Posts Tagged ‘Freakonomics’

Tax Roundup, 8/9/2013: Another international tax enforcement milestone. And don’t count on the ex for a character reference.

Friday, August 9th, 2013 by Joe Kristan

Andrew Mitchel,  Number of Expatriates Skyrockets Again (Second Quarter of 2013):

The number of published expatriates for the first two quarters of 2013 (1,809) has already exceeded the highest number of annual published expatriates ever (1,781 in 2011).  Thus, 2013 will clearly be the year with the highest number of published expatriates ever.

 

Chart by International Tax Blog.
Chart by International Tax Blog.

Another triumph for the IRS offshore enforcement program.  If you make being an American abroad a tax nightmare, people will stop being American.

 

TaxProf, The IRS Scandal, Day 92

Phony Scandal Watch: IRS agent: Tax agency is still targeting Tea Party groups. (Washington Examiner, Via Instapundit):

In a remarkable admission that is likely to rock the Internal Revenue Service again, testimony released Thursday by House Ways and Means Committee Chairman Dave Camp reveals that an agent involved in reviewing tax exempt applications from conservative groups told a committee investigator that the agency is still targeting Tea Party groups, three months after the IRS scandal erupted.

We did nothing wrong, it was just a few rogue agents in Cincinnati, and we don’t do it anymore.  Oh, and it’s phony.

TaxGrrrl,  DEA Passed Secret Data, Tips For Covering Up To IRS.   That’s reassuring.

 

Tax Analysts fights the good fight.  Transparency: Worth Fighting For  (Christopher Bergin).  They’ve done more than anyone else to fight the growth of secret tax law, known only to insiders and cronies.

 

Howard Gleckman, Beware of Tax Reform That Promises Deep Rate Cuts.  I worry more about tax reform that doesn’t promise rate cuts at all.

 

Tax Justice Blog,  Politicians Use Tax Breaks to Subsidize Manufacturing. What Could Possibly Go Wrong?  Everything, of course, though the Tax Justice Blog’s solutions would be no improvement.

 

Kyle Pomerleau, Cities, States, and Obamacare’s “Cadillac” Tax (Tax Policy Blog).

No, they shouldn’t. Cheating and Visibility on Taxes: IRS Efforts to Regulate Tax Return Preparers Should Continue (Procedurally Taxing):

Nonetheless, I believe that the IRS’s approach to the return preparer issue, with uniform identification requirements, reasonable competency testing and ongoing education requirements, will greatly enhance visibility in the return preparation process.

This is one of the better arguments I’ve seen for preparer regulation, but it is still not very good.  The preparer regulations impose restrictions on honest preparers that the cheaters will ignore.  It will raise the costs of preparation, causing many taxpayers to self-prepare and others to drop out of the system entirely. The real way to stop cheating is to remove the worst opportunities to cheating, especially refundable tax credits, and to make the law simple enough and the rates low enough that cheating is harder to hide and less attractive.


Watching the watchmen. NYPD cop faces hard time for tax fraud and identity theft. (New York Daily News):

Jonathan Wally, 34, was moonlighting as a tax preparer while working in the 34th Precinct that serves Inwood and Washington Heights. The 10-year NYPD veteran, who resigned upon entering his plea, admitted in Manhattan Federal Court to using bogus Social Security cards to list fictitious dependents.

I’m sure that with a little ethics training from the IRS, he would have turned out differently.

 

Paul Neiffer, Don’t Forget Your Retirement (Plan)!

Brian Strahle, CALIFORNIA:  HOW SHOULD YOU “SHAVE” (FILE YOUR 2012 INCOME TAX RETURN)?

Trish McIntire, Health Insurance Wizard for Business

Russ Fox,  While I Was Out…, where he discusses my post from yesterday, where the Tax Court required an S corporation $877 in taxable income to impute $31,000 in salary income to the owner to incur payroll taxes:

 I do agree with Joe’s conclusion: “When advancing and withdrawing funds from an S corporation, be sure to generate the appropriate prissy paperwork.”  If you have a loan, make it look like a loan: Charge interest and record it!  It’s possible that with good paperwork the owner wouldn’t have received such a ridiculous result.

The more I ponder this Tax Court decision, the more I dislike it.

Freakonomics Blog,  How Much Tax Are Athletes Willing to Pay?

Boxing is particularly interesting because it allows a participant to choose where he performs. If you are a pro golfer or tennis player, you might be inclined to skip a particular event because of a tax situation, but you generally need to play where the event is happening. A top-ranked boxer, meanwhile, can fight where he gets the best deal. Which is why it’s interesting to read that Manny Pacquiao will probably never fight in New York — primarily, says promoter Bob Arum, because of the taxes he’d have to pay.

Yes, tax rates matter.

 

Going Concern, After His Open Victory, It Appears Phil Mickelson Is Doing Some Tax Planning at the PGA Championship.  Yes, taxes are lower if you miss the cut.

 

I hope he didn’t solicit this character referenceA 64-year old Florida executive won’t get to enjoy a golf-course retirement for awhile.  TBO.com reports:

John D. Stanton III stalled an Internal Revenue Service audit for four years, promising he would submit corporate tax returns for his company while secretly diverting tens of millions of dollars to himself.
 
The deception caught up to him Thursday, when a federal judge sentenced him to 10 years in prison for tax evasion.

His ex-wife spoke up for him, pleading for leniency.  Yeah, sure:

The family drama emerged when a letter by ex-wife Susan Stanton was read aloud. In the letter, Stanton called her ex-husband “devious” and said he should be given the maximum prison sentence allowed. John Stanton III fled Tampa in December 2011, the letter said. An arrest warrant on a contempt of court charge was issued, stemming from a divorce case where Stanton defied an order to pay more than $6 million to his ex-wife. “He fled and stayed in $240-a-night hotels,” Susan Stanton wrote. While he was on the run, John Stanton III fathered a child with a 32-year-old woman, the letter said.

Other than that, the break-up was amicable. Now Mr. Stanton gets to spend 10 years in a federal prison, where any money he managed to hide isn’t much use.  When he gets out, assuming his health holds up, he will still have the government ready to seize any hidden cash that slips out.  It seems like the results would have been a lot better if he just had filed his returns.



A note to readers:  I have learned how to embed links to items within longer “Tax Roundup” posts.  I won’t use it for every item, but I will use them for some items that you might want to point out to someone.  There are two that you will find in this post, and they look like this:

No, they shouldn’t.

and

I hope he didn’t solicit this character reference.

Maybe I should just post these things as their own posts, but there you go.

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Tax Roundup, 7/22/2013: More fertilizer! And how to finance your party, the tax grifter way.

Monday, July 22nd, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

More taxpayer fertilizer.  Iowa board OKs additional $25M in tax credits for Orascom.  (Quad Cities Times):

The unanimous vote by the board on Friday makes a total of $82.5 million in state tax credit benefits available to Orascom Construction, parent of the Iowa Fertilizer Company.

The $1.8 billion plant is expected to employ as many as 165 workers when completed.

In case you’re wondering, that’s about $500,000 per “permanent job.”  That assumes that the money is actually buying jobs, but the plant almost certainly was going to be built in Iowa without the subsidies.  The $82.5 million only buys politicians press conferences, ribbon cuttings and silver souvenir shovels, with our money.

 

TaxProf, Faber:  ‘Ivory Tower’ Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States:

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes,  State Tax Notes, July 8, 2013, p. 97 … ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.

That’s right, in my experience.  Taxpayers absolutely take taxes into account when they move, even if it’s hard to isolate in aggregate data.  Tax aren’t everything, but they are definitely something.

Kim Reuben, Detroit’s bankruptcy: What does it mean for other cities? (TaxVox)

Russ Fox, The Flow of AGI from One State to Another

 

Jason Dinesen, Tax Aspects of Renting Your Home for a Day or Two.  Taking in RAGRAI riders can give you some tax-free income.

Robert D. Flach, KEEPING A CONTEMPORANEOUS MILEAGE LOG.  If you want to deduct your mileage, you need to keep your log up to date.

 

Tyler Cowen, Wealth Taxes: A Future Battleground.  Just another way for politicians to cover their profligacy.  Via Arnold Kling, who has more.

TaxGrrrl, Rather Than Tackle Tough Tax Reform, Congress Focuses On The Death Tax. Again.

Kay Bell, The U.S. tax system is not very attractive

William McBride, American Corporations Losing Ground (Tax Policy Blog):

The U.S. corporate tax is the most punitive in the developed world, not just because the statutory corporate tax rate is the highest but also because the effective corporate tax rate is the highest or nearly the highest according to recent studies

TaxProf, The IRS Scandal, Day 74.

 

Tax offender of the year nominee.  I no longer choose a Taxpayer of the Year, but Russ Fox still “honors” a “tax offender of the year.”  I hope he will consider Ayawna Webster, former president of the D.C. Young Democrats and staff aide to a D.C. City Council Member, Harry Thomoas Jr.  The Washington Post reports:

The former chief of staff to one-time D.C. council member Harry Thomas Jr. pleaded guilty Friday to falsifying tax documents in connection with payments for a 2009 political ball…

 According to court documents, [non-profit chief Millicent] West worked with Thomas and Webster to send trust money intended to pay for youth programs to help cover the cost of the party.

Just when you think politicians can’t come up with ways to make you think less of them, they come through.  Looting a fund for poor kids to pay for a “political ball” is notably evil.

 

Brian Mahany, Business Owner Pleads to Hiding Offshore Account

Jack Townsend, Liechtenstein Bank In U.S. Cross-Hairs

 

A video report on Rashia Wilson’s sentencing

She had a sixth-grade education and stole millions from the taxpayers.  When that can happen — over and 0ver – there just may be a problem with IRS controls over refunds.

 

The Critical Question.  Lap Dance Tax?  (Jim Maule)

News you can use.  The Data on Bar Fights (Freakonomics Blog)

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Tax Roundup, 4/19/2013: IRS agents charged with scamming jobless benefits. And post-4/15 thoughts

Friday, April 19th, 2013 by Joe Kristan

More20130419-1 evidence that preparers are out of control and need IRS employees to keep an eye on them:  24 IRS Employees Indicted for Theft of Government Benefits (TaxProf).

24 current and former employees of the Internal Revenue Service have been charged for crimes relating to fraudulently obtaining more than $250,000 in government benefits.
          
          Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare, and housing vouchers. All thirteen, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits.

They may have been right about being unemployed, just wrong about the timing.

 

We have to show the government our returns, so it’s only fair:  Iowa Gov. Branstad plans to show income tax returns to reporters (AP)

Howard Gleckman,  What Ever Happened to State Tax Reform? (TaxVox)

Kay Bell,  Obama’s 2012 effective tax rate was 18.4 percent; Now what do your members of Congress pay in taxes?  Make them do their returns on a live archived webcast, with a rolling comment bar.

Peter Reilly,  How Not To Care About IRS E-mail Snooping

 

William Perez,  IRS Provides Penalty Relief Due to Boston Marathon Explosion and Storms in South and Midwest

Patrick Temple-West,  Tax extension after Boston attack, and more (Tax Break)

Russ Fox, RS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same

TaxGrrrl,  So You Missed Tax Day, What Next?

 

Andrew Mitchel,  Code §911 Foreign Earned Income Exclusion – Adverse Conditions

Freakonomics Blog, The History of Taxes

Megan McArdle,  Our Tax Code is Too Complicated. Here’s How to Simplify It. ”Get rid of the corporate income tax. It’s not worth it, and there are better ways to collect the money.”

Janet Novack,  Tax Geeks: Make Tax Filing Easy, Kill The Mortgage Deduction, Tax  CPAs

Jim Maule, Tax Compliance and Non-Compliance: Identifying the Factors

Trish McIntire,  You Need the Numbers Before You Do the Return

Scott Drenkard,  Perry Calls for Reforms of Texas’ Margin Tax (Tax Policy Blog).  It could use it.

Christopher Bergin, It Just Isn’t Fair (Tax.com):

The headline producing data  in the report was that revenue loss – about $181 billion – from corporate tax expenditures in 2011 was “approximately the same size as the amount of corporate income tax revenue the federal government collected that year.” That makes a headline grabber; here would be my version: “Corporations Got More in Tax Breaks Than They Paid in Taxes, Government Says.”

It’s almost like the tax exists only so the politicians can carve loopholes for their friends.

 

Indeed.  It’s Rarely a Good Sign When a Tax Prep Business Closes Its Doors Three Days Prior to April 15th (Going Concern)

Just plead “miseducation” and leave it at that.  Lauryn Hill asks judge for leniency in  upcoming tax evasion sentencing claiming she failed to file taxes due to threats and withdrawal from society (dailymail.com.uk)

Tony Nitti,  Girl, You Know You Better Watch Out: Singer Lauryn Hill To Be Sentenced On Tax Evasion Charges

Jack Townsend, Bank Frey Executive and Swiss Lawyer Indicted

Can you blame them?  U.S. Taxpayers Buy a Lot of Weapons  (Jeremy Scott, Tax.com)
“The sum of the square roots of any two sides of an isosceles triangle is equal to the square root of the remaining side.”  Your tax filing stress probably made you smarter (Kay Bell)

How I spent April 15.  (Marketwatch, via Going Concern).  I approve of the comment at the bottom of the GC post.

Me too.  Tax Season 2013: Mostly Unpleasant, And I’m Glad It’s Over  (Jason Dinesen)

Robert D. Flach returns!  THAT WAS THE TAX SEASON THAT WAS 2013

Me: Back to work.

 

News you can use.  Hone your corporate tax evasion skills (Boston.com)

 

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Tax Roundup, February 25, 2013: And the award for the dumbest economic development tax credit goes to…

Monday, February 25th, 2013 by Joe Kristan

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Field of bad dreams.  TheFiscalTimes.com says Iowa is the ninth worst state for taxes:

The Hawkeye State gets a black eye for being the second worst state for corporate taxes, with a 12 percent rate. It also ranks 37th in property taxes, 33rd in individual income taxes and 34th in unemployment insurance taxes.

 They accompany the article with this photo of the “Field of Dreams” — an unwitting illustration of the problems of Iowa tax policy.  The Governor last year signed a proposal giving a special sales tax exemption to a private athletic complex being built around the field, made slightly famous in the Kevin Costner movie.  It’s special carve-outs like this that make for high rates and complicated taxes all around.

 

Speaking of movie-related scams, Instapundit Glenn Reynolds writes in the Wall Street Journal The Hollywood Tax Story They Won’t Tell at the Oscars.  Here he talks about how it worked out in Michigan:

State leaders ballyhooed the plan as a way of moving from old-style industry to new.           

Despite tens of millions of dollars in state investment, the promised 3,000-plus jobs didn’t appear. As the Detroit Free Press reported last year, the studio employed only 15-20 people. That isn’t boffo. That’s a bust. The studio has defaulted on interest payments on state-issued bonds, and the guarantors—the state’s already stressed pension funds—may wind up holding the bag. “In retrospect, it was a mistake,” conceded Robert Kleine, the former state treasurer who signed off on the plans in 2010.

He doesn’t neglect Iowa’s film fiasco:

Iowa ended its motion-picture subsidies in 2010, after officials misused $26 million in state money, leading to criminal charges. According to a 2008 investigation by Iowa Auditor David Vaudt, 80% of tax credits issued under the state’s film-subsidy program had been issued improperly (to production companies that weren’t even spending the money in Iowa, for example).

 

Two film credit recipients are now serving 10-year sentences on theft charges arising from the program.  That’s fine, but I really want to see a groveling public apology from the Governor who signed the program into law, the “economic development officials” who turned the keys to the state treasury over to a former Walgreens photo desk clerk in charge of the program, and to the legislators — all but three out of 150 — who voted the moronic program into existence.

 

 

Sequestration panic at the IRS.  Politico adds IRS cuts to the least of things we’re supposed to freak out about in the face of the tiny impending sequestration spending cuts:
“At a minimum, it’s probably going to take longer for people to get through on the phone; it’s going to take longer for refunds to be processed,” said Floyd Williams, a senior tax counsel at Public Strategies Washington.

Williams, who worked for the IRS for nearly two decades and directed the agency’s legislative affairs office for 16 years, says the sequester could also be a boon to those who purposely commit fraud, or accidentally fill out returns incorrectly.

Good thing the IRS can redirect the employees who had been assigned to the preparer regulation program to do something useful, now that the courts have shut down that futile enterprise.  The IRS can’t stand their good fortune, though; Tax Analysts reports ($link) that the IRS is appealing the court decision.

It would be even better if Congress stopped using the IRS as the Swiss Army Knife of public policy.  Given the agency’s new mandate to take care of our health insurance, their performance at the job of actually collecting taxes is only going to get worse.


Preparers gone bad.  Accounting Today rounds up the week in preparer fraud, including a guy in New Mexico who, while serving time for identity theft-related charges, has been hit with 56 counts of fraud and embezzlement.  That would be overachieving in underachieving.

 

Hak Ghun will travel.  To Club Fed. From DurangoHerald.com:

Durango man pleaded guilty to tax evasion this week in federal court in New Mexico.

Hak Ghun, 62, is facing 12 to 18 months in prison after signing a plea agreement with the U.S. Attorney’s Office. He also will be required to pay $249,567 in restitution to the Internal Revenue Service.

The man was accused of embezzling from a company that had received investments from the Navajo Nation. For those who don’t get the old TV show reference, here you go.


 

Paul Neiffer,  Safe to File After March 1

If a fire is worth fighting, it’s worth fighting in style.  But the firefighter still can’t deduct the Benz.  My new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Janet Novack,  The Forbes 2013 Tax Guide

Peter Reilly, Don’t Be Fooled By E-Mail ‘From IRS’ – But Don’t Ignore Their Snailmail

Jim Maule,  Tax Law Provision Enforceable Even if Unwise.  That would be most of them.  For example…

Tax Effects of the Health Care Act (Missouri Tax Guy)

Patrick Temple-West, Payroll tax’s return hits retailers, and more (Tax Break)


These guys are what I call real public servants.  Vigilantes fighting revenue-driven traffic enforcement (The Telegraph, London).

Breaking:  Women Are Not Men: A New Freakonomics Radio Podcast

Today’s Going Concern employment tip: Accountant on Probation for Embezzlement Still More Employable Than the Average Non-Accountant (Temporarily)

 

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Tax Roundup: 1/8/2013: Iowa to issue mortgage credit certificates. And: got change for a trillion?

Tuesday, January 8th, 2013 by Joe Kristan

 

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Dave Jamison

Iowa issuing new certificates for federal mortgage interest tax credits.  The Iowa Finance Authority yesterday announced that it will issue mortgage credit certificates that enable Iowans to qualify for the federal mortgage interest credit.  O. Kay Henderson reports:

The Iowa Finance Authority is offering a new tax credit for new homeowners who fall under limits on annual income and the purchase price of their home. Iowa Finance Authority director Dave Jamison says it’s a credit linked to the mortgage interest new homeowners are paying.

“Yet another way that Iowans who meet our program guidelines can experience the many benefits of home ownership,” Jamison says.

Iowans with the certificates may be able to claim the federal credit on Form 8396.  The IRS describes the credit here.  They note that interest that qualifies for the credit does not qualify for the home mortgage deduction.  You only qualify for the credit if you have a mortgage credit certificate from a qualifying agency; in Iowa, that agency is the Iowa Finance Authority.

The credit isn’t for everyone; there are limits based on income and home price.  From the O. Kay Henderson story:

Eligibility guidelines are different for each Iowa county. In the state’s largest county, Polk County, a couple with an annual income of up to $75,000 could qualify for the credit on a home that was purchased for $250,000 or less.

More from  WHOTV.com.

 

Nick Kasprak, Monday Map: Percentage of Taxpayers with AGI over $500,000 (Tax Policy Blog)

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Fiscal Cliff Notes

TaxGrrrl,  IRS Issues Statement On Tax Legislation, Makes No Promises About Start Of Tax Season:

The delay means that now, there are a lot of new forms to be printed, a lot of software programs to finagle. I’d be surprised – and wildly impressed, mind you – to see tax season kick off on time this year for all taxpayers. But fingers crossed, right?

I think the federal tax season won’t be too bad.  With all of the retroactive conformity problems in the new law, though, a lot of states are likely to give taxpayers fits.

Kevin D. Williamson,  You Cannot Raise Taxes on the Rich:

Tax hikes on the so-called rich may decrease the private sector’s share of income, but they probably will not do much to decrease the real income of high-wage workers and may in reality increase government revenue at the expense of low-wage workers in the long term, though it is very difficult to disaggregate the complex relationships between taxes, wages, and prices. But those who say that they are most interested in economic inequality would do well to follow Kenworthy’s example and look at transfers rather than taxes.

James Pethokoukis,  New study undercuts Obama’s income inequality argument

Washington’s tax hike on wealthier Americans won’t accelerate economic growth, won’t create jobs, and won’t lower the debt by an more than a rounding error. So what was the point of all that debate about the fiscal cliff? Why did President Obama insist on those upper-income tax increases, especially when the economy continues to struggle?

Simple: It was a way — even if mostly symbolic — of addressing what President Obama views as America’s biggest problem: rising income inequality.

A falling tide lowers all boats.

Freakonomics,  How Much Financial Inequality Is Due to Financial Illiteracy?  Is that illiteracy of the people who are unequal, or those who think it’s a big deal.

Jeremy Scott, Both Parties Should Have Pushed Payroll Tax Cut (Tax.com)

 Hani Sarji,  More Estate Tax Changes Could Follow Fiscal Cliff Deal (via the TaxProf)

Patrick Temple-West, More tax revenue to IRS before cliff, and more

 All the talk about the fiscal cliff and the inadequacy of the last-minute deal to avert it obscures one fact: It probably provided the government with tens of billions of dollars in unexpected tax receipts.

Many taxpayers accelerated income and deferred deductions anticipating the rate increases.

Wall Street Journal, The Stealth Tax Hike: Why the New $450,000 Income Threshold Is a Political Fiction:

Paul Neiffer, Fiscal Cliff Tax Bill May Increase Divorce Rate!

 

Russ Fox,  The Problem with PEOs.  No, not these PEOs.

Trish McIntire, More ITIN Info

Missouri Tax Guy,  Married Filing ….

Jack Townsend, HSBC Depositor Pleads Guilty to Conspiracy

Kay Bell, Tax moves to make in January 2013

I like the first half. Let There Be Wine (And Taxes)  (Jason Dinesen)

The Critical Question: Can You Distinguish a Tax from a Ransom Payment? (Robert Goulder, Tax.com)

I wasn’t serious about her anyway.  Ex-KPMG Chief to Auditors: You Are All Flirting With Irrelevance  (Going Concern)

Hope and change.  A lot of change, if you use it to buy coffee.   Should the President Mint a $1 Trillion Platinum Coin? (Megan McArdle)

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What is the return on investment in an additional IRS agent?

Friday, March 11th, 2011 by Joe Kristan

The Freakonomics blog approvingly cites the power-grabbing IRS Commissioner, Doug Shulman:

Now, the IRS may be doing even fewer audits, thanks to political efforts to cut the agency

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The 1986 Massacre of the Innocents

Tuesday, February 9th, 2010 by Joe Kristan

Future archaelogists will puzzle over the apparent loss of millions of children in 1986. About seven million dependents claimed on 1040s failed to show up in the following year. Freakonomist Steven Levitt puts a human face on this tragedy (via the TaxProf):

He told the story … of the midlevel employee who had been with the IRS for some 30 years who became fascinated over time by what sort of creatures and things taxpayers listed as dependents. Clearly, many of these

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