Posts Tagged ‘IRS disclosure scandal’

Tax Roundup, 3/23/16: “Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers.” And more!

Wednesday, March 23rd, 2016 by Joe Kristan

norcal logoNo Scandal here. The IRS has long history of hiding behind taxpayer confidentiality rules to avoid accountability. The Sixth Circuit Court of Appeals called the IRS on this yesterday in a harshly-worded opinion.

The case arose from the Tea Party scandal. NorCal Tea Party Patriots sued the IRS after the scandal emerged. The IRS has used every trick in the book to drag out the case, citing the “confidentiality” of the very taxpayers it abused. From the Sixth Circuit opinion (my emphasis):

The IRS argues that the “names and other identifying information of” organizations that apply for tax-exempt status — along with the applications themselves — are confidential “return information” under 26 U.S.C. § 6103. IRS Petition at 2, 16. The IRS argues further that the district court lacked authority to order disclosure of those names under a statutory provision for disclosure in judicial proceedings where “the treatment of an item reflected on such return is directly related to the resolution of an issue in the proceeding[.]” 26 U.S.C. § 6103(h)(4)(B). The IRS contends that the district court’s discovery orders threaten to undermine statutory protections for taxpayer privacy, and that a writ of mandamus is therefore appropriate.

A “writ of mandamus” is “an extraordinary remedy reserved to correct only the clearest abuses of power by a district court.” The Sixth Circuit wasn’t buying. They reviewed the IRS foot-dragging:

To that end, the plaintiffs sought discovery in the form of basic information relevant to class certification, including the names of IRS employees who reviewed the groups’ applications for tax-exempt status and the number of applications from similar groups that had been granted, denied, withdrawn, or were still pending. On the record before us here, the IRS’s response has been one of continuous resistance. For example, the IRS asserted that the names of IRS employees who worked on the groups’ applications were taxpayer “return information” protected from disclosure by § 6103. The IRS eventually abandoned that position, but argued instead that § 6103 barred the Department of Justice’s attorneys from even reviewing the groups’ application files to find the names of the IRS employees who worked on them. That was true, the IRS asserted, even though § 6103(h)(2) — entitled “Department of Justice” — expressly allows the Department’s attorneys to review a taxpayer’s return information to the extent the taxpayer “is or may be a party to” a judicial proceeding. See 26 U.S.C. § 6103(h)(2)(A). The IRS further objected — this, in a case where the IRS forced the lead plaintiff to produce 3,000 pages of what the Inspector General called “unnecessary information” — that “it would be unduly burdensome” for the IRS to collect the names of the employees who worked on the groups’ applications. The district court eventually intervened and declared the IRS’s objections meritless. Yet the IRS objected to still other document requests on grounds of “the deliberative process privilege[.]” That privilege, the IRS acknowledged, can be waived in cases involving “government misconduct”; but in the IRS’s reading, the IG’s report “does not include any allegation or finding of misconduct.”

Many taxpayers and preparers wish the IRS would use such a generous definition of “misconduct” when the criminal agents come calling.

The Sixth Circuit rejected all of the IRS arguments:

Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers.

Words that should be chiseled over the entrance to IRS headquarters.

Cite: United States v. NorCal Tea Party Patriots et al.; CA-6, No. 15-3793.

More coverage:

TaxProf, IRS Scandal, Day 1049:  6th Circuit Slams IRS Treatment Of Tea Party Group

Russ Fox, A Bad Day for the IRS in Court

 

Scott Drenkard,New Study on Electronic Cigarettes Released Today (Tax Policy Blog):

To some, vapor products are an exciting innovation that offers a new, less harmful alternative to traditional incinerated cigarette use. By contrast, tobacco control groups are concerned about youth use of the products.

Meanwhile, politicians are concerned about losing their sweet tobacco revenues if people stop gassing themselves with the real thing. Hence the moral panic.

This map is in the study:

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“Vapor products are generally found to have a much lower risk profile than traditional incinerated cigarettes.”

 

Paul Neiffer, Expanded Cost Basis Reporting is Here! Are you Ready? “The Surface Transportation and Veterans Health Care Improvement Act of 2015 (those two don’t really go together) added new tax laws that require executors to file cost basis information with the IRS.  This is required only when there is a taxable estate.”

Kay Bell, IRS releases Top 10 identity theft, tax fraud cases. 2015 only. 

Jack Townsend, IRS Publicizes Success in Prosecuting Identity Theft Refund Fraud

The IRS’s message from the selected 10 examples is that identify theft is serious and draws serious sentencings, with the principals involved receiving over 70 months (some well in excess of 100 months) incarceration (persons with lesser roles receive lesser, but still significant sentences).

That’s appropriate, but it’s not enough. Even though the thieves highlighted by the IRS report will rot for a long time, the millions they have stolen aren’t coming back. The petty grifters hightlighted in the report are probably not the type of folks who carefully weigh consequences when they can get free money right now. Nor will long sentences aren’t going to bother Russian organized crime networks, who have no intention, and little prospect, of facing U.S. justice.

Improved IRS processes that stop the crimes before they happen are what’s needed.

 

William Perez, How Much Can You Deduct by Contributing to a Traditional IRA? “Updated for 2016 contribution limits.”

Leslie Book, Filing a Day Late Can Be Timely Under Tax Court E-Filing Rules and So is Filing an Income Tax Return Ten Days Later After E-File Rejection. Good to know.

Robert Wood, Does Extending April 15 Deadline Increase Odds Of IRS Audit?. “It is worth saying it again: there is no increased audit risk to going on extension.” But there is definitely an increased risk if you mess up a return by doing it hastily, or by leaving off a late-arriving K-1.

Tony Nitti, Tax Geek Tuesday: Death Or Retirement Of A Partner In A Partnership. “Importantly, when a partner’s interest is to be liquidated by a series of distributions, the interest will not be considered liquidated until the final distribution has been made.”

 

TaxGrrrl, How To Survive Tax Season (Or Any Busy Work Day) In 10 Easy Steps.

Peter Reilly, IRS Bounty Hunters Should Not Waste Time On FBAR Penalties. In too many cases, that’s true of the IRS too.

 

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Donald Marron, Britain Builds a Better Soda Tax (TaxVox). Better at stupid is still stupid.

Annette Nellen, Taxing Candy and Snacks – That’s a Good Start. At meddling in places where the government has no business.

 

Career CornerAccounting Talent Demanding Everything Shy of the Moon, Your First Born (Caleb Newquist, Going Concern). “If I may speak for myself and many, many other people, I’d be “history” after a few days of being treated like family. The nagging questions, the guilt, the constant phone calls, the passive aggressive suggestions about marriage/kids/life direction/bad habits.”

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Tax Roundup, 2/15/16: President’s Day. Bah. Humbug. And more Monday news!

Monday, February 15th, 2016 by Joe Kristan

20160215-1Today is President’s Day. I don’t care to honor presidents, as a class. They range from remarkable to vile, and they are in the end, just men with a job and great responsibility, often exercised badly.

It seems as good a day as any to ponder a well-buried scandal of the current presidency, the Tea Party scandal. It came to light with a staged admission by Lois Lerner that Tea Party groups had been singled out for special treatment” by the IRS. The admission was intended to get in front of an Inspector General report exposing the partisan mistreatment.

Peter Reilly has followed it closely, from a viewpoint more sympathetic to the IRS than mine. He recently mused, in a post on Day 1000 of the scandal:

The narrative that seems most plausible to me is Lois Lerner as the Agent From Hell.  AFH is my term for a certain type of IRS agent that I have thankfully only encountered a couple of times in my career.  AFH is not that technically astute, but AFH is dogged.  And AFH is certain that your client is up to no good.  AFH just hasn’t quite figured out what that no good is.  That was Lois Lerner and the Tea Party applications, only she had to do her work through minions.  Lois Lerner was passionate about the dark money issue and nobody else seemed to care. So she tortured her line agents to get them to torture bewildered applicants who were already pumped up on conspiracy theories. A perfect storm of bureaucratic bumbling coming across as brilliantly subtle conspiracy.

Toby Miles, IRS.

Toby Miles, IRS.

It was never realistic to think the scandal would bring down the administration, considering how carefully the media cheerleaders avoided the subject. But the lack of presidential involvement only leads to a more disturbing conclusion, one I discussed way back when the scandal was only in single digits:

I doubt the White House left fingerprints on IRS efforts to harass political opponents (though it didn’t lift a finger to stop it).   That leads to an even more depressing possibility: that the IRS went out its way to beat up on the President’s opponents on its own.  Nobody blew the whistle.  That means IRS management is so corrupt and political that it would go after the administration’s political opponents with only a wink and a nudge.  And anybody who doesn’t think this was politically-motivated is kidding themselves.

James Taranto puts it well:

And the IRS scandal was a subversion of democracy on a massive scale. The most fearsome and coercive arm of the administrative state embarked on a systematic effort to suppress citizen dissent against the party in power. Thomas Friedman is famous for musing that he wishes America could  be China for a day. It turns out we’ve been China for a while.

The self-weaponization of the bureaucracy against its political opponents is hugely depressing. The government workforce is overwhelmingly on the side of the political party that favors an ever-larger state. There are plenty of Lois Lerners in the IRS and throughout the Leviathan. The Tea Party scandal, and the complete lack of accountability for its perpetrators, gives no reason to hope those who don’t share that worldview can expect a fair shake. That’s especially true when the sitting president shows no interest in discouraging such behavior.

 

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Arnold Kling, David Brooks Sends a Valentine. “Brooks claims that the Obama Administration was scandal-free. I think it was more of a case that the mainstream press had his back. Could George Bush have survived the IRS scandal?”

David HendersonIs David Brooks Right about Obama? (Econlog):

But that’s not the worst. Among the worst is his administration’s use of the Internal Revenue Service to go after Tea Party groups. After claiming in May 2013 that any IRS targeting of political groups, if true, was outrageous and that he would hold the relevant people accountable, he has not. Lois Lerner has not been charged. That’s a scandal. It’s true that the scandal did not swallow years from Obama. Is the relevant criterion for a scandal whether it uses up a president’s years or whether the president’s employees use their discretionary power to go after political scandals? If the former, then a president can avoid a scandal by being evasive and shifting the topic, as Obama has done. That’s not integrity, by the way.

And it was true. Whether you believe the IRS was told to do it, or whether you believe the bureaucracy took it on itself to pursue ideological enemies, it was a dangerous ideological abuse of the tax agency that is going unpunished.

TaxProf, The IRS Scandal, Day 1010Day 1011Day 1012. Don’t recall major network coverage of the scandal? Day 1011 says that it’s not because you weren’t paying attention.

 

William Perez, Understanding Form W-2, the Annual Wage and Tax statement. “An overview of common problems with Form W-2, Wage and Tax Statement, plus a description of various items, codes and amounts shown on Form W-2.”

Annette Nellen, Video – What’s New for 2016 Filing Season

Jason Dinesen, When Are Purchases Made With a Credit Card Deductible?

Kay Bell, ‘Pharma bro’ Martin Shkreli facing $4.6 million tax lien

Jim Maule, Relying on Incorrect IRS Advice Spares Taxpayer Penalty. “The question of how to deal with incorrect advice from IRS employees has befuddled the tax practice community for decades.”

Robert Wood, Atkins Doctor Tax Evasion Conviction Upheld (How Not To Deal With IRS). Sometimes bad examples are the most useful ones.

Russ Fox, North Carolina Added to Bad States for Gamblers. “There’s no longer a deduction for gambling losses, so an amateur gambler residing in North Carolina who has $100,000 of wins and $100,000 of losses owes tax on the $100,000 of wins.”

TaxGrrrl, On Valentine’s Day: Getting A Tax Break After The Big Break-Up. “A Sarasota area Goodwill has your answer: make yourself feel better by donating your ex’s stuff to charity.” Well, compared to leaving it on the curb for the garbage man, it has its attractions.

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Tyler Cowen, Do higher marginal tax rates reduce income mobility? Marginal Revolution). “The idea that taxes matter is making a comeback in economics, though I am not sure you would get that impression from most of the economics blogosphere.”

Joseph Henchman, Justice Scalia’s Legacy and What Happens Next (Tax Policy Blog).

Don Boudreaux, Evidence that Donald Trump Is As Ignorant of Economics As Is Bernie Sanders (Cafe Hayek). File under “longest books ever written.”

Scott Greenberg, Checking Bernie Sanders’s Math (Tax Policy Blog). “However, under the Sanders tax plan, households in the middle of the economy would also be subject to two new indirect taxes: a 6.2 percent payroll tax paid by employers (for healthcare) and a 0.2 percent payroll tax paid by employers (for family leave). Virtually all economists agree that, even though payroll taxes are remitted to the government by employers, the burden of the payroll tax is born entirely by wage earners.”

 

News from the Profession. The ‘Everyday Jeans’ Policy Backlash Has Begun (Caleb Newquist, Going Concern).

 

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Tax Roundup, 10/30/15: IRS: we didn’t overcharge you, and we won’t do it again. And: Beggars’ Night!

Friday, October 30th, 2015 by Joe Kristan

The IRS yesterday issued rules reducing the fees charged for giving tax preparers for Preparer Tax Identification Numbers, or PTINs. The rules reduce the annual fee from $50 to $33, but raise the fee charged by a third-party vendor that collects the fee from $13 ($14.25 for first time applications) to $17 for all applications.

It’s an interesting move, considering that the IRS is fighting a lawsuit arguing that the IRS has been overcharging preparers for the numbers, which are required for preparers signing tax returns. The IRS claims that the reduction reflects reduced costs for the program.

Dan Alban of the Institute for Justice, the public interest law firm that led the successful fight against the IRS preparer regulations, says that it is an admission that the IRS has been overcharging, and that the IRS cost reduction argument doesn’t hold up. From his Twitter feed:

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The IRS has never been straight with us about either preparer regulation — really, a power grab and a move to assist the big tax prep franchise outfits — or the PTIN fee. I look forward to seeing how the judge hearing the PTIN lawsuit reacts to this news.

Related: PTIN User Fee Will Be Lowered (Sally Schreiber, The Tax Adviser).

 

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I’m back from the Santa Monica TIAG conference. TIAG is an international alliance of independent accounting firms that Roth & Company joined last year. There were great sessions on technical and practice management topics, but the best part is to meet and get to know lawyers and accountants around the world. It’s nice to know people in other countries to call when our clients need professional services aboad, and it’s fun to compare notes with our offshore counterparts.

 

Friday – Buzz Day! Robert D. Flach rounds up interesting tax stuff from all over.

William Perez talks about Itemized Tax Deductions..

Annette Nellen, Poor recordkeeping – complexity or too busy. “Every year there are several tax cases where taxpayers think they’ll get a better result in court despite poor records. They almost always lose.”

Kay Bell, Obama and House reach budget, debt ceiling deal

Jack Townsend, Movie Review of Film on Corporate Offshoring

Jim Maule,Where Do the Poor and Middle Class Line Up for This Tax Break Parade? Properly decrying corporate welfare, the good Professor asks and answers:

So could it be time for “if you can’t beat them, join them”? Not for those of us who lack the resources to sign up for the parade, or perhaps what should be called the corporate gravy train.

What the good Professor hasn’t realized is that this is exactly what we can expect when we give the government more and more authority to run and regulate things. Those with the means and the connections win.

 

20151030-3TaxProf, The IRS Scandal, Day 903Day 904. This from the Day 904 link sounds about right to me regarding the idea of impeaching Commissioner Koskinen:

The evidence against Koskinen will be convincing, but Democrats and the media will claim that because it all involves his defiance of congressional directives – and in their opinion Congress shouldn’t have been investigating in the first place – he really didn’t do anything wrong. They used the same argument in defense of Bill Clinton. Sure, he lied under oath and obstructed justice, but there never should have been an investigation in the first place.

I think it’s a poor use of limited time and political capital.

Peter Reilly, IRS Commissioner Koskinen Impeachment Trial Would Be Historic. A long but worthwhile discussion of the history and process of impeachment, and its prospects.

Keith Fogg, Notification of IRS as a Junior Creditor (Procedurally Taxing). “Two recent lien decisions demonstrate the power of the federal tax lien and the specific steps that parties must take when trying to address that lien.”

Robert Wood, Last Chance To Report Offshore Accounts To IRS, Penalties Climb To 50%

TaxGrrrl. 5 Things You Need To Know About Paul Ryan’s Rise To House Speaker & Tax Reform.

Jeremy Scott, Paul Ryan Punts on Tax Reform (Tax Analysts Blog). “Paul Ryan is moving on to become speaker, and tax reform might be in a worse spot than it was when Dave Camp’s H.R. 1 went over like a lead balloon.”

Cara Griffith, Why Do We Still Have Unpublished Opinions? (Tax Analysts Blog). “Now unpublished opinions readily appear in online databases. As a result, unpublished opinions are not unpublished in the sense that no one has access to them, but are simply not published in an official reporter and hold less or no precedential value with courts.”

 

Greg Mankiw, Keep the Cadillac Tax. Better idea — scrap the ACA altogether, give a capped health insurance tax credit for individuals, eliminate interstate barriers to health insurance sales, and let nature take its course.

Career Corner, It’s Time for the Accounting Profession to Get Serious About Mental Illness (Leona May, Going Concern). They aren’t the same thing?

 

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Beggars’ Night! Des Moines and its suburbs don’t trick-or-treat on Halloween. Instead our little goblins go forth on October 30 – “Beggars’ Night.” An explanation: What’s up with Beggars’ Night?:

An article in The Des Moines Register on October 28, 1997, says “Blame World War II.” as well as rowdy youths in the early history of Des Moines. According to this article and other sources, Beggars’ Night was created in 1938 by the Des Moines Playground Commission (later the Parks and Recreation Department) because Halloween night had become a night of vandalism and destructive “tricks” such as setting fires and breaking windows.

Kathryn Krieg, director of recreation for the commission, in 1938 began a campaign to encourage less violent forms of Halloween fun. She declared Beggars’ Night to be October 30 in Des Moines, and further required that children would only receive their treat after earning it by performing a trick or telling a riddle. This too is the opposite of the rest of the country, which traditionally provides the treat in order to avoid being tricked!

So if you need a joke for tonight, you can always rely on the classics, like “What’s the pirate’s favorite restaurant? Arrghhhh-bys!”

 

 

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Tax Roundup, 9/23/14: Lois Lerner interview goes over… not well. And: Inversion action!

Monday, September 22nd, 2014 by Joe Kristan

man-wichLois Lerner’s interview with Politico published yesterday got some reaction. The Tax Prof has a great roundup in The IRS Scandal, Day 502, including these wonderful headlines:

American Thinker:  Politico Does Weepy Story About Poor Lois Lerner

PJ Media:  Politico Disguises A Slobbering Love Letter To Lois Lerner As An Interview

Breitbart:  News Site Seeks Mutually Beneficial Exclusive with Former IRS Exec (Must Love Dogs)

And my favorite:

Daily Caller:  Lois Lerner Compares Herself To Jeffrey Dahmer

So Tea Party-friendly web sites were not won over, apparently.  Some other reaction:

 

Instapundit:

LOIS LERNER TOOK THE FIFTH, but now she’s telling Politico that she did nothing wrong, and that she’s the real victim here. And note the prominent play Politico gives to alleged anti-semitic epithets, and to Lerner’s brownie-baking. So why the media-rehab operation — and that’s what this is — and why now?

But it’s nice to hear that even the Washington revolving-door apparat finds her “untouchable.” Perhaps that’s because nothing much in this story suggests that she didn’t target Tea Party groups for partisan political reasons.

 

David Hirsanyi, Sorry, Politico, But Lois Lerner Is Not A Victim:

 She has already admitted and apologized for the practice of targeting conservatives groups with terms like “Tea Party” or “patriots” in their titles. She claims that it was done in an effort to deal with the surge in applications for tax-exempt status asking for permission to participate in the political process. Yet, she didn’t aim at groups with the “climate change” or “fairness” in their names to mitigate this alleged crush of work she was facing.

Peter Suderman, Unapologetic Lois Lerner Insists She’s Done Nothing Wrong (Reason.com):

Lerner thinks she did nothing wrong, and she won’t apologize. “Regardless of whatever else happens, I know I did the best I could under the circumstances and am not sorry for anything I did,” she said in an interview with the paper.

That’s basically all she says about her role in the scandal. Lerner, who, after reading a statement, exercised her Fifth Amendment right to avoid self-incrimination when called to testify before Congress last year, doesn’t really add anything to her defense with the statements in her piece. She declares that she stands by her work—and that’s it.

And James Taranto reports “Politico landed an exclusive interview with Lois Lerner, the former IRS official at the center of the still-unresolved scandal, and to call it a whitewash would be an insult to lime.”

I think we can safely say of this PR stunt, so far, not so good.

Prior Tax Update coverage: Lerner speaks, sort of. And: a federal tax amnesty?

 

No Walnut STTreasury “does something” about inversions.  The moral panic over inversion transactions took its next logical step when the Treasury announced it would issue regulations out of nowhere to “crack down” on corporations trying to escape our awful U.S. corporation income tax. Notice 2014-52 has the technical details.

The Treasury has previously issued such notices, generally describing future regulations, when it is in a hurry to stop some kind of transaction and doesn’t want to wait for the usual regulation comment period to “do something.”

The Wall Street Journal explains the rules in general terms:

The Treasury rules will make it harder for companies that invert to use cash accumulating abroad—a big draw in recent deals. In addition, the government has made it more difficult to complete these overseas mergers.

The tax changes took effect immediately, officials said, and applied to all deals that hadn’t closed by Monday.

The article addresses how the deal might affect pending deals: (I removed the WSJ’s obligatory stock price info):

The new guidelines could impact a number of pending mergers and acquisitions, including Medtronic Inc. s proposed acquisition of Irish medical-device maker Covidien PLC; Salix Pharmaceuticals Ltd.’s acquisition of a division of Italy’s Cosmo Pharmaceuticals SpA; and Mylan Inc.’s  pending deal for Abbott Laboratories overseas generics business. It could also interfere with the merger of fruit grower Chiquita Brands International Inc. and Fyffes PLC.

Less clear is how it would impact Burger King Worldwide Inc. BKW -0.48% ‘s proposed acquisition of Canadian coffee-and-doughnut chain Tim Hortons Inc., THI.T +1.92% a deal that was designed to move the new corporate headquarters to Canada. 

That deal is structured somewhat differently, and experts disagree whether it would be affected by the new government rules. Most agree the rule changes aren’t likely to end inversions altogether.

Of course it won’t. As long as the U.S. has an uncompetitive business tax climate — better only than France and Portugal in the developed world — corporations will be forced to seek self-help, like inversion deals.

Tax Analysts has a story about how the last round of inversion rules created dangers for corporations who aren’t even inverting ($link): “The existing anti-inversion rules under section 7874 create several traps for foreign companies and individuals that could cause transactions to be treated as inversions when no inversion has taken place.”

Unintended consequences result, traps are created for the unwary, and the awful U.S. corporation income tax gets a little worse. Well done, Jack Lew!

The TaxProf has a roundup.  Howard Gleckman asks Does Treasury Have the Legal Authority To Curb Tax Inversions? (TaxVox): “This issue is the subject of heated debate among tax lawyers.”

 

 

buzz20140923Robert D. Flach brings the Tuesday Buzz, including links to posts covering ground from tax holidays to How Does a Sole Proprietor Get Paid?

TaxGrrrl, Back To School 2014: Moving Expenses

Tony Nitti, Tax Court: Anxiety, Depression Are Not Physical Injuries

Russ Fox, They Both Begin With “E”. Embezzlement, evasion. Add another: eventually detected.

Kay Bell, Identity theft tax refund fraud is increasing, but ways to prevent the crime are not likely to be popular

Jason Dinesen, Entrepreneurial Maturity. “In other words, a business owner who has entrepreneurial maturity knows what they don’t know.”

Annette Nellen, Points from your bank. On the “frequent flyer miles” Tax Court case.

Steven Olsen, Summary Opinions for 9/12/14 (Procedurally Taxing). Rounding up recent developments in tax procedure.

Jack Townsend has some Comments on the Warner Sentencing Oral Argument: “The panel was also concerned that, if Warner’s conduct were so bad, why did the Government argue at sentencing for only a sentence of 1 year and 1 day when the Guidelines range was significantly higher.”

 

20140923-1Alan Cole, The U.S. Tax Code is its Worst Competitive Weakness (Tax Policy Blog). “Simply put, while assessments of the U.S. tax code – both at Tax Foundation and elsewhere – are bleak, there is much to be optimistic about in America.”

Martin Sullivan, Should We Give Up On Reagan Style Tax Reform? (Tax Analysts Blog) “The landmark 1986 Tax Reform Act is an inspiration to all would-be tax reformers. But reforms following that basic framework have gotten nowhere in Congress.”

Steve Warnhoff, The Estate Tax Is Not Doing Enough to Mitigate Inequality: State-by-State Figures (Tax Justice Blog). It’s not working, so lets do it more, harder!

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Tax Roundup, 9/22/14: Lerner speaks, sort of. And: a federal tax amnesty?

Monday, September 22nd, 2014 by Joe Kristan
Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner gives an interview. The former IRS officer at the center of the Tea Party disclosure scandal won’t testify under oath, but she sat down for a two-hour interview with Politico: Exclusive: Lois Lerner Breaks Silence:

And she’s a savvy lawyer: She studiously avoided answering fundamental questions about her role in the IRS scandal that could land her in deeper trouble with Congress. During her POLITICO interview, flanked by her husband, a partner at a national law firm, and two of her personal attorneys, she opened up about her life as a pariah, joked about horrible news photos and advice that she disguise herself with a blond wig, and cried when expressing gratitude for her legal team’s friendship.

It is, of course, a public-relations play, designed to make her look like a misunderstood victim of a partisan witch hunt. But it isn’t an especially impressive effort. From the Politico piece:

Several Lerner allies said she was so focused on enforcement that she failed to see the sensitivity of bringing cases against incumbents running for reelection.

But Republicans continue to point to emails in which Lerner inquired about Crossroads specifically, asking her colleagues why the group hadn’t been audited and suggesting the group’s application should be denied. And just weeks before the tea party news broke, after she had seen a draft of the damning inspector general report, she asked colleagues if internal IRS instant messages are tracked and could be requested by Congress.

A little history sheds some light on her “non-partisan” background:

– Before she worked at the IRS, she worked at the Federal Elections Commission, she attempted to get an Illinois GOP senate candidate to withdraw from public life as the price for ending an FEC investigation. The allegations were later dismissed.

– The IRS Commissioner, Doug Shulman, repeatedly denied there was any targeting before the report. Either he knew better, or as a subordinate, she didn’t pass the word up the chain.

– She was in the middle of the Tea Party efforts at an early date. When the Treasury Inspector General Report was about to open the scandal, she did a modified limited hangout, using a planted question to spin the story as just a Cincinnati rogue agent problem.

– She had a hang-up about the Citizens United decision, and her emails show that she was trying to use the tax law to accomplish what the Supreme Court had forbidden.

– The numbers are glaring, showing that conservative groups got much more scrutiny, and it took much longer for their applications to be approved than liberal groups:

targetingstats

Ms. Lerner has, of course, invoked the Fifth Amendment to avoid testifying before Congress about her role in the scandal.

Presumably this interview is the start of a P.R. campaign. I don’t think it will work, but it might get her some good press from outlets inclined to dismiss the scandal.

 

TaxProf, The IRS Scandal, Day 500. It features Stonewall Koskinen: The IRS Commissioner Was Supposed to Clean Up the Mess. Instead, He’s Running Interference from Kimberly Strassel of the Wall Street Journal:

 The only thing Mr. Koskinen has seemed remotely interested in turning around is his agency’s ugly story-line. He has yet to even accept his agency did anything wrong, spending a March hearing arguing that the IRS didn’t engage in “targeting” and claiming the Treasury inspector general agreed. This was so misleading the Washington Post gave Mr. Koskinen “three Pinocchios, ” noting the IG had testified to the exact opposite.

He seems intent on de-throning Doug Shulman as the Worst Commissioner Ever.

 

 

get-outRobert D. Flach asks WHAT ABOUT A FEDERAL TAX AMNESTY?

This would be a one-time only offer. The legislation creating the Federal Tax Amnesty Program could so state by forbidding any future Amnesty programs. Or it could state that the federal government would not be able to institute another Amnesty Program during the twenty years after the end of the current amnesty period.

I have my doubts. One Congress can’t bind another, and if it is popular, the pressure for another amnesty will start building as soon as the first one ends. I also worry about the chump effect – people will feel like chumps for complying, and will convince themselves that if they don’t comply, there will be another amnesty anyway. But I might be convinced otherwise, especially if it were combined with tax reforms that would help prevent the need for another one.

 

Russ Fox, “I’ve tried to tell you the truth every time I’ve been here”. “That quote is from IRS Commissioner John Koskinen during his testimony from earlier this week on Capitol Hill. I have a simple question for Commissioner Koskinen: Why doesn’t that quote read, ‘I’ve told you the truth every time I’ve been here?'”

TaxGrrrl, Back To School 2014: Childcare Expenses

Jack Townsend, Trial Management of the Cheek Good Faith Defense.  Or as an old lawyer I know calls it, the “good-faith fraud defense.”

Kay Bell, Getting old sucks. We can’t stop Father Time, but we can prepare physically, emotionally and financially. And it still beats the alternative.

 

David Brunori talks about Nevada’s Tesla giveaway in State Tax Notes ($link):

Nevada is giving $1.3 billion to a company that is essentially owned by a guy worth $12 billion. I don’t begrudge Elon Musk his money. On the contrary, I admire his ability to create and accumulate great wealth. I just don’t see the need to give him public money. Assuming you ascribe to the belief that horizontal equity requires that similarly situated taxpayers bear similar burdens, Nevada is giving away public money…

I know that the politics of incentives are impossible to overcome. And I have had numerous readers tell me to give my constant ranting a rest. But the political inevitability of tax incentives does not make them appropriate or good.

Tax credit corporate welfare doesn’t just hurt the states that “lose” the competition to bribe companies like Tesla. It hurts all of the businesses of the “winning” state that have to pay full-freight while brazen and well-connected companies like Tesla pay nothing.

 

20140922-1William Gale, Income Tax Changes and Economic Growth (TaxVox) “While there is no doubt that tax policy influences economic choices, it is by no means obvious on an ex ante basis that tax rate cuts will ultimately lead to a larger economy.”

Joshua McCaherty,  Senator Schumer’s Retroactive Tax Bill (Tax Policy Blog). Part of the inversion diversion.

Ajay Gupta, Renouncing the Dogma of Surrey’s Infallibility (Tax Analysts Blog). Sounds like something involving the Pope and Henry VIII, but it’s really about transfer pricing.

A new Cavalcade of Risk is up at Workers Comp Resource Center, with posts from around the insurance and risk-management world.

 

News from the Profession. 15 Reasons Why EY’s BuzzFeed Post Is a Bunch of Malarkey (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 9/8/14: One week left for procrastinators. And: there were no abuses, because they abused everyone!

Monday, September 8th, 2014 by Joe Kristan

7004cornerYour extended 2013 corporation, partnership and trust returns are due a week from today.  If you have a pass-through entity and you file late, you have a $195 per month, per K-1 penalty going back to April if you don’t make the extension deadline.

 

TaxProf, The IRS Scandal, Day 487.  Among the links today is one from the Washington Post, Why Did the IRS Clean Out Lois Lerner’s Blackberry as Probes Began? It also quotes this from Russ Fox:

Let’s assume you’re under a court order to find some emails. Your hard drive crashed, but you think that some of them are saved on your Blackberry. Would you:

(a) Try to find them on the Blackberry,
(b) Do nothing, or
(c) Erase the Blackberry.

If you’re the IRS, the answer is (c)

For an agency that insists it has nothing to hide, the IRS sure acts like it is hiding something.  Just to ice the cake, IRS Says It Has Lost Emails From 5 More Employees. Can dogs eat emails?

Meanwhile, Democratic Senators released a report insisting the IRS picked on left-side outfits just as much as right-side ones and slamming Treasury Inspector General Russell George for insisting otherwise.  So let’s go to the stats:

 

targetingstats

No left-side groups have produced evidence of the absurdly-intrusive questioning faced by some right side groups. We can assume that if they existed, they would have come out by now. Mr. George stands by his work.

 

The Iowa Department of Revenue has given its web site a makeover.  Ain’t it pretty?

 

20120703-2Tyler Cowen, Civil forfeiture cash seizures:

Only a sixth of the seizures were legally challenged, in part because of the costs of legal action against the government. But in 41 percent of cases — 4,455 — where there was a challenge, the government agreed to return money. The appeals process took more than a year in 40 percent of those cases and often required owners of the cash to sign agreements not to sue police over the seizures.

Hundreds of state and local departments and drug task forces appear to rely on seized cash, despite a federal ban on the money to pay salaries or otherwise support budgets. The Post found that 298 departments and 210 task forces have seized the equivalent of 20 percent or more of their annual budgets since 2008.

Civil forfeiture rules in the U.S. allow outrages every day.  It’s very third-world, inherently corrupt, and way overdue for reform.

Phil Hodgen, Renunciation Interviews Not So Intense.  “The State Department justifies the new $2,350 user fee for renunciation by saying ‘Hey, it’s a lotta work. It’s intense. You have to pay me more.'” It looks a lot like civil forfeiture, where the government takes the money because they’re bigger than you, and they can.

 

20140521-2William Perez, How to Adjust Withholding in the Middle of the Year in 9 Steps

Paul Neiffer, A Deduction of Zero is Still Zero:

If the calf was born on the ranch and raised there, the tax deduction due to a death loss is zero.  Since the ranch is allowed to deduct all of the feed and other costs associated with raising the calf, the rancher has a tax basis in the calf of exactly zero.  Therefore, the rancher can deduct zero which is still zero.

It’s the same reason you can’t deduct wages you never received; you never pick them up in income to start with.

Russ Fox, Lies, Deceit, and Nefarious Schemes.  He addresses a VEBA scam:

His plans allowed you to both get the tax deduction and, “then later access the full cash value of their plan contributions by taking out loans against the life insurance policies purchased with plan contributions.” That’s not allowed.

Remember, if it sounds too good to be true, it probably is.

 

nfl logoKay Bell, NFL 2014 season underway, along with the taxable betting.  Kay also has a great map of NFL team affinities by county.  Oddly, it appears central Iowa is Packer Country.

Jack Townsend, Offshore Enabler Nabbed in Sting Operation Sentenced

Peter Reilly, New Hampshire Supreme Court Declines More Power In Tuition Credit Case. The New Hampshire court refused to stop tax credits for contributions to private schools.  Iowa and many other states have instituted such credits.  An athiest group said the credits amounted to an “establishment” of religion. If New Hampshire disallow the credits to the Richard Dawkins Country Day School, they’ll have a better case.

Annette Nellen, Is disclosure of corporate tax information a good idea?  Professor Nellen doesn’t care for proposals to require disclosure of public company returns.

 

 

Ajay Gupta, How Not to Stop an Inversion (Tax Analysts Blog).  “All those proposals focus on the inverting corporate entity—a wonderfully inanimate piñata-like container that can be repeatedly hit for enjoyment and will occasionally yield the candy of additional revenue. None targets the individuals at the helm of the corporation, the men and women who stand to make vast amounts of money from their collective decision to execute an inversion.”

Sebastian Johnson, State Rundown, 9/5: Gun Holiday in Mississippi, Shortfall in Wisconsin, and a Showdown in Washington (Tax Justice Blog)

Renu Zaretsky, Business Tax Reform: Will Patience Be a Vice? This TaxVox headline roundup talks business tax reform, Nevada’s corporate welfare plan for Tesla, and how individual tax revenues will grow, but not as fast as the government will spend them.

 

Tony Nitti, The IRS Cares Not For Your Vow Of Poverty.  “Call me conservative, but if I wanted the IRS to take my vow of poverty seriously, I’d probably refrain from cruising around town in a Mercedes.”

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Tax Roundup, 7/2/14: How to make the least of that office manager job. And: IRS gets around to the obvious!

Wednesday, July 2nd, 2014 by Joe Kristan


20140508-2No office manager is paid enough for this.  
The tax law doesn’t like it at all when an employer withholds payroll taxes from paychecks and fails to pass it on to the IRS.  One tool the IRS uses to encourage compliance is the “responsible person” penalty.  If a person with responsibility for remitting payroll taxes knowingly fails to do so, the IRS can assess that person with a 100% penalty — even if that person didn’t get any of the money.

A Virginia federal district court recently drove that lesson home to a Ms. Horne, an office manager for a medical practice:

A. Responsible Person

Horne was a responsible person for the Company for each quarter of 2006 through 2010. First, Horne was the Company’s Officer Manager throughout that time period. Second, Horne had substantial authority over payroll because she prepared and signed the Company’s payroll checks. Third, because Horne was charged with preparing checks to creditors, she necessarily determined which creditors to pay. Fourth, Horne participated in day-to-day management of the Company, including making decisions about employee compensation, maintaining the Company’s books and records, and preparing financial information to be presented at shareholder meetings. Fifth, at all relevant times, Horne had authority to, and did, sign checks drawn on the Company’s bank account. Sixth, Horne participated in decisions regarding the hiring and firing of employees.

B. Willful Action

From 2006 to 2010, Horne was aware of the Company’s unpaid employment tax liabilities as they accrued. However, she continued to prepare and sign checks to pay other creditors in preference over the United States. Accordingly, the Court finds that Horne acted willfully in failing to pay over to the Service the taxes withheld from the wages of the Company’s employees.

IV. CONCLUSION

For the aforementioned reasons, the Court will GRANT the Motion. Horne is, thus, liable to the United States in the amount of $2,926,809.51, plus statutory interest accruing from December 23, 2013. 

 

It’s hard to save $2.9 million even on the best office manager salary.

Update:  An excellent point made in the comments:  “I feel for anyone placed in the tough position of losing a job to avoid liability for an employer’s inability to pay its tax liability to the IRS, but the 100% penalty imposed by Section 6672 on responsible persons makes it clear that the job is not worth the tax problem arising from a company’s failure to pay its trust fund taxes.”

 

Cite: Miller v. United States et al.; No. 3:13-cv-00728

 

 

20130723-3IRS takes obvious measures to fight refund fraud five years late.  From Tax Analysts ($link)

     Starting in January 2015, the IRS will no longer make direct deposits of more than three tax refunds into one financial account, Commissioner John Koskinen told tax return preparers at the IRS Nationwide Tax Forum in Chicago July 1.

The move is meant to enhance the IRS’s efforts to combat stolen identity refund fraud, Koskinen explained in prepared remarks for his address to the forum.

Any refund after the third will automatically be converted to a paper check and mailed to the address on the tax return, Koskinen told preparers. “We will send out notices to those taxpayers that their refunds are being mailed and they should expect to receive them in about four weeks from the time of mailing,” he said.

That’s a good start.  Perhaps next the IRS can flag multiple refunds being sent to the same address — like the 655 refunds to a single apartment in Lithuania.  Baby steps.  Like this:

The IRS also plans to end the practice of a small number of preparers who serve as banker to their clients or who take fees from the refunds, Koskinen said. “We’ve identified about 4,400 personal accounts held by tax preparers where multiple refunds were deposited,” the commissioner said. “We’re putting a stop to that, too.”

No doubt some of these are full service firms that do your taxes, collect your refund — and spend it for you.

 

William Perez, Divorce and Taxes.  “We take a look at tax planning principles for property settlements, alimony and child support.”

Howard Gleckman, A Payroll Tax Math Error Adds $5 Billion To The Deficit (TaxVox).  “But the current law for the self-employed allows the full deduction of 7.65 percent—not only for earnings below the Social Security cap but, remarkably, even for earnings subject only to the 1.45 percent Medicare tax.”

Kay Bell, State tax law changes — from gas to sales to businesses and even soccer — take effect July 1

 

taxanalystslogoDavid Brunori, A Revenue Department Behaving Badly (Tax Analysts Blog).  “Documents (except for taxpayer information of course) produced by the “government” belong to the citizens.”

Kelly Davis, Kansas: Repercussions of a Failing Experiment (Tax Justice Blog).  “But the Governor’s experiment now appears to be in meltdown mode: revenues for the last two months have come in way under projections and may leave the state short of the cash needed to pay its bills.”

Lyman Stone, Scott Eastman, Liz Emanuel, Tyler Dennis, Courtney Michaluk, Independence Day Brings Fireworks Taxes to Light (Tax Policy Bl0g).  Hey, Iowa, if they aren’t legal, it’s harder to tax them.

Janet Novack, U.S. Taxpayers With Secret Offshore Money Face New Risks And Options 

Jason Dinesen, From the Archives: Iowa Deduction Finder — Insurance Premium Tax Deduction

Peter Reilly, Military Housing Allowance Much More Limited Than Clergy’s

TaxGrrrl, IRS Announces Shorter, Faster Application For Some Tax Exempt Organizations

Robert D. Flach, MORE INFO ON THE NEW IRS ANNUAL FILING SEASON PROGRAM.  “I still think in its current form it is stupid, and that very few tax preparers will actually ‘volunteer’.”

Robert is right.

 

Megan McArdle ponders the version of the email erasure story from Lois Lerner’s attorney:

This weekend, William Taylor III, Lerner’s lawyer, went on television and described Lerner’s experience. Lerner came in one morning in 2011, he said, turned on her computer and got a blue screen.

That interested me, because the description is quite specific. What he seems to be describing is the famed Microsoft Windows “blue screen of death.”

Well, because as I mentioned above, the Blue Screen of Death is an operating system error. The operating system lives on the hard drive. Which raises a question: If Lerner’s hard drive was so thoroughly malfunctioning that no one could even get the data off of it, how was it booting up far enough for the operating system to malfunction?

She comes up with some potential explanations — which mostly assume it didn’t quite happen the way the lawyer describes.

 

20140516-1John Hinderaker,  More on the IRS’s Illegal Destruction of Evidence

True the Vote’s brief points out that the first lawsuit alleging discriminatory targeting of conservative groups was filed by a pro-Israel group called Z Street, Inc., on August 25, 2010. On that date, at the very latest, the IRS had a legal duty to take measures to ensure that no emails, correspondence, memoranda, notes, or other evidence of any sort that could be relevant to the case was lost or destroyed…

But, according to IRS representatives who have testified before Congressional committees, the IRS ignored the law. Instead of making sure that relevant information was preserved, the IRS blithely continued erasing back-up email tapes every 90 days. Further, the IRS continued its policy of assigning each employee a ridiculously small space on an email server, and then authorizing employees (like Lois Lerner) to delete at will to keep space open. And, finally, when Lerner’s hard drive crashed ten months after the Z Street case was commenced, the IRS made no effort to preserve it, but rather, by its own account, recycled the hard drive in a business-as-usual manner.

Don’t try this at home, kids.

 

TaxProf, The IRS Scandal, Day 419

 

You should never be to busy to file correct tax returns.  Appeals court upholds Beavers’ tax conviction.

 

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Tax Roundup, 7/1/14: Where the IRS budget really goes. And: IRS ends automatic expiration of foreign tax ID numbers.

Tuesday, July 1st, 2014 by Joe Kristan

Dang.  “We do not hold, as the principal dissent alleges, that for-profit corporations and other commercial enterprises can ‘opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.'” — from the majority opinion in yesterday’s Hobby Lobby Supreme Court decision.

Had they allowed a religious exception to the tax law, all the world religions would quickly develop wildly-popular sects with a doctrinal allergy to tax, and, well,  lots of things.

 

Instapundit links to this chart where it looks like IRS spending is out of control

IRS total 20140701 cato

And I think it is — but not in the obvious way.  The Cato Institute, source of the first chart, also provides this:

IRS budget cato 20140701

It shows that almost all of the massive increase in IRS spending is from refundable credits, which are counted as part of IRS spending in the first chart.  But money given away through the Earned Income Tax Credit is not available for auditing taxpayers or buying additional backup tapes.

That, of course, doesn’t excuse the IRS malfeasance in the Tea Party scandal.  It does show that even as Congress has piled more responsibilities on the IRS — especially via Obamacare — it hasn’t provided additional resources.  Now that one party has seen that the IRS has been acting institutionally as its opposition, the agency is unlikely to get significant new resources as long as that party controls one house of Congress — even less so if the GOP takes the Senate, too.

Meanwhile, rather than trying to conciliate and reassure Congressional Republicans, Commissioner Koskinen has been defiant and tone-deaf in his response to the Tea Party and email erasure scandals.  The results for tax administration will not be good.

 

Jeremy Scott, IRS Strategic Plan Highlights Effects of Budget Cuts (Tax Anlaysts Blog):

A crippled tax collector means a damaged tax system. And a damaged tax system only hurts taxpayers and the federal government as a whole. Congress should focus more on punishing those responsible for the various missteps at the IRS and less on gutting the nation’s revenue collection and tax administration system as a whole.

That will require the IRS as a whole to stop acting like a partisan agency.

 

20130419-1IRS does something very sensible.  Credit where credit is due:  the IRS has decided to no longer make non-resident aliens renew their tax ID numbers every five years.   From IR-2014-76:

Under the new policy:

  • An ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years.
  • Any ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns. This includes ITINs issued after Jan. 1, 2013. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply starting in 2018, as was the case under the old policy.
  • To ease the burden on taxpayers and give their representatives and other stakeholders time to adjust, the IRS will not begin deactivating unused ITINs until 2016. This grace period will allow anyone with a valid ITIN, regardless of when it was issued, to still file a valid return during the upcoming tax-filing season.
  • A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. As with any ITIN application, original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form.

Very welcome, and long overdue.  Obtaining an ITIN is an inconvenient and burdensome process, involving either mailing passports or national ID cards to the IRS — and trusting them to return the documents — or making the often long trip to a U.S. consulate to apply in person.  For foreign residents with long-term U.S. financial interests, the requirement to renew ITINs every five years was a gratuitous and expensive burden.

(Hat tip: Kristy Maitre).

 

BitcoinRobert Wood, What IRS Calls ‘Willful’ May Surprise You–And Mean Penalties, Even Jail.  The lingering IRS threat to impose fines for “willful” FBAR noncompliance for small amounts is unwise; it seems that they are more concerned with missing a few lawbreakers than in bringing foot-fault violators into compliance.

Jack Townsend, Good Article on the Non-Willfulness Certification for Streamlined and Related Issues

TaxGrrrl, IRS Says Bitcoin Not Reportable On FBAR (For Now)   

 

Paul Neiffer, IRS Releases Final Regulations on ACA Small-Business Tax Credit

Robert D. Flach starts out July with a Buzz!

Kay Bell, Supreme Court finds contraceptive tax costs ‘substantially burdensome’ in its ruling for Hobby Lobby stores

 

 

Martin Sullivan, States Should Cede Some Taxing Power to the Feds (Tax Analysts Bl0g):

Given that states’ corporate taxes are here to stay, we should consider making them as painless and low-cost to businesses as possible. One way to do that is for Congress to exercise its authority under the commerce clause of the Constitution and require states to entirely piggyback their corporate taxes on the federal system.

Canada does this, and it does help, but getting rid of state corporate income taxes would help much more.

Liz Emmanuel, Millionaires’ Tax Clears New Jersey Legislature, Faces Likely Veto (Tax Policy Blog)

Renu Zaretsky,The Tax Man Cometh, But Sometimes Collects Less.  The TaxVox headline roundup covers the formal effective date of FATCA (today), Kansas budget woes, and a link to an interactive tool to track state budgets.

 

Russ Fox, IRS Didn’t Tell a Court About the Missing Lerner Emails

TaxProf, The IRS Scandal, Day 418

 

20140508-1I wouldn’t try asking one this question.  What Type of Fruit is a Polar Bear? Petaluma and Interpretive Choice (Andy Grewal, Procedurally Taxing)

Career Corner.  How to Create a CPA Exam Study Schedule That Guarantees Failure (Adrienne Gonzalez, Going Concern)

News from the Profession.  San Diego CPA convicted in elaborate tax evasion scheme:

A federal jury deliberated for 30 minutes before finding Lloyd Irving Taylor, 71, guilty of all 19 counts against him, including aggravated identity theft, making false statements to a financial institution, evading taxes, corruptly impeding the Internal Revenue Service and making false statements on U.S. passport applications.

According to evidence presented at trial, Taylor, who has been in custody since April 2013, stole the identities of deceased minors, used them as aliases and obtained fraudulent passports and other identification papers.

Oh, that’s illegal?

According to witnesses who testified, Taylor failed to report $5 million in income during the span of the fraud and owed the IRS about $1.6 million. During his 42 years of working, Taylor had filed a total of seven tax returns, according to trial testimony.

That’s one every six years.  It took awhile, but the IRS eventually notices something was amiss.

At a bond hearing last year, a judge ordered Taylor detained pending trial based on a number of factors, including his international travel on his false passports, the millions of dollars he controlled through dozens of bank accounts and his numerous false statements to banks.

I suppose the man felt invincible, given how long he apparently went without drawing IRS attention.  Eventually that comes around, though he had quite a 42-year run.  But he did get caught, possibly because of better computer matching and more comprehensive bank reporting.  Don’t count on stringing the IRS out for 42 years yourself.

 

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Tax Roundup 6/24/14: Koskinen’s political gifts. And: in case you didn’t think Hitler was bad already…

Tuesday, June 24th, 2014 by Joe Kristan

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Just the man to build bridges to Republicans who fund the IRS.  From Bryan Preston, IRS Chief Koskinen Has Donated Big to Democrats Over the Years:

According to the Washington Free Beacon, Koskinen has donated about $100,000 to Democrat candidates and committees since his first donation in 1979. His donor recipients include Gary Hart, the Democratic National Committee, the Democratic nominee in each presidential campaign since 1980 (which would even include Walter Mondale, who stood no chance of beating President Ronald Reagan in 1984), the Democratic Congressional Campaign Committee, and Hillary Clinton’s and Barack Obama’s campaigns. He most recently donated $2,500 to Sen. Mark Warner (D-VA) in 2013.

He has given no money to Republicans.

It’s hard to believe how tone-deaf he is to the Tea Party scandal, but this helps explain it.  (Via Instapundit)

 

Jeremy Scott, Lost Lerner E-mails Latest Example of IRS Death Wish (Tax Analysts Blog), my emphasis:

In contrast to their GOP colleagues, Democrats rushed to Koskinen’s defense. That is, perhaps, understandable, even though much of what the IRS has done during this scandal is indefensible. Democrats probably want to defend their president’s pick to head the IRS, and maybe they want to try to change the narrative heading into a potentially disastrous midterm election. But the reality is that the IRS isn’t doing them any favors. There’s only so much incompetence and disingenuous behavior that can be run through a political spin machine. The Democrats’ reflexive defense of Lerner (whose conduct can’t be excused) and their apparent willingness to accept any explanation from Koskinen (who didn’t even try to adequately explain why he hid information on the lost e-mails from February until late June) is baffling. Democrats weakly attempted to paint the GOP as on a witch hunt for a conspiracy, as though the IRS’s mismanagement and appearance of bias weren’t enough to justify congressional inquiry.

The IRS isn’t doing Democratic congresscritters any favors, nor are they doing any for the IRS.  They are just making the IRS look more like a partisan agency, which could cripple tax administration for years.

 

TaxProf, The IRS Scandal, Day 411

 

20140507-1Kay Bell, Save space and trees: Digitize your tax records.  That way if you lose them, the IRS will surely understand.

Russ Fox has some valuable information for online gamblers trying to stay FBAR compliant: Online Gambling Addresses (Updated for 2014)

Robert D. Flach has a Tuesday Buzz for you!

Tony Nitti, How State Taxes Could Play A Role In Carmelo Anthony’s Landing Spot.  Nah, state taxes don’t matter…

Peter Reilly, Step Kids Remain Step Kids After Divorce.  So you may still have a dependent, if not a spouse.

Jack Townsend, Comments by IRS Personnel on New Streamlined and OVDP Procedures.  “The new procedures were designed to ‘encourage folks who are considering quiet disclosures to come in with their hands up’ and avoid taxpayers coming into OVDP with the intention to opt out.”

Annette Nellen, Bitcoin Taxation – Clarity and Mystery, “If you are a tax practitioner and don’t think you need to deal with it, I’d be surprised if none of your clients uses bitcoin.”

William Perez, Backup Withholding.

 

Tyler Dennis, The Clinton’s Estate Tax Planning Demonstrates the Arcane Nature of the Estate Tax (Tax Policy Blog):

When the Clintons created the trust in 2011, their property’s assessed value was $1.8 million.  Without a residential trust, the future appreciation between 2011 and 2021 would count against the gift tax. If the property appreciated at a 4% annual rate and reached $2.6 million by 2021, that’s the amount that would count. With the residential trust, though, the Clintons were able to “lock in” the value of the home at its 2011 value of $1.8 million without actually relinquishing the property to the beneficiary of the trust.

Most supporters of higher taxes assume that they won’t have to pay them.

 

Renu Zaretsky, Disbelief, Devolution, and Death Benefits.  The TaxVox headline roundup talks about the Koskinen appearance before the Issa committee, and about how a surprising proportion of new life insurance is taken out on employees.

Andrew Lundeen, The Average U.S. Worker Pays over $16,000 in Income and Payroll Taxes (Tax Policy Blog):

The tax burden is a combination of income taxes at the federal, state, and local levels as well as the employee and the employer payroll taxes. Of the 31.3 percent tax burden, 15.4 percent is due to income taxes and 15.9 percent is due to payroll taxes, over half of which is paid by the employer on the employee’s behalf. (Workers pay the cost of the employer-side payroll taxes through lower wages.) 

Heck of a deal.

 

Stephanie Hoffer, Kuretski, the Tax Court, and the Administrative Procedure Act (Procedurally Taxing).

 

Another great tax planning idea down the tubes.  Kidnapping Prostitutes Is Not a Good Way to Claim Dependents for Tax Purposes (Greg Kyte, Going Concern)

If you didn’t think he was a bad guy already…  Adolf Hitler: Billionaire tax-dodger?

 

 

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

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

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

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

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

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

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

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

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

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

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

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

 

 

20140623-1TaxProf, The IRS Scandal, Day 410

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

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

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

 

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

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

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

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

 

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

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

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

 

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

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

 

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

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

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

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

 

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