Posts Tagged ‘Going Concern’

Tax Roundup, 6/9/14: The great Illinois privatized tax shakedown. And lots more!

Monday, June 9th, 2014 by Joe Kristan

The wedding was beautiful, and great fun.  Introducing the new married couple.


Illinois sealGreat moments in state taxation.  Tax Analysts has a disturbing story ($link) about how an Illinois law firm is using the “qui tam” recovery procedures of the state’s False Claims Act against out-of-state taxpayers.  In a “qui tam” proceeding, an outside party, known as a “relator,” can file a lawsuit alleging fraud against the state and then share in the recovery — up to 25%, according to the story.

And they actually may be hurting state tax collection efforts, according to the story:

“The cases have clearly interfered with the administration and enforcement of tax law and may have even ultimately cost the state money, though it’s impossible to quantify how much,” said Mark Dyckman, the Illinois Department of Revenue’s deputy general counsel for sales tax litigation.

The story says the firm involved “is responsible for 99 percent of the qui tam tax litigation in Illinois.”

The story says Illinois may encouraged the suits initially, apparently thinking it could get some easy money out of the deal.  In other states where the firm tried the same thing, state Attorneys General won dismissals of the initial suits, discouraging further efforts.  The firm is also incentivized by the ability of a relator to share in outsized false claim penalties:

Second, while the treble damages for back taxes under false claims acts naturally attract the most attention, [taxpayer attorney Jordan] Goodman said the civil penalty — generally $5,000 to $10,000 per false claim under the federal law and $5,500 to $11,000 per false claim under the Illinois statute — can be just as oppressive, depending on what counts as a false claim. If each monthly sales tax return is a false claim carrying a $10,000 penalty, and 12 returns are filed in one year, that’s a $120,000 penalty. If every failure to collect taxes on shipping and handling is a false claim, and the business averages 10 sales into the state per month for 120 false claims, that’s a $1.2 million penalty for the year, which can turn into $12 million for the 10-year period covered by the false claims act.

Wikipedia image of Tams

Wikipedia image of Tams

The story says that one tactic used by the Illinois law firm is to make out-of-state purchases over the internet, and then to file suits if no sales tax is collected.  As the law covering remote sales remains unclear, it’s difficult to consider these items “false claims.”  That’s especially true in suits in which the taxpayer either was following published guidance or an audit settlement with Illinois.

These cases have apparently been going on since 2002, and the legislature and the state have yet to stop what would appear to be a purely abusive and parasitic practice.  If there ever was a case for universal application of a “sauce for the gander” rule, in which a losing plaintiff had to pay the same amount of penalties asserted against the winning defendant, this would be it.


Alligator bait.  The New Orleans Advocate reports on a Film tax credit promoter sentenced to 70 months.  It’s remarkable what high quality entrepreneurs these state tax giveaways attract.


20130114-1The ISU Center for Agricultural Law and Education is setting up a “Tax Place” feature on its website.  They seek your input.

Paul Neiffer reminds us that FBAR Filing Deadline is Near

Peter Reilly, CPA Faces Prison For Letting Client Deduct Personal Expenses.  It makes you want to carefully consider the work you want to take on.

Russ Fox, Back to the Past: Poker Sites and FBARs. Poker Sites Are Again Reportable Foreign Financial Accounts.  More incomprehensible foreign tax enforcement.


Cara Griffith, Protecting Confidentiality When Information Is Exchanged Between Tax Authorities  (Tax Analysts Blog)

TaxGrrrl, As NBA Finals Continue, Tax Incentives Lure 76ers Into New Jersey   



20140321-3TaxProf, The IRS Scandal, Day 396

Kyle Pomerleau, CTJ and U.S. PIRG Mislead with New Report on Corporate Taxes (Tax Policy Blog):  “USPIRG also doesn’t mention that their ideal corporate tax code has been tried in other countries with negative results. New Zealand attempted ending deferral as USPIRG suggested. The results were devastating to their economy.

Tax Justice Blog, Tax Foundation’s Dubious Attempt to Debunk Widely Known Truths about Corporate Tax Avoidance Is Smoke and Mirrors.  Never let the facts get in the way of what is “widely known.”


Howard Gleckman, Are Domestic Partnerships A Way For Heterosexual Couples To Avoid The Marriage Tax Penalty?   (TaxVox) This sort of thing makes makes me question the usefulness of “nudge” strategies to use the tax code to encourage behavior.  There are always perverse unintended consequences.


News from the Profession.  Public Accounting Firms, Ranked by CEO Hotness (Going Concern).  A tallest midget competition.


Tax Roundup, 5/30/15: Antidumping edition. And: permanent bonus depreciation advances.

Friday, May 30th, 2014 by Joe Kristan

20121120-2Iowa Public Radio, Can Employers Dump Workers On Health Exchanges? Yes, For A Price:

The latest tweak from the Internal Revenue Service essentially prohibits employers from giving workers tax-free subsidies to buy policies in the online public marketplaces created by the health law. The New York Times first reported the rule.

But the headline on the story, “I.R.S. Bars Employers From Dumping Workers Into Health Exchanges,” overstates the case. Nothing stops employers from canceling company plans and leaving workers to buy individual policies sold through the exchanges — as long as the companies pay the relevant taxes and penalties, said Christopher Condeluci, a Venable lawyer specializing in benefits and taxes. Those would vary according to a company’s size and circumstances.

The ACA requires employers with more than 50 “full-time equivalent” employees to provide “adequate” coverage.  The IRS says that subsidizing employees to use the ACA exchanges doesn’t work.  This, of course, is the same IRS that arbitrarily and unlawfully just waived the requirement in the first place through 2014, and for those with under 100 employees through 2015.  Some laws are more equal than others.

It’s fascinating that the Administration refers to the practice of sending employees to buy policies on the exchanges as “dumping.”  The exchanges are a centerpiece of Obamacare, touted as an important step in making affordable coverage available for everyone.  Suddenly they are a “dump.”  Obamacare fines individuals for not patronizing that very dump.


20130422-2Permanent bonus depreciation advances in House.  Tax Analysts reports  ($link, my emphasis)):

Camp said the extenders the committee considered had been renewed enough times that most of them have been or soon will have been extended for at least 10 years, the budget window period. “If we’ve extended something for 10 years, let’s call it what it is, [and] that’s permanent policy,” he said. “We shouldn’t have to raise taxes other places in the economy to keep current tax law.”

The costliest bill the committee approved was H.R. 4718, introduced by Ways and Means Committee member Patrick J. Tiberi, R-Ohio. That bill would permanently extend bonus depreciation, allowing businesses to immediately deduct 50 percent of qualified purchased property. The bill, passed on a 23-11 vote, would expand the definition of qualified property to include owner-occupied retail stores. It would lift restrictions to allow for more unused corporate alternative minimum tax credits, which businesses can claim in lieu of bonus depreciation, to be used for capital investment.

Expiring provisions are a lie.  Any extension of an “expiring” provision should be counted as permenent under budget rules, as they pretty much are.

Related: Dave Camp’s Great Bonus Depreciation Flip-Flop (Howard Gleckman, TaxVox);  Negative GDP Growth Illustrates the Need for Bonus Depreciation (Alan Cole, Tax Policy Blog)


Wind turbineOne of these is not like the other.  The Des Moines Register coverage of last night’s Iowa GOP Senate Primary debate has something I never expected to see in a story about a candidate for statewide office:

Whitaker stands out because he doesn’t support the Renewable Fuel Standard, or any tax breaks for any energy source. “If we don’t believe in mandates for health care, we shouldn’t believe in mandates as it relates to energy,” he said.

All other candidates in both parties genuflect to the Renewables Subsidy idol.  In Iowa, ethanol apostasy is rare; more typical is the GOP governor who is all about picking winners and losers, when the winners are an influential local constituency.

Related: Governor’s press conference praises construction of newest great pyramids.


The IRS needs to regulate these people to stamp out fraud.  “Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that six former employees of the Internal Revenue Service have pleaded guilty to receiving unemployment benefits while they worked at the agency.” (Department of Justice press release)

Robert D. Flach serves up your Friday Buzz.  “Who would have guessed that I would agree with a group of CPAs?”

TaxProf, The IRS Scandal, Day 386





And now they’ve proved it.  A Minneapolis husband and wife who ran a website called were convicted last week on federal tax charges.” (

Across the road, of course.  Where are all the Chickens?  (Paul Neiffer)

News from the Profession.  This Big 4 Firm Just Ruined Selfies for Everyone (Going Concern)


Tax Roundup, 5/29/14: Supreme Court ponders crediting city income taxes on state returns. And: more jeers for “voluntary” preparer regulation.

Thursday, May 29th, 2014 by Joe Kristan

supreme courtThe U.S. Supreme Court will decide a case on whether states must allow a credit for taxes paid to municipalities.  The Supreme Court yesterday agreed to hear an appeal of Maryland v. Wynne, where a Maryland court ruled that the state must allow a credit against Maryland taxes for taxes paid in non-Maryland cities by Maryland residents.

State generally allow their residents credits for taxes paid to other states, to the extent the taxes don’t exceed resident-state tax on the same income.  Iowans compute this credit on Form 130.  This keeps residents with out-of-state income from doubling-up their state taxes.  Municipal taxes don’t necessarily get the same treatment.  An Iowa Department of Revenue representative outlined the state’s position:

Iowa Code section 422.8(1), which provides for the out-of-state tax credit, only refers to tax paid to another state or foreign country.  “State” is defined in Iowa Code section 4.1(32) as including the District of Columbia and its territories.  Therefore, based on the Iowa statute, Iowa would take the position that the out-of-state tax credit is not allowed for municipal taxes.

I have no idea how the court will rule on this.  Both Maryland and the Obama administration urged the court to take the case, which might indicate the court is sympathetic to them.  Or it might not.  For its own reasons, the Court may be looking for a vehicle to clarify the law of multistate income tax.

A brief from an organization of municipality attorneys describes the Maryland holding being appealed:

1. First, in order to avoid substantial interference in interstate commerce, the dormant Commerce Clause of the United States Constitution requires every state and subdivision thereof to give its residents a full tax credit for all income taxes paid in another state or subdivision; and

2. Second, the receipt of Subchapter S pass-through income in Maryland is “interstate commerce” which is being substantially affected by Maryland’s tax structure, in violation of the dormant Commerce Clause.

Both of those points seem perfectly reasonable to me.  If the court rules against the taxpayer, states may try to raise money be limiting their credit for taxes paid to other states.

In any case, it would be prudent for Iowans who have paid taxes to non-Iowa municipalities to file protective refund claims for open years.  For taxpayers who extended 2010 returns, that year is still open; otherwise, 2011 is the earliest open year.  The court will hear the case in its term beginning in October.

The TaxProf has a coverage roundup.  TaxGrrrl reports in Supreme Court Agrees To Hear Landmark Case On Whether States May Tax Income Earned In Other States, with a good discussion of the history of the case.


20130121-2Another supporter of preparer regulation comes out against “voluntary” certification.  The American Institute of Certified Public Accountants came out against the IRS “voluntary” preparer certification system this week.  Now the National Association of Enrolled Agents, which like the AICPA was a fan of the now-defunct IRS mandatory preparer regulation scheme, has also come out against the “voluntary” program proposed by Commissioner Koskinen.  Robert D. Flach reports:

It appears that the main objection of NAEA to the current IRS proposal is the replacement of the original initial competency test used in the pre-Loving mandatory RTRP program with a “50-question ‘knowledge based comprehension test’ to be created by individual CE providers”.

It goes on to say –

“CE by itself, even in combination with a ‘knowledge based comprehension test’, fails to provide a taxpayer with any assurance that the person preparing his or her return is even minimally competent to do so.”

I think this is just another way for the IRS to help its friends at the national tax prep franchises to get something to put on their windows without helping taxpayers.  Considering its limited financial resources, it is absurd for the IRS to be taking on a new program.  Taxpayers can already choose CPAs or Enrolled Agents if they want “certified” preparers, and nothing stops unenrolled preparers from setting up their own system.  You have to have a lot of unwarranted faith in IRS goodwill to believe that the “voluntary” program won’t really be mandatory, as the IRS gives little perks to the “volunteers” and little hassles to everyone else.



Kay Bell, Actual auto expenses or standard mileage rate? Which business deduction method will cut your taxes more?

William Perez,’s Direct Pay.  “Unlike the Electronic Federal Tax Payment System (EFTPS), people using Direct Pay do not need to register to use the service.”


20140328-1Russ Fox, Punt Blocked; National Audit Defense Network Heading to ClubFed.

Cara Griffith, How Much Knowledge Is in an Audit Manual? (Tax Analysts Blog).  “Yet while the IRS and several states make their audit manuals available online, other states, including Louisiana, do not. Taxpayers should not have to make a public records request to obtain manuals that will provide guidance on how a state conducts an audit. ”

Leslie Book, TEFRA Outside Basis and Tax Court Jurisdiction (Procedurally Taxing). “Periodically, like a kid forced to eat spinach, I will tackle TEFRA developments.”

Peter Reilly, Z Street Suit On IRS Israel Targeting Can Move Forward. “This lawsuit much like Teapartygate confirms me in my view, that the evaluation of whether an organizations purposes should allow it exempt status is not something that the IRS should be doing.”

Jack Townsend, Zwerner Jury Verdict — FBAR Willfulness for 3 Years

TaxProf, The IRS Scandal, Day 385


guillotineAndrew Lundeen, France’s 75 Percent Tax Rate Offers a Lesson in Revenue Estimating (Tax Policy Blog):

Since elected, French President Francois Hollande has raised the income tax, corporate tax and VAT. The government forecasted that these tax increases would lead to an increase in revenue of 30 billion euros.

As reported by the BBC, those estimates were off by about half:

“The French government faces a 14bn-euro black hole in its public finances after overestimating tax income for the last financial year.”

You can’t expect people just to stand still for something like that.


Adele Morris, Three Options for Better Climate Policy (TaxVox) Carbon Taxes, State carbon taxes, or no carbon tax.


Going Concern, IRS Throws Hissy Fit About Not Being Able to Regulate Preparers, Gives Up On Everything.



Tax Roundup, 5/28/14: Tax Fairy isn’t handicap-accessible. And: Why you should let your tax guy do the talking.

Wednesday, May 28th, 2014 by Joe Kristan

tax fairy
Audit defenders can’t defend themselves.  
There is something deep in our DNA that enables us to believe in the supernatural, at least when it comes to taxes. Otherwise sensible people act as if they believe in a Tax Fairy who can wave a magic wand to make taxes go away.  Operators offer themselves as intermediaries to the tax spirit world, taking real money to generate pretend tax breaks.

It had to take a real leap of faith to pay good money to the National Audit Defense Network.  Members of this Nevada group were convicted in Las Vegas yesterday of tax charges that included an implausible tax credit scheme.  They set up a “shopping” web site called Tax Break 2000 that was inaccessible to handicapped users.  They would then sell Tax Fairy adherents a “modification kit” to make the web site handicap-accessible for $10,475 — 20% down, and the rest payable on a promissory note “when they had no expectation that the customers would make payments on the promissory notes.”  They then told their clients that this generated a $5,000 tax credit.

How many Taxafarieans paid the $10,475 tithe?  According to the indictment, they sold 21,610 kits.  Assuming they collected 20% of the sales price, that grossed them $45,272,950.

Any attempt to commune with the Tax Fairy runs into snags.  The first big snag here was a letter from their own internal “dream team” of tax advisors telling them this wouldn’t work.  The indictment says the NADNers went opinion shopping and found accommodating attorneys who said it might work.  Good enough!

They had more difficulty clearing the next obstacle: a permanent injunction against selling Tax Fairy access.  But that’s the least of their problems now.

This case has attracted a little extra attention because of the involvement of a former NFL punter, who apparently decided to ignore his professional training and go for it.  When trick plays fail, they fail badly, and the participants now may face long prison terms.

And there is no tax fairy.


Wind turbineTony Nitti, Tax Geek Tuesday: Hot Assets And The Sale Of Partnership Interests

Kay Bell, Federal workers, including members of Congress and Treasury employees, owe Uncle Sam $3.3 billion in back taxes

No.  Does Warren Buffett Practice What He Preaches? (Paul Neiffer)  “The cost to Warren individually of raising his individual income tax bracket by 10% annually may cost him personally a couple of million or less, while his company saves over $400 million in tax by using energy tax credits.  I would make the trade-off any time.”



TaxProf, The IRS Scandal, Day 384

Joseph Thorndike, Bad Ideas Are Like Bad Pennies (Tax Analysts Blog).  He’s talking about private collection of IRS debts.  Considering that the IRS isn’t exactly blemish-free in its debt collection practices, I don’t share the objections to private collection of undisputed tax debts.

Joseph also raises this point: “But it’s also expensive to pander, since every dollar invested in IRS collection can return up to $20 in new revenue.”  I think that’s hugely unlikely as a marginal return, based on what I see in the field and the way the IRS misdeploys resources (preparer regulation, anyone?).


Not Senator Wyden

If there is something wrong with our tax exemption, then there is something wrong with America.  I won’t stand here while you badmouth our country!

David Brunori, Taxing Togas and Keggers (Tax Analysts Blog).  “States should consider ending the absurd practice of granting property tax exemptions to charitable organizations.”

Andrew Lundeen, The Economic Effects of Bonus Depreciation (Tax Policy Blog). “Permanently extending bonus depreciation would spur investment, lift wages, grow the economy, and increase federal revenue.”

Howard Gleckman, Turning Carbon Tax Theory Into Reality (TaxVox).  Don’t hold your breath for this to be enacted, even if it would keep that carbon in your lungs.


Do you ever wonder why practitioners like to do the talking when the IRS gets involved? Yes, by all means stand up for your rights when dealing with the IRS.  But there’s a line where you should stop.  Going Concern tells us of a Mr. Calcione who went way over the line:

Three days after the agent left the voicemail, Calcione left a couple voicemails of his own. One of the messages contained a threat made by Andrew Calcione that if the agent called him again he would show up at the agent’s home and torture the agent, then rape and kill his wife and injure his daughter while the agent watched, before killing the agent. A second message left by Calcione requested that Calcione disregard the first message, which Calcione said was left in error.

Oh, you didn’ t mean my wife and daughter?  Well, OK, then!

Mr. Calcione was convicted of threatening an IRS agent.  Whatever tax problems he had before, that voice mail made things much, much worse.

Related: Man Convicted Of Threatening To Assault & Kill IRS Agent, Family Over Audit Proceedings  (TaxGrrrl)



Tax Roundup, 5/27/14: IRS not so severe on e-file identification? And driving the extra mile to save on taxes.

Tuesday, May 27th, 2014 by Joe Kristan

e-file logoThe IRS may end up less ridiculous than they appear to be in writing.  We mentioned last week the new IRS Publication 1345 rules for e-file tax firms that by their terms appear to require practitioners to card their in-office clients and run credit checks on clients who mail or upload their tax information.  Our local “stakeholder liaison (the IRS representative who works with practitioners) called me and said she has been told by higher-ups that the requirements will be less severe than they look.  She also called Jason Dinesen, who reports:

This IRS this afternoon confirmed to me and other practitioners who had been making the IRS’s lives miserable the last few days that: the new e-file rules apply only to electronically signed e-file authorizations. And “electronically signed” means signed by some means other than pen-to-paper.

I hope this is true, but I will feel better when the IRS puts it in writing.  After all, you aren’t protected form penalties by oral advice.  But even if it is true, it seems even sillier than the original rule.  The whole idea is to prevent identity theft, but it’s a rare ID thief who hires a practitioner to steal identities.  It would be rarer still for one to go through the trouble of using an e-signature return.  That’s why I’m not fully convinced by the liaison; it just would create a requirement so onerous for a narrow set of returns that few people will file that way.

Related: Tax Roundup, 5/21/14: Practitioner Pitchforks and Torches edition. And: math remains hard!


20140527-1TaxGrrrl, On Memorial Day, A Look At Surviving Family Military Benefits   

If you’re a serious poker player, you might want to check out Staking and the 2014 WSOP: Nothing Has Changed.

TaxProf, The IRS Scandal, Day 383

Lyman Stone, New State-Level Price Data Shows Smaller State Real Income Differences (Tax POlicy Blog):

Federal tax progressivity has strange consequences. People who are “poor” in one state could be “rich” in another without changing the dollar amount of their income. So the progressive nature of the federal income tax can lead to poor- or middle-class people in high-price states paying taxes equivalent to what significantly richer (in real, standard-of-living terms) people would pay in low-price states.

It costs more to be rich in New York than Des Moines.


Renu Zaretsky, The ACA, Extenders, and More Swiss Banks.  The TaxVox headline roundup includes a link to a NY Times piece on a recent IRS ruling to prevent “dumping” of employees on state exchanges through tax-free reimbursement plans. Just one more hasty patch on a leaky system.

Robert D. Flach comes back from a long weekend with your Tuesday Buzz!

News from the Profession. California Board of Accountancy Says the Early Bird Gets the CPA Exam Worm (Going Concern)


20140527-2Going the extra mile to save on taxes.  An Alaska doctor should get points for endurance, anyway, even if it turns out that he is a tax cheat.  The Justice Department accuses Michael Brandner, an Anchorage doctor, of evading taxes through offshore accounts.  According to the Department press release, the physician literally was operating under-the-radar (my emphasis):

According to court documents, Brandner engaged in a scheme to hide and conceal millions of dollars of assets from the Alaska courts and from his wife of 28 years who was divorcing him.  Shortly after the divorce was filed, Brandner left Alaska and drove to Central America after converting assets into five cashier’s checks worth over $3,000,000.

Driving from Alaska to Panama isn’t for the faint-hearted.  Driving their with $3 million in cashiers checks — that’s impressive, in a crazy sort of way.  If he is convicted, his sentence should include time served on the road.



Tax Roundup, 5/23/14: We’re sorry. Can we have our funding now?

Friday, May 23rd, 2014 by Joe Kristan
Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The IRS wants its budget back.  The agency has withdrawn the proposed regs that would institutionalize its mistreatment of Tea Party groups.  Accounting Today reports:

The announcement Thursday came in response to the unprecedented number of comments—over 150,000—the IRS received on the proposed rules, which were supposed to govern the types of political activity that would be permissible for groups to maintain tax-exempt status as “social welfare” organizations under Section 501(c)4 of the Tax Code (see Treasury and IRS Issue Guidance for 501(c)4 Tax-Exempt Social Welfare Organizations). The issue has roiled the IRS since last year, when the former director of the IRS’s Exempt Organizations unit, Lois Lerner, admitted that the IRS had used terms such as “Tea Party” and “Patriot” to screen applications from conservative groups applying for tax-exempt status. Those revelations led to the departures of Lerner and a number of other high-ranking officials at the IRS, along with a series of contentious hearings, subpoenas and contempt of Congress charges against Lerner.

The new commissioner, John Koskinen, indicated back in February that the proposed regulations are not likely to be finalized anytime soon and would be subject to heavy revision in response to the thousands of comments the agency received (see IRS Commissioner Koskinen Says Proposed Tax-Exempt Rules Won’t Be Finalized Soon). Republican lawmakers in Congress introduced legislation in February to block the proposed regulations (see Congress Considers Legislation to Block IRS’s Proposed 501(c)4 Regulations).

I suspect it will be a loooong time before they come out with a new set of proposed regulations — comparable to the wait for the final regulations on self-employment taxation of LLC members, which have been “proposed” now since 1997.  This is probably a necessary first step for the IRS to get its full funding restored, given how much it has done lately to demonstrate that it is institutionally opposed to the GOP.  Maybe it would help also to demonstrate some fiscal discipline by dropping its costly pursuit of preparer regulation by “voluntary” means.


Related: TaxProf, The IRS Scandal, Day 379


Jim Maule, No Deduction If Entitled to Reimbursement.  “It is a long-established principle of federal income tax law that a taxpayer is not permitted to deduct an otherwise deductible expense to the extent that the taxpayer is entitled to reimbursement from the taxpayer’s employer.”

Kay Bell, Summer travel time is prime tax time

Peter Reilly, American Atheists Denied Standing To Challenge Church Tax Breaks.

Robert D. Flach come’s through with the week’s third Buzz!




Christopher Bergin, The Punishment of Credit Suisse Is Not Enough (Tax Analysts Blog). “People need to start going to jail for these types of abuses.”  No, our tax authorities prefer to shoot jaywalkers so we can gently chastise the international money-launderers.

Jack Townsend, Credit Suisse Update – The Aftermath for Credit Suisse #1.  The Federal Tax Crimes blog rounds up coverage of the Credit Suisse plea.

Stephen Olsen, Summary Opinions for 5/16/14 (Procedurally Taxing). The most interesting item to me in this roundup of tax procedure posts is “IRS is doing limited audits on Section 409A plans, and Winston and Straw has some coverage here.”  The horrible Section 409A rules haven’t triggered many audits.  That may be ending, and 20% penalties, plus income taxes, on funds never received will then be on the way as a result of foot-fault violations of the insanely-complex rules governing non-qualified deferred compensation plan distributions.


Joseph Henchman, IRS Considering Change in Tax Treatment of Travel Loyalty Points (Tax Policy Blog). What could go wrong?

Len Burman, Why Not Ditch the Medical Device Excise Tax and Boost Cigarette Taxes? You know, if we really wanted to promote public health, we should consider promoting e-cigarettes to get people off the real thing.  Instead, the government wants to tax and restrict them just like real coffin nails.


Adam Weinstein, Why Our Political System’s Screwed, in One Very Basic Chart:



Via Nick Gillespie.


News from the Profession: Ex-KPMG Partner Who Gave Insider Tips to His Former Golf Buddy Is Going to Talk About Ethics Before He Goes to Prison (Going Concern)


Have a great Memorial Day Weekend!



Tax Roundup, 5/22/14: IRS teams up with Bernie Madoff. And: more on the new e-file ID rules.

Thursday, May 22nd, 2014 by Joe Kristan
Bernie Madoff

Bernie Madoff

The IRS wants in on Bernie Madoff’s action.  The Tax Court is going to think about it.

Bernard Kessell died in July 2006.  He might have died content believing he was leaving a healthy investment portfolio for his heirs.  After all, just one part of the portfolio had issued its most recent month-end statement showing a value of $3,221,057.  That statement was issued by Bernie Madoff.

Of course Mr. Madoff was arrested in 2008 and is now residing in federal prison on charges arising from the Ponzi scheme that victimized Mr. Kessell and so many others.  The real value of the securities in Mr. Kessell’s Madoff portfolio was zero.

But the IRS isn’t letting that get in the way.  The agency says Mr. Kessell’s estate should pay estate tax on the value that Mr. Kessell died thinking he owned, rather than the zero actual value.  It wants to piggyback on Mr. Madoff’s fraud to tax an estate value that wasn’t there.

The IRS asked the Tax Court for summary judgment that the asset to be taxed was the account itself, not the vaporous underlying assets, and that because Mr. Madoff hadn’t been unmasked, a willing buyer would pay full sticker for the lying value on the Madoff statements.  The Tax Court court wasn’t willing to go along on summary judgement:

We cannot say on the record before us, however, whether that agreement constituted a property interest includible in Decedent’s gross estate separate from, or exclusive of, any interest Decedent had in what purported to be the assets held in the Madoff account. This question is best answered after the parties have had the opportunity to develop the relevant facts at trial. We will therefore deny respondent’s motion on this point.

As to the issue of the value, Judge Kroupa had this to say (citations omitted).:

     Respondent argues that a Ponzi scheme, by its very nature, is not reasonably knowable or foreseeable until it is discovered or it collapses. Respondent notes Mr. Madoff’s particular skill and that his Ponzi scheme was not disclosed until it collapsed in December 2008. Respondent then reasons that Mr. Madoff’s Ponzi scheme was knowable or foreseeable only at the point when it collapsed — when the amount of money flowing out of Madoff Investments was greater than the amount flowing in. For purposes of this motion, at least, we disagree.

Some people had suspected years before Mr. Madoff’s arrest that Madoff Investments’ record of consistently high returns was simply too good to be true. Whether a hypothetical willing buyer and willing seller would have access to this information and to what degree this information would affect the fair market value of the Madoff account or the assets purportedly held in the Madoff account on the date Decedent died are disputed material facts.  Thus, we will deny respondent’s motion on this point as well.

The rule on how assets are valued is in Reg. Sec. 20.2031-1(b):

 The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.

Most folks would consider the fact that the account was invested in a Ponzi scheme to be one of those relevant facts.  I guess that’s why most of us don’t work at IRS.

Cite: Estate of Bernard Kessel, T.C. Memo. 2014-97.


20130121-2The AICPA doesn’t care for the “voluntary” IRS preparer regulation proposal.  The reports:

That system, the AICPA argues, would create implied government backing for those preparers who comply with the standards, while punishing those who do not.

“The proposed voluntary system would undoubtedly leave the impression among most taxpayers that certain tax return preparers are endorsed by the Internal Revenue Service (IRS),” according letter.

Further, nonbinding standards would fail to root out bad actors, according to the group.

“As a practical matter, any voluntary regime constructed would still not address the problems with unethical and fraudulent tax return preparers,” the group contends.

All excellent points.  The AICPA has figured out that the “voluntary” program would eventually be voluntary like United Way contributions were “voluntary” when I was a green staff accountant at a national accounting firm.  They were voluntary, but amazingly, participation in the drive was always 100%.  Maybe the AICPA leaders still remember their staff accountant days.

I would add one more point.  Commissioner Koskinen and Taxpayer Advocate Olson never tire of telling us how underfunded the IRS is.  If so, why are the diverting some of their already inadequate resources to start a new nonessential program?  The obvious answer is they are trying a back door power grab now that the courts have barred the front door.

Going Concern: The AICPA Voiced “Deep Concerns” About the IRS’ Voluntary Tax Preparer Proposal.  “This means war…”

Larry Gibbs, Recent Developments in the IRS Regulation of Return Preparers (Procedurally Taxing).  A long guest post by a former IRS Commissioner about the power grab he never tried.


Russ Fox, New Identification Rules Go Over Like a Lead Balloon:

In this morning’s post, Joe Kristan told his readers to call the IRS. I agree; I urge all tax professionals to speak to or email their IRS Stakeholder Liaison.  

Russ quotes a new post by Jason Dinesen, I Was Wrong: We SHOULD Be Outraged About the New IRS E-File Requirements, which Jason followd up with Questions to Ponder About New IRS E-file Requirements.  I love Question 8: “How many ID thieves use a tax pro?”

Robert D. Flach has a special Thursday Buzz!, which includes Robert’s take on “voluntary” preparer regulation and the new IRS e-file requirements.


20140321-3TaxGrrrl, Still Looking For Your Tax Refund? Errors, 4464C Letters And Other Explanations

Peter Reilly,  Tax Court Threatens To Sanction Courtroom Commando Mac MacPherson.

Kay Bell, NYC arena Madison Square Garden pays no property taxes

Me, IRS Releases Applicable Federal Rates (AFR) for June 2014


William McBride, High U.S. Corporate Tax Rate Chases Away Companies, Jobs and Tax Revenue (Tax  Policy Blog).  If it didn’t, it would be a fascinating case of economic actors failing to respond to incentives.

TaxProf, The IRS Scandal, Day 378

Renu Zaretsky, Relief, Credits, Cuts, and Roads.  The TaxVox daily headline roundup talks about new tax relief for Minnesotans and the continuing worthlessness of film tax credit programs for everyone but filmmakers.

Cara Griffith, Should Taxpayers Challenge States if They Fail to Enact Rules? (Tax Analysts Blog):

State regulations are often vague or ambiguous, and authorities can use that to their advantage. But states should not be permitted to simply take the position that is in their best interest. They should be required to provide guidance and clarification on the positions they intend to take and, even better, clear-cut examples of how that position will be applied. And if a position will be applied to an entire industry, the state should issue a rule.

States prefer Calvinball rules.


Tax Justice Blog, Junk Economics: New Report Spotlights Numerous Problems with Anti-Tax Economic Model.  I suspect the biggest problem is that TJB doesn’t care for any model that doesn’t justify infinitely-high tax rates.


Des Moines, sometimes you are just adorable:

adorable des moines

Des Moines has started posting commute travel times, just like a big city.  On a bad day, it could be as much as 2 minutes to downtown from here.



Tax Roundup, 5/21/14: Practitioner Pitchforks and Torches edition. And: math remains hard!

Wednesday, May 21st, 2014 by Joe Kristan

20140521-1The new identification rules for remote signatures aren’t going over well.   (See update below.)  At a CPE event yesterday former IRS Stakeholder Liaison Kristy Maitre outlined the new e-filing identity match requirement we are supposed to meet (now!  for extended 2013 returns!).  These include “third-party verification” of identities of our long-time clients if they don’t visit the office.  The ones that visit, we only need to see their papers.

The 250 or so practitioners present didn’t appreciate the joke at all.  They asked the obvious question: how do we even comply with this?  It’s not at all clear how we get “third-party verification.”  I can pretty much guarantee that nobody is complying with that requirement now, because few are aware of it, and the ones that are don’t know where to start.

While the requirements are supposed to be part of the IRS war against identity theft, this effort is like responding to the attack on Pearl Harbor by bombing Montreal.  Identity thieves don’t waltz into tax prep offices and pay us to prepare fraudulent refund claims.  They prefer TurboTax.

Yet, there may be a method to the madness, suggested by one practitioner.  What if some outfit is gearing up to provide third-party verification services — say, one of the national tax prep franchises?  And the IRS has quietly created their revenue stream with this absurd rule?  You might say this preparer is cynical; I say he’s been paying attention.

So let’s fight.  Kristy is collecting comments and questions to send to her erstwhile IRS colleagues to try to stop this nonsense.  Send your comments to  I believe the IRS will back off if we brandish the electronic torches and pitchforks.

Update, 11:30 a.m.  I received a call from an IRS representative this morning saying that they have been getting phone calls as a result of this post (well-done, readers!).  She tried to reassure me by telling me that the third-party verification doesn’t apply to in-person visits.  I knew that.  I told her that as I read the rules, there are either “in-person” or “remote” transactions, with no third category of, say, “I’ve worked with this client for many years and they’re fine.” She didn’t disagree, though she still thinks I’m overreacting.  She did say IRS field personnel are  “elevating” the issue and seeking “clarification” from the authors of these new rules, including what “authentication” means for in-person visits and what a “remote transaction” is that would require third-party verification.  Keep it up, folks!


Russ Fox, Yes, Mom, I Need to See Your ID

Jana Luttenegger, Updated E-Filing Requirements for Tax Preparers

Jason Dinesen, Hold the Phone on the IRS E-file Outrage Machine 

Me, Welcome back, loyal client. IRS says I have to verify that you aren’t a shape-shifting alien.


The IRS Scandal, Day 377.

News from the Profession.  Crocodile Injured By Falling Circus Accountant in Freak Bus Accident (Going Concern)

Kay Bell, National Taxpayer Advocate joins fight to stop private debt collection of delinquent tax bills.  I’d rather she fight to keep the IRS from implementing its ridiculous e-file verification rules.

TaxGrrrl, Congress, Ignoring History, Considers Turning Over Tax Debts To Private Collection Agencies

Jim Maule, It Seems So Simple, But It’s Tax.  “People are increasingly aware that the chances of getting away with tax fraud are getting better each day.”

Missouri Tax Guy,  NO! The IRS did not call you first.


Tax Justice Blog, Legislation Introduced to Stop American Corporations from Pretending to Be Foreign Companies.  How about we just stop taxing them?

Kyle Pomerleau, Tom VanAntwerp, Interactive Map: Where do U.S. Multinational Corporations Report Foreign Taxable Income and Foreign Income Taxes Paid? (TaxPolicy Blog).  Holland does well, as does Canada.

Howard Gleckman, Tax Chauvinism: Who Cares Where a Firm is Incorporated?

So we are left with a sort of financial chauvinism. It is important to some politicians to be able to say that a company is a red-blooded American company. But when it comes to multinational firms in a global economy, why does that matter? 

Because, ‘Merica!


Andrew Mitchel now has some online tax quizzes for your amusement.  If they are too tough, the next item might restore your self-esteem.


20120905-1If you can’t answer these questions, taxes are the least of your problems.  Tackle these quizzlers (via Alex Taborrok):

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow.

More than $102. Exactly $102,. Less than $102? Do not know. Refuse to answer.

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, would you be able to buy.

More than, exactly the same as, or less than today with the money in this account? Do not know. Refuse to answer.

3. Do you think that the following statement is true or false? ‘Buying a single company stock usually provides a safer return than a stock mutual fund.’

T. F. Do not know. Refuse to answer.

I won’t give away the answers, but I shouldn’t have to.  Sadly, most people find these questions hard.  From Alex Taborrok:

Only about a third of Americans answer all three questions correctly (and that figure is inflated somewhat due to guessing). The Germans and Swiss do significantly better (~50% all 3 correct) on very similar questions but many other countries do much worse. In New Zealand only 24% answer all 3 questions correctly and in Russia it’s less than 5%.

At least that helps explain Vladimir Putin’s popularity.



Tax Roundup, 5/19/14: The Roth dilemma. And: risks in enlisting the bookkeeper in your tax crimes.

Monday, May 19th, 2014 by Joe Kristan

IRAIs it better to get a tax benefit now and pay taxes later on retirement income, or vice-versa?  Bloomberg econobogger Megan McArdle ponders the question in To Roth, or Not to Roth:

In theory, the calculation is easy: Figure out whether your tax rate is likely to be higher now or in the future. If you’re young, the answer is likely to be “future”; if you’re in your peak earnings years, you’re probably looking at a lower tax rate when you’re retired.

But while the theory is simple, in practice, things are considerably more complicated. Personal finance is less about math than psychology . . . and tax policy, in this case. What will the tax rate on your income be when you retire — higher or lower than your current tax rate?

“Roth” IRAs and 401(k)s offer no current tax reduction, but if the account is left untapped long enough, there is never an income tax on the earnings.  It’s not always a tough choice.  Many young people face a marginal income tax rate of zero.  To the extent a low-earning young taxpayer benefits from a 401(k) plan or saves in an IRA, you might as well go with a Roth version, as there is little or no current benefit anyway.

As you climb the income ladder, it quickly becomes a more difficult decision.  When my company first had a Roth option, I opted in for a year.  Then it occurred to me that I was making a bet on much higher tax rates in the future at much lower income levels.  That seemed like a losing bet (but see this) and I switched back to the traditional 401(k) with current tax savings.

Megan also notes a real, if hard to quantify, problem with betting on future benefits (my emphasis):

We’re running some substantial deficits, and we’ve made some big promises to retirees. Those obligations will have to be paid for somehow, and by “somehow,” I mean “With higher taxes on someone.” What are the chances that you’ll be that someone? Pretty high, if you save a lot for retirement.

That makes a Roth sound like a pretty good bet. But unfortunately, the same logic that suggests higher income taxes in the future also suggests that a hungry-eyed Congress might settle on all those fat tax-free retirement accounts as a way to balance the books. What Congress giveth, Congress can taketh away. Can you really count on that income being tax-free when it’s finally time to collect it?

If you think no politician would be so brazen, just remember:  “If you like your doctor, you will be able to keep your doctor, period. If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.


20121120-2Good thing the ACA solved the problem of the uninsured.  Report: 230,000 Iowans still lack health care coverage (Des Moines Register).  Good thing we destroyed the health insurance industry and imposed a whole series of punitive and complicated taxes.


Russ Fox, Deadlines for Us, But Not for Them (Part 2), “Later this week it will be seven months since my reply was received. Another nine-week hold has been put on collection activities as the IRS admits that there is correspondence waiting to be reviewed. If we go nine more weeks it will be over nine months since I responded.”

Another reason for a sauce-for-the-gander rule, applying the same rules to the IRS that they apply to us.

Robert D. Flach has a similar state-level example from New Jersey in THE DFBs!

We are told (highlight is mine) –
“New Jersey wrongly notified about 2,000 taxpayers that they underpaid their 2013 taxes, but the state won’t notify them about the error unless the taxpayer asks, possibly causing taxpayers to send the state money that wasn’t owed.”

Tar and feathers.


20140507-1Peter Reilly, Real Estate Dealer Or Investor – Can’t Switch At Drop Of Hat.  ” One of the more challenging questions in income taxation of real estate transactions is whether a taxpayer is a dealer or an investor.”  Investors get capital gains, dealers don’t.

TaxGrrrl, Tax Extenders Bill Stalled In Senate.  The latest move in the dance to the inevitable last-minute re-extension of the perpetually-expiring tax breaks.


Jack Townsend, Booker Variances are More Common in Tax Crimes. Why? And Do They Disproportionately Benefit the Rich?   He discusses variations from federal sentencing guidelines, including the shockingly-light sentence given Beanie Babies tycoon Ty Warner.

TaxProf, The IRS Scandal, Day 375

William McBride, Top 10 things to Know about Investment and Tax Policy.  (Tax Policy Blog).

Number 2: “Investment in the U.S. has yet to fully recover from the recession and remains near a record low.”

Number 10: “Of the ways to change tax policy to improve investment, expensing generally provides the greatest “bang-for-the-buck” because it applies strictly to new investment.”


Renu Zaretsky, Tax Mistakes, Collections, and Breaks.  Today’s TaxVox headline roundup covers a proposal to revive the use of private collectors in federal tax collection and “Affordable Care Act subsidy mistakes now could mean huge tax confusion later.”

Annette Nellen asks What’s missing from Camp’s tax reform proposal?  She has suggestions.


20120517-1The new Cavalcade of Risk is up at  The venerable roundup of insurance and risk-management posts includes Hank Stern on the possible perils of ride share. There is risk in letting other people use your car, as anyone who has seen Animal House knows, and those risks may not be covered under your car policy.



News from the Profession.  Another EY Associate Taking a Stab at Reality TV (Going Concern)

Honor among fraudsters.  Owners of a nostalgia-themed restaurant chain in Pennsylvania and New Jersey went up the river on tax charges last year.  Now comes word that the inside accountant who (allegedly) helped them cheat on taxes also (allegedly) helped himself.  From

An indictment unsealed today charges 58-year-old William J. Frio, of Springfield Township, with conspiracy, filing false returns, loan fraud, and aggravated structuring of financial transactions.

Prosecutors say Frio, who has been providing accounting services to Nifty Fifty’s since 1986, conspired with the popular chain’s owners in a scheme that used skimmed cash to help themselves and associates avoid paying taxes.

He also allegedly used his role as Nifty Fifty’s accountant to embezzle hundreds of thousands of dollars from the organization.

Aside from the obvious risk of going to jail, there are other complications that arise when businesses cheat on their taxes.  Unless your business is tiny, you need some help from your accounting staff.  When your bookkeeper is willing to defraud the government, don’t be shocked if he isn’t perfectly honest with you.



Tax Roundup, 5/16/14: Iowa Alt Max Tax resurfaces. And: Alimony madness.

Friday, May 16th, 2014 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

The Iowa Alternative Maximum Tax Trial Balloon rises again.  From O. Kay Henderson, ‘Flat tax’ likely on GOP legislators’ agenda in 2015:

The top Republican in the Iowa House says if Republicans win statehouse majorities in the House and the Senate this November, one item on his wish list for 2015 is a “flat” state income tax. House Speaker Kraig Paulsen, a Republican from Hiawatha, spoke early this morning at a breakfast meeting of central Iowa Republicans.

Paulsen and his fellow House Republicans endorsed a “flat” tax proposal last year, but it was not considered in the Democratically-led Iowa Senate. The proposal would have allowed Iowans to continue filing their income taxes under the current system or choose the alternative of a 4.5 percent flat tax on their income, with no deductions.

I call this an “alternative maximum tax” because taxpayers will compute the tax both ways and pay the smaller number.  That contrasts with the alternative minimum tax, where you compute taxes two ways and pay the higher amount.  It has the obvious drawback of adding a new layer of complexity to the current baroque Iowa income tax.

20120906-1The proposal is likely an attempt to enact a lower rate system in a way that doesn’t upset fans of Iowa’s deduction for federal income taxes — particularly the influential Iowans for Tax Relief.  Because the deduction would rarely provide a better result than the alt max tax, support for the old system would wither away, maybe.

I’m probably too much of a tax geek to read the politics correctly, but I’m not convinced adding a new computation to the Iowa 1040 will fire up the electorate.  I think something like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would be easier to run on.  Eliminate all the crony tax credits and well-intended but futile tax breaks.  Get rid of the job-killing, worst-in-the-nation Iowa corporation income tax.   Drastically lower rates, increase the standard deduction, and limit the role of the income tax to funding the government.   This would get my vote anyway, and it would at least be awkward to argue instead for the current system that sends millions to some of Iowa’s biggest corporations as subsidies on the backs of you, me and small businesses.

Related: The Iowa flat tax proposal: a good deal for middle class and up, but not for lower incomes.


I always thought enforcing the tax rules for alimony would be about the easiest job the IRS could have.  When you pay alimony, you get an above-the-line deduction, but only if you list the name and social security number of the recipient ex-spouse.  Just match the deduction with the income and generate notices when they don’t match.

This information systems problem is apparently too much for the IRS.  Peter Reilly reports:

According to the TIGTA report there were 567,887 Forms 1040 for 2010 that had alimony deductions.  The total claimed was $10 Billion.  When they compared the corresponding returns that should have recorded the income, there were discrepancies on 266,190 returns including 122,870 returns that had no alimony income at all reported.  There were nearly 25,000 returns where the income recognized was greater than the deduction claimed which produced a bit of an offset ($75 million).  On net, deductions exceeded income by $2.3 billion.  In her piece “Alimony Tax Gap is $1.7 BillionAshlea Ebeling goes into more details on the report, so I’m going to get a little more into what I see as the big picture here.

While I’ve never been a huge fan of the IRS, over my career I had developed a grudging respect for the organization’s competence and professionalism.  That’s been mostly drawn down over the last few years.


taxanalystslogoChristopher Bergin, A Warning About the IRS That We Should Heed (Tax Analysts Blog):

As I wrote almost a year ago, the IRS is in trouble. Punishing it will do no more good than ignoring what has happened over the last year. The former seems to be the plan of House Republicans; the latter appears to be the White House plan. We need to fix it, and that is harder than either of the above two approaches.

This is correct.  Unfortunately, the IRS became a partisan organization in the Tea Party scandal, and it’s proposed 501(c)(4) regulations only make that official.  The impasse won’t be broken until the IRS does something to reassure Republican congresscritters.  Withdrawing the proposed rules is probably a necessary start.


Kay Bell, Johnny Football’s Texas residency can cut his NFL income tax.

Lyman Stone, The Facts on Interstate Migration: Part Five (Tax Policy Blog):

On the whole, these high-inward migration states tend to have lower tax burdens. North Carolina and Idaho have periodically had higher than average tax burdens, but most, like Tennessee and Nevada, have consistently low tax burdens. Again, this doesn’t conclusively prove that taxes drive migration, as no doubt other living costs are lower in these states too: but it does suggest that taxes cannot be discounted out of hand.


Jason Dinesen, Glossary of Tax Terms: Asset

TaxGrrrl, Tesla Continues To Roll Out Tax Strategies For Consumers .  An auto company with a marketing pitch built around tax credits seems like a bad thing to me.

Stop by Robert D. Flach’s Place for a solid Friday morning Buzz!




Howard Gleckman, Are Multinationals Getting Tired of Waiting for Corporate Tax Reform? (TaxVox).  They seem to be taking a do-it-yourself approach more and more.

Tax Justice Blog, States Can Make Tax Systems Fairer By Expanding or Enacting EITC.  I think this is wrong, at least the way the earned income tax credit works now.  Arnold Kling has a much-more promising proposal that would replace the EITC and other means-tested welfare programs.

Kyle Pomerleau, Flawed Buffett Rule Reintroduced in Senate (Tax Justice Blog).  Of course, that’s the only kind.


Cara Griffith, In Search of a Little Guidance (Tax Analysts Blog). “If informal guidance is the only guidance available to practitioners and taxpayers, can they rely on it?”

TaxProf, The IRS Scandal, Day 372.  Guess what?  It wasn’t just a few rogues in Cincinnati.


News from the Profession.  Alleged “Touch It For a Buck” Creeper CPA Got His License Revoked For Felony Creepiness (Going Concern).



Tax Roundup, 5/14/14: Earned income credits, still busted. And: extenders advance.

Wednesday, May 14th, 2014 by Joe Kristan
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.

Nope.  Still busted.  From comes an update on what some call America’s most successful anti-poverty program:

The Treasury Department has released its latest report  on the fight against widespread fraud in the Earned Income Tax Credit program. The problem is, fraud is still winning. And there’s not even much of a fight.

“The Internal Revenue Service continues to make little progress in reducing improper payments of Earned Income Tax Credits,” a press release from Treasury’s inspector general for Tax Administration says. “The IRS estimates that 22 to 26 percent of EITC payments were issued improperly in Fiscal Year 2013. The dollar value of these improper payments was estimated to be between $13.3 billion and $15.6 billion.”

Wait.  Didn’t the President sign a bill in 2010 to fix all this?

The new report found that the IRS is simply ignoring the requirements of a law called the Improper Payments Elimination and Recovery Act, signed by President Obama in 2010, which requires the IRS to set fraud-control targets and keep improper payments below ten percent of all Earned Income Tax Credit payouts.

Whatever the EITC does to help the working poor, it is a boon to the Grifter-American community.  Fraudulent EITC claims are a staple of ID theft fraud and low-tech tax cheating in general.

It’s worth noting that the high rate of improper EITC payouts has not gone down in spite of the ever-increasing IRS requirements for preparers who issue returns claiming the credits.  This should give pause to folks who think IRS preparer regulations will stop fraud, though it won’t.

It’s also notable that Iowa recently increased its piggyback EITC to 15% of the federal credit — increasing the annual cost of the credit by an estimated $35 million.  Assuming Iowans are just as honest as other Americans, that means about $8 million of additional stimulus to the Iowa grifter economy.

Finally, the phase-out of the EITC functions as a hidden high marginal tax rate on the program’s intended beneficiaries, the working poor.  The effective marginal rate in Iowa exceeds 50% at some income levels.  Combined with other income-based phase-outs, the EITC becomes a poverty trap.


Related: Arnold Kling,  SNEP and the EITC. “My priors, which I think are supported by the research cited by Salam, is that trying to use a program like the EITC for social engineering is a mug’s game.”



Extenders advance in Senate.  Tax Analysts reports ($link)

Legislation that would extend for two years nearly all the tax provisions that expired at the end of 2013 cleared a procedural hurdle in the Senate May 13.

Senators voted 96 to 3 to invoke cloture on the motion to proceed to H.R. 3474, a bill to exempt from the Affordable Care Act’s employer mandate employees with healthcare coverage through the Veterans Benefits Administration or through the military healthcare program TRICARE.

The bill is the legislative vehicle for the tax extenders. It will be amended to include the text of the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act of 2014 (S. 2260) and likely that of the Tax Technical Corrections Act of 2014 (S. 2261), both of which the Senate Finance Committee passed April 3 via voice vote.

The bill that passes will probably look much like the Senate bill.  The House has advanced bills to make some of the perpetually-expiring provisions permanent, but the President, pretending that they won’t get passed every year anyway, says permanent extension is fiscally irresponsible.

Among the provisions to be extended yet again, mostly through 2015, are the research credit, new markets credits, wind and biofuel credits, bonus depreciation, and increased Sec. 179 deductions.  The five-year built-in gain tax recognition period is also extended through 2015.

Related: TaxGrrrl, Senate Moves Forward To Extend Tax Breaks For 2014


20120906-1O. Kay HendersonKnoxville Raceway ceremony for state tax break of up to $2 million:

Governor Terry Branstad went to Knoxville today to sign a bill into law that gives the Knoxville Raceway a state tax break to help finance improvements at the track.

“This is a great facility,” Branstad told Radio Iowa during a telephone interview right after the event. “Last year, in 2013, they attracted 211,000 visitors, so it’s a big tourism attraction and it’s a good investment and it’s great for the state to partner with the community for a project of this magnitude.”

Here’s how that partnership works: the racetrack will charge sales tax to its customers, and keep the money.  Only two other businesses are special enough to get this sweet deal.  Tough luck for the rest of us who don’t have the good connections and lobbyists.


Walnut st flowersJana Luttenegger, Updated E-Filing Requirements for Tax Preparers (Davis Brown Tax Law Blog).  “The handbook is not exactly clear.

Jason Dinesen, Things Tax Preparers Say: S-Corporation Compensation.  “But too many business owners — and their accountants — treat S-corps like a magic wand that can just make taxes disappear completely.”

Kay Bell, IRS fight to regulate tax preparers officially over…for now

Peter Reilly, Can Somebody Explain Tax Shelters To Thomas Piketty?  In the unlikely event that the Piketty recommendations are ever enacted, Peter notes that “there will be a renaissance of shelter activity.”  Peter provides a “Cliff Notes” summary of this year’s big forgettable book I’ll never read, which I appreciate.  Also: Peter uses the tax-law-as-Swiss Army Knife analogy that I am so fond of.

Robert D. Flach, STILL MORE CLIENTS SCREWED BY THE TAX CODE.  “The list of taxpayers screwed by our current Tax Code is not a short one.  Today I add taxpayers with gambling winnings.”


20130110-2Howard Gleckman, How “Dead Men” Fiscal Policy Is Paralyzing Government (TaxVox).  He reviews a new book, Dead Men Ruling, by Gene Steurle:

“We are left with a budget for a declining nation,” Gene writes, “that invests ever-less in our future…and a broken government that presides over archaic, inefficient, and inequitable spending and tax programs.”

All this has happened due to a confluence of two unhappy trends: The first is what the late conservative writer Jude Wanniski memorably described almost four decades ago as the “Two-Santa Theory.”

The Santas are the two parties, each of whom pick our pockets to fill our stockings.


Alan Cole, The Simple Case for Tax Neutrality (Tax Policy Blog).  “When states give preferential rates of sales tax to certain goods, the most visible result is the legal bonanza that follows from trying to re-categorize goods into the preferred groupings. ”

David Brunori, Repealing the Property Tax Is an Asinine Idea (Tax Analysts Blog). “Public finance experts are almost unanimous in their belief that the property tax is the ideal way to fund local government services… Most importantly, the property tax ensures local political control.”

William McBride, What is Investment and How Do We Get More of It? (Tax Policy Blog).  “Full expensing for all investment, according to our analysis, would increase the capital stock by 16 percent and grow GDP by more than 5 percent.”


TaxProf, The IRS Scandal, Day 370

News from the Profession.  AICPA Tackling the Important Issue of Male CPAs Wanting It All (Going Concern). 



Tax Roundup, 5/13/14: UPS Ground grounds late filer. And: how “voluntary” would “voluntary” preparer regulation be?

Tuesday, May 13th, 2014 by Joe Kristan

UPS 2nd-dayUPS Grounded.  E-filing is the best way to make sure your filing is timely, but sometimes it’s just not available.  If you do an old-fashioned paper filing, you can rely on the “mailbox rule,” which says that a tax filing postmarked by the deadline is considered filed on-time.  The mailbox rule used to only apply to returns sent via the U.S. Postal Service, but the IRS expanded it to private carriers like UPS and Federal Express. The availability of private delivery services for timely last-minute filing has been a boon to procrastinators.  Few post offices stay open late anymore to receive last-minute tax filings, but there are 24-hour FedEx and UPS stores.  Unfortunately, the IRS rules on private delivery services are tricky, and they tripped up one taxpayer in Tax Court yesterday. The IRS lists qualifying private delivery services in Notice 2004-83.  The notice identifies specific services for DHL, UPS and FedEx that qualify for the mailbox rule.  The UPS services that qualify:

UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The taxpayer in yesterday’s case sent his package via UPS Ground, and while sent before the 90-day deadline for Tax Court filings, it arrived after the deadline.  The Tax Court said that didn’t work:

 UPS Ground has not been designated by the Commissioner as a private delivery service. Notice 2004-83, supra. Thus, the timely mailing/timely filing rule of section 7502 does not apply to “UPS Ground” service… In so holding we acknowledge that the result may appear harsh, notwithstanding the fact that petitioner had nearly 90 days to file his petition but waited until the last moment to do so. However, the Court cannot rely on general equitable principles to expand the statutorily prescribed time for filing a petition.

The Moral?  If you use a private delivery service, make sure you use one that qualifies.  If you are filing with an IRS service center, be sure to use the correct street address, as the private delivery services can’t deliver to the service center post-office box addresses.

Cite: Sanders, T.C. Summ. Op. 2014-47



Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

TaxProfThe IRS Scandal, Day 369.  This edition links to the TaxProf’s own USA Today piece, The Media Ignore IRS Scandal:

Today’s news media are largely ignoring the IRS scandal, and it is impossible to have confidence in the current investigations by the FBI, Justice Department, and House committee. I am not suggesting that the current scandal in the end will rise to the level of Watergate. But the allegations are serious, and fair-minded Americans of both parties should agree that a thorough investigation needs to be undertaken to either debunk them or confirm them. Step one should be to give Lois Lerner full immunity from prosecution in exchange for her testimony. And then let the chips fall where they may.

True all around.   Journalists don’t care to investigate their own team.


Leslie BookABA Tax Section Procedural Highlights and Cohen APA Teaser:

Even without legislation, OPR Director Karen Hawkins stated that IRS will take a narrow interpretation of Loving insofar as it relates to its ability to regulate practitioners. As to the policy relating to regulating preparers, Director Hawkins announced that IRS will soon begin a voluntary testing and education plan that will provide some benefits to preparers who opt in to a regulatory regime.

What does it take to teach some people?  You got whipped, IRS.  The courts ruled that you grossly overreached.  How do you find a “narrow interpretation” of that?  It sounds to me like they will make their new program “voluntary” in the same way the national accounting firm I used to work at made United Way contributions “voluntary” —  they always had 100% participation.


Russ Fox, Florida Doctor Does Much Wrong on her Way to ClubFed:

She (and allegedly her husband) created nominee accounts at UBS and other foreign banks; of course, that income didn’t find its way to her tax return. Her half of the sale of the medical schools also didn’t find its way to the tax return. Those nominee accounts were at foreign banks; she didn’t file a Report of Foreign Bank and Financial Accounts (FBAR). And the money was used for conspicuous consumption: an airplane and three homes.

If you cheat on your taxes, it’s not wise to call attention to your wealth.


Wikipedia image

Wikipedia image

Jack Townsend, When is Booker Variance Too Much? Per DOJ, Certainly in the Ty Warner Case.  “What I draw from the sentence is that, when the hypothetical client is in the criminal cross-hairs asks the hypothetical reasonably welleducated and experienced criminal tax attorney with good judgement whether he [the client] will be treated as well as Ty Warner, the right answer is likely to be: ‘You’re not rich enough to get that quality of justice.’ “


Janet Novack, Prosecutor: Beanie Babies Billionaire Tax Cheat Didn’t Deserve `Get-Out-Of-Jail’ Card 


TaxGrrrl: What If Congressional Elections Were Run Like The NFL Draft?.  Well, a large percentage of football players are broke within three years of being drafted.  I’d favor that for congresscritters.

Kay Bell, IRS getting sneakier in tracking tax cheats.  ” If you’re bragging on Facebook about buying a Ferrari but reporting only $30,000 in annual income on your Form 1040, your social media comments will probably prompt the IRS to take an interest in you.”


It’s Tuesday Buzz-time!  At the Robert D. Flach emporium.


Lyman Stone, The Facts on Interstate Migration: Part One (Tax Policy Blog):

CBPP’s new report says that “State taxes have a negligible impact on Americans’ interstate moves,” and so falls pretty comfortably in the “taxes don’t affect migration” camp.What we’ve consistently argued at the Tax Foundation is that taxes matter on the margin, but that they’re just one of many factors. After reviewing Mazerov’s main arguments, this theme will be apparent: that his analysis doesn’t address the effect of taxes on the margin.

Any practitioner has dealt with cases where taxes do make a difference where people choose to live.  It’s painfully obvious when you live in a high-rate state with a zero-rate state (South Dakota) next door.  And to assume taxes don’t matter is to assume incentives don’t matter, which is like assuming gravity doesn’t hold things down.

Renu Zaretsky, Pizza, Expats and Drugs.  The TaxVox headline roundup covers today’s expected senate vote on extenders, take and bake pizza, and the high costs of FATCA for foreign companies who hire Americans abroad.


That’s clupeida roseus to you, Judge. States’ Failed Tax Policies Have Some Governors Throwing Red Herrings (Tax Justice Blog). 

Career Corner.  Helicopter Parents are Hitting Alumni Groups on LinkedIn to Find Junior a Job Now (Going Concern)


Tax Roundup, 5/9/14: Worst-ever edition. And: It’s Scandal Day 365!

Friday, May 9th, 2014 by Joe Kristan

I was grumpy yesterday when I noticed Tax Analysts correspondent @Meg_Shreve’s live-tweeting of a speech by Doug Shulman, the Worst IRS Commissioner Ever.  So I tweet-grumpted, adding “#worstcommissionerever (fixed)” to one of her posts — the “(fixed)” as a perhaps inadequate attempt to inform the Twitterverse that the tag was my addition, not hers (apologies to Meg Shreve).  That earned this response:




Ah, where to begin?  How about with identity theft?  Doug Shulman took office with a reputation as an information systems maven.  He then presided over an historic IT debacle.  Tax refund fraud — fundamentally a systems failure —  has let two-bit grifters like Rashia Wilson steal tens of billions of dollars in fraudulent refunds over the years.

This problem has been ramping up for years, and only now, with Shulman gone, is the IRS beginning to take effective action to prevent it.  My wife can’t go shopping in Chicago without me getting a call from the credit card company warning me of a suspicious transaction, but Doug Shulman’s IRS could send 655 refunds to the same apartment in Lithuania without batting an eye.

Rashia says "thanks, Commissioner!"

Rashia says “thanks, Commissioner!”

While the theft of taxpayer billions is outrageous enough, the inept treatment of ID theft victims makes it even worse.  Only after Doug Shulman left did the IRS even begin to get this right.

The Worst Commissioner Ever was just too darned busy to stop ID theft.  He was busy trying to increase IRS power over preparers with a useless, expensive and unilateral preparer regulation regime.  He reversed the longstanding IRS position that the agency had no such regulatory power, only to be unceremoniously slapped down by the courts.   In the meantime, the prospect of the regulations drove thousands of preparers out of the business, increasing taxpayer costs and driving many taxpayers to self-prepare — and surely causing some to fall out of the system altogether.  The IRS wasted enormous resources on this futile power grab — resources that might have been better-devoted, to, oh, maybe the fight against identity theft.


He was also busy shooting jaywalkers.  International tax enforcement is considered Doug Shulman’s greatest success — but there was no reason the pursuit of wealthy international money-launderers had to also terrorize American expatriates whose offenses were to commit everyday personal finance.  Many folks have been hit with ridiculous penalties for not filing FBAR reports that they had no idea existed.  These folks are often people who married overseas or moved out of the U.S. as children, but were presumptively treated as international money-launderers when they tried to come into the system, and were hit with enormous penalties — often when little or no tax had been avoided.

It’s hard to imagine that an agency that can find ways to simply wave away the ACA employer mandate couldn’t find a way to allow expats and individuals without criminal intent to come into the international reporting system without risking financial disaster.  The states that allow non-resident non-filers to come in by paying five years of back taxes provide an obvious model.


Former IRS Commissioner Shulman, showing how big is legacy is.

Former IRS Commissioner Shulman, showing how big is legacy is.

Then there is the scandal.  When Tea Party groups complained about absurd and abusive IRS information requests, sympathetic Congresscritters asked Doug Shulman if the IRS was targeting Tea Party groups.  The Worst Commissioner Ever testified before Congress that the IRS was doing nothing of the sort:

“There’s absolutely no targeting. This is the kind of back and forth that happens to people” who apply for tax-exempt status, Shulman said.

That statement, of course, became inoperative when the Treasury Inspector General for Tax Administration reported that the IRS was, in fact, picking on the Tea Party groups.  Subsequent revelations have shown that it was exactly a partisan attempt to fight anti-administration groups.  So Doug Shulman either was too lazy and ineffective to know what his own agency was doing, or he knew, or he didn’t care.  He destroyed the credibility of the agency as a nonpartisan enclave of competent technicians.

Now the party controlling the House of Representatives is on notice that the agency wants to see it lose.  That agency can hardly expect generous appropriations as long as that perception remains (and the new Commissioner has done nothing reassuring on that score).   This will damage the agency’s effectiveness for years — all because The Worst Commissioner Ever was unwilling or unable to run a professional, non-partisan agency.

This is a record of administrative ineptitude and negligence that is unbeaten.  No IRS commissioner has so squandered agency resources and reputation.  If another Commissioner has even come close, I’d sure like to know who it was.


Meanwhile, the TaxProf has reached a milestone: The IRS Scandal, Day 365.  The biggest item in this edition is the report that the IRS had not destroyed Tea Party donor lists — after saying it had — and that the IRS has audited 10% of Tea Party donors.  This is a staggering audit rate, if true, and is a tremendous scandal in itself if the IRS doesn’t come up with a good explanation.

TaxGrrrl, House Finds Lerner, Central Figure In Tax Exempt Scandal, In Contempt Of Congress


20140509-2Jana Luttenegger, Deadline Approaching to Avoid Losing Tax Exempt Status (Davis Brown Tax Law Blog). Get those 990-series reports filed!

Trish McIntire, EFTPS – Inquiry PIN.  “The Inquiry PIN will allow taxpayers to check and make sure that their federal tax deposits have been made and catch a problem before it becomes a major issue.”  This should be used by all employers.

Peter Reilly, Former Tampa Bay Buccaneers Owner Scores Touchdown In Tax Court.  “It may seem odd to look at a case that ends up with a charitable deduction dis-allowance of nearly $4 million as a victory, but when you consider how taxpayers generally fare in easement cases it really is.”

Leslie Book, Tax Court Jurisdiction to Determine its Jurisdiction: Foreign Taxes and Credits (Procedurally Taxing)

Mindy Herzfeld, International Tax Trending (Tax Analysts Blog)


Richard Borean, Tax Freedom Day Arrives in Final Two States: Connecticut and New Jersey (Tax Policy Blog)

Howard Gleckman, Taxing Employer-Sponsored Insurance Would Hike Social Security Benefits But Boost Federal Coffers (TaxVox)


Kay Bell, IRS employee arrested after inadvertently following Obama daughters’ motorcade onto White House grounds.  Oops.

Tax Justice Blog, Déjà vu: Oklahoma Enacts Tax Cut Voters Don’t Want.  I’m not sure about the “don’t want” part.

Robert D. Flach has your Friday morning Buzz!


News from the Profession.  Deloitte CEO Prefers Traditional Photo Op Over Selfie  (Going Concern)



Tax Roundup, 5/8/14: No, Virginian, there is no travel expense Santa Claus. And more!

Thursday, May 8th, 2014 by Joe Kristan

20120801-2News Flash: Tax Court Judges didn’t just fall off the turnip truck.  That insight might have occurred to a Virginian after yesterday’s Tax Court decision denying $64,775 in 2010  “car and truck expenses” for a “mobile advertising business” that grossed $7,200 in revenue.

The Virginian worked full-time for Verizon while traveling up a storm — 129,550 miles in 2010, by his own account.  Special Trial Judge Dean questioned The Virginian’s work ethic (my emphasis):

The number of hours petitioner worked for Verizon and purportedly drove for his mobile advertising business simply strains credulity. Petitioner’s monthly mileage for 2010 ranged from 7,419 miles to 17,864 miles. Petitioner testified that he drove at approximately 60 miles per hour. If it is possible that he could average 60 miles per hour in the month that he drove 17,864 miles, he spent at least 300 hours on the road that month or almost 10 hours a day. All this while working full time for Verizon.

The judge also has doubts about the business model:

Furthermore, petitioner’s extensive driving does not appear to be ordinary and necessary to his mobile advertising business. Petitioner claims that he drove all over the United States to post fliers and to advertise his own mobile advertising business, even though most of his clients were local clients except one online refinancing company. All the while, petitioner had very little income in relation to the excessive costs he incurred driving to put up flyers. Furthermore, the advertising for his own business appeared to be fruitless, as he never made a profit in any of the six years he engaged in the business, despite incurring great costs traveling to advertise mobile advertising business.

20140508-2But ultimately none of that mattered, because The Virginian failed to cross the initial threshold for deducting any sort of travel expenses — Section 274:

Notwithstanding whether petitioner’s excessive driving was ordinary and necessary for his mobile advertising business, he simply did not satisfy the strict substantiation requirements of section 274(d) for claiming car and truck expenses… Petitioner had no backup receipts and no beginning and ending mileage for the automobile he allegedly used. 

Section 274(d) requires taxpayers to document travel expenses “by adequate records or sufficient evidence”

-the amount of expense,

-the time and place of the travel, and

-the business purpose of the trip.

For travel, that means receipts where possible (e.g., hotels), and contemporaneous calendars or logs documenting mileage.  Without that, your work ethic and business model doesn’t even come into play.

Cite: Abelitis, T.C. Summ. Op. 2014-44.


20130114-1Roger McEowen, IRS Says Agents Acting Under Power of Attorney Subject to FBAR Reporting.  “The agent (along with the principal) is subject to the FBAR filing requirements if the POA gives the agent signature authority over a foreign account that exceeds the dollar threshold.” 


TaxProf, The IRS Scandal, Day 364.  Big day tomorrow.

TaxGrrrl, UPDATED: Timeline Of IRS Tax Exempt Organization Scandal.  It started with a planted question to try to blunt the impact of the impending TIGTA report that pointed out the targeting.

Kay Bell,  Lois Lerner held in contempt of Congress, ramping up next phase of midterm election year political posturing.  Yes, posturing is occurring — that’s what politicians do.  But Sam Ervin’s posturing — and he did his share — didn’t make Watergate less a scandal.


Cara Griffith, Transparency Versus Disclosure of Taxpayer Information (Tax Analysts Blog)  “…the disclosure of documents that contain taxpayer information, whether required by state law or the result of litigation, does not encourage transparency in tax administration.”  I agree; unfortunately, the IRS hides behind dubious assertions of confidentiality to cover up its own questionable behavior.


Jason Dinesen, Hold the Phone on the IRS E-file Outrage Machine.  No, don’t.  It’s still outrageous.

20140508-1Peter Reilly, Nonrecognition On Divorce Transfers Hurts Receiving Spouse .  It did in this case, when the recipient spouse had to pay tax.   Taxpayers receiving property in divorce receive the other spouse’s basis, and the other spouse doesn’t have a taxable sale.  But it’s still good policy.  Property settlements are contentious enough without hitting somebody giving up property with income tax on that dubious privilege.  Also, if the IRS got a cut, there would be less marital property to split in the first place.

Alan Cole, Failing by its Own Standard: What DC’s Insurance Tax Tells Us About its Obamacare Exchange (Tax Policy Blog)

Tax Justice Blog, What’s the Matter with Kansas (and Missouri, and …). “An anti-tax, Republican super majority in the Missouri Legislature claimed victory yesterday in a year-long battle with Gov. Jay Nixon over taxes by voting to override Nixon’s veto of a $620 million income tax cut.”

Do tell.  California Legislative Analyst’s Office Raises Concerns with Film Tax Credits (Lyman Stone, Tax Policy Blog).

Renu Zaretsky rounds up tax headlines for TaxVox with Contempt, Audits, Health Care, and Highways.

Janet Novack, Mansion Tax Kills Some Million Dollar Home Sales, Study Concludes.  Taxes always matter.

Jack Townsend, Another Foreign Account Sentencing.



The practice of regularly renewing the extenders package is unfortunate and should be stopped. It distorts the budget process, encourages legislative rent seeking, and invites highly particularistic legislative provisions that are better characterized as windfalls and wasteful government spending rather than well-targeted tax incentives.

Victor Fleischer,  Tax Legislation in the Contemporary U.S. Congress (Via the Taxprof)

News from the Profession: Grant Thornton Tries to Motivate With the Human Centipede, or Something (Going Concern)



Tax Roundup, 5/6/14. Welcome back, loyal client. IRS says I have to verify that you aren’t a shape-shifting alien.

Tuesday, May 6th, 2014 by Joe Kristan

e-file logo
It’s not enough that you’ve done business with me forever.  I need some ID.  
The invaluable Russ Fox yesterday threw light on new requirements for electronic filing from the IRS.  These requirements, found in their new Publication 1345, were issued with no public comment period or consultation with practitioners, as far as I can tell, and they sure look that way.

Let’s start with clients who come into our office — a minority of my clients, by the way, as most of my clients either mail in tax information or send it electronically.  Words are from Publication 1345, but emphasis is mine:

The ERO must inspect a valid government picture identification; compare picture to applicant; and record the name, social security number, address and date of birth. Verify that the name, social security number, address, date of birth and other personal information on record are consistent with the information provided through record checks with the applicable agency or institution or through credit bureaus or similar databases.

So I have clients I have been working with since 1985.  When retired gentleman comes in, a little slower than last year, with his cane, but still as charming as ever, I have to say “hold it right there, partner.  You may look like the client I’ve been working with for 28 years, but you might be a clever shape-shifting alien scum looking to defraud our government.  I need to see some picture ID.  Then excuse me while I call the credit bureau.”

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Oh, but it isn’t that bad:

For in-person transactions, the record checks with the applicable agency or institution or through credit bureaus or similar databases are optional.

Oh, I only have to run credit checks on my long-time clients who don’t come into the office.  Gee, that’s mighty kind of you, IRS.

Examples of government picture identification (ID) include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa or passport.

“National ID?”  I guess that must be next in the IRS off-plan business plan.

You’re thinking, “calm down, Joe.  Surely you are overreacting.  The IRS doesn’t really want you to card your longtime clients, right?”  Well, wrong:

If there is a multi-year business relationship, you should identify and authenticate the taxpayer.

You may think they are longtime clients, but you don’t know if you’ve been fooled by imposters all along!

Of course, this is all a reaction to the identity theft epidemic that the IRS has allowed to spread virtually unchecked for years.  The IRS, an agency too clueless to notice that 655 refunds are going to the same apartment in Lithuania, is now responding to the riot it incited by firing at the bystandersqea0hm77.  It is creating an enormous new and uncompensated burden on preparers and their clients that will do nothing to eliminate ID theft.

Rashia didn't use these bundles of cash at a CPA office.

Rashia didn’t use these bundles of cash to pay preparers.

Why won’t this work?  Most ID thieves work like Rashia Wilson, the self-proclaimed “Queen of IRS Tax Fraud.”  She used store-bought software to claim millions in tax refunds belonging to other people whose identities she had stolen.  ID thieves don’t walk into legitimate tax shops and pay to have fraudulent refunds claimed.  


Oddly, none of this applies to paper filings.  If the IRS is really serious about these rules, they can expect preparers  to sabotage the e-file process in self-defense by charging for the non-trivial new time and hassle of e-filing.  While preparers are required to e-file unless otherwise directed, taxpayers are allowed to choose paper.  Nothing says we can’t inform them of that right.  If even 10% of taxpayers respond by choosing to revert to paper, it will badly strain IRS facilities.  If 20% revert to paper, it will be a debacle for the agency.  And they’ll richly deserve it.


Other Coverage:

Russ Fox follows up with A Better Idea on Identity Theft. “The IRS should check each tax return’s address to verify it matches the address on file for the taxpayer.”  What a radical thought.

Robert D. Flach notes the Russ Fox post in today’s Buzz and adds, “Thankfully I am not an ERO – and after reading this I never will be!”


Flickr image by Christian under Creative Commons license.

Flickr image by Christian under Creative Commons license.

Kay Bell, 5 tax tips for Cinco de Mayo

Tony Nitti, Tax Geek Tuesday: Determining A Shareholder’s Basis In S Corporation Stock and Debt

TaxGrrrl, She’s Just Not That Into You: 11 Reasons Your Tax Pro Wants To Call It Off .  ” You need to tell your tax professional the truth. No matter how ugly it is.”

Keith Fogg, When One Spouse Files Bankruptcy How Should the Court Split the Refund Resulting from a Joint Return between the Estate of the Debtor Spouse and the non-Debtor Spouse (Procedurally Taxing)

Jason Dinesen, Tax Refunds and “Not Owing Tax”, Part 2 . “So if you get a refund, it’s possible that you “didn’t owe taxes,” but only if your “total tax” before refundable credits equaled zero.”

Margaret Van Houten, Anti Money Laundering Initiatives and Lawyers: What We Need to Know (Davis Brown Tax Law Blog).  “Unfortunately, however, not all well-intended actions are effective.”


20140506-1TaxProf, The IRS Scandal, Day 362.  What the IRS was busy with while the ID-theft fraud epidemic was getting rolling.

Howard Gleckman, Special Tax Penalties on Donald Sterling are a Personal Foul (TaxVox).  Not every foul has to be a tax issue.

Mindy Herzfeld, International Tax Trending (Tax Analysts Blog)

I reject this false choice.  Investment, GDP Slow in First Quarter: Bad Weather or Bad Tax Policy? (Stephen J. Entin, Tax Policy Blog)


News from the Profession.  BREAKING: CPA Exam Candidate Passes AUD  (Going Concern)



Tax Roundup, 5/1/14: Iowa remains on top! Oh, that’s bad.

Thursday, May 1st, 2014 by Joe Kristan

The Iowa House of Representatives has adjourned for the year.  That makes it official: Iowa will continue to have the highest corporation income tax rate in the U.S. for another year, as shown on this map from The Tax Foundation:

2014 Corporate Income Tax Rates

The U.S has the highest corporation tax rate of all OECD countries, so that means right here in Iowa we have the highest corporation income tax rate in the entire developed world.  That’s true even taking into account Iowa’s 50% deduction for federal corporation tax.  Whoopee.  That must mean that Iowa receives just gushers of corporate cash, right?

Wrong.  The Iowa corporation tax generated $403.6 million net revenue in calendar 2013, amounting to about 5.3% of state tax revenues.  The individual income tax, by contrast, generated $3.45 billion net revenue in the same period. (Figures available here.)

The net is so low because the corporation tax, like the Iowa income tax, is riddled with special credits and deductions for the well-connected and well-lobbied.  Some of the biggest corporations in Iowa pay no tax and, in fact, actually get multi-million dollar checks out of the Department of Revenue.

There’s nothing good about this system.  It’s brutal for small corporations without the lobbyists and pull to land big breaks.  Meanwhile, big corporations use their resources to skip around the tax, or even to profit from it.  The high rates and complexity drives away corporations who don’t want to play the influence game, while luring those who play it like a fiddle.  Far better to wipe out the tax and the accompanying subsidies with something like The Tax Update Quick and Dirty Iowa Tax Reform Plan!

Related: David Brunori, I Will Ask Again, Why Are We Taxing Corporate Income? (Tax Analysts Blog). “There is an increasingly influential school of thought that says the tax is borne by labor in the form of lower wages.”


Peter Reilly, Alimony That Does Not Look Like Alimony.  “So if an agreement says that the payments are to be treated as alimony for tax purposes, that really means nothing.  What matters is whether the requirements are met…”


20130114-1Roger McEowen, 
Analyzing Hedging under Obamacare’s Net Investment Income Tax Final Regulations.  “… a sole proprietor farmer’s income from hedging activity, or hedging income of a farming entity structured as pass-through entity is not subject to the NIIT, because the farmer or entity is engaged in the trade or business of farming and not the trade or business of trading in commodities.” 

William Perez, Tax Reform Act of 2014, Part 7, IRS Administrative Proposals Impacting Individuals.

Annette Nellen, How sales tax exemptions can waste one’s time.  “Recent litigation in Missouri over whether converting frozen dough into baked goods is “processing,” such that the electricity used is exempt from sales tax, shows the time and money that can be wasted with pointless rules.”

TaxGrrrl, Considering The Death Penalty: Your Tax Dollars At Work.  It should give pause to those who think the government should be the provider of health care when it can’t even kill somebody well.

Um, to save hundreds of millions of shareholder dollars?  Why Does Pfizer Want to Renounce Its Citizenship? (Tax Justice Blog). 


20121004-1Renu Zaretsky, Competition and Tax Reform: A Thorn in Everybody’s Side.  The TaxVox headline roundup.

Kay Bell, Amazon begins collecting sales tax from Florida buyers May 1; Will the online retailing giant lose even more customers?

Stephen Olsen, Did Donald Rumsfeld Just Invalidate His Return?  (Procedurally Taxing) “…he just wanted to be able to understand how his tax bill was computed.  Overall, not an unreasonable position, but perhaps a pipedream.”

Jack Townsend, Another Credit Swiss Related Bank Enabler Pleads Guilty


taxanalystslogoCara Griffith, The Problem With Outcome-Based Jurisprudence (Tax Analysts Blog).  ” It is not for the court to worry about how the state will fashion a remedy. Its task is to interpret and enforce the state’s laws and strike down those that are unconstitutional.”


The newest Cavalcade of Risk is up!  The roundup of insurance and risk management posts is hosted this time by Rebecca Shafer.  Our old friend Hank Stern contributes with bad news on the ACA computer security front: My Bleeding ( Heart


TaxProf,  The IRS Scandal, Day 357.  For a “phony scandal,” it’s awfully persistent.


The soft bigotry of low expectations.  IRS Commish Reminds Senator That Hill Staffers Have Worse Tax Compliance Than IRS Employees (Going Concern)



Tax Roundup: April 30, 2014: Force of nature edition. And: Extenders move in U.S. House.

Wednesday, April 30th, 2014 by Joe Kristan

Iowa 1040s are due today!  If you are 90% paid in, they extend automatically with no filing.  If you need more time and need to pay in something, use IA 1040-V.


20130113-3House votes to make permanent six “expiring” provisions.  The House Ways and Means Committee voted to permanently extend six of the perpetually-expiring tax breaks that Congress renews every year or two.  They include:

  • A simplified version of the research credit
  • The five-year built-in gain tax recognition period for S corporations
  • The $500,000 Section 179 deduction limit
  • A provision reducing the net basis reduction for S corporation donations of appreciated property to the basis of the property.

The committee also voted for two international extenders.

The votes were mostly along party lines, which means they are unlikely to be passed in this form by the Democratic-controlled Senate. The Senate Finance Committee has already approved its own temporary extender package, and my guess is the final extenders package will look like the Finance Committee bill.

Tax Analysts reports ($link) that the committee isn’t done with extenders, but it isn’t clear when it will look at Bonus Depreciation.

The “no” votes for the House package objected to the lack of offsets to the revenue “lost” by the package.   I’m less upset.  While I oppose the research credit on principle, these provisions are permanent anyway; the whole “extender” process is a sham, conducted only to pretend that the tax breaks aren’t permanent so they “cost” less under Congressional accounting rules.  It’s the sort of thing that would be a felony in the private sector, but just another day for our leaders.  At least the House bill drops the pretense that these things won’t get passed every time they expire.


Additional coverage available at Accounting Today.


Tax Justice Blog, Rep. Dave Camp’s Latest Tax Gambit Is “Fiscally Irresponsible and Fundamentally Hypocritical”

Clint Stretch, Dreams of Tax Reform (Tax Analysts Blog)



20130117-1No gas tax boost this year.  Sioux City Journal reports that a last-gasp attempt to boost Iowa gasoline taxes died last night as the General Assembly continues its pre-adjournment frenzy.


David Brunori, Sad Pragmatism and Tax Incentives (Tax Analysts Blog).  “If tax incentives are an unavoidable reality, we should make them as transparent and accountable as possible.”  True, but that doesn’t excuse the politicians who take your money and give it to their special friends.


The Iowa State University Center for Agricultural Law and Taxation has released its 2014 summer seminar schedule.  It includes a slate of webinars on topics from Ethics to ACA mandates.  There will also be two big out-of-town events, in West Baden Springs, Indiana, and West Yellowstone, Montana.  I’m not able to participate this year, but they are a hoot and a great learning experience.


TaxGrrl, Widow Loses House Over $6.30 Tax Bill.  “A Pennsylvania woman has lost her home for little more than the cost of a Starbucks Frappuccino.”  The law in all its majesty.

Kay Bell, File IRS Form 1040X to correct old tax mistakes

Peter Reilly, Graduation Contingency Kills Alimony Deduction.  It’s very easy to screw up an alimony deduction with bells and whistles, as Peter explains.


20120531-1Jason Dinesen, Preparer Regulation and Judging Preparers Based on Size of Refund.  “Anyone who’s worked in this business has experienced the irate client who thinks the preparer screwed up because their refund was less than their friend/co-worker/hair dresser, etc.”


TaxProf, The IRS Scandal, Day 356

Jack Townsend, U.S. Congressman Indicted for Tax Related Crime

Joseph Thorndike, Airlines Say Ticket Taxes Would Be More Visible if They Were Better Hidden (Tax Analysts Blog)

Alan Cole, What Gift Cards Can Teach Us About Tax Policy (Tax Policy Blog)

Renu Zaretsky, Funding Tax Breaks, the IRS, and Public Pensions, Safety, and Schools.  The TaxVox headline roundup.


News from the Profession.  EY Is Tackling the Important Issue of Dudes’ Need for Flexibility (Going Concern)


Clear error is a standard used by appellate courts to review some lower court decisions.  A Tax Court case decided by Judge Paris dealing with horse losses yesterday involved purported destruction of records by an old girlfriend.  Here’s where the clear error comes in:

The wrath of a former girlfriend may be a formidable force, but it is not analogous to a hurricane-like natural disaster, and it does not constitute a reasonable cause outside petitioner’s control.

I’ve met Judge Paris, and I strongly suspect she’s never dealt with a bitter former girlfriend. Anyone who has would never have written such a thing.  But as she pointed out that the petitioner provided no evidence that such destruction occurred, so you oughta know that the case probably still is on solid ground.


Cite: Roberts, T.C. Memo 2014-74.  Additional coverage from Paul Neiffer, Partial Taxpayer Victory on Horse Farm Case



Tax Roundup, 4/29/14: Funding what we do anyway edition. And: the real IRS crisis.

Tuesday, April 29th, 2014 by Joe Kristan

Remember, Iowa 1040s are due tomorrow!  They extend automatically, with no need to file an extension, to October 30 if you have at least 90% of your 2013 tax paid in.  If you need to pay in some more, use Iowa 1040-V.


Via Wikipedia

Via Wikipedia

O. Kay Henderson reports on a New state tax break proposed for Iowa parents who adopt:

The legislature has voted to establish a new tax credit for Iowa parents who adopt a child. If the governor signs the bill into law, Iowans could claim a credit of up to $2500 per child for adoption-related expenses.

The bill would allow the credit for expenses like legal fees and the medical bills for the birth mother.

So the legislature is boldly addressing the lack of available parents wanting to adopt children by subsidizing the process.  Except there is no lack of willing prospective adoptive parents.  In fact, the high cost of adoptions is largely driven by the lack of U.S. babies available, forcing parents wanting to adopt to pursue expensive overseas adoptions.

Adoptive parents do a wonderful thing, taking a stranger’s child into their house as their own.  But all good things don’t necessarily need their own tax break.  This break pays people to do what they are already doing.  If the tax law needs to encourage something, is this the most important thing to do?  Should it instead encourage something people wouldn’t do otherwise?  Should people choose what to do without tax law involvement?  Is it really worth making the Department of Revenue an overseer of the adoption process?  Nobody cares, apparently, as HF 2468 flew through the Iowa Senate 48-0, and the Iowa House, 95-1.  Governor Branstad will come out against farmers before he vetoes this one.


I’m sure they are.  Iowa Renewable Fuels Group Pleased With Biofuels Bill Approval. More special favors for special friends.


A scene from the heydey of Iowa energy independence.

A scene from the heydey of Iowa energy independence.


Kay Bell, Maryland pays $11.5 million to keep House of Cards.  Some people never learn.


This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Janet NovackThere’s A Crisis At The IRS And It’s Not What You Think:

The IRS is, however, an insular, often tone deaf and sometimes bumbling bureaucracy which is being starved of the resources it needs to do its job.  Since 2010, its Congressional appropriations have fallen 7% —-and that’s in nominal dollars, before any adjustment for inflation. During the same period, its appropriations funded workforce has shrunk by 10%, with enforcement staff down 15%, according to numbers Congress’ Government Accountability Office released last week. Meanwhile, the tax agency’s workload has increased with the explosion of identity theft tax refund fraud; a 4% growth in returns filed; and new laws to administer, including the Affordable Care Act  (a.k.a. Obamacare).

That is precisely true.  It’s also mostly the agency’s own fault.   The agency been shown to have used its powers against political opponents of the administration.  It refuses to back off of proposed regulations that would make its political role permanent.  Until it swears off that approach, it can only expect short funding.  The House GOP would be fools to fund an agency dedicated to the other party.  Untill Commissioner Koskinen can rise above pro-administration partisanship and pull the proposed regulations, the agency will continue to be shorted.


Annals of Public Service.  Rep. Grimm charged with tax fraud, says he won’t quit (USA Today):

Republican Rep. Michael Grimm was indicted Monday on federal charges of tax evasion and perjury for allegedly hiding more than $1 million in revenue from a New York City restaurant he owned where, prosecutors said, he also hired undocumented immigrants.

Grimm, a former FBI agent who has been under federal investigation regarding campaign contributions, said he is the victim of a “political witch hunt” and said he would not resign his seat.

While you can’t rule out a political explanation, the man is a politician, so the charges are at least plausible.  If it is an unsupported political prosecution, that will become apparent quickly.

Even if the charges are supported, that doesn’t rule out political bias.  After all, Democrat Charlie Rangel was never indicted, in spite of failing to pay his taxes for years.  That’s why arguments that the Tea Party persecution was OK, because some Tea Party groups didn’t qualify for exempt status, are unconvincing.  When a law is enforced only against opponents,  it is a gross injustice, even if the selective enforcement catches some actual violators.


IMG_1944Peter Reilly, Tax Court Denies Amway Losses – Again.  Peter ponders the Amway couple I discussed last week.  Peter has actually attended an Amway presentation, and he explains how the program works – or doesn’t.

Tony Nitti, Tax Geek Tuesday: Tax Planning For Mergers And Acquisitions, Part II.  This post discusses the tax-free kind.

TaxGrrrl, Let’s Go Places: Toyota Workers Could Save Big Tax Dollars With Move.  Food for thought for those who think state taxes are irrelevant.


TaxProf, The IRS Scandal, Day 355

Tyler Cowen, Accounting for U.S. Earnings and Wealth Inequality.  “So much of the current Piketty debate is simply forgetting that…science exists and has already offered a wide range of insights on these topics, as well as having rendered some of the more extreme claims unlikely.”

Richard Borean, Does a Flat Income Tax Create Income Inequality? (Tax Policy Blog).  Short answer: no.



Jeremy ScottThe Most Expensive Extenders (Tax Analysts Blog).  “Temporary tax policy is generally bad, but temporary policy that is designed to encourage long-term investment decisions is even worse. ”


It’s Tuesday!  That makes it Robert D. Flach Buzzday!


Russ Fox, It’s Probably Not Good for Your Case When the Court Considers Sanctioning Your Attorney.  When  your lawyer angers the judge, he may not be helping.

News from the Profession.  This Off-Kilter Accounting Firm Just Launched a New Website Begging to Be Judged (Going Concern)



Tax Roundup, 4/23/14: The Tax Fairy isn’t named “VEBA.” And: frivolous IRS notices!

Wednesday, April 23rd, 2014 by Joe Kristan

tax fairyThe Tax Fairy, that fickle goddess of painless massive tax reduction, is often sought in the misty fens of the welfare benefit sections of the tax law.  A U.S. District Court in California has deprived the Tax Fairy’s believers of one guide for their hunt.

CPA Ramesh Sarva and Kenneth Elliot led Tax Fairy seekers to Section 419, which provides for VEBAs — “Voluntary Employee Beneficiary Association” plans.  Properly operated, VEBAs enable employers to make deductible contributions to a plan that buys insurance for employees.

A company associated with Mr. Sarva and Mr. Elliot, Sea Nine, told employers that they could use VEBAs to get around the tax law rules against deducting most life insurance premiums.  Their customers deducted contributions to VEBAs and used them to buy whole-life insurance policies with high cash value accumulation on the business owners’ lives.  The owners then borrowed the cash values.  The purported result was a deduction, followed by tax-free access to the deducted cash via borrowing cash values.

Tax Fairy guides can always find willing customers: “…small business owners with high net worth (often doctors with small but lucrative medical practices),” according to the IRS complaint. It has not gone well for the Tax Fairy adherents:

Sarva has successfully marketed at least 33 separate VEBAs plans to a variety of small business owners.  All of these participants have been or are currently being audited by the IRS.  13 of these participant audits have been completed and have resulted in total tax adjustments of $3,500,519.

In other words, it doesn’t work.  The IRS warned people off of such plans as early as 1995, and the scheme was firmly shot down by a U.S. Court of Appeals in 2002 in the Neonatology Assoc. P.A. case.  In fact, Neonatology  was a Sea Nine client.  Undaunted, Sea Nine kept selling the idea, selling the plans through “a network of affiliated third parties” including “independent certified publica accountants (“CPA”) and financial planners.”   At least they did until yesterday, when they consented to a permanent injunction yesterday against further Tax Fairy hunts.

Sea Nine had clients all over the place; the complaint lists clients in California, Florida, Alabama, and Hawaii, all with big IRS exam adjustments.

A side note: This is another example of why preparer regulation will be little use in keeping practitioners on the straight and narrow.  The defendant was a CPA and as such faced much stricter credentialing than anything contemplated by the IRS.  Yet he continued to sell these plans for years after it should have been obvious that they didn’t work.

The Moral?  There is no Tax Fairy, and just because somebody has gotten away with something for a long time doesn’t mean they’ve found her.  Also: you can make somebody take a test.  You can make them somebody take CPE.  But you can’t make a bumbler competent or a scammer honest.


20130419-1Russ FoxIRS Prematurely Asking for Money:

A few years ago, the IRS routinely sent notices to taxpayers who filed tax returns prior to April 15th but didn’t pay their taxes until April 15th. After complaints from taxpayers and tax professionals, the IRS supposedly stopped this practice. Unfortunately, they’ve started it up again.

Another illustration of why we need a “sauce for the gander” rule that would require the IRS to pay a penalty to taxpayers when it takes such frivolous positions, same as a frivolous taxpayer would pay to IRS.


TaxProf, TIGTA: IRS Gave $1 Million in Cash Bonuses to 1,100 Employees Who Owe Back Taxes.  Trust me, they won’t do that for you.

Lyman Stone, More Film Tax Incentives Not a Solution for California (Tax Policy Bl0g).  No, not for California, but certainly for its filmmakers, fixers and middlemen.

Howard Gleckman, Should Congress Curb Donor Advised Funds?  They are a much more convenient and cost-effective than their alternative, private foundations, so Congress can be expected to put a stop to that.


Jim Maule, When It’s Too Late to Change One’s (Tax) Story

Kay Bell, Rough roads ahead as Highway Trust Fund runs out of money

TaxProf, The IRS Scandal, Day 349

Joseph Thorndike, It’s Good to Be the (Ex) President. But It Wasn’t Always. (Tax Analysts Blog).  “Until 1959, retiring chief executives got precisely nothing in the way of retirement benefits: no Secret Service protection, no administrative support, and certainly no money.”

News from the Profession.  McGladrey’s Latest PCAOB Inspection Reveals McGladrey Is Not Grant Thornton (Going Concern)



Tax Roundup, 4/22/14: $418,000 per-job edition! And: AGI and farm subsidies.

Tuesday, April 22nd, 2014 by Joe Kristan

20120906-1Iowa Watchdog reports Iowa to give Microsoft millions in exchange for 86 jobs:

The West Des Moines City Council on March 24 approved asking the IEDA to award Project Alluvion $18 million in sales tax rebates, the maximum amount possible under the IEDA’s High Quality Jobs Program.

Neither the city nor the IEDA questioned why Microsoft, which had $24.5 billion in revenue and $8 billion in profits in the most recent fiscal quarter, needed taxpayers’ support to build its data center.

By the time the new data center opens for business, Microsoft will have received from the state and the city more than $418,000 for each of the 86 jobs it says it will create.

There’s a good argument that businesses shouldn’t have to pay sales taxes on their purchases. There’s no good argument that only businesses who know how to pull strings in city hall and at the statehouses should be able to avoid sales tax on their inputs.  Yet that’s what Iowa’s “economic development” policy is all about: special deals for special friends.  The rest of you suckers without lobbyists and pull, pay up!


Tax Justice Blog, State News Quick Hits: Tax Breaks for Expensive Artwork and Apple Inc.



Roger McEowen, Farm Service Agency Adjusted Gross Income Calculation Could Influence Choice of Entity:

Beginning with the 2014 crop year, producers whose average adjusted gross income (AGI) exceeds $900,000 are not eligible to receive payments or benefits from most programs administered by FSA and the Natural Resources Conservation Service (NRCS). Previous AGI provisions distinguishing between farm and non-farm AGI are no longer utilized.  Average AGI for crop year 2014, for example, will be based on a producer’s AGI from 2010, 2011 and 2012.

This is an incentive for business owners receiving substantial farm subsidies to use C corporations, which don’t increase AGI, at least not immediately.  But C corporations do increase the effective tax rate on business income for most people who have enough AGI to worry about this problem.  It would be a lot easier to get rid of the subsidies and let farmers just grow what the market demands.


Yesterday was the national commemoration of The Tax Foundation’s Tax Freedom Day.   Not surprisingly, it’s later than last year.

Tax Freedom Day is “the day when the nation as a whole has earned enough money to pay its total tax bill for year.”  It varies by state.  Iowa’s day was April 13.  Connecticut and New Jersey will be the last states to finish paying their tax bill, on May 9.

Tax Freedom Day 2014 Map_0


TaxProf, GAO: IRS Audits 1% of Big Partnerships, 27% of Big Corporations

Jeremy Scott, The Misleading Debate About the Corporate Income Tax (Tax Analysts Blog):

Congress must consider passthroughs when discussing business tax reform. You can’t complain about high U.S. corporate tax rates or declining corporate tax revenues without looking at how the shift to passthrough entities is affecting the U.S. tax system. Passthrough reform is just as critical as corporate reform, even if it doesn’t receive nearly as much attention in congressional speeches or front-page news stories.

It won’t happen until the inane quest to hammer “the rich” is decisively rejected in tax policy debates  — because with pass-throughs, taxing “the rich” means taxing away employment.  Yet the same high-tax redistribution schemes have led to disaster over and over are enjoying a new vogue among people who just can’t stand other people having more money.


20140321-3Jack Townsend, GE Ducks Any Penalty for Its (BS) Tax Shelter — For Now 

Brian Mahany, Is the IRS Whistleblower Program a Failure?

TaxGrrrl, Higher Or Lower: How Do You Think Your U.S. Tax Burden Compares To Other Countries?   

Steven Rosenthal, A Flash Tax for the Flash Boys (TaxVox).  Never mind that high-frequency traders make for more efficient markets and lower transaction costs for other traders.  We need to screw up the capital markets even more.

Annette Nellen, Tax Day – April 15, 2014 – It Can Be Easier.  It sure could be.

TaxProf, The IRS Scandal, Day 348


William Perez, Obamas, Bidens Release 2013 Tax Returns.  I still say they should have had to prepare them by themselves in a live webcast — as should all congresscritters.

Russ Fox, If You Can’t Get the Refund, Why Not File Some Liens?  After all, it is a foolish and futile gesture, so go for it!

Peter Reilly, Court Approves Tax Sale Of New Mexico Property For Less Than 1% Of Its Value.  Peter sheds light on the sleazy practice of what amounts to stealing property to pay petty amounts of tax.

Jason Dinesen, On Schedule C’s and Setting Rates.  If your 1040 is really a business return, you can’t expect to pay the same as a 1040A filer.   In many ways Schedule C’s are harder, because they rarely have a balance sheet to provide a reality check.



Robert D. Flach’s Buzz is Back!  Welcome back, Robert!

Kay Bell, How are you spending your federal tax refund?

Jana Luttenegger, Are You Curious How Your Tax Dollars Were Spent? (Davis Brown Tax Law Blog)

News you can use.  Timely Filing a Tax Court Petition from Prison (Carl Smith, Procedurally Taxing)

Breaking!  Millennials Don’t Like Grunt Work, Says Millennial Grunt (Going Concern).  Hey Millennials, the rest of us aren’t so crazy about it either.  That’s why they have to pay us to do it.