Posts Tagged ‘CALT’

Tax Roundup, 1/6/2014: Start this year’s year-end planning now! And lots more.

Monday, January 6th, 2014 by Joe Kristan

20140106-1I’m back.  It was good to take a little time off after year-end planning season and before the 2013 return season starts.  But now that it’s 12 below with howling winds, I might as well be at the office.

It was sort of a busman’s holiday, though, as I got an early start on my 2014 year-end tax planning.   While December year-end planning is important, it’s asking a lot of one month to do the work of all 12.  You can do some important tax planning in January that will pay off all year long.  For example:

– You can fund your 2014 Individual Retirement Account right now.  If you are married, you can also fund your spousal IRA.  The maximum contribution is $5,500, or $6,500 if you will reach at least age 50 by December 31, 2014.

– You can fund your 2014 Health Savings Account today too.  The HSA limit for taxpayers with a high-deductible plan and family coverage is $6,550 this year; for a single plan, the limit is $3,300.  You need to have a qualifying high-deductible insurance policy, but if you do, you can deduct your contribution and withdraw funds for tax-deductible expenses tax-free.  If you leave the funds in, they accumulate tax-free and can be withdrawn tax-free later for qualifying health costs.  If you stay too healthy to use the funds on medical care, withdrawals are taxed much like IRA withdrawals.

Using spousal IRAs and an HSA, a 50-year old with family coverage can tuck away a combined $19,550 right now and have it earn interest or dividends tax free right away — 15 1/2 months sooner than if you wait until April 15, 2015, the last day you can make these contributions.  And by saving it now, you won’t be tempted to spend it later in the year.

A few other things that you can do right away to get some of your 2014 year-end planning out of the way:

– If you care about estate planning, nothing keeps you from making the $14,000 maximum 2014 exempt gift to your preferred family donees right now.

– Make sure you’ve maxed out your 2014 401(k) deferral with your HR people — or at the very least, be sure you are deferring as much as you can get your employer to match.

– If you are an Iowan with kids, you can make a 2014 College Savings Iowa contribution that you can deduct on your 2014 Iowa 1040.  The maximum deductible contribution is $3,098 per donor, per beneficiary, so a married couple with two kids can put away $12,392 right now.  The Iowa tax benefit works like an 8.98% bonus to you for putting money in your college savings pocket.

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

TaxProf, The IRS Scandal, Day 242: Lois Lerner Is 2013 Tax Person of the Year.  The TaxProf provides access to a Tax Analysts piece that says:

     While many of the Service’s problems were not necessarily its own fault, the exempt organization scandal was an almost entirely self-inflicted wound. No one personifies that scandal more than Lois Lerner.

Lerner ignited a political and media firestorm when she confessed in May that the exempt organizations unit of the IRS Tax-Exempt and Government Entities Division inappropriately handled many Tea Party groups’ exemption applications.

The now former exempt organizations director’s admission and subsequent refusal to testify before Congress contributed to her becoming the public face of the scandal. Although Lerner does not bear sole responsibility for the IRS’s missteps in processing conservative groups’ exemption applications, the publicity of her role in one of the year’s biggest news stories earns her the distinction of being Tax Notes’ 2013 Person of the Year. 

And in spite of much wishful thinking, it is a scandal.

It’s worth noting that Tax Analysts gives an honorable mention to Dan Alban, the Institute for Justice attorney behind the District Court defeat for the IRS preparer regulation power grab.

 

1040 2013William Perez, How Soon Can a Person File Their 2013 Tax Return?: “The Internal Revenue Service plans to begin processing personal tax returns on Friday, January 31, 2014, for the tax year 2013 (IR-2013-100).”  But don’t even try to get it done until you have your W-2s and 1099s all in hand.

Jana Luttenegger, Reinstating Tax-Exempt Organizations  (Davis Brown Tax Law Blog). She explains new IRS procedures for organizations that have lost their exemption by failing to file annual reports with the IRS.

Kay BellSocial Security taxable earnings cap in 2014 is $117,000. Thousands have already hit that tax limit.

Jason Dinesen, Small Business Planning: Got Your Financial Statements and Budget Done Yet?

Paul Neiffer, Remember Your Simplified Home Office Deduction

TaxGrrrl, What You Need To Know About Taxes In 2014: Expired Tax Breaks, Obamacare Penalties & More.

Russ Fox, 1099 Time.  A look at who has to issue information returns, and who gets them.

 

Robert D. Flach poses AN ETHICAL, AND PERHAPS LEGAL, DILEMMA:

Beginning with the 2014 Form 1040, am I legally, or ethically, required to assess my client a penalty for not having health insurance coverage?  Or can I, as I do with the penalty for underpayment of estimated tax, ignore the issue and leave it to the IRS to determine if a penalty is appropriate?  Will I face a potential preparer penalty if I ignore the issue?

It’s a good question.  I suspect they plan to make us ask the question, under the same sort of rules that make preparers unpaid social workers for the earned income tax credit.  I don’t expect to ever have to ask the question, though, as I think this dilemma will resolve itself by an indefinite delay, and eventual repeal, of the individual mandate as Obamacare falls apart.

 

David Brunori, State Tax Reform Advice for 2014 – Think About Spending (Tax Analysts Blog). Sometimes I think that’s all they think about.  But hear David out:

But in thinking about tax reform efforts in the past year, I am more convinced than ever that our refusal to rethink the size of government makes fixing problems with the tax code impossible. Here is what we know. Cutting government programs is difficult because each program has a constituency that will fight like a gladiator to protect its access to public money. So when the topic of tax reform comes up, conservatives and liberals vow to find a fix that will neither raise nor decrease spending. But we also know that politicians – the majority anyway – generally hate raising taxes. This reflects the fact that most of their constituents hate the idea of paying more taxes. But the costs of government continue to increase. And that leads to worse tax policy as states look to gimmicks, excises, gambling, and other junk ways of collecting revenue. It also ensures that some horrible tax policies are never fixed.

If the government dialed back spending to population-and-inflation adjusted 1990 numbers, I don’t think mass famines would result.

Scott Hodge, Despite Rising Inequality, Tax Code is at Most Progressive in Decades (Tax Policy Blog). I’m not sure “despite” is the right word here.

Annette Nellen, Continued bonus depreciation or tax reform?

Cara Griffith, Cyclists: The Next Great Source of Tax Revenue? (Tax Analysts Blog):

 While I strongly believe taxes should not be used to encourage or discourage behavior, the effect of requiring cyclists to register their bikes is not the big problem with these types of proposals. The real problem is that they don’t raise any revenue. Dowell’s suggestion that a bike registration fee would raise some $10 million for the city of Chicago is a pipe dream. Almost every cent would be used simply to administer the program.

From the interests of the bureaucrats proposing the program, just funding new patronage jobs is a perfectly acceptable result.

Howard Gleckman, Time To Park The Commuter Tax Subsidy (TaxVox)

Peter Reilly, Are IRS Property Seizures The Stuff Of Reality TV?   Now there’s some grim viewing.

The ISU Center for Agricultural Law and Taxation has a shiny new look at its website.

Tony Nitti, Yes Virginia, There Is A Tax Extender Bill In Congress.

The Critical Question: If You Won the Lottery Tomorrow, Would You Still Go to Work? (Going Concern).  Only to clean out my desk, and laugh.

 

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Tax Roundup, 5/2/2013: Peter Fisher takes on The Tax Foundation. And I’m a video star.

Thursday, May 2nd, 2013 by Joe Kristan
Peter Fisher

Peter Fisher

Cage Match: Iowan Peter Fisher takes on the Tax Foundation.  Mr. Fisher has written a study for Good Jobs First, a left side advocacy group.  Mr. Fisher who shows up in The Tax Update occasionally, doesn’t care for the Tax Foundation’s Business Tax Climate Index:

The TF, on the other hand, despite claims to the contrary, ignores the consensus approach to assessing business taxes in the economic literature and attempts to portray the effect of state and local tax law on business profits in an entirely different fashion: by stirring together no less than 118 features of the tax law and producing out of that stew a single, arbitrary index number. That number turns out to bear very little relationship to what businesses actually pay.

Here Mr. Fisher makes the same mistake he makes when he defends Iowa’s highest-rate-in-the nation corporate income tax, which collects very little net revenue because it clobbers some taxpayers while paying generous subsidies to the well-connected and well-lobbied.  He concludes that means Iowa’s corporation tax doesn’t matter because of the low net collection.

A good business tax climate, to the Tax Foundation, doesn’t take money from some businesses and give most of it to other businesses; good policy is based on “simplicity, neutrality, transparency, and stability.”  I agree.

As the Tax Foundation explains in its response to Mr. Fisher:

 The problem here is that we do not claim to measure business tax burdens. We measure and rank tax structures, and this because the size of a tax is less important than the economic distortions it creates. This is a fundamental error in Fisher’s understanding of tax policy.

Mr. Fisher seems more focused on “equity,” whatever that means.  But even if you think the tax law should be used to punish the rich and reward low incomes, cross-border mobility makes state tax systems an awful place to to that.

 
Tony Nitti,  Overview Of The New 3.8% Investment Income Tax, Part 3: Gains From The Sale Of Property.   Tony discusses the ridiculous proposed rules on sales of pass-through businesses, among other things.

TaxGrrrl,  IRS Rolls Out More Proposed Regulations On Health Care As “Train Wreck” Comments Continue To Make Rounds.   “Train wreck” is a term that frequently makes the rounds in the vicinity of train wrecks.  This batch of regs covers “minimum value” for determining whether coverage disqualifies individuals from premium credits.

Trish McIntire,  First Time Penalty Abatement.  The IRS will usually abate minor penalties for first-time infractions, but they don’t like to talk about it.

 

Jen Carrigan,  Should You Expect an Audit?  A guest poster at Missouri Tax Guy’s place explains the IRS exam process.

Jason Dinesen,  Another Example of a Tax Scam E-Mail.   The IRS never contacts taxpayers by e-mail.

Kay Bell,  Tax moves to make in May 2013

 

Janet Novack,  U.S. Demands Wells Fargo Records To Identify Tax Cheats Using Caribbean Havens

Cara Griffith, Feeling the Impact of Impact Fees (Tax.com).

 

Paul Neiffer,  From 80 to 45 in 40 miles.  Temperature, not speed.  I get to meet Paul tomorrow, it should be fun.

Catch a Thursday Buzz from Robert D. Flach.

 

Video!  The Iowa Bar Association now is selling DVDs of “Notes from the Fiscal Cliff,” a January webcast I did with Roger McEowen of the ISU Center for Agricultural Law and Taxation.  The outline is here. Supply your own popcorn.

 

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

Monday, January 14th, 2013 by Joe Kristan

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

 

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

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

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

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

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

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

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

20130114-2

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

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

 

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

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

Paul Neiffer, Good News – Certain Credits Offset AMT

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

Joseph Thorndike, Peggy Noonan and the Beleaguered 1 Percent

TaxGrrrl, Ask the taxgirl: Filing Your Tax Return Early

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

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

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

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

 

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Tax Roundup, 1/4/2013: How many seconds of federal spending do you cover? And more debris from the bottom of the Fiscal Cliff.

Friday, January 4th, 2013 by Joe Kristan

20130104-1Spending, by the numbers.  Local radio guy Brian Gongol asks, Why do we baffle ourselves with huge numbers instead of talking about budgets in per-person terms?  Why, indeed?  You could ask 100 people on the street how much money the government spends and how big the deficit is, and you would be lucky to get the size of the budget within a trillion dollars.  The numbers are hard to comprehend.

The ability of the politicians to get away with talk about “millionaires and billionaires” proves this — a billion is 1,000 million, and while there are likely people on your street with a net worth of $1 million, you probably haven’t met anybody worth $1 billion.  They aren’t remotely the same thing.

In doing year-end tax projections for a client with a once-in-a-lifetime gain from a business sale and a huge resulting tax liability, I wondered how long his enormous (to me) liability would keep the government running.  Dividing the 2012 fiscal year spending of $3.796 trillion by the 31,536,000 seconds in a 365-day year, I figure that the federal blob spends $120,370.37 per second.  The biggest tax liability I’ve ever seen comes well short of funding 2 minutes of government operations.  I probably will never cover a second.  Where do you fit?

 

Fiscal Cliff Webinar!   I will be appearing with Roger McEowen on the “Tax Notes From the Fiscal Cliff” webinar at Noon January 14.  We will be covering the new legislation and the proposed 3.8% “Net Investment Income Tax” regulations.  Register today!

 

The IRS has published new withholding tables for the Fiscal Cliff Legislation (Accounting today)

 

Fiscal Cliff Notes:

Wall Street Journal:  Cliff Fix Hits Small Business; Many Small Entities or Firms May Face Higher Taxes This Year After the Deal

David Henderson, Pssst:  Someone tell the Republicans they won:

So here’s the big news: the anti-tax side won.  Sure, Obama would love
to raise taxes even more, especially on people making between $200K and $450K.  But now he has almost zero leverage to do that. 

I think that’s about right.  And now the President has lost his ability to distract attention from the ongoing fiscal calamity with arm-waving about “millionaires and billionaires.”

Derek Thompson, Sorry, Middle Class: In a Few Years, Your Taxes Will Have to Go Up, Too (via Going Concern).  You know, we could try spending less.  In any case, the rich guy isn’t buying.

Tim Carney: How corporate tax credits got in the ‘cliff’ deal

Katrina Trinko, Hollywood, Electric Scooters Benefit From Tax Breaks in Fiscal Cliff Bill (The Corner)

Brad Plumer, From NASCAR to rum, the 10 weirdest parts of the ‘fiscal cliff’ bill (Wonkblog, via Tyler Cowen).

Chris James, Fiscal Cliff Deal Adjust Capital Gain Rates and Qualified Dividend Rates (Davis Brown Tax Law Blog)

Paul Neiffer, Some More Goodies Buried in the Fine Print

Kay Bell, Redefining ‘wealthy’ for tax purposes

Tax Trials, Fiscal Cliff Legislation – American Taxpayer Relief Act of 2012

Patrick Temple-West, Cliff fix hits small business, and more

Nick Kasprak, 2013 Tax Brackets (Tax Policy Blog)

Roberton Williams, TPC Tax Calculator Shows What Avoiding Fiscal Cliff Means for Taxpayers (TaxV0x)

Howard Gleckman,  What the Fiscal Cliff Deal Really Means for Taxes and Spending

TaxProf,  More Fiscal Cliff Tax Commentary

 

In other news…

Jack Townsend, Wegelin & Co. Pleads Guity to Conspiracy

Lynnley Browning, Swiss bank Wegelin to close after guilty plea.  They opened in 1741.

Jason Dinesen, Tax Predictions for 2013

Trish McIntire, Disclosing Prisoner Returns

Taxdood, Intrastate iGaming: Federal Reporting and Withholding Tax Obligations

Robert D. Flach, WTF IS THIS AMT EVERYONE IS TALKING ABOUT?

News you can use: “Have Fun and Don’t Be Bored” (Brian Strahle)

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Tax Roundup, 11/27/2012: Rocking Sheldon! And billionaires and millionaires

Tuesday, November 27th, 2012 by Joe Kristan

The Tax Update is in Sheldon, in the Northwest Iowa, helping out at the Iowa State University Center for Agricultural Law and Taxation Farm and Urban Tax School today.

Some of the happy practitioners at today’s Farm and Urban Tax School in Sheldon, Iowa.

Two schools are left: Red Oak and Ames.  Register today!

 

How easy is it for rich folks to avoid higher rates?  Florida Senator and potential presidential candidate Marco Rubio said that tax rate increases would be largely futile.  From Huffington Post:

WASHINGTON — Sen. Marco Rubio (R-Fla.) said Thursday there isn’t much point in raising tax rates on the wealthy, because they also have the money to hire people who will help them get out of paying taxes.

“The billionaires and millionaires that are going to be impacted by higher rates, they can afford to hire the best lawyers, lobbyists and accountants in America to figure out how not to pay those higher rates,” Rubio told National Journal’s Major Garrett at The Atlantic Washington Ideas Forum. “The people that are going to get stuck by that bill are the small businesses, the partnerships, the S corporations, that cannot hire the lawyers to get them out of it.”

Is it really possible for “billionaires and millionaires” to get out of taxes through the best efforts of their lawyers?  To some extent.  Greg Mankiw explains how Warren Buffett does it:

1. His company Berkshire Hathaway never pays a dividend but instead retains all earnings.  So the return on this investment is entirely in the form of capital gains.  By not paying dividends, he saves his investors (including himself) from having to immediately pay income tax on this income.

2. Mr Buffett is a long-term investor, so he rarely sells and realizes a capital gain.  His unrealized capital gains are untaxed.

3. He is giving away much of his wealth to charity.  He gets a deduction at the full market value of the stock he donates, most of which is unrealized (and therefore untaxed) capital gains.

All of these are useful only to people who don’t need their cash right away.  If you want to use your cash, these aren’t very useful.  And many of these items are fraught with danger for taxpayers with less pull than Warren.  For example, a closely-held C corporation that pays no dividends runs the risk of being hit with the Accumulated Earnings Tax.  Many other tax-sheltering opportunities have been shut down through various crackdowns on tax shelters over the years, like the passive loss rules.

The real futility of taxing the rich is that it does so little to address the government’s insolvency.  Letting the tax cuts for “the rich” expire only covers about $80 billion of the $1,200 billion annual budget deficit.  The big attempt to tax “the rich” is just a distraction; the rich guy isn’t buying.

 

Tax Prof Poll: Taxes and the Fiscal Cliff (TaxProf)

Joseph Henchman,   Chambliss, Others Distance Themselves from ATR Tax Pledge (Tax Policy Blog)

Patrick Temple-West,  Consensus on increasing tax revenue, a wide gulf on how to do it, and more (Tax Break)

Daniel Shaviro, Broadening the base versus raising the rate

 

I vote yes:  Can We Kill the Death Master File? (Russ Fox). The publication of dead folk’s Social Security numbers is a boon for identity thieves.

TaxGrrrl,  Tax Breaks For Medical Expenses Under ObamaCare.  Hint: they are fewer and smaller.

Paul Neiffer,  2012 May Be Last Year for Section 179 Flexibility.  “What many farmers do not know about is the ability to go back and amend their tax return to change their Section 179 deduction.”

Trish McIntire,  Document Your Holiday Giving.  If you give over $250, no receipt=no deduction.

William Perez,  Tax Tips for Charitable Giving During the Holidays

Anthony Nitti,  Could Tax Savings Expedite Free Agent Baseball Signings?

Jack Townsend,  Swiss Bank Pictet & Cie On DOJ Tax Radar Screen

Robert D. Flach didn’t let Thanksgiving weekend stop his Buzz!

Howard Gleckman, How Can 98 Percent of Us be Middle-Class? (TaxVox)

Angus Young (Wikipedia image)

Kay Bell, More Cyber Monday shoppers this year are paying state sales taxes

News you can use:  Tax Dodger Alert: Your Friend in the Senate (Robert Goulder, Tax.com)

Jeremy Scott,  Why the Finance Committee Needs Angus King. (Tax.com)  I prefer Angus Young.

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Tax Roundup, 11/19/2012: Pushing the AMT patch over the Fiscal Cliff. Also: Muscatine!

Monday, November 19th, 2012 by Joe Kristan

The Tax Roundup is reporting from Muscatine, Iowa, home of the 900-lb gorilla of Iowa tax policy, Iowans for Tax Relief.  Also a 24/7 WalMart, for business travelers who forget to pack socks.

Roger McEowen and IRS Taxpayer Liason Christy Maitre give the latest scoop on the Fiscal Cliff at the Iowa State University Center for Agricultural Law and Taxation Farm and Urban Tax School, Muscatine session.

Department of We’re Doomed:   The leaders of the House Ways and Means Committee say that they don’t plan to do an “AMT patch” separately from the “fiscal cliff” negotiations for next year.  Absent a patch, the AMT exemption for 2012 will decline drastically, throwing tens of millions of new taxpayers into AMT and increasing the tax bill for some taxpayers by over $8,000.  Tax Analysts reports ($link)

Asked by reporters about the AMT patch, which has caused anxiety for IRS officials preparing for the coming tax return filing season, Ways and Means Chair Dave Camp, R-Mich., responded, “I’m hopeful that we will address AMT by the end of the year.” He added that he doesn’t think a patch will be passed as stand-alone legislation.

Ways and Means ranking minority member Sander M. Levin, D-Mich., also expects the AMT patch and the extenders to be included in a larger deal on the fiscal cliff. “I think it’s preferable for everything to be put into a package. They relate to each other,” he told Tax Analysts.

The IRS warned last week that failure to patch AMT will delay filing season for affected taxpayers to, at best, sometime in March, with punishing big tax bills for millions of unsuspecting taxpayers.  Now Congress ties the immediate catastrophe of not patching the AMT to the impending catastrophe of the scheduled tax  rate increase.   No small failures for these guys.

 

Fiscal Cliff self-help:  Pressure’s on to sell farmland before end of the year (Dan Piller, Des Moines Register:

The clean, placid appearance of post-harvest Iowa farmland appears to be far removed from the messy fog of Congressional politics and the fiscal cliff.

But pressure is intense to sell land before Jan. 1 when, if Congress doesn’t intervene, capital gains taxes will rise from 15 percent to 23.8 percent and deductions on estate taxes will drop from $5 million to $1 million.

Yes, taxes do affect behavior:

“The tax changes are on everybody’s minds. We have a sale every day, except Sundays, between now and Thankgiving,” regional sales manager Sam Kain of Farmers National Co. said before selling 169 acres of Bremer County farmland from the estate of Alvin and Maxine Walther on the day before the election.

“I’ve been in this business for 30 years and I’ve never seen it this busy,” Kain said.

Selling now doesn’t necessarily help with the estate tax problem (unless, improbably, farm prices continue to rise), but it can make a big difference on income taxes.

Related:

Anthony Nitti, 5 Tax Planning Strategies For Dealing With The Additional 3.8% Obamacare Tax On Investment Income

Peter Reilly,   Carbon Tax Getting Serious Consideration As CBO Seeks To Address Regressiveness.  Sorry, the rich guy isn’t buying.

Martin Sullivan,  The Hidden Economic Damage of Deduction Caps (Tax.com)

 

In other news…

Robert D. Flach,  DEDUCTING SANDY-RELATED VOLUNTEER EXPENSES

Because one disaster deserves another.  Hostess bakery’s closure prompts another try at a federal fat tax (Kay Bell)

At least it’s something they’re good at:  As Hostess Folds, Congress Thinks of New Ways To Kill Snack Food Industry (TaxGrrrl)

 

Paul Neiffer,   Don’t Forget The Small Employer Health Care Credit

Brian Strahle,  Take Advantage of Multistate Tax Year-End Issues and Opportunities

Jim Maule,   Taxation of Medical Study Payments

 

Be thankful, it could be worse.

As we wind down for Thanksgiving week, lets give thanks for not being in California.  David Henderson discusses the Golden State’s self-inflicted pending disaster in It’s not Go Galt: It’s Go to Texas:

As I have noted before, the Laffer Curve–the curve that relates tax revenues to tax rates–must be correct.  The relevant question is where we are on the Laffer Curve.  Are we on the part of the curve–the “prohibitive region”–where an increase in marginal tax rates will reduce revenues and a decrease in marginal tax rates will increase revenues?  For the United States, I think the answer is pretty clearly no.

But what about for California?  We are about to have an empirical test.

The Laffer Curve is the idea that there is a revenue maximizing tax rate.  It’s not zero, and it’s not 100%, because people would do very little that would result in a 100% tax.  The maximum rate is different for different taxes  — a gross receipts tax would have a lower revenue-maximizing rate than an income tax because it would not have deductions, for example.  Mr. Henderson says that’s also true for state income taxes:

When state governments increase tax rates, people in those states have a relevant option that is not relevant to a discussion of increases in federal tax rates.  Specifically, they can move to one of the other 49 states.  So a simple estimate of the elasticity of taxable income with respect to marginal tax rates will underestimate the actual elasticity. Some of those other states with lower marginal tax rates on high-income–and that includes virtually all the other states–will be attractive substitutes.  Texas, for example, has no income tax.  Neither do Washington, Florida, and Nevada, to name just 3 others.

That could cause the tax take for California from its new tax increases to be much less than they are hoping for:

Notice one powerful implication of this second reason that makes the analysis quite different from the analysis for federal tax-rate increases.  Whereas when the federal government raises tax rates, any loss in revenue is due mainly to people cutting back on their income somewhat, when a state government raises marginal tax rates, people who move to another state cut the income that the state taxes to zero.

It’s not just a theoretical issue, as Russ Fox reports in  Phoenix Woos California Businesses:

A hint to California: As you continue making the state more and more hostile to businesses, businesses are forced to react.  No business wants to move (it’s expensive and disruptive), but like my business that moved last year, eventually the desert wastes of Las Vegas or Phoenix start looking really attractive.

The California weather’s nice, but not at any price.

 

And Ontario doesn’t even have the nice weather.   The TaxProf,  Tax Consequences of Florida Marlins – Toronto Blue Jays Trade.

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Tax Roundup, 8/9/12: IRS scolded for carelessly issuing ID numbers. Plus stupid vs. criminal, hitting bottom and digging.

Thursday, August 9th, 2012 by Joe Kristan

IRS Commissioner Douglas Shulman

IRS discouraged fraud detection in ID program (Huffington Post):

The Internal Revenue Service has been looking the other way instead of rooting out fraud when people apply for taxpayer identification numbers, Treasury Department investigators said Wednesday, exposing a shortfall with both financial and national security implications.

A member of Congress who sits on the House’s tax-writing committee responded to the report by calling on IRS Commissioner Douglas Shulman to resign, claiming the IRS is helping illegal immigrants defraud the government.

He wants the Commissioner to resign for that?  Considering that the Commissioner oversees the mailing of $5 billion annually to thieves, that he has terrorized and financially ruined otherwise law abiding Americans for footfault paperwork violations, and that he has, with questionable authority, imposed an expensive and futile preparer regulation scheme, this new outrage needs to take a number.

More coverage from the Wall Street Journal, Linda Beale and the TaxProf; read the TIGTA report here and a TIGTA press release here.

Instapundit on state film tax credits:

REPEAL THE HOLLYWOOD TAX CUTS!  (LOCAL EDITION):  La. film tax break program needs limits, budget group says.   “Louisiana has spent more than $1 billion over the past decade to attract movie productions to the state, but hasn’t received much in return besides the prestige of hosting big-name Hollywood actors, according to a report released today.  The left-leaning Louisiana Budget Project suggests state lawmakers should put tighter limits on the generous film tax break program, lessening the credits offered and capping the amount of money it can cost the state each year.”  Actually, it should be abolished, as should similar programs in almost every other state.  And this is something state Tea Party groups might even make common cause with lefties on.

A sadder-but-wiser Iowa repealed its version of the film credits this year after it collapsed in scandal and disgrace and the State Auditor reported that 80% of the credits were issued improperly or lacked documentation.  But in defense of the program, two filmmakers are moving to Iowa for up to ten years thanks to the film tax credit!

It’s time to register for this year’s ISU Center for Agricultural law and Taxation Farm Tax Schools!  I will be on the Day 1 panel at all eight sessions, starting with the October 29 school in Mason City.

We’re vacationing in the mountains this year, kids. The Plot Thickens for Swiss Bankers Involved In U.S. Evasion: (Jack Townsend):

Swiss bankers whose names were delivered to the United States in April as part of the crackdown on US tax evaders face the risk of arrest while travelling in some European countries, not just on US soil.

Well, the Alps are nice…

Stupidity is no crime: Were Reid’s Remarks About Romney’s Returns Unlawful? (TaxGrrrl)

We’re just getting started!  Have We Reached the Nadir of Tax Policy Discourse? (Going Concern)

“Bipartisan” means they’re ganging up on us: Wind energy tax breaks are bipartisan in Iowa (Ames Tribune)

Kay Bell has a new Carnival of Taxes for State Fair week!

Tax Policy Blog:  Misunderstanding Tax Reform: The Case of The Olympic Tax Elimination Act

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IRS loses farm ‘special use valuation’ case (again)

Monday, March 26th, 2012 by Joe Kristan

Roger McEowen has the scoop.

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ISU-CALT farm tax school schedule released

Monday, February 6th, 2012 by Joe Kristan

The Iowa State University Center for Agricultural Law and Taxation has released its schedule for the 2012 Farm Tax Schools. The biggest change for this year is that a school in Red Oak will replace the Griswold session, probably because of the rush-hour traffic problems in Griswold:
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The schedule:
October 29-30: Mason City (North Iowa Area Community College)
November 7-8: Waterloo (Hawkeye Community College)
November 8-9: Denison (Boulders Conference Center)
November 12-13: Ottumwa (Bridge View Center)
November 19-20: Muscatine (Clarion Hotel)
November 27-28: Sheldon (Northwest Iowa Community College)
December 11-12: Red Oak (Red Coach Inn)
December 17-18: Ames (Quality Inn and Suites)
Watch for more details at the CALT site.

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Estate Planning for 2012

Friday, January 6th, 2012 by Joe Kristan

Roger McEowen has some worthwhile thoughts.

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What’s new for 2011 taxes?

Thursday, January 5th, 2012 by Joe Kristan

My new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs. William Perez has some related thoughts.
If you really want to bone up on the new filing season, the Center for Agricultural Law and Taxation and the Iowa Bar Association are sponsoring a one-hour webinar at noon today. You can register here. I’m sitting this one out, but Roger McEowen will present and get things rocking.

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Ottumwa party!

Thursday, November 17th, 2011 by Joe Kristan

The Tax Update is in Ottumwa today, helping out with the Iowa State University Center for Agricultural Law and Taxation Farm Tax School.
Here IRS Stakeholder Liason Christy Maitre works with a practitioner who has been waiting for the IRS to process his PTIN application:


Emcee Roger McEowen gets excited about excess soil fertility:

If you want to join the fun, we still have schools left this year in Waterloo, Griswold and Ames!

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Donna Reed Country

Monday, November 14th, 2011 by Joe Kristan

It’s a beautiful fall day in Denison, Iowa, where I’m helping out at the Iowa State University Farm Tax School. Only four sessions left, so register now!

Denison is Donna Reed’s hometown, but has been relatively quiet since.
Posting may be light today, but I will do what I can in the breaks.

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IRS issues estate return instructions for 2011

Thursday, September 29th, 2011 by Joe Kristan

The first estate tax returns for 2011 decedents are about to come due. Just in time, the IRS has issued instructions for Form 706. Roger McEowen and The Tennessee Tax Guy have more.

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Now I’m hungry

Wednesday, August 10th, 2011 by Joe Kristan

Teaser from the ISU Center for Agricultural Law and Taxation:

Illinois Roadkill Bill Gets Squashed
Updated August 9, 2011 – The governor has vetoed legislation that passed earlier this spring allowing licensed hunters to count roadkill towards their bag limit per species. Updated recipe books on hold.

Mmmm… Pizza!

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Temporary = 35 years

Tuesday, July 5th, 2011 by Joe Kristan

The .2% FUTA surtax, enacted as a temporary measure during the 1970s, finally expired last week. Roger McEowen and Paul Neiffer have more.

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2011 farm tax schools!

Friday, June 10th, 2011 by Joe Kristan

In case you’ve missed it, the ISU Center for Agricultural Law and Taxation has released the dates and locations for this year’s farm tax schools:
Oct. 25-26 – Mason City
Oct. 31-Nov. 1 – Sheldon
Nov. 2-3 – Muscatine
Nov. 14-15 – Denison
Nov. 17-18 – Ottumwa
Nov. 21-22 – Waterloo
Dec. 5-6 – Griswold
Dec. 12-13 – Ames
The first day will feature the Smothers Brothers of the tax world — me and Roger McEowen — along with IRS Taxpayer Liason Kristy Maitre. Day two features either Neil Harl or David Bibler, James Goodman and Lee Wilmarth, depanding on location. Plan your trips today!

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More on grouping passive losses

Tuesday, May 31st, 2011 by Joe Kristan

The IRS last week issued guidance on electing to treat all rental real estate activities as a single activity. Roger McEowen provides a roundup on grouping elections for all passive activities, including non-rental activities.

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ISU Ag Law Center rounds up Iowa tax changes

Monday, April 25th, 2011 by Joe Kristan

All of the recent Iowa tax legislation, including Section 179 and bonus depreciation changes, is rounded up by the ISU Center for Agricultural Law and Taxation.
Related: The morning after the Iowa bonus depreciation veto

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Dealing with the 2010 estate tax holiday

Friday, February 18th, 2011 by Joe Kristan

Estates of taxpayers worth over $5 million who died in 2010 can elect out of the estate tax and instead pass on assets without a step-up in asset basis to full fair-market value. Roger McEowen covers the latest guidance for such estates.

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