Posts Tagged ‘IMA’

Tax Roundup, 1/9/2014: She stole from me! And gave it to my kids! And: $10 pizza and tax show!

Thursday, January 9th, 2014 by Joe Kristan

20120511-2It’s a rare thief that applies her ill-gotten gains to pay for college for the victim’s children.  But a Texan filed a tax return claiming just that, and it ended up in a Tax Court case decided yesterday.

The taxpayer divorced Wife #1 in March 2005, marrying Wife #2 in May 2005.  The second marriage went downhill quickly, with ending in an August 8 2006 divorce.

In the summer of 2006, the taxpayer asked Wife #1 to help him with some personal issues, including an alcohol problem and financial issues arising from the divorce.  Somewhere along the way, $120,000 was transferred to Uniform Transfers to Minors Act account for the children of the marriage to Wife #1 under signature authority granted by the taxpayer to Wife #1.  Judge Cohen explains:

Petitioner expressed to [Wife #1] that he intended that the money be used for expenses related to their children’s education. During this conversation, petitioner also discussed his upcoming divorce from [Wife #2]. Petitioner suggested to [Wife #1], and later represented to an Internal Revenue Service agent, that he wanted to preclude {Wife #2’s] access to the funds.

The funds ended up being spent on for their kids’ schooling, but eventually the taxpayer had other needs:

In September 2008, petitioner was having financial difficulties. He attempted to obtain funds from the accounts that [Wife #1] had set up. He advised [Wife #1} that the $120,000 transferred to her in 2006 should have been put in revocable trusts rather than in the childrens’ educational accounts.
 On June 19, 2009, petitioner filed a civil lawsuit against [Wife #1] related to the $120,000 transferred to the UTMA and section 529 accounts for their children and other matters. [Wife #1] asserted counterclaims in the lawsuit. In early 2010, the parties to the lawsuit entered into a settlement agreement. In the settlement agreement, petitioner and [Wife #1] acknowledged that the education accounts were the property of their children. [Wife #1] agreed to provide to petitioner biannual financial information related to the UTMA accounts. Petitioner and [Wife #1] released all claims against each other in the settlement agreement.

The judge weighed the word of the two spouses, and came down on the side of the one who hadn’t been to rehab:

We understand that former spouses are not objective witnesses in many instances, but we must reach a decision based on which version is more probable and which party has the burden of proof. In this instance, considering primarily the passage of time between the transaction and petitioner’s expressions of disagreement with [Wife #1]’s handling of the transaction and the absence of contemporaneous corroboration of petitioner’s intentions, we conclude that the burden of proof has not shifted and that petitioner has not proven that a theft occurred.

The Moral?  It isn’t considered standard financial procedure to give your ex-spouse signature authority over your finances.  If you do, you should probably document it very carefully.  If you don’t like the results, it might be hard to convince the IRS and a judge that you’ve been wronged.

Cite: West, T.C. Memo 2014-2.


Iowa Businesses!  The deadline for claiming the commercial property tax credit enacted last year is January 15!  Details at the Iowa Department of Revenue.


TaxGrrrl, Filing Your Taxes Early? IRS Will Not Process Returns Before Opening Day.  And don’t try to file until you have your W-2s and 1099s.

William Perez, Requesting Form W-9 from Independent Contractors

Robert D. Flach ponders A VOLUNTARY RTRP DESIGNATION!  I don’t care for the idea, for the reasons Jason Dinesen explains, but would be fine with preparers banding together to develop their own privately-administered standards.  I have no faith in the IRS doing so fairly or effectively.

Scott Hodge, The Number of Millionaire Tax Returns Fluctuates Every Year (Tax Policy Blog)

million-dollar filers

And the population of the million-dollar filers turns over a lot.

Cara Griffith, The Recurring Question of Corporate Disclosure (Tax Analysts Blog):

My general objection to requiring the disclosure of corporate tax return information is that it seems unnecessary. State tax authorities and economic development commissions are already receiving a substantial amount of information about corporate taxpayers. They have the ability to do any type of analysis they choose. Given that the information is already available to those who can properly analyze it, why is it necessary to make it public?

Why not instead develop a database of which tax incentives are available, who has received them, and the benefits they provide? 

Excellent idea.

Tax Justice Blog, Will Basic Constitutional Rights Be the Next Casualty of Kansas’ Supply-Side Experiment?  Hard to see where that happens in this post.

Kay Bell, LBJ’s war on poverty, aided by the Earned Income Tax Credit.  Too bad 20-25% of it gets stolen or misapplied.

EITC error chart

TaxProf, The IRS Scandal, Day 245


Des Moinesiacs, listen up!  From Kathryn Smith at IMA:

Please join us for the annual ICN broadcast sponsored by the North Central Regional Council of Institute of Management Accountants on January 9, 2014.  Our speaker will Joe Kristan.  Mr. Kristan will be presenting the 2013 Income Tax Update.  If you have not heard Joe before you are in for a treat.  Joe mixes a little humor with a rather dry subject.  We will start broadcasting at 6:00 p.m. and be joined by locations in Dubuque, Cedar Falls, Cedar Rapids, Grinnell and Davenport.  This is one meeting you won’t want to miss.  Join the Des Moines Chapter at 5:30 p.m. for pizza and pop.  Cost is $10.

It’s at Iowa Public Television, 6450 Corporate Drive, Johnston.  And rest assured, if you do this stuff for a living, it’s not a dry subject!

Career Corner: I’ll Take “Things That Are Worse Than Failing The CPA Exam” For $500, Alex (Going Concern)



Tax Roundup, 1/9/2013: E-filing gets underway January 30. Also: 79 year-old lady pleads to tax crimes.

Wednesday, January 9th, 2013 by Joe Kristan

20130109-1The IRS announced yesterday (IR-2013-2) that it will begin processing 1040s January 30.  From where I stand that’s right on time, as very few of our clients have their 1099s, W-2s and K-1s before then anyway.

The IRS will be unable to process some returns that soon.  From the IRS press release:

There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.

The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on

Form 8582, used to report passive losses, is one of the forms that will cause delays.

State taxes, that will be another matter.  As the legislature has to decide whether to accept the retroactive changes to the tax law, many Iowans will have to wait awhile to know what the 2012 Iowa rules are.


Tax Update on Iowa Cable Network tomorrow.  I will be giving a rundown Thursday at 6:00 pm on the Fiscal Cliff tax bill and other recent tax developments in an ICN broadcast (is that the right word for a closed-circuit presentation?) for the Institute of Management Accountants.  There will be a live audience at 6500 Corporate Drive, Johnston and viewing sessions at Grinnell High School, Marion High School, Keystone AEA (Dubuque) and St. Ambrose University.  Contact Kathy Smith,, if you are interested.


The TaxProf gives a non-subscriber link to Ethan Yale’s Taxing Market Discount on Distressed Debt, which appeared in Tax Notes yesterday.  The paper talks about the weird and ugly issues that arise when a third party buys bad loans and tries to collect.  The market discount rules treat the debt as having a real high interest rate, with all payments principal first, based on the difference between the discounted purchase price and the face amount of the debt.  The rules also can cause the income on collections to be ordinary, but the losses to be capital.

The paper talks about why these rules don’t make sense for deeply-discounted debt.   If you buy a debt at 50% of face due in one year, it doesn’t make sense to assume that it will cash out at a 100% APR return, but that’s how the regulations would work.  The paper also covers arguments taxpayers can make to try to ameliorate the harsh treatment that the market discount rules would apply, but there’s no assurance the IRS would buy them.


A 79 year-old widow pleads guilty to concealing overseas bank accountsShe agrees to pay over $20 million in penalties in the plea deal and faces up to six years in prison, according to a Department of Justice press releaseJack Townsend has more.


Fiscal Cliff Notes

Problem solved!  Well, not really.  You know how the tax increases in the Fiscal Cliff legislation won’t begin to solve the $1.2 trillion deficit?  The Congressional Research Service reports that it’s even worse: it will increase the current fiscal year deficit by $330 billion and the cumulative 10-year deficit by $4 trillion.  ($link through Tax Analysts)

Howard Gleckman, Grim Predictions about the Fiscal Cliff II and Deficit Reduction (TaxVox):

I spent lunchtime today moderating a thoroughly discouraging Urban Institute panel discussion  on the fiscal cliff. The consensus of the speakers—all highly-regarded budget experts—was that the New Year’s cliff deal was pretty lame and the coming round of self-imposed budget crises will be even worse.

Oh, goody.

Roger McEowen on the Fiscal Cliff bill: A short summary of the most significant provisions. 

Paul Neiffer,  Reprieve For S Corporations With Built-in Gain

Patrick Temple-West,  Insiders benefited from special dividends, and more (Tax Break)

William McBride,  Taxes Up, Stocks Up, What Can Go Wrong? (Tax Policy Blog)

Jana Luttenegger,  Filing for 2012 Taxes Delayed Until January 30 (Davis Brown Tax Law Blog)

TaxGrrrl, IRS Announces Delayed Tax Filing Season

Russ Fox,  IRS Announces Tax Season to Start on January 30th


David Brunori, Good — and Not so Good — Corporate Tax Ideas from New Mexico (

New Mexico Governor Susana Martinez, a rising star among GOP politicians, is calling for a steep reduction in the corporate tax rate.   She proposes cutting the rate from 7.6 to 4.9 percent. That is good news. The corporate income tax is — and will likely remain — one of the worst ways to raise revenue for state governments. The tax is inefficient, ineffective, and distorts economic decision making. It would be better if Governor Martinez called for the repeal of the tax, but whittling it down is okay as well.

Repeal of the corporate income tax would be a good idea in Iowa as well, but the influential corporations that get big checks from the state via the tax law aren’t going to jump on the repeal bandwagon.


Jason Dinesen, The IRS — Putting Paperwork Ahead of People.   Doug Shulman’s legacy of identity theft nightmares lingers.

Kay Bell, Tax Carnival #110: Happy New Tax Year

It’s Wednesday, so it’s Buzz Day at Robert D. Flach’s place.

Socially-awkward, that’s something else.  Great News: Accountants Are Less Likely To Be Psychopaths (Going Concern)

News you can use:  The Problem With Libertarian Women is Not Libertarian Men (Megan McArdle)