Posts Tagged ‘identity theft’

Tax Roundup, 8/13/15: IRS makes it hard to extend the W-2 deadline; Iowa makes it easy to extend a farm lease.

Thursday, August 13th, 2015 by Joe Kristan

20150813-1IRS ends automatic extensions for W-2s. Tax Analysts reports ($link) that IRS will no longer allow automatic extensions for W-2s. Non-automatic extensions will be allowed only in dire circumstances, according to the report:

Under the new rules, the IRS will grant the nonautomatic extension only when the filer demonstrates “extraordinary circumstances or catastrophe,” such as loss of record from fire or natural disaster.

It is an attempt to get wage information in sooner to make it easier to match refund claims to withholding, to help prevent identity theft. It’s a nice thought, but it is nowhere near enough. E-filed W-2s can be filed as late as the end of March – far too late to do much matching before refunds are issued.

Fighting identity theft will require more. It will probably require delays in refunds. It may also require a change in the culture that thinks big tax refunds are a good thing.

It will also require the IRS to raise its game in fraud prevention in its return processing. Russ Fox, Why Rob Banks, Redux:

From Los Angeles comes the news that the California Attorney General’s Office, along with the Long Beach Police and the US Postal Inspection Service did a “takedown” of the “Insane Crip” street gang; 22 members are in custody on charges that include 283 counts of conspiracy, 299 counts of identity theft, and 226 counts of grand theft.”

I doubt there is a lot of sophisticated computer savvy in the Insane Crip ranks. That the IRS is losing billions to street criminals says a lot about how poor the IRS anti-theft systems are.




Kristine Tidgren, Remember the September 1 Lease Termination Notice Deadline (Ag Docket):

Perhaps the most misunderstood portion of Iowa farm lease law is that governing the proper termination of a lease. Iowa law is unique in that under Iowa Code §562.6, a farm lease renews automatically—under the same terms and conditions as the original lease—absent specific action by one or both parties to the lease. The automatic renewal provision applies to both oral and written leases. 

Kristine explains what to do to end a bad lease.


Robert D. Flach, ONE REASON YOU SHOULD KEEP COPIES OF YOUR TAX RETURNS FOREVER. “I recently came across an excellent example of the benefit of keeping copies forever.”

Jason Dinesen, Choosing a Business Entity: Partnership. “A partnership can exist — for both tax and legal purposes — even if there’s no written agreement in place.”

Kay Bell, Don’t miss the tax break for college textbooks. “The American Opportunity Tax Credit, or AOTC, covers expenses for course-related books, supplies and equipment that are not necessarily paid to the educational institution.”


TaxGrrrl, Gun & Ammo Tax Aims At Reducing Violence In Seattle:

It wouldn’t be the only such tax in the country. A similar tax in Cook County, Illinois, was adopted after much controversy in 2012. The hope was that it would slow gun violence. However, according to reports in the Chicago Tribune, gun violence continues to escalate in the city of Chicago with the numbers of persons shot in 2015 so far on pace to top those shot in 2014.

This is the same community that is pricing the poor out of the job market with minimum wage increases.  In both cases, moral preening is substituted for sound policy.


Peter Reilly, Church Attendance Held Against Taxpayer In Maryland Domicile Case. Though I suspect attendance at the Secular Humanist Club down the street would have gotten the same result.




Kyle Pomerleau, Senator Carper Introduces Gas Tax Increase Paired With EITC and Child Tax Credit Expansion (Tax Policy Blog). “Paired with an EITC expansion, however, a gas tax increase becomes distributionally progressive: low-income taxpayers receive a net tax cut while middle and upper-income taxpayers receive a slight tax increase.”

TaxProf, The IRS Scandal, Day 826

Career Corner. Can an Accounting Firm Be a ‘Guilt-Free Zone’? (Caleb Newquist, Going Concern)



Tax Roundup, 6/15/15: IRS declines to make estate tax easy for surviving spouses. And: New ID theft measures!

Monday, June 15th, 2015 by Joe Kristan

Due Today: Second Quarter estimated tax payments; returns for U.S. citizens living abroad.


Funeral home signIRS declines to make the estate tax portability election easy. There’s no such thing as a joint estate tax return. That means if one spouse has all of the assets, the other spouse’s lifetime estate tax exemption — $5,430,000 for 2015 deaths — can be lost.

Congress changed the tax law to allow a surviving spouse to inherit the deceased spouse’s unused estate tax exemption, for use on when the surviving spouse files an estate tax return. unfortunately, this treatment is not automatic. It is only available if a Form 706 estate tax return is filed for the first spouse to die. The IRS on Friday issued final regulations rejecting any short-cuts in this process.

There are many problems with this approach. The most obvious is the lottery winner problem. A couple might be living in a trailer, and when the first spouse dies, there seems to be no point in filing an estate tax return when their combined assets are a small fraction of the amount triggering estate tax. Then the surviving spouse wins the Powerball, and suddenly the first spouse’s estate tax exemption becomes very valuable — but it’s lost, because no return was filed.

The IRS rejected allowing any pro-forma or short-cut estate tax returns for such situations:

The Treasury Department and the IRS have concluded that, on balance, a timely filed, complete, and properly prepared estate tax return affords the most efficient and administrable method of obtaining the information necessary to compute and verify the DSUE amount, and the alleged benefits to taxpayers from an abbreviated form is far outweighed by the anticipated administrative difficulties in administering the estate tax. In

The IRS did say it would be generous in allowing “Section 9100” late-filing relief for taxpayers who die with assets below the exclusion amount, but they did not provide any sort of automatic election. The result is a trap for the unwary executors of small estates.

Cite: TD 9725


20130419-1IRS announces ID-theft refund fraud measuresThe IRS last week announced (IR-2015-87) steps it promised in March to fight refund fraud in cooperation with tax preparers and software makers:

The agreement — reached after the project was originally announced March 19 — includes identifying new steps to validate taxpayer and tax return information at the time of filing. The effort will increase information sharing between industry and governments. There will be standardized sharing of suspected identity fraud information and analytics from the tax industry to identify fraud schemes and locate indicators of fraud patterns. And there will be continued collaborative efforts going forward.

The most promising of the steps:

Taxpayer authentication. The industry and government groups identified numerous new data elements that can be shared at the time of filing to help authenticate a taxpayer and detect identity theft refund fraud. The data will be submitted to the IRS and states with the tax return transmission for the 2016 filing season. Some of these issues include, but are not limited to:

-Reviewing the transmission of the tax return, including the improper and or repetitive use of Internet Protocol numbers, the Internet ‘address’ from which the return is originating.

-Reviewing computer device identification data tied to the return’s origin.

-Reviewing the time it takes to complete a tax return, so computer mechanized fraud can be detected.

-Capturing metadata in the computer transaction that will allow review for identity theft related fraud.

These are important because they might actually prevent fraudulent refunds from being issued. Measures to help identify fraud after it happens don’t do much, especially when the fraud occurs abroad. Catching the fraudulent returns before the refunds are issued is the only way to really deal with the problem, and the only way to keep innocent taxpayers whose identification has been stolen from having to go through the annoying and sometimes lengthy process of recovering their overpayments.

The sad thing – I see nothing here that couldn’t have been done five years ago, when ID theft refund fraud was already becoming a problem. But the Worst Commissioner Ever was too busy trying to impose preparer regulations on behalf of the big franchise tax prep outfits to pay attention. Priorities.




Bob Vineyard, Best Kept Secrets About Obamacare (Insureblog). “About half of those living in Kentucky and classified as poor were not aware of the basics of Obamacare.”

TaxGrrrl, Spain’s King Felipe Strips Sister Of Royal Title As Tax Evasion Charges Proceed. What good is being regal if things like this happen?

Annette Nellen, Tax reform for 2015? Seems unlikely

Kay Bell, Lessons learned from being tax Peeping Toms

Jason Dinesen, Marriage in the Tax Code, Part 10: Filing Statuses Arrive in 1948

Peter Reilly, Why Is Multi-State Tax Compliance So Hard? “Don’t get me wrong.  I believe that the prudent thing is to try to be in pretty good, if not perfect, compliance.  Just don’t expect anybody to make it really easy any time soon.”

Robert Wood, Beware Tax Cops At Farmers’ Markets


20120816-1Joseph Henchman, State of the States: Special Session Edition and Kansas Approves Tax Increase Package, Likely Will Be Back for More (Tax Policy Blog). Mr. Henchman rounds up end-of-session tax moves from around the country. Kansas may have made the biggest changes, including a small retreat from its exemption of pass-throughs from the income tax:

Kansas in 2012 completely exempted the income from such individuals, who now total over 330,000 exempt entities. Efforts to repeal this unusual and non-neutral total exclusion of pass-through income earned a veto threat from Governor Brownback. The guaranteed payments provision is estimated to generate approximately $20 million per year.

Taxing guaranteed payments will hardly plug the fiscal hole created by the blanket pass-through exemption. Joseph concludes: “But overall, it is a grab bag of ideas that does little to address the problems underlying Kansas’s tax and budgetary instability. Absent more fundamental changes, legislators will likely have to return in coming years to address budget gaps.”


Norton Francis, How Would the Kansas Senate Close the State’s Budget Gap? Mostly by Taxing Poor People (TaxVox)


TaxProf, The IRS Scandal, Day 765The IRS Scandal, Day 766The IRS Scandal, Day 767


Career Corner. Reminder: Parents Meddling in Your Careers Will Not Help You (Caleb Newquist, Going Concern)



Tax Roundup, 6/2/15: See what the thief filed to claim your refund. And: a crowded Irish address files 580 1040s!

Tuesday, June 2nd, 2015 by Joe Kristan

20111040logoIt seems only fair. In a policy change, the IRS will enable identity theft victims to see copies of fraudulent returns filed in their names, reports Tax Analysts ($link).

Tax-related identity theft victims will soon be able to obtain IRS copies of the fraudulent tax returns used to steal their identity, thanks in part to a push by Sen. Kelly Ayotte, R-N.H.

“Once we have a procedure in place, we will issue an announcement informing tax-related identity theft victims of the process for receiving a redacted copy of the fraudulent return,” IRS Commissioner John Koskinen said in a May 28 letter that acknowledged Ayotte as the impetus for the change in the tax agency’s identity theft policy.

The redactions will deal with other taxpayers included on the stolen return. I am guessing could include pretend spouses and dependents used by the ID thief.

This is good news for taxpayers, as it may help them resolve otherwise inexplicable problems with their IRS accounts. It also promises to help shed light on how the thefts occur and, perhaps, help practitioners suggest measures to fight the fraud. It’s also long overdue. It’s not as if thieves can reasonably expect confidentiality for their crimes.


20130316-1The luck of the IRisSh. The tax agency still seems to be way behind the ID thieves. This report from the Irish Times is hardly reassuring: 

An address in Kilkenny topped a table of addresses used for multiple potentially fraudulent tax return applications submitted to the Internal Revenue Service in 2012, a study by the US treasury has found.

The address in Kilkenny was used for 580 returns in 2012, which led to “refunds” totalling $218,974 being issued, according to the study by the treasury inspector general for tax administration in the United States.

The IRS likes to claim that budget constraints are behind its abject failure to control the identity theft refund fraud epidemic. The inability to flag hundreds of refunds claimed from the same offshore address — which would seem like an easy enough programming problem to solve — indicates the problems are deeper than lean budgets.

 An address in Kaunas, Lithuania, was used for 525 applications that prompted the payment of $156,274, while an address in Miami, Florida, came third on the list, with 417 applications leading to the payment of $221,806. 

Somehow this doesn’t tell me the IRS needs to expand its responsibilities — but Congress and the President clearly feel otherwise.


Will there finally be real steps to fight the problem? Tax Analysts also reports ($link) that the IRS, in cooperation with states and software vendors, will require additional information to process e-filings:

Central to the announcement is a greatly enhanced public-private effort to combat fraud through increased information sharing.

Another upshot is that industry and government will need to process returns differently starting with the 2016 filing season, said Alabama Department of Revenue Commissioner Julie Magee. On the front end, tax return preparation software providers will need to provide multifactor authentication steps when a taxpayer logs in or returns to a site, she said.

The changes also will require vendors to increase by a few dozen data points the amount of information collected from the taxpayer or the return and sent in a standardized format to the IRS and state revenue departments, Magee said.

The story says the details will be announced sometime this month to enable vendors to prepare for next season. We will cover the announcement when it is made.




Robert D. Flach has a fresh Tuesday Buzz roundup, covering topics as diverse as extenders and “I Love Lucy.

William Perez, The Key Benefits of Health Savings Accounts. Tax deductible contributions, tax-free accumulation, and tax-free withdrawals for qualified medical expenses.

Robert Wood, IRS Says If You’re Willful, FBAR Penalties Hit 100%, $10,000 If You’re Not

Peter Reilly, Conservation Easements – Tax Court Lets Owner Sell Them Or Give Them But Not Both

Jason Dinesen, History of Marriage in the Tax Code, Part 9: After Poe v. Seaborn. “Finally in 1948, Congress acted. For the first time, filing statuses were created and we moved closer to the tax system we know today.”

Kay Bell, Ohio becomes 25th state in which Amazon collects sales tax

Me, How states try to tax the visiting employee. My new post at, the Des Moines Business Record Business Professionals Blog.




Alan Cole, Oregon to Experiment with Mileage-Based Tax (Tax Policy Blog):

Oregon will become the first state to implement a per-mile tax on driving. The tax is voluntary – an alternative to the state’s fuel tax. Drivers will get the choice of paying one or another. Should they choose the mileage-based tax, they will be charged 1.5 cents per mile, but get a credit to offset the taxes they pay on gas.

States have difficulty increasing gas taxes. Energy-efficient cars and electric (coal powered!) vehicles also are affecting gas tax revenues. The post doesn’t expain how the state will measure mileage; privacy issues promise to be a big obstacle for mileage taxes, but if this can be overcome, expect more states to follow Oregon.

TaxProf, The IRS Scandal, Day 754

Martin Sullivan, How Grover Norquist’s Pledge Can Hurt the Conservative Cause (Tax Analysts Blog). “First, the pledge’s hard and fast prohibition on tax hikes can prevent signers from agreeing to compromises that would result in outcomes most conservatives would consider highly favorable.”


Scott Sumner asks Why are interest expenses tax deductible? (Econlog).

The cost of equity (dividends, etc.) is not tax deductible, while interest is deductible. But why?

Good question. I respond with another — why aren’t dividends deductible? That would prevent double taxation of corporate income while making sure corporations can’t be used as incorporated investment portfolios.





Tax Roundup, 2/12/15: The Federal $21 billion thief subsidy; the Iowa $37 million corporation subsidy.

Thursday, February 12th, 2015 by Joe Kristan


Accounting Today visitors: click here for the post on the updated auto depreciation limits.

Happy Lincoln’s Birthday. President Lincoln signed the first U.S. income tax into law in August, 1861, to cope with costs of the Civil War and the loss of income from customs collections in the rebellious states.  Wikipedia says the tax was initially 3% on income over an $800 exemption. Right away they started tinkering, and adding expiring provisions:

The income tax provision (Sections 49, 50 and 51) was repealed by the Revenue Act of 1862. (See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 ($12,742 in 2009 dollars) and 5% on incomes above $10,000 ($212,369 in 2009 dollars) or those living outside the U.S., and perhaps more significantly it was explicitly temporary, specifying termination of income tax in “the year eighteen hundred and sixty-six“).

The rates were increased again in 1864 to a top rate of 10%, but it actually was allowed to expire after the end of the war.

For some reason, this early version of the income tax isn’t a big topic in history books. Something else must have been going on then.


Rashia says "thanks, Commissioner!"

Rashia says “thanks, Commissioner!”

April 15, the thieves holiday Tax-refund fraud to hit $21 billion, and there’s little the IRS can do (CNBC):

Tax-refund fraud is expected to soar again this tax season, and hit a whopping $21 billion by 2016, from just $6.5 billion two years ago, according to the Internal Revenue Service.

And the problem—which the agency admits is growing quickly—is compounded by an outdated fraud-detection system that has trouble identifying many attempts to trick it.

$21 billion. The entire tax system of the state of Iowa raises maybe $8 billion, and the IRS issues $21 billion annually to thieves. Not counting earned income credit fraud, of course.

I’m no IT expert, but saying the IRS is helpless sounds like a cop-out. Even with obsolete technology, the IRS has been slow to stop obvious fraud, such as multiple (say, hundreds of) refunds going to a single bank account. The agency allowed this crisis to spin out of control years ago. Practitioners certainly knew about it during Doug Shulman’s execrable term as IRS commissioner, but he spent his efforts trying to regulate practitioners and harass the Tea Party, while grossly failing at the more basic duty of not wiring money to theives. Commissioner Koskinen obviously hasn’t solved the problem. I think it’s fair to conclude that they just haven’t considered it their biggest problem.

This should be the highest IRS priority, certainly more so than the “voluntary” preparer program. It should also be the highest oversight priority of the tax writing committees in Congress, who should be able to find a way to find the necessary funding in a way that keeps the Commissioner from diverting it to pet projects. Of course, the history of IRS technology upgrades isn’t very encouraging.

It’s possible that the solution will also require taxpayers to wait longer for refunds. It takes a lot longer to get a refund when your identity is stolen anyway, so it’s probably worth taking a little more time. But when technology exists to enable the credit card company to call me when my wife is buying an expensive dress in Chicago, the IRS ought to be able to notice someone like Rashia Wilson before she fills her purse with Benjamins.

Related: TurboTax Fraud May Impact Federal Returns Too, FBI Investigating (Robert Wood)


Iowa’s $37 million corporate subsidy programNot everybody knows that the State of Iowa mails subsidy checks to business taxpayers, including $11.7 million just to one. Iowa’s research credit is “refundable,” which means once it wipes out your Iowa tax, the state sends you a check for any remaining credit.

The total 2014 Iowa research credits claimed was $56,918,030 for 2014, according to the newly-issued Iowa Research Activities Tax Credit Annual Report for 2014. (Hat tip: Iowa Fiscal Partnership). Sixteen companies claimed $42 million of the credit, according to the report:


I know everybody thinks they have earned whatever cash they have coming from the state, and I’m not shy about claiming refundable credits for my clients. When the state offers you cash, you’d be foolish not to take it. Still, there’s no way this makes any sense from a tax policy perspective.  The money sent to a few taxpayers should be used to lower rates for everyone, or to help eliminate the futile Iowa corporation income tax.


William Perez, Last Year’s State Refund Might be Taxed on Your Federal Return

TaxGrrrl, IRS Releases Latest Version Of Its Mobile App – And Something’s Missing. Service!

Russ Fox, A Bipartisan Tax Bill? I’ll Drink to That! “It’s to end age discrimination against bourbon and whiskey.”

Peter Reilly, Lois Lerner’s Old IRS Team Looking Anti-tech. “…now I’m thinking there might be a full blown Luddite cult operating in there.”

Jason Dinesen, Tips For Financing a Small Business: Part 1 of 5 — There’s Going to Be Paperwork, Deal With It

Kay Bell, Got your tax refund yet? IRS issued 7.6 million in January



Principal Park, home of the Iowa Cubs. About 2 months until opening day!


Andrew Lundeen, Proposed Tax Changes in President Obama’s Fiscal Year 2016 Budget (Tax Policy Blog). “In total, the plan includes $2.4 trillion in proposed tax increases offset by $713 billion in new credits, deductions, and other offsets, for a total tax increase of nearly $1.7 trillion over the next ten years.”

Cara Griffith, Series LLCs: The Next Generation of Passthrough Entities? (Tax Analysts Blog). I think they will continue to be the wave of the future, as they have been for years now.

TaxProf, The IRS Scandal, Day 644


Career Corner. Interruptions at the Office: Good or Bad? (Adrienne Gonzalez, Going Concern). Bad, unless cookies are implicated.



Tax Roundup, 6/2/14: Tax moralism and moral panics. And: IRS, abetter of theives, scourge of victims!

Monday, June 2nd, 2014 by Joe Kristan

taxanalystslogoTax Analysts’ Tax Notes and State Tax Notes are part of my healthy breakfast, and today they are especially delicious.  The only bad part, for me, is that they are subscription publications, making them hard to share in full.  I can give you morsels, though.

Joseph Thorndike has an excellent discussion of the hollow moralism of tax debates, though he ends up defending it.  In the course of discussing an article by Allison Christians on the role of moralism in tax debates, he comes up with gem after gem.  He quotes Learned Hand’s discussion of the issue, which I find conclusive:

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

That never stops politicians, as Joseph points out:

     More recently, President Obama’s proposal for a “Buffett rule” clearly falls within that tradition of tax moralism (although in this version of the morality play, the billionaire plays the hero rather than the villain). Like the AMT, the Buffett rule is a rear-guard action to defend the fisc against the predations of aggressive avoiders.

But those sorts of Rube Goldberg tax contraptions are an admission of failure. They take for granted that the existing tax base and its statutory rate structure cannot be defended. But the efficacy of those second-best tax systems — at least when measured in terms of fairness — is anything but self-evident. And their costs in terms of complexity and opacity are substantial. 

If you move away from the law, to a system of “morality” in paying taxes, you lose your way.  Who decides what is moral?  Politicians?  Don’t make me laugh.  It’s hard enough to follow the law, given its ridiculous complexity.  If you then require taxpayers to meet subjective standards of whatever pressure group feels like calling a press conference that day, you make taxes pretty much impossible.

One point not mentioned is the conflicting moral obligations of taxpayers.  A rich individual has moral responsibilities to his children, his business and his own community.  The IRS can’t be the supreme moral agent.  And a corporation has moral and legal obligations to its shareholders, customers and employees that conflict with any “moral” obligation to the fisc.  Given that pensions are mostly invested in corporation stock and bonds, their “moral” obligation to give politicians more money for buying votes is hard to take seriously.


e-cigFor dessert, David Brunori chimes in on e-cigarettes and politicians

 I get the rationale for tobacco taxes. You smoke, you get sick, society has to pay for your medical care. That’s consistent with the classic rationale for excise taxes. Those taxes are legitimate only if used to pay for externalities — that is, the societal costs that aren’t borne by the market.

Of course, cigarette taxes in particular have never really been about externalities. If they were, every penny of revenue would go to smoking-related healthcare. Instead, dozens of states earmark some cigarette tax revenue for education (I still can’t believe teachers who rely on cigarette tax revenue for their raises aren’t leaving cartons of Lucky Strikes on their kids’ desks). 

Ah, but giving away cartons of cigarettes on a teacher’s salary?  Of course, my mom was a teacher, and I remember as a kid buying her cigarettes at the store.  But she never shared them, and I never picked up the habit.

David adds:

Taxing e-cigarettes is a money grab. If people use e-cigarettes instead of real cigarettes, the state loses money. The vested interests like the public employee unions and the myriad government contractors can’t have that. But proponents won’t admit the money-grabbing motive.

Iowa, like many other states, is a partner in the tobacco industry as a result of a shakedown settlement agreement with the big tobacco companies.  The industry continues to operate, with the politicians getting a cut of the revenue (nice vice racket you got there, hate to see something bad happen to it).  The moral panic over e-cigarettes is really about protecting this franchise.


20130419-1We’ll let them steal your money, and then we’ll punish you for it.  IRS freezes tax ID theft victims’ return – then hits them with late penalties. (

Pat Pekarek and her husband, Roger, discovered someone filed taxes using Roger’s Social Security number last year, after the IRS rejected their e-filed joint return.

The Pekareks, who live in Parma Heights, dutifully followed the IRS’ instructions to send their return by mail with documentation proving they were the real Pekareks. The IRS immediately froze their account, along with a credit that Pat Pekarek expected to use toward this year’s taxes.

A year later, the account remains in the IRS deep freeze – along with the credit. And now, even though it was the IRS freeze that kept the credit on ice, the agency is demanding the Pekareks cough up back taxes and pay late penalties.

The IRS has let identity theft get completely out of control, while spending its time and energy trying to regulate law-abiding preparers and harassing uncongenial political groups.  And they’ve managed to neglect and abuse the victims while doing so.  Good thing they are responsible for our health insurance system too.


William Perez, Foreign Bank Accounts due June 30th.  New form, and now you have to e-file.

TaxGrrrl, Las Vegas Man Cheated IRS, Taxpayers Using False Home Buyer Credits:  “Refundable credits are traditionally a magnet for fraudulent claims and this one was no different: initial reports indicated that nearly 100,000 refunds were perhaps inappropriately distributed, with $600 million of taxpayer credits labelled “suspicious” in 2009 (despite those numbers, Congress kept extending the credit).”

Jack Townsend, Accountant Sentenced For Tax Crimes; Conduct Included FBAR violations .  “The gravamen of Duban’s conduct is that he assisted the persons related to the automobile dealership in running nondeductible personal expenses through the corporation.”

Scott Schumacher, Winning the He-Said-She-Said Case (Procedurally Taxing)

Tony Nitti, S Corporation Shareholder Must Reduce Basis For Non-Deductible Corporate Loss 


20140401-1Lyman Stone, Response to Politico: Taxes and the Texas Miracle (Tax Policy Blog):

But long-term tax policies do matter. Stable, neutral, non-distortionary tax policies, offering low tax rates on broad tax bases, can support economic growth. Firm site selection is one channel, through which taxes affect economic decisions on the margin. There is robust evidence that taxes (while certainly not the only or even the largest factor) do matter for site selection. And, as one of the few site selection variables policymakers can directly control, it makes sense for them to be concerned about the role of taxes.

But not in the form of paying people to be your friends via tax credits.


Annette Nellen, Is tax reform on or off? Odd activities in the House last week

Kay Bell, Debate continues about tax havens and punishment fairness


Renu Zaretsky, Holes, Holidays, Hurricanes, and Tax Bills (TaxVox).  “The Illinois legislature passed a budget with revenue holes and no spending cuts.”


TaxProf, The IRS Scandal, Day 388

Me, 2 million served.  An arbitrary milestone, achieved!


Russ Fox, No, Fido & Lulu Can’t Own Your Business:

All corporations have to have a Board of Directors. That board handles various business items of the corporation. Now, in a tightly controlled corporation you might just have one board member–yourself. But Mr. Zuckerman elected a strategy that I haven’t seen before (and I doubt I’ll see again): He named his pets as board members.

They were probably as independent as any number of human board members.



Tax Roundup, 2/26/14: House tax reform plan expands cash basis, boosts 179 limits. And: $133 million employment tax theft.

Wednesday, February 26th, 2014 by Joe Kristan

Cash basis expansion, permanent Section 179 increase highlight Camp tax reform plan.  The GOP House tax leadership has released their tax reform draft, nicely rounded-up by the TaxProf.  The plan would lower top individual and corporate rates to 25%, while making big changes in business taxation.

They have released two alternate plans for small business taxation.  One plan would tweak S corporation and partnership taxation, making elections easier and easing S corporation penalty taxes.  The other draft would do away with the current pass-through regimes and replace them with a single pass-through tax system.

The Camp draft would also greatly expand the availability of cash method accounting:


I’m not sure how I feel about this.  I do like getting rid of the special rules for farmers and letting everybody have the same opportunity.  I less like the rule giving unlimited cash basis for sole proprietorships, as that would encourage people to keep things on their schedule C for tax reasons even if it is a bad structure otherwise.  Do we really need to preserve cash basis for a $100 million schedule C or Schedule F operation?  If something is that big, the “simplicity” argument doesn’t make sense.

I’m all for getting rid of the Section 263A stuff.

While I doubt that anything will happen with tax reform this year, there is a real possibility that things will start moving after the 2014 elections.

William McBride, Four Things to Look for in Chairman Camp’s Tax Reform Plan (Tax Policy Blog)

Renu Zaretsky, McConnell Throws Cold Water on Camp’s Tax Plan (TaxVox)



EFTPSTexans sentenced in massive PEO employment tax theft.  From

Federal prison sentences were recently handed down to three businessmen by Chief District Judge Fred Biery. The three defendants – John Bean, Pat Mire, and Mike Solis – are going to prison for their roles in a $133 million scheme involving numerous co-conspirators. The FBI and IRS conducted the investigations for the case, which is believed to be the largest criminal tax related case ever prosecuted in western Texas.

Bean and Mire both pled guilty to money laundering and mail fraud conspiracy charges. Solis plead guilty only to a mail fraud conspiracy charge.

The defendants admitted that from 2002 to 2008, they stole more than $133 million from clients of several of the Professional Employer Organizations (PEOs) that they owned and operated.

PEOs actually report client employees as their own, issuing W-2s and filing employment tax returns.  The danger of PEOs is that employers have no way to be sure their employment taxes are being deposited.  If the PEO is stealing them, the IRS will come back to the employers to collect.

With a non-PEO payroll service, the payroll tax returns are prepared for employers, who issue and sign them.  More importantly, non-PEO employers can go online using the Electronic Federal Tax Payment System and verify that their payroll taxes are being paid.


Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

TaxProfThe IRS Scandal, Day 293.  Among the items in his daily scandal roundup is a Wall Street Journal editorial, Liberals vs. the IRS: Even the Left Doesn’t Want the Tax Man Regulating Speech:

In the Nation magazine, Nan Aron of the liberal judicial lobby the Alliance for Justice writes that 501(c)(4)s aren’t merely groups like Karl Rove’s Crossroads GPS, but are “made up of over 86,000 mostly small organizations nationwide” that are active participants in civic life.

“They weren’t invented in the last election cycle; they’ve been around for generations. Their purpose isn’t to hide donors, it’s to advance policies,” Ms. Aron adds. “These groups are involved in elections, because it’s often impossible to advance a policy cause without being involved in the political process.”

There’s no principle that would justify suppressing political rights of 501(c)(4) outfits that can’t apply equally to other exempt outfits.  Furthermore, there’s no real reason to impose taxes on political outfits.  The answer to speech you don’t like is more speech of your own, not suppressing what you don’t want to hear.

TaxGrrrl, IRS Proposed Rules For Nonprofits Alarm Conservatives and Liberals Alike   


IRS fights ID theft with one hand, helps it out with the other.  From PC World:

This tax season you may have more to worry about than how much you owe. A new study from Identity Finder finds the IRS is not properly protecting social security numbers in some tax returns…

The research revealed an alarming failure to safeguard sensitive data. Identity Finder uncovered an estimated 630,000 Social Security numbers exposed online in form 990 tax returns.

The most affected group were tax preparers–many of which used their personal SSN rather than their PTIN (preparer tax identification number). However, directors, trustees, employees, donors, and scholarship recipients were all impacted as well. 

It’s fair to point out that preparers have some responsibilty — they are often including SSNs unnecessarily, especially their own.  But that doesn’t excuse the IRS.


uni-logoSome UNI workers filing taxes finding Social Security numbers have been used (

According to UNI officials, more than 20 employees have received “error” messages when filing their individual tax returns online, and their returns were rejected. Others who have yet to file say they called the Internal Revenue Service and found their Social Security numbers had been used. One person reportedly received a refund check at home from the IRS though they hadn’t filed a return yet.

UNI officials are playing down the possibility of identity theft, but that’s how I’d bet.  Any organization that collects social security numbers needs to be very careful with them, restricting access and shredding documents on disposal.

Jack Townsend, Stolen Identity Refund Fraud in the News


William Perez, Reporting Social Security Benefits

Kay Bell, Don’t fall prey to the Dirty Dozen tax scams of 2014

David Brunori, Great Opportunity for Tax and Public Finance Students (Tax Analysts Blog). “We are conducting our first student writing competition. You should encourage students who have written quality papers to submit them to”



Tax Roundup, 2/24/14: WSJ highlights tax season ID theft. And: Shock! Film Tax Credit Corruption!

Monday, February 24th, 2014 by Joe Kristan
The "Chromaro" purchased with ID-theft frauds by a Florida thief.

The “Chromaro” purchased with ID-theft frauds by a Florida thief.

The Wall Street Journal covers identity theft today: “Identity Theft Triggers a Surge in Tax Fraud”   It seems to be designed to tell what a great job the authorities are doing to fight the problem.  It’s nice that they’re stepping up the efforts, but the time to do that was four years ago, when the problem started exploding.  But the IRS was too busy with its attempt to regulate practitioners to be bothered with keeping billions from going out the door to two-bit grifters.  The article refers delicately to the grifters:

The scam, which involves repeatedly filing fake tax returns electronically and receiving refunds within days, is so enticing it is attracting suspects not typically associated with white-collar crime. On Friday, two members of an alleged crack-dealing gang in Miami were indicted on charges they also ran a tax-refund scam on the side. Suspects typically steal lists of names and Social Security numbers. Then they file large numbers of electronic returns claiming refunds, and can start getting money before investigators spot the fraud.

The story notes that stealing from the taxpayers is only part of the damage caused:

The crime creates two victims—the U.S. Treasury and individual taxpayers, who only learn of the fraud when they try to file their legitimate returns. Those taxpayers are stuck with the hassle of proving to the IRS that the previous document was a phony claim.

And the process can drag over years, as an ID-theft victim who works with Jason Dinesen would attest.   It’s a disgrace that the IRS has done so poorly at preventing ID theft, and it is doubly disgraceful that they don’t do a better job helping the victims of IRS negligence.

For your part, don’t help the ID thieves.  Never disclose your social security number.  Keep your tax information secure.  Don’t transmit your social security number in an unencrypted email.  If you want to transmit tax documents electronically, don’t send them as an email attachment.  Use a secure file transfer site, like our FileDrop site.


haroldDon’t let the door hit you.  ‘House of Cards’ threatens to leave if Maryland comes up short on tax credits (Washington Post, via Politico):

A few weeks before Season 2 of “House of Cards” debuted online, the show’s production company sent Maryland Gov. Martin O’Malley a letter with this warning: Give us millions more dollars in tax credits, or we will “break down our stage, sets and offices and set up in another state.”

That’s the problem with paying people to be your friend.  The price only goes up. In California, the film credit scam industry may be losing a friend, according to Capital Public Radio: Calderon Indicted On Fraud, Bribery Charges:

The Department of Justice announced Friday that State Sen. Ron Calderon (D-Montebello) is facing 24 federal charges including bribery, wire fraud and money laundering. U.S. Attorney Andre Birotte said Calderon solicited and accepted $100,000.

“Ron Calderon, we allege, took the bribes in return for official acts. Such as, supporting legislation to those that would be favorable to those that paid him bribes and opposing legislation that would harmful to them. The indictment further alleges that Calderon attempted to convince other public officials to do the same.”

~Andre Birotte, U.S. Attorney

The legislation centered on a potential film tax credit and regulation of medical billing. Calderon is accused of accepting cash, trips, dinners and jobs for his children.

I think film tax credits, and all incentive tax credits, are fundamentally corrupt, as they provide better treatment for the well-connected at the expense of everyone else. In Iowa, though, they were able to rely on credulous legislators, without resorting to bribes.

Russ Fox, California State Senator Ron Calderon Indicted on Bribery & Tax Charges.  “Mr. Calderon is facing a maximum of 396 years at ClubFed if found guilty on all charges.” [CC-BY-3.0 (], via Wikimedia Commons [CC-BY-3.0 (], via Wikimedia Commons

A victim of politically motivated tax prosecution goes free in Ukraine: Freed Ukrainian ex-PM Tymoshenko rallies protesters (CBC).  She had been imprisoned on politically-convenient tax charges by the toppled would-be dictators there.   With the complexity of the tax law, it is way too easy to indict somebody.  That’s why IRS partisanship is so dangerous.

And yes, it can (and has) happened here.




William Perez has the scoop on Reporting Investment Income and Expenses

Jana Luttenegger, Taxing Olympic Winnings.  (Davis Brown Tax Law Blog) Not a problem for the hockey team.

Kay Bell is right when she says Report all your income even if you don’t get a 1099.  The 1099 is a useful reminder, but income doesn’t become tax free if you don’t get one.

TaxGrrrl, IRS Processing Returns, Refunds Faster Than In 2013.

Roberton Williams notes An Updated Marriage Bonus and Penalty Calculator at TaxVox.



William McBride, Empirical Evidence on Taxes and Growth: A Response to CBPP (Tax Policy Blog).  The Center for Budget and Policy Priorities has never met a tax increase it doesn’t like, as if there never is a point that giving the mule more to carry slows it down. The McBride post mentions an often-overlooked aspect of our government spending:

The thing is in reality the federal government spends only a small fraction of its budget on public investments, such as roads and airports, and instead spends most of the budget on transfer payments, such as social security and healthcare. Transfer payments are unproductive and even harmful to economic growth, according to most studies. So in practice, income taxes mainly go to transfer payments, and this deal is a clear economic loser, according to the IMF and most academic economists. 

Some folks, like Jim Maule, act like any complaint about the level of government spending and taxes means you are against roads, courts and public order — when most of what the government does is takes money from some people and gives it to other people.


Jack Townsend, U.S. Authorities Focus on Swiss Insurance Products Used to Hide U.S. Taxpayer Assets and Income

TaxProf, The IRS Scandal, Day 291

The Critical Question.  Sylvia Dion CPA Asks – Where Are The Women? (Peter Reilly)

Going Concern, The Ten Stages of Busy Season.  “You begin to hate every single human being in your office”


Tax Roundup, 12/19/2013: Government finally to stop promoting identity theft. And more year-end tips!

Thursday, December 19th, 2013 by Joe Kristan

DMFGovernment shuts down identity theft enabling operation: its own.  The budget compromise headed to the President’s death places new restrictions on the Social Security Death Master File.  While prized by genealogists for their work, it’s prized even more by thieves, who use the information on it to snap up fraudulent tax refunds in the names of the dead.  It’s been a multi-billion dollar problem for years.

The person who stole the identity of the late husband of Jason Dinesen’s client almost certainly did so using DMF information, stealing unknown amounts from the government and disrupting the client’s tax life for years.

Bloomberg Business explains the new restrictions:

The legislation would exempt the records from the federal Freedom of Information Act and give the Commerce Department 90 days to set up a process to certify legitimate users. The public would have access to the data three years after an individual’s death.

The language in the bill was taken from a Senate Finance Committee draft from which lawmakers had asked for comment by mid-January, said Alane Dent, vice president for taxes and retirement security at the American Council of Life Insurers.

While the restrictions seem long overdue, not everyone is happy about them, aside from identity thieves.  Newsweek reports:

“Closing the Death Master File is ludicrous,” said Melinde Lutz Byrne, one of the nation’s top genealogists and part of a small group of forensic researchers at Boston University. They have banded together and for two years have fought similar proposals in Texas and Florida to block public access to the Death Master File.

“It is my opinion that the science of it all has bypassed our elected representatives and even the courts,” she said.

It’s a trade-off, but I think preventing fraud deserves priority here.  Still, the objectors are right about this:

“The IRS is handing out money like candy – and nobody wants to acknowledge it,” said Sharon Sergeant, a forensic researcher, technologist and tax-software programmer who strongly supports the Boston University group. “Why isn’t it checking to make sure dead people aren’t getting tax returns? Somebody who reads the obituaries and makes up a social security number the right way, according to the algorithm, can file a tax return and get a payment. It’s got nothing to do with the Death Master File. It has everything to do with the IRS not doing its job.”

But The Worst Commissioner Ever felt it was more important to expand power over preparers than to stop the thieves.


2013 year-end tip: Donate your appreciated stock now!  The tax law allows you to claim a full-value charitable deduction for donating appreciated long-term capital gain securities that are publicly-traded.  It’s a tax-efficient way to donate, as you get the full deduction without ever paying tax on the appreciation.

But there is a hitch: you have to get the stock to your favorite charity’s brokerage account by December 31 to get the deduction.  That can take time, especially when dealing with less-sophisticated smaller charities.  If you want a 2013 deduction, start by contacting the charity and learning how they want you to get the securities to them by year-end. Remind the charity that they need to provide you a written acknowledgement of the gift.  And make sure your own broker knows the transfer has to be completed this year.

Come back tomorrow for another 2013 year-end tax tip!


20120906-1Just bluffing.  “Archer Daniels Midland Co. decided Wednesday to set up its new international headquarters in Chicago even after it failed in its bid for millions of dollars in state tax breaks.”  Next time our politicians claim to have “created jobs” by giving away your money, remember that they are giving their friends money to do things they would be doing anyway.



Cara Griffith, The Tax Reform Debate…for a Limited Few in Wisconsin (Tax Analysts Blog):

What was advertised as an “outstanding opportunity for the hardworking taxpayers” to engage in discussions about tax reform are also closed to the public…

Making tax proposals available to the public and opening up a dialogue with affected taxpayers can be eye-opening for people who will eventually have to develop and administer the proposal. If tax legislation is enacted, those who wrote the legislation, those who will enforce it, and those who will be affected by it should all understand what the legislation was designed to do. 

Politicians and their friends don’t like company.


Christopher Bergin, Transparency Is in Our DNA (Tax Analysts Blog):

Tax Analysts is involved in litigation in the commonwealth of Kentucky to get its Department of Revenue to begin releasing redacted copies of final letter rulings. The agency is resisting that, which is why we are in court.

Bureaucrats and their friends don’t like company either.


Chris Stephens, Pressure Mounts Against “Jock Tax” in Tennessee (Tax Policy Blog):

For example, a player at the NBA league minimum of $500,000 who is paid per game would make about $6,097 per game. If the player plays only one game in Tennessee he would pay a tax of $2,500 for that game, which is a tax rate of 41 percent. It is also worth noting that the player would also pay approximately 40 percent in federal income taxes, potentially leaving almost nothing in take home pay.

The states that want to pick the stars’ pockets forget that not everybody is paid like LeBron.  Unfortunately, the federal proposal to prevent state income taxation of employees only in-state for a few days doesn’t cover athletes or entertainers, treating the couch-surfing musician the same as Peyton Manning.


20111040logoTaxGrrrl, IRS Finally Announces Start Date To 2014 Tax Filing Season  Filing season starts January 31.

Paul Neiffer,  Tax Filing Begins January 31, 2014

Jason Dinesen, Six Things I’m Talking to My Small Business Clients About at Year-End (Part 1)   

Tony Nitti, With Tax Break Set To Expire, Partnerships Should Consider Converting To C Corporations Before Year End.  This is a 100% exemption on gains for C corporation stock received on original issue held for at least five years.

Kay Bell,  Homeownership tax breaks to take in December


Margaret Van Houten, How to Maintain Records for your Digital Assets  (Davis Brown Tax Law Blog)


Janet Novack, Minus Taxes And Hype, $636 Million Jackpot Shrinks To $206 Million — Or Less 

Jim Maule, Let’s Not Extend The Practice of Tax Extenders.  Agreed.

Stephen Olsen, The “IRS Investigations” Scam.  A client he helped through the OVDI “amnesty” program gets targeting by a scammer.  Troubling.

Jack Townsend, Judge Rakoff Speaks on the Dearth of Prosecutions from the Financial Crisis   He quotes the judge: “But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years.”

It’s at least as much political fraud as financial fraud, but political fraud is never prosecuted.


Tax Justice Blog, Murray-Ryan Budget Deal Avoids Government Shut down but Does Not Close a Single Tax Loophole, Leaves Many Problems in Place

TaxProf, The IRS Scandal, Day 224


News from the Profession: Future CPA Seeking the Best CPA Review Course Someone Else’s Money Can Buy (Going Concern)



Tax Roundup, 12/6/2013: Fools Gold Edition. And: corporations can have their identity stolen too!

Friday, December 6th, 2013 by Joe Kristan

We’ve all had narrow misses with bad ideas.  For example, the general manager of the Yankees and Red Sox owner went out drinking and negotiated a trade of Ted Williams for Joe DiMaggio, only to call it off in the light of day.  Think of the time you almost went into business with your brother-in-law.  Fortunately, we usually think better of it in time to avoid disaster.

Not Robert Kahre.  He got this great idea to pay employees in gold and silver coins, which are worth far more than their original face value, while reporting the income and paying taxes at the face value.

Kahre met John Nelson (Nelson), who authored books and taught classes about the IRS and the monetary system, and Nelson’s ideas influenced Kahre to develop the payment system at issue.

According to Kahre, he developed his gold payroll system because the United States government had debauched the national currency and utilized inflation to confiscate the wealth of U.S. citizens. Kahre relied on court cases and the Gold Bullion Coin Act of 1985 that approved gold coins as legal tender. Kahre devised the independent contractor agreements to reflect that the IRS was a foreign agent for the World Bank and the International Monetary Fund (IMF). In Kahre’s view, by collecting taxes for the IRS, employers illegally served as foreign agents for the World Bank and IMF. Kahre relied on several federal statutes, regulations, and “Presidential Documents” in the process of developing his payroll system to avoid the collection of taxes on behalf of foreign agents.

How do you suppose that worked out?  Well, the above description comes from a federal appeals court decision upholding a 190-month prison sentence for Mr. Kahre, if that’s any indication.   More from the decision:

Appellants contend that the district court erred in denying their motions to dismiss the indictments because they did not know that their use of gold and silver coins for payroll payments was illegal under the tax laws. Appellants specifically maintain that the district court’s tax valuation predicated on the fair market value of the gold and silver coins unfairly imputed criminal intent to their unknowing actions.

A footnote helps show why the court wasn’t persuaded (citations omitted, emphasis added.):

Appellants contend that gold and silver coins are statutorily valued at face value. However, this appeal does not really concern the statutory value of gold and silver coins when utilized as legal tender. Instead, this appeal addresses Appellants’ payment of wages in gold and silver coins in a scheme to avoid payroll taxes, as evidenced by the facts that Kahre’s employees were required to immediately return the coins for cash and, that if an employee retained the coins, his wages were reduced by the fair market value of the coins.


The moral?  The tax law isn’t required to believe every ridiculous thing you read, and there is no Tax Fairy.

Cite: Kahre, CA-9, NO. 09-10471


TIGTAIt’s not just individual identity theft.  TIGTA: IRS Issues $2.3 Billion/Year in Fraudulent Tax Refunds Based on Phony Employer Identification Numbers. (TaxProf). Considering this, and the identity theft epidemic, and their worsening taxpayer service, their wish to devote resources to regulating preparers is hard to take.


Now there’s a shocker.  Democrats, liberals pan Gov. Terry Branstad’s flat tax idea (Jason Noble).  If you can’t get the cooperation you need to pass even a half-way plan, you can at least change the terms of the debate by going bold.


Jason Dinesen, Stock Losses and Taxes:

Beware of “wash sales.”  A wash sale occurs when you sell stock at a loss and then buy the same stock within 30 days before or after the sale.  (Example:  you sell Stock A at a loss on August 1 and then re-purchase Stock A on August 15.  This is a wash sale and the August 1 loss is not currently deductible but instead adjusts the basis of the stock you purchased on August 15.)

Year-end loss sales are a common tax planning move, but you need to be willing to do without the shares for 30 days.


Kay Bell,  Low corporate tax rates don’t guarantee more jobs.  No, but you won’t convince anybody that high corporate taxes help.’

Kyle Pomerleau, New Report on Corporate Income Taxes and Employment Doesn’t Come Close (Tax Policy Blog).  “Their conclusion is akin to blindly picking two jellybeans from a bag of 1,000, getting two red ones, and then concluding that the rest of the jellybeans in the bag must be red.”


Dueling cronyism.  Missouri Lawmakers to Washington: We’ll See Your $8.7 Billion, And… (Tax Justice Blog)

William Perez,  Year End Deduction Strategies for the Self Employed

 Andrew Mitchel,  New Resource Page: Monetary Penalties for Failure to File Common U.S. International Tax Forms.  They’re quite ugly.


Elaine Maag,  Analyzing Taxes and Transfers Together (TaxVox)

Keith Fogg,  What is a return – the long slow fight in the bankruptcy courts (Procedurally Taxing)

Jack Townsend,  Economic Substance Uncertainty in Civil Cases

Tax Trials, Supreme Court Adopts IRS Position on Jurisdiction and Application of Partnership Penalties


Courtesy Gateway Pundit.

Courtesy Gateway Pundit.

Fiduciary Income Tax Blog,  Valuation of Indirect Ownership Through a Trust


TaxProf, The IRS Scandal, Day 211


Robert D. Flach has a meaty Friday Buzz!

TaxGrrrl,  Flushing Out The Toilet Paper Tax Exemption   

News from the Profession.  Former CPA and Procrastinator Ordered By the State to Get Around to Removing “CPA” From All Her Stuff (Going Concern)


Happy St. Nicholas Day!





Tax Roundup, 10/4/2013: Anniversary. And… the Chromaro!

Friday, October 4th, 2013 by Joe Kristan

Wilson___________ Anniversary.  The worst president of the 20th century signed the income tax into law 100 years ago yesterday.  The TaxProf notes that New York Law School Hosts Symposium Today on The 100th Anniversary of the Income Tax.  Sounds like a rockin’ time.


Is Today – the Anniversary of the Income Tax – the Worst Day in American History? (Daniel Mitchell)

Don Boudreaux, Don’t Toast This Centenary

William Perez,  100th Anniversary of the Revenue Act of 1913

Kay Bell, Happy official 100th birthday federal income tax.  Happy?



William Perez, Deducting Home Office Expenses. “New for 2013, the IRS allows for a simplified method of calculating home office expenses at a rate of $5 per square feet up to 300 square feet of office space.”

Paul Neiffer, Is 2013 The Last Year to Deduct Sales Tax


Jack Townsend,  Court of Federal Claims Holds that Unlimited Civil Statute of Limitations Requires Taxpayer’s Fraud 


Russ Fox,  Some Things Still Work; Others Don’t (IRS Shutdown) “A piece of bad news:

Wikipedia image courtesy Tallent Show under Creative Commons license

Wikipedia image courtesy Tallent Show under Creative Commons license

Automated Underreporting (AUR) Notices will continue. They’re automated, so there’s no stopping them.”

Tax Justice Blog, Understanding the Government Shutdown and Debt Ceiling Debates

Andrew Lundeen, Obamacare Exchanges Are Open But Sign-up Numbers Are Low (Tax Policy Blog):

The White House says some applicants have signed up, but didn’t say how many. Rumors in the insurance industry hover in the single digits; several health plans say they are unaware of anyone signing up for their plan. BlueCross BlueShield of North Carolina says it has enrolled one person.”

But more than one person will be paying for it.

Donald Marron, Actually, the United States Has Defaulted (TaxVox): “The United States defaulted on some Treasury bills in 1979 (ht: Jason Zweig). And it paid a steep price for stiffing bondholders.”



They work for picking motorists pockets.  IDOT to Sioux City: Show us proof traffic cameras work.  (via The Beanwalker)


TaxProf, The IRS Scandal, Day 148

Hans A. von Spakovsky, Protecting the First Amendment from the IRS

Robert D. Flach has your Friday Buzz!


TaxGrrrl performs a valuable bit of journalism by posting a photo of the chrome-plated Camaro (Chromaro?) famously bought by Maurice Larry, the business partner and not-boyfriend of Rashia Wilson, the self-proclaimed “Queen of IRS tax Fraud.”  Here it is:




TaxGrrrl gives us the specs:

The car featured a red leather interior, 48 speakers, five flat screen TVs and 32-inch Forgiato wheels (the kind sported on the likes of Chris Brown’s BMW, Akon’s Lamborghini, Steve Novak’s Mercedes, and Will.I.Am’s Bentley). It was made to attract attention – and it certainly did.

Mr. Larry denies that he was the Queen’s consort, but with her platinum locks, she’d have been fabulous in this ride.  Sadly, after she serves out her 21-year prison sentence, she may be more silver than platinum.




Tax Roundup, 10/3/2013: Three-day shutdown retroactively responsible for 8-month ID theft refund delay! And… standards!

Thursday, October 3rd, 2013 by Joe Kristan
Wikipedia image courtesy Tallent Show under Creative Commons license

Wikipedia image courtesy Tallent Show under Creative Commons license

Never mind the last eight months, it’s the last three days that are the problem. reports:  Government Shutdown Holding Up Tax Refund for Local Family:

A Cedar Rapids woman and her family have been waiting for a $3,250 tax refund for 8 months now, and with late bills piling up, she doesn’t know how much longer she can hold out.

The problem is that during a government shutdown, there’s no way for her to contact the Internal Revenue Service to find out where her check is.
The troubles began for Autumn Alicea when she filed for her tax return back in February. A while later, she discovered someone in Florida had stolen her identity. Alicea said it took the IRS several weeks to investigate and verify that she was the real Autumn Alicea. “So they said it would take about 8 weeks to process my return now that they knew the one from Iowa was indeed the valid return, and the one from Florida was not.”

So the shut down for the last three days is responsible for the late refund?  Not likely.  It can take a lot longer than eight weeks for the IRS to get a stolen refund back in the right hands in the best of times.  It took 121 weeks to for Jason Dinesen’s widowed ID theft client to get hers.

It’s fascinating what the government considers “essential.”  Paying people to keep 90-year old veterans away from an unstaffed open-air memorial and to barricade private businesses is “essential,” but getting money it fairly owes to honest taxpayers after carelessly mailing it to two-bit grifters, well, that’s strictly optional.


More shutdown coverage:

William Gale, It’s Groundhog Day Over the Debt Ceiling

Christopher Bergin, ‘Your Voice at the IRS’ Silenced (Tax Analysts Blog).  Like I said, interesting priorities.

Kay Bell,  ‘Essential’ Representatives, Senators get paid during shutdown.  If they paid truly essential politicians, the federal payroll would go to about zero.



20131003-1Casey Mulligan, How ObamaCare Wrecks the Work Ethic (Wall Street Journal)

The chart nearby shows an index of marginal tax rates for non-elderly household heads and spouses with median earnings potential. The index, a population-weighted average over various ages, occupations, employment decisions (full-time, part-time, multiple jobs, etc.) and family sizes, reflects the extra taxes paid and government benefits forgone as a consequence of working.

Like many other “anti-poverty” programs, it fights poverty by punishing efforts to escape poverty.

(Via Greg Mankiw)

David Brunori, State Taxes and the Poor (Tax Analysts Blog): “As importantly, ITEP highlights the problems with states reducing their earned income tax credits”  I think the high implied marginal tax rate of EITC phaseouts on taxpayers trying to escape poverty is underappreciated.


TaxProf, IRS Waives Individual Mandate for Americans Living Abroad.  Finally a portion of the tax law where Americans abroad actually get better treatment than the rest of us.


Wikipedia image

Wikipedia image

It’s official.  Beanie Babies Creator Pleads Guilty to Tax Evasion (Wall Street Journal).  The article cites Tax Crimes Blog proprietor Jack Townsend: 

An analysis done earlier this year found U.S. courts have been more lenient in cases tied to the government crackdown on secret offshore accounts. The average sentence in criminal offshore cases has been about half as long as in tax shelter schemes, according to a comparison of Internal Revenue Service statistics and data compiled by Houston attorney Jack Townsend, who publishes the Federal Tax Crimes blog. In many cases, judges are also opting for shorter sentences than recommended under federal guidelines.

He will have to pay $53.6 million in FBAR penalties under the plea agreement.


Related: Jack Townsend, Ty Warner, Beanie Babies Creator, Pleads Guilty

Slightly related:  Green card received in 2006? Give it up in 2013 (Phil Hodgen)


Me, Creativity fails to protect custom homebuilder from capitalizing costs.  Section 263A snags custom homebuilder.

Andrew Lundeen, Blank Slate Tax Reform Could Damage Economic Growth (Tax Policy Blog)

Why partisan tax law enforcement is always a scandal.   Vietnam dissident Le Quoc Quan jailed over tax evasion (BBC).  I think “dissident” is key to understanding the “jailed” part.

Tax Justice Blog,  State News Quick Hits: Andrew Cuomo Loves Tax Cuts, So Does ADM, and More

Cara Griffith, Floating on a State Tax Revenue Bubble (Tax Analysts Blog):

According to a report by Lucy Dadayan and Donald Boyd of the Rockefeller Institute, the record income tax receipts are a “temporary ‘bubble.’” 

Related: Iowa tax revenue up 4.1 percent past three months (Des Moines Register)




I had to laugh at the H+R official referring to “the same standards as we do”.  I am not aware of any evidence of such standards.  In fact the evidence is to the contrary.

They have high standards of placing their people in high places in the IRS, at least.


Speaking of high standards:

Cop used his job to commit identity theft, feds say. (

Ex-W. Pa. deputy faces fed tax evasion sentence (AP)



Tax Update, 9/25/2013: Preparer regulation has a bad day in court. And the royal consort clarifies the record.

Wednesday, September 25th, 2013 by Joe Kristan

Bad Day for preparer regulation at appeals court? 
Tax Analysts reports ($link) that the judges hearing the IRS appeal of the D.C. District Court’s shutdown of Doug Shulman’s preparer regulation power grab do not appear inclined to reverse it:

The D.C. Circuit during September 24 oral arguments in Loving v. IRS, No. 13-5061 (D.C. Cir. 2013), expressed skepticism that the IRS possesses the statutory authority to implement its tax return preparer program. Stuart J. Bassin of Baker & Hostetler LLP said that the oral arguments did not go well for the government and that it didn’t appear as if the court was “buying what the government was selling.” 

I’ve heard the same thing from two attorneys who attended the session.  Preparers who have followed the story of selective enforcement of tax laws in the Tea Party scandal can’t relish the idea of giving the IRS more control over their practices.  It looks as though we may be spared that, until and unless Congress does something stupid like authorizing such preparer regulation.

Robert D. Flach has more, as does Kay Bell.  I have joined an amicus brief against the preparer regulations in this case.


20130925-1Incentives gone wild.  While Iowa’s state-level politicians love taking your money to lure and subsidize your competitors, the politicians in Coralville have taken it to Detroit-like levels, reports

The City Council of Coralville has piled up about $280 million in debt in recent years, the highest debt per capita for a city in Iowa.

The $14,511 burden for each of its 19,219 residents is seven times higher than Des Moines or Iowa City. It’s enough to pay for 38 Iowa Hawkeyes football season tickets or three semesters of tuition at the University of Iowa.

Moody’s Investors Service, after having downgraded the city’s debt four times, was, in a recent report, particularly tough on Coralville’s “history of issuing debt of non-essential government purposes, including the construction of a hotel, golf course, performing arts center and brewery, all of which are city owned.”

All in the name of “economic development,” of course.  Or, as the department store ads used to say, the more you spend, the more you save!  Unless you are one of the unlucky owners of the 60% of property in Coralville that isn’t in a tax-priviliged TIF district.


Jason Dinesen, IRS Guidance on FICA Refunds for Same-Sex Married Couples   

Jack Townsend,  Government Refusal to Grant Immunity Shifts Burden of Proof to IRS in Tax Court Case.  But he isn’t sure it will do the taxpayer any good.


TaxProf, The IRS Scandal, Day 139

Tony Nitti,  Understanding The Impact Of Legalized Recreational Marijuana On State Tax Revenue   Well, it might not seem to matter so much.

William Perez,  Average Child Tax Credit by State

William McBride,  America Loses another Fortune 500 Company due to High Corporate Taxes (Tax Policy Blog).  A US company, Applie Materials, Inc., acquires a Japanese company, and they move combined headquarters to… Holland:

 The U.S. and Japan have the highest statutory corporate tax rates in the developed world, and by most measures the highest effective corporate tax rates as well. In contrast, the Netherlands has a statutory corporate tax rate of 25 percent, compared to 39 percent in the U.S. and 37 percent in Japan. The Netherlands also has the most generous capital allowances for plant and machinery in the developed world, which is particularly important for these two manufacturing firms. Lastly, unlike the U.S., which taxes foreign earnings on a worldwide basis, the Netherlands uses a territorial tax system, which largely exempts foreign earnings from domestic taxation.

Howard Gleckman, An Upcoming Debate on Whether Private Equity Should Pay Higher Taxes.  (TaxVox) Yes, this country needs nothing more than lower returns to capital.   Just ask the people at Applied Materials.


David Brunori, Marriage and Religious Freedom Act Promotes Neither (Tax Analysts Blog):

The tax laws should be neutral when it comes to politics. Personally, I would end all tax exemptions for all political groups — gay, straight, or in between. The IRS rightfully took considerable heat when it singled out conservative groups for scrutiny. But the Marriage and Religious Freedom Act isn’t the answer.

More legislation seldom is, unless it just repeals old legislation.


Is there anything tax law can’t do?  Russians Consider Boosting Divorce Tax, Citing ‘Moral And Demographic Decline’ (TaxGrrrl)


Tax Justice Blog,  ITEP Analysis: Cuccinelli Tax Plan Mostly Benefits Wealthy Virginians – and Cuccinelli.  When the rich pay most of the taxes, any tax cut will “disproportionately benefit the wealthy.”

Taking a stand: Does the Economy Need Stimulus or Austerity? Yes. (Joseph Thorndike, Tax Analysts Blog)



20130717-1The Royal Consort clarifies the record. reports that the partner-in-crime of Rashia Wilson, self-proclaimed “Queen of IRS tax fraud,” wants to set the record straight:

He may have been her partner in crime, joining forces to steal millions from federal taxpayers.

He may have spent time at her house and shared “romantic liaisons.”

But Maurice Larry wants people to know he most definitely was not the boyfriend of Rashia Wilson, Tampa’s notorious self-dubbed Queen of Tax Fraud.

Just a good friend with benefits.

Wilson, who became known for her brazen Facebook postings taunting authorities about the millions she was stealing from taxpayers through stolen identity tax refund fraud, was sentenced in July to 21 years in federal prison.

Larry, who spent $100,000 covering a Camaro in chrome, was sentenced Tuesday to 14 1/2 years in federal prison, a sentence he is to serve at the same time as an 8-year, 5-month sentence he received Monday in another tax refund fraud case.

A chrome Camaro?  I suppose it went well with Ms. Wilson’s platinum hairdo.


That means they aren’t eating at the right places.  Deloitte Study: Accountants Don’t Have Fire in Their Bellies (Going Concern).



Tax Roundup, 9/24/2013: Departures edition – with and without benefits. And: Career Corner!

Tuesday, September 24th, 2013 by Joe Kristan


Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The IRS official at the center of the Tea Party scandal is retiring.  Iowa Public Radio reports that Lois Lerner is retiring:

The IRS announced Monday that Lerner would step down after being placed on paid leave in May. She refused that month to answer questions at a congressional hearing, citing the Fifth Amendment right not to incriminate herself.

The scandal involved groups applying for 501(c)(4) status in the period 2010-2012. Organizations with the words “Tea Party” or “patriot” in their names faced more questions and bureaucratic delays, although some progressive groups also encountered bureaucratic hassles, according to an inspector general’s report.

In a statement emailed to NPR, the IRS said the problems identified with screening tax-exempt status requests were the result of “mismanagement and poor judgment.” 

In a change of procedure, the IRS announced the retirement via a press release, rather than by planting a question at a continuing education event.

Tax Analysts ($link) reminds us of the compliance hassles that Ms. Lerner piled on all sorts of exempt organizations:

One of the more notable developments during Lerner’s tenure as exempt organizations director was the comprehensive redesign of Form 990, “Return of Organization Exempt From Income Tax.” The new version requires EOs to provide much more information about their activities than previously. 

Anyone who works with exempt organizations, or who serves on an EO board, knows how much additional useless busywork costs the new 990 imposes.

Lerner also oversaw a massive IRS outreach to get EOs that had not filed information returns for three straight years to come into compliance to avoid automatic revocation of exemption.

By “outreach” they mean “revoked their tax-exempt status.”  Thanks for leaving, Ms. Lerner, you’ve done quite enough.

Related: TaxGrrrl, Lesson Lerner-ed? Disgraced IRS Official Tenders Resignation  




Rashia Wilson in happier days.

While we say good-bye to Ms. Lerner, let’s spare a moment to note a different sort of departure, one involving somebody who may have had more influence on tax administration than Ms. Lerner. reports (my emphasis):

Three years after Tampa police stumbled on the first active tax-refund fraud operation they had seen, one of the suspects was sentenced Monday to eight years and five months in federal prison.

Maurice “Thirst” Larry faces even more prison time when he is sentenced today in another case in which his girlfriend, Rashia Wilson, is serving 21 years of federal time. Larry is expected to face a longer term in the second case because it involves the theft of millions of dollars, while the other case involved hundreds of thousands of dollars.

Larry and Wilson, along with Marterrance “Qat” Holloway, are viewed as pioneers in the wave of stolen identity tax-refund fraud that has flooded the streets of Tampa, dubbed the epicenter of a national epidemic that has cost U.S. taxpayers billions and left countless identity theft victims to pick up the pieces.

This sort of fraud costs the Treasury around $5 billion annually, while creating financial nightmares for taxpayers whose identities are stolen.  The flat-footed IRS response is one of the greatest failures of tax administration since the tax law was enacted.

What sort of devious criminal geniuses could crack open the Treasury like a pinata?

Authorities said Larry, a high school dropout with five young children fathered out of wedlock, has been a jet-setter, flying between Miami, New York and Las Vegas. He and Holloway also drove expensive cars and wore pricey clothes.

Just like James Bond, then.


Jana Luttenegger,  Deducting Clothing as a Business Expense:

Practically speaking, not many individuals can use the un-reimbursed clothing expense deduction. If your clothing expenses do qualify, in addition to providing receipts, be prepared to prove the apparel is not suitable for everyday wear.

Me,  Dress for success, but don’t look to the IRS for any fashion help.  My latest post at, the Des Moines Business Record blog for business professionals.


Brian Mahany,  Have A Government Security Clearance? Watch Out for IRS Tax Liens!

Paul Neiffer,  How Zero Equals $380.  How gambling losers can lose again at tax time under the new Obamacare Net Investment Income Tax.

Jim Maule, Deductions Require Evidence and a Bit of Care:

The first aspect of the case that caught my eye was the attempt of a tax return preparer to deduct a vacation as a business expense. She explained that she operated her tax return business from her home, and explained that “living in her neighborhood was stressful and that she felt harassed by her clients who would call her home at any hour.” Accordingly, she concluded that she needed to travel “just to get rest so that . . . [she] could function.” The Court, not surprisingly, denied the deduction, characterizing the cost of the vacation as a personal expense.

Peter Reilly, Musician Wins Hobby Loss Case   Peter covers the Gullion case that I covered last month, but he went further by contacting the victorious taxpayer, getting a perspective that you can’t get from reading the Tax Court opinion.


Linda Beale,  Beanie Baby creator to pay more than $50 million for offshore accounts

TaxProf,  The IRS Scandal, Day 138

Kay Bell, Dolce & Gabbana use their tax troubles as fashion inspiration

Jack Townsend,  Schedule UTP and Criminal Penalties. “Moreover, in almost all cases in which such behavior would be material, a knowingly incomplete or missing Schedule UTP could be used in support of the various penalties that might apply to the related underreported taxes — the 75 % civil fraud penalty and the accuracy related penalties.”

Jeremy Scott, Sun Capital Might Be Bigger Than You Think (Tax Analysts Blog)

Tax Justice Blog, When Congress Turns to Tax Reform, It Should Set These Goals.  Not necessarily my goals.

Andrew Lundeen, Elimination of State and Local Tax Deduction Possible (Tax Policy Blog)

Clint Stretch, Shopping for Tax Reform (Tax Analysts Blog)


It’s Tuesday, so it’s a Buzz-day for Robert D. Flach!



Perhaps if people with low incomes made really good decisions about how to spend their money, then poverty would be near zero. However, over the course of their lifetimes, many people make many bad decisions, and as a result they will spend a lot of time dealing with financial adversity. The moral and practical implications of this view of poverty are not as clearcut as either a progressive or a conservative would like.

Arnold Kling.


Career Corner: If You Can’t Admit You’ve Committed CPE Fraud, Then You Need to Take Another Ethics Course (Going Concern)



Long live the Queen!

Thursday, July 18th, 2013 by Joe Kristan

20130717-1The Facebook “Queen of IRS Tax Fraud” will need to live for a long time to get out of her new palace.  Rashia Wilson, who famously boasted on her Facebook of her fraud prowess, got a 21-year exile in federal prison yesterday in a Tampa federal courtroom.  Tampa Bay Business Journal reports:

A Tampa federal court judge sentenced Rashia Wilson, a Wimauma woman who dubbed herself the “First Lady” and “Queen of Tax Fraud,” to 21 years in prison on charges of wire fraud, aggravated identity theft and being a felon in possession of a firearm.

She also was ordered to forfeit $2.2 million, the proceeds traceable to the offenses, according to a written statement.

I have a feeling that not much of that $2.2 million will be recouped.

Ms. Wilson, perhaps imprudently, put on her Facebook:


She also posted the fetching picture in this post with some of your money.

Identity thieves like Ms. Wilson are milking the U.S. Treasury to the tune of maybe $5 billion annually.  While Rashia Wilson was buying $90,000 cars and throwing $30,000 birthday parties with your money, The Worst Commissioner Ever was leading IRS efforts to create a worthless preparer regulation bureaucracy while hassling Tea Partiers and terrorizing innocent Americans abroad.  Priorities, I guess.

Related: Jason Dinesen, Taxpayer Identity Theft — Part 17


Tax Roundup, 7/9/2013: IRS identity-theft assistance edition.

Tuesday, July 9th, 2013 by Joe Kristan

20130419-1Social Security numbers make the world of identity theft tax fraud go around.  Grifters get them from published lists of dead taxpayers, from stolen medical records — anywhere they can.  They use them to steal untold billions from the IRS while creating tax nightmares for the real owners of the numbers.

And the IRS is here to help!

Public.Resource.Org has discovered that the Internal Revenue Service has posted the Social Security Numbers of tens of thousands of Americans on government web sites. The database in question contains the filings of Section 527 political organizations such as campaign committees. This Section 527 database is an essential tool used by journalists, watchdog groups, congressional staffers, and citizens. While the public posting of this database serves a vital public purpose (and this database must be restored as quickly as possible), the failure to remove individual Social Security Numbers is an extraordinarily reckless act.

What does the IRS have to say for itself?  Tax Analysts reports ($link):

     The IRS said that the Service is required to disclose approved exemption applications and information returns, and advises groups to not include SSNs on those forms or attachments. According to a statement dated December 19, 2012, on the IRS website, “By law, with limited exceptions, the IRS has no authority to remove that information before making the forms publicly available. Documents subject to disclosure include attachments filed with the form and correspondence with the IRS about the filing.”

     Malamud (Carl Malamud of Public.Resource.Org) said that he disagreed with the IRS position that it could not redact the SSNs and that it ran counter to privacy laws and federal guidance protecting the disclosure of personal information.

This level of competence and restraint really makes me want the IRS to regulate preparers more.  Oh, and to run the health care system, too.

(Hat tip to Twitterite @kermalou)
Nothing to see here, move along.   IRS supporters 0-for-3 on putting scandal to rest (Daily Caller)

Since it was revealed in May that the Internal Revenue Service (IRS) improperly targeted the tax-exempt nonprofit status of conservative groups between 2010 and 2012, defenders of the beleaguered agency have offered three broad attempts to suppress the growing IRS scandal and put the matter to rest. However, each of these three attempts failed outright, and the scandal continues, with tenacious investigations underway by the House Oversight Committee and House Ways and Means Committee.

Sorry, Linda.  (via Instapundit)




Martin Sullivan, Effective Corporate Rate 13 Percent? (Tax Analysts Blog):

Putting all this together it seems reasonable to not revise the general consensus view that worldwide effective corporate tax rates are on-average in the mid-twenties when we are not in the throes of a recession. Moreover, it is important to remember that these broad averages hide a lot of interesting detail. Multinationals in the oil and mining businesses generally pay very high rates. Purely domestic firms generally have an effective rate close to 35 percent. And pharmaceutical and tech companies generally have effective rates much lower than average.

But I thought corporations “never had it so good“!


Jeremy Scott, Summers Pushes for Tax Break on Foreign Profits (Tax Analysts Blog)

Jack Townsend, Swiss Court Ruling in Credit Suisse Case.  “The Swiss Federal Supreme Court has ruled, here, that the U.S. “group requests” under the treaty exchange of information provision are permissible if the request includes enough detail to establish grounds for suspicion of tax fraud and the like.”

Donald Marron, Smart Tax Reform Could Shrink the Government (TaxVox).  If it doesn’t, it’s not very smart.

It’s Tuesday, so let’s Buzz with Robert D. Flach!

News you can use.  How Not to Commit Tax Evasion (Russ Fox)



Tax Roundup, 7/8/2013: Did IRS scandals stop employer mandate? And full-service postal service.

Monday, July 8th, 2013 by Joe Kristan
The tax law - The Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The tax law – The Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

Kay Bell, Did IRS troubles play a role in delay of Obamacare penalty?

During hearings into the various tax agency missteps, it routinely was noted by IRS and Obamacare haters that Sarah Hall Ingram, the employee who now runs the IRS office responsible for implementing ACA, was in charge of the office responsible for tax-exempt organizations between 2009 and 2012.

It was during that period that some groups were put on be on the lookout, or BOLO, lists and their 501(c)(4) applications for tax-exempt status were subject to additional scrutiny.

Such a connection, GOP critics contend, raises doubt as to how fairly and efficiently the IRS can do its health-care policing job.

Gee, how could they ever get that idea?

While it is true that the IRS mistreated right-side groups far worse than left-siders, having the IRS run Obamacare would be a bad idea even if the IRS were run by angels.  The tax law and tax agency are supposed to collect revenue to fund the government.  It does poorly at other things.    Like a Swiss Army knife, if you add too many functions, it stops being good at being a knife.

TaxProf, The IRS Scandal, Day 60.


The postman always files twice – once for him, once for you.  From a Justice Department press release:

According to the evidence presented at the trial, Harrison was a U.S. Postal Service mail carrier who was part of a stolen identity refund fraud conspiracy.  Members of the conspiracy used stolen identities to file false tax returns from various locations, including houses and hotels around Birmingham, Ala. and Montgomery.  They then had the fraudulently obtained tax refunds generated by those returns sent to debit cards which were subsequently mailed to addresses on Harrison’s postal route in Montgomery.  In exchange for cash, Harrison stole the debit cards from the mail and provided them to a co-conspirator.  Harrison stole, at a minimum, over 100 debit cards from the mail for his co-conspirators.

It’s a good thing criminals don’t seem to be very smart.  These folks aren’t exactly Dr. Moriarty, but they are getting $5 billion or so from the IRS in stolen refunds annually.  You wonder how much somebody who was a little bit smart would be able to steal.


Joseph Henchman,  Which States are Best for Small Businesses?

The Kauffman Foundation and teamed up a few weeks ago to produce their second annual Small Business Friendliness Survey, ranking the 50 states on the ease of starting a small business, the ease of hiring, health and labor regulations, taxes, licensing, environmental laws, zoning, and training programs. The study draws upon surveys from 7,000 small business owners.

The finding? Utah is the top-rated state and Austin, TX the top-rated city. At the other end were Rhode Island and Newark, NJ.

Iowa gets a “B-”


Jason Dinesen,  Yes, Enrolled Agents Do Need More Respect: “The EA designation has existed since 1884. Why are we still fighting for respect after 129 years?”

TaxGrrrl, Extreme Weather Serves Up Important Reminders To Taxpayers. “Floods and other disasters are a good reminder that tax and important papers should always be stored in a safe place.”



Tax reform road trip.  Max & Dave’s Excellent Tax Reform Adventure Kicks Off Today in Minneapolis (TaxProf)

Jack Townsend, Swiss Prepared to Interpret Exchange of Information Treaty Requests More Leniently; Credit Suisse to Deliver Information

Robert D. Flach, THE DFBs!  Struggling to get state refunds in New Jersey.


Peter Reilly has finished his personal battle of Gettysburg:  Walking In Armistead’s Footsteps 150 Years Later – Gettysburg Day 3 – Pickett’s Charge and Pickett’s Charge 150 – Aftermath.

Unless they are in the movies?.  No More Tax Credits for Strip Clubs in California (Russ Fox)



Tax Roundup, 5/10/2013: Pork and Tequila edition.

Friday, May 10th, 2013 by Joe Kristan

Politicians advance plan to allow politicians to give more tax money to private businesses.  From

Iowa communities would be able to designate special 25-acre development zones and use a share of sales tax and hotel-motel tax revenues to assist private projects of at least $10 million under legislation that’s getting bipartisan support.

House File 641 would establish reinvestment districts designed to spur development of “big ideas,” said Sen. Matt McCoy, D-Des Moines, who led a Senate Ways and Means subcommittee that revamped the bill representatives approved 87-9 last month.

This is, of course, an awful idea.  Politicians are notoriously bad at allocating investment capital, and they tend to make sure it goes to their cronies and contributors.  But when the state’s Governor, a member of the purported small government party, does an end-zone dance over a giant federal subsidy to a private utility controlled by a billionaire, the battlefield is left to the crony capitalists.  The House version of HF 641 passed 87-9.



David Cay Johnston, No Bang for the Buck (

New York State’s comptroller says giving $2.8 billion in tax breaks over  five years added more than a million jobs, which would be great news except that the state lost jobs.

I’m confident Iowa’s job-creating tax breaks work just as well.


Kyle Pomerleau,  Suggested (Large) Tax Increase on Investors is Far From International Standards (Tax Policy Blog)

For capital gains, the current law is already out-of-step with international standards. After the fiscal cliff, combined state and federal capital gains rates increased from 19.1 percent to 28 percent. This is more than 10 percentage points higher than the international average. One suggestion, of course, is to tax capital gains at the rate at the 1986 rate of 28 percent. This would push America’s average combined federal and state capital gains rate to more than 35 percent, more than double the international average.



Kay Bell,  Tax-writing committee chairmen launch tax reform website

Howard Gleckman,  Will the Slowdown in Health Cost Growth Change the Budget Debate?  (TaxVox)

Patrick Temple-West,  Tax collections from wealthy are saving government, and more (Tax Break).

Russ Fox,  How Long Should You Keep Your Tax Returns For?

Jim Maule, It’s Not a New Tax

Robert D. Flach offers your Friday Buzz.


Jack Townsend,  IRS, UK and Australia Joint Efforts on Offshore Accounts

Linda Beale,  Moving in the right direction: US, UK, Aussies to share tax info


Inspirational tax blogging.  No, really:  Five Years After A Brain Aneurysm, Fear Of Dying Can’t Make Me Quit Living  (Tony Nitti).  Inspiring and moving.


News you can use.  Book On New Jersey Wines Does Not Support Deducting Trips To France (Peter Reilly)


Her sister Everclear wasn’t implicated.  From, Ft. Meyers:

A chance traffic stop on I-75 in Lee County uncovers a massive tax fraud scheme. Deputies say the woman accused used her job to steal personal information – even stealing from people who were dead.

Thursday, 23-year-old Tequila Gordon was sitting in the Lee County Jail. Her bond was set at $72,000. 

Prosecutors say she worked at liberty tax services in 2009 and stole personal information from dozens of people.

I would think having a first name of “Tequila” would make getting a good job challenging.  It won’t be any easier now.



Tax Roundup, 4/12/2013: Friday frenzy edition

Friday, April 12th, 2013 by Joe Kristan

20130104-1We’re down to the wire, so we’re going with a bare-bones roundup today.  Filing deadline is Monday, kids!


Kay Bell, 3 ways to e-pay your tax bill

Peter Reilly,  April 15 What To Do If You Don’t Have The Dough

TaxGrrrl,  Last Minute Tax Filing Tips

Russ Fox,  Bozo Tax Tip #1: Don’t Be Suspicious!

Me: Does my share of partnership debt let me deduct K-1 losses?  Yesterday’s 2013 Filing Season Tip.  One-a-day through Monday.  Today’s goes up later this morning.  Collect them all!


Kyle Pomerleau, TPC, What About the “Pass-Throughs?”. (Tax Policy Blog). Measuring business taxes needs to look beyond corporation taxes when most businesses are taxed on 1040s.


Nanette Byrnes,  Middle class tax hikes loom in Obama proposal despite pledge, and more (Tax Break)

Janet Novack, Could Obama’s Plan To Curb The Boss’ Tax Breaks Hurt Workers’ Retirements?   They want you to save, unless you are too good at it.

Roberton Williams,  Taxing Millionaires: Obama’s Buffett Rule (TaxVox)  “But it turns out that setting a floor on the taxes rich people pay is not so easy.”

David Cay Johnston, Promises, Promises (  “Candidate Obama promised in 2008 to reform the Alternative Minimum Tax, and President Obama promised at least an honest accounting in his first budget, but his proposed budget for Fiscal 2014 is silent on the issue.”

Tax Trials,  Can the IRS Read Your Email?

Jack Townsend,  Restitution, Relevant Conduct, Counts of Conviction.  What gets counted when a judge orders a tax criminal to pay restitution?


Unclear on the concept:  When you steal somebody’s identity and claim their tax refund, having the refund check mailed to the victim’s home defeats your purpose.



Tax Roundup, 4/8/13: One week to go! And thinking out of the envelope

Monday, April 8th, 2013 by Joe Kristan
Wikipedia image

Wikipedia image

Greg Mankiw,  The President’s Latest Bad Idea:

Apparently, President Obama’s budget is going to include some kind of penalty for people who have accumulated more than $3 million in retirement accounts.  The details are not yet known, but I think we know enough to say that this is a terrible idea.

A sizable body of work in public finance suggests that consumption taxes are preferable to income taxes.  Completely replacing our tax system with a better one is, however, hard.  Retirement accounts, such as IRAs and 401k plans, are one way our tax code has gradually evolved from an income tax toward a consumption tax.  The use of these accounts should be encouraged, not discouraged.   

Unlike some of his other bad ideas, this one isn’t going anywhere.

William McBride, President Obama’s New Tax Increases (Tax Policy Blog)


TaxProf,  NY Times: Former Baucus Staffers Cash in as Finance Committee Tees Up Tax Reform.  Ah, the sacrifices of public service.  I bet they aren’t proposing the Instapundit revolving door tax.  Related: Max Baucus and Dave Camp,  Tax Reform Is Very Much Alive and Doable.  (Wall Street Journal).


Paul Neiffer. 3%-6%-12%:

One of our last posts indicated that the IRS had issued a notice indicating they might not assess the late payment penalty for returns that are extended and paid after April 15, 2013 if the return included certain forms that were delayed by the new tax law.

However, when you read the fine print, it appears that you still need to accurately estimate your tax and pay in at least 90% of this extra tax to escape the penalty.

The IRS language is:

For each taxpayer who requests or has requested an extension to file a 2012 income tax return that includes one of the forms listed in Exhibit 1 of this Notice, the IRS will deem the taxpayer to have demonstrated reasonable cause and lack of willful neglect, provided a good faith effort was made to properly estimate the tax liability on the extension application, the estimated amount is paid by the original due date of the return, and any tax owed on the return is fully paid no later than the extended due date of the return.

I suspect that the IRS will not be very strict in making taxpayers demonstrate reasonable cause, but if you have the cash, you should  pay up.


William Perez,  Filing Protective Claims for 2009 Tax Returns for Same-Sex Married Couples

Kay Bell, 6 ways to prepare and e-file your federal taxes for free

TaxGrrrl, Ask The Taxgirl: Home Offices And Capital Improvements

Roberton Williams, How Much Will 2013’s Payroll Tax Hikes Cut Your Take-Home Pay?


Peter Reilly,  Wesley Snipes Almost Out – Kent Hovind Remains In Prison

Russ Fox, Bozo Tax Tip #5: Don’t Seal the Envelope!

One of her clients mailed his tax return to the IRS but forgot to seal the envelope.  The return did make it to the IRS, but without page two of Schedule C.  The first that the client found out there was a problem was when the IRS sent him a letter noting the omission.  The second time he knew that there was a problem was when she found she was a victim of identity theft.

E-filed returns never fall out of the envelope.


Jack Townsend,  Good Overview Article on Financial Issues for Americans Living Abroad

Phil Hodgen,  Form 1040NR Filing, Tax Payment Deadlines


The criminal masterminds that the IRS can’t stop.  Tampa exotic dancer sentenced for tax fraud (

The Critical Question.  News Analysis: Why Are Fee Waivers Like Deep-Fried Twinkies? (Lee Sheppard, Tax Analysts; gated).


Stay tuned for my first 2013 filing season tip going up later this morning!



Tax Roundup, April 3, 2013: Six days to Iowa Tax Freedom Day.

Wednesday, April 3rd, 2013 by Joe Kristan

Tax Freedom Day for Iowans will arrive April 9, according to the Tax Foundation.  That’s nine days sooner than for the whole country.  From the Tax Policy Blog:

Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. A vivid, calendar-based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income.

 In 2013, Americans will pay $2.76 trillion in federal taxes and $1.45 trillion in state taxes, for a total tax bill of $4.22 trillion, or 29.4 percent of income. April 18 is 108 days, or 29.4 percent, into the year. Americans will spend more in taxes in 2013 than they will on food,  housing, and clothing combined.

You can find Tax Freedom Day for your state from this Tax Foundation Map:


The national Tax Freedom Day is five days later than last year:

Tax Freedom Day is five days later than last year, due mainly to the fiscal cliff deal that raised federal taxes on individual income and payroll. Additionally, the Affordable Care Act’s investment tax and excise tax went into effect.

But cheer up!  If taxes were high enough to pay for all government spending without borrowing, it wouldn’t be until May 9.


TaxProf, ESPN: Athletes’ Charities Fall Short of IRS, Nonprofit Standards.  Chis Zorich might agree.  Actually, the arguments against athletes setting up their own charitable foundations are the same as those for anybody else.  They take more work and expertise to run than most people realize.  Compliance with federal tax laws and state laws can be costly.  It’s easy to get into trouble with them, like Mr. Zorich did.  It’s much wiser for athletes with a charitable interest to work with an established charity that knows what it’s doing.


So you owe the IRS on your 2012 return and cash is tight. What now?My new post at, The Des Moines Business Record blog for entrepreneurs.

Jason Dinesen,  Taxpayer Identity Theft — Part 14 .  The latest adventures in trying to get the IRS to pay the refund of his client, an identity theft victim, for 2010.  She may have it in “another 6-8 weeks.”  We’ll see.


Kaye Thomas,  Last Call for Refundable AMT Credit.  Congress didn’t extend the refundability of long-term alternative minimum tax credits, making the exercise of incentive stock options once again potetially ruinous.

TaxGrrrl,  Taxes From A To Z (2013): R Is For Recapture


Kay Bell, What do you plan to do with your tax refund?

Jack Townsend,  FBAR Penalty Collection — Beyond the Collection Suit, Administrative Offsets Loom Large and Long

Tax Trials:  4th Circuit: District Court Abused Discretion by Allowing Evidence of CPA’s Personal Tax Situation in Tax Shelter Promoter Case

Peter Reilly:  Lawyers Unite To Keep Dark Money Dark

Howard Gleckman,  The Economics of Corporate Rate Cuts are More Complicated than Politicians Think


Joseph Thorndike: Hate Filing Your Tax Return? Good.  (  Good for those of us who charge money to prepare returns, anyway.


Russ Fox,  Bozo Tax Tip #8: 300 Million Witnesses Can’t Be Right:

For a tax blogger, people like Richard Hatch are wonderful. Hatch, for those who don’t remember, was the winner of the first Survivor and won $1 million. About 300 million individuals worldwide saw Hatch take down the $1 million.

Hatch received a Form 1099-MISC for his winnings. In the United States, winnings from contests are taxable. Hatch claims that CBS and/or the producers of Survivor promised him that they would pay his taxes. (Both CBS and the producers of Survivor deny this charge.)

Of course Mr. Hatch failed to pay the taxes on income he earned in front of millions, serving a prison sentence as a result.  Sometimes watching somebody else get into real trouble can be instructive.