Posts Tagged ‘Dan Meyer’

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.

 

Share

Tax Roundup, 2/28/2013: Sequester freak-out edition.

Thursday, February 28th, 2013 by Joe Kristan

20130228-1If Congress fails to act today, automatic spending cuts take effect that drastically reduce government outlays to more than they were last year.  Some commentary:

Gene Steurle, How to Avoid Sequester and Give Both Parties What They Want (TaxVox)

Michael Giberson,  Sequester Reporting Scavenger Hunt: Official Rules (Knowledge Problem): “If you find a news story emphasizing the pain of sequester budget cuts that also clearly indicates that alternatives such as raising taxes or increasing the national debt also cause pain, you are a winner.”

The last refuge of rich scoundrels.  Patriotic Millionaires Slam Congress on the Sequester Stall (press release)

Fire and brimstone coming down from the skies!  Boehner Tells Members They Have to Fly Commercial

Real wrath-of-God stuff.  Potential effects of U.S. cuts on Iowans remain a mystery (Des Moines Register)

 

Kay Bell,  Tax cheating is unacceptable, say most Americans

Joseph Henchman,  Wisconsin Governor Walker Proposes Income Tax Reduction.  He would leave the top rate at 7.75%.  Still too high.  It’s even above Iowa, if you take Iowa’s deduction for federal taxes into account.

Tony Nitti, House Republicans Take First Stab At Killing Off The Tax Code

Dan Meyer,  Another Tax Season, Another Warning: Watch Out for “IRS e-mail” Scams

Russ Fox,  Illinois’ Pension Problems Get Worse; Lottery Checks Bounce

Cara Griffith, Stealth Lobbying (Tax.com)

 

You’re as young as you feel. UBS Client, 78, Charged With Tax Evasion in Illinois Case (Bloomberg.com)

The worst part is, they don’t have PTINs or continuing education.  IRS: Gang members stealing tax returns (ABC-7.com)

 

Share

Tax Roundup, 1/28/2013: Should Iowa rebate its budget surplus? And PTIN limbo.

Monday, January 28th, 2013 by Joe Kristan

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

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

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

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

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

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

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

20130128-1

Link: Text of HF 1.

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dan Meyer, Will Tax Benefits Later Cost You Now?

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

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

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

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

 

Share

Tax Roundup, 1/21/2013: Preparer regs struck down. What’s next?

Monday, January 21st, 2013 by Joe Kristan

20130121-2After most of us stopped paying attention Friday afternoon, a federal judge in Washington D.C. stunned the tax world by striking down the IRS effort to regulate tax preparers.  U.S. District Court Judge James Boasburg ruled that the IRS lacks the legal authority to impose the RTRP program.

So now what?

I expect the IRS to appeal the ruling to the D.C. Circuit Court of Appeals, but that would take months.  It seems unlikely that Judge Boasburg would stay his own ruling in the meantime, and I doubt that an appeals court will either.

Dan Alban of the Institute for Justice, the legal team behind the suit, told Accounting Today:

“Anything that’s part of the RTRP regulations is struck down by this decision today,” Alban explained. “The PTIN is a separate regulation and it’s done under separate statutory authority. It’s a ‘shall issue’ type of permit. If you pay the fee, if you pay that amount of about $65, you’ll get a PTIN. The IRS was going to make the PTINs conditional on having the RTRP credentials, but now they’re not allowed to do that. It will go back to how it was last year, when you had to get a PTIN, but anyone could get one and you didn’t have to pass an exam or complete any continuing education.”

So no PTIN refunds, but no testing or CPE requirements, and, presumably, no more RTRP designation.  This would seem to end the need to get IRS approval for CPE programs, a requirement that has shut down many local CPE programs, like those offered by the organization of Iowa Enrolled Agents.

As of this writing, the IRS has yet to comment.

So who wins?  Small unenrolled preparers are big winners.  They are now free of the brain-dead RTRP bureaucracy.  Enrolled Agents are also big winners.  The RTRP designation threatened to kill the EA brand by confusing taxpayers about the difference between enrolled agents, with their much stricter testing and CPE requirements, and Registered Tax Return Preparers.  But the biggest winners are taxpayers, who will not have their costs increased by an IRS-imposed guild system that would reduce the availability of tax preparers while doing nothing to increase their quality.

The losers?  The IRS, which loses its ability to bully preparers with the extrajudicial discipline system of the new regulations.  The big national preparers, who were instrumental in drafting the rules because they promised to weaken their competitors.  And, retrospectively, Doug Shulman, the former IRS commissioner who masterminded the requirements.

 

When at first you get enjoined, try, try again.  In 2010 a Kansas City-area man was enjoined from setting up a bunch of tax shelter plans, finding that the man “Deliberately Advised His Clients to Break the Law, and Helped Them Go About Doing so.”  Apparently he dusted himself off and went right back to work.  From a Department of Justice Press release:

The Justice Department announced today that a federal court has permanently barred Cash Management Systems, a Virginia corporation, from promoting two tax schemes that allegedly involve disguising wages as tool-reimbursement or tool-rental payments. Also subject to the civil injunction order were Cash Mangement’s marketing arm, Xell Enterprises, incorporated in Kansas; its principals, Bruce Lemay and Richard Herson Mills; and Allen Davison, of Overland Park, Kan. According to the government complaint, Davison provided legal opinion letters regarding the schemes and served on Cash Management’s board of directors.

 Judge Eric F. Melgren of the U.S. District Court for the District of Kansas entered the permanent injunction, which the defendants consented to without admitting to the allegations against them. Davison was enjoined from promoting other tax schemes in 2010.

No, you can’t give a tax free “tool allowance” to employees.  And just because somebody was enjoined from promoting other tax schemes doesn’t mean this one works.

 

In case you were wondering: Iowa explains sales tax treatment of Groupons.

Gongol, The people who pay a tax aren’t always the people who give the money to the government:

Companies that make medical devices are paying a 2.3%  excise tax to help fund the Federal health-care program. A lot of people undoubtedly think that means the 2.3% will come straight out of the company’s profits (and this in turn can lead to strongly populist instincts about sticking it to the people making a profit in health care). But the people who pay for a tax aren’t always the ones who cut the checks to the IRS.

So true.

Paul Neiffer, IRS Announces April 15 Farmer Deadline

Russ Fox, Farmers & Fishermen Get Relief From Catch-22 Situation

Jack Townsend,  Tax Court Applies Willful Blindness to Find Civil Fraud by Clear and Convincing Evidence.  A discussion of the Fiore case, which I discussed last week.

TaxGrrrl, Why Justice Matters, Revisited

Richard Morrison,  Louisiana Tax Reform: Sizing up the Jindal Plan (Tax Po0licy Blog)

Roberton Williams,  How the New Tax Act Affects the Alternative Minimum Tax (TaxVox): “One curiosity that won’t please high-income taxpayers: the new Obamacare taxes on investment income don’t count in determining whether you owe  AMT.”

Robert D. Flach,  RULES FOR DEDUCTING NON-CASH CONTRIBUTIONS

Jana Luttenegger, IRS Offers Options if You Can’t Pay Your Taxes (Davis Brown Tax Law Blog)

Kay Bell, Tax filing preparation checklist

Brian Strahle,  Is Your Company Paying Too Much Virginia BPOL?

Dan Meyer, Identity Theft: When a Rogue Tax Preparer Could Cost You More than a Filing Fee

 

OK, taking bribes is bad, but not putting them on your 1040 is really beyond the pale.  C. Ray Nagin, Former New Orleans Mayor, Indicted on Federal Bribery, Honest Services Wire Fraud, Money Laundering, Conspiracy, and Tax Charges.  

Share

Tax Roundup, 10/31/2012: Sandy washes away the tax news. Happy Halloween…

Wednesday, October 31st, 2012 by Joe Kristan

The IRS sends $5 billion in fraudulent refunds to ID thieves annually.  Surely they have figured out how to help out those whose ID’s have been stolen?  No.  Jason Dinesen updates the saga of his widowed client whose deceased husband’s identity was stolen:

The good news is, the IRS has finally gotten its systems coded correctly to show that Wendy did file a 2010 tax return. They won’t be sending any more “collection” notices to her, and I don’t have to call the collections department every 60 days.

The bad news is, I now have to figure out how to deal with the IRS Identity Theft Unit.

They wouldn’t talk to Jason, even though he has power of attorney.  So the IRS, rather than going out of its way to help identity theft victims whose tax lives are in turmoil, jerks them around.  After promptly issuing the fraudulent refunds to the thieves, of course.  But at least Doug Shulman’s IRS is doing a bang-up job of selling confidential preparer identification number information.

 

There isn’t much tax news today thanks to the Hurricane Sandy disaster.  Some appropriate coverage:

Kay Bell,  Hurricane Sandy major disaster declarations could mean federal tax help

Trish McIntire,  Isaac to Sandy

 

In other news…

 

Richard Morrison, Chart of the Day: Income Levels vs. Education Levels (Tax Policy Blog)

 

 

Brutal Assault on Reason Watch: 

TaxProf,  Bartlett: Romney’s Tax Plan Won’t Work Like Reagan’s Did

TaxGrrrl,  Why Romney’s ‘Tax Avoidance’ Strategies Don’t Deserve Criticism.  Making the important point that tax planning isn’t somehow unsavory.

Patrick Temple-West,  Essential reading: Fiscal cliff forces all sides to jockey, and more (Tax Break)

 

So government never fails?   When Privatization Fails: Yet Another Example (Jim Maule).  The difference is that when a business fails, it goes away and the assets are redeployed.  When a government program fails, it just goes on and on.

Greg Mankiw,  Tax Expenditure Fact of the Day

Sara Palovick,   Avoiding the Self-Rental Trap (Double Taxation)

Paul Neiffer,   Fiscal Cliff Example # 2

Dan Meyer,  IRA Holding Allocations: Do Demographics Matter?

And a Halloween Buzz from Robert D. Flach!

 

Share

Tax Roundup, 10/10/2012: Happy Spiro Day! Also: Iowa’s business tax climate still frosty.

Wednesday, October 10th, 2012 by Joe Kristan

The Tax Foundation released its 2013 State Business Tax Climate Index.  Iowa dropped one place, to 42nd, switching places with Maryland in the bottom 10.  Iowa’s poor score has much to do with its terrible 49th-place ranking for corporation income tax.

Iowa scores badly on its corporation tax on a number of fronts:

– We have the highest stated corporation tax rate, and the second-highest effective rate taking the deduction allowed for half of the federal corporation income tax.

– Iowa has its own state corporation alternative minimum tax.

– Iowa no longer allows a corporation net operating loss carryback, distorting the tax on cyclical businesses.

– Iowa’s tax code is distorted by “incentive” tax credits that tend to favor pet industries and the well-lobbied.

Here’s what the full Tax Foundation report says about incentive tax credits (my links and emphasis):

Many states provide tax credits which lower the effective tax rates for certain industries and/or investments, often for large firms from out of state that are considering a move. Policymakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a bad business tax climate. Economic development and job creation tax credits complicate the tax system, narrow the tax base, drive up tax rates for companies that do not qualify, distort the free market, and often fail to achieve economic growth.

Recently Iowa City policy analyst Peter Fisher wrote an op-ed piece saying that Iowa’s corporation buisness climate is just great, largely on the basis that it doesn’t collect much tax.  A big part of the reason it doesn’t collect much is the special breaks granted to favored businesses by smokestack-chasing politicians.  The Tax Foundation notes that these “economic development incentives” don’t work, citing the work of none other than Peter Fisher. 

The Tax Update’s Quick and Dirty Iowa Tax Reform Plan has a better approach to state business tax policy.  Key points:

- Abolish the state corporation income tax.

- Abolish all economic development tax credits and special deductions.  You name the special break, I’m against it.

- Lower the personal income tax rate to 4% or less with the money saved by eliminating complicated deductions, tax credits and subsidies.

Iowa’s political leaders —  both parties — trip over themselves throwing tax credits and special breaks around.   But does anybody think that “no corporate tax” wouldn’t be a better way to attract and grow industry than “we have dozens of special tax breaks if you know the right people”?

Related:

Tax Roundup, 9/27/2012: Misdirected charity edition.  Also: No, Iowa, you don’t have a good tax climate.

TaxProf,  2013 Business Tax Climate: Chilliest in Blue States

Russ Fox,  Why I’m Happy to be in Nevada and Not in California

Roberton Williams,  Marginal Tax Rates Matter More than Average Tax Rates (TaxVox).  This is relevant to Peter Fisher’s argument that Iowa’s highest-in-the-nation corporation taxa rate doesn’t matter because Iowa’s loopholes let so much revenue slip through.  It’s the rate on the next dollar of income that affects decisions.

 

Thirty-nine years ago today, Spiro Agnew resigned the vice-presidency to pursue other interests, but mostly to plead guilty to tax evasion.   The Washington Examiner reports:

He was accused of receiving kickbacks from contractors while he was governor of Maryland. He claimed the charges were “damned lies” and eventually pleaded in federal court in Baltimore to no contest to not paying taxes on $29,500.

As part of his plea deal, Agnew agreed to resign from office. He was sentenced to three years’ probation and fined $10,000. He was disbarred.

Coincidentally (I think), the debate between the two major party Vice-Presidential nominees is tonight.

In other crime news:

Judge rejects Wasendorf’s bid for jail release (KTTC.com).  The confessed embezzler couldn’t convince the judge that a prison term that will keep him behind bars past his 100th birthday might be a reason he might flee.

It’s not just Harleys:  Sturgis surgeon convicted of income tax fraud, faces prison, reports the Mitchell Republic:

A federal jury has convicted a Rapid City surgeon on 13 felony charges related to income tax evasion. 

Edward Picardi, of Sturgis, was accused of sending millions of dollars of income out of the country and filtering the money through offshore accounts to avoid paying taxes on it. His trial lasted three weeks.

Sturgis would seem like a funny place to look for the Tax Fairy.

 

 

Regarding yesterday’s news about the West Des Moines payroll firm that apparently has not been remitting client payroll taxes timely:   Victims in Alleged $3.8 Million Payroll Fraud by West Des Moines Company Coming Forward.  West Des Moines Patch reports that the payroll firm founder:

…is the subject of a first-degree theft and fraud investigation, according to a report on file at the West Des Moines Police Department.

In that report, Des Moines contractor Priority Excavating claimed losses of $850,000 the company paid InFocus Partners’ subsidiary, ILC Staffing Inc., to administer its payroll.

Owner Tobias “Toby” Torstenson told police Detective Tom Boyd that he was contacted by the IRS and informed his company has not paid federal taxes since 2009.

Torstenson paid the money to InFocus, who was supposed to forward it to the IRS but never did, the police report said.

The IRS will still want the taxes from clients that have forwarded them to the payroll provider.  If you outsource your payroll compliance, sign up for EFTPS so you can verify  online that your payroll provider is remitting your payments.

 

Kay Bell,  Mortgage interest, charitable donation deductions are safe, says Romney

Dan Meyer,  Presidential Debates and Changing Accountants

TaxGrrrl,  9 Tax-Related Myths About Selling Your Home

Jack Townsend,  Render Unto Caesar — Another Intersection of Alleged Religion and Tax

Margaret Van Houten, ACTEC Wealth Advisor: A New App For Your iPad (Davis Brown Tax Law Blog)

Jason Dinesen,  Would a Name Change Help Enrolled Agents? Part 2

Robert D. Flach comes through with his Wednesday Buzz.

The Critical Question:  Will Farmers Have More “Repairs” This Year? (Paul Neiffer)

News you can use:  The IRS Is Not Obligated to Pursue Your Whistleblower Claim  (Anthony Nitti)

 

 

Share

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

Thursday, September 6th, 2012 by Joe Kristan

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

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

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

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

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

 

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

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

It covers 10 Louisiana parishes and four Mississippi counties.

 

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

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

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

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

 

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

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

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

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

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

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

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

Share

Tax Roundup, 8/30/2012: Hey, I said I’m sorry edition. But the IRS isn’t apologizing!

Thursday, August 30th, 2012 by Joe Kristan

Sorry about that $2.1 million.  Remember the world’s thriftiest tax cheat, the one who stole $2.1 million from Oregon and used it to buy a 1999 Dodge Caravan and some tires?  An apology from the director of the Oregon Department of Revenue didn’t go well, according to this report from OregonLive.com:

SALEM — A contrite director of the Oregon Department of Revenue appeared before a legislative committee Wednesday and apologized repeatedly for dropping the ball on a $2.1 million fraudulent tax refund. But both Democrats and Republicans weren’t in a forgiving mood, demanding to know why four workers who failed to catch the return weren’t fired and whether the agency can do its job.

“It’s not going to be enough to sit here and say you’re sorry,” said Rep. Cliff Bentz, R-Ontario.

 

Why are they so upset?  He said he was sorry, after all?

 

Two managers and one administrative clerk received written reprimands but no change in their salaries. A fourth worker was demoted and transferred to another part of the agency. That person, an administrative specialist, got a pay cut from $45,396 a year to $41,208.  

Most private sector clerks have problems beyond reprimands if they let $2.1 million go out the door to a theif.  Still, while the apology may not seem like much, it’s more than we’ve gotten from IRS Director Doug Shulman for letting over $5 billion per year go out the door to identity thieves.

Why is Doug Shulman too darn busy to apologize for letting ID thieves loot the Treasury?  Maybe because he’s spending his time making life miserable for Canadians.  Tax Notes reports ($link) that Frustration Grows for Canadians in OVDI:

Taxpayers and their advisers asked the IRS for guidance on how to deal with RRSPs [Canadian retirement accounts] in the summer of 2011 but received inconsistent replies     The IRS’s delay in issuing the guidance…  annoyed taxpayers because, at least regarding the requests for a letter ruling granting 9100 relief, it caused them to incur professional fees that turned out to be unnecessary.

“This decision could have been made in September, October, even November, and the clients could have avoided the additional costs,” said [attorney] Ciraolo. “While we appreciate the 9100 relief offered under FAQ 54, the fact that the IRS failed to acknowledge the inconvenience and cost caused by the delayed guidance, and failed to address whether the Canadians in the OVDI would be eligible for the new program open on September 1, only furthered the belief of the Canadian taxpayers that the IRS is acting without due consideration to the circumstances of those taxpayers who entered the OVDI in good faith.”

Of course.  The program has been haphazardly administered, treating innocent noncompliance with obscure IRS rules as presumptive evidence of offshore money-laundering.
The frustration that the delayed guidance on late elections to file Form 8891 has caused for U.S. practitioners and their Canadian clients exacerbated an increasingly tense diplomatic situation and perhaps convinced some Canadian taxpayers who sat out the 2011 OVDI that noncompliance was the right choice.

So we’ve provoked our closest neighbor while convincng many that non-compliance is safer than expecting the IRS to be fair.  Well done, Commissioner! 

Jack Townsend,  AICPA Complains to IRS About Form 3520 Administration Issues.  Form 3520 is a form that must be filed by taxpayers with interests in foreign trusts.  You’ll be shocked to hear that Doug Shulman’s IRS is botching it:
The AICPA letter described six specific errors the IRS letters claim taxpayers have made, including filing Form 3520 late when it was filed on time.

When you make it harder to follow the rules than to ignore them, the results won’t be good. 


This looks like one of those kinds of things that happen when staffing at a government agency is reduced beyond what is reasonable for the kinds of tasks that have to be carried out. 

I’d be more sympathetic to that argument if Doug Shulman’s IRS hadn’t taken it upon itself to devote massive resources to an intrusive and futile preparer regulatory scheme at the behest of the big national tax preparation firms and to requiring massive amounts of futile paperwork for international compliance.

How Bain Capital execs lower their taxes (Dan Primack, Fortune, via Going Concern):

There has been lots of talk over the past few days about how Bain Capital executives have used management fee waivers to effectively lower their tax payments (a tactic that is not unique to Bain). Some academics have argued that such waivers are an illegal dodge, while private equity tax attorneys I’ve spoken with call it “aggressive but accepted by the IRS.”

Here is the basic structure: Bain officially charges 2% management fees to investors in its private equity funds. The idea is to cover overhead, such as salaries, office leases, electric bills, etc.  But Bain has lots of other business lines (venture capital funds, hedge funds, etc.) that generate sufficient cash flow, so it “waives” the PE fund management fees…

By doing so, Bain partners don’t pay ordinary income taxes on their management fees. Instead, they pay at capital gains rates if/when the deals generate profit (because it’s now considered carried interest).

Many commentators seem to think that Mitt Romney should have gone out of his way to pay the highest tax possible, rather than doing what his tax advisors and the rest of his industry did.  I doubt that they direct their own preparers to forego deductions and exclusions that they think are poor policy or the result of poor administrative interpretations of the tax law.

 

TaxProf: Mitt Romney’s Tax Mysteries: A Reading Guide

Dan Meyer, The Annual Tax Extenders Legislation Addressed by the Senate.  But it has a long way to go.

Peter Reilly, Challenge To Clergy Tax  Break Gets Green Light — Next Stop, Scientology?

 Jason Dinesen has incorporated.

Anthony Nitti, How Does a “Go Shop” Provision Impact the Treatment of Transaction Costs?

 

Share

Tax Roundup, 8/7/12: sales taxes, Olympian taxes, California fever dreaming.

Tuesday, August 7th, 2012 by Joe Kristan

Iowa’s sales taxes are right in the middle, per this map from the Tax Policy Blog:

 

Roger McEowen: 2012 Drought Raises Questions About Deferring Crop Insurance, Livestock Sales and Cash Forward Grain Contracts 

California ponders suicideCalifornia’s Proposition 30 would raise top income tax rate, sales taxes  (Kay Bell)  California already has one of the highest tax burdens in the nation, but the bill would raise the top marginal rates to 12.3% on income over $500,000 — with no deduction for state taxes.  In a state where over 12,000 public employee retirees have pensions over $100,000, the problem probably isn’t that taxes are too low.

Brian Strahle, Texas “Fresh Start” Amnesty Program Ends August 17, 2012 – What Should You Do?

TaxGrrrl, President Obama Supports Tax Exemption for Olympic Athletes.  It’s too bad that the expats and others victims of the current jaywalker-shooting policy of enforcing offshore reporting requirements never learned to run fast, do gymnastics, or play basketball.   Andrew Mitchel reports that 189 U.S. citizens expatriated in the second quarter of 2012.  No doubt IRS harassment was behind some of these.

TaxTV: The Truth on Taxation of Olympic Gold Medals

Dan Meyer, “And Uncle Sam and his IRS Revenue Agent Buddy Step to the Podium”

Is there a gold medal for this? The Title of Most Awful Accountant in the World Is Spoken For (Going Concern)

Share

Tax Roundup, 6/7/2012: tax advice in the wrong places; the Daugerdas do-over; DOMA doomed?

Thursday, June 7th, 2012 by Joe Kristan

Best advice?  Don’t take advice from the wrong place (Robert D. Flach):

 I have given it much thought and decided the best piece of tax advice I can give anyone is DO NOT ACCEPT TAX ADVICE FROM ANYONE OTHER THAN A PROFESSIONAL TAX PREPARER.

I usually continue my answer by saying “don’t listen to your brother-in-law, your cousin Manny, your auto mechanic, your neighbor or co-workers, or a guy you ride to work with on the train”.
 
But I also mean don’t listen to a broker, banker, insurance salesman, or other “financial professional”.
 
Some of the most awkward conference calls are with non-tax financial people who have advised clients to do things that don’t work.
 

DOMA Ruled Unconstitutional (Again) in an Estate Tax Case  (Jason Dinesen)

Maybe it should get out of profession-creating and jaywalker-shooting so it can do its job. Overseer: IRS Could Face ‘Serious Problems’ (Via TaxBreak)

Kay Bell: Film tax incentives sometimes lead to extra state costs for criminal prosecution.  Plus bonus history of drive-ins!

Paul Neiffer: Present is Better Than Future!  Present interests in property for gift tax purposes, that is.

TaxDood: Another Former Madoff Employee Pleads Guilty.  A Madoff employee cheating on taxes?  Hard to believe, I know.

Dan Meyer: USCoC: US Corporate Income Tax Rate is World’s Highest

Share

Tax Roundup, 5/30/2012: life among the jaywalkers. What rich folk don’t pay taxes? And does having someone else cover your losses make a bad investment a good one?

Wednesday, May 30th, 2012 by Joe Kristan

What the war on “international tax cheats” means to the cowering civilians in the bombing area. International tax planning attorney Phil Hodgen dined with some Americans working abroad and reports:

For you, the American living overseas, tax return preparation is an order of magnitude more complicated than for someone living at home in the USA. There are extra forms to fill out. Extra stuff to report. Big, big penalties if you fluff things up. So you either spend an inordinate amount of your free time doing the tax returns yourself, or you pay a lot of money to an accountant to do the work for you. I don’t know what the people around the table last night spend, but it would be common to see tax bills of $3,000 – $4,000 in my experience. Let’s say you only spend $2,000. Lucky you.

The amount of tax that the IRS typically collects from people living in Europe and other high tax countries is ZERO. The foreign tax credit (PDF) ensures this. So does the foreign earned income exclusion (PDF).

Short story? You pay $2,000 or maybe much more to do a tax return that yields zero revenue for the U.S. government. And you burn up a lot of nights and weekends doing the paperwork.

Then you hear some Senator yammering about people like you and how you should be paying your “fair share” to the U.S. Treasury. 

The whole post is very much worth reading.  The pointless burden put on innocent taxpayers by the IRS shoot-the-jaywalkers enforcement of the already ridiculous international reporting rules is most disgraceful of IRS Commissioner Shulman’s many policy blunders.

And Here You Thought It Was Just Peasants Not Paying Any Income Taxes (Going Concern).  They quote a Bloomberg article:

 The percentage of U.S. taxpayers reporting adjusted gross income exceeding $200,000 who paid no U.S. income taxes increased in 2009 to 0.53 percent from 0.51 percent, meaning that one in 189 high earners avoided taxation, an Internal Revenue Service study found. The filers reported tax-exempt interest along with deductible charitable contributions, medical expenses and other items to legally reduce their taxable income.

Of course, the article is wrong in blaming muni bonds, which aren’t included in AGI in the first place.  So how do $200,000 AGI taxpayers get to zero tax?  It’s often where net income is overstated because the gross is in AGI but the expense generating the “income” is an itemized deduction.  Some candidates come to mind:

  • People with big margin interest accounts or other borrowing costs.  If you have $200,000 if interest income, you can deduct $200,000 of expense incurred to buy the interest-generating assets.  The income is “above the line” and included in AGI, but the deduction is a below-the-line itemized deduction.
  •  Gamblers.  A busy slots player can easily burn through $200,000 in “winnings,” which are above the line, offset by below-the-line gambling itemized deductions.

Another likely example is Old folks in a full-time nursing home. The medical costs can go through the roof. 

Readers – if you have other candidates, I’d love to hear about them in the comments.  Related: somehow Linda Beale gets from 1 in 189 high-income taxpayers paying no federal tax to one in fourNot a chance.  I’d say it was a typo, but she makes the assertion both in her headline and in the article text (UPDATE, 5/31: corrected now)

 

New state tax credits making solar a better investment for Iowans. (Sioux City Journal). Nonsense. It doesn’t make it a better investment, it just shifts the loss on the “investment” to us chump Iowa taxpayers who have to pay for other peoples’ solar toys.

Because Congressional accounting is always so reliable? FASB under political heat from Congress over lease accounting (TaxBreak)

 You man people have to pay for something on their own? Hot, Hot, Hot: Air Conditioning Tax Credits Have Disappeared (TaxGrrrl)

Paul Neiffer: Be Careful if You Have a Foreign Account

Jack Townsend: Why We Cheat and Lie — Taxes Included

 Len Burman: Billions in Tax Refund Fraud–and How to Stop Most of it

Howard Gleckman: Tax Reform: Going Long v. Going Prudent

Catch Robert D Flach’s Wednesday Buzz roundup of tax posts.

Dan Meyer: Am”Bushed” by Taxes? Keep or Let Die the Decade-Old Tax Cuts?

Next time he should proclaim himself “Lord Vader of the South” instead.  “Self-proclaimed “Governor” of Alabama Sentenced to Ten Years in Federal Prison for Tax Fraud.”  Just one more bit of proof that “sovereign citizen” tax schemes don’t work.

 At least it’s an aim that any legislator can achieve.  “Legislators aim at tax fraud

Share

Tax Roundup, 3/30/2012

Friday, March 30th, 2012 by Joe Kristan

Nikki Haley

Rumors seem to be rampant that South Carolina governor Nikki Haley will soon be indicted on tax chargesThe TaxProf rounds up the gossipUPDATE, 3/31:  Apparently there’s nothing to the gossip.

Kay Bell and Peter Reilly say a New Jersey decision will throw a damper on telecommuting.  The Garden State imposed income tax on a Maryland company who hired a New Jersey resident as a telecommuter, working at home.  It strikes me as an unsurprising result, and one that has much more support than the tax imposed on KFC and Jack Daniels in Iowa based solely on use on “intangibles” in the state.

There’s a lot more tax to Obamacare than the penalty for not buying insurance that may bring the whole thing down.  Howard Gleckman at TaxVox reminds us of the other taxes, like the 3.8% tax on “passive” income, that take effect in 2014.

21st Century morals: “A new survey suggests Americans consider cheating on their taxes more socially acceptable than shoplifting, drunk driving or even throwing trash out the window of a moving car,” reports Janet Novack.

The IRS is taking a page from the “Occupy” movement and going after the top 1%. Peter Pappas and Dan Meyer have the scoop.

You think you have tax problems?  “Italy in shock after man sets himself alight for tax evasion

A former Dodger pitcher will be sent down for awhile for admitting tax evasion on an illegal karaoke scheme, of all things.

You’ll be shocked, shocked! to learn there is tax fraud in the hip-hop recording business.

 

Share

Does 20 percent trump 9 percent?

Friday, October 28th, 2011 by Joe Kristan

GOP Presidential contender Rick Perry has made a bit of a splash with an optional “Flat Tax”‘ proposal. I don’t like optional tax computations because in real life they mean everyone has to compute their tax one more way to find which way gets the best result. Think of it as an Alternative Maximum Tax. It also fails to eliminate all the deductions that it could, leaving rates higher than they would need to be.
That said, it’s great that tax proposals are part of the campaign. We’re overdue for a tax overhaul, and even though none of the plans up for grabs will ever be enacted, we are probably seeing some of the pieces of the next tax system come together.
More coverage:
TaxProf
Tennessee Tax Guy
Going Concern
Dan Meyer
Also:
Robert D. Flach

Share

Area scientists discover complexity reduces tax compliance

Wednesday, July 6th, 2011 by Joe Kristan

Dan Meyer notes that the government has stumbled upon the obvious:

The Government Accountability Office recently released a study which indicated that the voluminous amount of content in the U. S. Tax Code and Regulations can lead to errors and understated taxes.

Ya think?!

Sometimes the obvious is the hardest to accept.

Share

Jim Maule: the new Ann Landers?

Monday, June 27th, 2011 by Joe Kristan

Villanova tax professor Jim Maule may not be the one to sort out your relationship issues for you, but he can help you with the resulting taxes. He ponders the tax lives of those who are paid to go out on dates:

According to the Philadelphia Inquirer article, someone set up a website called WhatsYourPrice. Notice that I

Share

What will the IRS tax preparer exam be like?

Tuesday, June 14th, 2011 by Joe Kristan

Dan Meyer ponders at Tick Marks:

The alternatives that I can see as plausible are: [1] a quite easy exam, perhaps designed on individual topics only. This is the most cynical option which basically says that the whole purpose of tax preparer registration is money grabbing by Uncle Sam; [2] a moderate difficulty exam (but significantly watered down from the EA exam) which would allow registered tax preparers (hereafter RTPs) ability to practice individual income taxes (and possibly or possibly not partnerships, LLC/LLPs and S Corporations on a limited basis as well–probably not C corporations, trusts and gift/estate returns); [3] a similar scope to [2] but somewhat more rigorous (though still less rigorous than the EA exam). Under [3], there would be a higher likelihood that partnerships/LLCs/LLPs/S Corps would included in permitted practice for RTPs; [4] something like option [1] or [2] with a retest requirement (perhaps every five or ten years).

I think the cynical answer is the best bet, simply because a truly hard exam will destroy the tax prep industry. Dan’s money is on 2 or 3.
Oh, and it’s not about the money. It’s about the power.

Share

Back in action

Monday, February 14th, 2011 by Joe Kristan

Dan Meyer has resumed posting at TickMarks blog. Welcome back!

Share

In-school suspension

Friday, November 26th, 2010 by Joe Kristan

Austin Peay accounting professor Dan Meyer has suspended his Tick Marks blog. Tick Marks is one of the longest-running tax and accounting blogs out there, and Mr. Meyer is a gentleman. I hope he returns soon.

Share

That National Treasure might come in handy

Wednesday, January 20th, 2010 by Joe Kristan

Actor Nicolas Cage owes a lot of taxes. Peter Pappas, TaxGrrrl and Dan Meyer are all over it.

Share

Preparer regulation: prepare for a mess.

Tuesday, January 5th, 2010 by Joe Kristan

The IRS has come out with its long-threatened batch of new regulations for paid preparers. The plan will require preparers who are not CPAs, lawyers or enrolled agents to pass some sort of competency exam and to take 15 hours of CPE. Nothing good will come of this.
– It will drive market share to the big franchised preparers like H&R Block, Liberty Tax, and so on, as they will find ways to make sure that their people pass the perfunctory exam.
– It will be a compliance nightmare for little tax-prep shops. Anybody who has ever tried to get the IRS to straighten out an ID number error can imagine how hard it will be for a small preparer to get redress when the IRS computers eat the CPE filings.
– It will eventually apply to everyone. Sooner or later some CPA or lawyer will get in trouble, and the IRS will move to apply to them “the same standards we apply to H&R Block.”
– The perfunctory CPE and competency tests won’t significantly improve the quality of the work. It will just ensure that bogus deductions and credits will be claimed on returns prepared by IRS-approved cheaters.
– It will raise the prices to taxpayers and motivate more of them to do their own returns, which can hardly improve return accuracy.
The only sure way to improve tax compliance is to simplify the tax law and eliminate the most egregious opportunities to cheat, like refundable credits. Since that isn’t going to happen, the IRS will saddle the innocent with paperwork that won’t solve the problems.
The proposal has everyone talking:
TaxProf Blog
Kay Bell
William Perez
Russ Fox
Eva Rosenberg
Robert D Flach
Dan Meyer
I’ll cover this more at Going Concern in the next day or so. UPDATE: my GC piece.

Reblog this post [with Zemanta]

Share