Posts Tagged ‘Donald Marron.’

Tax Roundup, 4/10/14: Still plenty of time for an IRA! And Iowa Tax Freedom Day looms.

Thursday, April 10th, 2014 by Joe Kristan

IRAWhen the tax deadline is looming, taxpayers looking for the Tax Fairy to wish away their tax problems often overlook the old-fashioned IRA.  You can still make 2013 IRA contributions through April 15.  An Individual Retirement Account contribution may be able to score you a 2013 deduction (or even a tax credit) for 2013; even if you don’t qualify for current tax savings, they are a nice and cheap way to build-up tax-sheltered savings.

IRAs come in two flavors: “traditional” and “Roth.”  Traditional IRAs build up their income tax-free, but earnings on them are taxable when they come out.  If you meet certain conditions, your traditional IRAs come with sprinkles: – a tax deduction.  If you don’t get the deduction going in, your principal is tax-free going out.

Roth IRAs never offer a deduction, but they leave a sweeter aftertaste: if you hold them long enough, income on Roth IRA assets is never taxed.  And unlike traditional IRAs, you are never forced to start withdrawing funds from the IRA, so the tax-free build-up can go on indefinitely.

Both traditional and Roth IRAs require you to have wage or self-employment net income.  The limits for contributions are the lesser of your taxable compensation or $5,500 ($6,500 if you were 50 by December 31, 2013).  You can contribute to a traditional IRA at any income level, but deductions phase out at higher income levels if you (or your spouse) are covered by a retirement plan at work.  The availability of Roth IRA contributions phases out at higher income levels regardless of whether you participate in another retirement plan.

One very useful way to use Roth IRAs is for teenagers and young adults.  A parent can fund a Roth IRA for them based on part-time job income — no matter what parent income is.  This starts a tax-free retirement fund for the young earner at a very age, giving the power of compound interest lots of time to do its magic.  And from what I’ve seen, parental Roth funding is much appreciated by the recipients.

While time is short, you can still fund a 2013 IRA if you make your contribution no later than April 15.  You can set one up at your friendly community bank or online with a mutual fund company on you lunch hour.  No, it probably won’t make your 2013 taxes go away, but it can be a nice step towards financial security for you or your kids.

This is the latest of our 2014 Filing Season Tips — a new one every day thorugh April 15!

Russ Fox, Bozo Tax Tip #4: Honey, You Don’t Exist!: “Perhaps it’s something in the water, but this year Aaron and I have seen multiple cases of individuals who have ignored that marriage license and filed as single if married.”

 

Kyle Pomerleau, When is My State’s Tax Freedom Day?  (Tax Policy Bl0g) Iowa’s is this Sunday.

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Kristy Maitre, How to Report National Mortgage Settlement Payments

TaxGrrrl, Taxes From A To Z (2014): X Is For XD   

Paul Neiffer, Trusts Can Get You in Trouble

Jason Dinesen, Tax Court Case Involving Radio DJ Strikes Close to Home for Me, Part 2 

 

Hey, preparers: are you ready to trust the IRS to regulate your livelihood?  A Week Before Tax Day, IRS Misses Crucial Windows XP Deadline (Washington Post, via the TaxProf)

Kay Bell, Computer problems for IRS, Canadian tax agency

 

20140401-1Alan Cole, Mainstream Economics Support Low Taxes on Capital Income (Tax Policy Bl0g): “The overwhelming bulk of the evidence is that taxes have a negative effect on economic growth, and that the effect is particularly strong on tax bases that include capital income.”  But, the rich!  Inequality!

Donald Marron, Seven Tax Issues Facing Small Business (TaxVox): “America’s tax system is needlessly complex, economically harmful, and often unfair.”

Cara Griffith, Guidance Today, Gone Tomorrow (Tax Analysts Blog).  “A recent Arkansas court opinion points out what might be a troubling trend in state taxation: the inability of taxpayers to rely on administrative guidance because the state can retract or supersede it on a moment’s notice.”

TaxProf, The IRS Scandal, Day 336.  It was a big day, with evidence that Lois Lerner was working behind the scenes with the ranking Democrat on the Ways and Means Committee to harass the opposition.

Tax Justice Blog, Is the Obama Administration Blocking International Efforts to Address Corporate Tax Avoidance? 

William Perez, Tax Reform Act of 2014, Part 4, Tax Credits

 

Hank Stern, The ObamaTax Domino Effect.  “While we’ve all seen the horrendous rate increases caused by the ObamaTax (including on our 1040′s), thee are other victims.”

“Pro-business” isn’t “pro-market,” a distinction utterly lost on Iowa officials.

David Brunori: I’ll Raise a Glass to Lower Booze Taxes (Tax Analysts Blog) “Jack Daniels is not bourbon, by the way, but Tennessee whiskey. There is apparently a difference, but frankly, after the first glass, I can never tell.”

Next: legislators are terrible at legislating.  GAO Went Undercover to Discover Tax Preparers Are Terrible at Tax Preparing (Going Concern)

 

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Tax Roundup, 1/5/14: President proposes $1 million Sec. 1031 cap. And: other doomed stuff!

Wednesday, March 5th, 2014 by Joe Kristan
Economic supergenius

0-99, 0-414

The President trotted out his old petty tax increases in his 2015 budget yesterday, and a few new ones.  The  new taxes would go towards, among other spending increases, an increase in the Earned Income Tax Credit welfare program for childless taxpayers.

If history is a guide, the Obama budget isn’t going to do well in Congress.  His own party leadership in the Senate has already pledged to pass no budget at all.  When his 2013 budget plan came up for a vote in Congress, it was rejected 99 -0 in the Senate and 414-0 in the House.

Still, it is worth mentioning some of the tax proposals, just so you are aware of them and their low likelihood of passage anytime soon.  Also, in light of the recent Camp “tax reform” proposal, apparently no tax provision is too dumb to get bipartisan consideration, so some of these might even pass someday.

S corporations: the bill would tax as self-employment income 100% of K-1 income from professional S corporations and partnerships of materially-participating owners.  Businesses covered would include health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, brokerage services, and lobbying.  For some reason, regular compensation would no longer be wages, but would instead be self-employment income.  That would wreak havoc on everybody’s 401(k) and profit-sharing plans.

- Like-kind exchange benefits would be capped at $1 million per taxpayer per year.  That won’t be popular with the real estate industry.

The bill also drags out dozens of the old proposals from his prior budgets, including LIFO repeal, ordinary income treatment for carried interests, capping the value of deductions at 28%, and capping build-ups in retirement plans.  Nothing at all is likely to happen before the next election on these proposals, but as many Obama proposals are also included in some form in the GOP Camp plan, they all have to be considered viable next time a major tax bill shows signs of moving.

The TaxProf has a good link-filled roundup.  The official explanation of the revenue-raisers is here.

Other coverage:

Kay Bell, Obama budget proposes more child care help for younger kids

Leslie Book, President’s Budget Proposes Major Procedural and Administrative Changes (Procedurally Taxing).  “The popular media has generally described the plan overall the way Reuters did in reporting that it ‘stands little or no chance of being approved as is by Congress, where Republicans, who control the House of Representatives, disagree with the president’s policy priorities.’”

 

Des Moines Register, Voters OK increasing franchise fee in Des Moines.  The vote is the result of the city being ordered to repay an illegally-collected utility tax:

The money raised by increasing the franchise fee to 7.5 percent from 5 percent for seven years will be used to pay off about $40 million in bonds issued by the city to pay for the refund and administrative costs.

Among the “administrative costs” is $7 million in legal fees Des Moines was ordered to pay to the winning taxpayer attorneys after a scorched-earth court battle by the city to avoid repaying the illegal tax.  Next time, don’t collect an illegal tax, and pay up if you’re called on it.

 

Alan Cole, True Marginal Tax Rates under Chairman Camp’s Proposal (Tax Policy Blog).  Full of high-income phase-outs, it creates all sorts of goofy marginal rate anomalies:

Marginal Tax Rates Camp Tax Reform

Note the spike in rates at the low-end as a result of the earned-income tax credit phase-out.  That doesn’t even include the effect of the state EITCs that piggyback on the federal credit.  All of this is the opposite of tax reform.  Apparently neither party is ready for reform.

William Gale and Donald Marron, The Macro Effects of Camp’s Tax Reform (TaxVox): “How would Camp’s plan increase growth, and why is the range of estimates so wide?”

 

Paul Neiffer, Additional Tax Reform Items.  “Remember, this is just a proposal and nothing will happen this year.”

Gene Steurle, A Camp-ground for Tax Reformers (TaxVox).

 

20130419-1Russ Fox, Deadlines for Us, but Not for Them:

For practitioners, the current state of the IRS is such that you can expect a lot of delays in responding to notices. Think months instead of weeks. Expect to have to call the IRS to verify that your response was received, and make sure clients are aware that the IRS is moving like molasses rolling uphill. Make sure anything you send is documented: certified mail with proof of receipt if by mail; if faxing, make sure you have the proof of receipt. Given the lengthy delays our clients are going to be in fear for far longer…

For taxpayers, you need to be aware that expediency is not part of today’s IRS. You have to be expedient in responding to notices but don’t expect the IRS to be expedient in getting back to you. Do not worry if it takes a long, long time to resolve something with the IRS. That’s just par for the course today.

Unfortunately, clients generally assume that if the IRS has sent a letter, that means the practitioner screwed up.  Many people, especially old folks, just pay up when they get an IRS notice.

 

William Perez, Tax-Deductible Relocation Expenses

TaxGrrrl, Taxes From A To Z (2014): B Is For Basis   

David Brunori, Taxing Coca Cola while Exempting Broccoli is Bad Policy Even for Native Americans (Tax Analysts Blog):

 In any event, several newspapers reported that one of the sponsors of the proposal was himself obese. He decided to change his life and lost 100 pounds. And he did it without any tax increases or help from the government.

Like so many reformed smokers/overeaters/drinkers, he has become annoying about it.

Tax Justice Blog, State News Quick Hits: State Policy Makers Need a Tax History Lesson

 

TaxProf, The IRS Scandal, Day 300.

 

Cheer up!  Filing Your Tax Return Is Terrible — But It Was Worse 100 Years Ago (Joseph Thorndike, Tax Analysts Blog).

News from the Profession.  The Real Loser at the Oscars This Year Was PwC.  (Going Concern)

20140305-1Jason Dinesen shares his Tax Season Tunes:

Here’s a sampling of other tunes I listen to while working when not getting my Gordon Lightfoot fix:

  • Neil Diamond. Generally not his “famous” songs. I detest — and I mean absolutely revile — “Sweet Caroline,” for example. The original recording is okay, but he’s turned it into a hokey, over-the-top, karaoke show-tune over the last few decades. Blech. I like the more introspective songs like “Shilo,” “If You Know What I Mean,” “Stones,” pretty much anything from his relatively new “12 Songs” and “Home Before Dark” albums,  and a host of other Neil Diamond songs that most people have probably never heard of.

  • An mix of songs that include Billy Joel, pop rock from the 60s and early 70s, Elvis, Willie Nelson, Conway Twitty, AC/DC, Juanes, Bon Jovi, CCR, Johnny Cash and Jimmy Buffett.

In case you were wondering, I believe Jason works alone.

 

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Tax Roundup, 11/5/13: IRS makes audits even more fun. And: the 400!.

Tuesday, November 5th, 2013 by Joe Kristan

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It’s not the same people every year.  High Income, Low Taxes and Never a Bad Year (James B. Stewart, New York Times, via the TaxProf.  A New York Times columnist comes through with all of the cliches about “the rich” in one column.

 Plenty of people did get hit in 2009, including people at the very top. But all things are relative. The fortunate 400 people with the highest adjusted gross incomes still made, on average, $202 million each in 2009, according to Internal Revenue Service data. And this doesn’t even count income that doesn’t show up as adjusted gross income, such as tax-exempt interest.

Yet the top 400 paid an average federal income tax rate of less than 20 percent, far lower than the top rate of 35 percent then in effect.

They also paid a lower rate than the top 1 percent, which were people with adjusted gross incomes in 2009 of at least $344,000. These affluent but hardly superrich taxpayers paid on average just over 24 percent of their adjusted gross income in federal income tax. Even the top 0.01 percent, people earning at least $1.4 million, paid 24 percent.        

You’d get the impression that this is the same top 400 every year, paying low taxes as they go.  That’s a wrong impression.

Most people who have spectacular incomes do so only once, usually because they sell their business or take it public.  That normally is how you hit that top 400.  Yet the “never a bad year” line implies that they have this kind of income year after year.

That income is capital gains, which are taxed at a lower rate.  That’s no mystery or conspiracy, that’s just math.

Furthermore, those capital gains are often one of two taxes on the income.  C corporation income is taxed twice — first on the corporation tax return, and again when retained earnings are distributed as dividends or recovered as capital gains.  And to the extent the capital gains reflect inflation, they are aren’t a tax on income at all; they are a confiscation of principal.

Mr. Stewart is rehashing numbers from 2009, when the top federal rate on capital gains was 15%.  It was increased for 2013 to 23.8%, nearly a 60% increase.   Yet because ordinary income rates went up too, the Famous 400 will always have lower rates, and Mr. Stewart will be able to write the same lame column five years from now.

Of course, many economists think that capital gain rates were too high even before the rate increase.  But maybe that’s true only unless it really matters.


20130419-1The IRS has figured out a way to make audits even more fun!  Tax Analysts reports ($link) “The IRS Large Business and International Division on November 4 released mandatory, stringent new procedures for enforcing information document requests (IDRs) and issuing summonses, allowing examiners almost no discretion even at the manager level.”

The new procedure requires the IRS to issue a summons on a tight deadline when an “information document request” (IDR) isn’t promptly met:

If the IDR response remains incomplete by the delinquency notice deadline, the examiner is required — again without exception — to issue a pre-summons letter within 14 calendar days of the delinquency notice deadline. The pre-summons letter sets another new deadline, which can’t be more than 10 calendar days away unless the director of field operations grants approval.

Former IRS official Larry Langdon warns:

Taxpayers who may have trouble meeting proposed deadlines in a draft IDR “need to immediately escalate that draft IDR before it goes final, because in effect if it goes final, they’re stuck with those dates,” Langdon said. At that point, he added, no amount of negotiation will stop the new enforcement process from proceeding.

Lovely.  Of course the IRS won’t stop conducting audits during busy season, or during client reporting deadline periods, but that’s just too bad, apparently.

Link: LB&I-04-1113-009.

 

Paul Neiffer,  Everything You Want to Know About Net Investment Income Tax (or Not)

If you have 1,000 acres of good farmland, it only takes $250 per acre cash rent to put you over the threshold.  Then, after a few years of cash renting, the farmer elects to sell his farmland.  In this case, almost all of the gain will be both subject to the 3.8% net investment income tax and the 20% maximum federal tax plus state income taxes.

But that year the farmer will be “rich,” so he’s fair game, right?

 

Jason Dinesen, Nebraska Tax Guidance for Same-Sex Married Couples   

William Perez, Estate and Gift Tax Figures for 2014

 

Russ Fox, The Wrong Kind of Education Leads to ClubFed

 A California tax preparer decided he wanted to increase refunds for his clients. There’s absolutely nothing wrong with that–I want my clients to get the maximum possible refund allowed under the law. It appears that Kenyon Williams forgot those last three words; he was found guilty of two counts of wire fraud and two counts of aggravated identity theft earlier today.

That “under the law” thing gets in the way of so many great ideas…

 

TaxGrrrl, Saying ‘I Do’ To Tax Planning   What the tax-savvy bride is wearing, and when.

Andrew Lundeen, Scott Hodge, Individuals Receive 91 Percent of Tax Expenditures (Tax Policy Blog):

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Tax Justice Blog, More Illinois Companies Trying to Extort Tax Breaks.  Given Illinois’ newly-increased taxes, it’s partly self-defense, but you can bet they’re shaking down Iowa too.

Donald Marron, Time to Fix the Budget Process (TaxVox)

 

tack shelterJeremy Scott, What the Daugerdas Verdict Means for Tax Shelter Promotion (Tax Analysts Blog):

While it might have secured a few convictions, and even jail time, in the KPMG and Daugerdas cases, it also lost face, along with time and resources, for its relatively modest success. Instead of spending many years to secure partial convictions on a few practitioners, perhaps the government’s time would be better spent attacking tax shelter transactions on the front end, at the exam and regulatory drafting levels.

If tax planning and compliance get you prosecuted, you’ll have a hard time getting people to perform tax planning and compliance.

 

Phil Hodgen’s Exit Tax Book: Chapter 6 – Taxation of Specified Tax-Deferred Accounts

Jack Townsend,  India Signs OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.  Bank secrecy isn’t.

 

Peter Reilly,  SPLC Calls Family Research Council Hate Group – Should IRS Take Action?  I think SPLC has done quite enough for the FRC already, thank you.  Peter wisely notes “The IRS teaming up with the FBI to identify hate groups does not sound like a confidence inspiring plan to me.”

Carnival Time at Kay Bell’s Place!  Tax Carnival #122: Return to Standard Tax Time

 

Things you didn’t learn in Geography Class: Ireland Is a Bagel (Martin Sullivan, Tax Analysts Blog)

 

News From the Profession: Guess Which Big 4 Firm Allegedly Just Punked Its Rejectees (Going Concern).  When I was interviewing out of school, I knew one visit went badly when they sent me a bill for my hotel room.

 

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Tax Roundup, 10/11/13: Why filing on time matters. And: nope, still closed.

Friday, October 11th, 2013 by Joe Kristan

20130311-1It’s the last weekend of 1040 season!  Some folks think that happened six months ago, but many of us know that extension season is when you are up against it.  Extended 1040s are due on Tuesday, and anything filed after that is late.  Only people out of the country on a long-term basis might have any more time.

So what’s at stake?  Is it really such a big deal to file your 1040 late?  Especially if you have a refund?

Yes.

First, let’s take a look at the penalties for late filing: five percent of any tax owed, up to 25% of the balance due, and interest on the unpaid balances.

But there are other drawbacks.  You never start the statute of limitations if you don’t file.  That means the IRS has pretty much forever to look at the year you haven’t filed for.

It doesn’t work that way if you have refunds coming.  From IRS Publication 17:

Time for filing a claim for refund. Generally, you must file your claim for a credit or refund within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date (even if the due date was a Saturday, Sunday, or legal holiday). These time periods are suspended while you are financially disabled, discussed later.

If the last day for claiming a credit or refund is a Saturday, Sunday, or legal holiday, you can file the claim on the next business day.

If you do not file a claim within this period, you may not be entitled to a credit or a refund.

So if you don’t file, its two years and out for getting that withholding back.  Each year stands on its own.  If you didn’t file for, say, 2007-2009, and you only owed tax in 2009, you still owe it, but you get no benefit for the 2008 and 2007 refunds you didn’t claim.

So file on time.  If you are missing information, file with what you have and amend later if necessary.  Don’t let the perfect be the enemy of the good.  Not filing can quickly become a habit, and it’s often a very expensive one.

Related: Penalties on Late 2012 Tax Payments (William Perez)

 

William McBride,  The Long Goodbye to U.S. Corporations (tax Policy Blog):

If not moving abroad, many U.S. businesses have been moving to the individual tax code, where they are taxed once on profits that are passed-through to owners, rather than twice through the corporate tax and shareholder taxes. The end result is there are now fewer corporations than at any time since the 1970s. The chart below shows standard C corporations peaked in 1986 at 2.6 million, and declined to 1.8 million as of 2008, according to the IRS. Preliminary IRS data indicates the number of C corporations dropped further to 1.6 million as of 2010. The trend shows no sign of slowing down.

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This has two important implications for tax policy:

1.  Increasing the individual rate means increasing the tax load on business, as more taxes are run through 1040s.

2. While corporate tax reform is important, it misses a lot.

 

Wikipedia image courtesy Tallent Show under Creative Commons license

Wikipedia image courtesy Tallent Show under Creative Commons license

Christopher Bergin, The IRS Is Shut Down – And We Will All Pay (Tax Analysts Blog)

Tax Justice Blog, Paul Ryan’s Latest Idea: Enact the Spending Cuts Proposed by Obama, Ignore His Revenue Proposals.  I’m good with that.

Janet Novack,  As IRS Shutdown Drags On, Some Taxpayers Face Big Problems:

The IRS has said that once the shutdown was “fully complete” it stopped its computers from automatically generating new liens and levies on taxpayers’ property and that it is now seizing taxpayers’ property in only rare cases. But that’s no help to the taxpayers who had their funds frozen immediately before the shutdown or who were hit by notices that had already been printed and were mailed after the shutdown. 

The government needs to use its money to chase people out of public parks, rather than to free your frozen funds.

 

OK, now I’m feeling the crisis.   No new specialty beers during government shutdown (Kay Bell)

 

Peter Reilly,  Are CVS Stores Actually Good 1031 Targets ?   

Detroit is back! Judge Hands Down Very Nearly The Longest Sentence Ever To Public Official For Corruption And Tax Fraud   (TaxGrrrl)

TaxProf, The IRS Scandal, Day 155.  This edition features reports that the IRS exchanged confidential taxpayer information with the White House.  Anybody who doesn’t think this is a real scandal should share somebody’s confidential tax information sometime with your favorite Republican official and see what happens.

Jack Townsend, Article on DOJ’s Swiss Bank Initiative.

Leslie Book, Supreme Court: Woods Oral Argument This Week.  “As many tax procedure buffs know, the case presents an opportunity for the Court to decide whether the 40% gross valuation misstatement penalty applies in a variety of tax shelter transactions when partnerships have sought to concede the underlying liability on grounds that do not directly relate to valuation misstatements, such as the at-risk rules or the economic substance doctrine.”

Jim Maule,  Tax Review Board Strips City’s Lap Dance Tax Attempt.

Robert D. Flach brings your Friday Buzz!

 

The Critical Question:  Should We Eliminate the Extraordinary Measures(Donald Marron):

You’ve probably heard that Treasury will hit the debt limit on October 17 and soon thereafter it won’t be able to pay all of America’s bills. That second part is true: Congress needs to act soon—preferably before the 17th—so Treasury doesn’t miss any payments. But the first part isn’t: Treasury actually hit the debt limit way back on May 19.

So how did Treasury keep paying our bills? Extraordinary measures.

Interesting.  It’s fiscal sleight of hand of the sort that would get you or me jailed.

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Tax Roundup, 9/19/2013: Beanie Babies busted. And no mo’ Mo Money.

Thursday, September 19th, 2013 by Joe Kristan


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Ty Warner was a big winner in life’s lottery.  He invented the Beanie Baby, a toy craze that made him a very wealthy man.  But then, like many lottery winners, he began to handle finances unwisely.  According to media reports, he will plead guilty to hiding funds in Swiss banks.  From the Wall Street Journal:

The creator of Beanie Babies has agreed to plead guilty to U.S. tax evasion and pay $53.6 million, the largest offshore-account penalty ever reported.

Ty Warner, chief executive of Ty Inc., the maker of stuffed dolls, reached an agreement with the U. S. Attorney for the Northern District of Illinois to plead guilty to a federal tax-evasion charge in connection with undeclared offshore Swiss accounts, according to his lawyer, Gregory Scandaglia, of Scandaglia & Ryan in Chicago.

Mr. Warner also faces a possible prison sentence.

$53.6 million is a lot of beanies.  What I found striking is how little he stood to gain compared to how much he will lose:

The unpaid tax on the account came to $885,300, according to a Justice Department statement.

By my math, there was $60 to lose for every dollar he stood to gain.  That seems like an unwise bet.

Jack Townsend has the definitive coverage, Whopping FBAR Penalty in Criminal Plea; Beanie Baby Creator Gets Beaned With No Free Pass:

But then his reported net worth is $2.6 billion, so in terms of real world punishment, well not much.  He is probably more concerned with the public embarrassment than the cost of his behavior.  It would appear that for real punishment of the mega-wealthy a penalty keyed to the net worth should apply (if higher than the normal FBAR penalty; then, depending upon the amount, there could be some real punishment rather than just a nuisance).  Of course, if he gets some serious incarceration period — which is what the Guidelines will indicate — then there may be some real punishment.  But, the courts have been notoriously lenient in sentencing, at least for persons not so wealthy as Warner (and his earlier colleague among the mega-rich, Olenicoff).

I have only the customary pity for somebody who falls from success to scandal.  It sounds like Mr. Warner knew exactly what he was doing.  I have a lot more sympathy for much smaller taxpayers who face similarly disproportionate penalties relative to unpaid taxes for inadvertent violations.  It’s too bad the IRS has such a hard time telling the difference.  Apparently you have to shoot the jaywalkers so you can slap the real criminals on the wrist.

The TaxProf has more.  So does Jana Luttenegger.

 

20130919-2Mo’ Money no mo’.  The owners of the Mo’ Money tax prep franchise won’t be making any mo’ money doing taxes.  From a Department of Justice press release:

A federal court in Memphis, Tenn., permanently barred the owners of Mo’ Money Taxes, Markey Granberry and Derrick Robinson, as well as a former Mo’ Money manager, Eumora Reese, from preparing tax returns for others and owning or operating a tax return preparation business, the Justice Department announced today.  The civil injunction order, to which Granberry, Robinson and Reese agreed without admitting the allegations against them, was signed by Judge S. Thomas Anderson of the U.S. District Court for the Western District of Tennessee.

The business seemed to have its share of fraud trouble at its franchises   Based on this, it appears the problems may have started at the top.

TaxGrrrl, IRS Gets Big Win In Corporate Tax Holiday Case, Readies For Next Fight

William Perez, Need to Pay Taxes for 2012? Be Aware of Penalties and Interest

Paul Neiffer, Estimated 2014 Inflation Adjusted Tax Items

Kay Bell, 2014 tax brackets preview indicates tax savings for many

TaxProf,  The IRS Scandal, Day 133

 

Cara Griffith, The ‘Tech Tax’ That Wasn’t (Tax Analysts Blog)

Alan Cole,  Obamacare’s “Cadillac Tax” – A Poor Patch for a Hole in the Income Tax (Tax Policy Blog)

Donald Marron,  The Costs of Debt Limit Brinksmanship  (TaxVox)

 

We should all have such funding problems.  There are two posts today bemoaning the lack if IRS funding:

Tax Justice Blog,  An Underfunded IRS Means More Tax Avoiders Get a Pass.

Christopher Bergin, Mind the Gap, and Fund the IRS (Tax Analysts Blog)

Here is a chart of inflation-adjusted IRS funding:

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You know, it doesn’t look the IRS is doing that badly by historical standards.  If Congress didn’t act like the tax law was the Swiss Army Knife of public policy, giving the IRS duties as varied as industrial policy and running the nation’s healthcare financing, funding would seem more than adequate.

 

The Critical Question:  Is Obamacare the GOP’s White Whale? (Howard Gleckman, TaxVox)

Career Advice:  This Way to CPA Isn’t Too Confident You Can Get By Without Mommy’s Help (Going Concern)

 

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Tax Roundup, 7/16/2013: States to be in when it rains. And IRS advice for picking a payroll service.

Tuesday, July 16th, 2013 by Joe Kristan

States with umbrellas.  The Tax Foundation’s map this week shows how well the states are doing at maintaining “rainy day funds.”  Iowa does pretty well.

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 Some states don’t bother.  Unsurprisingly, Illinois is one of them. (Richard Borean, Tax Policy Blog)

 

The IRS has good advice in Tips for Employers Who Outsource Payroll Duties issued yesterday.  Many employers have had to pay their payroll taxes twice after unscrupulous payroll providers have made off with their funds.  Two tips worth repeating:

Enroll in the Electronic Federal Tax Payment System   and make sure the PSP or RA uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their third-party payer is properly carrying out their tax deposit responsibilities…

And:

Refrain from substituting the third-party’s address for the employer’s address. Though employers are allowed to and have the option of making or agreeing to such a change, the IRS recommends that employer’s continue to use their own address as the address on record with the tax agency. Doing so ensures that the employer will continue to receive bills, notices and other account-related correspondence from the IRS.

Remember that if you are using a “professional employer organization,” you may not be able to monitor whether your payments are being made through EFTPS, making it critical to ensure the PEO’s trustworthiness in other ways.  Nobody wants to pay their payroll taxes twice.

 

TaxGrrrl,  As Debate Into Tax Exempt Scandal Continues, Here’s A Timeline Of Who Knew What And When.   “While it feels like this has all happened over a short period of time since the issue has only been in the spotlight for a few months, it’s actually taken us years to get to this point.”

Kay Bell, Cincinnati, D.C. IRS tax-exempt office employees, agency chief Werfel to testify this week at 2 more Congressional hearings

TaxProf, The IRS Scandal, Day 68

Lawyers, guns and money? When Earn-Outs Go Wrong: What Options Does A Seller Have When A Contingent Purchase Price Is Never Paid?  (Tony Nitti)

Peter Reilly, Fee Interest In Motels Not Like-kind To Leasehold

Jason Dinesen, Is the Patient-Centered Outcomes Trust Fund Fee Deductible as a Business Expense?

Keilly Strohmaier, (via Paul Neiffer),  Watch Out For Disregarded Entities When Someone Dies

 

Clint Stratch, 15,000 Poor Reasons to Do Tax Reform (Tax Analysts Blog):

Tax reform advocates say that because “Congress has made more than 15,000 changes to the tax code” since 1986, the code needs to be reformed. At first blush, this number leaves a pretty poor impression not just of the code but also of Congress. An alternative view could be that succeeding Congresses have been about continually improving the
code.

An alternative view could be that drinking a half-pint of bourbon for breakfast would make me a better accountant.  And that might be true if I were already in the habit of starting the day with a whole pint.

 

William Perez, Death Tax Repeal Act of 2013 Introduced in House and Sentate

Donald Marron,  The Fed and America’s Debt (TaxVox)

Jeremy Scott, Noem, Schweitzer Decisions Give Shape to Key Senate Races (Tax Analysts Blog)

Jack Townsend, Taxes and Morality.  Turns out that a lot more people think tax cheating is sinful than, say, binge drinking.

 Buzzing!  Get Robert D. Flach’s Tuesday Buzz roundup!

Me: If you are going to forge your travel calendar, at least get the year right.

 

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Tax Roundup, 7/9/2013: IRS identity-theft assistance edition.

Tuesday, July 9th, 2013 by Joe Kristan

20130419-1Social Security numbers make the world of identity theft tax fraud go around.  Grifters get them from published lists of dead taxpayers, from stolen medical records — anywhere they can.  They use them to steal untold billions from the IRS while creating tax nightmares for the real owners of the numbers.

And the IRS is here to help!

Public.Resource.Org has discovered that the Internal Revenue Service has posted the Social Security Numbers of tens of thousands of Americans on government web sites. The database in question contains the filings of Section 527 political organizations such as campaign committees. This Section 527 database is an essential tool used by journalists, watchdog groups, congressional staffers, and citizens. While the public posting of this database serves a vital public purpose (and this database must be restored as quickly as possible), the failure to remove individual Social Security Numbers is an extraordinarily reckless act.

What does the IRS have to say for itself?  Tax Analysts reports ($link):

     The IRS said that the Service is required to disclose approved exemption applications and information returns, and advises groups to not include SSNs on those forms or attachments. According to a statement dated December 19, 2012, on the IRS website, “By law, with limited exceptions, the IRS has no authority to remove that information before making the forms publicly available. Documents subject to disclosure include attachments filed with the form and correspondence with the IRS about the filing.”

     Malamud (Carl Malamud of Public.Resource.Org) said that he disagreed with the IRS position that it could not redact the SSNs and that it ran counter to privacy laws and federal guidance protecting the disclosure of personal information.

This level of competence and restraint really makes me want the IRS to regulate preparers more.  Oh, and to run the health care system, too.

(Hat tip to Twitterite @kermalou)
Nothing to see here, move along.   IRS supporters 0-for-3 on putting scandal to rest (Daily Caller)

Since it was revealed in May that the Internal Revenue Service (IRS) improperly targeted the tax-exempt nonprofit status of conservative groups between 2010 and 2012, defenders of the beleaguered agency have offered three broad attempts to suppress the growing IRS scandal and put the matter to rest. However, each of these three attempts failed outright, and the scandal continues, with tenacious investigations underway by the House Oversight Committee and House Ways and Means Committee.

Sorry, Linda.  (via Instapundit)

 

 

 

Martin Sullivan, Effective Corporate Rate 13 Percent? (Tax Analysts Blog):

Putting all this together it seems reasonable to not revise the general consensus view that worldwide effective corporate tax rates are on-average in the mid-twenties when we are not in the throes of a recession. Moreover, it is important to remember that these broad averages hide a lot of interesting detail. Multinationals in the oil and mining businesses generally pay very high rates. Purely domestic firms generally have an effective rate close to 35 percent. And pharmaceutical and tech companies generally have effective rates much lower than average.

But I thought corporations “never had it so good“!

 

Jeremy Scott, Summers Pushes for Tax Break on Foreign Profits (Tax Analysts Blog)

Jack Townsend, Swiss Court Ruling in Credit Suisse Case.  “The Swiss Federal Supreme Court has ruled, here, that the U.S. “group requests” under the treaty exchange of information provision are permissible if the request includes enough detail to establish grounds for suspicion of tax fraud and the like.”

Donald Marron, Smart Tax Reform Could Shrink the Government (TaxVox).  If it doesn’t, it’s not very smart.






It’s Tuesday, so let’s Buzz with Robert D. Flach!


News you can use.  How Not to Commit Tax Evasion (Russ Fox)

 

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

Monday, May 6th, 2013 by Joe Kristan

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

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

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

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

 

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

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

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

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

 

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

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

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

 

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

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

 

Kay Bell,  5 tax tips for Cinco de Mayo

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

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

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

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

Trish McIntire, RAL Fees in Court

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

 

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

 

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

 

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

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

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

How did he delay his trial?

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

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

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

 

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Tax Roundup, 3/21/2013: Helping the poor by increasing their marginal tax rate. Also: Demutualization semi-win!

Thursday, March 21st, 2013 by Joe Kristan

Most people would say that making low-income taxpayers pay a higher tax rate on each additional dollar they earn would be a funny way of “helping” the poor.  Yet that’s just the approach of a bill passed yesterday by the Iowa Senate to raise Iowa’s earned income tax credit (SF 422).  The bill would raise the Iowa earned income credit from current 7% of the federal credit to 20%.

The credit phases out as income increases; that means taxpayers who receive the credit have a high hidden tax rate on additional income — their regular tax rate, plus the lost earned income credit.  That gives them higher tax rates than the highest earners on each additional dollar of income.  Here is a new chart showing the marginal tax rates on an EIC recipient with three children as income rises under SF 422:

20130321-2

 

The marginal Iowa tax rate on EIC recipients would be around 10%.  That compares with an effective rate of just over 6%, counting the deduction for federal taxes, for Iowa’s highest earners.  Combined with the federal effective phase-out rate, the EIC earners face marginal rates over 50%.  That makes the EIC a poverty trap.

The EIC is a “refundable” credit — which means that if you don’t have enough tax to use the credit, the government writes you a check for the difference.  That makes it a welfare program, not a tax cut.  Yet the press often gets this wrong:

Omaha.com: Iowa Senate OKs tax cuts for low-income families

KCRG.com: Iowa Senate Approves Tax Break for Low-income Families

Spending is still spending, even when it’s run through a tax return.  This spending, though, is likely to get no further; even if the House passes this – very unlikely – the Governor vetoed a similar bill last session.

 

Cara Griffith, A Culture of Mistrust (Tax.com):

I recently spoke at a conference about transparency in state tax administration. Among other issues that were discussed, I suggested that there is a culture of mistrust between taxpayers and practitioners and state tax officials. When I suggested that the feeling was one of “us” vs. “them,” heads began to nod and many mouthed a silent yes. It
confirmed what I already knew: the culture of mistrust between taxpayers and state tax officials is very real.

But state tax authorities seem to perpetuate the culture of mistrust, in part because they have a tendency to play “hide the ball.” That is, they don’t let taxpayers in on the rules by which they are expected to play. The reason is that state taxing officials have a significant amount of discretion to adjust taxpayer incomes yet they don’t provide aroadmap for how and when that discretion will be used.

So true.

 

In other news:

Me: Taxpayer gets basis of 60% of IPO price in demutualized shares in Arizona case.  Taxpayers don’t win it all, but still a defeat for the IRS.

Russ Fox, When a W-2G (or Other Information Return) Is Wrong.  It happens.

Kay Bell, Tax penalty relief for some who file for an extension

TaxGrrrl, Taxes From A To Z (2013): K Is For Kidnapped Children

Donald Marron, TPC’s Upcoming Leadership Change (TaxVox)

Ellen Kant, U.S. Corporate Tax Rate Fails to Move with Competition (Tax Policy Blog)

Patrick Temple-West,  Tax reform spurs bipartisan lobbying, and more

William Perez,  Senate to Begin Tax Reform Hearings

Jack Townsend,  Acquittal in Pflueger Involving Offshore Accounts.

 

David Brunori, Everybody Loves a Drone (Tax.com)

News you can use: Internal Controls Are of the Devil (Or: Why Stealing from the Catholic Church Is So Easy) (Going Concern)

 

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

Friday, February 15th, 2013 by Joe Kristan

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

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

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

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

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

- The optional deduction for state and local sales taxes.

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

 

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

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

 

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

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

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

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

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

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

Russ Fox, Nevada Looks to Tax Online Poker Tournaments

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

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

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

20130215-1

Some people are just incurable romantics!

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Tax Roundup, 2/12/2013: Tax fraud, queens and princesses. And 21 lawyers!

Tuesday, February 12th, 2013 by Joe Kristan

Meanwhile, somewhere an ID thief is trying to get cash from an ATM with a peanut butter sandwich.  TBO.com reports:

A 6-year-old pupil at Symmes Elementary School in Riverview was asked to take her homework out of her backpack, according to Cpl. Bruce Crumpler of the Hillsborough County Sheriff’s Office.

The girl reached into her bag and pulled out a baggie containing 52 debit cards, Crumpler said.

The cards, which can be used as accounts for depositing tax refunds are commonly used by people who use stolen personal identities to file tax returns to obtain fraudulent refunds.

20130212-1Maybe she’s the little princess of tax fraud.  Meanwhile, the same TBO.com has an update on Rashia Wilson, who allegedly proclaimed herself the “Queen of IRS Tax Fraud:”

Wilson may not have been the biggest player in Tampa’s income tax fraud explosion, but she was one of the most brazen — “flashy,” a sheriff’s investigator called her, “in your face about it.”

The affidavits show Wilson even had a picture of herself with a cool smile on her face, wearing an oversized jewel-encrusted pendant spelling out her first name as she held bundles of cash.

“YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD,” reads a May posting on her Facebook page described in the affidavits. “IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!”

Easier than she thought, apparently.  She has been indicted on 57 federal tax fraud charges for collecting $1.3 million through fake tax returns, apparently claiming earned income credits and refundable education credits.  That should make the politicians think twice before they expand these fraud-ridden credits, but it won’t.

 

How many lawyers does it take to lose a tax case?  15.  At least that’s how many lawyers were listed on the losing side yesterday in Bank of New York Mellon Corp., a Tax Court case disallowing foreign tax credits in a tax shelter case.  Six lawyers are listed on the IRS side, for a total of 21.  The losing side was led by former IRS Chief Counsel B. John Williams.  If nothing else, the legal expense deductions should take a bite out of the losing side’s tax bill.  The TaxProf has more.

 

Iowa’s push for a 4.5% optional flat tax — which I call an “alternative maximum tax” – puzzles David Brunori ($link)

Many liberals in Iowa are complaining that a flat tax wouldn’t require the rich to pay their fair share, whatever that means. But a lot of those people seem more interested in soaking the rich than in helping the poor. Personally, I am much more in favor of reducing the tax burdens on the poor and dispossessed than I am in making rich people suffer.


     I think a flat income tax with few deductions (and a sizable exemption for low-income people) is the way to go. I’m unsure why the state would continue its horribly complicated personal income tax system that benefits return preparers, tax lawyers, and tax accountants.

It’s because of a peculiarity of Iowa politics.  The powerful lobbying group Iowans for Tax Relief opposes a repeal of the Iowa deduction for federal taxes paid.  ITR has shown that it can provoke successful primary challenges of Republican legislators who displease the Muscatine-based lobby.  Yet significant rate reduction is impossible if the deduction is retained.  Making the lower rate an “alternative” rather than a replacement appeases Muscatine, though at a cost in incoherence.

 

Will we see a revival in enforcement of the accumulated earnings tax?  The obscure depression-era tax on C corporations that retain cash in excess of their “needs,” as second-guessed by the IRS, is rarely asserted.  With left-side economists like Paul Krugman asserting that corporate cash-hoarding is one reason why the economy remains weak, don’t be surprised if his friends in the Obama administration try to revive enforcement of this archaic and foolish penalty tax. (Via Tyler Cowen).

 

William McBride, CBO Projections of Spending and Tax Credits (Tax Policy Blog):

As the chart below shows, mandatory spending represents the majority of the federal budget, and the part that has grown most dramatically in recent years.  Mandatory spending was about 10 percent of GDP for most of the 30 years prior to 2008.  It leapt to 15 percent of GDP in 2009 and now remains at 13.1 percent.  It is projected to increase to 14.1 percent of GDP by 2023.  Meanwhile, discretionary spending, on programs like defense, roads, and other infrastructure, is on a steady decline.  Discretionary spending is now 8.3 percent of GDP and set to go to a 50 year low of 5.5 percent of GDP by 2023.

 20130212-2

No spending is really “mandatory.”  Congress and the President can always change the “mandatory” programs.  And they will, or we will face fiscal disaster and crushing taxes.

 

Paul Neiffer,  Farmer Filing Due Date Update

Yes.  Will Obama’s Call for Tax Reform Ring Hollow? (Jeremy Scott, Tax.com).

TaxGrrrl, A Beginner’s Guide To Taxes: Do I Need To Hire A Tax Preparer Or Can I Do My Return Myself?

William Perez, Finding the Right Filing Status

Patrick Temple-West,  Sandy damage leads to tax trouble, and more (Tax Break)

Peter Reilly,  Co-op Owner Wins Casualty Loss Appeal

Missouri Tax Guy, Safeguarding Financial Records

Brian Strahle,   Delaware’s NEW Voluntary Disclosure Program for Unclaimed Property:  Should You Utilize It?

Jack Townsend,  Good Faith as a Defense to Tax Crimes

 

The Critical Question:  Would a Carbon Tax and Corporate Tax Reform Taste Great Together? (Donald Marron, TaxVox).

Kay Bell, Man gets $161,392 erroneous tax refund.  And in this case he didn’t even ask for it.

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Tax Roundup, 1/23/2013: PTIN Paralysis! And: pay Iowa taxes with a cell phone?

Wednesday, January 23rd, 2013 by Joe Kristan

20130121-2The IRS has turned off its preparer registration initiative following the federal court decision enjoining the program.  The Service issued this statement yesterday:

As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program. It is considering how best to address the court’s order and will take further action shortly. Please continue to check this site as additional information becomes available.

The second paragraph is the most interesting. While the IRS doesn’t admit that it overreached, this is far short of a vow to fight to the last appeals brief.  One can only hope they will reconsider the whole misbegotten regulatory scheme.

Meanwhile, Accounting Today confirms reports the IRS has shut down the PTIN registration system and the Registered Tax Return Preparer testing program.  They report the PTIN system is expected to come online again after the RTRP registration system is removed from it.  Meanwhile, the Return Preparer Office has apparently turned off its phones.

All of this makes me believe that the IRS is not seeking any emergency stay of Friday’s decision and is planning to do without the RTRP rules for this season, anyway.

 

TaxGrrrl posts a great interview with the winning attorney in the preparer regulation decision, Dan Alban.  She encounters a new perspective on whether regulation actually does more good than harm (my emphasis?:

Finally, with all of the legal niceties out of the way, I asked Alban the really tough questions: What about all of those folks who say that regulation is a good thing? What does this ruling mean for taxpayers? And why would you embrace a scheme that wouldn’t require – at a very basic level – some semblance of regulation to ensure that preparers are competent?

Alban didn’t hesitate. Intent, he says, is key. The intent of any kind of licensing scheme should be to protect the consumer. But Alban, who focuses on a occupational licensing in his practice, noted that frequently, these kinds of laws instead protect established interests from competition. That is, he says, not in the best interest of the consumer.

And with that, I paused. You see, in all of the years that I’ve been writing this blog, I’ve only received a phone call from IRS complaining about a post once. And it was for this one. The IRS wanted to assure me that the exemptions had nothing to do with any special interests. None. Not a whit. Interestingly, many preparers at smaller firms thought differently. I received a number of supportive emails and “off the record” comments about how the new rules felt discriminatory.

Bingo. Regulation always favors the big.  It’s no big deal for H&R Block headquarters staff to deal with regulations for all of its franchises.   It’s a different story for small operators like Sabina Loving, the solo preparer in a low-income South Side Chicago neighborhood who was lead plaintiff in last week’s decision.

It would appear that attorneys benefited disproportionately from the regulations; as a point of context, the American Bar Association (ABA) has encouraged the regulation of “other” preparers for years. Why is that? Is there maybe something to Alban’s idea that these kinds of laws protect established interests from competition?

And then Alban said something else that struck me:  about fifty years ago, only 1 in 20 workers in the U.S. needed government permission (in the way of regulations) to earn a living. Today, that number is 1 in 3. That, he said, is troubling. We are increasingly relying on the government to decide who is qualified to perform services for us. Is that something we want? Does regulation really make someone competent? Or honest?

No, it just gives them one more way to control things.

Russ Fox: Alphabet Soup

Trish McIntire, Voluntary Licensing?

 

Paying taxes with cell phone money?  The Iowa Department of Revenue yesterday announced a venture with Dwolla to enable taxpayers to pay taxes with Dwolla’s mobile device online payment technology.  The Des Moines Register Reports:

 Dwolla is a cash-based payment network that provides real-time, low-cost, online and mobile payments, officials said. Instead of charging a floating percentage and fixed fee per transaction for goods and services or dealing with administrative issues of checks, Dwolla’s network costs a flat 25-cent fee on any payment over $10, and it’s free for transactions under $10.

Iowa Department of Revenue Director Courtney Decker said the state’s first use of Dwolla will allow businesses that already pay more than $100 million in cigarette stamp taxes the option of using the Dwolla network. She added, “This is just the tip of the iceberg” in terms of Dwolla’s potential in state government.

Dwolla’s service is cheaper and safer than mailing and processing a paper check, Decker said, and it will allow participating businesses to receive their tax stamps more quickly. She added that 89 percent of Iowa individual income taxes are  filed electronically, but the percentage of people paying taxes electronically to her department is far lower.

Paying online now requires a slow application process and analog mail delivery to receive permission to make electronic payments.  The Dwolla system will be a big improvement if the Department enables it for individual income taxes.

 

IRS wins another demutualization case.  The IRS continues to fight the to tax proceeds on the demutualization of insurance companies.  They famously lost the Fisherdecision, which held that taxpayers could treat their payments for insurance premiums as basis when they received shares of stock in an insurance company changing from mutual ownership to a stock company.  But earlier this month the IRS won a Federal District Court Decision in California rejecting the Fisher“open transaction” scheme.  If the IRS wins on appeal, this will likely end up settled by the Supreme Court.  This is the second IRS victory since the Fisher decision.

Cite:  Reuben, DC CACD, CV 11-09448

 

Roger McEowen, Two Important Tax  Developments:

On January 18, two key tax developments occurred.  First, a federal district court wiped out the  IRS preparer regulations.  Later, IRS  announced that farmers aren’t stuck with the March 1 deadline and can file  timely by April 15.

 

David Brunori, Jindal’s Bold Move (Tax.com):

Republican Louisiana Governor Bobby Jindal has made the most provocative tax reform recommendation in many years. Jindal said he was going to overhaul the tax law. If he has his way, he will revolutionize it.

Pay attention, Governor Branstad.

 

Donald Marron,  Five Key Facts about the House Debt Limit Bill (Tax Vox)

Howard Gleckman,  How Obama’s Inaugural Address Frames the Policy Debate for the Next Decade (TaxVox).  I don’t think so.

Kay Bell,  Tax Carnival #111: Countdown to Filing.  It’s Kay’s roundup of tax tax-related posts from all over.

Jack Townsend,  Steps in OVDI/P Processing and Opting Out.  Dealing with the IRS when you have an undisclosed offshore account.

Jason Dinesen,  Home Office Deduction: IRS Offers a Simplified Calculation Option, But the Qualifying Rules Haven’t Changed

Patrick Temple-West,  Private equity tax breaks in jeopardy, and more (Tax Break)

William McBride,  Phil Mickelson’s Tax Rate

Robert D. Flach is Buzzing!  He also has posted What to Give Your Tax Preparer at Mainstreet.com.

Jim Maule, Tax Ignorance and Its Siblings.  “Tax ignorance, of course, is but one part of political ignorance, as I explored in When Tax Ignorance Meets Political Ignorance.”  Yet the good professor insists that 50% + 1 voting by ignorant voters works better than trusting individual decisions in the marketplace.

 

News you can use: Life After Big 4: What You May Miss and Won’t Miss At All (Going Concern).  I don’t miss it one tiny bit.

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Tax Roundup, 11/16/2012: Yes, failure is an option. And lawyers!

Friday, November 16th, 2012 by Joe Kristan

If disaster is on the menu, we have elected the right cooks.  From Tax Analysts ($link):

Failing to pass an alternative minimum tax patch during the lame-duck session of Congress would be a “real recipe for disaster” resulting in delayed processing of tax returns and economic harm, a former IRS official said November 14.

Clarissa Potter, a former IRS deputy chief counsel (technical) and former acting chief counsel who is now with American International Group Inc., said that because the IRS has programmed its computers under the assumption that the AMT patch and related tax credit ordering rules would be enacted before the filing season begins in January, failure to pass those provisions would force the IRS to reprogram its computers and delay the processing of tax returns until the end of March “at the earliest.”

With our political class, disaster is always an option!

 

What the fiscal cliff looks like from the back side of the electionMy new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Patrick Temple-West,   Obama’s “new ideas” likely well-worn tax proposals, and more  (Tax Break)

Joseph Thorndike, Is There a Tax Reform Consensus? (Tax.com)

Donald Marron,  Understanding President Obama’s Revenue Targets (TaxVox):

As rough justice, therefore, you can think of the president’s $1.6 trillion target as being almost entirely composed of his proposed tax increases on high-income households: $968 billion + $584 billion = $1.552 trillion. That ignores dozens of his other proposals, of course, but gives a good sense of what’s in his overall revenue aspiration.

Which shows it’s all just playacting, because the rich guy doesn’t have enough money to pick up the tab.

Nor does gloating.  Sore-Losing Doesn’t Bode Well for Well-Considered Policy Choices on Taxes… (Linda Beale).

 

Jason Dinesen,  That E-mail From the IRS Isn’t Really From the IRS :

The IRS never, ever sends e-mails to taxpayers. If you get an e-mail from the IRS … the IRS didn’t send it. It’s a phishing scam. 

Paul Neiffer,   Farm Lending Rose at Fastest Pace in Five Years

TaxGrrrl,   New Taxes Boost Cost of Nutella As French Take Measures to Avoid Getting Fat.  Not eating it works better than taxing it.

Joseph Henchman,   Colorado Debates Marijuana Tax; Would Be First Genuine Revenue-Raising Tax on Illegal Drug.  Until Congress repeals Internal Revenue Code Section 280E, which prohibits deductions connected with selling marijuana and other mostly illegal drugs, tax ruin awaits those who tries to sell legal pot in Colorado.

Presumably without the aid of marijuana, Robert D. Flach has a new Buzz!

 

Lawyers, Lawyers, Lawyers!   Starting with Jim Maule,  When Tax Meets the Demands of Law Practice.  Wherein a lawyer bungles his own tax case.

It was a rough day for lawyers yesterday down south.  From Cincinnati.com:

A federal judge has sentenced longtime Northern Kentucky lawyer Meredith “Larry” Lawrence to two years and three months in prison Thursday for failing to report income from various sources – including Racers Gentleman’s Club in Sparta.

No, he didn’t perform at the club; he owned it.  U.S. Attorney Elaine Leonard argued for a longer sentence:

“The evidence at trial also established that the defendant’s conduct went well beyond merely submitting false income tax returns,” Leonhard said. “Simply put, skimming cash was the defendant’s business model, a model he adopted in every business venture he pursued, whether it was his law practice, his strip club, or his role as a landlord.”

Leonhard described how fees collected from women who stripped at the club would be stuffed into a white envelope and delivered to Lawrence once a week. Strippers were independent contractors required to pay house fees to dance at the club. The strippers also had to pay a parking fee.

Some of the unreported income was money diverted from a special escrow account for lawyers, called an IOLTA account.

 

Meanwhile in Tennessee, Knoxews.com reports:

A former Knoxville lawyer has been convicted in federal court of income tax evasion.

John Threadgill, 69, faces sentencing March 14 before U.S. District Judge Thomas W. Phillips. He faces up to five years in prison and up to a $250,000 fine.

A jury returned the verdict Wednesday after a five-day trial.

He was charged with deducting personal expenses, including a $69,000 wedding.  I hope the couple appreciates it.

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Tax Roundup, 10/15/2012: no more procrastination edition. Also: how not to stay in touch with your ex.

Monday, October 15th, 2012 by Joe Kristan

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Today is it for extended 2011 1040s. File your return today, if you haven’t done so.  Get your 8879 to your preparer, e-file yourself,  send it certified mail, return receipt requested, or use an authorized private delivery service with the return addressed to the proper service center street address.  There are no more extensions available!

Related:  The End of Procrastination Season Is Upon Us  (Russ Fox);  TODAY IS “THE DAY”! (Robert D. Flach).

 

Brutal Assault on Reason Watch: 

Kay Bell, Top 10 tax moments in VP debate

Patrick Temple-West,   Essential reading: Biden and Ryan dispute economic toll of raising the top tax rates, and more

TaxGrrrl,  What The VP Debate Taught Us About Romney/Ryan – and Didn’t Tell Us About Tax

Joseph Henchman,   Biden, Ryan Give Tax Policy Rationales (Tax Policy Blog)

Donald Marron,  Five Things You Should Know about Mitt Romney’s “$5 Trillion Tax Cut”  (TaxVox)

Richard Morrison,   Chart of the Day: The Gains of the 1% Don’t Come at the Expense of the Middle Class  (Tax Policy Blog):

 

Peter Reilly,   Romney Wants No Estate Tax – Case For 2012 Mega Gift Remains Compelling:

When you break down possible outcomes on the political scene, they all argue for at least looking at your assets and sitting down with a planner to see if there is something worth doing.

Peter sees value in large-scale family gifting, no matter how the elections turn out.

Janet Novack,  The Forbes Guide To Estate Planning

 

Jim Maule,  Taking Tax Money Without Giving Back: Another Reality :

It is not surprising that, although they come at the problem from different angles and propose different solutions, both this commentator and the writer of this report consider taxpayer financing of private sector sports enterprises to be a very bad idea.

Brian Strahle, Non-Big 4 Firm SALT Professionals:  GOT LEVERAGE?

And, of course, Robert D. Flach came through with a Buzz this weekend.

 

So much for any chance of reconciliation.  A Fort Atkinson, Iowa man probably scored no points with his ex-wife while looking for tax refunds in all the wrong places.  Now Gene Jirak will serve a 45-month sentence for filing false refund claims.  From KCRG.com:

Prosecutors say Jirak devised a scheme by filing two tax returns claiming he was entitled in each return to a refund of over $50,000. Authorities say Jirak filed the first tax return as an amended joint return, using his ex-wife’s name and Social Security number and forging her signature.

Well, if he had a refund coming, maybe he should have asked for her signature.  Well, maybe because he didn’t have a refund coming.  Court documents show that Mr. Jirak attempted to get refunds under the absurd “1099-OID” theory, which, as much as I can make any sense of it holds that we all have big accounts in our name at the U.S. Treasury that we can tap by filing the right tax forms.    The judge wasn’t persuaded.

Acting as his own lawyer, Mr. Atkinson was convicted of five counts arising from the transaction.  Amazingly, he actually received a check from the IRS for $69,139.07 (still a few flaws in the old refund claim review system, I guess).  According the the indictment, his poor relationship with his ex caused things to go awry:

On or about March 9, 2009, defendant GENE JIRAK presented the Treasury check for deposit at Viking State Bank & Trust in Decorah, Iowa.  At the time the check was presented, it bore a forged endorsement signature [of his ex-wife].  When Viking State Bank & Trust determined [the] endorsement was forged, the bank returned the Treasury check to the IRS.

The Moral?  Don’t use ridiculous tax theories to claim tax refunds.  Oh, and forging your ex-spouse’s signature is never a great idea.

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Is federal tax reform making progress?

Wednesday, February 23rd, 2011 by Joe Kristan

Donald Marron at TaxVox sees hope:

Any reform creates losers as well as winners

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