Posts Tagged ‘Gongol’

Tax Roundup, 6/23/14: Making no friends edition.

Monday, June 23rd, 2014 by Joe Kristan
Rose Mary Woods checks her e-mail in the Nixon administration.

Rose Mary Woods checks her e-mail in the Nixon administration.

New IRS Commissioner Koskinen isn’t exactly making new friends for the agency in Congress.  His testimony Friday on the implausible rash of hard-drive failures that hit the IRS just as Congress began looking at Tea Party harassment amounted to an insistence that Congress take the IRS at its word, and give it more money.  From Tax Analysts ($link):

     “I don’t think an apology is owed,” Koskinen answered. “Not a single e-mail has been lost since the start of this investigation.”

Regarding the six other IRS employees who have experienced computer failures since the investigation began, Koskinen said technology experts told him that 3 to 5 percent of hard drives can be expected to fail during their warrantied lifetimes. 

It just happened to all the hard drives of the people most involved in beating up on the Tea Party.

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Commissioner Koskinen (correctly) points out that the IRS is underfunded for all of the chores (unwisely) given it by Congress.  With Congressional Republicans understandably reluctant to fund an agency it percieves, with justification, as its opposition, Mr. Koskinen ought to be going out of his way to assure them that he is making sure to eliminate political bias in the agency and to fully cooperate with the investigation.  He is doing nothing of the sort, and he may have already irretreivably lost his opportunity to convince GOP appropriators that he can be trusted.

IRS stonewalling isn’t a new thing.  As the many lawsuits filed by Tax Analysts to get the IRS to release its internal documents show, covering up is a way of life in the agency.  Christopher Bergin, in The Coverup Is Usually Worse Than the Crime (Tax Analysts Blog), gives some background:

Maybe it’s just sloppy record-keeping, which would be bad enough. Most of the government’s business is now conducted digitally, and those records need to be properly handled. Or is it worse? Is the IRS deliberately keeping things from the public? Excuse my cynicism, but the IRS’s penchant for secrecy is what led Tax Analysts, using the new Freedom of Information Act, to sue the agency in the 1970s to force it to release private letter rulings. There have been several subsequent lawsuits to pry records that should have been public out of the agency’s hands.

The idea that IRS emails are public records requiring preservation is nothing new, and was well-established at the time Ms. Lerner was busy.  It’s either negligent and outrageous incompetence or criminal destruction of public records, and to say that the IRS owes no apologies is to say that at least one of these unpleasant choices is just fine with him.



20140623-1TaxProf, The IRS Scandal, Day 410

Megan McArdle, An IRS Conspiracy? Not Likely … Yet.  “To be clear, of course six tragic hard drive failures in a relatively short period of time would make it very hard to believe in a benign explanation.”

Brian Gongol, Backing up your email isn’t hard to do.  “Someone should tell the IRS, which is making excuses for losing administrative emails — excuses that wouldn’t pass muster in an IRS audit

Russ Fox, We Don’t Need No Stinkin’ Backups


TaxGrrrl, Raking It In At Summer Yard Sales: Does Uncle Sam Get A Cut?   

Roger McEowen, U.S. Supreme Court Says Inherited IRA’s Not Exempt in Bankruptcy

Jason Dinesen, Bedside Manner is Important for Tax Pros, Too

Peter Reilly, Does Sixth Circuit ABC Decision Give Tenants Incentive To Buy?  “ABC Beverage Corporation is entitled to deduct the premium portion of the price it paid for the real estate as a cost of terminating the lease.”


Keith Fogg, D.C. Circuit Upholds the Constitutionality of Presidential Removal Powers of Tax Court Judges (Procedurally Taxing)

I think it’s only half-baked.  Stick a Fork in It: Is the Corporate Income Tax Done? (Joseph Thorndike, Tax Analysts Blog)

It’s not just a problem in Florida.  Seven indicted in Minnesota identity theft ring (


Wind turbineQuad City Times, Tax credits boost solar power in Iowa

David Henderson, Low-Carbon Alternatives: Solar and Wind Suck (Econlog).  “[A]ssuming reductions in carbon emissions are valued at $50 per metric ton and the price of natural gas is $16 per million Btu or less–nuclear, hydro, and natural gas combined cycle have far more net benefits than either wind or solar.”


Roberton Williams, U.S. Taxes Have Changed A Lot Since 1929 (TaxVox)

Steve Wamhoff,  Good and Bad Proposals to Address the Highway Trust Fund Shortfall (Tax Justice Blog).  The TJB has started putting individual author names on their posts, so I’ll do so too.

David Brunori, Tax Policy Is Not the Way to Deal With an Ass (Tax Analsyts Blog).  Not every problem is a tax problem.

Going Concern, IRS Can’t Afford to Upgrade to Windows 7 But Can Afford to Pay Microsoft to Use XP



Tax Roundup, 3/13/14: Looming Payday Edition. And: incentives galore!

Thursday, March 13th, 2014 by Joe Kristan

20130104-1Deduction day looms.   March 15 is the deadline for calendar-year corporate return filings and payments.  It’s also an important deadline for accrual-basis taxpayers for another reason:  compensation accrued at year-end by a calendar-year accrual-basis taxpayer has to be paid by March 15 of the following year to be deductible in the year accrued.

As every first-year accounting student learns, accrual accounting tries to match expenses with the period in which the income is earned.  If a bonus is based on calendar-year sales or profits, it normally can’t be paid until after year-end, when the numbers are sorted out; still, the bonus is related to those sales, so accrual accounting counts the expense against that year’s income.

The tax law has many limits on accrual accounting.  For example, accrued expenses to “related parties,” typically owners and their families, can’t be deducted until the expenses are actually paid.  The tax law gives accrual businesses 2 1/2 months after year-end to pay accrued compensation to non-related employees.  Otherwise, the deduction is deferred until the year in which the employee is paid.

Does the compensation have to be paid by Saturday, or can I wait until Monday?  The tax law provides that when tax returns are due on a weekend, the deadline is extended to the following monday.  That’s why 2013 calendar-year corporation returns  are due March 17, 2014 – March 15 is on Saturday this year.

But the IRS says that doesn’t work for compensation.  Rev. Rul. 83-116 holds that it only applies to “acts required to be performed in connection with the determination, collection, or refund of taxes”  — things like filing returns.  So, according to IRS, the March 15 deadline still stands for payment 0f 2013 accrued compensation.  It’s not clear that the IRS would win in court on this — they have lost on a similar issue — but you don’t want to be the test case.  If you want to deduct 2013 accrued compensation on your 2013 return, pay it by Saturday.



haroldIncentives!  Coralville Likely on the Hook for Large Chunk of Von Maur Taxes.  Coralville marches to the beat of its own drummer, who apparently is heavily medicated.

Hey, let’s pay $34 million to build a Des Moines Convention Hotel!  Brian Gongol reports “The city financed the hotel to help spur convention business…but now it’s in danger of losing money.”  You don’t say.

Tax Justice Blog, Film Tax Credit Arms Race Continues: “Saying “no” to Hollywood can be a difficult thing for states, but here are a few examples of lawmakers and other stakeholders questioning the dubious merits of these credits within the last few weeks”.

Good.  Iowa doesn’t seem to have been badly hurt since it turned from subsidizing filmmakers to jailing them.

Related: Robert Wood, Film Taxes Ensnares Beckhams, Bob Geldof, Andrew Lloyd Webber, Annie Lennox & More


TaxGrrrl, Taxes From A To Z (2014): F Is For Foreign Tax Credit.  “For many taxpayers, it’s more advantageous to claim income taxes you paid or accrued during the year to a foreign country or U.S. possession as a credit than as a deduction.”

William Perez, Chart: Total Refundable Credits from 1990 to 2011.  There are more of them now.

Peter Reilly, Hedge Fund, TEFRA And Community Property Give Woman Tax Nightmare

Russ Fox, The IRS Needs Volunteers for the Taxpayer Advocacy Panel


Cara Griffith, States’ Perspectives on Federal Tax Reform (Tax Analysts Blog)

Joseph Henchman, Nebraska Legislators Approve Inflation Indexing But Drop Major Tax Overhaul (Tax Policy Blog)

Howard Gleckman, Mike Lee’s Tax Plan: An Intriguing Idea That Would Add $2.4 Trillion to the Deficit (TaxVox)

Kay Bell, House panel finally looking at Internet sales tax legislation

TaxProf, The IRS Scandal, Day 308

News from the Profession.  Tweeting a Lot About Audit Stuff Can Get You a Job at Deloitte.  (Going Concern)



Tax Roundup, 10/7/2013: Not everything the IRS auctions is as glamorous as the Chromaro. And another Tax Fairy sighting!

Monday, October 7th, 2013 by Joe Kristan

Last week we mentioned the Chromaro, a toy seized by the government from a man who tricked out a Camaro with proceeds stolen from the IRS via identity theft refund fraud.  It will eventually be auctioned off to help recoup a small fraction of the stolen money.

The IRS Auction site lists other items the IRS has received from hapless taxpayers, many of which may be more difficult to unload than a Chromaro.  For example, this “Small Town Establishment – Bar/Lounge, 1,764 SF” in Blue Grass, Iowa, “Locally known as 202 W. Mayne Street, Blue Grass, Iowa”:


202 W. Mayne Street, Blue Grass, Iowa. IRS image.


Not nearly as shiny as the Chromaro.  Googling the street address generates the result “Harley’s Bar & Grill,” which probably means that it’s not a clubhouse for Kawasaki owners.  Whatever the clientele, it’s not nearly as shiny as the Chromaro.



Kay Bell,  Audit target? You’re getting a bit of a shutdown break

Janet Novack, Can’t Stop The Machine: During Shutdown, IRS Computers Still Churn Out Tax Liens, Levies And Bills: 

The IRS sends out more than 2 million entirely automated  “math error” notices a year telling taxpayers they made an arithmetic error, omitted a kid’s Social Security number, claimed a credit incorrectly, or otherwise did something the IRS considers a mistake.  These computer generated notices are “summary assessments”—meaning the taxpayer owes the extra money unless he contacts the IRS within 60 days to clear up the issue and to preserve his appeal rights. Good luck with that. No one is answering the phone or reading the mail at the agency.

Funny how it is essential to kick old people out of their private homes just because they are on government land, but it is also essential to not lift a finger to help taxpayers receiving erroneous tax notices from robots.


David Cay Johnston, The Importance of Tax Tribunals (via the TaxProf).  Iowa has a poor system of tax appeals that is stacked against the taxpayer, but even Iowa’s flawed system is better than that in many states.  The real answer is a dedicated Iowa tax court to enable Iowans to have their tax cases heard by judges who actually know a little about taxes.


Jack Townsend, To Opt Out or Not to Opt Out – That is the Question.  It refers to the IRS offshore “amnesty” program.

Leslie Book,  Court of Federal Claims Holds that Agent’s Fraud Does Not Extend Statute of Limitations (Procedurally Taxing)

TaxGrrrl, Lauryn Hill Leaves Prison Early, Releases New Single All In 24 Hours   


tax fairyPeter Reilly, Unveiled God Needs A Lawyer In US District Court :

There is a concept that my blogging buddy, Joe Kristan, calls the Tax Fairy – “the magical sprite that can make your taxes go away with fancy tax footwork”.  Corporation Sole has been a Tax Fairy wannabee for a while.

But, as Peter notes, there is no Tax Fairy.



Russ Fox,  Yet Another Reminder that a License Doesn’t Always Mean Ethical Behavior

The idea that just because people have licenses that they will all suddenly go the straight and narrow is laughable. There were tax crimes years ago; there will be tax crimes in the years that follow…licensing or not.

But with licenses, the government gives the cheater a seal of approval.


Lyman Stone,  The Vicious Cycle of New Jersey Property Taxes (Tax Policy Blog)

TaxProf, The IRS Scandal, Day 151

The Critical Question:  What’s the Matter with Oregon’s New Tax Deal?  (Tax Justice Blog)


News from the profession: Accounting Student Struggles with Love, Money, Blemish of Unknown Origin (Going Concern)



The income tax, the Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The income tax, the Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

Brian Gongol

The Treasury Department does a lot of things, but the original Treasury Act of 1789 didn’t say anything about a responsibility to the economy as a whole; instead, it charged the Treasury with making and keeping accounts by collecting taxes and other revenues and by managing how they are spent. At a time of government shutdown, perhaps it’s worth asking whether we’re keeping the Treasury occupied enough with its essential tasks, and not over-extending the scope of responsibility far more than is healthy for the department (and the country). Mission creep that grows to the extent that the Treasury Secretary thinks his primary job is to manage the economy (rather than to collect taxes and pay the nation’s bills) probably points us in the wrong direction. 

That’s a very diplomatic understatement of the problem.  The federal income tax law, just one subset of the Treasury’s portfolio, is designed to manage the economy in all kinds of ways.  A few, just off the top of my head:

Industrial research


Ethanol Production

Wind energy


College education

Subsidizing residential rents

Subsidizing home ownership

Subsidizing old buildings

And now, running the nations health care finance system.

The wisdom of the government in trying to do any of these things at all is at best debatable, and doing it all through the income tax is folly.  Yet the politicians continue to use the income tax as the Swiss Army Knife of public policy.  And like the Swiss Army Knife, if you add too many gadgets to it, it stops being very useful at anything.



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

Monday, May 6th, 2013 by Joe Kristan

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

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

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

Related: David Cay Johnston, Subsidies – Good News and Not So Good (


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

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

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

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


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

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

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


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

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


Kay Bell,  5 tax tips for Cinco de Mayo

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

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

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

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

Trish McIntire, RAL Fees in Court

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


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


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


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

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

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

How did he delay his trial?

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

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

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



Tax Roundup, 1/30/2013: Bah. Humbug. And where states get their cash.

Wednesday, January 30th, 2013 by Joe Kristan

20130130-4Why so grumpy?  Because it’s the first “official” day of tax season as the IRS begins processing returns.   But only some of them.  The last-minute Fiscal Cliff tax law is delaying the processing of many forms, delaying most business filings until “late February or into March.”  They also have delayed processing of returns with education credits until sometime next month.

Oh, and the streets are a mess.

Kay Bell,  Tax filing on hold for taxpayers who need 31 federal forms

TaxGrrrl, IRS Opens For Business Today, Many Taxpayers Qualify To File For Free


Taking your money to give to the well connected.  From Taxing the Rich to Pay for Big Business Tax Credits by Veronique de Rugy:



Taking from the small businesses, giving to the big business with pull.


Brian Gongol on the decision of Senator Harkin to not seek an umpteenth U.S. Senate term:

Wouldn’t it be wonderful if we could start with a blank slate and ask ourselves (as Iowans): Who is the smartest, most dependable, most thoughtful person we could send to an august body of decision-makers who are challenged with bringing wisdom and sobriety to the decision-making process of government?

Like somebody like that would stand a chance.


Why bother with a state corporate income tax?  While state income taxes are a reliable source of work for people like me, they do surprisingly little for the states, according to a new report released by the Tax Foundation yesterday.  Nationwide state corporate income taxes accounted for only 3% of 2010 state revenues.  In Iowa, it’s even lower.  Here are the revenue sources from Iowa and some nearby states:

Source: Tax Foundation

Source: Tax Foundation


The corporation income tax raises little revenue, is expensive to administer, is exploited by the well-connected and well lobbied, and is almost certainly a job-killer.  Why not go for a low-rate, low-loophole system like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan?

TaxProf,  A Distributional Analysis of the Tax Systems in All 50 States, passing on a report from the Center on Budget and Policy Priorities says state tax systems are regressive.  Keep this in mind:

Source: Heritage Foundation/

Source: Heritage Foundation/

If you only look at the distribution of taxes paid and ignore the value of services and cash payments received, you miss a lot.


Janet Novack,  IRS Tips Won’t Protect You From Identity Theft Tax Fraud.

Jack Townsend,  Article on Importance of Jury Instructions in White Collar, including Tax, Crime Cases

Jason Dinesen, An Obligatory 1099-K Post for 2013

Trish McIntire,  Before You Sign.  A timely reminder that you are responsible for what’s on your return, even when you use a paid preparer.

Patrick Temple-West,  Mickelson and the sports star migration, and more (Tax Break)

William McBride, CRS: Tax Rates Do Matter for Profit Shifting (Tax Policy Blog)

Joseph Thorndike, The Income Tax Is Inquisitorial — Get Over It( May he have a good National Research Project exam in his future.

Robert Goulder, French Budget Minister Caught In Tax Probe (

That wouldn’t take much.  Payroll Tax Cuts May Boost the Economy More than You Think (Howard Gleckman, TaxVox)


Bad news, good news:  The Twinkie is Dead! Long Live the Twinkie! (Megan McArdle).

News you can use.  Tax Law Warning: Don’t Cut Mom a Rent Break (Jim Maule)



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

Monday, January 21st, 2013 by Joe Kristan

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

So now what?

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

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

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

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

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

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

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


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

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

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

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


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

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

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

So true.

Paul Neiffer, IRS Announces April 15 Farmer Deadline

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

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

TaxGrrrl, Why Justice Matters, Revisited

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

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


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

Kay Bell, Tax filing preparation checklist

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

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


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


Tax Roundup, 12/31/2012: No cliff deal yet. And Branstad won’t try to fix income tax this year.

Monday, December 31st, 2012 by Joe Kristan

No cliff deal.  As of this morning, the President and Congress continue to fail to to make a “fiscal cliff” deal.  Rest assured, though, that even when they cobble together a lame and harmful deal, as they will today or weeks from now, they won’t even begin to address the real fiscal calamity — the government’s incontinent spending.

The unforgivable sin of the current president, and the last one, and their Congressional enablers, is spreading the idea that the government can buy us all free stuff, and the rich guy will pick up the tab.  Sorry.  The rich guy isn’t buying.


Income taxes: the redheaded stepchild of Branstad tax policy?  It looks more and more like the Branstad agenda for the 2013 Iowa legislative session  won’t include income tax reform.  From the Sioux City Journal:

Asked during a recent interview if there was room in all that for income tax reductions during the 2013 session, Branstad replied: “Probably not.”

“Honestly, property tax would be my priority and I’d love to do income tax, too, and maybe, if revenues exceed expectation, we could provide some income tax relief in addition,” Branstad said. “But I think I would rather focus and get something permanent done on the property tax. That’s the place where we’re the least competitive.”

That’s a shame.  Given the economically unwise attitude of the Senate leader, maybe nothing is possible:

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said he would need more details but at first blush he doubted it would go very far in the legislative process if it proved to be “just a way for the wealthiest Iowans to cut their taxes dramatically” while middle-class families picked up a greater share of the tab for the cost of state government.

That’s just silly.  The rich guy isn’t buying for Iowa either.  The wealthiest Iowans always can dramatically cut their taxes with a moving van, until Senator Gronstal figures out a way to keep them from escaping to zero-tax South Dakota or Florida.

Iowa’s income tax is way overdue for replacement.   Instead, it will get more Bondo and bumper stickers.

If Iowa's tax law were a car, it would look like this.

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


Fiscal Cliff Notes:

Greg Mankiw, New York Times:

When President Obama talks about taxing the rich, he means the top 2 percent of Americans. John A. Boehner, the House speaker, talks about an even thinner slice. But the current and future fiscal imbalances are too large to exempt 98 percent or more of the public from being part of the solution.       

Ultimately, unless we scale back entitlement programs far more than anyone in Washington is now seriously considering, we will have no choice but to increase taxes on a vast majority of Americans.

Think Finland.  Unless we choose to be Greece or Argentina.

Gongol: Fiscal Cliff…not resolved. I note a false choice:

The people who make the decisions at the highest level in this republic are either dishonest or utterly economically incompetent if they don’t say the following out loud: “We are demanding more out of our government than we can presently afford. We need to pay more, get less, or both.”

“Either?”  I say “both.”

Kay Bell: Senate ready for some football; adjourns Sunday without reaching fiscal cliff deal

TaxGrrrl, Budget Talks Stall As Reid Calls Latest GOP Move A ‘Poison Pill’

Kevin Drawbaugh, Fiscal cliff talks down to the wire (Tax Break)

Nick Kasprak, 2012 Likely to be First Year Without AMT Patch

Peter Reilly, Dysfunctional Congress – At Least They Are Not Maiming One Another.  If they don’t, maybe we should.


The roundup:

Cara Griffith, What Will Become of Physical Presence? (

Paul Neiffer,  Be Careful Of Fiscal Year Section 179 Issues!

Jason Dinesen,  6 Tax Predictions for 2012 — How Did I Do?

Tres Bien. French Court:  75% Tax Rate on Millionaires Is Unconstitutional (TaxProf)

Robert Goulder, Gérard Depardieu: Tax Exile (

TaxGrrrl, Congress Hasn’t Fixed The Budget Yet, Getting A Raise Anyway.  Courtesy of the President, who maybe thinks they make him look good by comparison.

Chris Sanchirico, New Ways to Think About a Tax on Public Companies

Insureblog,  Cavalcade of Risk #173: Post-Mayan Apocalypse Edition

The Critical Question: Is This Tax Preparation Nightmare Reawakening? (Jim Maule)

Tax Roundup, 11/12/2012: Ottumwa edition!

Monday, November 12th, 2012 by Joe Kristan

I’m in beautiful Ottumwa, Iowa today to help at the Iowa State University Center for Agricultural Law Farm and Urban Tax School.  Ottumwa last month made a rare appearance i!n the tax news when a resident pleaded guilty to tax charges arising from an investment scam.

There are four sessions of the school left — Muscatine, Red Oak, Sheldon and Ames.  Sign up today!


Whither Wandry?  The IRS made clear that the withdrawal of their appeal of the Wandry case does not mean they are going along with it. 

The case involved a “defined value” formula that prevented the IRS from increasing the value of intra-family gifts for gift tax purposes.  The formula said that if the IRS changed the value of the gift, the recipients would have to give part of the gift back to the donor so that the value of the remaining gift would be the amount reported on the gift tax return. 

The Tax Court agreed with the taxpayer that this worked, preventing an assessment of gift tax, but it apparently was settled before the 10th Circuit could rule on the IRS appeal.  The IRS has announced its “non-acquiescence” to the Tax Court case, signaling that they will continue to contest defined value clauses on family gifts.   Three circuits have ruled against the IRS in similar cases involving charitable gifts. 


Anthony Nitti,  The Fiscal Cliff For Dummies, Part 2: The Economic Impact Of Extending The Bush Tax Cuts

TaxGrrrl,  Tax Increases Looming in 2013: Who Pays, How Much and Will They Stick?

William McBride,  The Fiscal Cliff and the Stock Market (Tax Policy Blog)

Howard Gleckman, Washington Starts To Dance Away from the Fiscal Cliff

Brian Strahle, Is There a State Tax “Fiscal Cliff”?

Christopher Bergin,   Beware the ‘Frankentax’!

Robert D. Flach,  A SIMPLE FIX

TaxProf,  Burman & Slemrod: Taxes in America — What Everyone Needs to Know

Paul Neiffer,  Surprise! – IRS Does Not Promote “First Time Abatement” Program

Jack Townsend,   Court Holds Government Must Prove FBAR Willful Penalty by a Preponderance

Missouri Tax Guy,  Small Business Health Care Tax Credit

Spelling test.  IRA Penalty On Withdrawal To Pay Alimony – Can Family Law Judge Spell QDRO ?  (Peter Reilly) 

Buh-bye.   IRS Commissioner Shulman outta here, leaving fiscal cliff hassles to new tax  boss  (KayBell)

Russ Fox,  If It’s In Cash It Doesn’t Count, Right?

 Won’t that make it a lot more expensive? Cost of Ramsey Northstar station: $130,000 per new rider; But supporters say it will boost ridership significantly.  (Via Gongol.)



Tax Roundup, 7/30/2012: film budgets, semi-secret film trials, and who really benefits from targeted tax breaks

Monday, July 30th, 2012 by Joe Kristan

hh44.jpgIowa Supreme Court rules that film budget summaries for film tax credit recipients are public information.  The court ruled that the state must release the summaries, reversing a lower court decision that the information was confidential.

Oddly, one of the film companies fighting to keep the information confidential was Polynation Pictures, whose leader is serving a 10-year sentence for looting the program.

Technically the trial of film tax credit figure Chad Witter is also public information, but if you are looking for coverage in Iowa media, it might as well be top secret.  The trail enters its second week today. Whatever revelations are in the trial about the shadowy world of brokers and middlemen who market tax credits, local reporters don’t think they’re worth mentioning.

Meanwhile, Iowa taxpayers still are coughing up cash to Hollywood, reports

Judgments paid by the state of Iowa spiked to nearly $13.2 million last fiscal year as attorneys negotiated settlements to resolve claims and disputes caused by employee mistakes, workplace misconduct or other damages involving government operations.

Nearly half of the payout approved by the State Appeal Board in fiscal 2012 involved pre-litigation settlements with film projects that sought state tax credits under an ill-fated state incentive program that was shut down in 2009 after an audit showed millions of dollars worth of tax credits were awarded improperly.

But I’m sure we got our money’s worth out of the deals because of all of the intangibles they filmmakers brought to Iowa… (via   

Film credits don’t make any more sense in New York.  Andrew Cuomo: Subsidizer to the Stars. (Patrick Brennan)

That tells you who the tax credit programs are really for.  From

Lee Schafer of the Minneapolis Star Tribune called me the other day to see if I had any information on the effectiveness of angel investment tax credits for a story he was writing.

I told him that all that the tax credit programs do is speed up or slow down investments (to take advantage of their timing).  There is no evidence that they increase angel investment whatsoever. They are not the job creator politicians claim when enacting these programs.  (See my arguments in my editorial at the WSJ).

In his investigation of the program in Minnesota he found strong support among politicians for the program, but very little support from entrepreneurs.

State tax incentive programs are usually a head fake, especially in high-tax states like Minnesota and Iowa.  The politicians use them to pretend they are “pro-business”  while leaving a business-unfriendly tax system in place.

Tax Policy Blog, Taxes and the Outsourcing of U.S. Jobs

Kay Bell, Cayman Islands to tax foreign workers

Paul Neiffer, S Corporation Tax Returns Generate A Lot of Income

Peter Reilly, First Circuit In Easement Donation Case – Don’t Confuse The South End With South Boston

Trish McIntire talks about when you can claim a married child as a dependent.

Robert D. Flach was Buzzing over the weekend.

TaxGrrrl, Olympians Get a Free Pass on Taxes at the London Games

Wheres’ the easy money in that? Speed cameras and automated road monitors everywhere, but the police still can’t catch a drunk driver (Via Gongol)


Targeted tax benefits outside the lab

Monday, January 16th, 2012 by Joe Kristan

Tax Analysts in-house economist Martin Sullivan boldy calls for government to pick winners in business ($link). (Update, 1/17/12: free link now available via the TaxProf.)

Tax incentives for venture capital. Firms receiving financing from venture capital funds grow far more quickly and are far more innovative than other small businesses. Positive externalities from innovation are enough to justify preferential tax treatment for venture capital funding. Financial market imperfections provide additional justification. Venture capital funding suffers from a double moral hazard problem. Venture capitalists provide funding and experience to companies they fund. Companies funded by venture capital have imperfect knowledge of the effort venture capitalists will provide. That leads to low levels of venture capital that could be remedied by a reduction in capital gains taxes on venture capital investment. (See Keuschnigg and Nielsen.)
So there is a good economic case for extending tax benefits to venture capital…
…Tax incentives should be targeted to the subset of small businesses that are fast-growing and innovative.

Unfortunately, “targeted” tax benefits don’t work well outside the classroom. Iowa has tax incentives for start-up businesses, and a Cedar Rapids example, via Gongol, is instructive:

When he came to Cedar Rapids last year, Walter


Economic development incentives: why not “disarm”?

Friday, August 19th, 2011 by Joe Kristan

Brian Gongol accurately describes the state of play in corporate wellfare in the form of state “economic development incentives”:

Unilateral disarmament in the economic-development battlefield isn’t likely to happen, since nobody wants to be the politician or public official blamed for failing to “bring jobs” to a community. But the fact of the matter is that these incentives tax some companies and people to subsidize their own competitors. It’s a perverse structure that really must end.

That’s exactly so. And the politicians like it that way. They get to issue a press release, cut a ribbon, and claim credit for the jobs they “created” by taking your money and giving it to somebody else.
Yet unilateral disarmement is the right answer for corpore welfare. I’ll vote for any politician who declares war on economic development “incentives” with this battle cry:

Businesses aren’t stupid. Taking money from your taxpayers to troll for new businesses is like taking your wife’s purse into a bar to buy drinks for the girls. The girls know you’ll raid their purses when you get the chance, and any pickups you do get aren’t exactly going to be prizes.

Related: The Tax Update’s Quick and Dirty Iowa Tax Reform Plan


Is Iowa Farm Land bubble-icious?

Friday, April 29th, 2011 by Joe Kristan

Paul Nieffer at Farm CPA Today isn’t ready to say there’s a farm price bubble yet, but he has some thoughts about what happens if this is a bubble, and it pops:

Good farmland in Grundy County, Iowa peaked out in 1981 at approximately $2,947 per acre. It bottomed in 1986 at $1,047 or a drop of about $1,900 or 65%. It took from 1986 until 2003 or 17 years for the average price of farm land in Grundy County to top $3,000. From start to finish, it took about 22 years for the cycle to finish. Now, what is not factored into this is that farm land continued to return cash rent each year. This probably averaged a 3% or so return each year.
Most crashes from any bubble usually correct from about 50-65% each time. Therefore, if prices are around $10,000 right now and this is the top, farm land may not fully stop sliding until it hits $3,500


There is such a thing as a bad parking space

Tuesday, August 10th, 2010 by Joe Kristan

Brian Gongol points out a fundamental design flaw.


Cedar Rapids: taxing its residents and passerby to subsidize the privileged

Thursday, June 17th, 2010 by Joe Kristan

When the floodwaters receded from Cedar Rapids, they seem to have left a creepy power-grabbing residue. Brian Gongol reports:

Interstate 380 now has speed cameras mounted along the freeway as it passes through Cedar Rapids. This is abhorrent. When Iowa City puts up nuclear-weapon-free zone signs along the streets, it just looks goofy and anachronistic. (Who’s going to carry a nuke into Iowa City?) But when Cedar Rapids mounts police cameras along the road and uses those to issue fines, it reeks of creepy authoritarianism. When the law is enforced via camera, rather than by an individual officer of the law with judgment and discretion, then we’re turning over our responsibilities to think to the machines, and asking to be baby-sat by Big Brother.

In addition to levying a creepy tax on travelers, they are also taking money form their own taxpayers and giving it to well-connected companies to steal their “jobs” from the suburb that has hosted their city council meetings since the flood. Presumably their mayor, Republican former legislator Ron Corbett, is angling for a higher office by bringing “jobs” to Cedar Rapids. Lets hope that he never gets any more power than he has.
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Do we really do things differently in the Midwest?

Wednesday, February 17th, 2010 by Joe Kristan

Things are done differently here, says Brian Gongol. He cites the small size of our business world and our exposure to climate disasters as factors that lead to high levels of trust, concern with reputation, and awareness that things can go badly wrong. For example:

To use the Omaha example, the entire state of Nebraska has just 1.8 million residents. In a state of that size, everyone knows everyone else, particularly when they are in the same field of business. It’s often joked — and with no small measure of accuracy — that if the rest of the world runs on six degrees of separation, the Midwest runs on two.

I’m not sure that is as distinctive as it appears. Most industries are a small world in themselves, and a bad reputation of a supplier, for example, can race across the country and even the world. But this this sounds right:
As a result, business is often conducted on a handshake and a verbal agreement on deals where people in other places might bring out a six-page written contract full of terms and conditions.

And it usually works out pretty well. Still, in the internet age, the idea that you only do business “in the Midwest” may not last much longer. But maybe a smaller world will make everyplace more like the Midwest, rather than the other way around.
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Des Moines revenue-camera decision looms

Friday, July 24th, 2009 by Joe Kristan

Why traffic cameras are a crock.
Related: How much does the Des Moines City Council hate its voters?