Posts Tagged ‘Brian Strahle’

Tax Roundup, 1/30/14: Gas tax increase advances. And: IRS starts to accept 1040s, but not issuing refunds yet.

Thursday, January 30th, 2014 by Joe Kristan

 

Via Wikipedia

Via Wikipedia

They’re still trying to increase Iowa’s gas tax, reports William Petroski of the Des Moines Register:

An Iowa House subcommittee voted 5-0 today to approve a 10-cent increase in the state’s gasoline tax, although the proposal still faces steep odds of winning final approval this session.

The bill, managed by Rep. Josh Byrnes, R-Osage, would raise the fuel tax by three cents the first year, an additional three cents and following year, and four cents the third year. When fully implemented, the tax increase would generate $230 million annually for city, county and state roads.

It’s always hard to increase taxes in an election year.  There is a good argument that gas taxes are the way to pay for roads, and that Iowa’s tax needs updating, but so far Iowa’s road spending is in line with most other states, and the talk of a “crisis” isn’t convincing everyone.

 

Iowa Farmer Today, Little action expected on taxes in Legislature.  It quotes my co-presenter at the Farm and Urban Tax Schools, Roger McEowen:

McEowen, head of the Center for Agricultural Law and Taxation (CALT) at Iowa State University, says it is always possible the state might do something to clean up its tax code, but it appears unlikely this year.

“Frankly, I don’t think anything important is going to happen on taxes, not in this legislative session,” he says.

It is a sentiment echoed by many other legislative observers.

Like me.

 

 

20130419-1TaxGrrrl, IRS Accepting Returns As Part Of Test Program, Not Issuing Refunds Early

Trish McIntire, Yes, You Have to Wait.  If you haven’t received your W-2, you can’t file using your last 2013 pay stub.

Jason Dinesen, Iowa Firefighter/EMS Tax Credit.  A $50 spiff to volunteer firefighters and EMS people. One more feel-good provision that clutters up the tax law but is too small to enforce.

Brian Strahle, SALT PRACTICES: WHAT PEOPLE THINK, BUT DO NOT SAY.  ”SALT” is “State And Local Taxes.”

Paul Neiffer looks at the predictably expensive and absurd farm bill: How To Make an Extra $100 Per Acre!  It brings to mind the old joke:  ”How did the farmer double his income?  He bought a second mailbox.”

Related: Billionaires Received Millions From Taxpayer Farm Subsidies: Analysis (Huffington Post)

William Perez, Earned Income Credit Recipients by State

 

 

Phil Hodgen, How Many Appointments in Buenos Aires to Expatriate?  The State Department doesn’t always make it easy to shed U.S. citizenship.

Brian Strahle, FATCA and Unintended Consequences.  A story of an American in Switzerland who is losing the ability to commit personal finance because of this anti-”fatcat” legislation.

 

taxanalystslogoDavid Brunori, A Sales Tax Conundrum (Tax Analysts Blog):

The sales tax has been a blessing and a curse. One of its great virtues is that it is collected by the vendor, which then remits it to the state. Neither the taxpayer nor the tax agency has much to do except pay and collect. The vendor does the work. The success of the sales tax for the last 90 years is largely attributable to vendor collection. But if the vendor doesn’t collect and remit the appropriate tax, it is liable for the amounts. The vendor will have to pay the unremitted tax and could face severe penalties and even criminal charges.

So if a vendor is unsure about the status of an item it’s selling, it will collect the tax. Better to collect and remit tax not owed than to face the consequences of a mistake.

David notes that online vendors will have to deal with many states, with very confusing rules, and that over-collection of sales taxes is the inevitable result.  Not that the states mind.

Cara Griffith wonders, Are State Tax Authorities Hiding the Ball? (Tax Analysts Blog).  ”I’ve noticed an emerging trend in some state departments of revenue – a move toward secret law. In a time when transparency has become a buzzword, some revenue departments are doing what they can to avoid transparency.”

 

William McBride, State of the Union: Corporations Continue to Flee (Tax Policy Blog)

Tax Justice Blog, Why the Business Tax Reform Proposal in Obama’s SOTU Is Not as Great as It Sounds

Kay Bell, Taxes touched on lightly in State of Union via EITC, MyRA

Joseph Thorndike, The War on Wealth Is Not New.  (Tax Analysts Blog).  True.  And it has always been dishonest, disgraceful, corrupt, and impoverishing.

 

The Critical Question.  What Happens When You Mix a Seedy Strip Club, an Unsophisticated Taxpayer and the Tax Court? (Going Concern).  I’m sure if it was one of those real elegant and distinguished strip clubs, there wouldn’t have been a problem…

 

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Tax Roundup, 12/6/2013: Fools Gold Edition. And: corporations can have their identity stolen too!

Friday, December 6th, 2013 by Joe Kristan


20131206-1
We’ve all had narrow misses with bad ideas.  For example, the general manager of the Yankees and Red Sox owner went out drinking and negotiated a trade of Ted Williams for Joe DiMaggio, only to call it off in the light of day.  Think of the time you almost went into business with your brother-in-law.  Fortunately, we usually think better of it in time to avoid disaster.

Not Robert Kahre.  He got this great idea to pay employees in gold and silver coins, which are worth far more than their original face value, while reporting the income and paying taxes at the face value.

Kahre met John Nelson (Nelson), who authored books and taught classes about the IRS and the monetary system, and Nelson’s ideas influenced Kahre to develop the payment system at issue.

According to Kahre, he developed his gold payroll system because the United States government had debauched the national currency and utilized inflation to confiscate the wealth of U.S. citizens. Kahre relied on court cases and the Gold Bullion Coin Act of 1985 that approved gold coins as legal tender. Kahre devised the independent contractor agreements to reflect that the IRS was a foreign agent for the World Bank and the International Monetary Fund (IMF). In Kahre’s view, by collecting taxes for the IRS, employers illegally served as foreign agents for the World Bank and IMF. Kahre relied on several federal statutes, regulations, and “Presidential Documents” in the process of developing his payroll system to avoid the collection of taxes on behalf of foreign agents.

How do you suppose that worked out?  Well, the above description comes from a federal appeals court decision upholding a 190-month prison sentence for Mr. Kahre, if that’s any indication.   More from the decision:

Appellants contend that the district court erred in denying their motions to dismiss the indictments because they did not know that their use of gold and silver coins for payroll payments was illegal under the tax laws. Appellants specifically maintain that the district court’s tax valuation predicated on the fair market value of the gold and silver coins unfairly imputed criminal intent to their unknowing actions.

A footnote helps show why the court wasn’t persuaded (citations omitted, emphasis added.):

Appellants contend that gold and silver coins are statutorily valued at face value. However, this appeal does not really concern the statutory value of gold and silver coins when utilized as legal tender. Instead, this appeal addresses Appellants’ payment of wages in gold and silver coins in a scheme to avoid payroll taxes, as evidenced by the facts that Kahre’s employees were required to immediately return the coins for cash and, that if an employee retained the coins, his wages were reduced by the fair market value of the coins.

Oops.

The moral?  The tax law isn’t required to believe every ridiculous thing you read, and there is no Tax Fairy.

Cite: Kahre, CA-9, NO. 09-10471

 

TIGTAIt’s not just individual identity theft.  TIGTA: IRS Issues $2.3 Billion/Year in Fraudulent Tax Refunds Based on Phony Employer Identification Numbers. (TaxProf). Considering this, and the identity theft epidemic, and their worsening taxpayer service, their wish to devote resources to regulating preparers is hard to take.

 

Now there’s a shocker.  Democrats, liberals pan Gov. Terry Branstad’s flat tax idea (Jason Noble).  If you can’t get the cooperation you need to pass even a half-way plan, you can at least change the terms of the debate by going bold.

 

Jason Dinesen, Stock Losses and Taxes:

Beware of “wash sales.”  A wash sale occurs when you sell stock at a loss and then buy the same stock within 30 days before or after the sale.  (Example:  you sell Stock A at a loss on August 1 and then re-purchase Stock A on August 15.  This is a wash sale and the August 1 loss is not currently deductible but instead adjusts the basis of the stock you purchased on August 15.)

Year-end loss sales are a common tax planning move, but you need to be willing to do without the shares for 30 days.

 

Kay Bell,  Low corporate tax rates don’t guarantee more jobs.  No, but you won’t convince anybody that high corporate taxes help.’

Kyle Pomerleau, New Report on Corporate Income Taxes and Employment Doesn’t Come Close (Tax Policy Blog).  ”Their conclusion is akin to blindly picking two jellybeans from a bag of 1,000, getting two red ones, and then concluding that the rest of the jellybeans in the bag must be red.”

 

Dueling cronyism.  Missouri Lawmakers to Washington: We’ll See Your $8.7 Billion, And… (Tax Justice Blog)

William Perez,  Year End Deduction Strategies for the Self Employed

 Andrew Mitchel,  New Resource Page: Monetary Penalties for Failure to File Common U.S. International Tax Forms.  They’re quite ugly.

 

Elaine Maag,  Analyzing Taxes and Transfers Together (TaxVox)

Keith Fogg,  What is a return – the long slow fight in the bankruptcy courts (Procedurally Taxing)

Jack Townsend,  Economic Substance Uncertainty in Civil Cases

Tax Trials, Supreme Court Adopts IRS Position on Jurisdiction and Application of Partnership Penalties

 

Courtesy Gateway Pundit.

Courtesy Gateway Pundit.

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

Brian Strahle,  UDITPA REWRITE NECESSARY, BUT WILL STATES LISTEN?

TaxProf, The IRS Scandal, Day 211

 

Robert D. Flach has a meaty Friday Buzz!

TaxGrrrl,  Flushing Out The Toilet Paper Tax Exemption   

News from the Profession.  Former CPA and Procrastinator Ordered By the State to Get Around to Removing “CPA” From All Her Stuff (Going Concern)

 

Happy St. Nicholas Day!

 

 

 

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Tax Roundup, 11/26/13: If they can spend your money better than you, by all means write them a check. And more!

Tuesday, November 26th, 2013 by Joe Kristan

20130117-1I really wasn’t baiting anybody when I asked Would you trust a state legislator to spend your $54?   but Des Moines Register columnist Rekha Basu bit anyway with $54 refund would do us more good if state kept it.  This is classic (my emphasis):

Your 54 bucks might get you a dinner out, a pair of jeans, a couple of sideline tickets to a Hawkeyes football game, or some fancy bottles of wine. But consider what it could have done for the state.  The budget for fixing roads and bridges falls $215 million short of need every year. That especially riles state Sen. Joe Bolkcom, who chairs the Senate’s Ways and Means Committee. Not only could our little refunds take care of critical infrastructure repairs, but they’d create jobs in the process, points out the Iowa City senator.

You don’t matter; the state does. You’d just squander your money, but the all-wise state would unerringly direct your money to where it is most needed for the greatest good.  Just like Joe Bolkcom did when he voted for the Iowa Film Tax Credit Program, which gave tens of millions of taxpayer dollars to grifters and Hollywood sharpies before it collapsed in scandal and disgrace — but not before Rekha Basu could sing its praises:

But some benefits can’t just be measured on a dollar-for-dollar basis. The movies provide employment to local actors, construction crews, artists, caterers, drivers and a host of others. They expose non-Iowans to what the state has to offer. More intangible is the benefit of interactions in a state that can be cut off from the trends and centers of power. Not to mention the excitement factor. We’ve relied on caucuses every four years to bring action and celebrities to town. Now, sightings are anytime, any place.

 Saturday, “The Experiment” had a wrap party downtown. Brody and Whitaker were there, mingling and posing for pictures. Frank Meeink was there. The Iowan who may have inspired the 1998 “American History X” has an acting role. Deb Cosgrove, the nurse, was there. She’s been tending to the medical needs of the film’s luminaries. Casey Gradischnig, local multi-media designer, was there. He’s been working for Whitaker.

Yes, this is the sort of critical infrastructure that we should be trusting our wise leaders to fund on our behalf, so we don’t blow it on football games or bottles of wine, or groceries or medicine — all of which “creates jobs” just as much as money given by politicians to well-connected contractors or filmmakers.

Ms. Basu says she is “tempted” to return her $54.  Talk is cheap.  If she really thinks the state can spend her money better than she can, she can write a check to “Treasurer, State of Iowa,”  mark it as a donation to the state, and send it to the Department of Revenue, Attn: Courtney Kay-Decker, 1305 E. Walnut, Des Moines IA 50319.   Otherwise, she reveals that she doesn’t really trust the state to spend “her” money;  only other peoples’ money.

 

William Perez,  Strategies for Reducing the Net Investment Income Tax.  ”Planning strategies for the NIIT focuses on managing adjusted gross income, managing investment income or managing both.”

I would add that many strategies that might otherwise be unwise because of Alternative Minimum Tax, like prepaying state income taxes on big capital gains, become helpful in dealing with the net investment income tax.

 

I’ve seen niftier.  Nifty Scheme Lands Five at ClubFed (Russ Fox)

 

nfl logoJeremy Scott, The NFL Is Tax-Exempt? Yes, But . . . . (Tax Analysts Blog):

Removing the league’s tax exemption would be a largely symbolic move that would raise little revenue and wouldn’t change much about how the league does business. Far more significant would be increased debate and transparency over publicly financed stadium construction and the tax favors that are doled out to keep teams from moving…

The teams themselves are taxed, and that’s where the real money is.

 

Brian Strahle, MARKET-BASED SOURCING GOES INCOGNITO:

The trend toward market-based sourcing of revenue from services has been increasing over the past several years. Some states have adopted market-based sourcing by enacting legislation, and others have imposed it by interpreting their statutes and regulations to allow it.

Legislators looove taxing non-voters.

 

Stephen Olson, Summary Opinions for 11/22/2013 (Procedurally Taxing).

TaxGrrrl, Chrysler Slows But Doesn’t Put Brakes On IPO Amid Questions Over Taxes 

Peter Reilly, Decision On Clergy Housing Tax Break Evokes Memory Of JFK .  Not a connection I would have made.

Kay Bell, Religious housing tax break deemed unconstitutional

 

Elizabeth Malm, Richard Borean, Monday Map: Adjustment of State Income Tax Brackets for Inflation (Tax Policy Blog)

20131126-1

 

Clint Stretch, Max Baucus and the Stamp Tax (Tax Analysts Blog).  I don’t think Sen. Baucus was around for the Stamp Act of 1765, but I’m not so sure about Sen. Grassley.

 

TaxProf, The IRS Scandal, Day 201

 

Tuesday is Buzz-day at Robert D. Flach’s place!

One of these things is not like the others?  Tax Simplification, Male Prostitution, and Mormon Thrift Stores (Going Concern)

 

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Tax Roundup, 11/8/13: Kyle Orton gets the bad news about the Tax Fairy. And: how many Lithuanians can you fit into a mailbox?

Friday, November 8th, 2013 by Joe Kristan

tax fairyKyle Orton’s old lawyer fails to find the Tax Fairy, departs the tax business.  From a Department of Justice press release:

A federal court has permanently barred Gary J. Stern from promoting tax fraud schemes and from preparing related tax returns, the Justice Department announced today.  The civil injunction order, to which Stern consented without admitting the allegations against him, was entered by Judge Robert Gettleman of the U.S. District Court for the Northern District of Illinois.  The order permanently bars Stern from preparing various types of tax returns for individuals, estates and trusts, partnerships or corporations (IRS Forms 1040, 1041, 1065, and 1120), among others. 

According to the complaint, Stern designed at least three tax-fraud schemes that helped hundreds of customers falsely claim over $16 million in improper tax credits and avoid paying income tax on at least $3.4 million.  Stern allegedly promoted the schemes to customers, colleagues, and business associates.  The complaint alleges that his customers included lawyers, entrepreneurs and professional football players, and some of the latter, including NFL quarterback Kyle Orton, have sued Stern in connection with the tax scheme, alleging fraud, breach of fiduciary duty and professional malpractice. 

Mr. Stern seems to have led his clients on a merry chase after the Tax Fairy, the legendary sprite who can wave her wand and make your taxes disappear.  Kyle Orton is a graduate of Southeast Polk High School near Des Moines, where the truth about the Tax Fairy apparently was not in the syllabus.

Related: Jack Townsend, Chicago Lawyer Enjoined From Promoting Fraudulent Tax Schemes 

 

20131108-1Maybe Lithuanian apartments are crowded?  USA Today reports:

The Internal Revenue Service sent 655 tax refunds to a single address in Kaunas, Lithuania — failing to recognize that the refunds were likely part of an identity theft scheme. Another 343 tax refunds went to a single address in Shanghai, China.

Thousands more potentially fraudulent refunds — totaling millions of dollars — went to places in Bulgaria, Ireland and Canada in 2011.

In all, a report from the Treasury Inspector General for Tax Administration today found 1.5 million potentially fraudulent tax returns that went undetected by the IRS, costing taxpayers $3.2 billion.

When your controls don’t notice something like that, you have a lot more urgent problems than regulating preparers.   Yet Congress and the Administration think the IRS is ready to take on overseeing your health insurance purchases.  What could go wrong?

Tony Nitti is moved to offer the IRS a proposition:

MR. IRS,

REQUEST FOR URGENT BUSINESS RELATIONSHIP

FIRST, I MUST SOLICIT YOUR STRICTEST CONFIDENCE IN THIS TRANSACTION. THIS IS BY VIRTUE OF ITS NATURE AS BEING UTTERLY CONFIDENTIAL AND ‘TOP SECRET’.

Heh.

 

 

S-SidewalkCosting taxpayers by not taking their money.  Tax Analysts reports ($link):

Democrats seeking to raise revenue in ongoing budget talks have circulated a list of tax preferences they would like to see eliminated, including a provision that allows some wealthy individuals to avoid large payroll taxes, the carried interest preference, and the tax break for expenses businesses incur when moving operations overseas. 

The “provision that allows some wealthy individuals to avoid large payroll taxes” is called Subchapter S.  Form 1120-S K-1 income has never been subject to payroll or self-employment tax.  This bothers the congresscritters (my emphasis):

Commonly known as the “Newt Gingrich/John Edwards” loophole, it is most often used by owners of Subchapter S corporations to avoid the 3.9% Medicare tax on earnings, which costs taxpayers hundreds of millions of dollars every year.  Many S corporation shareholders receive both wages from the S corporation and a share of the S corporation’s profits, but they pay payroll tax only on their wages.

“Costs” taxpayers?  From my point of view, and from that of my S corporation clients, it saves taxpayers hundreds of millions of dollars every year — but keeps it out of the hands of grasping politicians, so it’s perceived as a bad thing, by grasping politicians.

The versions of this “loophole closer” proposed in the past have been lame.  When all they have to offer on tax policy is warmed over lameness like these, they aren’t serious.

 

 

TaxProf, Brunson: Preventing IRS Abuse of the Tax System.  The TaxProf quotes a new article by Samuel D. Brunson:

The IRS can act in ways that violate both the letter and the intent of the tax law. Where such violations either provide benefits to select groups of taxpayers without directly harming others, or where the harm to taxpayers is de minimis, nobody has the ability or incentive to challenge the IRS and require it to enforce the tax law as written.

Congress could control the IRS’s abuse of the tax law. Using insights from the literature of administrative oversight, this Article proposes that Congress provide standing on third parties to challenge IRS actions. If properly designed and implemented, such “fire-alarm oversight” would permit oversight at a significantly lower cost than creating another oversight board. At the same time, it would be more effective at finding and responding to IRS abuse of the tax system and would generally preserve the IRS’s administrative discretion in deciding how to enforce the tax law.

Right now the IRS — and by extension the administration in power — can pick and choose what parts of the law it wants to apply.  For example, the current administration has chosen to allow tax credits for participants in federal insurance exchanges, which the law does not authorize, while unilaterally delaying the employer insurance mandate but not the individual mandate.  Somebody should be able to challenge this sort of fiat government.

 

More on the shutdown of Instant Tax Service, a story we covered yesterday:Irwin

Department of Justice press release: Federal Court in Ohio Shuts Down Nation’s Fourth-Largest Tax-Preparation Firm and Bars CEO from Tax-Preparation Business

 

Irwinirwin.jpgPeter Reilly, Ninth Circuit Rules Against Irwin Schiff Sentence Appeal:

Irwin Schiff is probably one of the more famous alternate tax thinkers.  His seminal work “How Anyone Can Stop Paying Income Taxes” is available in hardcover on Amazon for one cent.

Mr. Schiff appealed his sentence on tax crimes on the basis that his attorney failed to raise a “bipolar disorder” defense and what an attorney I know calls the “good faith fraud” defense — the Cheek argument that you really thought the wacky stuff you were saying is true.  Peter wisely notes:

The problem with the Cheek defense is that you have to be smart to raise it, but if you show that you are too smart, then it does not work.

Its a fine line — smart enough to spend “thousands of hours” researching the tax law, but not smart enough to avoid a massive misunderstanding of it.

 

Jana Luttenegger,  IRS Change to Use-Or-Lose Rule for FSA Accounts (Davis Brown Tax Law Blog): “New IRS rules permit employers to allow participants in a health Flexible Spending Arrangement (FSA) to carry over unused amounts up to $500 from one plan year to the next.”

 

Paul Neiffer, Trusts Get Hit with New 3.8% Tax too. And hard.

Kay Bell, It could be time to harvest capital gains and future tax savings

Rush Nigut,  Careful Planning Necessary When Using Retirement Monies to Fund Startup Business

Brian Strahle, IGNORANCE MAY NOT BE BLISS WHEN IT COMES TO ‘ZAPPERS’  These are software apps designed to hide point-of-sale receipts from the taxman.

Phil Hodgen’s Exit Tax Book: Chapter 9 – Estate and Gift Tax for the Covered Expatriate

Catch your Friday Buzz with Robert D. Flach!

TaxGrrrl,  Former NFL Star Cites Concussions, Receives Prison Sentence For Role In Tax Fraud 

Leslie Book,  TIGTA Report on VITA Errors (Procedurally Taxing)

 

Howard Gleckman,  Can Expiring Tax Provisions Save the Budget Talks? (TaxVox).  ”Sadly, it is hard to see how.”

 

Not strictly tax-related, but good reading anyway:  How to Put the Brakes on Consumers’ Debt(Megan McArdle).  Megan points out the wisdom of spending less than you take in, in preference to trying to get the government to cover your shortfalls.

 

News you can use: 3 ways to screw up your next website (Josh Larson at IowaBiz.com)

News from the Profession: Failed PwC Auditor Finds Success in Burning Bridges With This Ridiculous Farewell Email (Going Concern)

 

Quick thinking.  From The Des Moines Register:

A Des Moines man awoke to find a stranger in his living room Thursday afternoon, police said. When the victim confronted the burglar, the suspect reportedly offered to mow the victim’s lawn for $5.

Guy needs to work on his pricing model.

 

 

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Tax Roundup, 10/23/2013: The Earned income tax credit thief subsidy feature. And: tax season delayed!

Wednesday, October 23rd, 2013 by Joe Kristan

Some smart people are big fans of the Earned Income Tax Credit. Some see it as a way to help the working poor, and some see it as a less destructive way to achieve the goals of minimum wages.

Yesterday the Treasury Inspector General for Tax Administration reported that from 21% to 25% of the earned income credit was paid improperly for the most recent fiscal year, and that $110 to $130 billion has been “paid improperly” over the past decade. That’s a nice way of saying “stolen.”

 

EITC error chart

Just because there is a lot of theft doesn’t by itself make a program bad — though that kind of loss rate would bankrupt anybody in the private sector.   Most people would send food to starving people in a war zone knowing that local warlords will be plundering some of it. But a program that comes at the cost of sending $11 billion annually to thieves needs to otherwise be a very good thing.   That’s not so clear with the EITC.

The credit does help the working poor — as long as they stay poor. As they work their way out of poverty, it becomes a trap. The phase-out of the credit imposes a punishing unstated, but very real, marginal tax rate.

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.

The EITC is only one program that does this; all “means-tested” welfare programs do this to some degree. It’s not uncommon for this implicit tax rate to exceed 100% at some income levels.

I don’t know what the right answer is (Arnold Kling has some ideas), but increasing the EITC, like Iowa did this year, isn’t it.

 

Oh, Goody. 2014 Tax Season to Start Later Following Government Closure; IRS Sees Heavy Demand As Operations Resume (IRS Press Release)

The IRS is exploring options to shorten the expected delay and will announce a final decision on the start of the 2014 filing season in December, Acting IRS Commissioner Danny Werfel said. The original start date of the 2014 filing season was Jan. 21, and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4. 

20131023-1It’s funny how programming IRS computers isn’t “essential,” but barricading open-air monuments is.

Other coverage:

William Perez, IRS Expects to Delay the Start of the 2014 Filing Season

Kay Bell, IRS won’t accept 2013 tax returns until Jan. 28, 2014

Russ Fox, Sigh: 2014 Tax Season to be Delayed up to Two Weeks

TaxGrrrl, IRS Announces Delayed Start To 2014 Tax Season   

 

Robert D. Flach, HOW TO DEAL WITH THE IRS AND LIVE TO FIGHT ANOTHER DAY

Paul Neiffer,  Taxpayers Want Their Cake, Frosting and Candles! Live by the low estate-tax value, die by the low estate-tax value.

Jack Townsend, Has the U.S. Aided International Tax Evasion?

Russ Fox,  Coming Attractions: When the IRS Writes New Law When They’re Not Allowed To.  A federal judge has allowed a suit challenging the IRS unilaterally extending the tax credit for insurance purchased on state-sponsored exchanges to policies sold on federally-run exchanges.

TaxProf, The IRS Scandal, Day 167

 

President Reagan signs PL 99-514, the Tax Reform Act of 1986.The Tax Policy Blog takes us on a nostalgia tour in  8 Technological Changes Since the 1986 Tax Reform.  Take a trip back to the days of “car phones.”

 

Clint Stretch, Whom Do Tax Reformers Want to Help? (Tax Analysts Blog):

When congressional leaders start talking about tax reform as if it will benefit everyone, someone should be asking: Whom are you trying to help? The answer may be Americans earning more than around $75,000 who have fewer itemized deductions, fewer kids, fewer healthcare benefits, and lower retirement savings than most.

I’m not convinced that’s the right way to look at it.  Getting rid of complexity and lowering rates helps everybody by eliminating dead weight loss and redirecting resources from tax planning and compliance to more useful pursuits.

Andrew Lundeen, A Lot Has Changed in the 27 Years Since the Last Major Tax Reform (Tax Policy Blog).  ”The amount of credits, loopholes, and deductions has increase by 44 percent, from $844 billion (2013 dollars), to over $1.2 trillion (2013 dollars), with much of that growth coming from the expansion of refundable tax credits.”

 

Howard Gleckman, Congress Shouldn’t Forget About Tax Entitlements In Its Search for Deficit Reduction (TaxVox)

 

Tax Justice Blog,  Governor Scott Walker Appropriates State Budget Surplus for Campaign Season Tax Cut.  In Tax Justice World, returning money taken by force of law to the taxpayers is “appropriating” it.

 

David Brunori, Eliminating the Sales Tax Is a Very Good Idea (Tax Analysts Blog) “But ending a tax that preys on the poor and is increasingly difficult to collect may provide the economic boost Rhode Island needs.”

Brian Strahle, BLAMING THE PLAYERS FOR THE RULES.  ”Regardless, most taxpayers are simply trying to comply with the maze and complexity of non-uniform multistate tax laws”

Joseph Thorndike, The Gas Tax Doesn’t Work Because Politicians Broke It (Tax Analysts Blog).  By not raising it, apparently.

 

The Critical Question:  JD Salinger – Was January 27 2010 A Good Day To Die ?  (Peter Reilly)

Career Corner.  First Round Interview Tips for This Fall’s Accounting Recruits (Going Concern)

 

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Tax Roundup, 8/22/2013: Is your passport worth your business? And a prodigal mom!

Thursday, August 22nd, 2013 by Joe Kristan


passport
A great post by Phil Hodgen, Why people renounce U.S. citizenship for estate tax reasons.  It’s an issue often overlooked in cheap talk of “tax cheats,” but not by those who face a tremendous hit to their family businesses from the  U.S. Estate tax:

The senior members of these families are pressuring the younger generation give up U.S. citizenship to protect against these problems. I have heard the ultimatum from the father to the son: “The business or your U.S. passport. You choose.”

I want to emphasize that I do not hear political rants from my clients, or from the other family members who must deal with having a U.S. citizen shareholder thrust upon them. Everyone I talk to is eager to travel to the United States, enjoys meeting Americans, and bears no ill will to anyone.

But faced with the prospect of destroying the family business or giving up the U.S. passport, it is no contest. The passport has to go.

40% of the value of your business, as second-guessed by the IRS, can be a high price for a passport.

 

Sorry, “Mom.”  The Tax Court yesterday found a problem with a claim for a dependent exemption:

Petitioner has failed to show that she is entitled to the dependency exemption deduction for Mr. Salako. Petitioner claimed on her 2008 return that Mr. Salako was her son. Mr. Salako was born on January 12, 1961, and was thus 47 years old at the close of 2008. Petitioner, born in 1959, is only two years older than Mr. Salako. Thus, he cannot be her biological son, and we do not find credible petitioner’s unsubstantiated testimony that Mr. Salako is her adopted son.

Decision for IRS, not surprisingly.

Cite: Golit, T.C. Memo 2013-191.

 

Scott Hodge,  Why Shouldn’t the Tax Foundation Pay Taxes?  (Tax Policy Blog):

Just 3 percent (or 6,508) of all non-profits have assets of $50 million or more. However, these organizations took in 73 percent of all non-profit revenues and commanded 81 percent of all assets held by non-profits.  

Inequality!

 

TaxGrrrl, Michael Jackson’s Estate To IRS: Beat It.  Prompting a whole generation to ask, “who’s Michael Jackson?”

 

Cara Griffith, Textbooks with Borders (Tax Analysts Blog):

Most of us have heard of doctors without borders, but has anyone heard of textbooks with borders? It’s a reality for those using Amazon’s textbook rental service. The reason for this is very likely related to Amazon’s recurring sales tax issues.

Taxes often explain seemingly bizarre behavior.

 

Kay Bell, Maryland Rep. Van Hollen sues IRS over its application of 501(c)(4) political nonprofit rules.  Good luck with that.

 

TaxProf, TIGTA: IRS May Be Violating Copyright Law on 89% of its Software.  I don’t suppose copyright violations will invalidate an assessment.

 

Missouri Tax Guy,  DOMAs Death, There Are Questions

Trish McIntire,  Rant- Keep Your Return Safe.  Certainly never send it as an unencrypted pdf attachment to an email.

Peter Reilly,  Group Claiming To Teach True Meaning Of Islam Denied Exempt Status. 

TaxProf,  The IRS Scandal, Day 105

 

The Critical Question:  WHAT DO HERNIAS AND STATE TAXES HAVE IN COMMON? (Brian Strahle)

Personal advice section: Someone Who Has Never Dated an Accountant Came Up With 15 Reasons to Date an Accountant (Going Concern)  Someone who has dated one might come up with fewer.

 

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Tax Roundup, 8/12/2013: Good intentions edition. And the mysteriously-lucrative profession of German toilet attendant.

Monday, August 12th, 2013 by Joe Kristan

Good intentions don’t always mean good results.  That’s one of the lessons in Michael Schuyler’s post  Evaluating the Growth Effect of the Earned Income Credit at the Tax Policy Blog:

The Tax Foundation study concluded that while the EIC raises the incomes f low-income workers, its net result is to reduce both national output and total hours worked.  This result may seem surprising because the credit creates a strong incentive for workers with very low incomes who are within the EIC’s phase-in range to work more since each extra dollar of earnings brings a larger credit.  Unfortunately, for the larger number of low-to-middle income workers who are within the EIC’s phase-out zone, the loss of benefits with rising earnings generates a powerful deterrent against additional work effort.

 That “deterrent effect” results from the high hidden marginal tax rate on income in the EIC phaseout range:
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.

The credit was invented with the worthy intention of encouraging those with the lowest incomes to find work, but it has the unintended, though predictable, effect of discouraging those who already have jobs from moving up.  It does, however, have a fine stimulative effect on grifters, as up to 25% of the credit is issued improperly (examples here and here).

 

IRS, Disclosure Authorization and Electronic Account Resolution retirement delayed three weeks.  It’s nice of them to delay making it harder for tax pros to resolve client problems.

  

Richard Doak, Salesman in Chief: Governors today focus on handing out tax ‘incentives’:

In the early days of the Republic, many states got burned by canal-building schemes and other enterprises that well-connected corporations talked state governments into financing.

By the time the Iowa constitutions were written, in 1846 and 1857, people had become wary of states getting involved with corporations. Hence the restrictions such as those in the Iowa Constitution.

Today, the restrictions are easily gotten around, and the spirit of state-corporate separation expressed in the Constitution is ignored as government rushes into entanglements.

Politicians will sell their souls for a mess of ribbon cuttings and press releases.

 

Megan McArdle, Fixing the Mandate From Hell:

I’m kind of surprised to hear a lot of liberals agree that the 30-hour rule is bad policy, and even more surprised to hear that it would be easy to repeal or reform. In fact, while I opposed the law, I find it easy to see why they designed an employer mandate for all employers who worked more than 30 hours, and difficult to imagine how it could be reformed.

Welcome to the brave new world of 29-hour per week jobs.

 

Brian Strahle,  FEAR AND UNCERTAINTY:  ARE YOU PLAYING THE “WAIT AND SEE” GAME?  “In the world of state taxes, companies are faced with vast amounts of
‘uncertainty’ when applying multiple state rules that lack conformity to  their company’s situation.”  I don’t think you need to qualify the uncertainty with scare quotes.

TaxProf, The IRS Scandal, Day 95

Kay Bell, New York cop pleads guilty to identity theft, tax refund fraud

Jack Townsend, Is It the Defendant’s Burden to Prove Good Faith As a Defense to Willfulness?

Peter Reilly,  Windsor As A Precedent – Much More Than Taxes

TaxGrrrl, IRS Releases List Of Americans Hoping To Expatriate, Number Tops 1,000

Russ Fox, Once Again, Registration of a Tax Preparer Doesn’t Stop Him from Bad Behavior.   Tax preparer regulation just gives the bad ones a government seal of approval.

 

Look on the bright side! AICPA to CPA Exam Candidates: Hey, at Least You Don’t Have Kidney Stones! (Going Concern)

Flushing out tax crime.   Toilet attendant who kept £35,000 in loose change she made from tips faces tax evasion charges in Germany after investigators discover 1.4 tonne pile of coins in her garage (London Daily Mail).

It sounds like she was some sort of bathroom boss:

The website reported how the woman would drive to a number of toilets across the country in her Mercedes collecting the money.

Police started investigating the woman after she fell out with an employee.

Officers were called to one of the toilets after the pair started fighting but they later opened investigations into how the company was run after suspicions were raised.

It’s the price they pay, apparently, for not having savage unsupervised bathrooms like we deal with here.
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Tax Roundup, 8/7/2013: Tax credits! That’s the ticket! And: would low-income workers be better off without the earned income credit?

Wednesday, August 7th, 2013 by Joe Kristan
Tax Credits! - The Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

Tax Credits! – The Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

Whatever the question, some folks answer “tax credits!”   From The Des Moines Register:

A former state lawmaker says he will try to rally school, city and county associations to support legislation that would provide tax credits to those who buy empty or abandoned public buildings and create jobs.

Clarence Hoffman, a Denison Republican who served in the Iowa House from 1998 to 2008, said a Des Moines Register Reader’s Watchdog column that raised the question of what to do with abandoned schools across Iowa was the catalyst for his renewed interest in seeking the legislation.

Tax credits!  Problem solved!  Except for the new ones, like:

- Once more the tax law is more complicated, and tax enforcement resources have to be spread even thinner to keep this new credit from being a fraud magnet, like so many others.

- The price of neighboring buildings owned by private owners will be depressed by subsidies offered for the competing public property.  The credit will “solve” the problem of hard-to sell public property by taking money out of the pockets of other property owners.  Maybe Mr. Hoffman can offer still another tax credit to solve that problem.

 

Would low income taxpayers be better off with no earned income tax credit and lower tax rates?  That intriguing possibility is raised in a new Tax Foundation study of the economic effects of repealing the fraud-ridden EITCRichard Morrison discusses the study in the Tax Policy Blog (my emphasis):

The credit does help workers with very low incomes. For workers with higher earnings, the credit continues to raise incomes until it is fully phased out. The phase-out, however, does discourage workers from accepting more hours worked by reducing the amount of additional pay they would otherwise receive. As a result, our research suggests that the negative impact of the phase-out depresses the labor supply by more than the phase-in bolsters it. 

The EITC serves as a poverty trap by imposing a high hidden marginal tax rate because of the way increasing income reduces the credit.  Iowa makes the problem worse by pairing its EITC with the federal credit, leading to marginal tax rates as high as those of the highest income earners:

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

 

More from Mr. Morrison:

It is possible that tax reformers in Congress could alter the Earned Income Tax Credit in any number of ways rather than eliminating it, but in the spirit of our Economics of the Blank Slate analysis series, we modeled a scenario in which it was dropped from the code entirely. It’s important to remember, though, that our analysis also found that pairing an EITC repeal with an across-the-board tax cut would increase GDP by $125 billion per year and add 783,000 full-time jobs. Those additional opportunities would also be good for low-income workers.

But what about the poor grifters who siphon off 25% or so of the EITC?  How can we help them?

 

Jason Dinesen,  Iowa Tuition and Textbook Credit and Back-to-School Shopping

William Perez, Anspach on the Benefits of Roth IRA Conversions

Missouri Tax Guy,  Tax Planning for Freelancers: Are You Prepared?  “One of the most common mistakes that freelancers make is that they don’t properly budget for taxes.”

Peter Reilly,  Internet Password Protocol Not A Charitable Activity

 

Quotable:

With the possible exception of Uncle Sam’s continual – and often horrendous – misuse of its military prowess, no government policy in America is as uncivilized – as offensive to common decency – as destructive of property rights – as arbitrary in its justification and in its applicationas incompatible with freedom – as conducive to corruption – as downright sickening and maddening as is civil forfeiture.

-Donald Beaudreax

 

TaxProf, The IRS Scandal, Day 90.

David Brunori, Lotteries are Winners, Except for the People (Tax Analysts Blog):

You see the lottery system is a big fat scam. It takes money from poor people. Am I the only person who finds it bizarre that the government would raise money from a regressive lottery and then celebrate by giving the money back to the poor and dispossessed in the form of scholarships?

It’s like so many government “benefits” — they take your money, and then they tell you how wonderful it is when they give some of it back.  That’s just as true for “economic development” tax credits.

 

Howard Gleckman, A Summer Update on Tax Reform (TaxVox)

Anthony Nitti, The Problem With Corporate-Only Tax Reform

TaxGrrrl, NC Lawmakers Reckon With The Three Rs: Reading, Writing & (Tax) Reform

Tax Justice Blog,  State News Quick Hits: Irresponsible Tax Promises in Gubernatorial Campaigns – and More

 

Is it really wise to smoke them?  Treating Twinkies Like Crack (Joseph Thorndike, Tax Analysts Blog)

The Critical Question:  NORTH CAROLINA TAX REFORM:  GOOD OR BAD??  (Brian Strahle)

Kay Bell, ‘Racist’ tanning tax assailed by GOP Representative. Racist?  How about plain old stupid?

 

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Tax Roundup, 7/29/2013: If the embezzler had used the money for figurines, would they sue Precious Moments?

Monday, July 29th, 2013 by Joe Kristan

20130729-1Blame the casino for the thief?  A Nebraska business may be taking an oddly-forgiving view towards employee theft.  The Associated Press reports that the Colombo Candy and Tobacco Wholesale Company (now there’s a product combo for everyone) declined to press charges against a former employee for allegedly stealing $4.1 million.  Instead they are suing a Casino for leading her unto temptation.

But the Nebraska Department of Revenue is less willing to let bygones be bygones, reports KETV.com:

The Nebraska Department of Revenue and the Sarpy County attorney have decided to pursue criminal charges against 54-year-old Caroline Richardson of Gretna.

Sarpy County Attorney Lee Polikov said this is a case he doesn’t see every day.

“I think it’s interesting for people to know that stolen money is considered income and has to be reported on your income tax,” Polikov said.  “If you don’t report it and don’t pay it, you’ll be prosecuted for it.”

In a civil filing where Richardson is identified as “Jane Doe,” Colombo Candy argued the blame should be less on Richardson and more on an Iowa Casino.

A more cynical view would be that the candy company knows that the accused thief has no money, so it’s going for the deep pockets.

 

Paul Neiffer, Help Prevent SE tax on CRP Rents!  Paul wants CRP recipients to help fund an appeal of the recent Tax Court Morehouse case, holding CRP income to be self-employment income.

The Morehouse case needs be appealed because the case sets a bad precedent for all owners of CRP across the country. Anyone who fails to treat CRP as self-employment income is subject to penalty for underpayment of Federal tax.

However, appeals cost money, and the dollars at risk for Morehouse personally (only $6,000) just aren’t enough for him to justify paying for the appeal. It is important enough that I want to spread the word, and request my readers who have ground in CRP to share in the cost.

If you have CRP ground and want to help the cause, Paul tells you how.

 

TaxGrrrl, Bolt Strikes At Diamond League Games, Says UK Races Hinge On Tax Laws 

Usain Bolt said he wouldn’t race in the U.K. after the Olympics unless they changed their tax laws… and they did, extending the laws in place for the Olympics for the Diamond Games.

Tough luck if you aren’t famous, I guess.

 

Phil Hodgen is launching Web-Based Seminar: U.S. Tax Solutions for Non-Filers Abroad.  It looks like a great resource for the innocents abroad caught up in the FBAR fiasco.

 

Jack Townsend,  Must a Defendant Prove Innocence of Uncharged Crime to Reverse Wrongful Conviction?  That’s insane.

TaxProf, The IRS Scandal, Day 81.  They’ll keep calling it a “phoney” scandal, but the Inspector General still says otherwise.  So did the President, until it became awkward.

Instapundit:

JACK LEW:  There’s No IRS Scandal, But I Won’t Say Whether I Talked To Wilkins About Targeting.

Those who keep saying there’s no scandal here need to acknowledge that the IRS admitted targeting conservative groups months ago.

 

Kay Bell, Scholarships and grants get better grades than borrowing and tax breaks as ways to pay college costs

William Perez, IRS Update for July 26, 2013

 

Joseph Henchman, Massachusetts to Have Second Highest Cigarette Tax, Rare Tax on Computer Services, Higher Gas Tax (Tax Policy Blog)

Brian Strahle, RECENT CALIFORNIA LLC FEE ISSUES AND WARNING FOR NONFILERS:  HERE COMES THE NOTICE!!  California is looking for nickels under your sofa cushions.

 

Christopher Bergin, Our Secretive Senate. (Tax Analysts Blog).  Not a fan of the 50-year memory hole for tax reform ideas.

Peter Reilly, Why Tax Reform Is Impossible

 

Jim Maule, Tax Law and National Defense: Hush Now!

Linda Beale, Proposals for Cutting the IRS Budget.

 

Janet Novack, U.S. Seeks PNC, Wells Fargo, JP Morgan Records To Find Tax Cheats–From Norway   Look out, Decorah.

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Tax Roundup, 6/3/2013: Annals of Crime and Redemption Edition.

Monday, June 3rd, 2013 by Joe Kristan

20130603-1How to make Zumba popular with men.  From The Guardian Express:

Zumba instructor and prostitute Alexis Wright has been convicted in an Alfred, Maine courtroom of prostitution, conspiracy, tax evasion, and theft by deception.

Wright used her Zumba training facility as a front to run a prostitution  ring.  She has been sentenced to ten months in jail.  She will also have to repay $57,280 for accepting welfare funds of more than $40,000.  It is believed that she netted more than $150,000 from prostitution.

The story has gotten some extra mileage because it happened in Kennebunkport, a picturesque and posh seaside town where George Bush the Elder maintained a place.  She also videotaped her private exercise sessions and had a client list including “prominent members of the seaside community.”

According to the story, the Zumba entrepreneuress has turned over a new leaf:

Now that her life of prostitution, conspiracy, and tax evasion has ended, Wright promised a change in her life after her release.

“It’s my intention to stand up for what is right. When I’m out, I’m going to pursue helping people fight through situations that are similar to mine. I’m optimistic that something good will come out of this,” Wright said Friday, according to the AP.

An inspiration to us all.  To pay our taxes, at least.

 

Speaking of misplaced inspiration, a Tennessee man who claimed the power to “decode” the tax law apparently misplaced his decoder ring.  Knoxnews.com reports:

 U.S. District Judge Thomas Phillips sentenced David Miner, 61, to an 18-month prison term for plotting a campaign to impede and harass IRS agents in a bid to help his paying clientele to avoid paying taxes and failing to file his own tax returns.

For $1,200, Miner sold a program to “decode” via an IRS manual a client’s Individual Master File, or IMF, which uses computer codes to document a person’s tax history, point out errors and write letters demanding the IRS fix those problems.

Assistant U.S. Attorney Frank Dale argued for a harsh sentence:

“Miner has written a book and other documentary materials, operated an Internet website, and spoken at various meetings, presumably on subjects related to defying the tax system,” Dale continued.

Not just a website, but an internet website!  Which is still up, oddly enough.  It’s full of tax protester nonsense, but I can’t argue with this assertion there:

We can’t help you convince your family and friends that you are not crazy or Satanic or destined for jail.

I’ve been trying for a long time, but my family and friends are convinced that some or all of these things are true about me.

How did the defendant justify himself?

Miner insisted that he believed his IRx-Solutions Inc. firm was not selling a scam. He said he was inspired by Joe Nelson Sweet, a Florida man currently serving a 10-year prison term for a similar venture.

The moral: when seeking inspiration, don’t look to folks serving ten-year sentences.

 

Debit cards don’t confer tax exempt status either.  A North Carolina man has pleaded guilty to tax crime charges:

William Robert Hupman Jr., pleaded guilty today to corruptly endeavoring to obstruct or impede the due administration of the internal revenue laws, the Justice Department and the Internal Revenue Service (IRS) announced today.

According to court documents, Hupman managed and controlled Security Concepts LLC.  a security alarm company based in Mebane, N.C.  Instead of receiving a salary from Security Concepts, Hupman received income by using a Security Concepts debit card to pay his expenses.

That sort of brazen skimming is likely to get caught eventually in any case, but the man may have done a little extra to attract IRS attention:

Despite the fact that employment taxes were withheld from the wages of Security Concepts employees, Security Concepts has not paid employment taxes and filed the required tax form since the third quarter of 2009.

The IRS notices that sort of thing pretty quickly.

 

Andrew Mitchel, U.S. Government Continues to Pursue Taxpayers Committing Tax Fraud, a roundup of recent tax crime news.

Jack Townsend,  Reminder on FBAR Filing for 2012 Year – Must be Received by June 28, 2012

 

Paul Neiffer,  The Advantages of Commodity Contributions

Brian Strahle, “SUBJECT TO CHANGE”:

If something bad has happened in life, or with your company’s state tax position, the good news it is probably temporary.  There is most likely a practical and effective way to mitigate the risk, exposure or liability. 

TaxGrrrl, June A Busy Month At IRS For Taxpayers and Tax Pros.   FBARs, second quarter estimates, and more.

 

Kyle Pomerleau,  Another Study Confirms: U.S. Has One of the Highest Effective Corporate Tax Rates in the World

Trish McIntire,  Fiscal Cliff-Kansas Style

Peter Reilly,  NFL As Tax Exempt Less Than Meets The Eye ?

Tony Nitti, Raising Capital Gains Rates In the Name Of Tax Reform

 

TaxPro, The IRS Scandal, Day 24

Getting ahead of the game. IRS issues preemptive apology for tax conference excesses(Kay Bell) But boy, they can dance!

Megan McArdle, IRS White House Visits: Less Than Meets the Eye

Russ Fox, The Answer Is in Washington

 

Robert D. Flach,  AND YOU WONDER WHY I DO NOT USE TAX PREPARATION SOFTWARE.  Robert passes on a tax software horror story, which we all have.  Yet for all of its flaws, there is a reason most practitioners use tax software.  It saves an enormous amount of duplicative work, avoids the vast majority of math errors, and enables you to get much more done.  But you don’t want to cheap out on your software — you get what you pay for.

Robert is welcome to his hand-crafted returns, but I’d quit rather than do a 20-state 1065 by hand.

 

Not strictly tax-related, but when people get nostalgic for how wonderful things were back in the day, remember that back then TV makers actually competed on how easy it was to fix them when they broke.

 

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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

20130531-1

 

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, 5/22/2013: Don’t blame me, I’m only the boss. Also: tornado tax relief.

Wednesday, May 22nd, 2013 by Joe Kristan
Former IRS Commissioner Shulman, showing how bad he feels about politcal harassment under his watch.

Former IRS Commissioner Shulman, showing how bad he feels about politcal harassment under his watch.

The Worst Commissioner Ever returned to Washington yesterday to testify before a Senate committee on the IRS scandal.  He bravely took responsibility for the targeting of disfavored political groups and apologized to the victims.

Well, not exactly:

 I certainly am not personally responsible for creating a list that had inappropriate criteria on it. And what I know, with the full facts that are out, is from the inspector general’s report, which doesn’t say that I’m responsible for that. With that said, this happened on my watch. And I very much regret that it happened on my watch.

In other words, I was just the boss, and you can’t blame me for what those crazy kids in Cincinnati do.

 

Just exercising the right they encouraged the Tea Partiers to use – silence.  The IRS functionary who announced the scandal in response to a planted question isn’t going to answer real ones.  From the Wall Street Journal:

Lois Lerner, the head of the Internal Revenue Service office that targeted conservative groups, intends to invoke her constitutional right against self-incrimination and decline to answer questions about the matter when questioned by a congressional committee Wednesday.

Ms. Lerner, director of the tax-exempt-organizations division at the IRS, notified the House Committee on Oversight and Government Reform through her attorney that she wouldn’t answer questions on the matter, according to a committee spokesman.

When it comes to the Bill of Rights, better late than never.

 

Is Washington a suburb of Cincinnati?  Oversight from Washington, All Along    (Eliana Johnson)

TaxProf, The IRS Scandal, Day 13

Watchdog.org, Top 10 quotes about Obama’s #scandalpalooza

Via Don Boudreaux, The Real Lesson of the IRS Scandal (Richard Epstein) and The Autocrat Accountants    (Mark Steyn)

Patrick Temple-West,  White House knew of IRS scandal in April, and more (Tax Break)

Clint Stretch, Targeting tax-exempts and tax reform (Tax Analysts Blog)

Joseph Thorndike, A World Without 501(c)(4)s (Tax Analysts Blog)

Russ Fox, Ms. Lerner Knows the Fifth (IRS Scandal Update)

 

In other news:

Kay Bell, Tornado-ravaged areas of Oklahoma declared major disasters, leading to special tax relief from IRS

Trish McIntire,  Oklahoma DIsaster- Tax Relief.

TaxGrrrl, IRS Announces Tax Relief For Oklahoma Tornado Victims

 

Paul Neiffer, Will Excess Farm Loss Rules Apply With New Farm Bill?

Jason Dinesen, How to Allocate the Deduction for Federal Estimated Tax Payments on Your Iowa Tax Return

Robert D. Flach, TRUE TAX TIME TALES – IRA WITHDRAWALS

 

Brian Strahle,  MARYLAND:  WYNNE CASE UPDATE

On Friday, May 17, 2013, the Maryland Court of Appeals denied the comptroller’s motion for reconsideration in Comptroller v. Wynne,  which struck down the state’s application of credits against pass through income from S corporations; however, the court stayed implementation of the ruling to allow the comptroller to petition the U.S. Supreme Court for certiorari.

Peter Reilly,  RVania Resident Taxed By New Mexico.  State tax problems of folks who live on the road.

 

Kaye Thomas,  Self-Directed IRA Implodes.  The same case I discussed here.

 

 Jack Townsend, Tax Perjury and FBAR Charges Related to Illegal Income Fake Art Case

Jim Maule, Taxation is Not Theft.  It’s not theft when the government does it.

 

 

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Tax Roundup, 5/9/2013: Gotta start somewhere edition.

Thursday, May 9th, 2013 by Joe Kristan

rand paulGotta start somewhere.  The Hill reports “Rand Paul introduces bill to roll back parts of tax evasion law“:

“FATCA’s harmful impacts cover the spectrum,” Paul said. “It is a violation of Americans’ constitutional protections, oversteps the limits of Executive power, disregards the mutual respect of sovereignty among nations and drains money from the federal treasury under the guise of replenishing it, and discourages overseas investment in the United States.”

“Tax evasion is a problem that should be addressed, but not in such an egregious way,” Paul added.

FATCA has made normal financial life difficult or impossible for many Americans abroad.  Too bad politicians didn’t think of these things before they voted.

Probably related: Lynnley Browning, U.S. Citizens Ditch Passports in Record Numbers (via the TaxProf).  Also this from Phil Hodgen.

Jack Townsend, HSBC India Reported to be Cooperating with DOJ and IRS and Projecting Significant Penalty

 

TaxGrrrl,  Sanctions May Be Least Of ‘Copyright Troll’ Worries As Matter Is Referred To Feds, IRS.  A great article telling the story of an attorney/copyright troll who annoyed a judge enough to get him to call in the IRS to investigate his taxes.  Hilarity ensues.

Cara Griffith, Pot Calling Kettle Black? (Tax.com):

Good Jobs First is just hiding the ball a little bit by trying to get rid of reports on business climate. The Good Jobs First report says that the real issue we should be focusing on is “how to build a tax system that is fair, modern and relevant.” Yes, that’s exactly what needs to be done, but I would argue that reports on business climate add to the debate. And while I do think that such reports must be examined with a critical eye, “business climate” matters.

Related Tax Update coverage here.

 

Tyler Cowen

“When economists are not listened to, that often means strong special interests and/or strong voter sentiment stand on the other side of the equation.  The numerous special deductions in the tax code, most of which have no efficiency justification, are examples.”

True of both federal and Iowa tax laws.

 

Brian Strahle,  MARKETPLACE FAIRNESS ACT:  IMPACT ON NON-INTERNET REMOTE RETAILERS?

Hence, it appears that this Act would apply to any business (not just Internet Retailers) that makes sales into a state in which it does not have nexus.  Therefore, manufacturers or other non-Internet retailers who sell directly to retail customers who do not have sales representatives or any other physical connection with a state may (under this Act) be required to collect sales tax on its remote sales.

It’s not just the e-Bay sellers who would have to deal with this.  If you really want to create “market fairness,” there are two ways that are much simpler: either a straight national sales tax collection regime with uniform rules and rate where the proceeds are allocated to the states based on the sales to the state, or a sales tax based on shipping location.

 

Janet Novack,  Reverse Showrooming: Best Buy, Amazon And The Internet Sales Tax:

Traditional bricks and mortar retailers squander their immediacy edge with indifferent/uninformed sales help, who look even worse compared to the information now available on the web. But they can do well if they integrate their online and in-store services, carry enough inventory and price competitively.

 

Christopher Bergin, No Use for Useless Stances (Tax.com)

Linda Beale,  Senate did the right thing–will the House?

 

Tony Nitti, Boxer Manny Pacquiao Ducks U.S. Taxes, Will Return To Ring In China

Paul Neiffer,  Make Sure to Coordinate Estate Documents with Ag Laws

Kay Bell,  It’s property tax appraisal, and scam, time

 

It’s great to waste money, as long as it’s wasted here.  I dust off my old personal rant blog in response to this.

Going Concern, Groundbreaking CFO.com Survey Reveals Accounting Professionals Desperately Need Communication Skills.  All I can say to that is, pprdrhnt.

 

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Tax Roundup, 4/30/2013: Iowa due date edition. Send them your cash, so they can forward it to thieves.

Tuesday, April 30th, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

Legislator insists that thieves get $11 million as price of property tax deal.  As Iowans pay their 2012 balances due on today’s state income tax deadline, they may want to take a moment to ponder how careful the legislature is about spending the money they are sending in.

The Des Moines Register reports that Senator Joe Bolkcom demands an increase in the Iowa earned income credit as the price of a property tax bill:

Sen. Joe Bolkcom, D-Iowa City, chairman of the tax-writing Senate Ways and Means Committee, spoke at a Statehouse news conference sponsored by The Coalition for a Better Iowa, which released a booklet with the stories of Iowans who have been helped by the earned income tax credit. About 200,000 Iowa working families receive the tax credit, which assists households with incomes under $45,000.

Senate Democrats want to raise the earned income tax credit from 7 percent now to 20 percent at a cost of about $55 million annually.

Both Sen. Bolkcom and the Register fail to mention the massive fraud rate of the earned income tax credit.  The Treasury Inspector General for Tax Administration this month reported:

The IRS estimates that 21 to 25 percent of EITC payments were issued improperly in Fiscal Year 2012. The dollar value of these improper payments was estimated to be between $11.6 billion and $13.6 billion.

Applying that fraud percentage to Sen. Bolkcom’s proposal will result in $11.5 million to $13.75 million in “improper” — mostly fraudulent — Iowa EITC payments.   Remember that the EITC is a “refundable” credit, which means that if it exceeds your tax, the state writes you a check.  It’s a spending program, a welfare program.

I would say it takes a special kind of legislator to demand $55 million in spending knowing that it’s an appropriation of at least $11 million to thieves, but really it just takes a run-of-the-mill legislator spending your money instead of his own.

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.

 

Only somebody who doesn’t prepare tax returns would say something this stupid.  The TaxProf links to this from a University of Wisconsin academic:

 This Article analyzes the ongoing structural transformation by observing and explaining the advantages that accrue from pursuing social and regulatory objectives through the tax code. In particular, this Article identifies a number of legislative and normative advantages that tax-embedded policies offer.

The tax law has one important job: to raise revenue.  If this author had ever done business tax returns for a living, she would know what a challenge it is to simply determine taxable income.  If she had ever helped a client through an IRS audit, she would know how difficult it is for the agents to simply work through the accounting, let alone run a bunch of social programs on the side.  The author should be made to spend three years working at a storefront tax prep business to learn the chaos her views cause outside the faculty lounge.

 

Tony Nitti,  Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities

Jeremy Scott, Baucus, the Marketplace Fairness Act, and Tax Reform (Tax.com):

Baucus’s shift to the right in the last few months (which people had assumed was positioning for the election next year) has antagonized more than just progressives.  It seems his Senate colleagues are growing frustrated as well. 

And that will severely hamper the chances that a major tax reform bill will make it to the Senate floor.

 

Judge Sentences Widow to Less Than a Minute of Probation in Tax Case (Accounting Today)

TaxGrrrl, Willie Nelson, Who Saved His Career And His House With The IRS Tapes, Turns 80

Nanette Byrnes,  Republicans pursue tax reform, and more  (Tax Break)

 

Brian Strahle,  STATE TAXES:  WHAT WILL MAKE YOUR COMPANY CHANGE – CHOICE or AUDIT NOTICE?  On not being in denial about your exposure to business taxes in other states.

Jack Townsend, a criminal tax defense attorney, offers some wise advise in  Tips to Avoid an IRS Criminal Investigation or, Worse, a Tax Grand Jury Investigation

 

It’s time for Robert D. Flach’s Tuesday Buzz!

 

Always heed tax policy advice from a violent cannibal boxer.  Boxer Mike Tyson TKOs Fox host with talk pro-tax talk (Kay Bell)

Martin Sullivan, To Balance the Budget: Tax Sex Appeal (Tax.com)  Yes. by all means cut my taxes.

 

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Tax Roundup, 4/25/2013: Internet sales taxes and Red Vines

Thursday, April 25th, 2013 by Joe Kristan
Shapeways.com N scale Ventilated Boxcar

Shapeways.com N scale Ventilated Boxcar

Megan McArdle,  The Real Problem With the Internet Sales Tax:

Few of the commentators I’ve read have asked themselves what happens to the money after the software has collected the money. Do the sales tax fairies simply whisk it off to the nice folks at the state tax department?

Sadly, no. Rather, as an SBA guidebook for small businesses points out, you have to file a tax return with each and every locality for which you have collected tax. The bill streamlines this a bit, but you’ve still got to keep 50 states’ worth of records and file 40-odd states worth of returns.

For Amazon—the actual target of these laws—this is trivial. Its staff of  crack accountants can probably roll these things out before their Monday-morning coffee break. For a small vendor, however, that’s a whole lot of paperwork.

Speaking as a cracked accountant, I am sure that while Amazon can handle its sales tax burden, it is far from trivial.  It takes an expensive staff and a good organization with excellent systems in place to do reasonably well — and I expect they still get inexplicable notices from states quibbling over obscure tax issues.  Good sales tax compliance functions are expensive, affordable only in a large organization.   For some guy selling handmade N-scale boxcars out of his basement, it could be painfully expensive, if not ruinously so.   Like any expanded regulation, requiring online sellers to collect Internet sales taxes inherently favors the big.

Related:

Kaye Thomas, Taxing Internet Sales

Brian Strahle,  The “Pause” Button and the Marketplace Fairness Act (kind of)

 

Cara Griffith, Things That Make You Nuts (Tax.com):

According to the Streamlined Sales Tax agreement, the definition of candy  is a “preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. ‘Candy’ shall not include any preparation containing flour and shall require no refrigeration.”

So pursuant to that definition, a sweet with flour is not candy, while a sweet without flour is. For example, a Hershey’s chocolate bar is candy, while a Twix bar is not. Ditto for Kit Kat bars. Makes sense, right? But what about Twizzlers? Seems a solid bet that licorice is candy, but it isn’t because flour is a top ingredient.

So Red Vines are good for you, then.

Robert D. Flach,  LEARNING FROM YOUR 2012 FORM 1040:

In the past when a client got too big a refund I would scold him/her and say that he/she was making an interest free loan to the government.  While this is still true, I do not scold any more, considering the pitiful amount of interest being paid on savings account today. 

I’m not a big fan of excess withholding, but it’s a lot easier for a client to deal with a refund that’s too big than a tax bill they can’t pay.

 

Kay Bell,Where’s My Amended Tax Return?

 

David Brunori, Let’s Stop with the Revenue Neutrality (Tax.com):

Increasingly, I hear stories of relatively wealthy people contemplating moving to states that do not tax their assets upon death. These are not people with private jets or suites at Yankee Stadium. They are just people who had the good fortune to do better financially than most. Do New Jersey or Maryland or the other states with pretty onerous estate taxes really want their elderly wealthy to move?

While motivations for moving are complicated, taxes are one of them.  Why do the same people who want higher cigarette taxes to discourage smoking believe that higher income and estate taxes don’t also affect behavior?

 

Patrick Temple-West,  Congress looks at REIT tax exemption, and more

News you can use:  Leff Presents Tax Planning for Marijuana Dealers Today at Harvard (TaxProf)

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Tax Roundup, 4/1/2013. Taxes are due two weeks from today. No fooling. And…Zumba!

Monday, April 1st, 2013 by Joe Kristan
Flickr image courtesy Sean MacEntee under Creative Commons license

Flickr image courtesy Sean MacEntee under Creative Commons license

April Fools day is a challenge for tax bloggers.  No matter how outlandish an idea you have for a joke story, chances are that the legislation has already been proposed.   Today’s challenge:  Real tax headlines are mixed with fake ones from today’s Tax Policy Blog.  Can you pick the real fakes without peeking?

A. Protecting Consumers by Eliminating the Business Deduction for Advertising

B. Could tax breaks keep psychiatrists in Iowa?

C. Proposal would give artists tax credit for fair market value of donated work.

D.President Obama Backs Proposal to Legalize Marijuana, Tax Junk Food

E. Could Taxing Violent Video Games Actually Save Lives?

F.  Senator backs off tax on condoms, contact  lenses

G. Following Cyprus Lead, Senator Proposes Tax on “Everyone Else”

H. Mexico Considers Border Fence to Halt Californians Fleeing High Taxes

I. California politician proposes tax on email

Answers at bottom of post.

 

In fact, the research activities credit is noteworthy for its excessive cost — more than $45 million each of the past three years — and the lack of any demonstration of a public benefit. This giveaway is so loosely managed that companies are not even required to disclose how many jobs are related to the taxpayer cost, let alone demonstrate that the jobs would go away without the subsidy.

Related:  Your tax dollars at work for somebody else.

 

David Brunori gets righteous on the “incentives” industry in today’s Tax Notes (unfortunately for subscribers only):

Incentives are inequitable. They’re unnecessary — and hence a waste of money. They distort markets. They breed cronyism. If the players involved weren’t establishment politicians, household name corporations, and prestigious law and accounting firms, we’d describe them as grifters.

Why wouldn’t we describe  ”establishment politicians, household name corporations, and prestigious law and accounting firms” as grifters?  Redundancy?

    Here’s a new one. A Pakistani company, the Fatima Group, would like to open a fertilizer plant in Indiana. The company, which for all I know makes the Cadillac of fertilizer, is seeking both federal and state incentives to build its factory. The twist is that the Fatima Group’s fertilizer has been used in 80 percent of roadside bombs in Afghanistan. That’s awkward.

Right now Iowa seems to lead the world in fertilizing fertilizer companies with tax money.  No doubt explosive growth is just down the road.

 

Lawrence Zelenak, Learning to Love Form 1040: Two Cheers for the Return-Based Mass Income Tax (via the TaxProf).  I’m ready to see if absence might make the heart grow fonder.

Don Beaudreax takes Mr. Zelenak’s thinking to its logical conclusion:

If spending time and effort connecting with tax collectors helpfully “draws our attention to our duties as citizens,” then tax withholding short-circuits that attention.  So why not eliminate withholding and oblige each income earner to pay every cent of his or her tax bill by writing personal checks to the IRS?  Not only would elimination of withholding make us even more attentive to our “duties as citizens,” we would also – as any behavioral economist would point out – gain a truer and more fully felt sense of the price we pay for Uncle Sam’s splendors.

Reading Don Beaudreax Cafe Hayek blog for one week will make you smarter than all of Iowa’s legislators combined.

 

Russ Fox begins his annual countown of bad tax ideas with  Bozo Tax Tip #10: Report Income That You Didn’t Earn

 

William Perez,  April 1st Deadline to Take Required Minimum Distributions for 2012

Kay Bell,  IRS loses latest round in tax preparer regulation lawsuit

Brian Strahle,  New York “Amazon Law” Ruled Constitutional:  But Wait, There’s More

Trish McIntire,  Return Is Done but you Owe.

Peter Reilly,  First Circuit Tells Tax Court To Look Harder For Fraudulent Transfer

TaxGrrrl, Taxes From A To Z (2013): P Is For Passive Activity Rules

David Cay Johnston, Spam and Taxes (Tax.com)

Howard Gleckman,  Is This a Good Time to Reform the Mortgage Interest Deduction? (TaxVox)

 

Zumba instructor finds way to draw men to her studio.  From RegisterCitizen.com:

The dance instructor who used her Zumba fitness  studio as a front for prostitution faces jail time after pleading guilty  in a case that captivated a quiet seaside town known for its beaches  and picturesque homes.

The plea agreement, which calls for a  10-month sentence, spares Alexis Wright from the prospect of a  high-profile trial featuring sex videos, exhibitionism and pornography.  She’s scheduled to be sentenced on May 31.

Wright quietly answered  “guilty” 20 times on Friday when the judge read the counts, which  include engaging in prostitution, promotion of prostitution, conspiracy,  tax evasion and theft by deception.

Remember, just because they pay in cash doesn’t make it tax-free.  

 

News you can use.  “Just Go Rob the H&R Block Instead, Their Computers Are Nicer” (Going Concern)

 

Fakes: A, D, G, H.

 

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Tax Roundup, 3/26/2013: Snatching defeat from the jaws of preparer-regulation victory. And: Iowa leads, UK follows on film.

Tuesday, March 26th, 2013 by Joe Kristan

20130326-1Film tax credit scams are big news in the U.K. right now.  An Irish actress, Aoife Madden, yesterday received a 54-month sentence in her role in scamming a U.K. film tax credit scheme.  Irish Times reports:

The group successfully claimed £1.5 million in film tax breaks after they said they intended to make a film titled Landscape of Lives  with a £19 million budget, funded by Jordanian backers.     

Once they were arrested two years ago, the five hurriedly produced a film called, ironically, Landscape of Lies for just £90,000, which went on to win a Silver Ace award from last year’s Las Vegas Film Festival.     

The film, which starred former EastEnders actor Marc Bannerman and Andrea McClean, told the story of a former British soldier’s attempts to discover the truth behind his friend’s murder in an apparent mugging.     

Before suspicions had been aroused, Madden’s London film company, Evolved Pictures, told revenue and customs that millions had been spent on Hollywood A-list actors and film crew when it lodged a value added tax repayment application for £1.48 million. It received more than £1 million.

Lost in the coverage is Iowa’s pioneering role in film tax credit scams.  A little-known film producer from Minnesota came here and showed the Brits just how it’s done:

Take Iowa. A start-up called Polynation Pictures came looking for backing for a sci-fi flick so lame it would have embarrassed Ed Wood. With a financing scheme worthy of Max Bialystock, the con these folks pulled was nearly as inept as the film they made, but Iowa’s film office was too starry eyed to notice.

The $767,250 production Polynation Pictures proposed eventually came in at $3.7 million. This was achieved in part with preposterous expenses. Producers claimed they paid $1,350 to rent six orange road cones. The use of two 6-foot ladders supposedly cost the company $900 (a bargain, as Polynation claimed to have spent another $900 to rent a single 8-foot ladder). Among production necessities was a new Mercedes. The partners set up an array of separate companies and used them to bill themselves extravagantly for work supposedly done on the picture. These were presented to Iowa as “deferred payments”—to be paid if the movie made money (which the enterprise was sure to do when Iowa handed the tax credits over). The only thing missing was a staged rendition of “Springtime for Hitler.”

Polynation mastermind Wendy Weiner Runge received 10 years for her star turn in the film credit program.

The film credit program was touted as a way to make Iowa a leader in the film world.  And, in a way, it did.

You might be interested in this interview with Ms. Madden about her role in the film, knowing what we know now.  She said this:

This project has been a crazy but wonderful challenge!! I’ve always wanted to produce a feature, and have a number of projects in development, but this was the one I just wanted to lift off the page. I think the biggest challenge was sourcing finance, which is no surprise for an independent film company. We were extremely lucky to find international investors and lobby them to back the project, but this was a lengthy process and has always been a challenge.

A challenge, yes, but I’m not sure they turned out lucky.

 

Snatching defeat from the jaws of victory. Now that the courts have saved the IRS from itself by shutting down the misguided preparer regulation system, the Senate rides to the rescue to screw everything up again, Accounting Today reports:

The two leaders of the Senate Finance Committee, Chairman Max Baucus, D-Mont., and ranking Republican member Orrin Hatch, R-Utah, have begun developing proposals for reforming the U.S. Tax Code, including giving the Internal Revenue Service the clear statutory authority to regulate tax preparers in case the IRS loses its appeal of a recent court case invalidating its Registered Tax Return Preparer regime.

The IRS can’t answer its phones.  Its pockets are being picked to the tune of billions by semi-literate South Florida grifters.  And the Senate thinks that preparers are the problem?   Preparer regulation is a market-share enhancement program for the national franchise tax prep outfits;  the rules were written by a former H&R Block CEO.  If Senators Baucus and Hatch want to re-enact these anti-competitive and useless rules, it just shows who they really represent.  (Via Going Concern). 

 

Howard Gleckman,  Congress Has Not Passed A 2014 Budget, and Probably Won’t (TaxVox).  Why do that, when Henry and Robert have other chores for them?

Joseph Henchman,  Senate Votes on Tax Proposals, Including State Taxation of Internet Commerce.  (Tax Policy Blog) Amazon taxes seem inevitable.  Otherwise Wal-Mart can’t compete with a guy selling things from his basement on the Internet.

Brian Strahle,  The Marketplace Fairness Act:  Is It Really Fair?

Kay Bell,  Online sales tax a step closer with Senate budget amendment

Thanks, you’ve helped enough already.  A New Proposal to Promote American Manufacturing (Martin Sullivan, Tax.com).

 

Jack Townsend, Supreme Court Will Decide Whether B____t Tax Shelters with Basis Overstatements Draw the 40% Penalty

Tony Nitti,  What Are Your Odds Of Being Audited By The IRS?

TaxGrrrl, Taxes From A To Z (2013): N Is For Notice Of Deficiency

Missouri Tax Guy,  Social Security Benefits, are they taxable?

Patrick Temple-West, Proposals to tax trades spark financial firm lobbying, and more (Tax Break)

Peter Reilly,  Has Scalia Already Thrown In The Towel On Same Sex Marriage ?

Dan Meyer, “Where No Tax Rate Has Gone Before…”

Trish McIntire,  That Reminder – 2013. “Your Failure to Plan Is Not My Emergency!”  The tax preparer April battle cry.

 

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Tax Roundup, 3/15/13: Corporate return day! And: Can you audit a myth?

Friday, March 15th, 2013 by Joe Kristan

Calendar-year corporation returns are due today! They are easy to extend on Form 7004 if you can’t finish them today.  If you don’t extend an S corporation return and you file late, the penalty starts at $195 for each late K-1, and $195 each for every additional month the return is late.

 

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

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

Joseph Henchman,  Iowa House Passes Alternative Maximum Tax: Income Tax Option Clear of Carveouts (Tax Policy Blog).  Joseph has some good things to say about the Iowa alternative tax that passed the house this week (HF 478):

I’ve never filled out an Iowa income tax form but it looks like one of the harder state tax returns. Iowa allows you to deduct what you pay in federal income tax, which is nice but is that much more calculation work (and probably drives up tax rates). There are lines for the lump-sum tax, the minimum tax, the K-12 textbook credit, the school district surtax, the motor fuel tax credit, and the earned income tax credit. I’m sure each one of these has their explanations of necessity but together it sounds like a lot of paperwork, record-keeping, and Tax Filing Day frustration.

Hence, I’m impressed by a bill passed yesterday (House File 478)  by the Iowa House which would offer an alternative to all Iowa taxpayers: a 4.5 percent tax on all income above about $15,000, which no further deductions or exemptions. It’s not perfect: our friend Joe Kristan pointed out that a credit for taxes paid to another state and a deduction for federal interest are probably constitutionally required, and offsetting deductions to certain kinds of income (allowing gambling losses if you tax gambling winnings) is good policy. But as Joe said, the bill “is a welcome step towards improving Iowa’s income tax.”

I’m hoping it’s a step towards the Tax Update Quick and Dirty Iowa Tax Reform Plan.

 

 

It’s a myth, so they’re cracking down on it!

Huffington Post, The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic.

Bloomberg News, States Crack Down on Top Earners Who Flee as Levies Rise: Taxes

If they feel have to “crack down” on something, maybe there’s something to that myth.

 

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Janet Novack,  Blame Congress, As Well As H&R Block And IRS, For College Tax Credit Mess. Oh, I do!  From the article:

Far be it from me to let either the Internal Revenue Service or tax prep giant H&R Block off the hook for the current mess which has delayed refunds for more than 600,000 taxpayers claiming college tax credits by up to eight weeks. In addition to their operational missteps, both did a poor job (at least  initially) of communicating with taxpayers who desperately need those refunds to pay tuition or other bills.

But let’s put some of the blame where it rightly belongs: on the Washington politicians. For more than two decades, Congress has been expanding  “tax expenditures” with little regard for how complicated such provisions might be for taxpayers to use and for the IRS to administer,  let alone for whether they do enough good to justify their cost and the economic distortions they create.  A new 1065-page Congressional Research Service compendium lists 250 different tax expenditures. Happy reading.

Every little break like this diverts IRS resources from actually collecting income taxes and makes the income tax a little less effective and useful.  Yet Congress still sees the tax law as the Swiss Army Knife of public policy.

 

Jim Maule,  Tax Depreciation: Do the Math:

No matter how well a student in the basic tax course masters the depreciation deduction to the extent it is studied, that student knows that the total depreciation with respect to a property cannot exceed its cost. All of the students would find themselves bewildered by the proposition that depreciation deductions on a property that cost $34,799 would total $56,000.

So was the Tax Court.

 

Tony Nitti,  Golfer Sergio Garcia Comes Up Short In Tax Court, But Is The Decision A Victory For Other Athletes? He won on his endorsement royalty income, so while he may not have had an undisputed win, he did OK, like a PGA golfer who gets second-place prize money.

 

William Perez,  Delays in Issuing Tax Refunds Related to Education Tax Credits

Going Concern,  IRS Won’t Be Sorry If You Never Get Around to Claiming Your Refund.  Over $900 million in 2009 refunds will be out of reach of their rightful recipients after April 15, when the 3-year window for claiming them expires.

Trish McIntire, Don’t Lose Your 2009 Refund

 

Paul Neiffer,  Will Large Farmers Be Able to Use Cash Method in the Future?!  Farmers should get the same tax rules and breaks everyone else does, no less and no more.

Kay Bell,  Will a relationship neutral tax code save traditional marriage?.  Not every problem is a tax problem.

Howard Gleckman, The Ideological Chasm Between the House and Senate Budgets

William McBride, Dave Camp Floats a Rewrite of Small Business Tax Rules (Tax Policy Blog)

 

Jack Townsend, U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation

Brian Mahany, IRS Agent May Be Headed To Prison For Info Leak – Whistleblower Protection

Brian Strahle, State Tax Revenues:  Corporate Income Tax Not That Important?

Oh, Goody.  Applying for Obamacare Subsidies Will Be as Complicated as Doing Your Taxes (Megan McArdle)

 

Argo pay your taxes.  It turns out Iowa isn’t the only government whose film tax credits attract scammers.  From London comes this via Boston.com:

In some ways ‘‘A Landscape of Lies’’ was a typical indie film, with a tiny budget, a B-list cast and an award from an American film festival.           

What made it special is that it was created solely to cover up a huge tax fraud.

In fact, officials say, the project was a sham, set up to claim almost 1.5 million pounds in goods and services tax for work that had not been done, as well as 1.3 million pounds under a government program that allows filmmakers to claim back up to 25 percent of their expenditure as tax relief.

No word on whether Leo Bloom prepared the fraudulent returns.

 

News you can use: Polish Up Your Guccis. (Christopher Bergin, Tax.com).

Will there be tax reform? I think there has to be. But I don’t think it will look like theTax Reform Act of 1986 because, in short, it’s not 1986, and we don’t have the same problems or even the same tax system. That doesn’t mean there aren’t a lot of lessons to be learned from the ’86 experience. But I don’t think tax reform will happen soon. And a few of the reasons I think that come right out of “Gucci Gulch.”

I have a copy of Showdown at Gucci Gulch, the book about how the 1986 tax reforms were enacted.  I haven’t brought myself to open it; it seems too much like reading about my job.

 

TaxGrrrl,  Arrest of Dancing Mascot Puts Liberty Tax Wavers In The Spotlight

He should have hidden the cash across the pond.  Opening statements underway in Beavers tax evasion trial (WGNtv.com)

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Tax Roundup, 3/7/2013: Consultant says Iowa should do more of what he consults about. Also: how not to file a lawyer’s tax return.

Thursday, March 7th, 2013 by Joe Kristan

http://www.rothcpa.com/misc/20090604-1.JPGAnswering the wrong questions.  The Iowa Chamber Alliance asked a consulting firm that makes money playing the corporate location incentives game whether Iowa should sweeten its corporate location incentives.  Guess how they answered it.

From an Iowa Chamber Alliance press release:

“Iowa has a solid base of state - level economic development incentives tools upon which to build. However, to become more competitive, Iowa may wish to increase the funding level and flexibility of some of the State’s key incentive programs” states Darin Buelow, a Principal with Deloitte Consulting LLP.

It’s hard to imagine the study coming to a different conclusion considering what they were looking for:

At the request of the Iowa Chamber Alliance (ICA), Deloitte Consulting (Deloitte) benchmarked incentives programs in Iowa and in five alternate states, focusing on a high-level analysis of state-level incentive programs, their value, and overall effectiveness in attracting investors.

In other words, they were to look at whether Iowa has more and better giveaways than its neighbors.

I looked for the study in vain for any analysis of the value of Iowa’s tax credits to the economy vs. alternative uses for the funds — like lowering the tax rates of the rest of us who pay for them.  There is no mention of opportunity cost.”  In looking at the “value” of the programs, it makes unsupported conclusions like this one about the “High Quality Jobs Program:”

Considered effective and competitive in providing benefits to mitigate corporate income tax, refunding sales tax for construction and providing a supplemental refundable research credit.

Considered effective by whom?  On what basis?  It doesn’t say.

The study says Iowa should enrich its data center corporate welfare — where the rest of us subsidize the infrastructure of Microsoft and Apple.  They also recomment Iowa “consider allowing sale, refund or transfer” of tax credits.

A few years ago, after the film tax credit disaster, Governor Culver tasked a panel with reviewing the effectiveness of Iowa’s dozens of tax credits.  Their report failed to come up with a clear benefit for any of Iowa’s tax credits.  The panel also had this to say about transferable tax credits: (my emphasis)

Transferability of tax credits complicates the projection of revenues and the tracking of credits, creates uncertainty about when credits will be claimed because the purchasing entity may utilize a different fiscal year than the entity awarded the credit, and siphons resources from awarded entities through brokerage fees… Once tax credits are transferred, it creates limited recourse for the State to recover funds claimed in instances where the business awarded the original credit does not fulfill the contracted obligations or if the credit was awarded in error.  Additionally, transferability has also resulted in abuses in some tax credit programs.

It would be better Iowa to not “compete” in taxing its current taxpayers to lure and subsidize their competitors.  Instead Iowa should enact a tax system good enough that we don’t have to pay people to be our friends.   The Quick and Dirty Iowa Tax Reform Plan would be better for Iowa businesses than any number of pocket-picking tax credits.

 

Poor legal move.  From Bloomberglaw.com:

Former Kirkland & Ellis LP senior partner Theodore Freedman pleaded guilty to fraud in connection with the filing of false tax forms.

Freedman changed his plea yesterday from not guilty to guilty of four counts of tax fraud. U.S. District Judge Deborah Batts in Manhattan accepted the plea and set sentencing for Sept. 17. Freedman’s lawyers reached a plea agreement with U.S. attorneys.

Indicted in July 2011, Freedman misrepresented his income as a partner at the law firm by about $2 million, the U.S. said. He also claimed more than $500,000 in expenses for a sole proprietorship that didn’t exist, the government said.

It’s hard to imagine how he thought this would work.  K-1s get matched against tax returns, at least occasionally.  The IRS matching system is cumbersome and inefficient, but it works well enough that you can’t habitually ignore K-1s with six-figure income.  Furthermore, claiming big bogus Schedule C losses like that is practically an engraved invitation for the IRS to visit your return.

Related:  Former Kirkland & Ellis Partner Pleads to Tax Crimes (Jack Townsend)

 

The Colonel knows why your business might have to file returns in other states.  My new post at IowaBiz.com, The Des Moines Business Record blog for entrepreneurs.

William McBride, The Carried Interest Debate: Funding Government for 3.1 Hours (Tax Policy Blog).

Patrick Temple-West,  Cadbury gets tax bill in India, and more (Tax Break).

Daniel Shaviro,  Skepticism about “fundamental tax reform”

Angie Picardo,  Grads – Filing for First the Time (Missouri Tax Guy guest-post)

Brian Strahle,  D.C. Combined Reporting – Transition Rules for 3/15 and 4/15!

Janet Novack,  New IRS Data: Rich Got Richer, But Paid Lower Tax Rate As Stocks Gained

William Perez,  Child Tax Credit for 2012

 

There’s a new Cavalcade of Risk up at Health Business BlogIt’s always worth the ride at the blog world’s roundup of insurance and risk management!

 

Is that an argument for or against intelligent design?  The Sequester: ‘Designed to be Stupid’ (Cara Griffith, Tax.com).

Because they aren’t in a position to speak for themselves: Ellen DeGeneres Speaks Out For Spanish-American War Widowers (Peter Reilly). 

The Critical Question: Why Is Amy Poehler Going To Hell? And What Does Taylor Swift Have To Do With It? (TaxGrrrl)

 

 

Programming note: This site was pretty much shut down part of yesterday afternoon.  Our valiant hosting service says it was a comment spam attack on the pre-2012 archived posts.  Sorry about that.

 

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Tax Roundup, 3/6/2013: Tax return numerology, and similar economic development science. Plus rapper tax tips!

Wednesday, March 6th, 2013 by Joe Kristan

20130306-1Tax tip: IRS doesn’t buy this numerology stuff.  A strange story out of New York:

A tailor who counted star athletes including Rickey Henderson and Wilt Chamberlain among his clients has pleaded guilty to skirting about $2 million in sales and income taxes.

Mohanbhai Ramchandani pleaded guilty on Tuesday, state Attorney General Eric Schneiderman said. His company, Mohan’s Custom Tailors Inc., also has had local stars Patrick Ewing and Darryl Strawberry among its clients and made an appearance on Bravo’s “The Real Housewives of New York City.”

The charges say that he failed to pay $1.7 million in sales taxes starting in 2001, and he failed to pay $256,000 of income taxes from 2007 through 2009.  I didn’t know tailoring could be so lucrative.  But this is unusual:

Authorities said a whistle-blower first raised concerns over Ramchandani’s tax practices. They said one indication of fraud was the use of numbers on his tax forms that added up to multiples of 10, an outgrowth of his belief in numerology.

Once in a while you prepare a return that happens to foot to a round number somewhere.  It looks funny, but it will happen occasionally just by chance.  But when they are all round, apparently the tax people might notice.

 

As strange as Mr. Ramchandani’s approach to numbers is, Iowa gives him a run for his money.   Iowa’s lead tax credit pusher, Debi Durham, has issued a press release touting the economic wonders of enormous tax credits granted Orascom, an Egyptian company, to build a fertilizer plant in Southeast Iowa.  The release bases its conclusions on “ the Regional Economic Modeling Inc. (REMI) analysis for the Iowa Fertilizer Co. project.”  From the release:

“The  REMI analysis of the Iowa Fertilizer Co. project speaks for itself,” said Debi Durham, director of the Iowa Economic Development Authority (IEDA).  “On the front end, Iowa Fertilizer Co. will inject $1.4 billion of capital investment into our state and create at least 165 permanent jobs and thousands of construction-related jobs.  Now we know that the benefits of that project will serve Iowans for years to come.”

It speaks for itself and it says nothing.    It says nothing about whether the project would have gone ahead without the credits, but Iowa’s claims that Illinois was hot after the plant with its own incentives lack credibility.

The analysis really betrays itself by omitting two key words: “opportunity cost.”  It claims every projected benefit from the project without asking whether any benefits would be available if the money were used for something else.  It certainly doesn’t say what Iowa loses by having a complex tax system with high rates to pay big subsidies to the well-connected.

I’ve said it before: using taxpayer money to lure businesses is like a guy taking his wife’s purse to the bar to buy drinks for the girls.  It’s not impressive.  They might let the guy buy the drinks, but they realize he’ll treat them like he is treating his wife if he gets the chance.  And anybody he goes home with isn’t likely to be much of a prize.

 

Egypt taking a different approach to Orascom.   The Orascom executives do better in Iowa than back home, reports SiouxCityJournal.com:

An Egyptian billionaire behind one of the largest and most controversial projects in the state is being investigated for tax evasion and has been barred from leaving his country.

According to an article published Tuesday in Construction Week Online, Orascom Construction CEO Nassef Sawiris and his father, Onsi Sawiris, are barred from travel until a resolution is reached regarding the sale of an Orascom subsidiary and the taxes from that sale.

As hard as it is to deal with Iowa and federal tax authorities, they are probably downright reasonable compared to Egyptian revenuers.  I suspect that the “resolution” being sought is much like that sought by a kidnapper.

 

The TaxProf links to this from the New York Times Dealbook: Why Carried Interest Is a Capital Gain.  It is as good an explanation as I’ve seen of why capital gain on private equity isn’t a crime against humanity:

Typically private equity investors are paid a 2% management fee, on which they pay ordinary income tax rates, and a 20% carried interest of the partnership’s profits that is only paid after limited partners receive a preferred return of 8%.

Carried interest, therefore, is the profits share on the sale of a capital asset and not “ordinary income” as some would have it treated.  In other words, it is a capital gain within a partnership and is rightfully taxed at the long-term capital gains rate  — provided that  the asset, or company, is held for more than one year.

The underlying principle is no different than two friends who partner together to purchase a restaurant.  One might bring capital and the other brings expertise.  The restaurant could be in disrepair or a great concept that needs additional capital to expand.  The chef identifies the restaurant to buy and possesses the skills to manage the restaurant and add value to the enterprise over time.  The friend has the capital to invest, but doesn’t possess the operational or investment skills to generate a return.

When they sell the restaurant years later, both partners receive capital gains treatment on their long-term investment.  A private equity partnership works in the same way.  This is Partnership Law 101.

Exactly.  And it’s not like a salary, where somebody writes you a check.  The private equity investor is taking a risk, and on any given investment is likely to get nothing.  It’s not like, say, a tenured law school faculty paycheck that comes every two weeks.

 

 

It’s not just the rich guy?  Obamacare Tax Increases Will Impact Us All (Andrew Lundeen, Tax Policy Blog).

Howard Gleckman, Changing Government’s Inflation Measure Would Raise Taxes as Much as it Would Cut Spending (TaxVox)

Jason Dinesen,  Greatest Hits: Enrolled Agents, The Liechtenstein of the Tax World.  ”When people hear ‘enrolled agent,’ they think either ‘what the hell is
that?’ or ‘he must work for the IRS, flee for your lives!’”

Anthony Nitti,  Business Owners Could Find Their Tax Deferral Backfiring.  Deferring income into higher-rate years works badly.

Russ Fox,  Did the IRS Write Law?  “I suspect the IRS has erred.”  I agree, the IRS can’t change statutory rates to deal with budget issues.

 

Jack Townsend,  Proposed New FBAR Form And Explanation

Brian Strahle,  Will Maryland Match Virginia’s Corporate Income Tax Rate?

Patrick Temple-West,  Tax-exempt bonds get scrutiny, and more

TaxGrrrl, Taxes From A To Z (2013): C Is For Carpooling

Robert Goulder, Will EITI Kill Transfer Pricing? (Tax.com).  First ask yourself: what is EITI?

 

David Brunori, Remember the Alamo, Buy a Gun (Tax.com)  On the unwisdom of sales tax holidays, even for guns.


ProTip: Don’t take your tax advice from rappers.  This from Going Concern:

As you might expect, TMZ has the scoop and it quotes a number of artists who are currently considering tips for strippers as a legit deduction and therefore a serious tax strategy. And who doesn’t love creative tax planning? But how might they rationalize this idea? 

Well, Bizzy Bone considers these young ladies to be like his family:

Bizzy Bone tells TMZ, “I’m giving charity to females who need their light bills paid.  So, of course, that’s a write-off.  You write off your kids, don’t you?”

Um, no.  Mr. Bone might want to ponder the stories of Ja Rule, Fat Joe, and Beanie Sigel, to name a few, before he gets too smug about his tax deductions.

 

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