Posts Tagged ‘Branstad tax policy’

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

Monday, February 18th, 2013 by Joe Kristan

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

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

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

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

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

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

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

 

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

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

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

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

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

 

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

 

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

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

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

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

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

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

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

 

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

Jack Townsend,  New Plea Agreement Involving Israeli Banks

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

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

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

 

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

 

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

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

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

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

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

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Tax Roundup, 2/15/2013: Governor couples Iowa taxes to fiscal cliff bill. Also: 19 years for municipal thief.

Friday, February 15th, 2013 by Joe Kristan

20130117-1Governor Branstad has signed the bill conforming Iowa’s tax law to federal changes enacted last month.  The Governor signed SF 106 yesterday afternoon.

The bill allows taxpayers to use several federal provisions in computing their 2012 Iowa taxes, including:

– The federal Section 179 deduction of up to $500,000.

– The federal above-the-line deductions for tuition and educator expenses.

– The exclusion for IRA distributions to charity for taxpayers who have reached age 70 1/2, and the transitional rules for January 2013 charitable rollovers of IRA distributions.

– The optional deduction for state and local sales taxes.

The bill does not conform Iowa to federal bonus depreciation; Iowa filers will normally use federal standard MACRS depreciation instead.

 

Tony Nitti,  Senate Proposal for Tax Reform Part II: Democrats Seek To End S Corporation Payroll Tax Loophole.  It’s similar to nonsensical proposals put forward in prior years to tax S corporation K-1 income when 75% or more of revenues are “attributable” to three or fewer shareholders — an impossible standard to evaluate in many cases, and one that discriminates against the smallest S corporations.  It shows they are lazy — the problems with the approach are well known, yet the won’t make the effort to correct, instead trotting out the same old bill.  It just shows they aren’t serious.

David Cay Johnston finds the cuts to IRS funding that would result from the impending sequester “Particularly Devastating” (Tax.com)

 

Going Concern,  Former Dixon Comptroller Rita Crundwell Gets Nearly 20 Years.  She stole over $50 million from an Illinois municipality of 15,000 people going back to 1990.  And nobody noticed for over 20 years.

Kay Bell,  IRS’ Where’s My Refund? site swamped by impatient refund tracking taxpayers.

Taxpayers overwhelmed with compliance demands, asks government to slow down.  IRS Overwhelmed With Refund Requests, Asks Taxpayers To Slow Down(TaxGrrrl)

Paul Neiffer, Another Bill to Reduce Farm Payments is Introduced!

Jack Townsend, Swiss and US Sign IGA.  An agreement under the “FATCA” foreign bank reporting rules.

Patrick Temple-West, Married couples face tough taxes, and more (Tax Break)

Russ Fox, Nevada Looks to Tax Online Poker Tournaments

Donald Marron,  The Balanced Budget Amendment’s $300 Billion Error

News you can use.  Retire Rich: The Forbes 2013 Antiretirement Guide (Janet Novack)

Nick Kasprak,  Happy Valentine’s Day! Will You Marry Me (For Tax Reasons?) (Tax Policy Blog).

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Some people are just incurable romantics!

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Tax Roundup, 2/8/2013: IRS “cracks down” on ID theft. And… bacon!

Friday, February 8th, 2013 by Joe Kristan
Flickr image courtesy Dinner Series under Creative Commons license

Flickr image courtesy Dinner Series

About time. IRS Cracking Down on ID Theft, Tax Fraud (AP): 

In 2012, the IRS says its investigations and in-house filtering systems prevented $20 billion in would-be fraudulent refunds, up from $14 billion the year before. But [Acting IRS Commissioner] Miller acknowledged that thieves still get away with stealing numerous tax refunds, although the IRS could not provide exact loss figures.

“In terms of how much got past us, we’re quite sure some did,” Miller told reporters in a conference call. “I know it doesn’t approach the number that we stopped.”

How much might that be?  Maybe $5 billion a year, maybe more.  That’s means about 20% of the fraud gets through.  If your “in-house filter” let 1/5 of the grounds of your coffee into the pot, you’d change filters.

This is the first highly-publicized nationwide IRS crackdown on identity theft, years after the problem began to spiral out of control.  It’s surely coincidence, but it almost is as if the IRS, now that it has been barred from it’s preparer regulation power grab, has decided that maybe it really should do something about ID theft after all.

Other Coverage: TaxGrrrl, IRS Makes Arrests, Targets Businesses In Massive Identity Theft Crackdown

 

Governor “likely” to sign Iowa coupling bill.  GlobeGazette.com reports:

DES MOINES – The first bill the Iowa Legislature will send to the governor this year will align the Iowa and federal tax codes, a move that will reduce the amount of taxes Iowans pay to the state.

Although Republican Gov. Terry Branstad will thoroughly review the legislation, his spokesman said the governor supports the intent of Senate File 106 “and will likely support it.”

That’s good news.  The sooner he signs it, the sooner the state can begin processing 2012 returns with Section 179 deductions, educator expenses, and a number of other provisions affected by the Fiscal Cliff legislation.

 

Christopher Bergin, More Than an Obstacle to Tax Reform (Tax.com):

Up until now, I’ve given the President the benefit of the doubt about reforming our broken tax system. I just didn’t think tax reform was a big issue for his administraiton. But now I’m beginning to think he doesn’t care about tax policy at all.

What was the tip-off?

No matter the fiscal crisis, the President never misses an opportunity to propose tax increases on “the fat cats.” To the President, the fat cats are the people and the businesses he thinks can pay a “little more” to support their government. I’m not sure I buy his definition of fat cat. But I certainly don’t buy his definition of tax reform. Tax reform is about building a tax system that is fairer, simpler, and more economically efficient. If in the process it raises revenue, I’m fine with that, but I don’t think the primary goal of tax reform is to wring more money from the well-to-do simply because they are doing better than you are.

It’s been blindingly obvious from the beginning that the President has no interest in tax policy.  Look at his record:

– Increases in top marginal rates, which creates incentives for more loophole-carving.

– A baffling new tax on “net investment income” just to pretend that “the rich” will be paying for Obamacare.

– New “targeted” tax credits, which are pretty much the opposite of tax reform.

And his big current proposals are to limit deductions for corporate jets and screwing around with how private equity is taxed — symbolic and political gestures that would make the tax law even more complex.  Any belief that the Obama administration cares a fig about tax reform requires more unfounded faith than a fourth marriage.

 

Tax Trials, Conservation Easement Deduction Denied as Quid Pro Quo for Subdivision Approval.  Interesting case for developers.

Paul Neiffer, Capital Gains Tax On Inherited Property

Roberton Williams, Finally, a Permanent Estate Tax, Though Just for the Wealthy Few

I’ll bet he does. Stop the Indictment; My Client Wants Off (Jack Townsend).

Dan Meyers, The Second Hundred Years of The Federal Individual Income Tax

Patrick Temple-West,  Pharmaceutical makers lower their taxes, and more (Tax Break)

Jim Maule ponders the imponderable: When Is a Tax Increase Not a Tax Increase?

Peter Reilly,  Maryland Exempts Residence For Mormon Temple Workers As “Convent”

 

Kay Bell,  ‘Devil’s’ tax form prompts man to quit job.  Maybe there should be a Super Bowl ad, “Satan Made a Tax Accountant.”

 

I don’t condone this behavior, but I understand: Police say people smoking pot, doing taxes at Clay H&R Block (Charleston Daily Mail).

 

20120208-2Central Iowa Culture Watch.  The State Fairgrounds in Des Moines hosts the cultural event of the season this weekend: the Blue Ribbon Bacon Festival.  Tickets routinely sell out in minutes, so if you have to ask, you can’t go.  What will you miss?  KCCI.com reports:

Start with the dress. It is made of real bacon, created by an East Des Moines dressmaker – and it is actually worn by the Bacon Queen…

“It wildly surpassed anything I thought was achievable. I mean, look at it, it sparkles,” said Porter.

Yes, the Bacon Fest sells out in no time.  Meanwhile, plenty of tickets remain to see Nadja Salerno-Sonnenberg later this month.
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Tax Roundup, 1/28/2013: Should Iowa rebate its budget surplus? And PTIN limbo.

Monday, January 28th, 2013 by Joe Kristan

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

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

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

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

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

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

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

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Link: Text of HF 1.

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dan Meyer, Will Tax Benefits Later Cost You Now?

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

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

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

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

 

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Tax Roundup, 1/17/2013: Iowa alternative maximum tax introduced. Also: cash for clunkers, firearms edition!

Thursday, January 17th, 2013 by Joe Kristan

20130117-1Alternative Maximum Tax introduced in Iowa House.  The Republican leadership of the Iowa House of Representatives has introduced a new way to compute Iowa personal income tax.  HF 3 would create an optional “alternative base income tax”at a 4.5% flat rate.   The bill would allow taxpayers to elect to be taxed on their federal Adjusted Gross Income before net operating losses, less a $6,200 standard deduction ($12,400 for joint filers and heads of households).  The only credits allowed would be for estimated taxes and withholding.  Taxpayers could instead continue to follow the existing tax law.

There is an obvious flaw in the statute as drafted: federal AGI includes interest on federal debt, which states aren’t allowed to tax.  Maybe that’s just assumed, but the existing Iowa income tax law specifically excludes U.S. interest.  This tax is different from that proposed by Iowans for Discounted Taxes, which would exempt all investment income from the tax base.

The bill would be a huge step forward for Iowa tax policy if it were enacted as a replacement for Iowa’s current tax, rather than an option.  Eliminating all of the tax credits and special state deductions would greatly simplify everyone’s tax life, and lowering the rate would make Iowa much more attractive to businesses and newcomers.  In this form, though, it’s just another computation, an alternative maximum tax.  It’s like the alternative minimum tax, except you pay the lower tax computed, rather than the higher one.   It was probably drafted this way to avoid a fight over eliminating the current deduction for federal income taxes on Iowa returns.

I will run some numbers to see how the HF 3 tax would compare with taxes computed the current way.  The bill is co-sponsored by 54 representatives, including House Speaker Paulsen, so it’s a given that it will pass the House in some form.  It will be interesting to see whether the Senate, controlled by Democrats, will bring this to a vote.  The Governor has made clear income tax reform isn’t his priority this year.

 

This plan might be half-cocked.  From William McBride at the Tax Policy Blog:

This week Rep. Rosa DeLauro (D-CT) proposed an assault weapon buy-back program that would operate through the tax code:

“The SAFER Streets Act creates a $2,000 refundable tax credit ($1,000 for two consecutive years) for an assault weapon owner who turns in their firearm to the state police.”

This assumes the gun manufacturers cannot produce additional guns as
fast as the old ones are destroyed, and that they cannot be produced, at
this rate of production, cheaper than the buy-back price. 

Cash for Clunkers, firearms edition.

Kay Bell,  Guns, ammo, violence and taxes

 

TaxProf, TIGTA: IRS Has 60% Error Rate in Policing Noncash Charitable Contribution Deduction.  I’m sure they’ll do lots better implementing the Affordable Care Act.

Patrick Temple-West,  New Yorkers face higher real estate taxes, and more

Peter Reilly,  Are Tax Protesters Actually Winning ?:

Ms. Curtis lost as badly as it is possible to lose in Tax Court.  There is the 75% fraud penalty and the maximum sanction, $25,000, for frivolous arguments. She still might appeal, though.  Presumably the Circuit will make relatively quick work of that and maybe pile on some more sanctions.  Fine.  Now the IRS has to start trying to collect from her. 

Tax protester arguments can slow down the tax collector, but the tax man wins in the end.

 

Robert D. Flach, THE RETURN OF A HOME OFFICE STANDARD DEDUCTION

Kerry Kerstetter,  New option for Home Office deduction

Jason Dinesen,  How the Fiscal Cliff Deal Affects Teachers

Trish McIntire,  Red Forms

Cara Griffith, Should States Just Enforce Use Tax Collection? (Tax.com)

Russ Fox,  California Supreme Court Takes Gillette Case

Joseph Henchman,  The Al Bundy Tax Rule: New Hampshire Governor Pledges to Veto Beer Tax (Tax.com)

If it’s your identity, pretty bad.  IDENTITY THEFT AND TAX FRAUD – HOW BAD IS IT? (TaxTV.com)

Brian Mahany,  Steelers’ Plaxico Burress Pays Off $98,000 IRS Tax Lien

Christopher Bergin, Everybody’s Gone Surfing (Tax.com)

News you can use: Going Concern’s Guide to a Healthy Busy Season: Because No One Should Die at Work

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Tax Roundup, 1/16/2013: Iowa legislators to push Alternative Maximum Tax? Also: new home office deduction option.

Wednesday, January 16th, 2013 by Joe Kristan
20130116-1

Kraig Paulsen

It looks like the Republican leadership in the Iowa House of Representatives will be pushing income tax changes this year.  Unfortunately, it looks like they are pushing the plan I call an “alternative maximum tax” like the one floated by Governor Branstad last year and quietly dropped after the election.  O. Kay Henderson reports:

House Republicans are calling for a “flat” state income tax. If their idea becomes law, Iowans would have the option of filing their personal income taxes under the current system — which has a top rate of nearly nine percent — or opting to pay a four-and-a-half percent rate, with no deductions.

 The governor has made it clear property tax reform is his top priority,
but House Speaker Kraig Paulsen of Hiawatha, the top Republican in the
legislature, says Branstad hasn’t said no to cutting income taxes.

20130116-2Any tax practitioner will point out that this will in practice just be one more complication in computing Iowa taxes.  Taxpayers will compute their taxes under both the current system and the flat system and choose the one that results in the lower tax.  I assume the legislative leaders are resorting to this awkward plan to get around the implacable opposition of the powerful Muscatine-based Iowans for Tax Relief to any tax reform that would repeal the deduction for federal taxes on Iowa returns.  Their plan is likely based on that proposed by Iowans for Discounted Taxes.

Far better to just clean up Iowa’s tax law.  Repeal the special interest loopholes and corporate welfare tax credits, get rid of all non-federal deductions, get rid of the deduction for federal taxes, tie the tax law to the federal code, drastically lower the rates, and eliminate the corporation income tax entirely.  In short, enact The Quick and Dirty Iowa Tax Reform Plan.

 

Flickr image courtesy e53 under Creative Commons license

Flickr image courtesy e53 under Creative Commons license

Whether or not Governor Branstad wants to deal with income taxes, he may have to.  His neighbor in Nebraska may be forcing his hand.  1011Now.com reports:

Gov. Dave Heineman is calling for an overhaul of Nebraska’s tax system, saying the state needs to get rid of its individual and corporate income taxes and make up the lost revenue by shutting off as much as $2.4 billion in tax breaks for businesses.

The Republican governor unveiled his tax plan Tuesday during his annual State of the State address to lawmakers.

Heineman says his plan would keep the state competitive with two neighboring states, Wyoming and South Dakota. Both have no individual income tax.

It sounds much like the plan proposed by Louisiana Governor Jindal this week.   If the other states massively improve their income tax systems and Iowa doesn’t, all of the fertilizer tax credits in the world won’t help Iowa’s business climate.

 

 

IRS unveils simplified home office deduction for 2013.  The IRS yesterday unveiled a new optional way to compute home office deductions.  From IR-2013-5:

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

This will be handy.  When you depreciate part of your home for a home office deduction, you lose the ability to exclude that much gain on a later home sale.  Home office deductions are also complicated and a magnet for IRS examiners.  This looks like it will be useful for the growing ranks of people who run businesses out of their home.  Taxpayers will still be allowed to opt out of this new method and compute their home office deductions the old way.  Full details are found in Revenue Procedure 2013-13.

Other coverage:

TaxProf,  IRS Announces Optional $1,500 Home Office Deduction in Lieu of Depreciation

Russ Fox, Is A Simplified Home Office Deduction Better?  “The reality is that $5 per square foot understates the cost of most home offices, especially when factoring in depreciation.”

 

Paul Neiffer,  Senator Grassley Wants Extension of March 1 Filing Deadline:

Due to the passage of the new tax law, the ability of the IRS to accept most farmers tax returns by March 1 is very uncertain.  Senator Grassley’s letter indicates that the IRS has granted an extension in the  past, most recently last year when the MF Global mess occurred.  In that case, the IRS did not actually extend the filing date, but granted  waivers of the penalty for any estimated tax penalty caused by MF Global  untimely mailing of form 1099.

Farmers don’t have to make estimated tax payments if they file by March 1.  If they can’t do that, the IRS can impose estimated tax penalties on the whole balance due.  The late enactment of new tax laws for 2012 may make it impossible for the IRS to process returns by then.

 

January: the month to start your 2013 year-end tax planning!  My new post at IowaBiz.com, the Des Moines Business Record’s blog for entrepreneurs.

Jason Dinesen, Rental Properties and Basis Allocation

TaxGrrrl,  IRS Announces 2013 Tax Rates, Standard Deduction Amounts and More

Mary Ellen Goode,  A Stark Reminder of the Excessive Cost of Complying with the Tax Code

Rush Nigut,  Iowa Business Specialty Court Pilot Project.  I hope it leads to a specialized Iowa Court for tax cases.  Taxpayers are at a huge disadvantage arguing before District Court judges with no tax expertise.

Kay Bell, The 1040 is ready! The 1040 is ready!

Anthony Nitti,  Dear America: Your Higher Payroll Taxes Are Not The Result Of A Tax Increase.  Only if the multi-year payroll tax break didn’t count as a tax cut.

Janet Novack,  11 Ways To Tap Retirement Cash Early, Without A 10% Penalty

David Brunori, Virginia’s Gas Tax Reform (Tax.com)

Howard Gleckman,  A Budget Deal is Staring Them in the Face, But Here’s Why Lawmakers Won’t Compromise in 2013 (TaxVox)

Robert D. Flach has a new Buzz!  He responds to my take on his take on CPAs.

Jim Maule,  Still More Joys of IRC Section 86.

 

Kyle Pomerleau, New Paper on Estate Tax Misses the Mark.  (Tax Policy Bl0g). It’s about…

Caron & Repetti: Occupy the Tax Code: Using the Estate Tax to Reduce Inequality (TaxProf)

My experience in tax practice convinces me that the estate tax is unnecessary to break up and dissipate large estates.  Beneficiaries take care of that just fine.

 

Hey!  I said I was sorry!  Defendant Screws Up His Acceptance of Responsibility (Jack Townsend):

Although the defendant claimed remorse, his actions after the time of the guilty plea continued the obstructive conduct.  Hence, this defendant got no benefit from pleading guilty, and saving the Government and the court the time and expense of trial.  Not only that, his obstructive conduct convinced the judge to sentence him at the top of the unreduced Guideline range.

If you want the judge on your side, it might be a good idea to stop committing the crime for awhile.

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

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

Via Wikipedia

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

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

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

Some legislators are more ambitious, reports Henderson:

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

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

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

 

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

 

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

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

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

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

Robert goes astray in his next paragraph:

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

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

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

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

Substitute “RTRP” for “unenrolled preparer.”

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

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

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

 

Trish McIntire, Preparer Conflict of Interest

 

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

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

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

 

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

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

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

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

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

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

 

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

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

IRS Releases Additional Inflation-Adjusted Figures for 2013

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

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

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

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

 

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

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

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Tax Roundup, 1/14/2013: Big webcast today! Meanwhile, outlook bleak for Iowa income tax policy.

Monday, January 14th, 2013 by Joe Kristan

20130114-1New law webcast today!  I will be participating in a webcast today on the new Fiscal Cliff law and other recent tax developments.  The webcast, sponsored by the Iowa Bar Association, will start at noon.  I will join Roger McEowen of the ISU Center for Agricultural Law and Taxation, and IRS Taxpayer Liason Christy Maitre.   Cost:  $35 for IBA tax school attendees and attendees of any 2012 CALT Farm and Urban Tax School; $35; $75 otherwise.  Agenda here, registration page here.  2 hours of timely CPE and Tax Update fun!

 

No good will come of this.  The 2013 session of the 85th Iowa General Assembly begins today, and the outlook for improvement in Iowa’s tax system is bleak.  Iowa business groups have firmly embraced a state tax incentive policy based on taking money from all of us to bribe well-connected businesses to do things they would do anyway.  From the Sioux City Journal:

Business groups like the Iowa Chamber Alliance, a non-partisan coalition representing 16 chambers of commerce and economic development organizations, are supporting a variety of tax credits to retain, grow and attract investments in the state. Those credits include restoring the $185 million cap on economic development tax credits that currently stands at $125 million for fiscal 2013.

Jason Hutcheson, chief executive officer of the Greater Burlington Partnership, said tax credits are a highly effective tool that deliver a high return on investment and are essential to retain, expand and recruit businesses and to attract technology and research. ICA members also are lobbying legislators to spend at least $25 million for business development incentives after the line item was shrunk to $15 million for the current fiscal year.

The politicians shed crocodile tears about just being forced to go along with a system based on them granting special favors:

Senate GOP Leader Bill Dix of Shell Rock said there is opposition to government choosing winners and losers with taxpayer-funded incentives, but he added, “There’s no question in my mind that an incentive policy is the world we live in. I don’t appreciate that and wish it wasn’t the case, but we do need a policy that includes incentives.”

You know what would be a real incentive to grow a business in Iowa?  A much simpler tax system with lower rates, one eliminating the corporate income tax altogether.  Something like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Instead, Iowa has a horrible system built around complexity and high rates, made less painful — even lucrative — for those with the connections and lobbyists to score targeted tax credits.  The legislators hear from those people — not from the more numerous businesses  who quietly set up shop in South Dakota or other more friendly tax climates.

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The Iowa Research Credit is refundable, so Iowa writes a check when the credit exceeds the computed tax. The $45.2 million in corporate research credits claimed in 2010 resulted in $43 million in refunds.

The best we can hope for from the legislature is prompt action on “coupling” legislation to conform Iowa’s 2012 tax law to the federal changes passed earlier this month.  The 2012 filing of many Iowa returns is on hold until they do so.  We’ll see if they can even accomplish that much.

 

What does the Worst IRS Commissioner Ever do for an encore?  He becomes a guest scholar at the Brookings Institution, which may never recover (TaxProf)

Scott Drenkard, Governor Jindal’s Bold New Tax Plan  (TaxPolicy Blog).  Could you live with a higher state sales tax if the income tax goes away?  Even if it taxes accounting services?  Tempting.

Paul Neiffer, Good News – Certain Credits Offset AMT

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

Joseph Thorndike, Peggy Noonan and the Beleaguered 1 Percent

TaxGrrrl, Ask the taxgirl: Filing Your Tax Return Early

News you can use: States to seniors: Good times may be ending, and more (Patrick Temple-West, Tax Break)

The Critical Question: Your Money Or Your Life – Which Can You Deduct ? (Peter Reilly)

That’s what they say, anyway.  White House says no to Death Star.  (Kay Bell)

At least she knows her constitution.  Miss Iowa takes fifth! (TheBeanwalker.com)  UPDATE!!!  Miss America Contestant Says Marijuana Should Only Be Legal For “Recreational Use and Health Care” (Mike Riggs, Reason.com).  So don’t smoke at the office.

 

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Tax Roundup, 1/7/2013: Economist says Iowa’s problem is income tax, not property tax. And: thieves don’t report all of their income?

Monday, January 7th, 2013 by Joe Kristan

O. Kay Henderson reports that maybe the Branstad focus on property taxes is misplaced in Economist: Iowa income taxes not competitive:

A Midwestern economist says Iowa policymakers should focus on cutting income taxes rather than property taxes. Ernie Goss, an economist at Creighton University in Omaha, says Iowa’s income tax rates are fifth highest in the country.

“In terms of what Iowa needs to look at, in my judgement, given what’s going on in Kansas, what’s about to go on in Nebraska — Iowa’s neighbors — you need to look at income taxes, in terms of being more competitive,” Goss says.

Iowa property taxes are too high, but income taxes  matter more for many taxpayers.  While property taxes are a big deal to companies that own real estate, like a manufacturer or a big insurance company, income taxes can mean a lot more to a start-up or a tech company.  Fortunately the Tax Update’s Quick and Dirty Iowa Tax Reform Plan is ready to go!

 

Making a dent in the deficit!  A chart shows how much the tax increases on “The Rich” will reduce the $1.2 trillion federal deficit (new taxes in green, deficit in red)

Fiscal cliff taxes vs deficit

Either the government spends a lot less, or taxes go up a lot for everyone. The rich guy isn’t buying

 

The IRS isn’t buying, either.   Tax Analysts reports Better IRS Enforcement Could Net $1 Billion More a Year, Says GAO ($link).   $1 billion is less than 1/1000 of the deficit.  They won’t audit their way to solvency.

 

Breaking tax news from the Eisenhower administration:

Amity Shlaes,   Think Obama’s Tax Hikes Are Low Compared With Rates Of The 1950s? Think Again.  (Via Instapundit)

Andrew Biggs,  Were taxes really higher in the 1950s?

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It’s Monday.  Do you know if your payroll taxes have been remitted?  Another sad story of a payroll service provider who decided he needed taxes withheld from his clients more than the IRS did.  Digtriad.com reports that Arthur Weiss of Winston-Salem, North Carolina is going away for 15 years:

Case documents show Weiss operated professional employer organizations (PEOs), which provided payroll-related services to client companies. For his client companies, Weiss agreed to pay the employees, withhold and remit federal and state taxes, prepare and file the federal and state employment tax returns  and provide workers compensation insurance (WCI).

Weiss did pay the employees and withhold the employment taxes, but he failed to remit the employment taxes, keeping them for his personal use.

PEOs that file taxes under their own names and ID numbers have a hidden danger: their clients can’t verify that the IRS has received their payments via the Electronic Federal Tax Payment System (EFTPS).  Employers can use EFTPS to monitor payments when they use a payroll service that reports employee taxes under the employer’s own name and Tax ID number.  This makes it necessary for taxpayers to investigate PEO-type providers very carefully before trusting them with payroll services.  If your payroll taxes are stolen by your payroll provider, the IRS will come after you to collect.  Not many employers can afford to pay payroll taxes twice.

Russ Fox has more.

 

Few thieves report their income honestly.  From WHOTV.com:

Disgraced former Peregrine Financial CEO Russell Wasendorf Sr. is in jail awaiting sentencing for embezzling over $200-million in customer funds, fraud, and lying to federal regulators.

Now the state says he may have also cheated on his taxes.

Records show the [Iowa Department of Revenue] filed an assessment in November against Russ  and Connie seeking $14.1-million in unpaid taxes and penalties to Iowa.

Good luck collecting anything.

 

Fiscal Cliff Notes:

TaxProf,  WSJ: The Stealth Tax Hike — Why the New $450,000 Income Threshold Is a Political Fiction

Elected representatives at work.  Tim Carney: Baucus rewards ex-staffers with tax breaks for their clients:

Tax breaks for Hollywood, NASCAR, windmills, algae and multinational corporations ended up in the “fiscal cliff” bill thanks to President Obama, according to Senate Republican sources. But they were spawned by a web of lobbyists, donors and staffers surrounding Democratic Sen. Max Baucus of Montana.

Baucus’ Finance Committee passed a bill in August extending 50 expiring deductions and credits for favored industries. At Obama’s insistence, the Baucus bill was cut and pasted word for word into the cliff legislation.

But it’s all for our own good, I’m sure.

William Perez, President Signs the American Taxpayer Relief Act into Law

The ‘fiscal cliff’ bill and Iowa entrepreneursMy new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Paul Neiffer,  Up to Ten Capital Gains Tax Rates for 2013!

Janet Novack,  The Forbes Guide To The Fiscal Cliff Tax Deal

TaxGrrrl,  10 Things You Should Know About The Fiscal Cliff Deal

 

Kay Bell,  Ravens, Redskins and tax revenue

Brian Strahle,  Minimize Restructuring Costs with State Tax Due Diligence

Peter Reilly,  War Tax Resisters – Don’t Call Them Frivolous.

Patrick Temple-West,  Inquiry into tech giants’ tax strategies nears end, and more (Tax Break)

Kaye A. Thomas,  American Taxpayer Relief Act

Tax Trials,  Senate Confirms Two New Tax Court Judges

Robert D. Flach ponders whether he should rename his Buzz roundup of tax news.  Don’t do it, Robert!

 

Make up your minds!

Tax Analysts, New Congress’s Partisanship, Inexperience May Hurt Chances for Tax Reform 

The Hill:  Tax reform more likely after ‘fiscal cliff’ agreement, say House Republicans. (Via Instapundit)

 

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Tax Roundup, 12/31/2012: No cliff deal yet. And Branstad won’t try to fix income tax this year.

Monday, December 31st, 2012 by Joe Kristan

No cliff deal.  As of this morning, the President and Congress continue to fail to to make a “fiscal cliff” deal.  Rest assured, though, that even when they cobble together a lame and harmful deal, as they will today or weeks from now, they won’t even begin to address the real fiscal calamity — the government’s incontinent spending.

The unforgivable sin of the current president, and the last one, and their Congressional enablers, is spreading the idea that the government can buy us all free stuff, and the rich guy will pick up the tab.  Sorry.  The rich guy isn’t buying.

 

Income taxes: the redheaded stepchild of Branstad tax policy?  It looks more and more like the Branstad agenda for the 2013 Iowa legislative session  won’t include income tax reform.  From the Sioux City Journal:

Asked during a recent interview if there was room in all that for income tax reductions during the 2013 session, Branstad replied: “Probably not.”

“Honestly, property tax would be my priority and I’d love to do income tax, too, and maybe, if revenues exceed expectation, we could provide some income tax relief in addition,” Branstad said. “But I think I would rather focus and get something permanent done on the property tax. That’s the place where we’re the least competitive.”

That’s a shame.  Given the economically unwise attitude of the Senate leader, maybe nothing is possible:

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said he would need more details but at first blush he doubted it would go very far in the legislative process if it proved to be “just a way for the wealthiest Iowans to cut their taxes dramatically” while middle-class families picked up a greater share of the tab for the cost of state government.

That’s just silly.  The rich guy isn’t buying for Iowa either.  The wealthiest Iowans always can dramatically cut their taxes with a moving van, until Senator Gronstal figures out a way to keep them from escaping to zero-tax South Dakota or Florida.

Iowa’s income tax is way overdue for replacement.   Instead, it will get more Bondo and bumper stickers.

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

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

 

Fiscal Cliff Notes:

Greg Mankiw, New York Times:

When President Obama talks about taxing the rich, he means the top 2 percent of Americans. John A. Boehner, the House speaker, talks about an even thinner slice. But the current and future fiscal imbalances are too large to exempt 98 percent or more of the public from being part of the solution.       

Ultimately, unless we scale back entitlement programs far more than anyone in Washington is now seriously considering, we will have no choice but to increase taxes on a vast majority of Americans.

Think Finland.  Unless we choose to be Greece or Argentina.

Gongol: Fiscal Cliff…not resolved. I note a false choice:

The people who make the decisions at the highest level in this republic are either dishonest or utterly economically incompetent if they don’t say the following out loud: “We are demanding more out of our government than we can presently afford. We need to pay more, get less, or both.”

“Either?”  I say “both.”

Kay Bell: Senate ready for some football; adjourns Sunday without reaching fiscal cliff deal

TaxGrrrl, Budget Talks Stall As Reid Calls Latest GOP Move A ‘Poison Pill’

Kevin Drawbaugh, Fiscal cliff talks down to the wire (Tax Break)

Nick Kasprak, 2012 Likely to be First Year Without AMT Patch

Peter Reilly, Dysfunctional Congress – At Least They Are Not Maiming One Another.  If they don’t, maybe we should.

 

The roundup:

Cara Griffith, What Will Become of Physical Presence? (Tax.com)

Paul Neiffer,  Be Careful Of Fiscal Year Section 179 Issues!

Jason Dinesen,  6 Tax Predictions for 2012 — How Did I Do?

Tres Bien. French Court:  75% Tax Rate on Millionaires Is Unconstitutional (TaxProf)

Robert Goulder, Gérard Depardieu: Tax Exile (Tax.com)

TaxGrrrl, Congress Hasn’t Fixed The Budget Yet, Getting A Raise Anyway.  Courtesy of the President, who maybe thinks they make him look good by comparison.

Chris Sanchirico, New Ways to Think About a Tax on Public Companies

Insureblog,  Cavalcade of Risk #173: Post-Mayan Apocalypse Edition

The Critical Question: Is This Tax Preparation Nightmare Reawakening? (Jim Maule)
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Tax Roundup, 12/12/12: Iowa income tax reform on hold? And Warren calls for more taxes on non-Warrens.

Wednesday, December 12th, 2012 by Joe Kristan

What’s missing here?  Governor Branstad had an interview with the Associated Press about his plans for the coming legislative year.  Topics covered include

– Property tax reform

– Education reform

– “Accepting” higher spending.

Anything missing?  Not a word here about income tax reform.  The governor had been talking about income tax reform in the runup to the elections, but hasn’t said much about it since.  I’m getting the feeling that Iowa’s chilly business tax climate isn’t warming up anytime soon.

What the current model of the Iowa tax law would look like if it were a car.

They could have thought about that before they voted for it.  From Byron York:

Sixteen Democratic senators who voted for the Affordable Care Act are asking that one of its fundraising mechanisms, a 2.3 percent tax on medical devices scheduled to take effect January 1, be delayed.  Echoing arguments made by Republicans against Obamacare, the Democratic senators say the levy will cost jobs — in a statement Monday, Sen. Al Franken called it a “job-killing tax” — and also impair American competitiveness in the medical device field.

You mean taxes matter?  Who knew?  (via Instapundit)

 

Warren Buffett calls for another tax increase on people who aren’t Warren Buffett.  From CNBC:

Warren Buffett isn’t limiting his call for higher taxes to a minimum rate for very rich Americans who get a large chunk of their income from investments.

He’s also one of several dozen wealthy people who have signed a statement calling for a “strong tax on the largest estates.”  It’s been released by a group called “United For a Fair Economy.”

Like the income tax hikes he supports, this increase wouldn’t affect him, because he plans to leave his pile to the Bill and Melinda Gates Foundation, where it will escape estate tax.  I’ll take him seriously if he calls for reducing or eliminating the estate tax charitable deduction.  Going Concern has more.

Peter Reilly, Warren Buffett And George Soros Want Higher Estate Tax Than Obama Proposes

 

In Iowa he’d have to collect sales tax too.  The Tax Court yesterday told a Houston patrolman learned that he was in independent contractor when performing security services off-duty.  From the decision (citations omitted):

An employment relationship is indicated when the service recipient has the right to control the details and means by which the worker performs the services.  In contrast, independent contractor status is indicated where the opposite is true.  This factor is generally critical in determining the nature of a working relationship.  Petitioners did not demonstrate that the third parties maintained the requisite right to control Mr. Specks in the performance of the security services.

Also, his employers clients didn’t withhold taxes from his payments.  If there’s no withholding, that’s a strong clue that you are not an employee.  Off-duty officers in Iowa are also expected to collect sales tax for their services.  (Specks, T.C. Memo 2012-343)

 

Jack Townsend links to a study of plea agreements in federal criminal cases.  While much of his post is of interest only to attorneys, this quote from the study should be read by anybody tempted to file a return (or not file) based on the idea that the income tax is unconstitutional (my emphasis):

These constitutional challenges do not work out well for defendants. Almost twenty years ago, the United States Supreme Court held that a considered, fundamental disagreement with the constitutionality of the tax laws does not represent a valid defense to a charge of tax evasion. Yet even with this guidance, many tax resisters remain unwilling to concede the point, and demand to take their cases to trial. One exasperated federal judge catalogued some of the “tired arguments” advanced by these defendants: 

That defendants continue to press these arguments in court despite their nonexistent odds of success underscores how many parties simply do not behave as extrapolation from likely trial outcomes might predict.

There’s no point trying to convince tax protesters that they are wrong in theory.  All you can point out is that their arguments never work when it matters.

 

Patrick Temple-West,  Boehner tries to keep GOP ranks behind him, and more (Tax Break)

TaxGrrrl,  Boehner, Obama Talks Heat Up But Still No Deal On Taxes, Spending

 

Jason Dinesen,  What Couples in Same-Gender Marriages Should Be Doing, Tax-Wise, Before Supreme Court Ruling.  I think it’s likely the court will require the IRS to recognize same-sex marriages, and Jason’s post is a must read for affected taxpayers. 

Paul Neiffer,  File Your Gift Tax Return.  It gets the statute of limitations started.

David Brunori,  Time To Get Rid of the Deduction for State And Local Taxes.  (Tax.com)  When the taxes arise from business income, like from S corporations and partnerships, I disagree.  It any case, it should only come with rate reductions.

Brian Strahle,  State Budgets and Taxes:  What Will Happen in 2013?

Jim Maule,  Ohio as Role Model for Tax Policy

Buzz time!  It’s Wednesday somewhere, so Robert D. Flach has a new roundup of good tax stuff.

The Critical Question:  Is your response to taxes genetic? (Kay Bell)

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An alternative maximum tax for Iowa?

Wednesday, October 24th, 2012 by Joe Kristan

Governor Branstad yesterday floated a trial balloon for his upcoming tax reform proposals. He suggested a new tax plan that would exist side-by-side with Iowa’s current complex and loophole-ridden mess.  Donnelle Eller reports in today’s Des Moines Register:

Gov. Terry Branstad suggested Tuesday letting Iowa taxpayers decide whether they want to pay a flat tax rate or deduct federal taxes under the existing tax system.

Branstad told business executives who make up the Iowa Partnership for Economic Progress Board that discussions are early and models were being used to determine what the flat tax rate proposal should be.

The plan resembles that of Iowans for Discounted Taxes.  Their web page describes their proposal:

 The legislation needs to offer you the opportunity to file with all your deductions, or with your new “discount” at the rate of only 5.32% on EARNED income. You would pay 0% on your interest income, dividends, pensions, Social Security, and, JUST LIKE BILL CLINTON DID FOR HOMEOWNERS, 0% on all capital gains.

It’s unlikely that the Governor would pursue a plan that exempted investment income, given the likely response telegraphed by Senate Majority Leader Mike Gronstal in the Register article:

 “Democrats agree that the state treasury can afford tax cuts. We think any tax cuts we do ought to be targeted toward helping growing small businesses and the middle class,” he said.

Of course “targeting” tax benefits is how we got to the horrendous tax system Iowa has now.  Politicians like to “target” tax breaks to their friends and preferred constituencies.  That means they target the wallets of everyone not lucky or well-connected enough to get the breaks.

The Governor’s trial balloon, which I’ll call an Alternative Maximum Tax, has its own problems.  The obvious one is that it would just add one more computation to an already difficult tax return.  Taxpayers would compute their taxes under each system and file whichever return produced the lowest tax.

It would seem to make more sense to just put in one simpler tax system and throw out the old one.  Why is the Governor taking this strange approach?  Possibly as a way to get around the dead-ender opposition to ending the deduction for federal taxes on Iowa’s return, led by the powerful Muscatine advocacy group Iowans for Tax Relief.  If the old mess is left as an option, perhaps a parallel simpler system with lower rates and no federal deduction could pass muster in Muscatine.  Then maybe the old system would eventually wither away.    Somehow, I don’t think the withering would ever happen, and we’d end up with an even worse system.

There’s still time for the Governor to go bold.  The time is now for the Tax Update’s Quick and Dirty Iowa Tax Reform!

Other coverage: Rod Boshart,  Branstad favors giving Iowans choice of tax breaks

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Tax Roundup, 10/16/2012: A rate-cutting tax reform for Iowa? Also: tax season is now really over.

Tuesday, October 16th, 2012 by Joe Kristan

Iowa’s Governor Branstad seems to be serious about this tax reform thing.  From WCFCourier.com:

Gov. Terry Branstad cautioned lawmakers against finding ways to spend the state’s projected budget surplus, while calling Monday for across-the-board tax changes.

Speaking at a Statehouse news conference, Branstad said he’s working on a tax reform proposal to “dramatically” cut personal, corporate and property taxes in the state.

Specifics would be announced later, he said, possibly when he delivers the Condition of the State speech next year.

An automotive representation of Iowa’s income tax.

Iowa’s basic tax system is little changed structurally from the one we had when the Governor took office the first time in 1983.  Substituting rate schedules, you could almost prepare a 2011 Iowa 1040 on 1984 forms.   You wouldn’t even have to substitute the rate schedule to prepare a corporate return; Iowa’s highest-in-the-nation corporation rate is unchanged since 1981.

While the basic structure is unchanged, the system has become infested with special interest deductions and credits over the years — a process that started under Governor Branstad and that got out of control during the 12-year interregnum between his fourth and fifth terms.

In some ways tax reform would be a reversal of course for the Governor.  He has continued the process of complicating the Iowa tax law with special breaks since his return, enacting new carve-outs for ESOPs and proposing special rules for “anchor manufacturers” while making a massive tax credit allocation to the new Southeast Iowa fertilizer plant.

But Governor Branstad also has some history as a tax cutter.   He signed a big rate cut that took effect in 1987, reducing Iowa’s highest individual tax rate from an insane 13% to a still painful 9.98%.  Yet that cut left the basic Iowa structure — including the individual deduction for federal income taxes — untouched.  When he made the huge allocation to the Orascom plant, he was at least embarrassed enough to say that it was an argument for corporate tax reform.

So will the Governor go big?  Will he embrace important elements of the Tax Update’s Quick and Dirty Iowa Tax Teform Plan, which would eliminate Iowa’s corporation tax and cut individual rates to around 4%, while sweeping away the federal income tax deduction and all special carve-outs?  Stay tuned.

Related: Tax Foundation 2013 State Business Tax Climate Index

 

Brutal Assault on Reason Watch: 

CRFB:  Repealing Deductions Could Lead to 30% Tax Rate Cut (Not Merely 20% Claimed by Romney) and Obama’s $49 Billion Tax Increase on Small Business in 2013 (TaxProf)

What the Joint Tax Committee Really Said About Tax Reform (Howard Gleckman, TaxVox)

Because Doug Shulman’s IRS would rather spend its resources licensing preparers than giving tax refunds to struggling businesses: DELAYS IN PROCESSING NET OPERATING LOSS CASES RESULTED IN MILLIONS OF DOLLARS IN UNNECESSARY INTEREST PAYMENTS (TIGTA report)

Anthony Nitti,  Can A Shareholder Own Corporate Goodwill?

Jana Luttenegger,  Basics of Estate Tax and Gift Tax (Davis Brown Tax Law Blog)

Peter ReillyDon’t Freak Out If You Hear Your Trust Is Defective

Trish McIntire,  98 Days and Counting.  98 days for 2012 tax planning.

News you can use:  I GIVE UP!  (Robert D. Flach) “The members of Congress are idiots.  More so now than ever before in our history.”

The Critical Question:  When it comes to auditing, just what does familiarity breed? (Nanette Byrnes)

Paul Neiffer,  Another Tax Season Bites The Dust

Mothers, hide your children.   Tax Professionals To Be Released Into the Wild Later Today (Going Concern). Oops, too late, that happened yesterday.

Oh, and happy Bosses Day.

 

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Tax Roundup, September 17, 2012: non-1040 extension deadline day! Also: Iowa bluffed?

Monday, September 17th, 2012 by Joe Kristan

20080410-1ibiz.jpgToday is the extended due date for 2011 calendar year 1041, 1065, 1120 and 1120-S returns.

For pass-throughs, the penalty for late filing is $195 per K-1, per day.  E-file if you can; otherwise go with Certified Mail, Return Receipt Requested or an approved private delivery service.

 

 

Was Iowa bidding against itself for fertilizer plant?  From the Quad City Times:

When Iowa Gov. Terry Branstad pulled the trigger on the biggest incentive package in state history, he said he did so, in part, because of competition from neighboring Illinois.

But economic development officials with Illinois Gov. Pat Quinn’s administration say they wanted no part of the project after they got wind of Iowa’s “excessive” bid for the $1.4 billion fertilizer plant for which the Branstad administration offered up to $240 million in state and local tax breaks.

“To be clear — the state never put an offer on the table. We recognized early on that Iowa’s bid was excessive, and we were not going to engage in a bidding war,” Marcelyn Love, communications manager for the Illinois Department of Commerce and Economic Opportunity, wrote in an email.

True, the word of Illinois politicians isn’t the most reliable thing in the world.  Then again, neither is the word of people telling you why you should give them money:

Tina Hoffman, spokeswoman for the Iowa Economic Development Authority, said the authority relied on the word of Orascom corporate officials and news reports to determine that Illinois was making a play for the fertilizer plant.

“Company officials indicated the tax savings would be in excess of $130 million. That information was validated when an Illinois senator was quoted in several news outlets about the bill he was sponsoring to assist a project like the one Orascom was proposing,” she wrote in an email.

All right, then!   If you say so, here’s your $107 million!

Subsidizing the fertilizer plant would be unwise even if there were a bidding war  with Illinois.  It’s never wise to take money from your taxpayers to lure and subsidize people.  As I’ve pointed out, it’s like taking your wife’s purse to the bar to buy drinks for the girls.  It’s neither effective or impressive.   But apparently there was no real bidding war, and Orascom was going to come to Iowa anyway;  if so, they just bluffed Iowa into helping pay for it — and maybe also into indirectly helping finance their purchase of The Weitz Company, Iowa’s oldest and largest construction contractor.   Not exactly a shining moment for Iowa tax policy.

 

Holman Jenkins of the Wall Street Journal rips wealthy whistleblower Birkenfeld, Grassley:

[Birkenfeld] told Bloomberg: “I’m the most famous whistleblower in the history of the world. It’s a question of doing the right thing, and that’s what I did.”

What would have been right was not participating in tax evasion in the first place.

The author of the whistleblower law that so benefited Mr. Birkenfeld was none other than prairie populist Sen. Charles Grassley, who issued a statement this week: “An award of $104 million is obviously a great deal of money, but billions of dollars in taxes owed will be collected that otherwise would not have been paid.”

This is the same Mr. Grassley last heard calling for AIG workers “to resign or commit suicide” during the 2009 retention bonus furor, which also saw the New York Attorney General implicitly threatening to publish the names of innocent AIG employees who didn’t “voluntarily” relinquish money they were legally entitled to.

This is the same Mr. Grassley whom Wikipedia baldly states “repeatedly introduced measures that increase the level of double taxation on American citizens living abroad, including retroactive tax hikes.”

Need we add that Mr. Grassley’s longtime aide, who actually drafted the whistleblower law, now represents Mr. Birkenfeld and stands to collect an interesting percentage of the award Mr. Grassley so obligingly applauds?

Senator Grassley has been a major play in tax policy for nearly three decades.   The state of the tax law today isn’t exactly a tribute to the senator.

 

I’m Barack Obama, and I approve this press release.  From a Department of Justice Press Release:

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.

OK, if it’s President Obama’s task force, it’s also President Obama’s IRS that is letting $5 billion annually go out the door to identity  thieves.  It’s President Obama’s IRS that is tormenting innocent Americans for paperwork foot-faults so that President Obama’s Justice Department can slap internationa tax criminals on the wrist.  Glad that’s cleared up.


Mike Ralston,  Iowa View: Time to stop a tax hike on all Americans’ dividends:

The current federal tax rates on investment income — dividends and long-term capital gains — expire at the end of this year. Today, the top tax rates for both dividends and capital gains are capped at 15 percent. But if Congress and the president don’t act to extend them, the top tax rate on capital gains will rise to 20 percent and the top tax rate on dividends will rise to 39.6 percent.

It’s worse than that.   With the Obamacare tax hikes set to kick in, the actual top rate for dividends will hit 43.4% — nearly tripling the old top rate of 15%.

 

Kay Bell,  Sequestration’s blunt and indiscriminate budget cuts.  Also, tiny.  From Veronique de Rugy:

 

Jim Maule,  When Tax Ignorance Meets Political Ignorance.  Yet while the good professor (rightly) bemoans voter ignorance, he insists that it is wise to put more decisions in the hands of the polticians elected by the same ignorant voters.

Paul Neiffer,  Mistakes to Avoid in Lifetime Giving – Part 2

Jack Townsend,  Whistleblowers for Swiss Banks Appear to be Live and Well

Jason Dinesen,  RTRPs, CPAs, Attorneys and Grandfathering

True:   1099s From Insurance Companies – Don’t Ignore But Don’t Take At Face Value Either (Peter Reilly)

Patrick Temple-West,  Financially troubled parts of Europe consider taxing church properties, and more

TaxGrrrl,  Are Federal Taxes Driving Smokers to Stop Lighting Up?

Will Freeland,  NYC Ban on Large Sodas Plagued by Same Problems as Soda Excise Taxes (Tax Policy Blog)

Howard Gleckman,  What Mitt Romney Didn’t Learn from Ronald Reagan (TaxVox)

Anthony Nitti: For A Rich Guy Who’s Only Been Divorced Once, R Kelly Certainly Doesn’t Seem to Have A Lot of Cash

Good question:  WHAT TO DO?  (Robert D. Flach)

News you can use:  If You Get a Tax Refund That’s Someone Else’s, Don’t Spend the Money  (Russ Fox)

 

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Tax Update, 9/11/2012. Did you ask about that $107 million? Look, Blago! Also: wind and hot air; never forget.

Tuesday, September 11th, 2012 by Joe Kristan

Look, there’s Rod Blagojevich!  Governor Branstad defended the big smokestack-chasing tax credit package awarded to the Orascom Lee County fertilizer plant.  From QCTimes.com:

Branstad criticized President Barack Obama for “picking winners and losers in the marketplace” in an opinion piece distributed last week. It was the same week he announced the richest incentive package in state history that would be used to land the biggest single capital investment in state history.

As far as picking winners and losers, the governor cracked, “Illinois is the loser, Iowa is the winner.”

Branstad then took some more shots at the Land of Lincoln, describing it as “dysfunctional” and “willing to promise you the moon, then pulling the rug out from under your feet.” The state, he said, has “a reputation for corruption.”

Yes, corruption is unknown in Iowa.  Oh, wait…

Ramona Cunningham, currently serving time in federal prison for looting the Central Iowa (“no corruption here!”) Employment and Training Consortium, at the dedication of the CIETC Tom Harkin Learning Center.

This is fascinating:

Asked during his weekly news conference about how his column jibes with what he approved for the fertilizer plant, Branstad said the incentive package will be a catalyst for reforming the state’s tax system.

“A catalyst for reforming the state’s tax system?”  What does that mean?  That the award is so outrageous that it will finally spur legislators to replace Iowa’s futile, loophole-ridden system of high rates and complexity, sweetened with special deals for insiders?  “Stop me before I spend again?”  If it shocks legislators into adopting the Tax Update’s Quick and Dirty Iowa Tax Reform plan, it might almost be worth it.

More from the Des Moines Register.

 

Grounded.  Former Us Airways Pilot Sentenced in North Carolina to 10 Years in Prison for Tax Fraud (Dept. of Justice Press Release):

Charles A. Davis, 63, formerly of Mooresville, N.C. was sentenced today in U.S. District Court to 120 months in prison for committing tax fraud, the Justice Department and Internal Revenue Service (IRS) announced. U.S. Judge Richard L. Voorhees in the Western District of North Carolina also ordered Davis to serve twelve months of supervised release after his prison term and pay $538,569 as restitution to the IRS.  

Trial evidence established that in April 2006, Davis filed five fraudulent amended income tax returns for 1996 through 2000, falsely claiming that he earned little or no adjusted gross income in each of those years. And from April 2008 to February 2009, Davis filed five fraudulent individual income tax returns for 2004 through 2008, reporting false amounts of federal income tax withheld for each of those years and requesting fraudulent refunds from the IRS in amounts up to approximately $1.5 million. The evidence also established that during the time he failed to pay his taxes, the defendant drove a Ferrari and a Mercedes, and lived in a lakefront home on Lake Norman, N.C.

Well, he lived high for awhile.  Ten years imprisonment will bring down the average on his lifestyle.

 

Russ Fox,  A Modest Proposal on Tax-Related Identity Theft:

The IRS should check the address of every filed return versus the address on file for the taxpayer.  If the Jetsons’ return is filed with the same address as used last year, it’s likely the return is legitimate.  If not, then the IRS should put a hold on processing the return, and send a letter to the taxpayers at the address used in the prior year (with forwarding requested).

With this Russ has already done more to solve the $5 billion annual theft problem than Doug Shulman has done in over four years as IRS Commissioner.

 

Rob Smith, Residential wind energy a lot of hot air? (IowaBiz.com):

I can buy electricity from MidAmerican Energy at about 9 cents a KWH. My electric bill last month was $100.  At that rate, which is during the summer peak load, the investment would take 20-25 years to pay for itself.  My suggestion instead is to conserve energy or do other measures like insulation or new windows.

Indeed.

 

Robert D. Flach, NEVER FORGET.

TaxGrrrl,  The Post I Swore I Wouldn’t Write (Redux)

TaxProf,  6th Circuit: Severance Pay Is Not Subject to Employment Taxes

Jason Dinesen  On Mike Holmes and Going Cheap.  I like the quote he uses.

Peter Reilly,  Are Divorce Attorneys Trying To Whipsaw IRS ?

Patrick Temple-West,  Essential news: Travelers to Chicago pay steep taxes, and more.  I visited Chicago over Labor Day; he’s right.

Brian Strahle,  District of Columbia Extends Deadline for Combined Report!!

Politicians?  Describe the White House candidates in one (printable please!) word (Kay Bell)

You do?   You Have To Admire the Persistence of E&Y’s Partners (Anthony Nitti)

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Tax Roundup, 9/7/2012: Iowa income tax reform? Also: suing the IRS for ID-theft refunds.

Friday, September 7th, 2012 by Joe Kristan

Iowa Republicans hint at income tax reform.  Governor Branstad has pushed hard for property tax reform in the first two years of his term, but has done nothing about Iowa’s awful income tax.  At a press conference yesterday Iowa Republican leaders hinted that they might try do change that.  From Radio Iowa (via thebeanwalker.com):

House Speaker Kraig Paulsen, a Republican from Hiawatha, said tax reform is a key portion of the plan the call “Iowa Strong.”

Paulsen said property taxes aren’t the only focus. “We also need changes in our income tax code. We need to reduce both personal and employer income taxes,” according to Paulsen. “And we’re going to do this, we’re going to … lower out our extremely high rates so that all Iowans can keep more of their hard-earned money and that entrepreneurs can better compete on a worldwide basis, and encourage them to invest right here in the state of Iowa, invest in our workforce.”

So far it’s just talk, and no details were provided.   Still, this is at least the second time they’ve mentioned income tax reform.  If they are serious, there is a terrific plan on the shelf they could use.

 

A shortcut for refunds for identity fraud victims?  Taxpayers whose identities have been stolen have a tough time getting refunds out of Doug Shulman’s IRS.  A Clearwater, Florida lawyer is looking for a way to cut through the red tape. From TBO.com:

Clearwater lawyer Jim Staack may have found a way for frustrated identity theft victims to get their overdue tax refunds: Sue the IRS.

Last year, Staack represented James and Christine Gordon in their effort to pursue a class action on behalf of identity theft victims who were unable to obtain their rightful tax refunds. The Gordons got their refund 12 days after the suit was filed.

Then Staack added Crystal Lake as a plaintiff in the case. Twelve days later, she got her refund.

But the IRS says that the quick refunds were just a coincidence, and that suing won’t help.  Still, it’s easy to understand why taxpayers will give it a try:

People trying to get their tax refunds are forced to navigate a byzantine system of unreturned phone calls, conflicting regulations and unskilled Internal Revenue Service employees who give them incorrect information, according to the report.

Staack said that after he filed the Gordon lawsuit last year, his office was contacted by a steady stream of identity theft victims who all tell the same story.

“They get the runaround from the IRS. They make promises that are not kept. They’re told it will take 60 days. Nothing happens. Then they call back and are put off again.”

These frustrated taxpayers will find comfort in knowing that the IRS open-book tests for preparers are going strong.

 

William McBride, Obama’s Tax Rates on Investment would exceed Clinton’s Rates (Tax Policy Blog):

Source: Tax Policy Blog

 

David Cay Johnston asks Who pays the top income tax rate?

Playing the parsonage allowance: Phil Driscoll Petitions Supreme Court On Housing Allowance For Second Home (Peter Reilly)

Jim Maule, Using Taxes (or Money) to Measure Generosity (or Values).

Winter fodder for $200, Alex. What About Hay? (Paul Neiffer)

I’m skeptical, but maybe it’s worth a try:  If At First You Don’t Succeed, Just Waste The Tax Court’s Time Some More (Anthony Nitti)

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Tax Roundup, 9/6/2012: Fertilizer and Iowa tax policy; supporting the arts; mythbusting!

Thursday, September 6th, 2012 by Joe Kristan

So Iowa approved the additional tribute to close the deal on the new Lee County fertilizer plant.  With all of the fertilizer generated by politicians explaining the benefits of the project, it’s hard to see how the new plant can withstand the competition.  My favorite line from the Governor’s press release — purchased with up to $107 million in tax credits, plus local breaks bringing the package to $240 million — was this:

To successfully compete for this project, Iowa had to offer incentives to overcome its current corporate income tax structure.  The governor used this project as an example of why tax reform is necessary.

So the out-of-state company gets $240 million now, while it’s jam tomorrow for everybody already here trying to “overcome” our current corporate income tax structure every day — the same taxpayers who will pay to fertilize the Lee County plant.  Some of us have been pointing out how uncompetitive Iowa’s income tax system is for a long time, but the Governor has done nothing about it in the first two years of his term  — and not much in his four previous terms, either.  But let some out-of-state company present an opportunity for a big ribbon-cutting, and $107 million in tax credits suddenly materialize.  To put that in perspective, Iowa’s entire corporate income tax receipts for fiscal 2011 came to $394.5 million.  Priorities, I guess.

Related: The Tax Update’s Quick and Dirty Iowa Tax Reform Plan, Tax Roundup, 9/5/2012: Laying it on thick for the fertilizer plant. and Celebrate corporate welfare, I mean incentives!

Update, 9/8:  Fertilizer plant deal involves largest tax incentive package in Iowa history (Bleeding Heartland)

 

IRS provides relief for tax filings affected by Hurricane Isaac: (IR-2012-70)

 The tax relief postpones various tax filing and payment deadlines that occurred on or after Aug. 26. As a result, affected individuals and businesses will have until Jan. 11, 2013 to file these returns and pay any taxes due. This includes corporations and businesses that previously obtained an extension until Sept. 17, 2012, to file their 2011 returns and individuals and businesses that received a similar extension until Oct. 15. It also includes the estimated tax payment for the third quarter of 2012, normally due Sept. 17.

It covers 10 Louisiana parishes and four Mississippi counties.

 

12-year sentence for payroll tax scamming.  From a Department of Justice press release:

Bruce Gregory Harrison III of Greensboro, N.C., was sentenced today to 144 months in prison following his December 2011 conviction for payroll tax fraud and other crimes, announced Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division; Ripley Rand, U.S. Attorney for the Middle District of North Carolina; and Richard Weber, Chief of Internal Revenue Service (IRS) – Criminal Investigation.

 Harrison was convicted on a 63-count indictment alleging large-scale payroll tax fraud and failure to file individual income tax returns. The evidence at trial and at sentencing showed that Harrison failed to pay over more than $40 million dollars in federal taxes withheld from the pay of his thousands of employees in the years 2004-2006 and 2009.

If you withhold payroll taxes and fail to remit them, the consequences can be a lot worse than late-payment penalties.

 

TaxGrrrl, Eleven Tax Myths Debunked.  The $600 free-money myth, among others.

Did Someone Really Steal Mitt Romney’s Tax Returns From PwC’s Franklin, Tennessee Office?  (Going Concern, Did Someone Swipe Mitt Romney’s Unpublished Tax Returns from PwC? (Anthony Nitti),and Anonymous hackers claim to have Romney’s tax returns, demand $1 million ransom to keep them private (Kay Bell).  I suppose it could happen, but that’s not the way to bet.

Will Freeland,  To Eliminate Income Tax Fraud, Simplify the Tax Code (Tax Policy Blog)

Peter Reilly hosts a guest post, In Defense Of Special Tax Treatment For Clergy

Dan Meyer,  NAEA: Bring AMT and Taxes on Social Security Received into the 21st Century.   It wouldn’t bother me if we left those taxes behind in the 20th Century, actually.

News you can use: Flying 5,400 Miles and Finding an $882,000 Shortfall in a Prizepool Isn’t a Good Thing (Russ Fox)

Support the arts! NY Court to Decide If Lap Dance Is Tax-Exempt Art (TaxProf)

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Celebrate corporate welfare, I mean incentives!

Thursday, September 6th, 2012 by Joe Kristan

With the approval of the enormous tax breaks and subsidies for the Lee County fertilizer plant yesterday — $240 million for 165 “permanent jobs” — it’s time to rerun an old celebration of corporate welfare that originally ran when Microsoft got bribed to locate a data farm in West Des Moines.

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

August 21, 2008

In a tearful virtual press conference held at their corporate headquarters, Roth & Company spokesman Joe Kristan recanted his opposition to targeted tax breaks and vowed to accept massive government subsidies on behalf of the firm.

“We are really excited about the new Microsoft server farm.   The bipartisan enthusiasm for taking money from taxpayers and giving it to selected businesses frankly moved us,” said Kristan.  “With Microsoft receiving tax breaks worth $40 million to create 50 jobs next year, and maybe 75 eventually, we realized that our 35-employee firm must be eligible for $28 million or so.”  While the Microsoft benefits are in the form of tax breaks, said Kristan, “We prefer cash.  We’ve already created the jobs and have been doing so for years.  We’re willing to swallow our pride and take money for it.  We could charge interest and muck up the tax law, but we’re a good corporate citizen.   We’ll just take the money.”

Kristan pointed out that it was a better deal for the state than the Microsoft server farm in a number of ways.  “We’re using a building that’s already there.  You don’t have to put in roads or run fiber lines.  Just write us a check.  A wire transfer would be fine too.”

Kristan said the firm was committed to creating “dozens, maybe hundreds of thousands of jobs” eventually — “someday, somehow, somewhere.”

The firm, which was started in 1990, plans to use the money on a number of projects.  Kristan said it would be nice to have a couple of fully redundant sets of file servers for the office.  “Not so much a server ‘farm’ as a server patio garden,” he explained.  The firm also plans to install a state of the art coffee maker to provide fresh brewed coffee from freshly-ground beans on demand.  The remainder of the funds are expected to be used to fund energy independence, affordable health care and retirement security for the firm’s owners.

“We thank Governor Culver, Senator Grassley, Congressman Boswell and Senator Gronstal for opening our eyes to the benefits of these targeted incentives,” said Kristan.  “We are confident that the necessary legislation will pass.  All it will take is for our elected officials to give our proposal the same scrutiny they gave to the proposals by Microsoft and Google.”

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

Wednesday, September 5th, 2012 by Joe Kristan

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

165 jobs, $110 million in aid

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

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

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

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

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

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

 

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

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

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

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

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

 

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

TaxProf, Tax Planks in Democratic Party Platform

Andrew Mitchel, Partnership Definition

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

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

Kay Bell, Tax moves to make in September 2012

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

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

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

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

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

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

Tim Geithner, call your office.

Cite:  Bartlett, T.C. Memo 2012-254.

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

 

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Tax Roundup, 8/21/2012: Branstad to push income tax rate cuts? Also, tax and marriage. Plus more masterminds!

Tuesday, August 21st, 2012 by Joe Kristan

Will Iowa finally do something about it’s horrendous income tax?  Governor Branstad provided a glimmer of hope, according to the Quad City Times’ Rod Boshart (my emphasis):

Gov. Terry Branstad said Monday that any legislative effort to raise the state’s gas tax would be contingent on Iowa lawmakers approving tax relief for property owners and income earners.

Branstad told reporters he intends to advocate for a reduction in the commercial/industrial property tax rate, a limitation on increases to residential and agriculture property tax rates and a reduction in Iowa’s individual and corporate income tax rates once the newly elected members of the 85th Iowa General Assembly convene their 2013 session next January.

So what does that mean?  It doesn’t sound like a bold call to reform Iowa’s high-rate, high-loophole income tax.  It sounds more like a trial balloon to tie a gas tax increase to income tax rate cuts; the rate cuts, possibly trivial, could provide political cover for a gas tax increase.  I hope I’m wrong.

Be bold, Governor!  Go big!  Go for the Quick and Dirty Iowa Tax Reform Plan!

 

Meanwhile, it’s business as usual on the Iowa corporate welfare front.  The Iowa City Press Citizen reports:

Development on the Iowa River Landing is moving full steam ahead in Coralville, aided recently by up to $2 million in state tax credits for four companies developing portions of the mixed-use development along Interstate 80.

The Iowa Economic Development Authority board approved the grants at a meeting Friday as part of its Brownfield and Grayfield Redevelopment Tax Credit Program, a series of tax credits the state doles out annually to redevelop properties around the state with environmental issues or other hindrances to development.

Grayfields?

A Grayfield is an industrial or commercial property that already has infrastructure, such as a building, in place, but whose use is outdated, Iowa Economic Development spokesperson Tina Hoffman said. Tax credits for Grayfields can be for up to 12 percent of the qualifying investment.

“Grayfields”  then means “just about any place that has ever been developed.”

If a building doesn’t need government help to be built, it shouldn’t get it.  If it does need government money, it probably has no business going ahead in the first place.  The buildings developed with government help will compete with those already in place and paying taxes to help subsidize the new ones.

Related: State 29, Live By The Tax Credit, Die By The Tax Credit

 

Yesterday we noted how the IRS is being swindled to the tune of billions by petty thieves in Tampa.  News of another criminal mastermind who outwitted Doug Shulman’s IRS to get taxpayer cash comes out of Chicago:

The Department of Justice says 41-year-old Katrina Pierce was sentenced in federal court Monday. She pleaded guilty in January to fraud and aggravated identity theft.

The department says Pierce used a collection of stolen identities to defraud the Illinois Department of Human Services of more than $146,000 in child-care benefits between 2006 and 2010.

Pierce also filed about 180 fraudulent income tax returns from the 2006 and ’07 tax years and collected more than $60,000 in refunds.

We aren’t dealing with criminal geniuses here, but they are smart enough to fool Doug Shulman’s IRS for billions of dollars.  Remember, each of those 180 fraudulent returns come at the expense of a victim like Jason Dinesen’s client, who gets the IRS runaround while the thief gets her cash.

 

Thinking about a ring?  The Tax Policy Center has some advice for the lovelorn with TPC’s New Marriage Bonus and Penalty Calculator(TaxVox)

Still not sure?  The Tax Policy Blog’s Monday Map asks: Does your state have a marriage penalty?

 

 

TaxGrrrl, Romney’s ‘Number’ Is 13.9: What’s Yours?

Anthony Nitti, Leave Romney Alone:

This is who Mitt Romney is, at least in part: a rich guy with rich guy tax problems and rich guy tax solutions. Romney wasn’t obligated to pay any more tax than the law required, and he very likely didn’t. His refusal to overpay the government shouldn’t be an indictment on his ability to lead a government.

 

Jack Townsend, Judge Apportions Restitution in a Massive Tax Shelter Case:

Judge Baer of SDNY imposed restitution against one of the individual defendants in the massive BDO Seidman tax shelter case, but apportioned the restitution so that the defendant, who pled to a conspiracy count for the large conspiracy, is liable for only a portion of the tax loss.

 

Russ Fox:  Not Only Were the Employees Outsourced, The Taxes Went Away, Too.  An “professional employer organization” that let employers outsource their payroll function is accused of swindling clients out of their payroll taxes:

From San Antonio comes word of a company that allegedly took care of small businesses’ taxes in a way that’s, well, arresting.  John Bean apparently owned a professional employer organization named “Synergy Personnel.”  Most PEOs become the actual employer and, for a fee, they relieve a small business of the duties of personnel including the payment of taxes.  Mr. Bean’s company allegedly had a unique and (if proven) very illegal method of dealing with those taxes: They didn’t.  The FBI and IRS allege that Mr. Bean’s company kept the money for taxes and workers’ compensation insurance.

The IRS will still want the taxes from the company’s clients.  Cases like this remind us how wise it is for employers to set up with EFTPS, the Electronic Federal Tax Payment System, even if they outsource the payroll function.  You can go online with EFTPS and make sure your tax deposits are really going to the IRS.  Nobody wants to pay their payroll taxes twice.  If your PEO arrangement doesn’t support this, you are taking a potentially-expensive leap of faith.

 

Peter Reilly, DOMA Takes the Security Out of Social Security for Married Gay Seniors

Robert D. Flach, OUR PPACA IS HERE TO STAY (AT LEAST FOR NOW)

Kay Bell, 401(k) fee disclosure info due Aug. 30

William Perez, IRS Offers Tips for Correcting Tax Returns

Crisis!  Peter Luger: Steak Prices May Soar As Drought Culls Herds.  (via Going Concern).

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