pleased With Biofuels Bill Approval. More special favors for special friends.

 

A scene from the heydey of Iowa energy independence.

A scene from the heydey of Iowa energy independence.

 

Kay Bell, Maryland pays $11.5 million to keep House of Cards.  Some people never learn.

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Janet NovackThere’s A Crisis At The IRS And It’s Not What You Think:

The IRS is, however, an insular, often tone deaf and sometimes bumbling bureaucracy which is being starved of the resources it needs to do its job.  Since 2010, its Congressional appropriations have fallen 7% —-and that’s in nominal dollars, before any adjustment for inflation. During the same period, its appropriations funded workforce has shrunk by 10%, with enforcement staff down 15%, according to numbers Congress’ Government Accountability Office released last week. Meanwhile, the tax agency’s workload has increased with the explosion of identity theft tax refund fraud; a 4% growth in returns filed; and new laws to administer, including the Affordable Care Act  (a.k.a. Obamacare).

That is precisely true.  It’s also mostly the agency’s own fault.   The agency been shown to have used its powers against political opponents of the administration.  It refuses to back off of proposed regulations that would make its political role permanent.  Until it swears off that approach, it can only expect short funding.  The House GOP would be fools to fund an agency dedicated to the other party.  Untill Commissioner Koskinen can rise above pro-administration partisanship and pull the proposed regulations, the agency will continue to be shorted.

 

Annals of Public Service.  Rep. Grimm charged with tax fraud, says he won’t quit (USA Today):

Republican Rep. Michael Grimm was indicted Monday on federal charges of tax evasion and perjury for allegedly hiding more than $1 million in revenue from a New York City restaurant he owned where, prosecutors said, he also hired undocumented immigrants.

Grimm, a former FBI agent who has been under federal investigation regarding campaign contributions, said he is the victim of a “political witch hunt” and said he would not resign his seat.

While you can’t rule out a political explanation, the man is a politician, so the charges are at least plausible.  If it is an unsupported political prosecution, that will become apparent quickly.

Even if the charges are supported, that doesn’t rule out political bias.  After all, Democrat Charlie Rangel was never indicted, in spite of failing to pay his taxes for years.  That’s why arguments that the Tea Party persecution was OK, because some Tea Party groups didn’t qualify for exempt status, are unconvincing.  When a law is enforced only against opponents,  it is a gross injustice, even if the selective enforcement catches some actual violators.

 

IMG_1944Peter Reilly, Tax Court Denies Amway Losses – Again.  Peter ponders the Amway couple I discussed last week.  Peter has actually attended an Amway presentation, and he explains how the program works – or doesn’t.

Tony Nitti, Tax Geek Tuesday: Tax Planning For Mergers And Acquisitions, Part II.  This post discusses the tax-free kind.

TaxGrrrl, Let’s Go Places: Toyota Workers Could Save Big Tax Dollars With Move.  Food for thought for those who think state taxes are irrelevant.

 

TaxProf, The IRS Scandal, Day 355

Tyler Cowen, Accounting for U.S. Earnings and Wealth Inequality.  “So much of the current Piketty debate is simply forgetting that…science exists and has already offered a wide range of insights on these topics, as well as having rendered some of the more extreme claims unlikely.”

Richard Borean, Does a Flat Income Tax Create Income Inequality? (Tax Policy Blog).  Short answer: no.

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Jeremy ScottThe Most Expensive Extenders (Tax Analysts Blog).  “Temporary tax policy is generally bad, but temporary policy that is designed to encourage long-term investment decisions is even worse. ”

 

It’s Tuesday!  That makes it Robert D. Flach Buzzday!

 

Russ Fox, It’s Probably Not Good for Your Case When the Court Considers Sanctioning Your Attorney.  When  your lawyer angers the judge, he may not be helping.

News from the Profession.  This Off-Kilter Accounting Firm Just Launched a New Website Begging to Be Judged (Going Concern)

 

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Tax Roundup, 4/28/14: No connection found for Iowa broadband credit. And: it can take a long time to recover from tax season.

Monday, April 28th, 2014 by Joe Kristan


20120906-1
Truly we live in the age of wonders.  
A new set of economic development tax credits made it to the floor of the Iowa House on a Friday — and failed.  It’s a wonder that they actually showed up on a Friday — and to reject corporate welfare, to boot.

Before we get excited, it would be wrong to believe that the Iowa General Assembly has suddenly come to its senses about tax incentives.  It appears that many of the “no” votes on HF 2472 were from people who felt it wasn’t a big enough giveaway, reports the Des Moines Register:

Democratic leader Mark Smith, D-Marshalltown, said his members voted against the bill because they felt it didn’t go far enough in incentivizing and stimulating the expansion of high-speed Internet service.

Governer Branstad was unhappy:

“Rather than coming together to pass common sense legislation to increase broadband access in rural Iowa, Iowa House Democrats have turned their backs on rural Iowans and those who are under served,” Branstad said. “Today, the Iowa House Democrats played the worst of political cards; the Washington, D.C., hand of ignoring what is in the best interest of the taxpayers for political purposes.”

But nine Republicans also voted no in the 44-51 vote against the bill: Heartsill (Marion), Mawell (Poweshiek), Pettengill (Benson), Salmon (Black Hawk), Shaw (Pocahontas), Sheetas (Appanoose), Upmeyer (Cerro Gordo), Vander Linden (Mahaska), and Watts (Dallas).  If four of them had voted with the Governor, the bill would have passed.   The Des Moines Register didn’t bother to ask the Republicans why they voted no, but O. Kay Henderson did:

Representative Guy Vander Linden of Oskaloosa was among the nine Republicans who voted no.

“The ‘Connect Iowa’ bill, in my mind, doesn’t connect any Iowan, let alone every Iowan,” Vander Linden said.

Vander Linden faulted the bill for the way it handed out tax breaks to companies.

“We don’t say they need to meet any requirements in terms of our capacity, speed — anything. All we say is: “If you will put broadband infrastructure in place in any unserved or underserved area…we’ll give you all these benefits,” Vander Linden said. “That, to me, sounds like a blank check that I’m not willing to sign up to.”

Lack of standards and accountability hasn’t stopped tax credit giveaways before.  And they actually worked on a Friday, too. Yes, it truly is an age of wonders.

 

20140307-1Jason Dinesen, I Get Very Sad When a Client Gets Involved in Multi-Level Marketing.:

The reason I get sad nothing to do with taxes or fears that the client will be over-aggressive with deductions.

The reason I get sad is: so few of them actually make money.

 

Russ Fox, Your Dependents do have to be Your Dependents…

Kay Bell, Storm season 2014 arrives with a vengeance. Disaster victims should seek tax recovery help after the skies clear

TaxGrrrl, Now That Tax Day Has Passed, How Long Should You Keep Those Tax & Financial Records? 

Paul Neiffer, Are You Still Running Windows XP?! I finally upgraded to Windows 8.1 at home this weekend — a virtual machine on an iMac running Parallels Desktop.  It was the smoothest Windows installation I’ve ever done — it actually went without a hitch the first time through.

 

 

TaxProf, The IRS Scandal, Day 354

Renu Zaretsky, Tax Shelters, Tax Fights, and One Way to Reform a Zombie.  The TaxVox headline roundup includes an update on House taxwriter plans to work on an “extenders” bill this week.

Tax Justice Blog, Lawmakers Will Move Tuesday to Approve Hundreds of Billions in Business Tax Breaks — and Still No Help for the Unemployed.

William McBride, Corporate Exits Accelerating, Taking Jobs with Them (Tax Policy Bl0g).  Rates matter.

 

IMG_2493U.S. residents must pay U.S. tax, regardless of celestial citizenship.  A Minnesota couple hasn’t gotten the message, according to PioneerPress.com:

Living in the “Kingdom of Heaven” will not get you out of paying taxes, according to federal prosecutors.

On Tuesday, Tami Mae May, 55, was indicted in U.S. District Court in Minneapolis on 15 counts of filing fraudulent tax returns and a single count of obstruction of due administration of internal revenue laws, according to the U.S. attorney’s office.

Through 2013, she claimed “zero income,” signed under altered certifications, said both she and her husband were not citizens of the United States but were instead permanent residents of the “Kingdom of Heaven,” and reported false withholdings in an attempt to claim “hundreds of thousands of dollars in fraudulent … refunds,” the U.S. attorney’s office said. 

I need to research where the Bible says you can recover cash from the IRS as a result of a divine passport.

 

20140330-1Practitioners everywhere are putting their lives together after another tax season.  Yes, it’s rough, but it’s unlikely you will still be sorting out this tax season two years from now, like an Iowa woman who is just getting her 2012 tax season put to bed.

Here’s what this North Liberty tax practitioner faced in 2012:

The co-owner of a local tax service has been accused of using more than $22,000 from the business’s savings account to cover her credit card bills and her husband was arrested for allegedly causing a drunken disturbance at a local elementary school.

According to an Iowa City police criminal complaint, an investigator met with a co-owner of C & M Tax Service. The other co-owner is 31-year-old Melissa M. Frost of North Liberty.

But it was worse than that:

Police said Frost’s husband, 33-year-old Cory A. Frost was also arrested on Friday. Cory Frost went to North Bend Elementary in North Liberty at 2:45 p.m. to confront an employee there concerning a “situation with his wife,” according to North Liberty police Lt. Diane Venega. It is unclear if that situation is related to Melissa Frost’s arrest.

[…]

When police found Frost, he smelled of alcohol and appeared to be intoxicated. Police said Frost had a blood-alcohol content of .204 percent. He was previously convicted of public intoxication.

KCRG provides an update:

A North Liberty woman accused of stealing money from her own business entered an Alford plea as part of a plea deal with prosecutors.

Melissa Frost, 34, entered the pleas on two separate counts of tampering with records last week, according to online court records. Under the Alford Plea, Frost admits no guilt but acknowledges there is likely enough evidence to convict her.

As part of the deal, Frost received a sentence of probation and deferred judgement, which means she could have the conviction expunged from her record if she fulfills the terms of her probation.

So however bad your tax season was, this is a reminder that somebody, somewhere, probably had it worse.

 

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Tax Roundup, 1/13/14: They’re back edition. And: tax fairy doesn’t show up at appeals court.

Monday, January 13th, 2014 by Joe Kristan


20130117-1
The 2014 session of the 85th Iowa General Assembly begins today.
 It doesn’t look like much tax legislation will pass.

The Governor abandoned a plan to allow taxpayers to choose between the current byzantine Iowa income tax and a lower-rate version with fewer deductions and no deduction for federal taxes paid even before the session started.  He instead will focus on lame feel-good initiatives in an election year, reports Omaha.com:

Gov. Terry Branstad is set to unveil his agenda Tuesday during the Condition of the State address. He said his priorities will include expanding broadband Internet access, fighting school bullying and curtailing student loan debt.

The Governor’s opposition will block any tax reform that isn’t sufficiently punitive to the “rich” — which means any reform worthy of the name.  They will try to change some of Iowa’s worst corporate welfare giveaways, reports the Des Moines Register, but the Governor, an inveterate smokestack chaser and ribbon-cutter, can be expected block any restrictions on using your money to lure and subsidize your competitors.

Meanwhile, trial balloons about increasing the gas tax have already deflated.  That means we can expect a quiet session on the tax front, and a continuation of Iowa’s insanely complex and worthless tax system for another year.  But if they change their minds and want to do something useful, it’s always a good time to talk about The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

tax fairyTax Fairy seeker loses appeal.  A South Dakota surgeon who looked across the ocean for the Tax Fairy found only grief — and the grief wasn’t alleviated on appeals.  The Eighth Circuit Court of Appeals last week upheld the conviction that led to a five-year sentence for Dr. Edward Picardi.

The doctor used a scheme where he “leased” his medical services to an offshore company he controlled to artificially reduce his income by stashing earnings in offshore accounts.  The scheme was promoted to him by an attorney-CPA who has been acquitted of criminal charges in another employee leasing case.

Other taxpayers have avoided fraud penalties from employee-leasing to offshore entities (see here), but not taxes and penalties.  When the best you can say about a tax plan is that you avoided fraud penalties, it’s not much of a plan.  There is no tax fairy.

Prior coverage here.

 

Kay Bell has Important January tax dates, deadlines

 

Lyman Stone, Should Nebraska Follow the Example of Illinois or Indiana?  “The case of Illinois is a great example of how higher taxes can contribute to a worsening business climate, which leads to less jobs.”

Annette Nellen, Marijuana and the Tax Law.  Despite appearances, there is no evidence the lawmakers are smoking something when they write tax laws.

TaxGrrrl, Top 10 Most Litigated Tax Issues.  Number one is penalties.

TaxProf, The IRS Scandal, Day 249

Robert D. Flach offers a SPECIAL OFFER FOR ITEMIZERS!

 

TaxTrials, Famous Fridays: Wesley Snipes, A Lesson in Listening to Bad Advice.  Did he ever.

 

The Critical Question: Massages May Feel Nice, But Can You Deduct Them at the Poker Table? (Russ Fox)

News from the Profession: KPMG Upgrades Its Female Interns From Necklaces to Camisoles  (Going Concern)

 

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Tax Roundup, 12/31/2013: So much for Iowa tax reform. And: last-minute charity!

Tuesday, December 31st, 2013 by Joe Kristan

ijlogoThere’s only so much you can do on one day to achieve last-minute tax deductions.  The markets are open, so you can harvest your tax losses.  The post office closes early, so if you want to mail a check for a deductible expense, get down there this morning.  You might want to review all of my 2013 year-end tax tips for some other ideas.

If you are both charitable-minded and deduction-minded, credit-card donations up to midnight tonight work.  Indulge me while I suggest a few good causes that can get you a charitable deduction:

Salvation Army, doing hard work with the homeless and lost and on hand to help at disasters, doing much with little.

Iowa Donor Network, the Iowa organization that gathers and allocates donor organs.

Institute for Justice, the non-profit that helps the little guy fight back against government’s bent on stealing their business or preventing them from making a living.  IJ is the outfit behind the battle against the IRS preparer regulation power-grab — it’s hard to imagine how the IRS would have been stopped without their good work.

The Tax Foundation, fighting the good fight for sound tax policy.

Reason Foundation, supporting liberty against all comers.

Alzheimers Association, fighting an awful disease.

Sertoma, little platoons working to prevent hearing loss through education and awareness.

Cornell College, my undergraduate alma mater.

Southern Illinois University, where I got my accounting degree.

Last but not least, The ISU Center for Agricultural Law and Taxation, sponsor of the Farm and Urban Tax Schools.

That’s it for our 2013 year-end tax tips, but there’s good stuff all year at the Tax Update!

 

Related:

William Perez, Last Day Deduction Ideas

TaxGrrrl, 13 Dramatic Year End Tax Strategies For 2013   

 

If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

So much for the Iowa alternative maximum tax.  Branstad says he’s “realistic” — abandoning idea of pushing for income tax changes in 2014, reports O. Kay Henderson:

Earlier this month Governor Terry Branstad was considering a plan to let Iowans keep filing their personal income taxes under the current system, or opt for a flatter, simpler system with fewer deductions. Branstad’s now abandoning the idea.

“I’ll be real frank to say that with the present make-up of the senate and particularly with the present chairman of the Ways and Means Committee, I doubt that we’re going to see anything significant on the tax front this year,” Branstad said during an interview with Radio Iowa.

The majority Senate Democrats, led by Joe Bolkcom, are obsessed with sticking it to “the rich,” meaning employers, and the Branstad plan fails to do so sufficiently.  As the Senate can block any tax proposal, there was never much hope for the Branstad plan.

As the Governor’s half-baked plan was going nowhere anyway, perhaps now he can start working for the sort of real income tax reform that is so long overdue in Iowa.  The current system is a rat’s nest of special interest breaks, feel-good provisions, complexity and high rates that pleases only lobbyists and string-pullers.  It discourages small businesses with unforgiving complexity while paying the well-lobbied to be our friends.

Let’s get rid of all of the special deductions for special friends of the politicians, and all of the feel-good deductions, and even the deduction for federal taxes.  Oh, and lets get of the Iowa corporation income tax entirely.  Let’s drastically reduce rates to 4% or less and make Iowa taxes easy to understand and pay.  Governor, embrace the Tax Update’s Quick and Dirty Iowa Tax Reform plan for all and see if the soak-the-rich crowd really wants to stand up for insiders, lobbyists, complexity, high rates, and high compliance costs.

 

It’s a dishonor just to be nominated, but Russ Fox can only choose one 2013 Tax Offender of the Year.  The recipient worked very hard to earn the title, and is quite deserving.

 

Tony Nitti, Tax Geek Tuesday: Does The Sale Of Property Generate Ordinary Income Or Capital Gain?  It depends on what you sell, and who you sell it to.

 

Scott Hodge,  Out With the Extenders, In With the New Obamacare Taxes (Tax Policy Blog).  In case you were getting excited about a new year.  It lists all of the Lazarus provisions that expire at midnight, and all of the new taxes that start at 12:01.

Kay Bell,  Expiring commuter tax break will cost public transit users

 

Robert D. Flach brings you his last Buzz of 2013!

Jason Dinesen lists his Most-Popular Blog Posts of 2013

News from the Profession.  Count Your Blessings For Not Being on These Horrible Inventory Counts (Going Concern)

 

I will take the rest of the week off to clear my mind for tax season.  Happy New Year, and see you on Monday!

 

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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, 12/5/2013: Branstad floats optional income tax without federal tax deduction. And: is IRS hiding something?

Thursday, December 5th, 2013 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

Iowa Alternative Maximum Tax proposal revived?  Governor Branstad may push an optional income tax with lower rates and no deduction for federal taxes.  This plan looks like an attempt to improve Iowa’s byzantine income tax without provoking the wrath of Iowans for Tax Relief, the Muscatine-based advocacy group that strongly opposes efforts to do away with the deduction.  KJAN.com reports:

Iowa’s income tax rates higher when compared to most other states because Iowa offers a deduction that’s offered in only five other states. That deduction allows Iowans to subtract their federal income tax liability from their income before calculating their state income taxes.  “We don’t want to erode federal deductability,” Branstad says, “and that’s why we’re saying: ‘Give ‘em the option.’” By giving taxpayers the option to file their income taxes under the current system with that major deduction or under a new system with lower and flatter rates, Branstad might avoid the firestorm he faced from his fellow Republicans in the late 1980s when he proposed doing away with that deduction.

The Governor appears to plan to add a new twist to the plan, reports Kathie Obradovich:

Branstad indicated that he wouldn’t allow Iowans to “game the system” by changing their form every year. That means taxpayers who give up the federal deduction would have to stick with the choice even if the other option would result in lower taxes in a given year.

That means the new system would be a one-way street.  It no longer would be an “alternative maximum tax,” where taxpayers would always compute their tax both with and without the federal deduction and choose the lower amount.  That makes it even worse than the version passed by the Iowa House of Representatives last year, which would have allowed taxpayers to make the choice annually.  Unless the new system provides significantly better results in the great majority of circumstances, most taxpayers would want to retain the option to use the federal deduction.  That would stall the (presumably) desired transition to a simpler system.  Both the Branstad plan and the House plan significantly add to the complexity of the tax law.

While Iowa’s high stated tax rates — individual and corporate — don’t help, the ridiculous complexity of Iowa tax law is the real problem.  Iowa has a bunch of penny-ante credits and deductions that don’t apply for federal purposes.  These are too small to make a significant difference to taxpayers but also too small for the Department of Revenue to police.  There are also dozens of special-interest tax credits and deductions that take dollars from the rest of us on behalf of people with connections at the Statehouse.

It’s not in his nature, but the Governor ought to go bold and embrace the Tax Update’s Quick and Dirty Iowa Tax Reform Plan.  It strips the Iowa tax law to a very few deductions and repeals Iowa’s highest-in-the-nation corporation income tax while drastically lowering personal rates.  The Iowa Senate is unlikely to pass the Governor’s half-baked half-measure anyway; why not change the terms of the debate with a plan that actually makes sense?

Related:  The Iowa flat tax proposal: a good deal for middle class and up, but not for lower incomes.

 

taxanalystslogoChristopher BerginTax Analysts v. IRS: What Are They Hiding? (Tax Analysts Blog):

Back in August, I wrote about the lawsuit Tax Analysts had filed against the IRS seeking documents under the Freedom of Information Act. The documents being sought were training materials used to instruct and guide IRS personnel in the IRS exempt organization determinations office in Cincinnati. The big story then, and now, was generated by former EO director in the IRS Tax-Exempt and Government Entities Division Lois Lerner’s admission that the agency had used inappropriate means to determine which organizations qualified for tax-exempt status as social welfare organizations. The organizations singled out for extra scrutiny were mostly, if not entirely, conservative. Tax Analysts felt compelled to seek relief from the courts because we were getting nowhere with the IRS – other than the big stall – even though it had promised expedited treatment on our original request.

Several months later, the big stall continues — to the point that I have to ask myself whether the IRS just made a stupid mistake in targeting those organizations or whether something much worse is going on. 

They are using the “taxpayer confidentiality” excuse for their standard big stall.  Christopher isn’t buying it:

But I’ll say it again: Training materials, really? Why on earth would the IRS try to keep those secret? You’d think the training manuals would all be in a file cabinet somewhere, which hardly would require a search party of 100 lawyers and a scouring for tax return information.

Could it be that this time something is different? Could there be a smoking gun here? I’m not saying there is. I’m just saying it may be time to start asking that question. Because even for the IRS, this is darned peculiar behavior.

Congress should amend the taxpayer confidentiality rules to keep the IRS from using them as an excuse to hide its own dirty laundry.  It shouldn’t require a federal lawsuit to get the IRS to publicize internal non-taxpayer documents.

 

 

20130121-2Whither the Registered Tax Return Preparer Program?  Robert D. Flach argues that the RTRP designation that was part of the nearly-dead IRS preparer regulation power grab should be administered by the IRS on a voluntary basis.  I disagree.

Robert would like a way to distinguish the better class of “unenrolled” preparers from less-professional seasonal preparers.  I can understand that, but I don’t think that the IRS is the agency that should do this.  It would divert already strained IRS resources to do something the preparer industry could do on its own.  I agree with Jason Dinesen that if preparers want a government designation, they should take the Enrolled Agents exam, which is much more difficult than the RTRP literacy test.  The EA designation is sadly underappreciated in the market, and adding a new IRS-run designation would only make that worse.

 

The IRS reminds us that the “savers credit” can help lower-income taxpayers who contribute to a retirement plan.  This is a non-refundable credit of up to 50% of the amount contributed to IRAs or deferred to a 401(k) plan.  For parents, funding a young adult offspring’s retirement plan contribution is a tax-efficient way to help build a nest egg.

 

Don’t try this with your tax deadlines.   TIGTA: IRS Is Seven Years Past Statutory Deadline for Providing Online Account Access to Taxpayers (TaxProf).  From the TIGTA report:

The RRA 98 required the IRS to develop procedures to allow taxpayers filing returns electronically to review their account online by December 31, 2006. The IRS did not meet this requirement, and we determined that the IRS has not made adequate progress in allowing taxpayers to access tax accounts. Currently, taxpayers cannot review account information electronically.

In fact, the IRS is getting worse, having cut back electronic access for tax professionals.  That makes resolving even a simple IRS notice a tedious multi-week snail-mail slog.

 

Tony Nitti, The Definitive Questions And Answers On The New Net Investment Income Tax [Updated For Final Regulations] 

amazonCara Griffith It’s a Bird, It’s a Plane…It’s Amazon Prime Air? (Tax Analysts Blog).  Sales tax by drone.

Alan Cole, Report: Obamacare Premium Subsidies Will Need Fraud Protection (Tax Policy Blog).  No kidding.

TaxProf, The IRS Scandal, Day 210

 

Kay Bell, Tax e-filing continues to grow, hitting 122 million in 2013

TaxGrrrl, Will Congress Drive Up Gas Taxes In 2014?   

 

Um, because most commuters drive?  Why Does the Tax Code Favor Commuters that Drive? (Tax Justice Blog)

Going Concern, IRS’ Improved e-File System Is a Total Success Except For Two Jerks Who Foiled It

 

Don’t trust tax collectors, if you’re a tax collector:

The former tax collector of Plainville, who is also former treasurer of the Connecticut Tax Collectors Association, was arrested Monday morning and charged with first degree larceny, after being under investigation for possible embezzlement since June.

Debra Guerrette, of Bristol, was placed on administrative leave from Plainville’s Revenue office in June after Bristol police informed the town Guerrette was involved in a criminal investigation.

After an analysis of the financial records for the Connecticut Tax Collectors Association, and also Guerrette’s financial records, police said she had “misappropriated funds in excess of $50,000” between 2008 and 2013, into her personal account.

Will there be a special assessment of the collectors to make up the difference?

 

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