Posts Tagged ‘Institute for Justice’

Tax Roundup, 11/4/14. Vote. Or don’t. And: Pittsburgh police 1, IRS Agent 0.

Tuesday, November 4th, 2014 by Joe Kristan
Flickr image courtesy Letta Page under Creative Commons license

Flickr image courtesy Letta Page under Creative Commons license

Today is election day. Vote if you think you know what you’re doing.  But ask yourself: do you know, without looking it up, the names of both of your Senators, your congresscritter, your Governor, the President and Vice-President, and can you properly identify their political parties? Can you name the three branches of the Federal government? If not, you should ponder whether you really ought to be doing this.

Jared Walczak, Voters to Consider Tax Ballot Initiatives in Eighteen States Tomorrow. (Tax Policy Blog) That would be today now.

Election days are on Tuesdays, so you can catch a fresh Buzz from Robert D. Flach before you hold your nose and vote. His roundup today includes links to a story about tax initiatives up for a vote around the country, among other good stuff.

 

Peter ReillyWhat If Lois Lerner Was Right About The Tea Party?

 If there is a pretty compelling case that Tea Party Patriots Inc was intended from day 1 to be a political organization, rather than a social welfare organization, would that make any difference in how we view Lois Lerner?

No. “Tea Party Patriots Inc.” was one organization that appropriated the “Tea Party” name, but the Tea Party movement is not any one organization. It was (and is) an amorphous grassroots reaction to the percieved overreach of the Obama administration. Lois Lerner went after a range of groups with “Tea Party” and other words she associated with small government activism– like “constitution.” The IRS held up the applications of those groups, harassing them with improper and ridiculously intrusive questions. Meanwhile, the applications of “progressive” groups flew right on through.

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The issue was never whether Tea Party Patriots Inc. abused tax-exempt status. The issue is whether the IRS discriminated against groups opposed to the Administration. The answer is clearly yes. If you only enforce laws against people you disagree with (and it’s clear she didn’t like the Tea Party), that’s abuse of power.

 

Jason Dinesen, Joe the Window Washer Gets a Reality Check:

For example, here are a few realities Joe will have to face:

  • In Iowa, if Joe cleans windows on commercial property, he has to collect sales tax.

  • He has to file an income tax return.

  • While not necessarily required, it would be good for Joe to talk to an insurance agent about having a business liability policy in case he accidentally damages a customer’s property.

It’s amazing how complicated washing windows can be.

 

Russ Fox, Math Is Hard (Tax Court Edition). When the judge tells you to keep it to 75 pages and you file an 88 page brief, you might as well not file one at all. It saves paper, and you get to the same place.

Tony Nitti, The Top Ten Tax Cases (And Rulings) Of 2014: #8-A Big Break For Home Builders

 

20130426-1Michelle Feit, Failure to File Required International Information Return Suspends Statute of Limitations on Entire Return until the Information Return is Filed (Procedurally Taxing):

Thus, if a taxpayer is required to report on interests in, control over, transfers to, or distributions from foreign accounts, corporations, partnerships, entities or trusts (as provided for in the above-listed sections), the three-year statute of limitations will not start running until the taxpayer submits that foreign information report to the IRS.

And, since March 2010, the extended limitations period generally applies to the entire return applicable to that Taxpayer, not simply to the liabilities associated with the information that was not filed.

It’s not enough to get clobbered with a $10,000 penalty for not filing a return they won’t read. You keep the whole year open indefinitely too.

 

Kay Bell, November tax moves to help you avoid tax turkeys

Jack Townsend, Raoul Weil Found Not Guilty. A high-profile Swiss bank prosecution fails.

 

Jeremy Scott, Is the IRS Office of Professional Responsibility in Decline? (Tax Analysts Blog) “Hawkins’s legacy as OPR chief might end up being defined more for the IRS’s overreach and what she didn’t accomplish than the numerous things she has.”

Mr. Scott’s post does have an error, or at least a badly-worded sentence.  He says:

Many small return preparers thought the rules were too onerous, and they particularly objected to the continuing education requirements for a preparer tax identification number. Some of them coalesced into a group known as the Institute for Justice, which filed a lawsuit against the finalized preparer regulations in 2012.

While the Institute for Justice did help the preparers, the implication that it was formed by preparers is incorrect. IJ is a public-interest law firm with a libertarian bent that was around before the preparer case. It continues to do righteous work on behalf of victims of asset forfeiture (including the Arnolds Park  IRS victim) and in battles against regulations that protect existing busiensses from competition.  I support it with my donations, and you can too.

 

Martin Sullivan, Immigration Reform in 2015? We Could Use the Money (Tax Analysts Blog). I don’t think this issue is really about the tax revenue, but if it is, it would be more direct to just sell admission.

 

This will sure attract outside investment. Argentina accuses Procter & Gamble of tax fraud, says suspends operations

TaxProf, The IRS Scandal, Day 544

Revecca Wilkins, New Filing This Week Reveals Apple Continues to Divert Profits to Tax Havens (Tax Justice Blog). In other news, heavy things fall to the floor if you let go of them.

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News from the Profession. Deloitte, Please Stop Trying to Be the Walmart of Professional Services (Adrienne Gonzalez, Caleb Newquist, Going Concern).  I’m not even sure what that would mean. Retired partners offering a friendly greeting at the door?

 

The best and the brightest. Police: Man Arrested For Kicking Heinz Field Barriers, Trying To Bribe Officers (CBS Pittsburgh):

A man was arrested after injuring a woman by kicking a steel barrier at Heinz Field Sunday evening.

According to police, 29-year-old Stephen Sapp was intoxicated at the time of the incident.

According to the criminal complaint, Sapp stated, “Listen, I know how this works. How much money will it take to make this go away and to let me go home today?”

The officers informed Sapp that he could not attempt to bribe them, but Sapp continued.

“Look, I am an IRS agent and I can help you in other ways if you let me go home and make this go away.”

Was an IRS agent, anyway. (via Instapundit)

 

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Tax Roundup, 10/21/14: Gander gets sauced! And: IRS Commissioner’s prophecy of tax season doom.

Tuesday, October 21st, 2014 by Joe Kristan
Flickr image by Sage under Creative Commons license

Flickr image by Sage under Creative Commons license

Gander, Meet Sauce. An alert reader points out something wonderful I had missed — a ruling awarding attorney fees and costs of $257,885 to the return preparers who successfully challenged the IRS preparer regulations. It’s a rare and welcome example of the IRS being held accountable for being unreasonable with taxpayers. And the court said the IRS was being unreasonable (all emphasis mine; some citations omitted):

In the present case, the reasonableness of the government’s position can be measured by the familiar guideposts of statutory interpretation: text, legislative history, statutory context, and congressional intent. In each of those dimensions, the interpretation of § 331(a)(1) advocated by the government was deficient. Indeed, on several key points, such as the proper meaning of the word “representatives,” the IRS offered no support whatever for its interpretation. The Court therefore finds that the government’s position was not substantially justified.

Losing the battle over whether its position was justified, the IRS dipped into its seemingly bottomless supply of chutzpah to challenge the amount:

As an initial salvo, the IRS argues that it was unreasonable and excessive for Plaintiffs to request compensation for over 1,700 hours spent advocating an interpretation of the statute that Plaintiffs themselves contend is obvious.

Our position was reasonable! OK, it was so unreasonable that even a cave man could litigate against it!

The Court declines the IRS’s request for across-the-board cuts to Plaintiffs’ award. The choice of a hatchet is particularly inappropriate here for several reasons. First and foremost, Plaintiffs prevailed at every stage of this litigation and achieved the entirety of their requested relief. Degree of success is “the most critical factor” in evaluating the reasonableness of a fee award.  Second, the IRS understates the complexity of this case. To be sure, this Court and the D.C. Circuit both concluded that Plaintiffs’ was the only reasonable interpretation of 31 U.S.C. § 330(a)(1). That conclusion, however, was apparent largely as a result of Plaintiffs’ thorough research and well-reasoned briefs.

Hah.

The only thing that would make it better would be if the IRS were assessed a penalty for taking a frivolous or negligent position. Maybe someday. But congratulations to the plaintiffs and the Institute for Justice for pulling off a legal end-zone dance.

 


Cite: Loving, Civil Action No. 12-385 (DC-District of Columbia)

And if you think that preparers can now do whatever they please, read Tax preparation business owner sentenced for tax fraud:

Charles Lee Harrison has been ordered to federal prison following his conviction of willfully aiding and assisting in the preparation and presentation of a false tax return, announced United States Attorney Kenneth Magidson along with Lucy Cruz, special agent in charge of Internal Revenue Service – Criminal Investigation (IRS-CI). Harrison, the owner of a tax preparation business in Houston and Navasota, pleaded guilty June 16, 2014.

Today, U.S. District Judge Lynn N. Hughes, who accepted the guilty plea, handed Harrison a 36-month sentence to be immediately followed by one year of supervised release. He was further ordered to pay $396,057 in restitution.

I’m confident Mr. Harrison feels quite regulated at the moment.

 

Oh, Goody. “So we have right now probably the most complicated filing season before us that we’ve had in a long time, if ever. ”

-IRS Commissioner John Koskinen in an interview with Tax Analysts October 17 ($link)

The Commissioner also had an interesting idea for large partnerships ($link):

Our position is the most significant thing we can do to break that bottleneck — and I think it’s supported by a lot of people in the private sector — would be to say we need to amend [the 1982 Tax Equity and Fiscal Responsibility Act] and say we can audit a partnership,” Koskinen said. “And when we make an adjustment to the tax quantities, the partnership will absorb that that year,” he said, adding that the reporting would take place on the partnership’s Schedule K-1 for that year and the adjustment would automatically flow through to the partners.

Koskinen added that even though that statutory change would effectively shift the tax liability from those who were partners in the year under audit (and who benefited from the improper tax position) to the current partners, “that happens with mutual funds all the time. . . . People are used to buying and selling investments, recognizing whatever the tax and investment situation is.

Maybe that makes some sense for large partnerships, but it would be horrible for small ones, as anybody buying a partnership interest would also be buying three open years of audit exposure.

 

buzz20140923It’s Tuesday. That means Robert D. Flach is Buzzing with links from around the tax world!

Jason Dinesen, Iowa Tax Filing Deadline is October 31: Claim Your $54 Credit Before Then

Paul Neiffer, Will ACA Require You To Include Health Insurance as Wages. Spoiler: no.

Matt McKinney, Can I force my Iowa corporation to buy my stock? (IowaBiz.com). A common question from minority owners of closely-held corporations.

Tony Nitti, The Top Ten Tax Cases (And Rulings) Of 2014: #10 – IRA and Qualified Plan Rollovers Are More Treacherous Than You Realize.

TaxGrrrl, Suspected Nazi War Criminals Collected Millions In Social Security Benefits After Fleeing The U.S.

William Perez, Payroll Taxes: A Primer for Employers

Peter Reilly, Taxpayer Barred From Communicating With CPA Still Hit With Late File Penalty. Weird and unjust.

Kay Bell, Jury doesn’t buy ‘vow of poverty’ as excuse for not filing taxes. Well, this tax evasion conviction will help the defendant fulfill the vow.

 

 

20141021-1Martin Sullivan, A Double Bias Against Infrastructure (Tax Analysts Blog)  He doesn’t mention the biggest problem: When most of government spending is just transfers from some taxpayers to others, it squeezes out everything else.

Donald Marron, A “Normal” Budget Isn’t Really Normal (TaxVox): “From 1975 to today, the federal debt swelled from less than 25 percent of GDP to more than 70 percent. I don’t think many people would view that as normal. Or maybe it is normal, but not in a good way.”

TaxProf, The IRS Scandal, Day 530

 

News from the Profession. AICPA Seeks to Better Weed Out Losers, Misfits with Evolved CPA Exam (Adrienne Gonzalez, Going Concern). Good thing I passed the exam before this development.

 

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Preparer regulation loses again; DC Circuit upholds Loving decision.

Tuesday, February 11th, 2014 by Joe Kristan

20130121-2The Shulman-era IRS preparer regulation program is dead.  The Appeals Court for the DC Circuit today upheld the DC District decision in Loving, a decision holding that the IRS had no authority to enact its elaborate “Registered Tax Return Preparer” regime.  The winning attorneys at the Institute for Justice issued a press release:

Today, the D.C. Circuit Court of Appeals ruled that the IRS had no legal authority to impose a nationwide licensing scheme on tax-return preparers. The decision affirms a January 2013 ruling by U.S. District Court Judge James E. Boasberg, which struck down the IRS’s new regulations as unlawful. Both courts rejected the agency’s shocking claim that tax-preparer licensure was authorized by an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses.

“This is a major victory for tax preparers—and taxpayers—nationwide,” said Dan Alban of the Institute for Justice, the lead attorney for the three independent tax preparers who filed the suit. “The court found that Congress never gave the IRS the power to license tax preparers, and the IRS cannot give itself that authority.”

It’s great news for taxpayers, who will not have their return prep costs artificially increased by a regulatory scheme written by a former H&R Block CEO.  It’s good news for preparers, who will not have to waste time and effort in futile paperwork that will do nothing to solve the real problems of the tax system — baroque complexity and internal controls so weak that petty grifters steal billions through refund fraud annually.

The court was blunt in dismissing IRS arguments that a Reconstruction-era statute on Civil War claims gave them the authority to invent an elaborate preparer regulation scheme out of thin air:

In our view, at least six considerations foreclose the IRS’s interpretation of the statute.

Put simply, tax-return preparers are not agents. They do not possess legal authority to act on the taxpayer’s behalf. They cannot legally bind the taxpayer by acting on the taxpayer’s behalf. The IRS cites no law suggesting that tax-return preparers have legal authority to act on behalf of taxpayers. Indeed, a tax-return preparer who tried to act on the taxpayer’s behalf would run into trouble with the IRS…

The IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading of Section 330.

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

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

It’s bad news for the already battered legacy of The Worst Commissioner Ever, who let identity theft balloon while he wasted his time on this pointless exercise.

Congratulations to Dan Alban and the Institute For Justice for their winning work in this case.  I’m glad to have played a small role as an early agitator against preparer regulation and as a participant in an Amicus brief to the D.C. Circuit opposing the rules.

Cite:  Loving, CA-DC No. 13-5061

 

 

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Tax Roundup, 11/18/13: Waterloo day! And Iowa’s new $54 individual credit.

Monday, November 18th, 2013 by Joe Kristan

The ISU Farm and Urban Tax School is in Waterloo, Iowa today for another sold-out session.   Only Red Oak, Denison and Ames after this, so register now!  Then I drive to Cedar Rapids to talk about the Net Investment Income Tax and how it affects trusts before heading home tonight.  Coffee vendors all over Iowa will have a good day today.

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Today seems like a different kind of Waterloo for IRS — their web site is down this morning.

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Iowa “Trust fund” tax credit $54 for 2013.  The Department of Revenue has announced the new individual income tax  credit enacted last session as part of the property tax reforms:

In order to claim the Credit, a 2013 Return must be filed by October 31, 2014, which is the extended due date.  To avoid penalty, Iowa income tax returns normally must be filed by and 90% of any tax owed must be paid by April 30. The Credit will be applied to the computed Iowa tax after first applying any other refundable and nonrefundable tax credits.  Any amount of the Credit that is in excess of the tax due is not refundable and cannot be carried back or carried forward to another tax year.

The $54 Credit amount and additional information will be reflected in the IA 1040 instructions for the 2013 tax year. 

I won’t turn down the $54, but it’s not anything like real tax reform.  That would be the Tax Update’s Quick and Dirty Iowa Tax Reform.


Paul Neiffer, CPR for Section 179:

For all farms since 2007, the percentage of Section 179 to total depreciation averaged about 70% and in 2012 the number was slightly over 75%.  For purchases over $100,000 the percentages has been even higher.  Based on this table, it appears that most farmers have just about fully depreciated their farm equipment purchases over the last few years using Section 179. 

Section 179 limits are slated by law to fall to $25,000 next year.  I think it’s likely that Congress will eventually extend the $500,000 limit currently in effect to 2014, but it will make a big difference if they don’t.

 

tax fairyPeter Reilly, Charitable Foundation Haunted By 1999 Corporate Tax Assessment:

It turns out that the “Midco” intermediaries were relying on variations of what Joe Kristan calls the Tax Fairy – the magical sprite that can make your taxes go away with fancy tax footwork.  Of course as someone who just sold their corporation to someone, that’s not your problem – or so you would like to think.  The IRS has been thinking otherwise.  Since the corporations that have been sold are dry husks by the time taxes are assessed the IRS has been asserting transferee liability against selling shareholders.  Results have been mixed.

There is no Tax Fairy.

 

Jeffrey Dorfman, Obamacare Will Lift Tax Fraud To A Whole New Level.  That’s just what we need, a better class of tax fraud.

Annette Nellen, Affiliate nexus legislation – everyone loses

Jack Townsend,  Watch the Refund Statute of Limitations on OVDP Payments Related to Income Tax 

Phil Hodgen has a New tax ebook for nonresident freelancers.

Paul Caron, The IRS Scandal, Day 193

 

Crisis!  U.S. MexiCoke fans fear effect of Mexico’s new soda tax.  (Kay Bell)

 

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How could they be so frivolous?  The Department of Justice announces that a California couple has

been indicted for, among other things, filing liens against the IRS Commissioner.  Everyone knows that you can’t just file baseless liens.

Only they can do that.

TaxGrrrl reports on a Michigan couple whose bank account was emptied by the IRS when they suspected they were “structuring” bank deposits to stay below the $10,000 disclosure limit.  She takes up the story:

Instead, they insist that the deposits were generally less than $10,000 because their insurance policy covers the theft of cash only up to that sum. As a result, they do not let their employees carry more than that amount at any time, including walking deposits to the local bank.

That didn’t stop the feds from seizing the Dehkos’ remaining funds. Using a process called civil forfeiture, the federal government can seize assets on the basis of suspicion: there is no requirement for firm evidence nor are the property owners entitled to notice. The government didn’t ask the Dehkos about their deposits or they would have found out about the insurance policy.

Months after the seizure, prosecutors had never offered any evidence to prove that the Dehkos were engaged in money laundering or that they were avoiding income tax. In fact, a Bank Secrecy Act examination from last year resulted in a notice stating that “no violations were identified.”

Fortunately, the Institute for Justice stepped up and financed court action by the Dehkos, who run a grocery store in Michigan.   The IRS has said it will return their funds.  But unlike the California couple who went after the Commissioner, nobody at the IRS will ever be disciplined for slapping a lien on the Michigan grocers and seizing their cash, with no due process and, admittedly, for nothing.   This sort of thing will continue until there is a Sauce for the Gander Rule, where taxpayers can sue IRS officials who make baseless filings on the same basis the IRS can sue taxpayers.

 

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Tax Roundup, 3/28/2013: Appeals Court upholds injunction against IRS preparer regs. Also: Indicted for overstating income?

Thursday, March 28th, 2013 by Joe Kristan

 

ijlogoWith less than three weeks left in filing season, the US Federal Circuit Court of Appeals has denied the IRS attempt to overturn the injunction against their preparer regulation scheme.  From the Wall Street Journal Total Return blog:

The District of Columbia Circuit Court of Appeals denied a renewed request by the Internal Revenue Service to suspend a January 18 injunction against the agency’s effort to license tax preparers.

A three-judge panel upheld U.S. District Court Judge James E. Boasberg’s refusal to lift his injunction against the IRS’s licensing program.

This doesn’t mean the IRS has permanently lost its case, but it does mean that the IRS cannot move forward with its power grab unless and until it convinces the appeals court that it has the authority to regulate preparers.

Meanwhile, filing season continues, with no evidence that taxpayers have been harmed by the availability of preparers who haven’t passed an IRS open-book exam on Publication 17.

You would think that an agency short on staff and plagued by identity theft refund fraud would be grateful for the chance to redirect resources from a futile and wasteful regulation program.  Yet they seem to be lobbying the Senate for legislative authorization for their power grab.  Shameful, but not surprising.

Congratulations to the Insitute for Justice for another win for consumers.

 

20130328-1Iowa preparer indicted – for helping clients report too much income.  From KCRG.com (my emphasis):

 Keith Rath, of Shellsburg, was arrested last week by IRS agents after a grand jury indicted him on eight counts of aiding in the preparation and  presentation of a false tax return.

The indictment says that on  eight occasions over the years 2008, 2009 and 2010, Rath helped clients  falsely claim thousands of dollars in business income that he knew they  did not earn.

Mr. Rath has pleaded not guilty.

You might wonder why anyone would claim business income they didn’t earn.  The answer, of course, would be to claim refundable earned income tax credits.  A taxpayer with no “earned income” is ineligible for the credit.  The EITC is “refundable,” which means that when there is the credit exceeds the computed tax, the IRS will send you a check for the difference.  By reporting imaginary Schedule C income, taxpayers can (illegally) increase their refund check.

EIC fraud is a huge problem.  It is estimated that as much as 25% of EIC is improperly awarded, resulting in billions of dollars of fraudulent tax refunds.  The Iowa Senate wants to make the problem even bigger.

 

Elizabeth Malm,  Minneapolis Star Tribune Editorial Board Warns Legislators Against Higher Taxes on High-Income Earners (Tax Policy Blog).  If the Star-Tribune thinks you’ve gone too far in jacking up taxes, you’ve got a problem.

Tony Nitti,  Derek Jeter Flees New York, Tax Savings Soon To Follow .  But they keep telling us that tax migration is a myth.

Just like capital migration.  ‘Legal Enemies of the State’!  (Christopher Bergin, Tax.com):

In Tax Notes this week I wrote about abusive transfer pricing and other techniques being used by multinational corporations and their brilliant  tax advisors to avoid as much tax as possible. That these techniques are technically legal, and, some would say, actually enabled by governments like the United States and groups such as the Organization of Economic Cooperation and Development (OECD), doesn’t necessarily make them right.

In fact, the OECD itself recently issued a report – known as the BEPS report –  on how these techniques create base erosion and profit shifting. The problem is so serious, according to the report, “What is at stake is the integrity of the corporate income tax.”

The “integrity of the corporate income tax” is in the third aisle next to the chastity of the bordello.

 

Peter Reilly,  Tax Court Does Not Buy Vow of Poverty of Prophetess.   Her full title is “Prophetess, Teacher, Pastor and Certified Paralegal,” so she has something to fall back on.

Paul Neiffer,  You Can Always Do An IRA!

Cara Griffith, The Meaning of a Symbolic Vote (Tax.com).  Senate approval of sales tax on internet sales may keep the issue alive.

Tax Trials, Supreme Court to Hear Arguments in DOMA Tax Case

Patrick Temple-West,  TurboTax’s lobbying fight, and more

Jack Townsend,  Random thoughts on Ethics, Tax Opinions and A Tax Lawyer’s Life at a Big Law Firm

Kay Bell,  Don’t fall for these Dirty Dozen tax scams of 2013

 

TaxGrrrl, IRS Apologizes For Star Trek Video As Congress Jumps At Chance To Criticize Spending.  She notes that a trivial expenditure is generating a lot of political preening.  As far as I’m concerned, I’d rather they make videos than a lot of other things they do.

Well, it’s a better use of funds than preparer regulation.  Dear IRS, Please Make More Parody Videos (Going Concern)

 

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Tax Roundup, 2/4/2013: District Court declines to stay decision stopping IRS preparer rules. And ___ Anniversary!

Monday, February 4th, 2013 by Joe Kristan

20130121-2Not surprisingly, the judge who ordered the IRS to shut down its preparer regulation program declined to stay his order.  The IRS asked James Boasberg, the U.S. District Court Judge who ordered the IRS to stop its preparer regulation program, to stay his order pending an appeal.  The judge declined:

As the factors beyond likelihood of success do not decisively tilt in favor of the IRS — indeed, they tip somewhat against — the Court sees no basis to lift its injunction pending appeal. Nor does the Court believe it warranted to suspend the injunction for fourteen days to permit the IRS to seek a stay in the Court of Appeals. This would only lead to more confusion for preparers and their clients as the tax season gets underway. While nothing in this decision prevents the IRS from seeking such relief there, the Court sees no benefit of a brief stay while it does so.

So where do things stand?  The IRS will be allowed to continue to administer the Registered Tax Return Preparer test and issue PTINs, but it cannot require RTRP tests or CPE, or collect fees for them.  Whether the IRS will continue testing on a voluntary basis, or whether there will be takers, remains to be seen.

More coverage from TaxGrrrl: IRS Loses Big In Court (Again), Tax Season Chugs Along; and Russ Fox: IRS Loses Again to Institute for Justice.

 

You surely didn’t miss the 100th anniversary of the 16th Amendment yesterday.  They had a football game and everything to observe it.  The 16th Amendment, which gave rise to the current income tax, was ratified by Delaware on February 3, 1913, making it official.  And yes, it is official.  While some tax protesters insist that the 16th Amendment was never properly ratified, all the federal judges say otherwise — not to mention the folks at IRS, the U.S. Marshals Service and the Bureau of Prisons.  So, in any way that matters, it’s official.  Still, I can’t bring myself to say “Happy” anniversary.

More from Richard Morrison:  100 Years of the Federal Income Tax (Tax Policy Blog)

 

Iowa’s oldest judge, age 90, steps downRuth Klotz, a Polk County Probate Judge, remains respected by the lawyers I know who practiced in her court.   Happy Retirement, Judge Klotz!

 

Paul Neiffer,  Many States Are Delaying Farmer Filing Deadline

Jack Townsend, UBS Depositors Fail on Pleadings in Civil Case Against UBS

Kay Bell, Tips are taxable income

TaxGrrrl, Pay Taxes On Your Super Bowl XLVII Winnings? You Can Bet On It

Trish McIntire,  Gambling 1099MISCs.  They don’t make your winnings taxable, they just let the IRS in on the secret.

Patrick Temple-West,  Early payouts of dividends, bonuses spur a windfall, and more (Tax Break)

Martin Sullivan, Is Aggressive Tax Avoidance Moral? (Tax.com).  Strange question.  If you are paid to maximize shareholder returns, is it moral to do less than your best to do so?

Rudy Penner,  The Risks of Dumbing Down Fiscal Goals (TaxVox).  It’s hard to think they could get any dumber than they are now.

 

Jim Maule,  Looking Again at Tax and Political Ignorance:

The study’s conclusion is disheartening. The authors conclude that incumbents can get themselves elected by associating themselves with good news for which they ought not take credit because they are not responsible, support policies that generate good news for their districts even if they are bad for the nation, and to use rhetoric to distract voters from the incumbents’ histories.

Perhaps this will lead the good Professor to reconsider his preference for government solutions over market outcomes.

Linda Beale,  Red state tax “reform” and “economic growth”

Robert D. Flach, JUST ONE MORE THING, HE SAID COLUMBO-LIKE

 

The Critical Question: The Devil Wears Prada, But Does Her Boyfriend Pay Taxes? (Robert Goulder, Tax.com).

What this country needs is a good 25-cent sneaker.  Illinois Proposes 25-Cent Sneaker Tax (TaxProf)

It’s the little things.  The mark of a true craftsman is attention to detail.  Two Ohioans’ alleged failure to mind the details has led to trouble.  From the Columbus Dispatch:

Roma L. Sims, 34, and Samantha C. Towns, 30, were arrested on Thursday and charged with aggravated identity theft, conspiracy and wire fraud for using the identities to file tax returns and rake in $1.3 million.

But they misspelled several cities when they listed return addresses: Louieville and Pittsburg, according to the criminal complaint. Those geographic goofs caught the attention of investigators.

So did misspelling some of the occupations they listed on the phony tax returns.

I bet they thought those spelling drills in grade school were pointless.

 

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Tax Roundup, 1/31/2013: Happy IRA mulligan day! And on brief, the Tax Update!

Thursday, January 31st, 2013 by Joe Kristan

20111109-1Today is the last day to make a charitable IRA rollover for 2012.  Yes, 2012 is over, but taxpayers who are required to make IRA minimum annual distributions may still have one 2012 transaction left in them.

Taxpayers who are born before July 1, 1942 who took cash from an IRA in December 2012 can contribute up to $100,000 to a charity today and have it excluded from their 2012 income.

- Taxpayers who have failed to take their required minimum 2012 distribution can avoid the 50% penalty for failing to take their distribution by arranging for the IRA to transfer the minimum amount, up to $100,000, to a charity today.

These opportunities are part of the retroactive extension of the rule allowing up to $100,000 to be transferred from an IRA directly to a charity without including the amount in the IRA owner’s income.  This avoids the 50% of AGI charitable contribution limit.  It also avoids other potentially unpleasant consequences of having the IRA income above-the-line, like making your Social Security taxable.

 

On brief, the Tax Update Blog.  The Institute for Justice, the victorious legal team behind the shutdown of the preparer regulation program, has filed a brief opposing a stay in the injunction against the program.  Making their case airtight, they cite the Tax Update, along with tax bloggers Kelly Phillips Erb (TaxGrrrl), Robert D. Flach  and Jason Dinesen.  From Footnote 18 of the brief:

For an example of the disruption routinely caused by the IRS’s misadministration of the RTRP regulations, see Alban Decl., Ex. 3 (the comments from preparers are illustrative and reference previous examples of similar disruptions); see also Joe Kristan, IRS quietly delays CPE requirement under new preparer regulation scheme , Tax Update Blog (January 8, 2013), http://rothcpa.com/2013/01/irs-quietly-delays-cpe-requirement-under-new-preparer-regulationscheme/ (describing IRS message as “a quiet admission of failure”).

With the Tax Update Blog on their side, who can be against them?

 

What does a poor college student have that could be lucrative to a thief? A Social Security number.  From the Memphis Business Journal:

With tax season bearing down, the IRS has a warning about a new refund scam aimed at college students, seniors and church members.

The Internal Revenue Service said Tuesday the scam tries to get students to give their personal identification and file tax returns claiming fraudulent refunds. It has sent misleading and bogus refund claims using the American Opportunity Education Tax Credit on college campuses throughout the Southeast.

Be very cautious about giving anybody but your employer, your bank, a medical provider or the IRS your Social Security number.  And never give it to a scammer.

 

David Brunori, Stifling Lefty — Political Correctness in the Tax Debates (Tax.com):

So the pro tax people managed to shut Mickelson up. Rather than engaging  in a discussion about why it is okay to take his money, they stifled him.

Shut up, they explained.

 

Paul Neiffer points out that now that penalties are waived for farmers who file after March 1, they may not want to file by their usual deadline:  File Your Return After March 1 Not Before!

 

Have you mailed your 1099s and W-2s?  Today is the deadline for sending them to recipients.  Russ Fox has the scoop.

TaxGrrrl, Ask the taxgirl: Tax ID Numbers and 1099s

Kay Bell,  Tax e-filing and Free File is now available for most taxpayers

Trish McIntire,  Freebies.  Don’t ask for them.

Chris Sanchirico,  Camp’s Investment Tax Plan: Implications for Lower Rates on Capital Gains? (TaxVox)

Tax Foundation, New Report: Cell Phone Taxes Exceed 20% in Several States

Margaret Van Houten and Jodie Clark McDougal,  Iowa Trust Industry Breathes a Sigh of Relief after the Supreme Court’s Reversal in Trimble

Cara Griffith, Kentucky DOR’s Disregard of Transparency (Tax.com)

Jack Townsend,  Another UBS Depositor Pleads

Patrick Temple-West,  India sees end to Vodafone tax dispute, and more

 

News you can use. IRS: No One Is Too Old, Too Poor Or Too Sympathetic To Avoid Prosecution  (Brian Mahany)

How to catch a dinosaur.  Not Income Tax Evasion – Structuring – That’s How They Got Kent Hovind (Peter Reilly)

Robert D. Flach goes into blog hibernation for the remainder of tax season:  SO LONG, FAREWELL, AUF WIEDERSEHEN, GOOD NIGHT!

These are a few of my favorite things…  Guns and Tax Returns. (Christopher Bergin, Tax.com).

 

Today’s morale builder: Les Misérables-Inspired Video Reminds You That Busy Season Kills Your Dreams (Going Concern)

 

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Court throws out IRS preparer regulation scheme!

Friday, January 18th, 2013 by Joe Kristan
Soon-to-be-former-IRS Commissioner Douglas Shulman

Doug Shulman shows what’s left of his signature achievement, the preparer regulation scheme.

So passes Doug Shulman’s legacy:

For the reasons set forth in the accompanying Memorandum Opinion, the Court ORDERS that:

1. Plaintiffs’ Motion for Summary Judgment is GRANTED;

2. Defendants’ Motion for Summary Judgment is DENIED;

3. Defendants lack statutory authority to promulgate or enforce the new regulatory scheme for “registered tax return preparers” created by 76 Fed. Reg. 32,286;

4. Defendants are permanently enjoined from enforcing such scheme; and

5. Judgment is ENTERED in favor of Plaintiffs.

The IRS can, and almost certainly will, file an appeal to preserve its preparer regulation power grab, but losing on summary judgment and being enjoined from enforcing the new rules is a complete shutout for them in District Court.

I am glad that the IRS lost in court.  I have hoped the regulations would be overturned, and I thought they should be illegal, but I am not a master of the law covering IRS regulatory problems.  Regardless of whether they are legal, I have always thought the regulations unwise.

The regulations have been sold as a way to assure taxpayers of quality preparation by making them pass a test and take CPE.  Yet the test is a joke, an open-book review of Publication 17.  The IRS has already waived the CPE requirement for 2013.  The IRS has already undermined their own arguments.

To me, the real purposes of the regulations have been:

  • to expand the power of the IRS by increasing their grip on preparers, while
  • helping the well-connected national tax franchise outfits by eliminating many of the small independent preparers who compete with them.

Too cynical?  Seeing that the IRS has abandoned its stated goals, the unstated goals are all that are left.  Considering that the former CEO of H&R Block wrote the rules for the IRS, it’s hard to make the case that this was done with the taxpayer in mind.

What does it mean?  It looks to me that the IRS has to stop its RTRP regime in its tracks, absent a stay on the ruling from the District Court or the D.C. Circuit Court of Appeals.  No more rulemaking, no more RTRP open book tests, and no more approval of tax CPE by the IRS.  No more cashing the $63 RTRP checks.  Refunds?  It would serve them right, but I don’t know.

Meanwhile, it’s back to the Wild West days of two years ago, when taxpayers had to rely on the reputations and credentials of individual preparers, rather than on a worthless pretend certification from the IRS.  Oh, the humanity!  Congratulations for the Institute for Justice, the legal team behind the suit.

UPDATE, 1/21: more here.

Other coverage:

Katherine Mangu-Ward, Mom-and-Pop Tax Prep Firms Defeat IRS! (Reason.com)

AP, IRS loses lawsuit in fight against tax Preparers.

Related: David Brunori, Government Power, Cronyism, and the IRS Running Amok

UPDATE, 1/19. 

TaxProf, Court Says IRS Lacks Authority to Regulate Tax Preparers

Russ Fox, Institute for Justice 2, IRS 0

Joseph Henchman, Court Strikes Down IRS’s Arbitrary Tax Preparer Licensing Requirements  (Tax Policy Blog)

Kay Bell, IRS loses lawsuit challenging tax preparer registration, testing

Robert D. Flach, YOU COULD HAVE KNOCKED ME OVER WITH A FEATHER!, MORE ON THE TAX PREPARER REGULATION COURT CASE, AND THE BEAT GOES ON . . .  I like this: “Joe Kristan is as expected, a pig in reality tv over the court decision.”  If he calls me “Snooki,” I’ll know he’s really upset.

Trish McIntire, “Licensing Pity Party

Janet Novack, Federal Judge Shoots Down IRS Attempt To Regulate All Paid Tax Preparers

Some practitioners are upset about the ruling (see Trish McIntire).  None of us should have the right have the government  lock potential competitors out of the market — even if we don’t think the competitor is adequately trained.  It’s the customers’ money, and it’s up to them to make the choice.

 

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IRS quietly delays CPE requirement under new preparer regulation scheme.

Wednesday, January 9th, 2013 by Joe Kristan

In a quiet admission of failure, the IRS Return Preparer Office posted on its Facebook page that it won’t be enforcing the new 15-hour CPE requirement for Registered Tax Return Preparers this year:

We’ve received some questions from people who didn’t get their 15 hours of CE completed in 2012. Here’s the deal: In addition to the 15 hour requirement for 2013, you must also make up any hours not completed in 2012. There is no need to designate or notify us that hours earned in 2013 are for 2012. Be sure to keep records of the programs you attend. Additionally, for those people who answered “no” to  the CE requirement question on their PTIN renewal, we will be sending them a letter soon advising them they are still responsible for the hours.

There are about 370,000 tax preparers that the IRS estimates are covered by the new rules.  The whole regulation scheme was a stupid idea anyway, except as a power grab by Doug Shulman, Worst IRS Commissioner Ever.

The rules will do little or nothing to improve the quality of tax return preparation.  By driving seasonal preparers out of the market, they will raise prices.  At the margin, that will cause some taxpayers to self-prepare, and others to not file at all.  That does nothing for the taxpayer, except for taxpayers who are shareholders in the nationwide tax return franchise businesses that are the real beneficiaries of the rules.

The Institute for Justice lawsuit against the regulation scheme is pending.  Katherine Mangu-Ward has more in New IRS Rules Kick In, Leaving Mom-and-Pop Tax Preparers in Limbo (Reason.com)

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Tax Roundup, 12/13/2012: Tax preparer deadline looms. Also: why some companies are happy with a bad tax law.

Thursday, December 13th, 2012 by Joe Kristan

As Year-End Deadline Looms, Independent Tax Preparers Continue Fight Against IRS Power Grab. (Institute for Justice).  IJ has prepared a two-minute video about their suit to stop the inane and futile preparer regulation program.

I wish IJ luck; if you are looking to make a last-minute charitable contribution, IJ is certainly a worthy cause.

 

TaxProf,   Fleischer: Not All Companies Would Welcome a Lower Tax Rate

Reaching an agreement to cut the corporate tax rate should be easy. Major figures from both political parties have expressed interest in reducing the tax from 35%, which is the highest rate among the country’s main trading partners. Corporations would generally benefit from paying less tax and having more cash to reinvest in new projects or pay in dividends to shareholders.

The 35% rate is more of a “sticker price” than a reflection of the average tax burden. Corporations can pay a lower rate by lobbying for special deductions and credits, employing aggressive transfer pricing strategies to shift profits offshore and structuring operations to minimize how much they pay in taxes in the United States.

You can see the same dynamic in Iowa, with its highest-in-the-nation corporation tax rate.  That’s just fine for the lucky and the well-lobbied, some of whom actually make money from the Iowa tax law through refundable tax credits, especially the Research Credit.  For a little guy without connections or lobbyists, it’s a great reason to set up in South Dakota.

Speaking of which:   Key Iowa senator questions tax-incentive programs (Quad City Times):

An influential state senator said lawmakers will have to take a harder look at the state’s tax-credit programs this session, including the economic development credits used to entice companies to build in Iowa.

Sen. Joe Bolkcom, D-Iowa City, who was reappointed to chair the Senate Appropriations Committee on Wednesday, held a Statehouse hearing on tax-credit programs Wednesday. He has been a vocal critic of the how the state uses incentive programs to compete against other states for economic development.

That will be a lot easier if it is accompanied by a drastic lowering of rates — or better yet, a repeal of the Iowa corporation income tax.  Yet there’s always a voice for breaks for those with connections — in this case Tom Sands (R-Wapello), Chairman of the Iowa House Appropriations Committee. From the story:

Sands said the people in Lee County and Woodbury County — for the most part — aren’t complaining about the incentives offered to the companies and are looking forward to the jobs they’ll bring.

That’s why it’s hard to get rid of these things.  Politicians point to the jobs they “create” by bribing companies to do what they would probably do anyway.  They don’t have to call press conferences for all of the anonymous businesses that never come to Iowa, or that never get started to begin with, because of Iowa’s expensive and byzantine tax law.

There is a better way:  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan

 

Fiscal Cliff Notes:

Roberton Williams,  Paying 2013 Dividends in 2012 May Save on Taxes but Not for Everyone:

For instance, that extra dividend income could throw some shareholders onto the alternative minimum tax. Some retirees could see more of their Social Security benefits subject to income tax. Some families with children will pay more tax as their child credits phase out.

While some investors would be hurt by the accelerated dividend payouts, many low- and middle-income taxpayers could benefit.

Christopher Bergin,  More Cliffs (Tax.com)

Cara Griffith,  Despite Revenue Growth, States Must Plan for the Fiscal Cliff (Tax.com)

TaxGrrrl,  Senate Can’t Nail Down Budget, Does Have Time For Fruitcake

Patrick Temple-West,   Corporate taxes on table in cliff talks, and more.  I don’t get a good feeling about these guys trying to rewrite the corporate tax in two weeks.

Paul Neiffer,   How Much Would A Gas Tax Raise?

Anthony Nitti,   While The Fiscal Cliff Keeps You Distracted, The AMT Will Rob You Blind

 

Russ Fox,  Ref Fouls Out:  “As always, it’s far, far easier to just pay the tax you owe…but that thought rarely occurs to the Bozo mind.”

Joseph Henchman,  Study: Toll Collection Cheaper Than Conventionally Thought (Tax Policy Blog).  If electronic tolling is cheap enough to run, it could supplement or replace gas taxes.

Tax Trials:  Tax Question May Determine Supreme Court’s Position on Same-Sex Marriage

Missouri Tax Guy,   Some Easy & Effective Ways to manage Personal Finance

Trish McIntire,  Saving Electronic Records:

Download and save your electronic pay statement to your computer every payday. Save a copy of the invoice anytime you order online. The same goes for all credit card and bank statements that aren’t paper. Once you have a system started, you can start duplicating the paper documents. A home scanner can be inexpensive and a lifesaver.

Once you’ve created a tax documentation system that works for you, don’t forget to back it up and to safely get rid of the paper documents.

If it’s worth backing up, it’s worth backing up twice.

Jack Townsend,   Reasonable Doubt – Explaining It to a Jury.  Best not to have to.

Kay Bell,   French actor Gerard Depardieu moves to Belgian tax haven.  Belgium has a top income tax rate of 50%.  When that becomes a “tax haven,” that tells you how bad France is.

Ungentlemanly:  Fourth Circuit Upholds Conviction of Gentlemen’s Club Owner (Peter Reilly)

Russ Fox,  Ref Fouls Out.  A group of rec-league refs set up an identity theft-based tax fraud scheme.  It worked great, until suddenly it didn’t.    Russ wisely points out:

All told, the four individuals involved in the scheme must make restitution totaling $200,000.  As always, it’s far, far easier to just pay the tax you owe…but that thought rarely occurs to the Bozo mind.

These guys ran their scheme for 12 years before it blew up.  The longer you do something like this, the closer your chance of getting caught approaches 100%.

 

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Tax Roundup, 8/20/2012: Meet the criminal masterminds that outwit Doug Shulman’s IRS.

Monday, August 20th, 2012 by Joe Kristan

Doug Shulman, protecting the taxpayer

You are sending $5.2 billion annually to identity thieves, courtesy of Douglas Shulman’s IRS.  What sort of criminal masterminds are outwitting IRS internal controls to pick your pockets?  Tampabay.com tells the story of one modern-day Professor Moriarty:

More than 10,000 people remain on a waiting list for federally subsidized housing in Hills­borough County.

Not LaSandra Gamble, 27-year-old mother of five.

Last summer, between housing, utilities and food stamps, she drew benefits of $2,363 a month, Tampa Housing Authority files show.

Yet, in August 2011, she put down $9,000 on a black 2006 Lexus GS430, police said. Three days later, they said, she put down another $9,000, this time on a red 2007 Lexus ES 350. Combined, the monthly payments were nearly $2,000.

Gamble, in an interview, said police have it wrong. She said she got the cars because she was involved with the car dealer.

“I didn’t have to put nothing down,” she said. “We were in a relationship.”

Legally, she was in a relationship with her husband, 33-year-old Angelo Juan Pedrosa, whom she had married a year earlier.

Police got involved Oct. 8, when they stopped Pedrosa driving the black Lexus. Pedrosa is a convicted cocaine dealer. Along with marijuana residue, the officers reported finding $6,000 and a dozen debit cards in other people’s names.

Reloadable debit cards, sold online, carry Visa or MasterCard logos. Some people use them to shop on the Internet, control spending or get around poor credit. Tax thieves use them to collect refunds from the IRS.

Police filed a report with the IRS.  Ms. Gamble denies any involvement with tax fraud.

The gist of the TampaBay.com story is that the multi-billion dollar refund fraud — much of which is based in Tampa — is largely the work of thieves who are also collecting money from you through public assistance, and a motley array of petty thieves.   And Doug Shulman’s IRS is helpless to stop them.

Or maybe they just have priorities other than protecting your tax money.  Priorities like expanding the power of the bureaucracyAn opinion piece in today’s Wall Street Journal by Chip Mellor of the Institute for Justice (via the TaxProf):

Under new regulations imposed last year—without congressional approval—the IRS now requires all paid tax preparers to become “registered tax return preparers” by paying extra fees, passing a government exam, and taking continuing-education classes annually. (Exempted from the mandate are attorneys, CPAs and politically powerful “enrolled agents.”) Big tax-preparation firms such as H&R Block and Jackson Hewitt supported the licensing scheme, as did lobbying groups representing CPAs and others who are exempted from new regulation. 

So while petty thieves loot the Treasury, rest assured that Doug Shulman’s IRS is doing what it can for the well-connected.  For a taste of what it Doug Shulman is doing for those whose identities are being stolen (darn little), check out the newest installment in Jason Dinesen’s saga of a client’s identity theft nightmare.

 

Billy Hamilton of State Tax Notes has a fine history of the Iowa Film Credit up today.  Unfortunately at the moment it is only available to State Tax Notes subscribers (here).  He uses a “film noir” theme to tell the story:

Unless all of the main characters are dead, life continues past the closing credits, and in Johnny’s case, that means arrest and a return to the Big House. But filmmakers and audiences seldom bother with what is, in effect, the story after the story.

     That probably helps to explain why there was minimal press attention when opening arguments began on July 23 in the trial of the last of 10 defendants charged in the Iowa film tax credit scandal that erupted three years ago and was a hot topic at the time in Iowa, in the movie community, and in tax circles.

If you get a chance, read the whole thing.

 

Peter Reilly, Should We Care About Romney’s Unreleased Tax Returns?:

The business culture that both Romney and Warren Buffett have  operated in, as have I at a much less ethereal level, considers overpaying taxes to be irresponsible.  That is the story of Romney’s tax returns.

I’ve not encountered a business culture that considers overpaying taxes to be “responsible.”  Peter’s post is worth reading for the “It’s a Wonderful Life” references alone.

 

Tax Policy Blog: Usain Bolt Serves the UK an Olympic Hangover and At least 90 Percent of Americans Have a Lower Income Tax Rate than Romney

Kay Bell: Romney’s tax returns take 2

Robert D. Flach has been busy, with a new “Buzz” and a look at RYAN’S TAX RETURNS.

Anthony Nitti, Tax Policy Center Fights Back

Jack Townsend, Swiss Banks Rat Out Their Employees to U.S.

TaxDood, Usain Bolt Serves the UK an Olympic Hangover

TaxGrrrl is moving her offices this week, so she makes the best of it with Moving Right Along: Deducting Work-Related Moving Expenses

Good news for Iowa’s Mississippi River towns: Illinois Adopts Strip Club Tax (Russ Fox)

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Lawsuit challenges preparer regulation program

Tuesday, March 13th, 2012 by Joe Kristan

The libertarian public interest law firm Institute for Justice is suing the IRS today to shut down the preparer regulation program. From the IJ press release:

Congress never gave the IRS the authority to license tax preparers, and the IRS can

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Institute for Justice speaks out on IRS power grab

Saturday, October 9th, 2010 by Joe Kristan

The libertarian public interest legal advocate Institute for Justice has joined the fight against the impending tax prep regulation regime. In an article in the Daily Caller, IJ attorney Dan Alban rips the proposed IRS power grab:

This scheme would disproportionately hurt small tax-return preparation businesses and independent preparers, many of whom may be forced out of business. Part-time and seasonal preparers

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