Posts Tagged ‘Howard Gleckman’

Tax Roundup, 3/25/16: Who is qualified to appraise your old laundry? And: Dept. of Revenue explains coupling.

Friday, March 25th, 2016 by Joe Kristan
Flickr image courtesy Jen Waller under Creative Commons license.

Flickr image courtesy Jen Waller under Creative Commons license.

Why you really don’t want a $10,000 deduction for that trip to Goodwill. Some taxpayers view the deduction for donations of stuff you can’t sell at a rummage sale as a standard deduction by other means. How likely is it that the IRS is going to look at the $250 deduction I’m claiming for dropping those bags at Salvation Army, anyway?

The poison is in the dose. Just yesterday we discussed the magic words you need to get from any charity for gifts of $250 or more. If your gift of property exceeds $500, you have to notify the IRS by filing Form 8283. And if your donation goes over $5,000, you have to get a “qualified appraisal.”

How does that affect your trip to the thrift store? One taxpayer who cleaned out his late mother’s possessions found out the hard way. The Tax Court describes the donations:

These items allegedly included seven sofas, four televisions, five bedroom sets, six mattresses, a kitchen set, a dining room set, a china cabinet, and three rugs. For charitable contribution purposes, petitioner placed a value of $11,730 on these items.

Petitioner testified that he also donated to AMVETS during 2009 numerous items of clothing belonging to him and his children. These items allegedly included 180 shirts, 63 pairs of slacks, 153 pairs of jeans, 173 pairs of shoes, 51 dresses, 35 sweaters, nine overcoats, and seven suits. For charitable contribution purposes, petitioner placed a value of $14,487 on these items.

You have to group “similar items” to see whether you exceed $5,000 and trigger the need for an appraisal. IRS Publication 561 describes what “similar items” means (my emphasis):

The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return.

So splitting up your donations between Goodwill and Salvation Army doesn’t help. But carefully identifying your donation and keeping each category (eg, books, china, silver) under $5,000 can work. Be sure to carefully document what you are donating; pictures are a good idea.

The taxpayer who went to Tax Court with his AMVETS donation ended up getting a zero deduction for his trouble. You don’t get a “partial” deduction when you claim a >$5,000 property charitable deduction and fail to get a proper appraisal. You get nothing.

Now if you can even find an appraiser for your old laundry, be sure you get one that counts. A qualified appraiser has to meet certain requirements for independence and expertise. For example, neither the donee nor the person who sold you the property qualifies.

You can’t wait for the IRS examination to find the appraiser. The appraisal also has to be timely, made not more than 60 days before the donation and not later than the extended due date of the return claiming the deduction. So if you don’t have that appraisal yet for your 2015 donation, it may not be too late — if you extend your return.

This is another of our irregular series of 2016 filing season tips. Collect them all!

 

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The Iowa Department of Revenue, Immediate income tax changes for Iowa taxpayers:

Effective with the enactment of House File 2433 on March 21, 2016, Iowa tax provisions are coupled with federal provisions retroactive to January 1, 2015 for tax year 2015 only.  The most common federal provisions with which Iowa is now coupled are listed below.

 NOTE: Iowa did not couple with the bonus depreciation provisions allowed for federal tax purposes for the 2015 tax year

 For Tax Year 2015 Only:

For Individual Income Tax Filers Only:

-Deduction of educator expenses
-Tuition and fees deduction for higher education
-Election to deduct state sales/use tax as an itemized deduction in lieu of state income tax
-Treatment of mortgage insurance premiums as qualified residence interest
-Tax free distribution from an IRA to certain charities for individuals 70½ and older

For Individual Income Tax Filers as well as Corporate Income Tax (including S Corporations), Partnership, Fiduciary and Franchise Tax:

-Section 179 limit for Iowa for the 2015 tax year is $500,000, which is the same as the federal section 179 limit. The phase-out threshold is $2 million.

The Department will update online forms, instructions, and web pages accordingly. Taxpayers impacted by these provisions who have already filed tax year 2015 returns should review information provided on the Department’s website at https://tax.iowa.gov about how to file an amended return.

These aren’t the only provisions coupled, of course.

 

TaxGrrrl, Worried You Might Run Out Of Time To File Your Taxes? Get An Extension. It’s always better to extend than to file late. It’s always better to extend than amend.

Annette Nellen, ACA Complexity Evident in IRS Incomplete Tax Tip. “For the past few weeks, the IRS has been publishing Health Care Tax Tips.  The one I received by email today was troubling because it includes an error or at least not enough detail to be entirely useful.”

Jack Townsend, TRAC Offerings on IRS and DOJ Criminal Tax Enforcement. “The data reported shows that referrals by the IRS to DOJ Tax peaked in the early 90s at 20 per million of population and are about 9 per million in fy 2015.”

Carl Smith, CDP Notice of Determination Sentence Causing Late Pro Se Petitions. “At the very least, it is time for the IRS to redraft the CDP notice of determination sentence so that it does not anymore trick pro se taxpayers into filing late.”

Kay Bell, Attention White House wannabes: the IRS audits presidential tax returns every single year.

 

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Joseph Thorndike, Face It: Americans Just Don’t Like the Estate Tax (Tax Analysts Blog) “At what point do liberals need to consider the possibility that something besides ignorance and stupidity is necessary to explain the popular distaste for the estate tax?”

TaxProf, The IRS Scandal, Day 1051

Howard Gleckman, The Gulf Between the Presidential Candidate Tax Plans Is Historic (TaxVox). “Calling it a gap hardly does it justice. It is an ocean of difference.”

News from the Profession. However the Presidential Election Goes, CPAs Probably Not Moving to Canada (Caleb Newquist, Going Concern)

 

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Tax Roundup, 3/24/16: Executors get until June to file basis reports. And: Don’t foot-fault that charitable deduction!

Thursday, March 24th, 2016 by Joe Kristan

20160122-3Now it’s June. The IRS has again delayed (Notice 2016-27) the new requirement for executors of taxable estates to notify beneficiaries of their basis. The rule is meant to keep the IRS from being whipsawed by having taxpayers use lower values for estate tax filings than for income tax filings.

The rule, which would require the executor to provide Form 8971 to the IRS, has been delayed several times now. The form includes a schedule for each beneficiary of the assets they are inheriting, along with the asset basis reported on the Form 706 filed for estate tax purposes. Each beneficiary is to receive a copy of their own schedule.

The filing is mandatory for estates required to file an estate tax return when the return is filed after July 31, 2015. It had been due March 31. The deadline is now June 30, 2016.

 

Charitable contributions: paperwork or bust. The law isn’t willing to take your word for charitable contributions any more. If you make a charitable contribution of $250 or more, the tax law now says no deduction is allowed unless you have magic words in writing from the charity. From IRS.gov:

The written acknowledgment required to substantiate a charitable contribution of $250 or more must contain the following information:

-Name of the organization;

-Amount of cash contribution;
-Description (but not value) of non-cash contribution;
-Statement that no goods or services were provided by the organization, if that is the case;
-Description and good faith estimate of the value of goods or services, if any, that organization provided in return for the contribution; and
-Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.

In addition, a donor may claim a deduction for contributions of cash, check, or other monetary gifts only if the donor maintains certain written records.

Even if you have a cancelled check for your $250+ gift, if you lack the magic words, your deduction is zero. 

A taxpayer learned this lesson the hard way in a Tax Court opinion released yesterday. The taxpayer’s gift in this case was a conservation easement valued at $350,971. While there are complex additional requirements for deducting such property gifts, those weren’t the problem. The taxpayer never got past the magic words:

Although the conservation deed includes provisions stating that the intent of the parties is to preserve the property, those provisions do not confirm that the preservation of the property was the only consideration because the deed did not include a provision stating that it is the entire agreement of the parties. Without  such a provision, the IRS could not have determined by reviewing the conservation deed whether petitioners received consideration in exchange for the contribution of the conservation easement. We conclude, therefore, that the conservation deed taken as a whole is insufficient to satisfy section 170(f)(8)(B)(ii). Because petitioners’ contemporaneous written acknowledgment does not comply with section 170(f)(8)(B)(ii), petitioners are not entitled to any claimed carryover charitable contribution deductions,

Lacking the magic words, the deduction suddenly went from $350,971 to nothing. 

While this was a six-figure problem in this case, the rule is just as effective for a $250 gift to your church or your favorite charity.

I’ll just get the acknowledgment if I get audited. That doesn’t work. The acknowledgement has to be “contemporaneous.” Tax Court explains:

A written acknowledgment is contemporaneous if the taxpayer obtains the acknowledgment on or before the earlier of the date the return was filed or the due date (including extensions) for filing the return for the year in which the charitable contribution was made.

Many smaller charities, and even a few bigger ones, have been slow to realize the importance of these acknowledgements. If you don’t have one yet, it is wise to get it. If you want the charitable deduction, it’s worth extending your return for.

Cite: French, T.C. Memo 2016-53.

This is another of our irregular series of 2016 filing season tips. They’ll keep coming through the April 18 deadline!

 

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Paul Neiffer, Are You 70 1/2?. “If you have retirement or IRA accounts and you are approaching age 70 1/2, you must be careful to make sure to take your required minimum distributions (RMD) and April 1 can be a key deadline.”

Jason Dinesen, If I Turn 65 in August, Am I 65 on My Tax Return?

TaxGrrrl, Taxes From A To Z (2016): I Is For Inheritance

Robert Wood, Payroll Tax Violators Get Penalties Or Jail, And IRS Is Watching. “The IRS is especially vigorous in going after payroll taxes.”

Nicolas Xanthopoulos, Investigating Assets Prior to Submission of Collection Remedies (Procedurally Taxing). Important work from a practioner dealing with the hard end of the tax law, collections.

Jack Townsend, Interview of Acting Assistant Attorney General Ciraolo on Tax Enforcement. It sounds like they still want to shoot jaywalkers.

Kay Bell, $10,000 crowdsourcing prize available to designer of Future IRS taxpayer accounts website

 

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Howard Gleckman, Paul Ryan and The “Ridiculous Notion” of Tax Distribution (TaxVox):

Last week, House Speaker Paul Ryan said in a CNBC interview that the distributional analysis of tax plans done by the Tax Policy Center, the Joint Committee on Taxation, and others is based on the “ridiculous notion” that the effect of tax changes on different income groups  is important.

Mr. Gleckman thinks Speaker Ryan is wrong, that it is very important to show how much tax changes benefit “the rich.” While that is interesting information, Speaker Ryan is right in that notions of distributional fairness have an outsized impact on tax policy deductions. I get the impression from some people that they would be fine with executing people, seizing their property, and selling their families into slavery, so long as it only affected the top 1% of earners.

David Brunori, How to Save the Corporate Tax (Tax Analysts Blog). “First, get all the states in a big room and have them agree to end all targeted tax incentives.”

TaxProf, The IRS Scandal, Day 1050. Today’s link: Chipping Away at the IRS Stonewall: A Federal Court Scores the Agency For its ‘Continuous Resistance’

 

Humor impairment is a lifestyle, not a crime! White-Collar Crime Watch: Polygamists, Fixed Tennis Matches, An Unfunny Accountant (Leona May, Going Concern).

 

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Tax Roundup, 3/14/16: Coupling week! And: remember your March 15 federal and state deadlines.

Monday, March 14th, 2016 by Joe Kristan

coupling20160213Coupling! We expect the Iowa General Assembly to pass the 2015 tax coupling bills this week, and the Governor is expected to sign. You can follow their progress at the General Assembly site. The extender bills have been renamed SF 2303 and HF 2433.

We will be following the developments and will post news as it happens.

 

March 15 looms. Tomorrow is the first real big deadline of the filing season. Corporate 1120 and 1120-S corporation returns are due.

If you can file on time, you should extend. The penalties for late filing without an extension can be painful, and you may miss the opportunity to make important elections that are only available on a timely-filed original return.

But it’s not just federal returns. While many states, like Iowa, have April due dates for corporations returns, 23 states  want the returns on March 15. Even if you are filing an S corporation return, where the corporation itself doesn’t file, many states require payment anyway — either as a misbegotten corporation tax, as in California, or as withholding on individual income taxes of non-resident shareholders.

Source: RIA Checkpoint.

Source: RIA Checkpoint.

Extensions can be tricky too. Many states either accept the federal extension or, like Iowa, automatically extend a return if the tax for the year is sufficiently paid by the original due date. But other states require a separate extension filing. States requiring a separate extension filing, even when no payment is due, include Arkansas, Connecticut, D.C., Florida, Massachusetts, Maryland, Michigan, Missouri, North Carolina, North Dakota, Nebraska, New Hampshire, New Jersey, New Mexico, New York, New York City, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont and West Virginia.

It’s already late — don’t put off those extensions any longer.

 

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Gretchen Tegeler, Can taxpayers ever get a break? (IowaBiz.com). “Alas, even the best-intentioned measures can be twisted into an argument to compound the taxpayer burden.”

Kristine Tidgren, Iowa Utilities Board Has Approved Bakken Pipeline (AgDocket).

Kay Bell, Filing deadline for 2012 taxes — and almost $1 billion in unclaimed tax refunds — is April 18

Jason Dinesen, Glossary of Tax Terms: Pass-Through Entity, “In tax terminology, a pass-through entity is a business where the end results of operations ‘pass through’ to the owners and are reported on the owners’ personal tax returns.”

Jack Townsend, Tax Obstruction Conviction Permits Inclusion in Tax Loss of Penalties and Interest. “That issue was whether the conviction for obstructing the collection of tax could include penalties and interest within the scope of the financial harm Black intended to inflict on the IRS by his obstructive acts.”

TaxGrrrl, On Pi Day, A Peek At Your Piece Of The National Tax Pie. “You can see your personalized taxpayer receipt by the dollars from the White House by plugging in the tax you paid in 2014 here.”

Andrew Mitchel, Rev. Rul. 2016-8: Tax Aspects of the Cuban Thaw

Robert Wood, As U.S. Passports For Domestic Flights Loom, IRS Can Now Revoke Passports. What could go wrong?

Leslie Book, Using Craigslist to Fish For Bogus Dependents (Procedurally Taxing)

Jim Maule, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just A Need for More Revenue?. Come now. Putin is just concerned for the health of his beloved people.

 

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TaxProf, The IRS Scandal, Day 1038Day 1039Day 1040.

Howard Gleckman, The Challenges of Modeling Presidential Tax Plans (TaxVox) “How much do tax changes affect the economy, and, in turn, what do those economic effects mean for the revenue cost of a reworked tax code?”

 

Just what kind of CPA are you? Take this quiz from the AICPA and find out. You want to know!

 

 

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Tax Roundup, 2/19/16: Sen. Bolkcom says Iowa coupling won’t happen. And: An expat writes the First Lady.

Friday, February 19th, 2016 by Joe Kristan

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Accounting Today visitors: Click here for the Presidents Day post.

The Fix is in. Small businesses fighting to retain the full $500,000 Section 179 deduction in Iowa got more bad news yesterday. Senator Joe Bolckom, Chairman of the Iowa Senate Ways and Means Committee, yesterday issued a statement saying it won’t happen:

Statement by Sen. Joe Bolkcom
Chair of the Senate’s Ways & Means Committee

“Based on a recommendation from Governor Terry Branstad and David Roederer, Director of the Iowa Department of Management, the Iowa Senate will not couple Iowa’s tax law with the federal changes for tax year 2015.

“We simply cannot afford to couple with federal changes this year and responsibly balance the state budget.”

I don’t recall Democratic Sen. Bolckom ever being so eager to accept Republican Governor Branstad’s recommendations. It appears that the fix is in. You might recall that the House passed a broad “coupling” bill overwhelmingly last month. I suspect the Senate would also, if it got a chance. Arrangements are apparently in place to ensure that vote never happens.

The Governor proposes (SSB 3107) to follow Congress only with respect to the research credit. Like Section 179 and the other provisions that the Governor proposes to not couple with, the research credit had expired at the end of 2014. Iowa law defines qualified research eligible for the credit with respect to the federal definition.  There may be no such thing as qualified research, and no research credit, for Iowa without retroactive coupling.

capitol burning 10904This means the Governor is proposing to continue big cash subsidies to some of Iowa’s largest corporations with retroactive coupling to the federal research credit renewal, while increasing taxes on Main Street taxpayers by not coupling the the Section 179 renewal.

The Des Moines Register reports on the controversy in today’s edition:

Sen. Randy Feenstra, R-Hull, criticized Senate Democrats on Thursday, saying they have failed Iowa farmers and small-business owners by choosing not to couple state law with federal tax depreciation changes. That will cost Iowans millions of dollars in additional taxes, he said.

“This is shameful,” Feenstra said. “This affects every small business and farmer in this state. Senate Democrats failing to move this bill will create significant hardships for many Iowans who anticipated we would pass this coupling legislation like we have in past years.”

The Register article closes:

Ben Hammes, Branstad’s spokesman, said late Thursday that the governor is working with the House and Senate to resolve their differences.

As the Senate and the Governor seem to be on the same side, resolution may be elusive.

The Department of Revenue has not issued guidance on how to deal on 2015 filings with non-coupled provisions, which include:

Exclusion for IRA contributions to charity
Exclusion of gain from qualified small business stock
Basis adjustment for S corporation charitable contributions
Built-in gain tax five-year recognition period
Educator expense deduction
Exclusion of home mortgage debt forgiveness
Qualified tuition deduction
Conservation easement deductions
Deduction for food inventory contributions

What to do? While efforts continue to prevent the unexpected tax increase caused by the Governor’s decision, that’s not the way to bet. If you have a big refund coming, or if you are a farmer who must file by March 1, file assuming that coupling won’t happen. But otherwise it may wise to wait for further guidance, especially for issues where the proper Iowa non-coupled treatment isn’t entirely clear — such as for IRA charitable distributions. And who knows – maybe the legislature will change its mind yet.

Related: Paul Neiffer, Why Won’t Iowa Couple Section 179?!

 

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Robert Wood, Dear Mrs. Obama, Why I Gave Up My U.S. Citizenship:

I have lived abroad most of my life. This is my 46th year in Canada. I married Canadian, my kids are Canadian, not American, I have worked my entire life in Canada. I invest here, and will retire here. I am Canadian, but as you are likely aware, giving up that USA brand is not easy. I have many relatives living in the 50. I used to love to visit them. At the moment, I couldn’t care less if I ever cross that border again.

This brings me to my main reason for handing in my passport: you are still taxing me.

Mrs. Obama couldn’t care less.

Kay Bell, IRS issues an extra tax phishing alert on the heels of its annual Dirty Dozen tax scams list

TaxGrrrl, IRS Issues ‘Dirty Dozen’ List Of Tax Schemes & Scams For 2016

Jack Townsend, IRS Issues Publication Warning of Abusive Tax Shelters and Scams

Keith Fogg, Trustee Personally Liable Based on Application of Insolvency Statute (Procedurally Taxing). “It can trace its roots back further into English common law and the statement ‘the King’s debtor dying, the King comes first.'”

 

Joseph Henchman, Letter to IRS Commissioner Re IRS Website Data Vulnerability

Howard Gleckman, How The GOP Candidate’s Tax Plans Stack Up Against One Another (TaxVox)

Jeremy Scott, Obama’s Oil Barrel Tax Would Be Extremely Regressive (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 1016

Robert Goulder, Revenue Losses From Profit Shifting: The Numbers Tell a Story (Tax Analysts Blog)

 

Career Corner: L’Affaire Denim: Accounting Firm Dress Code Debates Span Borders, Decades (Jim Peterson, Going Concern).

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Tax Roundup, 2/17/16: Nationwide ‘unregulated’ tax practice regulated out of business. And: Where’s Roger?

Wednesday, February 17th, 2016 by Joe Kristan

20150921-1The Wild West of Unregulated Tax Practice. Well, not entirely: Federal Court Shuts Down Nationwide Tax Preparation Business (Department of Justice):

A federal court in Chicago has ordered Servicios Latinos Inc. to close its nationwide tax preparation business, the Justice Department announced today.  The order comes after the Justice Department filed a civil lawsuit against the business and its owners, Georgina Lopez, Pamela Miranda and Jorge A. Miranda, alleging that the defendants falsely understated their customers’ tax liabilities or overstated their customers’ entitlement to a tax refund.  The injunction also prohibits Lopez, Pamela Miranda and Jorge Miranda from acting as federal tax preparers, owning or operating tax preparation businesses and employing tax preparers.  The defendants agreed to entry of the injunction, but did not admit the allegations in the complaint.

The abortive IRS preparer program had an ethics component. I’m sure that this would never have happened if the barred preparers had attended a one-hour ethics CPE course.

They were successful, until now:

According to the complaint, Servicios Latinos operated out of approximately 84 stores in as many as 30 states, with locations including Kennet Square, Pennsylvania; Kansas City, Missouri; and Las Vegas, Nevada. 

They probably had many clients who were delighted at the big refunds that the stodgy preparers down the street were too timid to claim. The press release says the now-closed firm’s alleged stock in trade included phony child tax credits and earned income tax credits. Sometimes a big refund can turn out to be expensive. Now their satisfied clients can look forward to their “Dear Taxpayer” letters.

This shows that the government has powerful tools to shut down bad actors. Regulation would not improve the conduct of good preparers, but it would saddle them with useless expense and paperwork. It’s just another form of occupational licensing, this time to the benefit of the national tax prep franchise outfits.

 

RMceowenPaul Neiffer, Welcome Aboard Roger McEowen:

Roger just recently left the Center For Agricultural Law and Taxation (CALT) at Iowa State University and I am pleased to let everyone know that he has agreed to join CliftonLarsonAllen as a tax director for our Agribusiness and Cooperative group.  He will be based out of Des Moines and will continue to do his normal seminars around the country and provide additional advice for our clients on income and estate tax and succession planning (along with other advice).

Roger recruited me as a speaker for the CALT Farm Tax Schools for the past several years. Congratulations, Roger, on your move to the private sector!

 

186 companies get refunds under Iowa R&D tax credit (Des Moines Register):

Critics of the program have questioned why so few companies claim such a large part of the tax credits. They’ve also questioned why the state is providing companies with money when it faces tight budgets.

Supporters of the research activities tax credit, however, have said the tax credit helps the businesses decide where to locate and where to conduct their research. Providing the tax credit helps spur investment in Iowa, some have said.

People who get free money always have good reasons why it should keep coming.

Related: What Iowa considers more important than Sec. 179. 

 

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Jason Dinesen. Glossary: Form 8332. “Form 8332 is a tax form signed by a custodial parent to release their claim to a dependency exemption for a child and give it to the non-custodial parent.” It’s a wonderful way to enable parents to continue fighting long after the divorce is final.

TaxGrrrl, Understanding Your Tax Forms 2016: Form 1099-INT, Interest Income. “The ‘FATCA filing requirement’ box is ticked if the information reported on this form is required by rule or statute to comply with the Foreign Account Tax Compliance Act (FATCA). If this box is checked, you may have your own FATCA related reporting requirements, including the filing of a Report of Foreign Bank and Financial Accounts (FBAR).”

Russ Fox, Board of Equalization Excoriated for Ignoring the Law and Binding Precedents, “This is just another reason why the business climate in California is so dreadful.”

Kay Bell, Louisiana budget gap could shut down LSU football. The most important function of the state university system, apparently.

Jack Townsend, The Revenue Rule: Is It Relevant Any More? Should It Be? “Historically, the ‘Revenue Rule’ has been a barrier to one country seeking to collect taxes in another country.”

Keith Fogg, Why is the IRS Collecting Taxes for Denmark? ({rocedurally Taxing)

Peter Reilly, How Valid Is Tax Foundation Dynamic Scoring? It’s all modeling, which is always questionable. Still, taxes do matter. The same people who insist 70% tax rates won’t be ruinous insist soda taxes affect behavior. They’re half right that way.

Robert Wood, Kim Kardashian + Kanye West File Taxes Separately. Maybe You Should Too. If I were married to Kim Kardashian, I absolutely would.

 

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Ajay Gupta, Justice Scalia’s Tax Law Jurisprudence—Just as Acerbic and Prophetic (Tax Analysts Blog). “In cases involving the interpretation of federal tax statutes, Scalia brought to bear his general disdain of legislative history.” And he was not a friend of commerce clause challenges to state taxes.

Michael Schuyler, What Would The Administration’s $10 Oil Tax Do To The Economy And Federal Revenue? (Tax Policy Blog). It would go into, among other things, “high-speed rail.

Howard Gleckman, Cruz’s Flat Tax + VAT Would Cut Revenues By $8.6 Trillion. If only there were a candidate with a plan that would improve the tax system and not increase the deficit

TaxProf, The IRS Scandal, Day 1014

Tax Justice Blog, Tax Justice Digest: Voodoo Economics — Corporate Tax Watch — Social Contract. Check out what the left side of the tax conversation is up to. Oddly, the words “social contract” don’t show up in the post. Maybe because I never signed it?

 

News from the Profession. Would an Accountant Ever Fall for a Phony IRS Call? “And if a CPA did get duped, it’s not like he or she could tell anyone about it. If they did, they’d literally die from the embarrassment.”

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Tax Roundup, 2/12/16: I want my K-1. I want it now, Daddy!

Friday, February 12th, 2016 by Joe Kristan

Accounting Today visitors, click here for the post on password hygiene.

20160212-1No, your K-1 isn’t late. As even late 1099s are arriving, more and more taxpayers are ready to file their 2015 1040s. So why is that stupid partnership or S corporation taking so long to get me that 1099? Isn’t there a penalty for not getting that to me by the end of January?

No, there isn’t. First, it’s not a 1099, it’s a K-1. The earliest any K-1s are due is March 15, and that’s only for “electing large partnerships”  — typically publicly-traded ones (and if you own a bunch of these, expect a dirty look from your tax preparer, as they are time-consuming and therefore bill-increasing).

K-1s for S corporations are due March 15 for calendar-year corporations. Unlike with 1099s, though, the S corporation can get an automatic extension of the filing deadline until September 15. This is often needed because preparing a business return is a more complicated project than computing someone’s wages or interest income. It can be more complex still if the S corporation itself has to wait on…

Partnership K-1s. For 2015, these have an April 15 deadline that can be extended to September 15 (except for the publicly-traded partnerships due March 15). Preparing partnership returns can be devilishly complex, especially when partners come and go. The deadline becomes March 15 next tax season, but that just means more extensions will be filed.

Trust K-1s are also due April 15. Most bank trust departments can get their trust returns and K-1s filed in January and February, as they have all of the information at hand. If the trust has business or rental property, or is waiting on K-1s of its own, though, expect delays.

Remember, almost all pass-throughs are calendar year taxpayers. That means everybody is trying to get their returns done at once. We preparers do our best, but the pipe is only so wide.

Tax is hard. If you think preparing your 1040 is painful, it’s minor compared to doing a return for an operating business.  Look at the IRS publications for partnerships or S corporations if you don’t believe me. If you have to wait on your K-1, it’s not because the partnership, S corporation or tax preparer is indolent or incompetent. It just takes time to get it right — and when you have a bunch of 1040s that will be thrown off if you goof, you really want to get it right.

This is another in our irregular series of 2016 filing season tips

 

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Taxable Talk, Phishers Target Tax Professionals:

Tax professionals, be wary. There are phishing emails supposedly from the IRS targeting tax professionals. Now, we have supposed new clients emailing tax professionals. My mantra, if it sounds too good to be true it probably is, holds for tax professionals, too. Do not click on links that you do not know for certain are valid.

Read the whole thing for more good advice on protecting yourself.

 

William Perez, 3 States are Delaying Tax Refunds

Kay Bell, Full, permanent Internet access tax ban approved

Stuart BassinDistrict Court Certifies Class Action in Tea Party Challenge to IRS (Procedurally Taxing).

Robert Wood, IRS And Justice Department Push Tax Prosecutions

TaxGrrrl, Ask The Taxgirl: Solar Panels & Tax Credits

Kristine Tidgren, Iowa Court Denies Private Condemnation of Right of Way (AgDocket). “Iowa Code § 6A.4(2) confers the right to take private property for public use ‘upon the owner or lessee of lands, which have no public or private way to the lands, for the purpose of providing a public way which will connect with an existing public road.'”

 

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Howard Gleckman, Rubio’s Ambitious Consumption Tax Would Reduce Revenue by $6.8 Trillion, Give Most Benefits to the Highest-Income Households (TaxVox):

Senator Marco Rubio would convert the income tax into a progressive consumption tax, an ambitious idea that would eliminate the income tax’s penalty on saving. However, a new Tax Policy Center analysis finds that Rubio’s version would slash federal tax revenues by $6.8 trillion over the next decade with most of the benefits going to high-income households.

The “mostly benefits high-income households” is the most tiresome and useless cliché in tax policy. Considering that the high earners pay almost all the income taxes, any improvement to the (awful) system will inevitably benefit them disproportionately. But the possible revenue loss is a serious issue, if Rubio remains a serious candidate.

Alan Cole, The Most Important Chart from Tax Policy Center’s Analysis of the Rubio Plan (Tax Policy Blog). “Our latest estimates, calibrated for Washington’s traditional ten-year budget window, showed the plan reducing overall tax revenues by $6.1 trillion on a static basis, while TPC shows a reduction in revenue of $6.8 trillion.”

If only there was a candidate with a plan that would improve the tax system and not increase the deficit

 

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Megan McArdle, Obama’s Oil Tax Is Running on Empty. “The administration has made some gestures toward mitigating this opposition, notably by claiming that the tax will be paid by oil companies. But this is obvious nonsense.”

Carl Davis, More Details Emerge on President’s Proposed Oil Tax (Tax Justice Blog)

TaxProf, The IRS Scandal, Day 1009

Alex Durante, High Corporate Taxes May Increase Debt, Study Finds (Tax Policy Blog). “A new paper published in the Journal of Financial Economics finds that countries with high tax rates on corporate income also have higher corporate leverage ratios. This paper improves upon the methodologies of prior research that had struggled to confirm a link between tax rates and corporate structure.”

 

News from the… Profession? Area Police Department Offers Help to Drug Dealers Struggling With Tax Season Preparations (Caleb Newquist, Going Concern)

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Tax Roundup, 2/11/16: C corporation law firm hammered for bonusing all income. And: PTIN class action certified.

Thursday, February 11th, 2016 by Joe Kristan

20150403-3Incorporated professional businesses are darned if they do, darned if they don’t. If they do elect S corporation treatment, the IRS pushes them to treat as much of the business income as possible as salaries, to maximize employment tax receipts. If they don’t, and operate as C corporations, the IRS likes to argue that the salaries are excessive, triggering tax on the “excessive” part at the highest corporation tax rate.

A Tax Court case yesterday reminds us that of these risks, the C corporation has the most to lose. A big Chicago intellectual property firm routinely paid its year-end earnings as bonuses, running its income down to zero. Professional C corporations like to do this because the “personal service corporation” rules deny professional corporations the benefit of the lower corporate tax rates; they pay a flat 35% on dollar one. Any dividends paid are non-deductible and are taxed again at a 20% individual rate.

S corporations typically make the reasonable argument that some of their income is from invested capital and accumulated goodwill, and therefore can properly be treated as corporate distributable earnings – which, incidentally, aren’t subject to FICA or Medicare taxes. The IRS turned this argument against the Chicago firm, arguing that a C corporation law firm with 65 shareholders and 150 attorneys would have such earnings not strictly attributable to the shareholder wage compensation.

The law firm conceded the tax, but argued that it shouldn’t have to pay penalties because it had “substantial authority” for bonusing out all the income. The court found otherwise:

We do not doubt the critical value of the services provided by employees of a professional services firm. Indeed, the employees’ services may be far more important, as a factor of production, than the capital contributed by the firm’s owners. Recognition of those basic economic realities might justify the payment of compensation that constitutes the vast majority of the firm’s profits, after payment of other expenses — as long as the remaining net income still provides an adequate return on invested capital. But petitioner did not have substantial authority for the deduction of amounts paid as compensation that completely eliminated its income and left its shareholder attorneys with no return on their invested capital.

The Moral? Professional corporations should usually be S corporations. The few additional fringe benefits available to C corporations don’t pay for the chance that you will get hit with 35% tax on a big chunk of corporate income.

Cite: Brinks Gilson & Lione A Professional Corporation,  T.C. Memo. 2016-20

 

IRS certifies class action for suit on excessive PTIN fees. Text here. Still pushing back on the IRS preparer regulation power grab.

 

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Is there anything they can’t do? Tax credit could spur biochemical revolution (Sen. Rita Hart, Rep. Mary Ann Hanusa, Des Moines Register). Presumably just like they spurred the Iowa film industry revolution. And who better than statehouse politicians to pick  the next great industry? My thoughts here.

 

Tony Nitti, Just Three Years Later, President Seeks To Expand Obamacare Tax On Business Owners. It’s going nowhere for now, but Tony cautions: “As a reminder, Hillary Clinton has not offered much of a tax plan of her own, and has shown a willingness to leverage off of proposals posited by the President. Which means this might not be the last we see of a mulligan on the net investment income tax.”

Jason Dinesen, Can Married Same-Sex Couples Claim Their Spouse as a Dependent?

TaxGrrrl, Understanding Your Tax Forms 2016: Form 1099-C, Cancellation of Debt

Robert Wood, Lawyer Fees Soar To $1,500 An Hour, But Tax Write-Offs Cut It To $900

Kay Bell, Hackers try, but fail, to get into IRS e-filing PIN system

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David Brunori, Base-Broadening and Rate-Lowering Remains a Good Idea (Tax Analysts Blog). “Whether you’re a liberal, a conservative, or a Martian, you must admit that net worth taxes are horrible tax policy.”

Scott Greenberg, More Americans than Ever are Renouncing Their Citizenship, and Taxes are to Blame (Tax Policy Blog)

Howard Gleckman, The White House Quietly Rolls Out Its Last Tax and Budget Plan (TaxVox).

TaxProf, The IRS Scandal, Day 1008

 

Career Corner. Reminder: Don’t Let Inside Information Turn Into a Career Limiting Move (Leona May, Going Concern). “Regardless of how you learn the inside information, don’t trade on it. Regardless of whether or not you’ll explicitly benefit, Don’t share the information -– especially not with your greedy brother-in-law.”

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Tax Roundup, 1/27/16: Sign right here, friend, it’s just paperwork! And: Tax Foundation vs. U of I prof.

Wednesday, January 27th, 2016 by Joe Kristan

20151124-1What you’re signing isn’t necessarily what the nice salesman says you’re signing. A sad tax story in the Des Moines Register today shows how easy it is for a taxpayer to commit to a bad deal. The story, Misclassified: Iowa won’t refund veteran’s $5K payment, tells how a maintenance worker who was erroneously paid as an independent contractor by a Cedar Rapids furniture store ended up conceding a $5,000 sales tax liability he didn’t owe.

Iowa imposes a sales tax on “Janitorial and building maintenance or cleaning” for non-residential buildings. Because he was paid as an independent contractor, Iowa asserted sales tax on maintenance man James Robertson. He argued that he should have been classified as an employee, which would make the sales tax go away.

According to the story, Iowa was hounding him for unpaid taxes and preventing him from renewing his driver’s license. So he settled with Iowa for a $5,000 payment. From the story:

But he did so believing that the money he borrowed from a friend would be returned once a federal review process he was pursuing verified his claim he was not a contract worker.

The Internal Revenue Service on Oct. 14 determined that Robertson was indeed wrongly classified, documents he provided to The Des Moines Register show.

But that doesn’t mean he gets his $5,000 back, according to the Department of Revenue:

Victoria Daniels, a spokeswoman for the Department of Revenue, said it’s unlikely Robertson can win an appeal because he participated in what her agency calls its “offer in compromise” program.

Robertson signed a document during the settlement negotiations saying he accepts that “all administrative and judicial protests and actions filed in relation to these taxes and tax periods be dismissed.”

“When a person signs an offer in compromise, one of the things that they are signing their names to is the fact that they are giving up their appeal rights and the rights to get any of that money back,” Daniels said. “When you sign an offer in compromise with the Department of Revenue you are signing away any appeal rights you may or may not have had.”

IMG_1287Mr. Robertson didn’t think that’s what he had signed, according to the story (my emphasis):

Robertson said the documents he signed pertained to unpaid tax liabilities, not to his rights to a refund for taxes he never owed. And he said the department collectors led him to believe a refund would be made in the event it was shown he’d been unjustly classified as a contract employee.

This is why any battle between an unrepresented taxpayer and a tax agency is an unfair fight. The taxpayer drew a distinction between tax liabilities and tax refunds that doesn’t matter here. It’s all just taxes. While the nature of the document he signed may have been obvious to the people at the Department of Revenue who work with these things every day, it was all new and unclear to a taxpayer who had never encountered an offer in compromise. I hope he can find a way to get back his $5,000.

The Moral: In any tax controversy, be very careful what you sign. There are a number of ways you can forfeit important rights. If the dollars are big enough to matter to you, hire a tax pro. It doesn’t appear that Mr. Robertson did. Having a guide to the bureaucracy can be a big equalizer in an unfair fight. It’s not right to have to pay someone to help you avoid a tax you don’t owe in the first place, but it might be necessary to avoid something much worse.

 

 

Peter Fisher

Peter Fisher

Joseph Henchman, Open Letter: Errors on Peter Fisher’s Grading the States Website. The brilliant Mr. Henchman takes on U of Iowa prof and tax complexity advocate Peter Fisher’s attack on the Tax Foundation’s State Business Tax Climate Index.

Like most people who dislike the Tax Foundation’s ratings, Mr. Fisher doesn’t like the Index because it doesn’t measure things he wants to measure. But the Index only tries to measure business tax climate. It doesn’t measure regulatory climate, or quality of education, quality of life, weather, or income inequality. And because it makes states with certain tax policy sets look bad, people with an affinity for high taxes or crony capitalism try to change the subject.

 

Paul Neiffer, What Gets a Step-Up. “I continue to get questions regarding how much of a step-up in cost basis farmland gets when someone passes away.  Again, as with most tax questions, it depends.”

Kristine Tidgren, Iowa Supreme Court Says Ag Lease Violates Iowa Constitution (Ag Docket). “Article I, section 24 of the Iowa Constitution states that no lease of agricultural lands ‘shall be valid for a longer period than twenty years.'”

William Perez, Should Married Couples File Taxes Separately? “The Married Filing Separately filing status provides fewer tax benefits than filing joint returns, but it does protect each spouse from any tax mistakes the other spouse makes.”

Kay Bell, 3 marriage-related tax tips to celebrate Spouse’s Day

Jim Maule, “Who Knows the Tax Code Better Than Me?”. “No, it’s not ME asking that question. Who asked it? According to this story, Donald Trump did.” I suspect Mr. Trump knows just enough to hire someone who really does understand the tax law.

G. Brint Ryan, Fee Arrangements are a Matter between Taxpayers and their Advisors. “In an important win for business against government encroachment, a California Superior Court recently invalidated a rule restricting taxpayers from paying performance-based fees for professional services.”

Robert Wood, Missing An IRS Form 1099 For Your Taxes? Keep Quiet, Don’t Ask!

TaxGrrrl, Executors Seek $100 Million For Work On Estate Of ‘Queen Of Mean’ Leona Helmsley

Robert D. Flach, WHAT IS GOFUNDME?

The circus is in town. A media center takes shape at Capital Square, downtown Des Moines.

The circus is in town. A media center takes shape at Capital Square, downtown Des Moines.

 

TaxProf, The IRS Scandal, Day 993. “Citizens Against Government Waste, CAGW Names IRS Commissioner John Koskinen 2015 Porker of the Year

Jacob Sullum, Corny Crony Capitalism in Iowa (Reason.com). “The RFS raises food prices and imposes a hidden tax on motorists because ethanol is more expensive than gasoline and produces less energy per gallon. Between 1982 and 2014, Manhattan Institute Senior Fellow Robert Bryce found, ethanol cost an average of 2.4 times as much as an energy-equivalent amount of gasoline.”

Howard Gleckman, Tyco, Tax Inversions, Income Shifting, and Lost Revenue (TaxVox)

Stuart Gibson, The Dissonance of European Tax Harmonization (Tax Analysts Blog). “The question: Why do so many Americans, even those new to the country or born to immigrant parents, find it so easy to self-identify as American, while so few Europeans identify primarily as European?”

Meg Wiehe, What to Watch for in 2016 State Tax Policy: Part 1 (Tax Justice Blog)

 

Career Corner. How Will Your Team Air Its Grievances This Busy Season? (Caleb Newquist, Going Concern).

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Tax Roundup, 1/22/16: Tax scams for tax pros. And: How Des Moines got so cool once I moved here.

Friday, January 22nd, 2016 by Joe Kristan

Accounting Today Visitors:  Click here for the post on Popular wisdom and tax rates.

 

Gone Phishing. It’s not just taxpayers that get scam emails. Scammers also aim at tax pros. For example:

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Of course the message is a fake. It was sent by the sketchy-sounding email address “info@tablerockbelize.com” and the link goes to something called “otadealsbox.com/irs.” Nothing good would happen from following that link. Be careful out there.

 

Nicole Kaeding, Map: State-Local Tax Burden Rankings for FY 2012 (Tax Policy Blog):

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While Iowa’s tax burden isn’t that out of line — it’s actually a little better than average — our business tax climate is one of the worst. It’s a result of how poorly designed Iowa’s tax system is. The good news is that there’s a lot of room to improve our tax system without increasing the overall tax burden.

 

Start your weekend right with fresh Buzz! from Robert D. Flach. Today’s links cover lots of ground on early filing, and a good explanation of why the talk of how “IRS now has six years to audit your taxes” isn’t right.

Jason Dinesen, Do I Need Form 1095-C to File My Tax Return? The next question: how many taxpayers even know to expect one?

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William Perez reminds readers to Communicate Effectively with Your Tax Preparer

Annette Nellen, Filing 2015 tax returns – help for practitioners

Kay Bell has 4 filing tips to ensure you get your tax refund ASAP

Robert Wood, What To Do If Form 1099 Reports More To IRS Than You Received

Paul Neiffer, Mr. Market Wants Its Excess Profits Back. “We know what happened after the 1970s and now Mr. Market is now trying to grab those excess profits back from farmers from the ‘ethanol’ boom.”  Of course, aging corn state politicians are fighting back by yelling at clouds.

Jim Maule, Deductions Arising from Constructive Payments. “The Tax Court explained that payment by an S corporation of a shareholder’s personal expense is a constructive distribution. It pointed out that this principle had previously been articulated by the court. Thus, explained the court, ‘It also follows that for purposes of claiming the deduction, the shareholder is treated as constructively paying the obligation.'”

Peter Reilly, Tax Planning In Bernie Sanders Land Would Feel Familiar To Elderly CPAs. Older than me, even.

E. Martin Davidoff, New Format of Notice of Intent to Levy Fails to Provide Sufficient Notice (Procedurally Taxing)

Russ Fox, Fail, Caesar! An Update. Implications for poker pros.

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TaxProf, The IRS Scandal, Day 988. “Tax Agency Erased Hard Drive Despite Litigation Hold.” Don’t try that with your tax records.

Jeremy Scott, Furor Over Extenders and Rising Deficits Disingenuous (Tax Analysts Blog), my emphasis:

So the new CBO report is something of a bitter pill for Obama. But the president isn’t to blame, according to some observers. In fact, the CBO itself points out that about half the cost of rising deficits is from tax legislation enacted since August 2015. The biggest chunk, of course, comes from the extenders compromise, which made some expiring (or expired) tax provisions permanent. That hurts the budget outlook, which always assumed expiring tax provisions would stay expired.

But extenders have never been allowed to stay expired. They are always renewed — sometimes late and sometimes retroactively, but without significant exception. And that makes the CBO’s observations about extenders deceptive. It also highlights why previous CBO projections about the deficit were always too rosy. By assuming that extenders would go away once they expired, budget forecasters were always showing too much revenue. If the CBO had used a model that assumed Congress would continually renew popular provisions like the research credit, the deduction for state and local sales taxes, and bonus depreciation, the numbers would look almost identical to what the January 19 report is showing now.

Exactly. The extenders were an ongoing accounting scam, pretending provisions that were permanent in reality would go away. “By making some extenders permanent, Congress has finally allowed the CBO to paint a more realistic portrait of the federal deficit and the long-term budget outlook.”

Matt Gardner, After Years of Shrinking, Nation’s Deficit Set to Grow in 2016; Recent Tax Cuts a Contributor (Tax Justice Blog)

 

Howard Gleckman, What Are the Consequences of a Financial Transactions Tax? (TaxVox). Aside from moving exchanges offshore, damaging markets, erasing wealth, and making it harder for the little guy to close transactions, it’s a great idea.

 

Joseph Thorndike, Do Progressives Hate Tax Reform? (Tax Analysts Blog):

The Tax Reform Act of 1986 was far from perfect, but it made good on the lower rates/broader base mantra. Almost immediately, however, both parts of the bargain began to fray; rates began creeping up within a few years, and preferences (never vanquished entirely in the first place) also began to grow. By the mid-1990s, tax reform was starting to look like a disappointment, to both liberals and conservatives.

Today, classic tax reform has little real support outside the wonk community. So it’s fair to say, as Holtz-Eakin does repeatedly, that liberals don’t care about tax reform.

But neither do conservatives.

I think that’s always true, in a way. That doesn’t mean it’s not worth doing.

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News from the Profession. Report: CPAs Exaggerate Their Success at the Bar, Pretty Much Everywhere (Caleb Newquist, Going Concern).

Fun link: How America’s Dullest City Got Cool. I think they overstate how much of the revival of Des Moines was planned by anyone, but they are right to point out home much this town has improved since I moved here in 1985 (proving that correlation is definitely not causation). Thanks to @lymanstoneky for the link on Twitter.

 

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Tax Roundup, 1/20/16: Divorce transfer foot fault wrecks Iowa ESOP. And: efficiency!

Wednesday, January 20th, 2016 by Joe Kristan

tax fairyMarriage explodes, ESOP explodes. S corporations and ESOPs are a tempting mix. To the extent an ESOP holds the shares of an S corporation, it becomes a tax-exempt for-profit business. This is almost like finding a real-life tax fairy. If any other tax-exempt entity holds S corporation stock, it will pay Unrelated Business Income Tax — a form of the regular corporate income tax — on its S corporation earnings.

These features draw tax-fairy seekers to the S corporation ESOP. For a Muscatine, Iowa chiropractor, the quest ended in both tax and romantic failure. The failure reminds us that ESOPs are not to be adopted lightly. It also shows that ESOP failures, unlike some marriages, last forever.

The chiropractor involved incorporated his practice in 1999, made an S corporation election, and immediately established an ESOP. He and his wife were the only shareholders and only ESOP participants.

The marriage broke up in 2007. In 2009, the ex-wife left the company and agreed to give up her ESOP account, then valued at $286,904.53. But they did it wrong. The Tax Court explains (citations omitted):

In addition, once a participant’s benefit becomes vested, it is nonforfeitable under ERISA. In sum, a participant in a section 401(a) plan may not assign or alienate his or her benefit, and at the same time, he or she has a nonforfeitable right to that same benefit.

Pursuant to the May 27, 2009, corporate documents, and relying upon the divorce decree, [Wife] transferred 100% of her ESOP shares and relinquished any rights she had under the ESOP. The ESOP’s June 30, 2009 and 2010, reports [*15] reflect that 100% of the shares allocated to [Wife] on June 30, 2009, were reallocated to {Husband’s] account as of June 30, 2010.

Before April 5, 2007, [Husband] and [Wife]… were also [the corporation’s] sole employees and ESOP participants. Although the 2007 divorce decree dissolved the… marriage, it is insufficient to allow the transfer of plan assets that transpired in this case. Transferring the vested shares from [Wife]’s account to [Husband’s] caused [Wife]’s ESOP account to become alienated from her after it became fully vested. By violating section 401(a)(13), the plan ceased to be qualified. Accordingly, we hold that respondent did not abuse his discretion in disqualifying the ESOP for its 2010 plan year and for subsequent plan years.

Public domain image courtesy Wikipedia

Public domain image of Phoenix courtesy Wikipedia

You might wonder why one mistake in one year wrecked everything. Judge Dawson explains:

In general, a qualification failure pursuant to section 401(a) is a continuing failure because allowing a plan to requalify in subsequent years would be to allow a plan “to rise phoenix-like from the ashes of such disqualification and become qualified for that year.”

That’s the frightening thing about going ESOP. You have to comply with extremely detailed and complex qualification rules every year, every time. This requires significant legal and consulting bills, and even then mistakes can be made. While ESOPs can be useful in the right situations, you have to live with serious compliance costs and risks.

In this case, I’m only surprised that the ESOP lasted as long as it did. Section 409(p) imposes a both the UBIT and a 50% excise tax when “disqualified persons” receive an ESOP allocation. Related taxpayers who own more than 10% of the S corporation, or 20% with family members, are “disqualified persons.” In this case the couple owned 100% of the corporation. The case is silent on this issue, but I don’t understand how this structure could have worked even before the disqualification in light of the Section 409(p) rules. The case does say that they terminated their S corporation in 2005, which would have solved the 409(p) problem after that date.

This is the fourth ESOP disqualification the Tax Court has decided involving the individual named as trustee in this case, who I believe had an Iowa-based practice. This continues Iowa’s unhappy history of involvment in bad ESOPs.

Cite: Family Chiropractic Sports Injury & Rehab Clinic, T.C. Memo 2016-10.

 

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William Perez, Secure Ways to Send Tax Documents to Your Accountant. It is reckless and dangerous to send pdfs of your W-2s, 1099s, etc. as an unencryped e-mail attachment. William offers good advice on how to do it right.

Jason Dinesen, Glossary: Compilation. “In the accounting world, the term “compilation” refers to formal financial statements prepared by a public accountant.”

Robert Wood, IRS Forms 1099 Are Coming, The Most Important Tax Form Of All.

Robert D. Flach, 2015 INFORMATION RETURNS. Robert offers a handy chart of the various information returns, except for K-1s.

Russ Fox, Texas Attorney General: DFS Illegal in Texas. “Texas’s Attorney General, Ken Paxton, issued an opinion today that says that daily fantasy sports (DFS) is illegal under Texas law.”

 

 

Illustration for early draft Bernie Sanders tax plan.

Illustration for early draft Bernie Sanders tax plan.

Water is wet. Bernie Sanders Is Proposing Really Big Tax Increases (Howard Gleckman, TaxVox).

It is hard to grasp the enormity of the tax increases Bernie Sanders is proposing, how far out-of-step he is with recent economic history in the U.S., and what a stunning contrast he presents with Republican presidential hopefuls.

I love when “enormity” is used correctly unintentionally.

While Sanders describes his top rate as 52 percent, top-bracket taxpayers would be paying up to 58 percent rate (the 52 percent base rate, plus the 2.2 percent health premium, plus the Affordable Care Act’s 3.8 percent surtax on investment income, which Sanders would keep).

Be happy he doesn’t take more, kulaks!

Peter Reilly, Bernie Sanders Tax Plan Moderate On Top Income Tax Rate. Well, I suppose compared to beheading high bracket taxpayers, confiscating their estates, and selling their families into slavery, it is.

 

 

Career Corner. Accountant Worked One Day, Allegedly Embezzled $15k (Caleb Newquist, Going Concern). Efficiency!

 

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