Posts Tagged ‘Brian Mahany’

Tax Roundup, 12/23/2013: The joys of being at-risk. And: commence self-destruction sequence!

Monday, December 23rd, 2013 by Joe Kristan

S imageS image20091210-1.JPG‘Tis the season to be at-risk.  We mentioned yesterday how you can get basis for deducting S corporation losses by making a loan to the corporation.  But not just any loan.  If you borrow from another S corporation shareholder to make your loan, your basis won’t be “at-risk.”

A Monroe, Iowa farmer learned that the hard way with his 1991 loan, as we discussed long, long ago:

Larry Van Wyk, a farmer from Monroe, Iowa, got a taste of the dangers of the at-risk related-party loan rules back when farmers were their primary target. He owned an S corporation farm 50-50 with his brother-in-law, Keith Roorda. On December 24, 1991, Larry borrowed $700,000 from Keith. The loan was fully-recourse, so the brother-in-law could proceed ruthlessly against Larry in the event of non-payment. Larry used about $250,000 to repay money he owned the S corporation and loaned the remainder to increase his basis to enable him to deduct losses.

 Unfortunately, Larry’s brother-in-law had “an interest in the activity” – he owned half of it. This made the deduction not “at-risk,” even though no loan from a brother-in-law is without risk in a very real sense. The efforts of some of the finest tax attorneys west of the Mississippi were unavailing; the Tax Court agreed with the IRS, and Larry lost his losses.

It’s not enough to avoid borrowing from another shareholder; you don’t want to borrow from somebody related to another shareholder.  And as “interest in the activity” isn’t necessarily the same as “shareholder,” you should watch out for borrowing from anybody else involved in the business.  The safe thing is to visit your friendly community banker for your loan.

This is another of our daily year-end 2013 tax tips — one a day through December 31!

 

Weekend update!  In case you missed it over the weekend:

2013 Winter Solstice Tax Tip: S corporation basis and

Winter Sunday tax tip: loans for S corporation basis.

 

William Perez, Roth Conversions as a Year-End Tax Strategy

Jason Dinesen,  Six Things I’m Talking to My Small Business Clients About at Year-End (Part 2) 

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

We have a Commissioner.  Senate Votes 59-36 to Confirm John Koskinen as IRS Commissioner (TaxProf).  A lot of folks have noted that once again we have a Commissioner who hasn’t done taxes for a living.  That doesn’t have to be fatal.  Anybody who has hung around CPA firms can tell you that somebody who is good at taxes can be pretty terrible at running an organization.

Still, it’s not a great sign.  The new guy, John Koskinen, will be 79 years-old when his five-year term runs out.  He got his reputation as a “turnaround guy” at Freddie Mac in the wake of the financial crisis, preserving the bureaucracy as responsible as any for the financial meltdown.  I suspect he was hired to protect the agency, not the taxpayer.

By the way, there is another Koskinen.

 

The crumbling mandate.  Tax Analysts reports ($link):

Individuals whose health insurance plans were canceled by insurers because they did not meet the requirements of the Affordable Care Act will be eligible for an exemption from the individual mandate penalty that takes effect in 2014, the Department of Health and Human Services said late December 19.

20121120-2Megan McArdle says this means Obamacare Initiates Self-Destruction Sequence:

As Ezra Klein points out, this seriously undermines the political viability of the individual mandate: “But this puts the administration on some very difficult-to-defend ground. Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8 percent of their income. Either that threshold is right or it’s wrong. But it’s hard to argue that it’s right for the currently uninsured but wrong for people whose plans were canceled … Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people whose plans were canceled more deserving of help than people who couldn’t afford a plan in the first place?”

Arnold Kling put it more pithily: “Obama Repeals Obamacare.”

They’re desperately improvising as they go.  Not a good situation, considering the mandate tax is supposed to take effect in less than two weeks.   I’m starting to doubt that it ever gets enforced.

Related: Paul Neiffer, Cancelled Health Insurance Policies

 

20121220-3Kay Bell, Singing the praises of tax-favored retirement savings

Brian Mahany, IRS Ordered To Pay Taxpayer’s Legal Fees 

Russ Fox, The Death of the Death Master File (Sort of)

Peter Reilly,  Woody Allen’s Blue Jasmine Has A Tax Lesson.  If you don’t wan’t to stay married to a spouse, you might not want to file a joint return either.

TaxGrrrl,  12 Days Of Charitable Giving 2013: Esophageal Cancer Action Network

Robert D. Flach has a special Monday Buzz!

 

Tax Justice BlogUltra-Wealthy Dodge Billions in Taxes Using “GRAT” Loophole

Michael Schuyler, Why A Death Tax “Loophole” May Make Economic Sense (Tax Policy Blog).

Jack Townsend, Swiss Bank Hype and Over-Hype.  ” Merely having U.S. clients with undeclared accounts is not the problem for those banks; it is those banks actions to become complicit in the U.S. clients’ failure to report the accounts.”

Jim Maule finds his inner libertarian, embracing a Reason Foundation report calling for elimination of the home mortgage deduction in exchange for lower rates.

 

News from the Professon.  PwC Won’t Stop Beliebin’ In Ugly Christmas Sweaters (Going Concern)

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

Tuesday, November 19th, 2013 by Joe Kristan

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

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

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

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

 

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

The Tax Court seems to agree:

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

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

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

 

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

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

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

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

 

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

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

 

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

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

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

 

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

 

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

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

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

 

Jason Dinesen, Missouri Guidance on Same-Sex Marriage

 

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

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

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

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

 

William Perez, Tax Provisions Expiring at the End of 2013

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

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

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

TaxProf, The IRS Scandal, Day 194

Robert D. Flach brings the Tuesday Buzz!

 

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

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

 

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Tax Roundup, 11/12/13: Mason City is cold edition. But: a reprieve!

Tuesday, November 12th, 2013 by Joe Kristan

The ISU Center for Agricultural Law and Taxation Farm and Urban Tax School makes its Mason City stop today.  7 degrees and sunny.

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But we have a sold-out house today to keep us warm!  We are also sold out for Thursday in Ottumwa.  Meanwhile Paul Neiffer helps with the second day of the show today in Sheldon and tomorrow here.  Seats are going fast for our remaining sessions in Waterloo, Red Oak, Denison and Ames, so register today!  And if you come to one of the shows, please come up and say hi!

 

The first chart for any tax policy debate is in this post from Andrew Lundeen at the Tax Policy Blog,  Government at All Levels Redistributed $2 Trillion in 2012

 givers and takers

 From the study referenced in the post:

As Chart 1 illustrates, the typical family in the lowest 20 percent in 2012 (with market incomes between $0 and $17,104) pays an average of $6,331 in total taxes and receives $33,402 in spending from all levels of government. Thus, the average amount of redistribution to a typical family in the bottom quintile is estimated to be $27,071. The vast majority of this net benefit, a total of $21,158, comes as a result of federal policies.

Before considering any more taxes on “the rich,” it’s worth stopping to understand what is already happening, and to consider that if this isn’t solving the problem, maybe more of the same isn’t the answer.

 

You don’t get a “reprieve” from something you should look forward to: “Iowa gets Obamacare reprieve.”  Coming from Press-citizen.com, the party newspaper of the People’s Republic of Iowa City, that’s probably not the sort of headline to cheer up the administration.

 

train-wreck Megan McArdle, Hope Is All Obamacare Has Left :

When the tech geeks raised concerns about their ability to deliver the website on time, they are reported to have been told “Failure is not an option.” Unfortunately, this is what happens when you say “failure is not an option”: You don’t develop backup plans, which means that your failure may turn into a disaster.

Great idea!

 

Peter Suderman, Time to Start Considering Obamacare’s Worst Case Scenarios (Reason.com):

But it’s time to start considering the worst-case scenarios: that the exchanges continue to malfunction, that plan cancellations go into effect, that insurers see the political winds shifting and stop playing nice with the administration, and that significant numbers of people are left stranded without coverage as a result. Rather than reforming the individual market, which was flawed but did work for some people, Obamacare will have destroyed it and left only dysfunction and chaos in its wake. 

None of this makes me optimistic for a repeal of the inane 3.8% net investment income tax enacted to finance the debacle.  Cleaning up the disaster will be costly, and they’ll need the money for it.

 

Trish McIntire, The New January 21st.  ”Despite the delay in the start of the tax season, taxpayers won’t get extra time to file their returns.”

 

Check out Robert D. Flach’s Tuesday Buzz!

Jack Townsend,  IRS Authority to Settle After Referral to DOJ Tax, a discussion of Ron Isley’s tax troubles.

Brian Mahany,  IRS Makes Important Changes For FBAR Appeals – FBAR Lawyer Blog

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

Norton Francis, Narrow Tax Hikes Win Support in Several States (TaxVox)

 

All the news that’s fit to print.  NY Times: Estate Planning for Sex Toys (TaxProf)

News from the Profession.  Someone With Lots of Spare Time Has Doodled Big 4 Stereotypes (Going Concern).

 

 

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Tax Roundup, 10/21/2013: Obamacare and Iowa small business. And the spiritual side of tax credit fraud!

Monday, October 21st, 2013 by Joe Kristan

Tomorrow is the 27th Anniversary of the Internal Revenue Code of 1986.  I assume many of you will leave work early today to prepare for the festivities.

20121120-2Things may not be going well for Obamacare when the Des Moines Register finds itself  coping with the concept of unintended consequences, in Few small businesses sign up for tax credits:

 The Affordable Care Act offers a tax credit to entice more small businesses to offer health insurance. But few small-business owners have taken advantage of it so far. And the law could have the unintended effect of prompting small businesses to drop coverage, which would make their employees eligible for individual subsidies on the new health insurance exchanges, insurance experts and business owners told The Des Moines Register.

The article gives a surprisingly realistic view of how Obamacare looks to employers, and why the much-touted small employer tax credit doesn’t work for many employers:

Jesse Patton, a West Des Moines insurance broker and president-elect of the Iowa Association of Health Underwriters, said the tax credit’s confusing rules narrow its appeal.

The credit is available for employers that have fewer than 25 employees making an average of less than $50,000.

“But you start to get a reduction in that credit if you’re over 10 employees and over $25,000 income,” he said.

Also, business owners can’t take the credit for any family members, and many small firms include relatives. Patton’s eight employees include himself, his wife, his son and his daughter-in-law.

“That’s typical for a small business,” he said.

And jumping through the hoops isn’t free:

“Unfortunately, when everybody gets through all of that formula, which is complicated, and pay their accountant $600 to do it, they’d be better off to just take the normal tax deduction versus the credit,” Patton said.

When even the Des Moines Register is starting to get the point about the unintended consequences of Obamacare, it’s in trouble.

 

Megan McArdle has an excellent summary of the current state of the Affordable Care Act in Four Things We Think We Know About Obamacare.  It’s worth reading the whole thing, but this tax nugget is important:

The penalty for being uninsured next year is $95. Again, this is partly true. In fact, the penalty for being uninsured next year is $95 or 1 percent of your income, whichever is higher. So if you make $75,000 a year and you decide to go without insurance, the penalty will be $750. There are a number of things you can do to avoid having to pay it, from deliberately getting your utilities shut off to under-withholding taxes from your paycheck so that they don’t have a refund from which to take out the penalty. But that number is what will go on the books at the Internal Revenue Service, not the $95 you’ve probably heard.

If it remains somewhere between difficult and impossible to buy through the exchanges, this poses an obvious problem.

 

amazon

Joseph Henchman, Illinois Supreme Court Strikes Down “Amazon Tax” (Tax Policy Blog):

Most of the legal challenges to these laws have focused on whether the state power exceeds constitutional limits under the Commerce Clause, but the Illinois Supreme Court focused on this disparity between Internet advertisers and traditional advertisers. Ultimately, the court concluded that because the law requires Internet-based performance marketers to collect tax, but does not require that of traditional performance marketers, it is a discriminatory tax on Internet-based commerce in violation of the federal Internet Tax Freedom Act…

Janet Novack, Illinois High Court Shoots Down Amazon Sales Tax Law; Will SCOTUS Step In?   

 

Paul Neiffer, IRS Releases List of Counties Eligible for Another Year of Livestock Deferral

Kay Bell,  IRS is back and asks for patience as it reopens its doors.  Hey, IRS, do unto others…

Jana Luttenegger, IRS Back to Work, What to Expect (Davis Brown Tax Law Blog):

After 16 days of not opening mail, not processing returns, and not answering phone calls, the IRS is expecting it will take some time to get back to “normal” operations. In fact, the IRS issued a statement urging taxpayers with non-urgent matters to wait to call the IRS. I can only imagine what the call traffic will be like after a 16-day shutdown.  

Not to mention whether the answers you get when you call will be any more accurate.

 

Howard Gleckman, One Modest Path to a No-Drama Budget Deal (TaxVox)

Jack Townsend, Swiss Bank Frey to Close

Brian Mahany, FATCA, FBAR and Opt Outs

 

Leslie Book, Larry Gibbs on Loving v IRS.  Shockingly, a former IRS commissioner thinks IRS commissioners should have all the power they want.

Russ Fox,  One Down, One to Go: DOJ Gets an Injunction, Asks for Another.

One of the more humorous (to me) aspects of the Loving case was hearing the IRS argue that it has no means of disciplining rogue tax preparers. That’s just not true. If I deliberately prepare a bad return, I can be sanctioned and penalized. If I prepare a series of bad returns, the Department of Justice can attempt to have me barred from preparing federal tax returns. As noted at the end of one of the two press releases I’m linking to in this article, “In the past decade, the Justice Department’s Tax Division has obtained more than 500 injunctions to stop tax fraud promoters and tax return preparers.”

They just want to be able to do it by themselves without any of that messy due process stuff.

 

Peter Reilly, Was JD Salinger Facing A Major Estate Tax Problem ? 

TaxGrrrl, How Twitter Hopes To Reduce Its Tax Bill (In 140 Characters Or Less)   
The cobbler’s children always go barefoot.   Attorney Who Claimed Tax Expertise Sentenced to 20 Months in Jail for Understating His Income (TaxProf)

The Critical Question:  Would You Prepare Your Home For A Disaster If It Were Tax Deductible? (Tony Nitti)

 

 

Flickr image courtesy Natesh Ramasamy under Creative Commons license.

Flickr image courtesy Natesh Ramasamy under Creative Commons license.

The sacred side of earned income tax credit fraud.  A Washington tax preparer found an unusual way to get in touch with the spirit world, reports seattlepi.com.  Cleo Reed is scheduled to be sentenced today for preparing fraudulent returns claiming imaginary earned income credits:

Writing the court, Assistant U.S. Attorney Arlen Storm noted Reed had many of his clients claim income for “household help” while claiming to be self-employed. Reed did so for two undercover IRS agents and three fake clients.

During their encounter, Reed explained he pays his recruiters $500 for each young woman with a new child they bring to him, Storm told the court. Agents identified three recruiters who’d brought Reed dozens of clients.

Investigators later determined Reed filed at least 1,305 fraudulent returns in three years, and that the IRS paid out $4.3 million on those claims, Storm continued.

Refundable tax credits are a magnet for fraud, but they are also a path to holiness, it seems:

Writing the court, Reed has denied paying others to recruit clients and claimed he operated in “an ethical manner.” He went on to claim he was only helping his clients “achieve the American dream.”

“I had a spiritual calling to give aid, support, and guidance to the underemployed, disabled, and veterans of this great land,” Reed said in his letter to the court.

Somehow I think this is one religious belief system that the Bureau of Prisons won’t feel compelled to accommodate.

 

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Tax Roundup, 10/18/13: IRS is back, but the lines may be busy. Happy Fall Friday!

Friday, October 18th, 2013 by Joe Kristan

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The Tax Court had two weeks to work on it, and they issued no decisions yesterday.  Slackers.

So audits resume, notices come out again, and the IRS can resume giving 20%-accurate answers to taxpayer questions.  Some reports from the re-opening:

Kay Bell, IRS employees are back, but temporary shutdown deal could mean 2014 tax filing season trouble:

But I fear that come Jan. 16, we’ll be back in a federal government shutdown situation that could pop today’s celebratory grand federal facilities’ reopening balloon. 

And while a government shutdown, even a partial one, is a problem for almost every one at any time, it will be major hassle for millions of taxpayers in January.

That’s the month that that federal tax filing season begins.

Yet another reason to dread next tax season.

 

TaxGrrrl, IRS Asks Taxpayers For Patience As They Tackle Shutdown Backlog   

William Perez, The IRS is Open Again.

Howard Gleckman, One Modest Path to a No-Drama Budget Deal (TaxVox)

Tax Justice Blog, Shutdown Ends with Deal Creating Yet Another Budget Panel.  TJB wants them to just get on with another tax increase.

 

20120830-1Joseph Henchman, Elia Peterson, Oregon Changes Tax Structure for Most Businesses (Tax Policy Blog)

Driven by rhetoric about cutting taxes for small businesses but in reality just adding more complexity and non-neutrality to the tax code, these changes make Oregon the third state to adopt a special income tax system for pass-through businesses. Kansas offers a complete exclusion for all pass-through business income, resulting in a non-neutral situation where income from corporate profits is taxed twice, wage income is taxed once, and most small business is not taxed at all. Ohio has enacted a 50 percent exclusion for the first $250,000 of pass-through income, adding complexity to an already non-neutral carveout. Oregon’s is more transparently an effort to tax corporations while reducing tax burdens for some (but not all) pass-through entities.

The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would repeal the corporate income tax altogether and allow S corporations the option of being treated as C corporations for Iowa purposes.

 

Jack Townsend,  Quiet Disclosures Increasingly on IRS’s Radar Screen.  He notes a Tax Analysts article ($link) that says the IRS is looking closely at taxpayers with foreign accounts who come in from the cold without going through “Offshore Voluntary Compliance Initiative.”

Brian Mahany, Lawyer Indicted For Estate Fraud And Tax Evasion

Keith Fogg, Erroneous Refund Case Reveals the Intersection of Bankruptcy and Tax Procedure (Procedurally Taxing). “The first thing that caught my eye here was the timing of the refund.  It was issued more than 14 years ago. ”

I almost forgot! Robert D. Flach has your Friday Buzz!

 

William McBride, JCT: Corporate Tax Falls Partly on Labor (Tax Policy Blog):

While this is progress, it does not in fact reflect the middle range of the current economic literature. At least since the 1990s, most economists have recognized that the burden of corporate taxes fall mainly on labor in the long run. 

You can’t tax the boss without taxing his employees.

 

 

Going Concern: This TaxMasters Video Is of the Devil.  It truly is.

Peter Reilly, Study Shows Taxpayers With Balance Due More Likely To Cheat.   The prospect of writing a check is apparently more of a motivator than the lure of a fraudulent refund.

News from the Profession: Michigan CPA Charged with Murdering Michigan CPA (Going Concern)

 

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Have a great weekend!

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Tax Roundup, 10/16/2013: Extension season is over, now what? And the joy of infinite marginal tax rates.

Wednesday, October 16th, 2013 by Joe Kristan

20111040logoI hope you don’t have to.  Filing Tax Returns after the October 15th Deadline (William Perez):

You’ll need to mail in your return to the IRS, whether you prepare the return yourself or hire an accountant. That’s because the IRS’s electronic filing servers start going offline after October 15th to prepare for the next filing season.

If you are filing after October 15 this year, my first advice is to file quickly, as you are likely to never file if you don’t get it done now.  My next advice is to make sure it doesn’t happen next year.

Most people who file late make it harder than it needs to be.  90% of the stuff that could possibly go on their returns comes from third parties — things like W-2s, 1099s, mortgage interest and property tax statements, and thank-you notes from charities.  People who can’t seem to file on time should get a big envelope.  They should put these items in the envelope as they come in starting in early January.  They should seal the envelope on February 28 and give it to their preparer.  For most taxpayers, that is all you need to get a reasonably accurate return.

The procrastinators want to go through their checkbooks and find every last $10 charitable gift, and then they never get around to it.  When they finally do, it’s almost certainly a poor use of their time, and when it causes them to file late, it costs them a lot more than that last $10 deduction will save.

Related:  2012 Tax Season Officially Bites the Dust (Paul Neiffer)

 

 

Implicit marginal ratesAlan Cole, Obamacare Puts Infinite Marginal Tax Rates in Action (Tax Policy Blog):

The moment your modified AGI reaches 400% of the poverty line, you instantly lose a subsidy that could easily be worth $15,000. This is a discontinuity in public policy with respect to income. It is a place where an infinitesimal change can result in disastrous consequence for a taxpayer. At 400% of the poverty line, the marginal tax rate is infinite.

It’s an extreme example of the way means-tested welfare benefits can impose high hidden tax rates on poor and middle class taxpayers — punishment ignored by advocates of higher benefits in the name of “compassion.”  More from Arnold Kling.

 

Tony Nitti,  A Quick Look At Expiring 2013 Tax Provisions: What To Do Before Year-End

TaxProf, The IRS Scandal, Day 160

 

Kyle Pomerleau, What is the Debt Ceiling and Why Does it Matter? (Tax Policy Blog) ’

Howard Gleckman, The U.S.May Not Default on Friday But Washington Is Still Playing A Dangerous Game

Joseph Thorndike, Debt Limit Fights Are All the Same – Except for This One (Tax Analysts Blog)

But in fact, the nation’s fiscal shortfall can’t be permanently finessed with any sort of measures, be they ordinary, extraordinary, or even superhuman. Default will happen — the only question is when.

Have a nice day.

 

 Jason Dinesen,  If EAs are Liechtenstein and CPAs are the U.S., What are the Unenrolled?   That’s not fair to CPAs; I don’t know any who’ve been shut down for the last two weeks.

 

Leslie Book, Potential Storm Over Removal Power of Tax Court Judges (Procedurally Taxing):

Kuretski is like one of the many thousands of CDP cases where the parties disagree on some aspect of a collection determination, but also has one very big wrinkle: the taxpayers are using the case as a vehicle challenging the constitutionality of the President’s powers to remove Tax Court judges under Section 7443(f).

I didn’t know the President could do that.

 

2014 State Business Tax Climate IndexTax Justice Blog, State News Quick Hits: Criticism of “Business Climate” Rankings Grows, and More.  Most of the criticism comes from politicians in states with poor business tax climates, and their allies, for some reason.

 

Brian Mahany, High Intrigue in Florida FBAR Trial!

Lush Caribbean islands, secret unreported Swiss accounts, tens of millions of dollars and a husband who disappears into the night. Is this the plot of a new best seller suspense novel? No! It’s some of the events unfolding in a Ft. Myers federal court room where prosecutors say that Patricia Hough conspired to defraud the IRS and filed false tax returns.

I prefer a boring life, at least compared to something like this.

 

Kay Bell, Supreme Court says ‘no’ to NY strip club’s tax relief plea.

The Critical Question: Do Women in Accounting Really Have More Opportunities Than They Did Ten Years Ago? (Going Concern)

 

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Tax Roundup, 10/14/2013: Tomorrow’s the day for filing extended 1040s! And Pope Francis won’t get you off the hook.

Monday, October 14th, 2013 by Joe Kristan

20111040logoTomorrow’s is it.  Extended 1040s are due tomorrow.  There are no further extensions available. Get ‘er done!  As Russ Fox says, It’s One Minute Before Midnight….  Russ has some excellent advice for last minute filers.

Related:

TaxGrrrl, Shutdown Or No, IRS Filing Deadline Remains October 15.

Kay Bell, 4 Oct. 15 tax deadlines: 1 filing, 3 retirement related

 

Some folks have, well, unorthodox ideas of how the tax law works.  Destry James Marcotte of Illinois, for example.  Mr. Marcotte was indicted on charges of claiming improper tax refunds.  As part of his defense he filed an “AFFIDAVIT” that testifies to his approach to taxes.   It starts off:

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There are 14 pages of this sort of thing, including:

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And:

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The Pope Francis thing is an innovation in the tax law, but too much of one for the U.S. District Court of Illinois, where Mr. Marcotte was found guilty of tax charges.

The Moral:  Mr. Marcotte went through a lot of work here.  All in all, it would have been easier to file his returns correctly.  No matter how much crazy he put into his tax filings, it wasn’t enough.  He’s likely to get some time in federal prison to ponder his next tax planning moves.

 

 

2014 State Business Tax Climate IndexLyman Stone, Taxes and Economic Outcomes: Indiana and Wyoming Edition (Tax Policy Blog)

At least for this sample, when we look at apples-to-apples comparisons of similar states, taxes matter. They aren’t the only variable, something we make clear in the Index report, but they are a significant variable that legislators can control directly. 

Taxes may not be everything, but it defies everything we know about economics to say they are nothing.

 

Tax Trials, Tax Court Reverses Itself on Qualified Appraisals for Façade Easements

TaxProf, The IRS Scandal, Day 158

Jack Townsend,  HSBC Depositor Convicted.  Bank secrecy isn’t what it once was.

Brian Mahany, It’s Too Late To Close Your Foreign Account – FATCA Post

Stephen Olsen,  Procedure Roundup for 10/11/2013 (Procedurally Taxing)

 

Robert D. Flach has a special Monday Edition Buzz.

The Critical Question: Judge Orders Man To Stay Dead Despite His Insistence He’s Alive: Could You Be Next? (TaxGrrrl) and Jim Maule, Do Dead People Pay Taxes?

 

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Tax Roundup, 9/24/2013: Departures edition – with and without benefits. And: Career Corner!

Tuesday, September 24th, 2013 by Joe Kristan

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The IRS official at the center of the Tea Party scandal is retiring.  Iowa Public Radio reports that Lois Lerner is retiring:

The IRS announced Monday that Lerner would step down after being placed on paid leave in May. She refused that month to answer questions at a congressional hearing, citing the Fifth Amendment right not to incriminate herself.

The scandal involved groups applying for 501(c)(4) status in the period 2010-2012. Organizations with the words “Tea Party” or “patriot” in their names faced more questions and bureaucratic delays, although some progressive groups also encountered bureaucratic hassles, according to an inspector general’s report.

In a statement emailed to NPR, the IRS said the problems identified with screening tax-exempt status requests were the result of “mismanagement and poor judgment.” 

In a change of procedure, the IRS announced the retirement via a press release, rather than by planting a question at a continuing education event.

Tax Analysts ($link) reminds us of the compliance hassles that Ms. Lerner piled on all sorts of exempt organizations:

One of the more notable developments during Lerner’s tenure as exempt organizations director was the comprehensive redesign of Form 990, “Return of Organization Exempt From Income Tax.” The new version requires EOs to provide much more information about their activities than previously. 

Anyone who works with exempt organizations, or who serves on an EO board, knows how much additional useless busywork costs the new 990 imposes.

Lerner also oversaw a massive IRS outreach to get EOs that had not filed information returns for three straight years to come into compliance to avoid automatic revocation of exemption.

By “outreach” they mean “revoked their tax-exempt status.”  Thanks for leaving, Ms. Lerner, you’ve done quite enough.

Related: TaxGrrrl, Lesson Lerner-ed? Disgraced IRS Official Tenders Resignation  

 

 

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Rashia Wilson in happier days.

While we say good-bye to Ms. Lerner, let’s spare a moment to note a different sort of departure, one involving somebody who may have had more influence on tax administration than Ms. Lerner.  TBO.com reports (my emphasis):

Three years after Tampa police stumbled on the first active tax-refund fraud operation they had seen, one of the suspects was sentenced Monday to eight years and five months in federal prison.

Maurice “Thirst” Larry faces even more prison time when he is sentenced today in another case in which his girlfriend, Rashia Wilson, is serving 21 years of federal time. Larry is expected to face a longer term in the second case because it involves the theft of millions of dollars, while the other case involved hundreds of thousands of dollars.

Larry and Wilson, along with Marterrance “Qat” Holloway, are viewed as pioneers in the wave of stolen identity tax-refund fraud that has flooded the streets of Tampa, dubbed the epicenter of a national epidemic that has cost U.S. taxpayers billions and left countless identity theft victims to pick up the pieces.

This sort of fraud costs the Treasury around $5 billion annually, while creating financial nightmares for taxpayers whose identities are stolen.  The flat-footed IRS response is one of the greatest failures of tax administration since the tax law was enacted.

What sort of devious criminal geniuses could crack open the Treasury like a pinata?

Authorities said Larry, a high school dropout with five young children fathered out of wedlock, has been a jet-setter, flying between Miami, New York and Las Vegas. He and Holloway also drove expensive cars and wore pricey clothes.

Just like James Bond, then.

 

Jana Luttenegger,  Deducting Clothing as a Business Expense:

Practically speaking, not many individuals can use the un-reimbursed clothing expense deduction. If your clothing expenses do qualify, in addition to providing receipts, be prepared to prove the apparel is not suitable for everyday wear.

Me,  Dress for success, but don’t look to the IRS for any fashion help.  My latest post at IowaBiz.com, the Des Moines Business Record blog for business professionals.

 

Brian Mahany,  Have A Government Security Clearance? Watch Out for IRS Tax Liens!

Paul Neiffer,  How Zero Equals $380.  How gambling losers can lose again at tax time under the new Obamacare Net Investment Income Tax.

Jim Maule, Deductions Require Evidence and a Bit of Care:

The first aspect of the case that caught my eye was the attempt of a tax return preparer to deduct a vacation as a business expense. She explained that she operated her tax return business from her home, and explained that “living in her neighborhood was stressful and that she felt harassed by her clients who would call her home at any hour.” Accordingly, she concluded that she needed to travel “just to get rest so that . . . [she] could function.” The Court, not surprisingly, denied the deduction, characterizing the cost of the vacation as a personal expense.

Peter Reilly, Musician Wins Hobby Loss Case   Peter covers the Gullion case that I covered last month, but he went further by contacting the victorious taxpayer, getting a perspective that you can’t get from reading the Tax Court opinion.

 

Linda Beale,  Beanie Baby creator to pay more than $50 million for offshore accounts

TaxProf,  The IRS Scandal, Day 138

Kay Bell, Dolce & Gabbana use their tax troubles as fashion inspiration

Jack Townsend,  Schedule UTP and Criminal Penalties. “Moreover, in almost all cases in which such behavior would be material, a knowingly incomplete or missing Schedule UTP could be used in support of the various penalties that might apply to the related underreported taxes — the 75 % civil fraud penalty and the accuracy related penalties.”

Jeremy Scott, Sun Capital Might Be Bigger Than You Think (Tax Analysts Blog)

Tax Justice Blog, When Congress Turns to Tax Reform, It Should Set These Goals.  Not necessarily my goals.

Andrew Lundeen, Elimination of State and Local Tax Deduction Possible (Tax Policy Blog)

Clint Stretch, Shopping for Tax Reform (Tax Analysts Blog)

 

It’s Tuesday, so it’s a Buzz-day for Robert D. Flach!

 

Quotable:

Perhaps if people with low incomes made really good decisions about how to spend their money, then poverty would be near zero. However, over the course of their lifetimes, many people make many bad decisions, and as a result they will spend a lot of time dealing with financial adversity. The moral and practical implications of this view of poverty are not as clearcut as either a progressive or a conservative would like.

Arnold Kling.

 

Career Corner: If You Can’t Admit You’ve Committed CPE Fraud, Then You Need to Take Another Ethics Course (Going Concern)

 

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Tax Roundup, 9/18/2013: No, the rich guy still isn’t buying. And non-phony scandals.

Wednesday, September 18th, 2013 by Joe Kristan

taxanalystslogoJoseph Thorndike gets a lot wrong in Two Cheers for a Government Shutdown (Tax Analysts Blog), but he gets one important thing exactly right (my emphasis):

 Democrats have been much less willing to defend discretionary government spending — the kind of spending that will grind to a halt during a shutdown. The discretionary portion of the federal budget has been slashed to the bone in recent years, and it’s slated for more slashing in the years ahead.

Those cuts are bad for the country in any number of ways. But until Democrats make the case against them, they’ll keep coming.

And here’s the most important point: Defending the value of discretionary spending also means defending the taxes that pay for it. Yet Democrats have been unwilling to defend taxation for decades. Ronald Reagan really was a transformative president — he changed not only the way Republicans talked about taxes, but the way Democrats talked about them, too.

Democrats have always liked taxing the rich. But for decades, they understood that you couldn’t tax only the rich. Anyone who thinks seriously about solving our long-term budget problems comes to the inescapable conclusion that taxes are going up for everyone. At least they will be going up if we hope to continue with a federal government that looks anything like the one we have today.

20121226-1Democrats have to embrace that fact. They have to defend the value proposition of progressive government, not just the feel-good politics of progressive taxation. 

I don’t buy for a moment that discretionary spending has been “slashed to the bone.”  Just visit your friendly money-bleeding post office, airport TSA line, high-speed rail boondoggle, solar subsidy disaster…  But he is exactly right when he points out that the rich guy isn’t buying.

 

Chart by the Tax Foundation

 

When the “Rogue Agents in Cincinnati” defense of the IRS in the Tea Party scandal was discredited, those attempting to minimize the scandal fell back to new defensive positions:

There is no evidence of partisan bias, and

Progressive groups were targeted too.

These assertions appear in a USA Today Story (via Instapundit), IRS list reveals concerns over Tea Party ‘propaganda’.

 Newly uncovered IRS documents show the agency flagged political groups based on the content of their literature, raising concerns specifically about “anti-Obama rhetoric,” inflammatory language and “emotional” statements made by non-profits seeking tax-exempt status.

More than 80% of the organizations on the 2011 “political advocacy case” list were conservative, but the effort to police political activity also ensnared at least 11 liberal groups as of November 2011, including Progressives United, Progress Texas and Delawareans for Social and Economic Justice.

Progressive outfits are unlikely to be caught by a screener looking for “anti-Obama” rhetoric. Given that “over 80%” of the groups picked for extra screening are right-side, it’s hard to accept that there is no political bias in the screening process.  Prior revelations have shown that the few left-side groups that were picked for extra scrutiny got very gentle treatment compared to their right-side counterparts:

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Nothing phony about this scandal, no matter how much some people devoutly wish otherwise.

 

TaxProf, The IRS Scandal, Day 132

Russ Fox,  IRS Scandal: Lerner, Others Re-Enter Spotlight

 

 

Lynnley Browning, Complying With U.S. Tax Evasion Law Is Vexing Foreign Banks (via the TaxProf).   It’s one more reason why foreign banks are closing their doors to U.S. expats, and why Americans abroad are turning in their passports.

 

Paul Neiffer,  IRS Has Two Sets of De Minimis Rules.  He is discussing final regulations issued last week on what purchases need to be capitalized, rather than written off as expenses:

The first set applies to companies with applicable financial statements (i.e. an audit) and allows the company to expense any fixed asset purchase that does not exceed $5,000.  The second set allows any other taxpayer to expense any fixed asset purchase that does not exceed $500.  Personally, I would have hoped this number would be closer to $2,500, but $500 is better than none.

The Regulations also provide for guidance to IRS agents that they can reach an agreement with a taxpayer during audit to use a de minimis number higher than the ceiling in the Regulations.

I think the distinction between audited financial statements is nonsensical, but at least taxpayers know where they stand.

 

Jason Dinesen: Having a Side Business in Multi-Level Marketing Doesn’t Make Personal Expenses Deductible.  It’s amazing how many people believe that it does.

 

Kay Bell,  Tax deadlines extended to Dec. 2 for Colorado flood victims

Tony Nitti, IRS Provides Tax Relief To Victims Of Colorado Storms   

Trish McIntire,  Disasters and Chutes and Ladders

TaxGrrrl,  2014 Tax Brackets, Exemption Amounts Likely To Save Tax Dollars   

William Perez,  Top Tax Rate Paid by Sole Proprietors by State

Brian Mahany,  Do You Have The Right To Rely on IRS Forms? Court Says “Maybe”

David Brunori, The Conundrum of Taxing Lots of Kids (Tax Analysts Blog)

 

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Phil Hodgen, Simplicity:

Reaching for $1,000X of tax savings frequently costs you $2,000X in accounting and legal fees to make the IRS all warm and fuzzy on your tax returns. We saw this last week where a prior year tax election was made that saved $5,000 (!) of tax, but so far has cost $40,000 to fix. Not to mention the time distraction for the principal of the venture.

That’s why I don’t care for things like C corporations that try to manipulate their income to use the lower tax rates when income is under $100,000.  You can save maybe a few thousand in taxes if you do it just right, but at the cost of professional fees and management time best spent elsewhere.

 

The Critical Question: Is the Spies Element for Evasion (i) Tax Deficiency or (ii) the Criminal Tax Number? (Jack Townsend)

 

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Tax Roundup, 9/10/2013: If your S corporation numbers aren’t perfect, zero isn’t good enough. And Wonka accounting!

Tuesday, September 10th, 2013 by Joe Kristan

20120511-2As we approach the October 15 extended deadline for 1040s, some taxpayers face a tough call: they still haven’t received all of their K-1s.  Yes, the extended K-1 deadline is normally September 15, but sometimes failure to file on time is an option for partnerships and S corporations, and the K-1s just aren’t done on time.  The tax law tells you to report the income as best you can, and amend if you get better information.  The IRS usually will understand.

Except when you control the S corporation with the delinquent K-1s.

A Californian, Dr. Sampson, owned two S corporations. His preparer hit a wall preparing the S corporation returns, according to the Tax Court (my emphasis):

Mr. Araradian has been preparing returns for Dr. Sampson and the corporations for many years. He receives the information necessary to prepare the corporations’ tax returns from Dr. Sampson’s administrator, who keeps general ledgers for both corporations using a computer program, QuickBooks, which is available to Mr. Araradian electronically. He also receives copies of the actual documents, such as bank statements and payroll reports, underlying the entries in QuickBooks (source documents), which he believes are necessary to verify the data in QuickBooks.  before he will prepare a tax return. For neither of the years in issue did either corporation provide source documents to Mr. Araradian before the respective dates on which their Forms 1120S for those years were due. The corporations’ Forms 1120S for those years were delinquent because, without source documents Mr. Araradian would not prepare those returns. 

Well, he still had the Quickbooks files, so he should be able to throw together a tentative taxable income number for the doctor, right?  Apparently not:

     And since he had not prepared the corporations’ returns by the dates on which petitioners’ 2008 and 2009 Forms 1040, U.S. Individual Income Tax Return (together, original returns), were due, Mr. Araradian did not have the corporations’ Schedules K-1, Shareholder’s Share of Income, Deductions, Credits, etc., from which to enter pass-through items from the corporations on the original returns.

Consequently, Mr. Araradian prepared the original returns omitting any income or losses passed through to petitioners from the corporations. He told Dr. Sampson in each case that he was making a statement on the return saying that pass-through items from the corporations were not being included. The statement that he made on each return is as follows:

      THE ENCLOSED TAX RETURN FOR REGINALD AND GERVEL SAMPSON DOES NOT INCLUDE THE K-1′S FROM MONTEBELLO MEDICAL CENTER, INC. * * * AND REGINALD SAMSPN [sic] MD A PROF CORP * * *. THE * * * [2008/2009] PERSONAL INCOME TAX RETURN FOR REGINALD AND GERVEL SAMPSON WILL BE AMENDED ONCE THE TAXPAYER RECEIVES THE * * * [2008/2009] K-1′S.

So he had the Quickbooks files, but he just used zeros.  For two years.   That turned out to be  less than the income that should have been reported, leading to over $130,000 in additional tax.  The IRS didn’t think that was reasonable and assessed penalties.

The taxpayers argued they filed a “qualified amended returns” for the two years.  The judge pointed out that the amended returns were filed after the IRS had contacted the taxpayers, so they didn’t work.

It seems strange to me that the preparer wouldn’t file a return based on the Quickbooks file alone, though maybe he felt the doctor’s bookkeeping wasn’t to be trusted without support.  Given the penalties for filing late S corporation returns, it’s surprising that the doctor didn’t turn over the “underlying documents.”  Considering that he had quite a bit of information in the Quickbooks files about the K-1 income, it’s surprising that they used zeros on the doctor’s 1040, instead of an estimate based on Quickbooks numbers.  But the tax law can be full of surprises.

The moral?  If you don’t have perfect information, the zero option may not be your next best option.  If you can’t file perfect, it’s better to file something, and to try to make it as close as you can.

Cite: Sampson, T.C. Memo 2013-212.

 

Richard Borean and Kyle Pomerleau,  Monday Map: Top Marginal Tax Rates on Sole Proprietorships and S-corporations (Tax Policy Blog).  Today, S corporations:

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Yes, increasing rates on the wealthy also increases tax rates on businesses.

Don Boudreaux,  It’s Not Really a Taxingly Difficult Subject (Cafe Hayek): “Among the most economically naive calculations that people (including government officials) make is to estimate the growth in tax revenues based on the assumption that nothing changes beyond a hike in the tax.”

 

TaxGrrrl,  Back To School: Taking Advantage Of The Tuition & Fees Deduction 

Peter Reilly,  Sixth Circuit Highlights S Corporation Perils In Broz Decision  ”Don’t rely on your accountant to straighten every thing out with journal entries.”

Russ Fox,  California to Require Annual Reporting of Like-Kind Exchanges for Out-of-State Property

Trish McIntire, Tip or Service Charge?

Robert D. Flach, When to contact your tax pro.  It’s amazing all the different things your average guy might need a tax pro for.  Robert also has fresh Buzz today!

Joseph Henchman, Wisconsin Offers Constructive Tax Filing Guidance for Same-Sex Couples

Jason Dinesen, Wisconsin State Tax Guidance for Same-Sex Married Couples   

William Perez, Statute of Limitations on Tax Refunds.  ”Did you know that you can claim a tax refund for up to three years after the original deadline?”

Clint Stretch, Healthcare and Tax Reform:  “Repealing the employer-provided healthcare exclusion might make sense in economic theory, but in the practical world, it would accelerate a day of reckoning on healthcare for which we are unprepared.”

Jack Townsend, On Harmless Error

Brian Mahany, FBAR Basics – Foreign Reporting 101

TaxProf,  The IRS Scandal, Day 124

Me, Iowa’s “economic development” policy: bipartisan follies.

 

Kay Bell, Pennsylvania school tax protester pays $7,143 bill with $1 bills

News from the profession: Oh Dear Lord, Grant Thornton’s Belfast Office Has a Willy Wonka Room (Going Concern)

 

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Tax Roundup, 9/4/2013: Another high-level IRS retirement. And where do Germans hide their cash? Depends.

Wednesday, September 4th, 2013 by Joe Kristan

20130419-1Eliana Johnson, IRS No. 2 Set to Retire:

The second in command at the Internal Revenue Service, Beth Tucker, will retire at the end of September. 

Tucker, the Deputy Commissioner of Operations Support, is a 29-year IRS veteran and in her current position reports directly to the agency’s commissioner. She came under fire for her failure to act when she learned that the IRS had awarded hundreds of millions or dollars in contracts, fraudulently, to the information technology provider Strong Castle, Inc.

National Review Online reported in July that Tucker is one of a handful of senior IRS officials who, according to inspector general J. Russell George, “ran up extremely high travel expenses” on the taxpayer dole commuting to Washington, D.C., from outside the region (she lives in Texas). The agency has since changed its travel policy, putting an end to the practice of employees commuting to the capitol by plane. 

But I’m sure their regulation of preparers would be incorruptible.

 

Russ Fox, IRS Is Big Hindrance in Social Security’s Matching of Social Security Numbers and Names.  Thanks, guys.

 

Howard Gleckman,  Are Some Americans Paying Federal Income Tax They Don’t Owe? :

It is easy to understand the motivations of those who owe Uncle Sam and don’t file (such a course of action isn’t very smart but it is explainable). It is much harder to figure out why someone who has tax withheld and is likely eligible for refunds or refundable tax credits doesn’t bother. 

It’s something that happens quite a bit.  Unfortunately, such folks often eventually find themselves examined, and it turns out they have a year in which they owe taxes.  Then they learn that the can’t use the excess taxes they paid more than three years ago against the taxes they owe because the statute of limitations for claiming those refunds has expired.

TaxProf, Tolan: Obama’s Proposal to Limit Tax Deductions for High-Income Donors Would Undermine Charitable Giving

Joseph Thorndike, Republicans Are Confused About Their Leverage in the Debt Debate (TAx Analysts Blog)

William Perez,  24 States Ban Same-Sex Marriage and have a State Income Tax Tied to the Federal Income Tax

TaxProf, The IRS Scandal, Day 118

 

Jack Townsend, Update on U.S.-Swiss Bank Matters – Of Apologies, Wages of Sin, and Leavers

A reader notes that accounting must-read blog Going Concern understands our profession: “‘Your jaded mentality toward the profession is often over the top

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Depend-ing on bank secrecy. Germans Hide Cash in Diapers as Swiss Secrecy Crumbles (Bloomberg News)

 

 

 

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Tax Roundup, 8/26/2013: The corporation that’s gone no longer protects you.

Monday, August 26th, 2013 by Joe Kristan

20130826-1Most people set up corporations at least partly to protect themselves from being liable for liabilities incurred in the business.  And it usually works that way.   But not always, as a case out of Colorado reminds us.

Colorado Gas Compression, Inc. ceased operations in 1998 and was administratively dissolved in 2005.  In 1998 the IRS assessed taxes on the company for 1994 through 1996, and eventually won in Tax Court.  But the company was gone by then.  So what happened?  The IRS went after the corporation’s shareholder:

Mr. Holmes was the sole shareholder of Colorado Gas until it was dissolved by the Colorado Secretary of State in 2005, by which time it had ceased operations…

Colorado Gas made a series of distributions to Mr. Holmes in the years from 1995 to 2002, transfers which totaled over $3.6 million. As will be explained infra, it is significant that Colorado Gas was in the process of winding up its active operations at this time. 

Cutting to the ending, the appeals court ruled that Mr. Holmes was liable as a “transferee” of corporate assets.

If the corporation had died owing taxes, but had not distributed funds to Mr. Holmes, the answer likely would have been different.  But if a corporation dies owing taxes while the owners withdrew funds, they might be on the hook.  The same idea can apply to estates when the IRS assesses tax to either the estate or the decedent.

Cite: Holmes, CA-10, Nos. 12-1164, 12-1220

 

 

Kay Bell, Remembering Martin Luther King’s legacy and tax trial:

King was indicted in February 1960 by an Alabama grand jury on two counts of felony perjury. The state charged that King had signed fraudulent tax returns for 1956 and 1958.

A state audit of King’s returns the previous month claimed that he had not reported funds he received on behalf of the Montgomery Improvement Association (MIA) and the Southern Christian Leadership Conference (SCLC), and still owed Alabama tax collectors more than $1,700. 

Tax law can be politicized very easily.  That’s why the IRS Tea Party scandal is serious business, and why Presidents shouldn’t joke about auditing their enemies.

 

Paul Neiffer, The Power of Installment Sales:

Assuming our farmer had other ordinary farm income of $150,000, his total capital gains tax bill if sold for cash would be 15% on the first $100,000 of gain, 18.8% on the next $200,000 of gain and finally 23.8% on the last $100,000 of gain for total tax owed of $76,400 (the actual tax would be slightly higher due to phaseout of itemized deductions and exemptions).  However, if he spreads the gain over the next ten years and keeps his net gain in the 15% bracket (staying under $250,000 of adjusted gross income), the total tax owed on the gain would only be $60,000 for a net tax savings of $16,400.  Plus, the farmer may have received an interest rate on the installment note greater than current interest rates.

By spreading the income over a longer time, the taxpayer kept his AGI below the $250,000 threshold for the Obamacare Net Investment Income Tax.

 

Jason Dinesen, Evaluating the Cost of Working:

What we found was, the difference between me staying home with the kids (thus eliminating all of the above costs) and me continuing to work was: $200/month.

I could stay home with the kids, contribute $2,400 a year to our family’s bottom line from my side business, and we’d be in the exact same financial situation as we would be in if I continued to work at my day job.

It was a simple decision.

I quit my day job, and have been part accountant, part stay-at-home dad for the last two years.

But, he notes, it’s not for everyone.

 

Peter Reilly, S Corporation SE Avoidance Still A Solid Strategy   Just remember, hogs get slaughtered.

 

TaxProf, 9th Circuit Reverses Tax Fraud Conviction for Using Charitable Contribution to Arm Chechnyan Terrorists, Rather Than to Purchase Mosque

 

Phil Hodgen,  Relinquishing U.S. citizenship and expatriation

Brian Mahany, Offshore Tax Evasion Update – By The Numbers

Jack Townsend,   Swiss IT Specialist Sentenced for Disclosing Bank Client Data to German Tax Authorities.  He got paid over 1 million Euros by the German tax authorities.

 

Russ Fox, Have I Got a Fixer-Upper for You.  It sounds a little like Iowa’s Wallace Building, but bigger.

William McBride, Repatriated Foreign Earnings Do Not Mainly Go To Shareholder Payouts

Because they think we’re pockets to be picked.  Polk County expands use of speed cameras (Des Moines Register)

 

I’ve been interviewed: Interview with Joe Kristan, Author of the Roth CPA Tax Update Blog

 

Moving beyond straw man arguments:

Clay men face federal tax fraud charges

Cobb Man Charged in ID Theft Scheme

 

 

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Tax Roundup, June 30, 2013: Faithful execution edition. And getting real in New Jersey.

Tuesday, July 30th, 2013 by Joe Kristan

20130730-2He shall take Care that the Laws be faithfully executed.  Does delaying Obamacare and FATCA requirements run afoul of the President’s constitutional responsibility?  Jeremy Scott at Tax Analysts Blog has some thoughts (my emphasis):

Treasury’s ability to delay the implementation of a law despite a specific statutory effective date is disturbing.  On its face, it seems a clear violation of separation of powers.  If the executive branch disagrees with a law passed by Congress, it can simply delay its effective dates indefinitely.  What if Mitt Romney had won the 2012 election and was president today?  Could he have simply decided to delay ALL of the effective dates for Obamacare, effectively repealing the law without the consent of the Democratic Senate? 

Read the whole thing.

This administration won’t hold power forever.  Its partisans will come to regret the precedents they are creating.

 

Richard Borean, Monday Map: Sales Tax Holidays in 2013 (Tax Policy Blog):

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Iowa’s sales tax holiday for clothing and school supplies starts Friday.  Details here.  Sales tax holidays are, of course, political posturing and bad tax policy.

 

TaxProf, The IRS Scandal, Day 82.

Jason Dinesen, I Ask Again: What’s the Upside of Preparer Regulation for Enrolled Agents?  Jason finds none, and he is correct.

William Perez, Federal Tax Issues for Same-Sex Married Couples

Jack Townsend, Reciprocity — the U.S. Issues John Doe Summonses to Identify Norway Tax Cheats

Brian Mahany, Many Indian Americans Unprepared For FATCA.  Many Americans and green-card holders from India are already unknowingly out of compliance with FBAR and Form 8938 filing requirements.

Kay Bell, Farm bill subsidies feed America’s junk food appetite.  Mmmm, pork.

 

Peter Reilly, Hard For Snow Birds To Avoid New York Tax

 

 It’s Tuesday, so head over to Robert D. Flach’s place for fresh Buzz!  And if you need more, check out his TaxPro Buzz at his other site.

 

Kansas becomes a bad bet for gamblers.  Gambling Loss Deduction Removed from Kansas Tax Code Beginning in 2014 (TaxDood).  Nobody wins all the time.  If you don’t allow losses at least to the extent of winning, you tax imaginary income.  As Kansas has four casinos, tax disaster for many Kansas is just a matter of time.

 

Robert D. Flach, call your office. ‘Real Housewives’ Stars Indicted On Bankruptcy, Fraud And Tax Charges  (TaxGrrrl):

The indictment also alleges that Giuseppe Giudice received income from
his business during the tax years 2004 through 2008 but did not file
federal income tax returns for those years. Giudice reportedly received
income totaling $996,459 during that time. He is charged with five
separate counts of tax evasion as a result. 

I’ve never watched their show,  but I understand they lived an expensive-looking televised life.  If they were committing tax and bankruptcy fraud in front of a national TV audience, that would be unwise.

 

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Tax Roundup, 7/23/2013: It’s not a fixer-upper, unless you trip a mine. And how to spend your $104 million.

Tuesday, July 23rd, 2013 by Joe Kristan

20130723-1Ed and Elaine Brown won’t be needing their New Hampshire house anytime soon, so the IRS is selling it.  If you’re a potential buyer, good luck finding a home inspector.  TaxGrrrl reports:

While federal officials hope to unload the property, former home of Ed and Elaine Brown, in order to settle a number of debts, they’ve had to be clear that they can’t guarantee that explosives and other booby traps aren’t hidden on the property. Even more interesting? Your bid doesn’t guarantee you access to the property: you won’t be able to check it out until you’ve been deemed the winning bidder and agreed that you absolve the government from any bad stuff that could happen after you enter the property. You know, like losing a limb or dying. Despite having bomb detection devices and dogs on the property, authorities can’t guarantee that the property is clear from bombs and other booby-traps.

The Browns were well prepared for a regular armed assault when they holed-up in their house following their convictions on federal tax charges.  So federal authorities wisely posed as supporters of the Browns incoherent cause; the Browns invited them in, where they surprised and arrested the couple.

If you want to get away from it all, but have small children or limbs that you don’t want to take chances with, the IRS Auction website has plenty of real estate to choose from, including 31 wooded acres near Spooner, Wisconsin pictured above.

Kay Bell has more.

 

All righty, then. A Cincinnati IRS Lawyer Speaks:  We Are Democrats, But Nonpartisan Democrats(TaxProf).  Well, then, I’m sure the Tea Party folks are now completely reassured.

Watch out for scandal creeps. IRS scandal creeps closer to White House (Mike Hashimoto)

Shooting the messenger.  The Smearing of J. Russell George   (Eliana Johnson)  As the IRS scandal heats up, expect more of this.

I’m sure they were talking tax policy.  Embattled IRS chief counsel met with Obama 2 days before agency changed targeting criteria (Daily Caller)

Richard Borean, Monday Map: Growth in State Government Spending, 2001-2011

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Paul Neiffer, Will Crop Insurance Proceeds Be Deferrable This Year?  “The income tax laws allow you to defer crop insurance proceeds related to yield loss, but not price loss.”

Kay Bell, The many U.S. tax breaks for your little prince or princess

News you can use.  How Not To Run A Side Business: Navigating The Hobby Loss Rules (Tony Nitti)

 

Tax Justice Blog, OECD Action Plan Would Reduce Corporate Tax Avoidance But Fails to Propose Fundamental Reform

Martin Sullivan, How Will Business Lobbyists Spin the OECD Action Plan? (Tax Analysts Blog)

Jeremy Scott, Shedding Light on Advance Pricing Agreements (Tax Analysts Blog)

Peter Reilly, Freedom Rider Asks To Give Peace A Chance – Peace Tax Fund Act Of 2013

Brian Mahany, Two Florida Physicians & CPA Indicted in Unreported Foreign Accounts Scheme

 

It’s Tuesday, so it’s Buzz-day at Robert D. Flach’s place!

Claire Celsi, All Media is Biased (IowaBiz.com).  Yes, even the Tax Update.

It’s OK, the drinks are on the IRS.  Brad Birkenfeld, who received $104 million as an IRS reward for blowing up Swiss bank secrecy, seems to be using his reward as many of us might. Portsmouth Patch reports:

Bradley Birkenfeld, a whistleblower who received an enormous award for helping expose tax evaders, was arrested in Portsmouth.

Birkenfeld, 48, of Rye Beach, was charged with DWI at a roadblock set up by police Friday night. He was released on $750 bail.

Yes, it’s important to set the bail high enough to ensure the defendant shows up for court.

Unless they’re lifeguards.  Studying for the CPA Exam at the Beach Isn’t Really an Option Since Most Candidates Have Jobs (Going Concern)

 

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Tax Roundup, 7/22/2013: More fertilizer! And how to finance your party, the tax grifter way.

Monday, July 22nd, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

More taxpayer fertilizer.  Iowa board OKs additional $25M in tax credits for Orascom.  (Quad Cities Times):

The unanimous vote by the board on Friday makes a total of $82.5 million in state tax credit benefits available to Orascom Construction, parent of the Iowa Fertilizer Company.

The $1.8 billion plant is expected to employ as many as 165 workers when completed.

In case you’re wondering, that’s about $500,000 per “permanent job.”  That assumes that the money is actually buying jobs, but the plant almost certainly was going to be built in Iowa without the subsidies.  The $82.5 million only buys politicians press conferences, ribbon cuttings and silver souvenir shovels, with our money.

 

TaxProf, Faber:  ‘Ivory Tower’ Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States:

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes,  State Tax Notes, July 8, 2013, p. 97 … ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.

That’s right, in my experience.  Taxpayers absolutely take taxes into account when they move, even if it’s hard to isolate in aggregate data.  Tax aren’t everything, but they are definitely something.

Kim Reuben, Detroit’s bankruptcy: What does it mean for other cities? (TaxVox)

Russ Fox, The Flow of AGI from One State to Another

 

Jason Dinesen, Tax Aspects of Renting Your Home for a Day or Two.  Taking in RAGRAI riders can give you some tax-free income.

Robert D. Flach, KEEPING A CONTEMPORANEOUS MILEAGE LOG.  If you want to deduct your mileage, you need to keep your log up to date.

 

Tyler Cowen, Wealth Taxes: A Future Battleground.  Just another way for politicians to cover their profligacy.  Via Arnold Kling, who has more.

TaxGrrrl, Rather Than Tackle Tough Tax Reform, Congress Focuses On The Death Tax. Again.

Kay Bell, The U.S. tax system is not very attractive

William McBride, American Corporations Losing Ground (Tax Policy Blog):

The U.S. corporate tax is the most punitive in the developed world, not just because the statutory corporate tax rate is the highest but also because the effective corporate tax rate is the highest or nearly the highest according to recent studies

TaxProf, The IRS Scandal, Day 74.

 

Tax offender of the year nominee.  I no longer choose a Taxpayer of the Year, but Russ Fox still “honors” a “tax offender of the year.”  I hope he will consider Ayawna Webster, former president of the D.C. Young Democrats and staff aide to a D.C. City Council Member, Harry Thomoas Jr.  The Washington Post reports:

The former chief of staff to one-time D.C. council member Harry Thomas Jr. pleaded guilty Friday to falsifying tax documents in connection with payments for a 2009 political ball…

 According to court documents, [non-profit chief Millicent] West worked with Thomas and Webster to send trust money intended to pay for youth programs to help cover the cost of the party.

Just when you think politicians can’t come up with ways to make you think less of them, they come through.  Looting a fund for poor kids to pay for a “political ball” is notably evil.

 

Brian Mahany, Business Owner Pleads to Hiding Offshore Account

Jack Townsend, Liechtenstein Bank In U.S. Cross-Hairs

 

A video report on Rashia Wilson’s sentencing

She had a sixth-grade education and stole millions from the taxpayers.  When that can happen — over and 0ver – there just may be a problem with IRS controls over refunds.

 

The Critical Question.  Lap Dance Tax?  (Jim Maule)

News you can use.  The Data on Bar Fights (Freakonomics Blog)

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Tax Roundup, July 15, 2013: The IRS isn’t a payday-lending company.

Monday, July 15th, 2013 by Joe Kristan

Federal_Bureau_of_Prisons_Seal.svgDon’t think of it as borrowing money from the government.  They don’t look at it that way.  An Iowan has pleaded guilty to criminal charges for failing to remit payroll taxes withheld from employees.  The AP reports that Eric Holub, a Cedar Rapids man, admitted to not remitting withheld taxes from employees of his private security firm.

He may face prison time. It can be tempting to not remit payroll taxes when your vendors want to be paid.  Sometimes employers rationalize it as “borrowing” that will be repaid someday, somehow.  As this case shows, it can be a very expensive “loan.”

Link: Copy of Indictment.

 

Kay Bell,  Monday, July 15, is filing deadline for Boston area taxpayers

 

Penalty declined.  No jail time for Zorich (Chicago Sun Times, via Going Concern).  The former Chicago Bear and Fighting Irishman gets fines, probation for failure to file.

Russ Fox,  Microsafted to ClubFed.  No, that’s not a typo:

Matthew Taylor is heading to ClubFed for a 7 1/2 year of  vacation from
his previous job as an art thief and tax evader.  It’s what he did to
try to hide his crime that makes this case interesting…

What did he do to hide his income?  He used false social security numbers to hide money in bank accounts, he used multiple post office boxes to open other post office boxes, and he sent money to an offshore account.  Those are typical strategies.

It’s a couple of other things he did that grabbed my attention.  He set up phony companies with names similar to other companies (Microsaft, anyone?).  He blamed his mother for all his bank accounts and tax troubles…even though she was in failing health.

Well, at least he won’t have to talk to Mom at awkward family dinners for awhile.

 

Jason Dinesen,  Have an HRA? Make Sure to Pay Your “Patient-Centered Outcomes Trust Fund Fee” .  A tax where the compliance cost will usually exceed the revenue for the government.

TaxTrials, Government Denied Summary Judgment in Conservation Easement Case

 

Brian Mahany, Offshore Account Post: Trust Me, I Am From The IRS

Jack Townsend,  DOJ Requests Tougher Sentencing for Tax Crimes Involving Offshore Accounts.  Shoot to kill the jaywakers.

 

Missouri Tax Guy,  Really, you don’t’ know what an Enrolled Agent (EA) is?  Sadly, the EA designation is widely unknown and undervalued, as Bruce’s post makes clear.

 

TaxGrrrl, Congress Threatens IRS With ‘Right-Sized’ Budget Cuts

The budget, which Chairman Hal Rogers (R-KY) has referred to as “right-sized” (downloads as a pdf), gives the IRS $9 billion for 2014. In a classic case of the pot calling the kettle black, the budget is clearly a tweak at the IRS, which has been the target recently of investigations into disreputable practices, defiant bonuses and questionable spending. Rogers says the spending limits will remain “until there are clear signs that they have fixed their broken bureaucracies, curtailed lavish
spending on employee conferences and awards, and returned to abiding by the will of Congress.”

TaxGrrrl is much more sympathetic to the IRS than I am, but she is right to criticize this typical fire-into-the-crowd approach.

 

Martin Sullivan, Virginia Gas Tax Cut: Drivers Short-Changed at the Pump? (Tax Analysts Blog)

Austin John, Update on the Maryland Rain Tax (Tax Policy Blog)

 

What could go wrong?  An Honor System for Federal Taxes? (Jim Maule).  In truth, the Obamacare individual mandate has some aspects of an honor system, given the inability of the IRS to use its usual collection tools to enforce it.

 

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Tax Roundup, 7/12/13: We get scam email. And flappers!

Friday, July 12th, 2013 by Joe Kristan

Don’t be stupid.  Yes, you hardly need to consult your CPA for that advice, but I think of it every time I get spam email like this:

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Somewhere I read that email scammers make their pitches stupid on purpose to identify the dumbest marks, as they are easiest to fleece.  This one certainly does so.  Some signs of stupid:

  • The email address: smoggiest@HELP.STATE.TX.US.GOV.    Come on.
  • The salutation:  “Dear Accountant Officer.”  It sounds like it’s addressing somebody who issues parking tickets to CPAs.
  • The English of someone not brought up speaking English: “Hereby you are notified…”
  • The use of “please” by a revenue agency.  Please…

Folks, the IRS and state taxing agencies don’t send notices like this via email.  When you get one, delete it — and never click the links.

 

TaxProf, The IRS Scandal, Day 64

Janet Novack, 4 Steps To Take Now That Stretch IRAs Are Endangered:

But the new stretch IRA limits, which Finance Committee Chairman Max Baucus (D-Mont.)  first floated in the Senate last year, would require most retirement accounts inherited by anyone other than a spouse to be distributed (and in the case of non-Roth accounts taxed) within five years of the owner’s death…

The limit on stretch IRAs, which also appeared in President Obama’s most recent budget proposals, would raise $4.6 billion over 10 years, Congress’ Joint Committee on Taxation estimates.  

Janet explains how this possibility can affect your thinking about beneficiary designations and Roth conversions, among other things.

 

Christopher Bergin, Jaws (Tax Analysts Blog):

Clearly, the IRS did some inappropriate things in handling the applications for exemption for tea-party groups and others. But I would prefer to have congressional committees working on making sure our tax agency operates fairly and efficiently rather than going on witch-hunts.

Christopher is right, and as a practitioner I don’t want to see tax adminstration get any worse.   Still, you can’t ignore the long-term benefit for punishing bureaucratic misbehavior.  It would require a suicidal level of tolerance for GOP legislators to let bygones be bygones after the outrageous behavior of the IRS in the Tea Party scandal.  Maybe some budget haircut is needed to make the IRS less eager to take sides next election.

 

Howard Gleckman,  How Not to Fix the IRS:
Forgive me, but let’s try to apply a dash of common sense to the agency’s problems. After months of looking, the IRS’ most vocal critics have found no evidence that its poor processing of requests by political organizations seeking tax-exempt status was politically-motivated.
It was, however, real. And its cause seems to be a staff that suffered from low skills, poor training, low morale, a shortage of resources, and bad management. It is hard to see how cutting an organization’s budget by one-third will fix any of these problems.

Saying that it wasn’t politically-motivated over and over doesn’t make it so.  As the Treasury Inspector General has reaffirmed, the IRS treated right-side outfits far worse than left-side outfits.  That doesn’t just happen — the thing speaks for itself.   And considering Lois Lerner’s partisan past with the Federal Election Commission, the circumstantial evidence of bias is overwhelming.  The “overworked and underfunded” defense of IRS behavior doesn’t fit these facts.

Still, it would be nice if Congress would use its funding power carefully to punish bad behavior, rather than as a meataxe that will harm innocent taxpayers as much as guilty bureaucrats.

 

Kay Bell, States could get more money by modernizing sales tax laws

Brian Mahany, TICs and REITS – “Accidents Waiting To Happen”  Many REITs are perfectly good investments.  I like them myself.  But illiquid ones can lock up your money while generating big liquid fees to a broker.

Tax Justice Blog, Undocumented Immigrants Pay Taxes, and Will Pay More Under Immigration

TaxGrrrl, Parents Sue School For Art Auction Gone Bad.  Some parents apparently shouldn’t be allowed to run around loose.

 

There’s a new Cavalcade of Risk up at Workerscompensation.com! Don’t miss Hank Stern’s Hunger Games and the MVNHS©, about ingenious health care cost savings innovations across the pond.

Via Wikipedia

Via Wikipedia

Robert D. Flach has your Friday Buzz ready!

Great Grandpa knew this.  Not all flappers are created equal (Rob Smith, IowaBiz.com)

The Critical Question: Is Diet Soda Worse than Regular Soda? (Scott Drenkard, Tax Policy Blog)

 

 

Friday workplace fun.  Let’s Discuss: Big 4 Bullies (Going Concern):

Probably the most irritating thing, according to this study, is that these people get ahead. We’ve all seen it.

That’s about how I remember it.  They rarely get the comeuppance they deserve, but when they do, it’s awesome.

 

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Tax Roundup, 7/5/2013: Iowa preparer meets her Waterloo. And a sixty-nine year anniversary.

Friday, July 5th, 2013 by Joe Kristan

20130705-3Waterloo preparer to plead to preparing return with bad deductions.  From the Waterloo-Cedar Falls Courier:

The U.S. Attorney’s Office for the Northern District of Iowa filed a criminal complaint against Victoria A. Jones, age unavailable, in U.S. District Court in Cedar Rapids on Tuesday.

She is charged with one count of aiding in the preparation of a fraudulent return. An arraignment has been scheduled for July 9 in Cedar Rapids.

Authorities allege Jones helped a couple identified only by the initials R.D. and L.D. submit a false tax return to the IRS for 2008. The return claimed the filers had $67,211 in itemized deductions when they had significantly less.

Court document says that she intends to plead guilty, but provides no additional information as to the nature of the false deductions.

 

Iowans Can Now Pay Taxes With Their Phones, Online (The Dwolla Blog).  Only property taxes for now, and only in some counties.  It would be nice if they added income taxes.

 

He shall take Care that the Laws be faithfully executed.  Executive Nullification, Once Again (Arnold Kling)

 

Make everyone poorer, to put the 1% in their place.   From a paper by Karel Mertens (via Tyler Cowen):

A hypothetical tax reform cutting marginal rates only for the top 1% leads to sizeable increases in top 1\% incomes and has a positive effect on real GDP. There are also spillover effects to incomes outside of the top 1%, but top marginal rate cuts lead to greater inequality in pre-tax incomes. 

So cutting top tax rates makes everyone better off.  Yet because it helps the “top 1%” the most, politicians like the President will tell us it’s a bad idea.

 

Ex-Bear Zorich way behind.  The Chicago Tribune reports that former football player Chris Zorich is financially underwater as he faces a July 12 sentencing date on tax charges.

TaxProf, The IRS Scandal, Day 57

Because it would never pass?  Why is the Carbon Tax Missing from the Climate Change Debate? (Tax Justice Blog)

Gene Steuerle, The Baucus-Hatch “Blank Slate” Approach to Tax Reform Could Be Revolutionary:

 

Kay Bell has posted Tax Carnival #118: July 4th Tax Fireworks!

Christopher Bergin, Gratitude on the Fourth of July (Tax Analysts Blog)

TaxGrrrl, Taxes & Independence: Happy Fourth Of July.   Kelly freely quotes the Declaration of Independence, including this:

 He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.

Good thing that couldn’t happen today…

 

Why Exactly Do You  Want An Offshore Account?

Jack Townsend, Information on Filing Delinquent FBARs

 

Economic development for Iowa!  Minnesota: Higher Income and Cigarette Tax Making It the Land of 10,000 Taxes? Philip Hammersley, Tax Policy Blog:

Minnesota Governor Mark Dayton (DFL) recently signed  legislation increasing income and cigarette taxes in the Gopher State. The legislature hopes to raise nearly $2.1 billion in revenue from the tax hikes in order to close the budget deficits and fund new spending projects. The average Minnesota taxpayer currently pays 10.79 percent of his income in state and local taxes. This tax burden makes Minnesota the 7th highest taxed state in the nation.

Iowa’s tax system has more than its share of flaws, but it sure could be worse.

 

Cara Griffith, Taxes and Whistleblower Suits (Tax Analysts Blog).  Should whistleblowers be able to file tax suits against corporations?

Holiday or no, Robert D. Flach has fresh Buzz!  He reminds us that the IRS is closed today.

 

Peter Reilly, Gettysburg Interlude – Understanding Historiography

 

Sixty-nine years ago today, my Dad’s participation in the war ended.  The third stage of the Tour de France went by the place where it happened earlier this week.

The final mission of B-24 42-78127, over the target in Toulon, France.  John Kristan was top turret gunner in one of the planes - likely the one at the bottom of the picture.

The final mission of B-24 42-78127, over the target in Toulon, France. John Kristan was top turret gunner in one of the planes – likely the one at the bottom of the picture.

So my job doesn’t seem so hard today.

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Tax Roundup, 5/31/2013: Obama and Shulman, buddies. And the hidden path to world domination.

Friday, May 31st, 2013 by Joe Kristan

Megan McArdle, Boy, the Head of the IRS Went to the White House A Lot

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I believe Megan is correct when she says that it is unlikely that Shulman was spending his time there conspiring against the President’s opponents:

Why on earth would it have taken 118 meetings?  Did Doug Shulman not  understand “target the tea party” the first 117 times Obama said it?  

The close contact between the IRS and the White House is actually what you might expect to see now that the IRS has become a ridiculous superagency with a portfolio dwarfing that of the traditional cabinet agencies.  Still, it’s very weird that Doug Shulman spent more time at the White House than the Treasury Secretaries and the Secretaries of Defense — combined.

Update: It would be less weird if it didn’t happen.

 

TaxProf, The IRS Scandal, Day 22

IRS, Bureaucratic Blunder or Political Profiling? (Topaccountingdegrees.org)

 

Kay Bell, More tax professionals (including bloggers) formally support legal challenge of IRS’ effort to regulate tax preparers.  That would be me.

Kyle Pomerleau, A Redistributional Effect of Obamacare (Tax Policy Blog)  Picking the pockets of healthy young men.

Estimated effect of Obamacare on health insurance costs in select states (via Tax Policy Blog)

Estimated effect of Obamacare on health insurance costs in select states (via Tax Policy Blog)

 

William Perez,  “Complaint Case #460575036224″ — Fake Email from the IRS.  Rule of thumb: if you get an e-mail that says it’s from the IRS, it’s not from the IRS.

Trish McIntire, Phishing Again

 

Paul Neiffer, Pay Your Kids!  If you can get them to actually do some work, of course.

Brian Mahany,  The Promised Land – FATCA Causes Record Number Of Americans To Leave.  Congress is making America more of a “selective” taste.

 

TaxGrrrl, Donations Pour In For Oklahoma Relief Efforts, Including $1 Million From Carrie Underwood and Kevin Durant

Patrick Temple-West,  Evidence that tax breaks favor the rich, and more.  Common sense, folks: the rich pay most of the taxes, so any “break” will go to the person who pays most of the taxes.

Howard Gleckman,  Who Benefits from Tax Preferences? You Do. (TaxVox): “When it comes to tax preferences, Pogo was right. “We have me the enemy and he is us.”

 

Fiduciary Income Tax Blog: Decanting.  Trusts, not old wine.

Jim Maule, The Tax Woes of a Corporation Owned by an Indian Tribe

Tax Justice Blog, Governor Cuomo Hearts Tax Cuts.  But only in some places.

Brian Strahle,  MIDDLE MARKET COMPANIES:  RECENT STATE AND LOCAL TAX “PAIN” POINTS

 

Christopher Bergin, Ireland Is Not a Tax Haven, Dammit (Tax Analysts Blog)

Robert D. Flach has his Friday Buzz on! I like this: “The recent scandal has proven that the IRS can’t even properly regulate its own employees, let alone try to properly regulate tax preparers!”

 

It’s a small world after all.  McGladrey’s Plan For World Domination: Nebraska! (Going Concern)

 

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Tax Roundup, 5/6/2013: Iowa tax policy receives recognition! And – potassium forever?

Monday, May 6th, 2013 by Joe Kristan

20130117-1David Brunori doesn’t think much of the tax wisdom of the Iowa House of Representatives ($link):

The Iowa House of Representatives recently passed the Iowa Reinvestment Act, which would allow companies to keep sales tax revenue they collect rather than turning it over to the general fund as the citizens think will happen. Basically, the act is designed to allow businesses to recoup the cost of development. The state has done that before to allow the public to help finance a speedway and other projects that apparently  can’t be justified in the free market. The vote for that abomination of tax policy was 87 to 9. That’s what we call bipartisan bad tax policy.

Just more of using your money to subsidize the well-lobbied and well-connected.

Related: David Cay Johnston, Subsidies – Good News and Not So Good (Tax.com)

 

Jim Maule leaps from his blog to Tax Notes, IRS-Prepared Tax Returns: A Theory That Doesn’t Work in Practice.  (Via the TaxProf):

The idea of the IRS preparing individuals’ returns is a classic example of a theory that cannot survive in a practical  world. Like most theories, it deserved an experiment. It had that chance, in California, and it failed, with only a tiny portion of the eligible population deciding to participate.

Making taxpayers’ lives easier is a matter of simplifying the tax law, not enabling the complexities by turning tax preparation over to the IRS.

This strikes me as wise.  I just can’t imagine IRS data processing ever making this possible, considering the complexity of the income tax and the way Congress changes it all the time.

 

Brian Gongol on the Obama Administration’s proposed $3.4 million cap on retirement account accumulations:

On one hand, $3.4 million is a lot of money — nobody should doubt that. But we’re also nearly completely blind in America to how much is “enough” for retirement. Many people would say the word “millionaire” and imagine Uncle Pennybags or Uncle Scrooge. But consider this: If you wanted to get $40,000 a year in retirement income and do it just on interest payments alone (in other words, if you were trying to avoid taking anything out of your nest egg and just live on the interest), then if you had your money in “safe” 10-year Treasuries earning 1.78%, then you’d have to have more than $2.2 million in the bank. Under those conditions, “rich” doesn’t really look so rich anymore.

I don’t think the nation’s biggest problem is people saving too much.

 

Holding your breath for tax reform?  Exhale.  Martin Sullivan says tax reform is on the Fast Track to Nowhere. (Tax.com)

Donald Marron,  Immigration, Dynamic Scoring, and CBO (TaxVox)

 

Kay Bell,  5 tax tips for Cinco de Mayo

Brian Mahany,  FINRA Issues Warning On Nontraded REITs – Stockbroker Fraud Post

We have written several times about the dangers of nontraded or thinly traded REITs. They are a popular way of investing in real estate but they can be difficult to sell or liquidate if an investor suddenly needs cash.

I saw an elderly, ill client with severe cash problems while holding a private REIT investment that he couldn’t cash out.  This really does happen.  This is not a problem with widely-traded REITs, which are as liquid as any stock.

Jim Maule,  Why the “Toss Tax Records After Three (or Seven) Years” Advice is Bad.  I never throw away tax returns, and you need to keep records to support the cost of shares and big assets.  If you have loss carryforwards, you need to keep the records that support the losses as long as you are using the carryforwards.

Trish McIntire, RAL Fees in Court

Scott Hodge, In Memorial: Gordon Paul Smith.  We lose an important tax scholar.

 

Jack Townsend,  Article on Singapore Crackdown on Singapore Bank Accounts Used for Other Country Evasion

 

The tax law: is there anything it can’t do?  Scientist Pitches Proposal to Curb Bird Deaths: A Tax On Cats  (TaxGrrrl)

 

Potassium forever?  An accused embezzler apparently was in no hurry to stand trial.  From StarTribune.com:

A Texas man faces more than 16 years in federal prison for his role in a scheme to bilk nearly $400,000 from his former Eagan employer, Advantage Transportation.

Clayton “Craig” Hogeland, 43, also obstructed justice by faking a life-threatening medical condition, U.S. District Judge Patrick Schiltz found. That caused delays for both his trial and sentencing hearing.

How did he delay his trial?

Further health-related delays stretched out the trial before his conviction on Dec. 6, 2011. He was placed in custody Jan. 8, 2013, and the erratic blood potassium readings stopped. Six days later, his wife reported to federal authorities that she found in his belongings four zip-top bags of what turned out to be potassium chloride.

Despite his continuing complaints about symptoms after being jailed, tests revealed no abnormal blood potassium levels, the prosecution said.

I’m not sure this was well thought-out.   What’s the next move?  More potassium?  Maybe when you are looking at 16 years in federal prison, delay is its own reward.

 

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