Posts Tagged ‘Elizabeth Malm’

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

Tuesday, November 26th, 2013 by Joe Kristan

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

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

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

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

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

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

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

 

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

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

 

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

 

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

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

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

 

Brian Strahle, MARKET-BASED SOURCING GOES INCOGNITO:

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

Legislators looove taxing non-voters.

 

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

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

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

Kay Bell, Religious housing tax break deemed unconstitutional

 

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

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

 

TaxProf, The IRS Scandal, Day 201

 

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

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

 

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Tax Roundup, 11/20/13: Are reports of the death of Instant Tax Service premature? And: film credits = bait car?

Wednesday, November 20th, 2013 by Joe Kristan
"Fez" Ogbasion, Instant Tax Service CEO.

“Fez” Ogbazion, Instant Tax Service CEO.

Is Instant Tax Service still dead?  Maybe not, reports TaxGrrrl: In Apparent Defiance Of Court Order, Fourth Largest Tax Biz In Country Preps For Sale :

Within a week of the Order, [founder "Fez"] Ogbazion was said to be engaged in discussions relating to the sale of the company, an activity that would appear to be barred under the injunction. Todd Bryant, General Counsel for ITS Financial, confirmed via email that “[a]n asset sale is being considered.”

It was a puzzle, though, as to who might be interested in purchasing the beleaguered company.

An insider, it turns out.  TaxGrrrl questions whether that will work, given that the court order seems designed to destroy the company and salt the earth so it can never return.  Judge for yourself (my emphasis):

Based on the foregoing, IT IS HEREBY ORDERED pursuant to I.R.C. §§ 7402 and 7408 that Defendants ITS Financial, LLC, TCA Financial, LLC, Tax Tree, LLC, and Fesum Ogbazion, and their representatives, agents, employees, attorneys, and/or any person or entity acting in active concert or participation with them, are PERMANENTLY ENJOINED from directly or indirectly, by use of any means:

A. Operating, or being involved with in any way, any work or business relating in any way to preparation of tax returns; and, accordingly, Defendants ITS Financial, LLC, TCA Financial, LLC, and Tax Tree, LLC shall cease to operate; and Defendant Fesum Ogbazion shall cease operating, or being involved with in any way, any work or business relating in any way to preparation of tax returns;

B. Acting as tax return preparers; and/or acting or operating as a franchisor of businesses relating in any way to preparation of tax returns;

C. Supervising or managing or assisting tax return preparers; and/or owning, operating, or engaging in work or a business relating in any way to preparation of tax returns;

D. Assisting with or directing the preparation or filing of tax returns, amended returns, claims for refund, or other related documents;

E. Representing before the Internal Revenue Service any person or organization whose tax liabilities are under examination or investigation by the IRS;

F. Organizing, promoting, providing, advising or selling any business or work of tax services;

They seem to be looking for a loophole here by selling assets, rather than stock, though the injunction against “selling any business” would seem to cover that.  I suspect the judge will make things clear in the coming days.

Prior coverage: Judge shuts down Instant Tax Service.

 

Instant Tax, meet Mo’ Money.  Owner of St. Louis tax prep franchise gets 20 months for 20130919-2fraud (stltoday.com):

The owner of a Mo’ Money tax preparation franchise in St. Louis was sentenced to 20 months in federal prison on Tuesday after pleading guilty in July to conspiracy to commit tax fraud and aiding and abetting the preparation of false tax returns.

Jimi Clark, 57, of Memphis, Tenn., and four employees were arrested and indicted in October 2012 on one felony count each of conspiracy to commit tax fraud. All were accused of falsely claiming educational tax credits on at least 47 tax returns for 2009.

Refundable credits like the American Opportunity Credit and the Earned Income Credit are the fuel for the fraudulent return industry.

 

haroldLyman Stone,  California Film Tax Credit Faces Controversy, Delay (Tax Policy Blog):

 A recent FBI sting in California revealed that state Senator Ron Calderon may have taken up to $60,000 in exchange for pushing to lower eligibility requirements for California’s $100-million-a-year film tax incentive program. This isn’t the first time film incentives have been connected to corruption and scandal. Indeed, a scandal about misallocation of film tax credits ultimately led to the demise of Iowa’s program over the last few years.

Sometimes I think that Iowa’s Film Credit Program was just an elaborate “Bait Car” episode that ultimately didn’t run because the stealing was too easy.

 

Elizabeth MalmMaryland Governor Touts Benefits of Film Tax Credits, Despite Evidence to the Contrary  (Tax Policy Bl0g).  Iowa has stopped giving filmmakers money and is instead giving them time, with no apparent bad economic effects.

Kay Bell, Coast-to-coast concerns about film and TV tax credits

 

David Henderson, Saez You: Income Distribution without Key Components of Income.  It turns out one of the most-cited articles on income inequality leaves out a lot of income, particularly government transfers and welfare benefits.  He notes notes, increased transfers are always advocated as a cure for inequality, and yet by the measuring stick used, it can never “help.”

 

Clint Stretch, Turning Down the Heat on Energy Tax Policy  (Tax Analysts Blog).  He notes the new oil and gas boom, and that “Oil and gas tax incentives are not responsible.”

 

TaxProf, The IRS Scandal, Day 195

Source: The Tax Foundation

Source: The Tax Foundation

Howard Gleckman, Baucus Proposes International Tax Reform But Future Action Remains Uncertain (TaxVox)

According to the plan, passive income from overseas activities would continue to be taxed at U.S. rates. Most income from the sale of goods and services overseas would also be taxed at full U.S. rates. The draft would end the practice of deferral that allows firms to avoid U.S. tax on foreign earnings until they bring those profits home. However, income that is currently parked overseas would be taxed at a 20 percent rate payable over 8 years.

Baucus would move the U.S. closer to a territorial system favored by many multinationals and GOP lawmakers. Under such a system, income is taxed in the jurisdiction where it is earned rather than by the firm’s home country. While the plan does not fix a specific tax rate, staffers say Baucus is aiming to reduce the corporate rate from 35 percent to about 30 percent.

But in the Baucus plan, this shift closer to a territorial tax comes at a price. To limit the ability of multinationals to game the system, the plan would impose a stiff minimum tax on income earned overseas by foreign affiliates of U.S. parent companies.

Reducing the corporate rate is fine, but remember that most business income is taxed on 1040s anymore.

 

Tax Justice Blog,  Statement from CTJ Director Robert McIntyre: Is the Baucus Plan for Multinational Corporations a Prelude to a Middle-Class Tax Increase?

 

Peter Reilly has been playing hooky at the commemoration of yesterday’s 150th anniversary of the Gettysburg Address.  I’m jealous.

The Critical Question: Hasn’t the Government Done Enough to Mess Up Higher Education Finance? (David Brunori, Tax Analysts Blog)  Well, I’m sure they can always mess it up even more.

News from the Profession. Non-Traditional Holiday Celebrations at Accounting Firms, Care To Add Yours?

 

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Tax Roundup, 11/7/2013: Cold comfort on 3.8% Investment Income Tax guidance. And how big a penalty for not buying unavailable insurance?

Thursday, November 7th, 2013 by Joe Kristan

20121120-2Well, that’s reassuring.  Tax Analysts reports ($link) that David Kirk, an IRS official involved in drafting the final rules on the 3.8% Obamacare “Net Investment Income Tax” that took effect January 1, says the rules are still “in flux” with filing season only two months away:

     As for additional NII tax guidance, Kirk said the final regs will contain “overflow valves, breakers” that will allow the IRS to issue subregulatory guidance to address problems that arise, given that opening a new regulatory project “is a very painful and long process.”

“We’re just going to have to roll this out. We’re going to see how these rules work . . . and there’s always fine-tuning,” Kirk said. 

They’ve had over three years to do this, and now “we’re going to see how these rules work”?  Sounds like another recent Obamacare roll-out.  It makes me really excited about the upcoming filing season.

 

Roberton Williams,  How Big is the Penalty if You Don’t Get Health Insurance? (TaxVox)

The basic penalty is $95 in 2014—if you’re unmarried with no dependents and your income is less than $19,500. If your income is higher, you’ll owe more: 1 percent of the amount by which your income exceeds the sum of a single person’s personal exemption and standard deduction in the federal income tax. That’s $10,000 in 2013. But be warned: Income equals adjusted gross income (AGI—that number on the last line on page 1 of your tax return) plus any tax-exempt interest and excluded income earned abroad. If you make $30,000, your penalty will be $200.

Still with me? Good, because it is about to get more confusing.

If you like the penalty you have, you can keep the penalty you have.  Until next year, anyway.

 

Christopher BerginACA + IRS = Perfect Storm (Tax Analysts Blog)

And what lies ahead? The perfect storm: The IRS and the ACA brought together by a hapless Congress that tasked the nation’s tax collector with administering portions of our new healthcare system.

I can see a day coming when a taxpayer gets a letter from her insurance provider canceling her healthcare coverage and then a letter from the IRS informing her that she owes additional taxes under the ACA. Apparently our government thinks that two nightmare bureaucracies must be better for us than one.

You think this is about “us,” friend?

 

200px-Isleys-mrbiggs-eternal.jpg

Ron Isley is a lot better at music than he is at taxes.  He has served time on federal tax charges, and yesterday he lost a Tax Court bid to get his back taxes reduced under an “offer of compromise” he agreed to, but which the IRS rejected before it became final.  The ruling turns on a lot of technicalities involving the rules for accepting compromises in criminal tax cases.

The Tax Court decision wasn’t a total loss, in that they are allowing Mr. Isley to argue against tax levies and to pursue a compromise of his 2009 and 2010 taxes.

Cite: Isley, 141 TC No. 11.

Prior coverage here.

 

Jason Dinesen,  Life After DOMA: Watch Your Withholding 

Annette Nellen, Many tax questions on same-sex federal tax filings

William Perez, The Additional Medicare Tax, Part 4

Tony Nitti,  On Eve Of Twitter IPO, Misguided Senators (Again) Attack Tax Deduction For Stock Option Compensation  Exercising stock options convert corporation income taxed at 35% to individual income taxed at 40.5%, plus payroll taxes.  And yet the congresscritters act like this is some kind of loophole.

 

Russ Fox congratulates The Real Winners of the 2013 World Series of Poker.  It’s not the guys with the cards in their hands.

Now there’s a business plan!  BlackBerry Pins Recovery Hopes On Rumored $1 Billion In Tax Refunds  (TaxGrrrl)

 

potleafpotleafpotleaf20090722-2.jpgWouldn’t you? Colorado Voters Reject $1 Billion Income Tax Increase (Elizabeth Malm, Tax Policy Blog).

But other taxes…  Coloradans agree to a high tax to get high (Kay Bell)

Tax Justice Blog,  Tax Policy Roundup for the 2013 Election

 

 

 

Phil Hodgen’s Exit Tax Book, Chapter 8 – Taxation of Nongrantor Trust Interests

 

The Critical Question.  Is There One ‘Right’ Apportionment Formula? (Cara Griffith, Tax Analysts Blog): 

It could almost be a case in which one state adopted it on the grounds that it would create jobs and increase investment in the state. Then other states followed suit, not because single-sales-factor apportionment produced more accurate results, but because it was perceived as making a state’s tax laws more competitive or business friendly. But while single-sales-factor apportionment may benefit some businesses, it is far from being universally beneficial for taxpayers. In the end, if state officials are truly concerned with making their state more attractive to businesses, perhaps they should consider retaining — or returning to — the three-factor apportionment method and focus on a less burdensome corporate tax system overall.

Iowa was the first state to adopt single-factor apportionment.  It applies to the highest tax rate in the nation, helping make Iowa’s corporation tax both onerous and useless.  A repeal of the corporation income tax would be the best way of making the corporation tax “less burdensome.”

 

Because they may one day make money?  Why Twitter May Have to Pay Income Taxes One Day (Victor Fleisher, via The TaxProf)

 

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Tax Roundup, 11/6/13: Relief for the road warrior? And the futile state corporation income tax

Wednesday, November 6th, 2013 by Joe Kristan
Flickr image courtesy Tom Hilton under Creative Commons license

Flickr image courtesy Tom Hilton under Creative Commons license

Relief for the traveling employee?  Tax Analysts reports ($link) that the “Mobile Workforce State Income Tax Simplification Act of 2013″ (S. 1645) was introduced yesterday.  The bill would make the tax lives of employers and employees who cross state lines much easier by preventing states from taxing folks, other than athletes and entertainers, who are in a state for less than 30 days.  From the Tax Analysts:

The bill is “a modernization of everything,” Maureen Riehl, vice president of government affairs for the Council On State Taxation, told Tax Analysts. It is “about supporting the mobility of an economy that has people moving around a lot more often than when the income tax laws went into effect in the states back in the ’30s and ’40s,” she said.

Who would oppose such sensible simplification?

The Federation of Tax Administrators does not share Riehl’s enthusiasm. Deputy Director Verenda Smith said the bill “does not strike an appropriate balance between administrative simplification and necessary tax policies.”

Smith took issue with the safe harbor provision, saying the 30-day threshold “is beyond a level necessary to deal with the vast majority of individuals who would be temporarily in a jurisdiction.”

The states want to tax you on their whim if you sneeze in their jurisdiction.

Still, they should have one more threshold: no state tax if you earn less than some threshold amount in a state, maybe $5,000.  That way they can still pick LeBron’s pocket when he comes to town from his tax-free home in Florida, but a carload of struggling musicians couch-surfing from town to town would be saved the hassle of filing a tax return in every state where they have a gig  – or more likely, saved the need to ignore the filing requirement.

 

Peter Reilly,  Mobile Workforce Act Good Idea But May Need More Limits  ”Over the years I have studied the rules for what invokes state income tax withholding requirement.  It varies substantially from state to state.”

 

Elizabeth Malm, Richard Borean, Map: Share of State Tax Revenues from Corporate Income Tax (Tax Policy Blog)

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Notice that it’s a relatively paltry part of Iowa tax receipts, even in a good year, and even with the highest rate in the nation.  Better to repeal it as part of the Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

David Brunori, Feckless Legislators and Corporate Welfare (Tax Analysts Blog)

If I ran a big corporation in Illinois, I would have my lobbyists asking for tax breaks daily. Why not? The tax incentive racket is a profit center for most corporations in Illinois. Is it blackmail? Sure. But it is cold, calculated, rational blackmail.

…if once you have paid him the Dane-geld

You never get rid of the Dane.

 

Tax Justice Blog,  Let’s Face It: Delaware and Other U.S. States Are Tax Havens

 

Paul Neiffer, Crop Insurance Deferral Options.  ”When a crop insurance claim relates directly to a drop in price, those claims cannot be deferred to the next year.”  Paul explains what the choices are if the recovery relates to a yield loss.

Tony Nitti, Shareholder Computes Basis In S Corporation Stock Incorrectly, $1.5 Million Loss Becomes $2 Million Gain

 

Jana Luttenegger, Interactive Form to Assist in Applying for 501(c)(3) Status (Davis Brown Tax Law Blog) 

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

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

William Perez, CBO: Marginal Tax Rates Faced by Low- and Moderate-Income Individuals.  Helping the poor stay that way.

Andrew Mitchel, 2014 Inflation Adjustments for Individuals in the International Tax Arena

Roger McEowen, Inflation Adjusted Amounts for 2014

TaxProf,  The IRS Scandal, Day 181

TaxGrrrl, Bayern Munich Keeps Winning Even As Their Chief Faces Trial For Tax Evasion.

 

Brian Mahany,  More Guidance on Taxation of Same Sex Marriages

Jack Townsend,  Should You Opt Out of OVDI/P?.  He examines Robert Wood’s discussion of opting out of the IRS “amnesty”

Phil Hodgen’s Exit Tax Book: Chapter 7 – Taxation of Deferred Compensation 

 

Joseph Thorndike, Forget Carried Interest–It’s All About Taxing Capital Gains (Tax Analysts Blog).   He’s right when he says “The only issue that really matters is how we tax capital gains.”  Then he goes off the rails in so many ways.  Read Joseph, and then read Steve Landsberg.

 

A Wednesday Buzz from Robert D. Flach!

May you have this problem.  The Tax Treatment of Olympic Gold Medals (TaxProf)

News from the Profession.  Recruiting Season: Salaries and Offers for the Public Accounting Class of 2014 (Going Concern)

 

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Tax Roundup, 8/30/2013: Same-sex joint return frenzy edition.

Friday, August 30th, 2013 by Joe Kristan

Wed in Iowa, still married in Utah.  The IRS yesterday announced that same-sex couples married legally in any state will be treated as married for tax purposes, even if they reside in a state that does not recognize same-sex marriages.

The IRS also announced that couples that married in earlier years may amend their tax returns to claim joint filing status for open married tax years.  However, they will not be required to.  Couples who extended their 2009 returns have until October 15, 2013 to file amended 2009 returns.  Otherwise, 2010 is the earliest possible open year.

The announcement cuts both ways.  If the IRS says you are married, you no longer have the option of filing as a single taxpayer.  Many couples find that marital bliss comes at a tax price.  This chart from the Tax Foundation illustrates income situations where marriage can be more costly than single status:

Marriage penalty

The opportunity for same-sex couples to choose between single and joint status for open years is unique.   This only goes one way, though; joint filers cannot amend their open years to file as single taxpayers.

Couples who have legal status short of marriage, such as “registered domestic partners” recognized in some states, are not considered married by the IRS.

Other IRS releases on the issue:

Rev. Rul. 2013-17

Frequently Asked Questions For Legally Married Same-Sex Couples  and For Registered Domestic Partners, Civil Unions

Lot’s of coverage of this in the tax blog world.  Iowa’s own Jason Dinesen has long owned this issue, and he comes through with BREAKING: IRS Releases Guidance on Same-Sex Marriage The IRS’s DOMA Guidance: How are Iowa Returns Affected?What if One Spouse in a Same-Sex Marriage Hasn’t Filed Yet? and Will Same-Sex Married Couples Be Required to Amend? 

The Tax Policy Blog has also flooded the zone:

Elizabeth Malm,  Same-Sex Marriages Recognized for Federal Tax Purposes – What Does it Mean for the States?

Nick Kasprak, State of Celebration and Marriage Penalties and Bonuses (Families with Children Edition)

Other coverage:

TaxProf, IRS Recognizes Same-Sex Marriage, Regardless of State

Kay Bell, IRS grants same-sex married couples equal federal tax filing status regardless of where in the United States they live

Trish McIntire, The IRS and DOMA – part 1

Peter Reilly, IRS Recognizes All Marriages But Not Civil Unions

TaxGrrrl, IRS Rules All Legal Same Sex Marriages Will Be Recognized For Federal Tax Purposes   

Tax Trials, IRS Recognizes Same-Sex Marriages in All States

Althouse, “All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes.”

Going Concern, IRS to Recognize All Same-sex Marriages, Regardless of Resident State

Linda Beale,  Same-Sex Married Couples Will be Recognized for Federal Tax Purposes Even When Moving to Nonrecognition State

The Iowa angle: IRS will recognize marriage of same-sex Iowa couples (Des Moines Register)

 

There is a little other news today:

43 percent is the new 47 percent.  And Now for the Movie: Fewer Americans Pay No Federal Income Tax (Roberton Williams, TaxVox):

The percentage of Americans who pay no federal income tax is falling, thanks to an improving economy and the expiration of temporary Great Recession-era tax cuts. In 2009, the Tax Policy Center estimated that 47 percent of households paid no federal income tax. This year, just 43 percent will avoid the tax.
That is good news, as far as it goes.  It’s not healthy to have only a minority paying income tax, the primary funding source for big government.  It’s too tempting to order a double when someone else is picking up the tab.   Mr. Williams thinks that we should count payroll taxes like income taxes, but I agree with Robert D. Flach that they’re not the same thing.

 

Tony Nitti, Tax Aspects Of The NFL Settlement Payments  ”Well, if you’re a retired NFL football player, the Blue Book value has been set: your cognitive capacity is worth a cool $150,000.”

Andrew Lundeen,  Why Eliminating Taxes on Capital Would Be Good for Workers (Tax Policy Blog)

Jack Townsend, Another Israeli Bank Depositor Plea to Conspiracy

Robert D. Flach tops off a heroic week with a third Buzz!

 

Perhaps this isn’t the best way to handle an IRS exam.  Tax Analysts reports ($link) on a taxpayer who alleged that an IRS agent coerced him into sex:

Burroughs had sex with Abrahamson in September 2011 when she arrived at his home “provocatively attired,” according to the suit. U.S. Magistrate Judge Thomas Coffin concluded in the July 31 decision that Abrahamson was not acting in her official capacity, because the encounter occurred at Burroughs’s home during nonwork hours and “not in respect to the performance of official duties of the federal employee.”

One survivor of an IRS exam told me that she felt the least the IRS owed her for the experience was drinks and dinner.

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Tax Roundup, 7/25/2013: Mo’ refundable credits, mo’ fraud. Plus cigarettes and preschoolers!

Thursday, July 25th, 2013 by Joe Kristan

momoneyRefundable tax credits are a magnet fo’ mo’ fraud.  Five from Mo’ Money tax prep office in St. Louis arrested in scheme (St. Louis Post-Dispatch):

Mo’ Money franchise owner Jimi Clark, 57, of Memphis, Tenn., abused the American Opportunity Credit to attract and keep clients, prosecutors said. They filed for the credit on at least 47 returns where the taxpayer had not incurred any educational expenses, and unwisely, claimed the same amount of educational expenses, $3,765, on the “vast majority” of the returns, their indictment says.

In all, the 47 returns claimed more than $50,000 in educational credits.

Maybe 25% of the rundable Earned Income Tax Credit is paid improperly.  Yet legislators ignore how the credits actually work because they like them in theory.

 

Bankrupt state pays people to be friends. Illlinois governor to sign deal to lure fertilizer plant (Sioux City Journal)

Speaking of Bankrupt… Detroit Taxes and the Laffer Curve (Alex Tabarrok):

  • [The] per capita tax burden on City residents is the highest in Michigan. This tax burden is particularly severe because it is imposed on a population that has relatively low levels of per capita income.
  • The City’s income tax… is the highest in Michigan.
  • Detroit residents pay the highest total property tax rates (inclusive of property taxes paid to all overlapping jurisdictions; e.g., the City, the State, Wayne County) of those paid by residents of Michigan cities having a population over 50,000.
  • Detroit is the only city in Michigan that levies an excise tax on utility users (at a rate of 5%).

Sometimes you can’t solve the problem with more taxes.

 

Robert D. Flach, DEDUCTING CAPITAL LOSSES

Tony Nitti, Q&A: How Can An Accrual Basis Business Defer Revenue When It Receives Cash In Advance?

Phil Hodgen, Nonfilers–voluntary disclosure is not your only choice:

But my opinion is that the official program is fabulous for someone who is in deep trouble and might otherwise face a spot of prison time.  For that person, the “Your money or your life!” demand from the IRS is easy to answer.  Give ‘em your money. 

For almost everyone else, the voluntary disclosure program is stupidly expensive–in tax cost, penalties, interest, and professional fees to give the government all of the paperwork they want.

You gotta shoot the jaywalkers so you can slap the real crooks on the wrist.

Peter Reilly, Not Good For Real Estate Loss When Tax Court Judge Says Purports

Fiduciary Income Tax Blog, Trials and Tribulations of Nongrantor Trusts

 

 

Cara Griffith, Improving Transparency in Pennsylvania (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 77

Howard Gleckman, The OECD’s International Tax Plan: The First Step on a Long Road (TaxVox)

Tax Justice Blog, CTJ Presents the Nuts & Bolts of Corporate Tax Reform

Linda Beale, Senators promised 50 years of secrecy on their tax reform proposals

Daniel Shaviro, What is a “tax expenditure” and when does this matter?

 

TaxGrrrl,  Louisiana To Offer ‘Fresh Start’ Tax Amnesty Program.  I’m sure this time they really mean this is the last one.

Missouri Tax Guy, The Enrolled Agent, EA

Jack Townsend, Fourth Circuit Holds Defendant to His Tax Loss Stipulated in the Plea Agreement

Kay Bell, Summer 2013 sales tax holidays begin this weekend

William Perez, Sales Tax Holidays in 2013

                                                              

Quotable: (my emphasis)

The manufacturing innovation institute, meanwhile, is just another iteration of an idea that’s been around for longer than Barack Obama has. Go to any Rust Belt city and you’ll find research campuses, innovation institutes and similar institutions named after hopeful politicians who promised that a new manufacturing base would coalesce around this exciting agglomeration of creative minds. Unfortunately, in most instances it has turned out that manufacturing bases would rather coalesce around cheap land, low taxes and acres of uncongested freeway.

-Megan McArdle, “Obama’s Speech Is a Confession of Impotence

 

I think one judge will think otherwise. Three South Dakota men say income taxes don’t apply to them (Argus-Leader.com)

Tax Court Judge Holmes has a new opinion out.  Always entertaining and enlightening.

News you can use:  No Such Thing as Free Swag (Austin John, Elizabeth Malm, Tax Policy Blog).  Sorry, ESPY winners.

More harebrained than what they do anyway? U.S. Senators with Harebrained Tax Reform Ideas Offered an Opportunity (Going Concern)

Maybe not where you grew up. Cigarettes and Preschoolers Don’t Go Together (Scott Drenkard, Noah Glyn, Tax Policy Blog)

 

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Tax Roundup, 7/17/2013: Stories of wounded jaywalkers. And: checking in on Rashia.

Wednesday, July 17th, 2013 by Joe Kristan

taxanalystslogoMarie Sapirie of Tax Analysts has an excellent piece about how the IRS offshore account enforcement program treats the thousands of ordinary Americans abroad — and many green card holders living in the U.S. —  as presumptive tax criminals when they try to remedy foot-fault paperwork violations in reporting offshore accounts.  She tells the stories of four “minnows” who tried to remedy inadvertent minor violations of the foreign account rules.  Get a load of the advice they gave “Taxpayer 3:”

The taxpayer, like many others, sought help from a congressional representative in reaching a satisfactory resolution with the IRS. The response that the lawmaker received from the IRS — that the taxpayer could renounce U.S. citizenship — was disappointing. “I lived in the U.S. for 30 years; I never was treated unfairly for 30 years. I was proud of it. And here the IRS is telling me to renounce my citizenship
because it may be the best solution considering my situation,” the taxpayer said.

When the IRS is telling people to expatriate themselves, something is very wrong.

The article discusses the headaches involved in clearing up FBAR reporting, including the delays caused because IRS agents aren’t allowed to make international phone calls.

The IRS should imitate programs for state non-filers for FBAR violations: allow taxpayers to come in penalty-free anytime if they file disclose their accounts and amend returns for five years back to report any unreported offshore income.  Time to stop shooting the jaywalkers.

20130717-1

Rashia Wilson in happier times.

While Doug Shulman’s IRS was busy shooting jaywalkers, the grifters were running wild.  TampaBay.com has an update on the woman who boasted on her Facebook page that she was the “queen of IRS tax fraud”: IRS loss to fraud’s ‘first lady’ may have hit $20 million:

Rashia Wilson may have duped the IRS out of as much as $20 million before her arrest on stolen identity refund fraud charges.

That’s according to a court document, filed in advance of her sentencing today, that estimates the government’s loss at $7 million to $20 million.

What kind of criminal mastermind could break through the internal controls at IRS to loot that kind of money?

“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!”

Well done, Shulman!  Criminal masterminds like Ms. Wilson are robbing the Treasury of $5 billion annually, and you are busy telling taxpayers trying to come into compliance to renounce their citizenship.

Prior tax update coverage: Identity theft tax fraud: women’s work?

Jason Dinesen, Taxpayer Identity Theft — Part 16. “The IRS still has not processed Brian and Wendy’s final joint tax return for 2010.”

 

Inspector General finds “willful” rummaging through political “candidate or donor” records, but Justice Department declines to prosecute.  This is a big deal.  All we know is that it is sometime after 2006.  Failing to prosecute that is shocking; it’s hard to imagine a good excuse.  Tax Analysts reports today ($link) that IRS denies any of its employees were involved.

TaxProf, The IRS Scandal, Day 69

Kay Bell, Justice Department refusal to prosecute IRS disclosure of taxpayer information prompts inquiry from GOP Senator

Janet Novack,  Former IRS Auditor Gets Probation For Taxpayer Info Leak, Conflict Of Interest.  ”Dennis Lerner admitted disclosing information about an audit of
Commerzbank AG and seeking a job with the German bank even as he was still negotiating a $210 settlement with it.”

 

William Perez, Same Sex Marriage, the Windsor Case and Estate Planning

Paul Neiffer, Capital Gains Questions on Selling Farmland

Missouri Tax Guy, Choose your tax pro? A rundown on the difference between CPAs, Enrolled Agents and other preparers.

 

Kay Bell, IRS will be fully staffed July 22 as furlough day is canceled

TaxGrrrl, IRS To Remain Open For Business As Furlough Day Is Canceled

 

Joseph Thorndike, Tax Expenditures Should Be Attacked Head On, Not Through the Backdoor (Tax Analysts Blog).

David Brunori, Immigrants are Good for Us (Tax Analysts Blog)

Howard Gleckman, Will Obamacare Delays Encourage Health Exchange Cheating?  (TaxV0x). Just because we can’t verify that you’re not cheating won’t result in massive cheating, according to Mr. Gleckman.  Let’s ask Rashia about that.

Russ Fox, The Most Ridiculous Tax Ever.  He’s talking about the insane “PCORI” fee.

Tax Justice Blog, North Carolina Facing Disastrous New Tax Laws.   The “disatrous” changes include reduction of the individual rate to 5.75% (currently 7.75%) and the corporate rate to 5% (from 6.9%).  If that’s a disaster, here’s hoping for one in Iowa.

Elizabeth Malm, More Details Released on North Carolina Compromise Plan and North Carolina House, Senate, and Governor Announce Tax Agreement (Tax Policy Blog).

 

Jack Townsend,  UBS Client, 78 Years Old, Sentenced to One Year and One Day

There are no athiests in taxholes.  Economist who dodged tax due to ‘religious objection’ gets four years behind bars (New York Post)

 

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Tax Roundup, 6/28/2013: Not dead yet edition

Friday, June 28th, 2013 by Joe Kristan

20120928-2Thought the IRS scandal was dead? IRS Inspector Firm on One-Sided Targeting; Small Number Faced Extra Scrutiny, While All Tea-Party Applications Were Reviewed (Wall Street Journal):

Internal Revenue Service employees flagged for extra scrutiny fewer than a third of progressive groups applying for tax exemptions from mid-2010 through mid-2012, compared with 100% of conservative applicants, an IRS inspector general said.

The new data, released in a letter to Democratic lawmakers that was dated Wednesday, appear to support Republicans’ contention that conservative groups were subjected to more IRS scrutiny, and undercut Democrats’ case that the IRS treated left-leaning and right-leaning groups similarly.

Just saying it’s over doesn’t make it so.

TaxProf, The IRS Scandal, Day 50

Christopher Bergin, Get to the Bottom of It  (Tax Analysts Blog)

Clearly, there is a problem at the IRS, a serious one. And that does not just apply to exempt organizations, which, frankly, have always been the third rail of national tax administration. What’s going on is not funny or entertaining. What’s going on means the country is in trouble.

While I am more easily entertained then Christopher, I agree with his conclusion.

David Cay Johnston, Revelations Show Lois Lerner Blew It  (Tax Analysts Blog)

 

Linda Beale isn’t on board with the IRS “apology payment” plan floated by the Taxpayer Advocate:

This seems to me to be a very very bad idea.  Creating payments for jobs not perfectly done implies a perfection that simply isn’t achievable in large institutions with multi-faceted functions.

OK, fine — but if it’s not achievable for a giant institution with enormous resources and all the time in the world, maybe it’s not achievable for small institutions with with “multi-faceted functions” and far fewer resources under severe time constraints — like your average business or your local Tea Party run by activists in their free time.  Maybe the IRS shouldn’t so routinely assert penalties on audit deficiencies.  Until they stop, though, I say sauce for the goose, sauce for the gander.

 

Remember when the state-run Iowa Cable Network was going to make Iowa the cutting edge tech state?  Iowa tries to sell ICN, but gets bids from only one prospect (Thegazette.com, via Gongol)

 

More DOMA demise fallout

William Perez, Tax Issues of the Supreme Court Ruling that DOMA is Unconstitutional

Margaret Van Houten, Tax Implications of DOMA Ruling   (Davis Brown Tax Law Blog)

Peter Reilly, DOMA Decision May Affect Civil Unions

Tax Justice Blog, What Are the Tax Implications of the Supreme Court Ruling on Marriage Equality?

 

In other news…

Trish McIntire, Amortizing Your Life:

I get asked occasionally if a client can take the value of their time as a deduction. They’ve done the repairs on a rental house themselves and they want to deduct what they would have paid someone else to do it or they have worked for a charity and would like to use their time as a charitable deduction. Of course, the value of one’s time is not deductible. 

Philip Hammersley, Elizabeth Malm, Pennsylvania’s Family Business Death Tax on Life Support (Tax Policy Blog)

Howard Gleckman,  Can The Baucus-Hatch Blank Slate Plan Jump Start Tax Reform?  (TaxVox)

TaxGrrrl, What Back Taxes? Senate Passes Immigration Reform Bill, Goes Easy On Tax Repayment

Robert D. Flach is ready with your Friday Buzz!

 

Going Concern, Oregon Department of Revenue Sensitive to the Fact That Some Religious Groups Think Filing Tax Forms Electronically Is of the Devil.  There are days when I think that’s right if you leave the word “Electronically” out.

 

It looks like I have to update my blogroll for Megan McArdle for what — the fifth time?  But Megan was one of the first economics bloggers, and she’s well worth following to her new blog home.

 

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Tax Roundup, 3/28/2013: Appeals Court upholds injunction against IRS preparer regs. Also: Indicted for overstating income?

Thursday, March 28th, 2013 by Joe Kristan

 

ijlogoWith less than three weeks left in filing season, the US Federal Circuit Court of Appeals has denied the IRS attempt to overturn the injunction against their preparer regulation scheme.  From the Wall Street Journal Total Return blog:

The District of Columbia Circuit Court of Appeals denied a renewed request by the Internal Revenue Service to suspend a January 18 injunction against the agency’s effort to license tax preparers.

A three-judge panel upheld U.S. District Court Judge James E. Boasberg’s refusal to lift his injunction against the IRS’s licensing program.

This doesn’t mean the IRS has permanently lost its case, but it does mean that the IRS cannot move forward with its power grab unless and until it convinces the appeals court that it has the authority to regulate preparers.

Meanwhile, filing season continues, with no evidence that taxpayers have been harmed by the availability of preparers who haven’t passed an IRS open-book exam on Publication 17.

You would think that an agency short on staff and plagued by identity theft refund fraud would be grateful for the chance to redirect resources from a futile and wasteful regulation program.  Yet they seem to be lobbying the Senate for legislative authorization for their power grab.  Shameful, but not surprising.

Congratulations to the Insitute for Justice for another win for consumers.

 

20130328-1Iowa preparer indicted – for helping clients report too much income.  From KCRG.com (my emphasis):

 Keith Rath, of Shellsburg, was arrested last week by IRS agents after a grand jury indicted him on eight counts of aiding in the preparation and  presentation of a false tax return.

The indictment says that on  eight occasions over the years 2008, 2009 and 2010, Rath helped clients  falsely claim thousands of dollars in business income that he knew they  did not earn.

Mr. Rath has pleaded not guilty.

You might wonder why anyone would claim business income they didn’t earn.  The answer, of course, would be to claim refundable earned income tax credits.  A taxpayer with no “earned income” is ineligible for the credit.  The EITC is “refundable,” which means that when there is the credit exceeds the computed tax, the IRS will send you a check for the difference.  By reporting imaginary Schedule C income, taxpayers can (illegally) increase their refund check.

EIC fraud is a huge problem.  It is estimated that as much as 25% of EIC is improperly awarded, resulting in billions of dollars of fraudulent tax refunds.  The Iowa Senate wants to make the problem even bigger.

 

Elizabeth Malm,  Minneapolis Star Tribune Editorial Board Warns Legislators Against Higher Taxes on High-Income Earners (Tax Policy Blog).  If the Star-Tribune thinks you’ve gone too far in jacking up taxes, you’ve got a problem.

Tony Nitti,  Derek Jeter Flees New York, Tax Savings Soon To Follow .  But they keep telling us that tax migration is a myth.

Just like capital migration.  ‘Legal Enemies of the State’!  (Christopher Bergin, Tax.com):

In Tax Notes this week I wrote about abusive transfer pricing and other techniques being used by multinational corporations and their brilliant  tax advisors to avoid as much tax as possible. That these techniques are technically legal, and, some would say, actually enabled by governments like the United States and groups such as the Organization of Economic Cooperation and Development (OECD), doesn’t necessarily make them right.

In fact, the OECD itself recently issued a report – known as the BEPS report –  on how these techniques create base erosion and profit shifting. The problem is so serious, according to the report, “What is at stake is the integrity of the corporate income tax.”

The “integrity of the corporate income tax” is in the third aisle next to the chastity of the bordello.

 

Peter Reilly,  Tax Court Does Not Buy Vow of Poverty of Prophetess.   Her full title is “Prophetess, Teacher, Pastor and Certified Paralegal,” so she has something to fall back on.

Paul Neiffer,  You Can Always Do An IRA!

Cara Griffith, The Meaning of a Symbolic Vote (Tax.com).  Senate approval of sales tax on internet sales may keep the issue alive.

Tax Trials, Supreme Court to Hear Arguments in DOMA Tax Case

Patrick Temple-West,  TurboTax’s lobbying fight, and more

Jack Townsend,  Random thoughts on Ethics, Tax Opinions and A Tax Lawyer’s Life at a Big Law Firm

Kay Bell,  Don’t fall for these Dirty Dozen tax scams of 2013

 

TaxGrrrl, IRS Apologizes For Star Trek Video As Congress Jumps At Chance To Criticize Spending.  She notes that a trivial expenditure is generating a lot of political preening.  As far as I’m concerned, I’d rather they make videos than a lot of other things they do.

Well, it’s a better use of funds than preparer regulation.  Dear IRS, Please Make More Parody Videos (Going Concern)

 

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Tax Roundup, 3/13/2013: Governor, legislators battle over who to give your money to. Plus: Education credit returns bog down.

Wednesday, March 13th, 2013 by Joe Kristan

GovBranstadI will fight for the right to tax you to subsidize other people.  Governor Branstad is touchy about criticism of the massive tax breaks for the Southeast Iowa Orascom fertilizer plant.  Radio Iowa reports:

“I’m here to make it clear that the chief executive of this state is on your side and we will fight for these jobs and I want to make it clear that when we make a promise to Lee County — or to any county in Iowa for that matter — it’s a promise we’re going to keep, no matter what they might say in Des Moines in any committee meeting,”

Never mind the high possibility that the plant would have been built without our tax money.  Never mind the moral problem of taxing existing businesses and taxpayers to lure and subsidize outsiders.  Never mind that political allocations of investment capital are always and everywhere unwise.  Forget the lost opportunities for taxpayers to spend the money on their own projects.  Jobs!

The Governor also hinted at darker forces opposing the tax credits, reports KCCI.com:

And he said he believed the Koch brothers were behind some opposition to the plant because it would hurt their fertilizer business.

So Iowa Democrats opposing the subsidies are tools of the libertarian Koch brothers.  Who knew?

Prior coverage here.




In other bad state tax policy news, the Senate Ways and Means Committee Democrats advanced an increase in the Iowa earned income credit from 7% of the federal amount to 20%.  Unfortunately, it would also be a huge increase in the marginal Iowa tax rate of families working their way out of poverty.  The phase-outs of the credit create a hidden high marginal tax rate that punishes families emerging from poverty.

 

The EITC is a refundable credit, which means the tax man writes checks to folks with no taxes.  Naturally EITC fraud is rampant.

 

 

TaxGrrrl, Hundreds Of Thousands Of Taxpayers Thought To Be Impacted By Education Credit Snafu

IRS agent pleads guilty to charges resulting form selling out a whistleblower.  Jack Townsend has the scoop.

Kay Bell,  2013 tax filing season gets crazier for some H&R Block, TurboTax customers

Jason Dinesen,  Small Business Health Insurance Credit, Part 2

Elizabeth Malm,  Texas Considering Drastic Modifications to Margin Tax (Tax Policy Blog).  Good.

Patrick Temple-West,  Yankees embrace frugality to dodge tax, and more.  Who says taxes don’t influence behavior?

Jeremy Scott, Carl Levin Changed the Face of Tax Enforcement (Tax.com)

Howard Gleckman,  Taxes and Paul Ryan’s Budget (TaxVox)

William Gale, A Carbon Tax is a Win-Win for the Economy and the Environment (TaxVox)

 

David Brunori, Things to Read, Sites to Visit(Tax.com).  He shares some online resources, but tragically fails to mention the Tax Update.

Peter Reilly,  No Fans Of Sister Wives At The IRS ?   As far as I’m concerned, the possibility of consolidated individual returns should be all the argument needed against polygamy.

The Critical Question:  Why Is My Refund Short? (Trish McIntire)

 

News you can use.  Note to Drivers: All Wheel Drive Does Not Give You Superpowers, Just a Dangerous Overconfidence (Megan McArdle). 

So you think you’re having a bad busy season?  It could be worse: Upstanding San Leandro Accountant Finds Himself on Oakland’s Most Wanted ListGoing Concern has the news of law enforcement gone awry.

 

 

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Tax Roundup, 2/22/2013: Why California refugees might not choose Iowa. And: to C or not to C?

Friday, February 22nd, 2013 by Joe Kristan

 

Enjoying a short Des Moines winter commute.

Enjoying a short winter commute in bicycle-friendly Des Moines.

We aren’t scaring them.  Governor Branstad is making a trip to California to poach some businesses from the failing Golden State.  He’s not scaring one Californian:

Iowa’s top state personal income tax rate is 8.98 percent, compared to 13.3 percent in California. Probably not enough of an improvement to lure millionaires from Pacific Palisades to Dubuque. By contrast, Texas offers zero percent.

The top state corporate income tax rate is 12.5 percent in Iowa, 8.84 percent in California and zero percent in Texas.

Earlier this year, Branstad said he would no longer pursue getting rid of Iowa’s corporate and personal income taxes. Instead, he’s going to focus on cutting property taxes.

Well, California’s property taxes already are fairly low thanks to Proposition 13. Although property prices here are triple those in Iowa and most other states because of our severe restrictions on building.

Bottom line: Iowa doesn’t offer enough incentives to attract many businesses and people to leave California. The Hawkeye State is the Golden State with bad weather.

Ouch.  Well, Iowa’s solvent, too, unlike California, which is a fiscal disaster.  We also have short commutes.  Still, he makes a valid point: it’s not enough to compete with a basket case like California.  Golden State refugees have plenty of places to choose from, many of which have better taxes, better weather, or both.  I have no thoughts on fixing the weather, but The Quick and Dirty Iowa Tax Reform Plan would take care of the tax problems.  With no corporate tax and a 4% individual rate, combined with good employees, education and quality of life, we’d see some Californians.

 

To C or not to C?  The Wall Street Journal reports that taxpayers are revisiting whether to operate businesses as C corporations or pass-through entities.  C corporations face a top rate of 35%, where individuals have top rates over 42% as a result of the ill-concieved fiscal cliff and Obamacare tax increases.  From the article:

“Even though on the surface you’re looking at 35% versus 39.6%, it’s a deceptive comparison,” says Robert W. Wood, a tax lawyer with Wood LLP in San Francisco. “There may be a slight short-term advantage in C-Corporations, but there are a number of negative long-term implications that would outweigh short-term benefit.”

For example, C-Corporation profits can be double-taxed. In addition to the corporate tax on profits, owners also would owe personal taxes on any money they take out of the company as dividends. The double tax kicks in when a business is sold, too.

Another potential problem is that a firm that switches from an S-Corporation generally has to remain a C-Corporation for at least five years. 

At current rates, a switch to C corporation format is probably still unwise, if tempting, because of the double tax issue.  You might have lower tax up front, but getting the money out involves either paying a second tax on the dividends or expensive tax gymnastics, often involving renting to a corporation or potentially “excessive” compensation.  C corporations are the Roach Motels of the tax world: they’re a lot easier to check into than check out of.  But if there is a significant reduction in corporation rates, the current tax savings will be enough to tip the balance for many taxpayers to C corporation status, double tax or no.

Hat tip: TaxProf Blog.

 

When Will Tax Complexity Cause a Collapse? (Jason Dinesen). 

The tax code, as most everyone knows and acknowledges, is ridiculously complex and getting more complex all the time.

When will the complexity cause the system to collapse? And what, exactly, will collapse?

I think it would require a combination of things to “collapse” the tax law.  If the perception becomes widespread that it is impossible to comply with the tax law without unreasonable effort, or the rates get intolerably high, and technical advances allow for cash transfers and banking that the government can’t trace, then the game is over.

Tax Analysts is having a conference today on whether, after 100 years, the income tax has run its race.

Elizabeth Malm, Holy Smokes! Washington Loses $376 Million to Cigarette Tax Evasion in 2012.  Many states have raised tobacco taxes to a point where smuggling becomes attractive.

 

Howard Gleckman, Congress May Not Rewrite the Tax Code in 2013, But It Could Make It Simpler (TaxVox).  If you can’t do everything, you might still do something.

Kay Bell, Education tax credit form, already pushed into February, now causing filer confusion and more delays in processing

Peter Reilly,  Bill Romanowski’s Tax Court Loss Not A Typical Horse Case.  We covered it here yesterday.

TaxGrrrl, About Those Leaked Wal-Mart Emails… Is IRS To Blame For Sluggish Sales?  Are tax refund delays stopping consumer spending?

Teaching by bad example, Nebraska-style.  I examine the tax troubles of a prairie-town lawyer.

 

Jim Maule, How Tax Falsehoods Get Fertilized.  That “70,000-page tax code” really bugs him.

Want to raise the minimum wage?  Then apply it to your interns, Congresscritters. (Donald Boudreaux).

Don’t bug Robert D. Flach with requests for free tax help.

 

It’s probably how he meets girls too.  Berlusconi & The Lure of Tax Refunds (Robert Goulder, Tax.com).

CPA exam tip: Calm Down, This CPA Exam Practice Question Isn’t as Dirty as You Think (Going Concern)

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Tax Roundup, 2/6/2013: 4.5% Iowa tax? Flat chance. And hidden dangers of an IRS exam.

Wednesday, February 6th, 2013 by Joe Kristan

20130206-1Shock!  David Osterberg doesn’t like the 4.5% flat Iowa Income tax proposal!  State Tax Notes tracked down former Senate Candidate and Cornell College Econ Prof* David Osterberg for his views on the proposal to create a flat 4.5% income tax in Iowa alongside the current income tax.  Not surprisingly, he doesn’t like it ($link):

     The founder and executive director of the Iowa Policy Project said a Republican-sponsored House bill to create a flat personal income tax option would shift more of the tax burden to low-income residents.

     But David Osterberg said he is not too concerned because he doesn’t think the proposal has a shot at passing the Senate, where Democrats hold a majority…The proposal is “part of this ideology that says we somehow have to take  care of the top 1 percent and things will be good,” Osterberg said. “I don’t think low-income people believe that — we sure don’t.”

State Tax Notes also tracked down Tax Foundation Economist Elizabeth Malm:

     “Iowa’s current income tax system has nine brackets, with rates ranging from 0.36 percent of income to 8.98 percent of income,” Malm said in an e-mail to Tax Analysts. “In 2012, this made Iowa the fifth highest top income tax rate in the country, among those states that levy PITs.”

     Without additional information, Malm declined to say whether the plan is regressive. She did say, however, that the proposal would fail to simplify the tax code because it keeps the current system intact.

     “I’m guessing the rationale behind allowing taxpayers to choose between the two systems is to ease concerns that the flat 4.5 rate would hit low-income individuals harder,” Malm said.

Wrong guess.  The rationale is almost surely to avoid provoking the powerful lobby group Iowans for Tax Relief, which holds sacred the current Iowa individual deduction for federal taxes paid.  Proposing the flat tax as an alternative, rather than a replacement, finesses that problem — but at the cost of adding more complexity.  In this form, the flat tax is what I call an “Alternative Maximum Tax.”

*Disclosure: I once borrowed his shotgun at Cornell.  It had dust bunnies in the tubes.

 

David Brunori, Who Pays? Who Cares? You Should (Tax.com):

No matter your views on government, there is no justification for asking the poor to pay more than the rich. I do not favor dramatically increasing the tax burdens on the wealthy, particularly income tax burdens. But there are a lot of policies that can be enacted that could even the playing field. Broader base consumption taxes, less reliance on excise taxes, and larger income exemptions for low wage taxpayers would go a long way.

None of these are incompatible with lower top tax rates.

Tracy Gordon,  The Downside of States as Laboratories for Tax Reform (TaxVox)

 

Needed, but impossible.  Tax Notes has a sad-but-true headline that brilliantly summarizes the state of our national tax policy: Urban Institute Panelists Agree Tax Reform Necessary but Unlikely. ($link)

Linda Beale, More on PTINs for previously unregulated tax return preparers:

We have seen considerable evidence of tax return preparers who do not understand the tax laws or who intentionally misapply them (in the home office deduction, etc.).  It is imperative that those who assist others in preparing tax returns demonstrate minimal competency in the tax law as demonstrated by the qualifying exam.

The “qualifying exam” is open book — really more of a literacy test.  The IRS can make preparers show they can read.  They can’t make them competent.  When you consider the Big 4 tax shelter scandals, and the hopeless complexity of the tax law, it’s funny to say that the problem is really “people who do not understand the tax laws.”

 

Peter Reilly, Future Baseball Commissioner Tackles Tax Laws As Complex As Infield Fly Rule

Tough tax return choice for 2012: Pay more now to save later?  My new post at IowaBiz.com, the Des Moines Business Record Blog for Entrepreneurs, discussing whether maximizing 2012 deductions is really a good idea.

Jason Dinesen, Taxpayer Identity Theft — Part 12 .  More Kafkaesque obstacles to resolving an identity theft for his client.

William Perez, IRS Provides Further Disaster Relief for Hurricane Sandy

Kay Bell, Tax Carnival #112: Super Bowl of Taxes

Jim Maule, Tax Ignorance As Persistent as Death and Taxes

Missouri Tax Guy:  Missouri does not mail  Form 1099-G.  You have to get it online.  One more little blow to tax compliance for small taxpayers.

Trish McIntire, Low Cost Tax Preparation Options

TaxGrrrl,  U.S. Postal Service To Eliminate Saturday Delivery: Will It Save Tax Dollars?  Next they’ll shut down the Pony Express.

Patrick Temple-West, Waiting on the phone for the IRS, and more (Tax Break)

Ellen Kant, William McBride, Super Bowl Tax Bill (Tax Policy Blog)

Russ Fox,  Will the Third Time be the Charm for Appeals?  A case where the “independent” IRS appeals function failed twice.

Howard Gleckman, Can the Income Tax Fund the Government We Want?  (TaxVox).  I can’t speak for “we,” but it could easily cover all of the government I want.

 

The Critical Question: Et Tu, Sarkozy? (David Goulder, Tax.com)

If they can spell their address, tax cheating should be easy for them: Massapequa Restaurant Owners Sentenced for Tax Fraud (Massapequa Patch).

Isn’t that conspiracy?  Tax fraud: We have a plan, authorities say (Myfoxtampabay.com)

Screwed either way.  Taxpayer Sues IRS, Claims Agent Coerced Him Into Having Sex to Avoid Adverse Audit  (TaxProf).

 

But not hotirsagent.com?  I guess there really are stupid easy ways to earn internet money.  A Kansan found one, but then got in trouble by not paying his taxes.  KFDI.com reports:

Dallen Harris, 39, pleaded guilty to one count of tax evasion. He reported a taxable income of a little more than $164,000 in 2010, when it was actually more than $1 million. 

Harris’ income came from Internet domain names, according to court ecords from a related civil forfeiture case in federal court. The government is seeking to forfeit Harris’ houses, cars and bank accounts in that case. The domain names included celebritysextape.tv, adultkingdom.net, Porntesters.com, hardcorefilms.tv, celebritynakedpic.com and sextape.com. 

No, I won’t link to any of those.  It doesn’t sound like they need any help generating traffic anyway.

 

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Tax Roundup, 1/18/2013: Iowan gets 87 months on Ponzi, tax charges.

Friday, January 18th, 2013 by Joe Kristan
87 months?  Holy Cow!

87 months? Holy Cow!

Iowan gets 7 years on Ponzi scheme, tax charges.  An Ottumwa man who used funds he was supposed to invest to finance his online dating life was sentenced yesterday to 87 months in federal prison on federal fraud and tax charges.  John Holtsinger, 52, will serve the federal sentence after he completes a state OWI sentence.

Mr. Holtsinger entered a guilty plea last year.   The indictment said he sold this improbable investment opportunity:

After conducting trades on behalf of investors for a short period of  time, Holtsinger offered and sold investments to the investors in the form of promissory notes.  He represented that the notes would yield high returns with no risk including, but not limited to, what he called an “inheritance investment” that would be invested through his mother and pay out upon her death.  The “inheritance investment” required a $20,000 deposit and was to pay annual returns of 9% with automatic liquidation and payout if the investment dropped below 3% of its initial value.

“High returns with no risk” is a rare beast indeed, nearly as rare as the Unicorn.  I doubt if they show up in Ottumwa very often.

 

IRS stimulates prison system economy by $35 million in 2010.  From a report by the Treasury Inspector General for Tax Administration:

Refund fraud committed by prisoners remains a significant problem for tax administration. The number of fraudulent tax returns filed by prisoners and identified by the IRS has increased from more than 18,000 tax returns in Calendar Year 2004 to more than 91,000 tax returns in Calendar Year 2010. The refunds claimed on these tax returns increased from $68 million to $757 million. Although the IRS prevented the issuance of $722 million in fraudulent tax refunds during Calendar Year 2010, it released more than $35 million.

The new IRS regulation of tax preparers isn’t going to do much for this problem.  (via the TaxProf)

Related: Doing Your Time (Jack Townsend)

 

TaxGrrrl, As We Creep Closer To The Debt Ceiling Limit, Is Your Tax Refund At Risk?

Kay Bell, Government report fuels fear (again) of federal mileage tax proposal

Russ Fox, The Walking Dead Come Back.

Brian Mahany,  Taxpayer Advocate Questions OVDI, FBAR Penalties

David Cay Johnston, Foundering Tax Avoidance (Tax.com)

Paul Neiffer,  Watch Out For Those Retroactive State Tax Gotchas!

Nanette Byrnes, Facebook’s slump hits California’s budget, and more (Tax Break)

Joseph Henchman and Elizabeth Malm, New Report: Gasoline Taxes and Tolls Pay for Only a Fraction of Road Spending (Tax Policy Blog)

Catch your weekend Buzz early!  From Robert D. Flach.

Howard Gleckman,  A Tiny Little Blog Post on a Tiny Little Tax Bracket. (TaxVox).  Hey, I noticed it first!

News you can use:  Retaining CPAs Is As Easy As Letting Them Work in PJs and Attend Boring Meetings, Says Guy (Going Concern)

 

When outsourcing goes too far.  A story of how a model employee outsourced his own job. (Greg Mankiw).  Nice work if you can get paid while some guy in China does the dirty work.

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