Posts Tagged ‘ISU-CALT’

Tax Roundup, 11/6/15: Time to invade rural Iowa! And: IRS backs off valuation discount limits.

Friday, November 6th, 2015 by Joe Kristan

Tax School Rampage! In the pre-dawn hours Monday I will rendezvous with Roger McEowen, Director of the Iowa State University Center for Agricultural Law and Taxation, for the drive to Waterloo and the first 2015 session of the Iowa Farm and Urban Tax Schools. We will rampage through four Iowa towns this week. The complete schedule:

Nov. 9-10 – Waterloo
Nov. 10-11 – Sheldon
Nov. 11-12 – Red Oak
Nov. 12-13 – Ottumwa
Nov. 16-17 – Mason City
Nov. 23-24 – Maquoketa
Dec. 7-8 – Denison
Dec. 14-15 – Ames

For those of you unfortunate enough to not be in Iowa, or who prefer to study from the comfort of your computer, the Ames session is also available in a live webinar.

I am on the Day 1 schedule for all eight sessions, along with Roger and Kristy Maitre, the former Iowa IRS stakeholder liaison. There are two Day 2 teams. Waterloo, Mason City, Maquoketa and Denison get Dave Bibler, Jim Goodman, and Daniel Fretheim. Sheldon, Red Oak, Ottumwa and Ames get Dave Repp and Paul Neiffer of FarmCPA Today blog fame.

We have lots to cover this year. Details of topics here, and registration information here. Say you heard about it at the Tax Update Blog and get free coffee at any session!

20151106-1

 

Valuation power grab inoperative. Tax Analysts reports that Treasury officials have disavowed any intention of using forthcoming regulations to crack down on valuation discounts in estate planning. From the Tax Analysts report ($link):

Coming regulations on estate valuation for interests held by family members will follow not the Obama administration’s prior budget proposals, but the statute, an IRS official said November 4, signaling a welcome about-face for practitioners from earlier comments made by Treasury officials.

“There seems to be some confusion as to exactly what the guidance will rely on,” Finlow said. “We are looking to the statute as it is now. . . . We are not looking at the green book,” she said, referring to Treasury’s green book explanation of the president’s proposal on valuation discounts in his fiscal 2013 budget plan.

How do such crazy rumors get started?

In May Catherine Hughes, attorney-adviser, Treasury Office of Tax Legislative Counsel, said practitioners should look to that fiscal 2013 proposal for hints on what would be in store in the regs. The Obama administration asked Congress to amend section 2704(b) to disregard some provisions, such as some transfer and liquidation restrictions, in the valuation of intrafamily transfers of interests in family entities.

This would take the urgency out of some gift tax planning that is going on in anticipation of a crackdown on discounts for minority interests that seemed to be telegraphed by the Hughes comments.

 

buzz20150804Friday is a good day for so many reasons. Not least of which is that it’s the day Robert D. Flach posts his Friday Buzz roundup. Today his links included his year-end planning guide and bad news about the level of IRS service we can look forward to this coming filing season.

 

Robert Wood, Surgeon Hid Money In Divorce, Is Convicted Of Tax Evasion, Faces Up To 95 Years Prison:

He left the country without telling friends, family or his workplace, and secretly drove to Costa Rica He opened two bank accounts there, depositing more than $350,000 in cash. He also hid a thousand ounces of gold in a Costa Rican safe deposit box. Crossing into Panama, he opened another account there under the name of a sham corporation, Dakota Investments. By 2008, he had moved $4.6 million into that account.

He was hiding the money from an estranged wife and the IRS. With the benefit of hindsight he may wish he had instead invested in good divorce and tax counsel.

 

Roger Russell, Taxes in the Sharing Economy (Accounting Today). Includes a discussion of local lodging taxes for AirBNB renters.

William Perez explains Itemized Tax Deductions.

Kay Bell, New Ways and Means chairman Rep. Kevin Brady wants to move tax extenders ‘sooner rather than later’. “Like House Speaker Paul D. Ryan before him, Brady favors making the tax extenders permanent pieces of legislation.”

Paul Neiffer, Does 7 Equal 5? “For most farmers, Section 179 (at the $500,000 level) is much more important than a five-year life for equipment depreciation.”

Keith Fogg, How Does Indexing Federal Tax Lien Impact Its Effectiveness (Procedurally Taxing). “The purchasers in this case did not realize they were purchasing property encumbered by a federal tax lien because the title search did not turn up a lien against a prior owner.”

TaxGrrrl, IRS Announces Lower Fees For 2016 As PTIN Registration Opens

 

harvest

 

TaxProf, The IRS Scandal, Day 911. Today’s link discusses the scandal’s context in the larger effort of “campaign finance reform” advocates to silence their opposition by government power.

Richard Auxier, 2015 Ballot Measure Results: Tax cuts, yes; marijuana, sometimes (TaxVox).

Career Corner. CPA Exam Score Release Anxiety Is the Best Anxiety (Caleb Newquist, Going Concern).

 

Share

Tax Roundup, 9/3/15: How to cut the IRS in on your foreign inheritance. And more!

Thursday, September 3rd, 2015 by Joe Kristan

20150903-1Uncle Heinrich from the old country left you a bundle. Congratulations! Make sure to tell the IRS.

Why, you ask, should I tell them? Inheritances are tax-free, after all.

Well, yes. But the IRS still wants to know about them. And if you don’t tell them, you may be cutting the IRS in on 25% of the gift.

The tax law requires you to file Form 3520 to report gifts or bequests from a foreign source if they exceed $100,000 (or $13,258 if received from a foreign corporation or partnership). This return is due at the same time as your income tax return, including any extensions, but it is filed separately. The penalty for not reporting is 5% of the unreported amount per month, up to 25%.

What if Uncle Hans gives you $75,000, and his wife Aunt Anne-Sophie gives you another $75,000? Then the gifts are counted together and exceed the reporting threshold.

I will be talking about these and other easy-to-overlook  international reporting requirements that can arise in estate planning and administration at the ISU Center on Agricultural Law and Taxation September Seminars. They are September 17 (Agricultural Law Seminar) and September 18 (Farm Estate and Business Planning Seminar). My talk is on the 18th.  Register by September 10 for an early-bird discount!

 

20150903-2Robert D. Flach, AICPA CONTINUES TO PROMOTE THE URBAN TAX MYTH. “There is absolutely nothing about possessing the initials CPA that in any way, shape, or form guarantees that the possessor knows his or her arse from a hole in the ground when it comes to 1040 preparation.”

TaxGrrrl, Owner Of ITS, Formerly Fourth Largest Tax Prep Biz In Country, To Face Criminal Charges. “Readers sent me numerous emails advising that ITS was still in business for the 2014 tax season, despite the court order.”

Robert Wood, Report Cites Flawed IRS Asset Seizures, And Ironically, Sales Are Handled By ‘PALS’

Kay Bell, Tax moves to make in September 2015. Worth visiting for the accompanying autumn leaves picture alone, but lots of other sound advice too.

Stephen Olsen, Summary Opinions for August 1st to 14th And ABA Tax Section Fellowships (Procedurally Taxing). Recent happenings in the tax procedure world.

Jack Townsend, Ninth Circuit Affirms False Claim Convictions for Tax Preparer. “The false claims statutes involved, however, are not complex statutes.  All that is required is that the defendant know that the claims are false.”

Annette Nellen, 50th Anniversary of Willis Commission Report. “This is likely the most comprehensive study and report ever done on state and multistate issues covering income tax, sales and use tax, gross receipts tax, and capital stock tax.”

 

20150903-3

 

Scott Greenberg, Every Tax Policy Proposal from the 2016 Presidential Candidates, in One Chart (Tax Policy Blog). “While some presidential candidates have issued tax reform proposals that touch on almost all of these areas of the tax code, other presidential candidates are not listed as having offered any tax policy proposals at all.”

Renu Zaretsky, The Case of the Unreturned Call for Tax Code Simplicity (TaxVox)  “Are taxpayers clamoring for a simpler, faster, and cheaper filing experience? Well, they are, and they are not.”

Richard Phillips, Ben Carson’s 10 Percent Flat Tax is Utterly Implausible (Tax Justice Blog)

TaxProf, The IRS Scandal, Day 847. Today’s installment links to an update on the status of the scandal by James Taranto of the Wall Street Journal: “In any case, it’s unreasonable for government officials to expect us to trust their assurances when they take such pains to prevent their verification.

 

News from the Profession. Here’s a Guy Wearing a PwC T-Shirt Giving Weird Street Massages (Caleb Newquist, Going Concern)

 

Share

Tax Roundup, 2/9/15: New York questions its tax incentives. And: where’s the ‘no anthrax’ sign?

Monday, February 9th, 2015 by Joe Kristan

New York FlagNew York Comptroller: nobody tracks whether the state’s corporate welfare tax incentives do any good. Tax Analysts’ Jennifer DePaul reports ($link):

It’s unclear whether the $1.3 billion in incentives and credits doled out annually by New York is creating jobs, a February 5 report by State Comptroller Thomas DiNapoli concluded.

The ESDC, which administers more than 50 economic development programs, provides little public information on taxpayer-funded investments in its initiatives, the report said.

“ESDC makes no public assessment of whether its disparate programs work effectively together, whether such initiatives have succeeded or failed at creating good jobs for New Yorkers, or whether its investments are reasonable in relation to jobs created and retained,” the report said.

Naturally the politicians disagree:

On February 5 Gov. Andrew Cuomo (D) told reporters that he disagreed with the comptroller “fundamentally and on his concept of economic development” and said New York has lost its effectiveness to attract businesses over the past decade.

“We’ve come a long way in the past four years in terms of reversing that and bringing jobs back to New York,” Cuomo said. “To the extent that the comptroller thinks we should go back to the old way where we saw New York losing jobs, I couldn’t disagree more strongly.”

To politicians, the only job creation that matters is the kind that lets them hold issue press releases, hold press conferences, and cut ribbons.

For a brief shining moment in the Iowa’s Culver administration, the film tax credit fiasco made our politicians look at the Iowa’s tax credit programs. A panel of state officials issued a report finding no clear evidence that the tax credits do any good. So Iowa replaced them all and lowered individual and corporate tax rates with the savings.

Actually, no. They just continued enacting new credits. I can dream, though.

Link: The Comptroller Report.

 

dirtyThe Journal of Taxation has a summary of this year’s IRS “Dirty Dozen” tax scams. Number 1 with a bullet are phone call scams from people saying they are IRS agents. Just remember, if the caller claims to be from the IRS, he (or she) isn’t, unless you have been in touch with a specific agent by mail already.

 

Puzzling over the tangible property regulations and the 3115 requirements? The ISU Center for Agricultural Law and Taxation wants to help solve the puzzles. They have scheduled a webinar on on the regs February 18Roger McEowen and Paul Neiffer will host. Registration info available here.

 

Russ Fox celebrates 10 — the tenth anniversary of his excellent Taxable Talk. Congratulations, Russ!

William Perez, How Is Interest Income Taxed and Reported?

Annette Nellen discusses the new IRS Directory of preparers and Annual Filing Season Program (AFSP). Another useless effort by the supposedly impoverished agency.

IMG_1271Leslie Book, Preparers and Due Diligence (Procedurally Taxing)

Kay Bell, Additions to the tax law name roll of [dis]honor? We at Roth & Company would like to claim rights to the name “Roth IRA,” but alas, we had nothing to do with it.

Jason Dinesen, I Like Mowing My Lawn and Shoveling Snow; Do You Like Preparing Your Tax Return?

I see no value in hiring someone else to mow my lawn or shovel my snow.

The same principle holds true for people who choose to prepare their own taxes. If they know what they’re doing and they enjoy doing it, then I encourage people to do it themselves because they won’t see value in the work of a tax professional.

I see no value in hiring someone else to do my lawn and driveway either. That’s what the teen-ager is for.

TaxGrrrl, Brady Passes On Super Bowl Prize As Butler Hauls In Truck & Tax Bill

Jim Maule, So Who Gets Taxed on the Super Bowl Truck?

Peter Reilly, Oil Rig Manager Does Not Qualify As Foreign Resident

Robert Wood, On-Demand Workers: It’s Tax Time, You’re Self-Employed, Audits Are Inevitable

Me, IRS issues 2015 vehicle depreciation limits, updates 2014 limits for Extension of Bonus depreciation

 

IMG_1273

 

TaxProf, The IRS Scandal, Day 641. Judicial Watch says it has received emails showing the IRS Office of Chief Counsel delayed the investigation into the Tea Party scandal.

The tax law is obese. So the supergenius behind Obamacare, Jonathan Gruber, has floated the idea of taxing folks based on body weightArnold Kling is comments wisely: ” I know that many of my progressive friends would be disgusted by the obesity, but that does not make it a public policy problem.”

That’s right, not every problem is a tax problem. Or even the government’s problem.

David Henderson has more: Jonathan Gruber on Sin Taxes (Econlog)

 

Kyle Pomerleau, Worldwide Taxation is Very Rare (Tax Policy Blog):

At the beginning of the 20th century, 33 countries had a worldwide tax system. That number slowly dropped to 24 countries by the 1980s. By the 2000s, the number of countries switching to territorial systems accelerated, with more than 10 countries switching in 10 short years. Nearly all developed countries have moved to the superior territorial tax system. Today there are only 6 countries that tax corporations on their worldwide income. The President’s proposal would double-down on the U.S.’s current system and push the United States further out of line with the rest of the developed world.

The U.S. is even more of an outlier on worldwide taxation of individual income, with only Eritrea joining us in taxing citizens abroad.

Tracy Gordon, Go Team: Score 1 for Obama on Ending Tax Subsidies for College Sports (TaxVox).

Sebastian Johnson, State Rundown 2/5: State of the States (Tax Justice Blog).

IMG_1286

Career Corner. Let’s Discuss: The Worst of Eating in the Audit Room (Marty, Going Concern)

Brian Gongol says “You’re not allowed to carry a bag of anthrax spores through a mall.” My bad. It won’t happen again.

 

Share

Tax Roundup, 10/28/14: Back-to-school edition! And: IRS says it will stop stealing.

Tuesday, October 28th, 2014 by Joe Kristan

The 2014 tour of Iowa begins. I am helping Roger McEowen and Kristy Maitre teach Day 1 of the Farm and Urban Tax School this year, and this morning we are starting the first of eight sessions in Waterloo. We hit Maquoketa Thursday.  Other sessions will be in Sheldon, Red Oak, Ottumwa, Mason City, Denison and Ames. It’s two great days of CPE, and it’s a bargain. Get your details and sign up for a convenient session at the ISU Center for Agricultural Law and Taxation today.  Here is the crowd this morning:

20141028-1

Looks like fun, no?

f you are a Tax Update reader, come see me (Hi, Kevin!). You qualify for a discount! Well, not really, but I can get you a free postcard from the DNR Chickadee Checkoff booth…

20141028-2

 

Have a nice day. We’re All Flies in the IRS’s Widening WebMegan McArdle on the IRS’s sudden turnabout on asset seizures stealing from innocent businesses after the New York Times reported on it:

It’s as if the IRS just noticed that they were grotesquely abusing their power in order to punish people who appear to have done nothing actually wrong. Did this not occur to them when the victims’ lawyers pointed it out? Did none of their thousands of employees wonder aloud whether they really needed to make war on America’s college funds?

I’m sure it was forced on them by budget cuts.

So think about what has happened to our government agencies. We passed a law, to raise taxes, or curb the usage of addicting drugs. That law didn’t work as well as we wanted, because a lot of people were evading it. So we passed new laws, to make it easier to enforce the original one, like requiring banks to report all transactions over $10,000. And then people evaded that, so we made another rule … and now people who had no criminal intent find themselves coughing up tens of thousands of dollars they shouldn’t owe. 

There’s a lot of that in the tax law. FATCA and the FBAR foreign financial account reporting requirements are classic examples of laws nominally aimed at big-time tax evaders that destroy the finances of thousands of innocent foot-faulters.

As in the case of the fly, we were better off leaving the original ailment alone. No, I’m not saying that we shouldn’t try to catch tax evasion. I’m saying we shouldn’t try so hard that we end up criminalizing a lot of innocent behavior. There are worse things than a country with some tax fraud. And one of those things is a government with vast and arbitrary power to punish people who have done no wrong. 

And a willingness to use it carelessly.

Joseph Henchman, IRS Promises to Curtail Property Seizures After Abuses Come to Light (Tax Policy Blog)

Kay Bell, IRS seizes honest taxpayers’ assets under forfeiture program. “Oh my Lord, IRS. What in the hell were you thinking?”

 

buzz20140909Paul Neiffer, IRS Disagrees With Morehouse Ruling (Of Course). It looks like they will continue to assess SE tax on non-farmers with CRP income outside the Eighth Circuit.

Robert D. Flach has fresh Tuesday Buzz!!

Tax Prof, Tax Revolving Door Enriches Former IRS Officials Who Cash in by Navigating Inversions Through Rules They Wrote. And Commissioner Koskinen approves.

 

Leslie Book, A Combo Notice of Deficiency Claim Disallowance Highlights Tax Court Refund Jurisdiction (Procedurally Taxing)

 

Jeremy Scott, Will a Graduated Income Tax Sink Martha Coakley? (Tax Analysts Blog)

Steve Warnhoff, Senators Defend LIFO, a Tax Break that Obama and Camp Want to Repeal (Tax Justice Blog)

 

TaxProf, The IRS Scandal, Day 537. Today’s scandal roundup features Bob Woodward saying “If I were young, I would take Carl Bernstein and move to Cincinnati where that IRS office is and set up headquarters and go talk to everyone.

Share

Tax Roundup, 6/9/14: The great Illinois privatized tax shakedown. And lots more!

Monday, June 9th, 2014 by Joe Kristan

The wedding was beautiful, and great fun.  Introducing the new married couple.

 

Illinois sealGreat moments in state taxation.  Tax Analysts has a disturbing story ($link) about how an Illinois law firm is using the “qui tam” recovery procedures of the state’s False Claims Act against out-of-state taxpayers.  In a “qui tam” proceeding, an outside party, known as a “relator,” can file a lawsuit alleging fraud against the state and then share in the recovery — up to 25%, according to the story.

And they actually may be hurting state tax collection efforts, according to the story:

“The cases have clearly interfered with the administration and enforcement of tax law and may have even ultimately cost the state money, though it’s impossible to quantify how much,” said Mark Dyckman, the Illinois Department of Revenue’s deputy general counsel for sales tax litigation.

The story says the firm involved “is responsible for 99 percent of the qui tam tax litigation in Illinois.”

The story says Illinois may encouraged the suits initially, apparently thinking it could get some easy money out of the deal.  In other states where the firm tried the same thing, state Attorneys General won dismissals of the initial suits, discouraging further efforts.  The firm is also incentivized by the ability of a relator to share in outsized false claim penalties:

Second, while the treble damages for back taxes under false claims acts naturally attract the most attention, [taxpayer attorney Jordan] Goodman said the civil penalty — generally $5,000 to $10,000 per false claim under the federal law and $5,500 to $11,000 per false claim under the Illinois statute — can be just as oppressive, depending on what counts as a false claim. If each monthly sales tax return is a false claim carrying a $10,000 penalty, and 12 returns are filed in one year, that’s a $120,000 penalty. If every failure to collect taxes on shipping and handling is a false claim, and the business averages 10 sales into the state per month for 120 false claims, that’s a $1.2 million penalty for the year, which can turn into $12 million for the 10-year period covered by the false claims act.

Wikipedia image of Tams

Wikipedia image of Tams

The story says that one tactic used by the Illinois law firm is to make out-of-state purchases over the internet, and then to file suits if no sales tax is collected.  As the law covering remote sales remains unclear, it’s difficult to consider these items “false claims.”  That’s especially true in suits in which the taxpayer either was following published guidance or an audit settlement with Illinois.

These cases have apparently been going on since 2002, and the legislature and the state have yet to stop what would appear to be a purely abusive and parasitic practice.  If there ever was a case for universal application of a “sauce for the gander” rule, in which a losing plaintiff had to pay the same amount of penalties asserted against the winning defendant, this would be it.

 

Alligator bait.  The New Orleans Advocate reports on a Film tax credit promoter sentenced to 70 months.  It’s remarkable what high quality entrepreneurs these state tax giveaways attract.

 

20130114-1The ISU Center for Agricultural Law and Education is setting up a “Tax Place” feature on its website.  They seek your input.

Paul Neiffer reminds us that FBAR Filing Deadline is Near

Peter Reilly, CPA Faces Prison For Letting Client Deduct Personal Expenses.  It makes you want to carefully consider the work you want to take on.

Russ Fox, Back to the Past: Poker Sites and FBARs. Poker Sites Are Again Reportable Foreign Financial Accounts.  More incomprehensible foreign tax enforcement.

 

Cara Griffith, Protecting Confidentiality When Information Is Exchanged Between Tax Authorities  (Tax Analysts Blog)

TaxGrrrl, As NBA Finals Continue, Tax Incentives Lure 76ers Into New Jersey   

 

 

20140321-3TaxProf, The IRS Scandal, Day 396

Kyle Pomerleau, CTJ and U.S. PIRG Mislead with New Report on Corporate Taxes (Tax Policy Blog):  “USPIRG also doesn’t mention that their ideal corporate tax code has been tried in other countries with negative results. New Zealand attempted ending deferral as USPIRG suggested. The results were devastating to their economy.

Tax Justice Blog, Tax Foundation’s Dubious Attempt to Debunk Widely Known Truths about Corporate Tax Avoidance Is Smoke and Mirrors.  Never let the facts get in the way of what is “widely known.”

 

Howard Gleckman, Are Domestic Partnerships A Way For Heterosexual Couples To Avoid The Marriage Tax Penalty?   (TaxVox) This sort of thing makes makes me question the usefulness of “nudge” strategies to use the tax code to encourage behavior.  There are always perverse unintended consequences.

 

News from the Profession.  Public Accounting Firms, Ranked by CEO Hotness (Going Concern).  A tallest midget competition.

Share

Tax Roundup: April 30, 2014: Force of nature edition. And: Extenders move in U.S. House.

Wednesday, April 30th, 2014 by Joe Kristan

Iowa 1040s are due today!  If you are 90% paid in, they extend automatically with no filing.  If you need more time and need to pay in something, use IA 1040-V.

 

20130113-3House votes to make permanent six “expiring” provisions.  The House Ways and Means Committee voted to permanently extend six of the perpetually-expiring tax breaks that Congress renews every year or two.  They include:

  • A simplified version of the research credit
  • The five-year built-in gain tax recognition period for S corporations
  • The $500,000 Section 179 deduction limit
  • A provision reducing the net basis reduction for S corporation donations of appreciated property to the basis of the property.

The committee also voted for two international extenders.

The votes were mostly along party lines, which means they are unlikely to be passed in this form by the Democratic-controlled Senate. The Senate Finance Committee has already approved its own temporary extender package, and my guess is the final extenders package will look like the Finance Committee bill.

Tax Analysts reports ($link) that the committee isn’t done with extenders, but it isn’t clear when it will look at Bonus Depreciation.

The “no” votes for the House package objected to the lack of offsets to the revenue “lost” by the package.   I’m less upset.  While I oppose the research credit on principle, these provisions are permanent anyway; the whole “extender” process is a sham, conducted only to pretend that the tax breaks aren’t permanent so they “cost” less under Congressional accounting rules.  It’s the sort of thing that would be a felony in the private sector, but just another day for our leaders.  At least the House bill drops the pretense that these things won’t get passed every time they expire.

 

Additional coverage available at Accounting Today.

Related:

Tax Justice Blog, Rep. Dave Camp’s Latest Tax Gambit Is “Fiscally Irresponsible and Fundamentally Hypocritical”

Clint Stretch, Dreams of Tax Reform (Tax Analysts Blog)

 

 

20130117-1No gas tax boost this year.  Sioux City Journal reports that a last-gasp attempt to boost Iowa gasoline taxes died last night as the General Assembly continues its pre-adjournment frenzy.

 

David Brunori, Sad Pragmatism and Tax Incentives (Tax Analysts Blog).  “If tax incentives are an unavoidable reality, we should make them as transparent and accountable as possible.”  True, but that doesn’t excuse the politicians who take your money and give it to their special friends.

 

The Iowa State University Center for Agricultural Law and Taxation has released its 2014 summer seminar schedule.  It includes a slate of webinars on topics from Ethics to ACA mandates.  There will also be two big out-of-town events, in West Baden Springs, Indiana, and West Yellowstone, Montana.  I’m not able to participate this year, but they are a hoot and a great learning experience.

 

TaxGrrl, Widow Loses House Over $6.30 Tax Bill.  “A Pennsylvania woman has lost her home for little more than the cost of a Starbucks Frappuccino.”  The law in all its majesty.

Kay Bell, File IRS Form 1040X to correct old tax mistakes

Peter Reilly, Graduation Contingency Kills Alimony Deduction.  It’s very easy to screw up an alimony deduction with bells and whistles, as Peter explains.

 

20120531-1Jason Dinesen, Preparer Regulation and Judging Preparers Based on Size of Refund.  “Anyone who’s worked in this business has experienced the irate client who thinks the preparer screwed up because their refund was less than their friend/co-worker/hair dresser, etc.”

 

TaxProf, The IRS Scandal, Day 356

Jack Townsend, U.S. Congressman Indicted for Tax Related Crime

Joseph Thorndike, Airlines Say Ticket Taxes Would Be More Visible if They Were Better Hidden (Tax Analysts Blog)

Alan Cole, What Gift Cards Can Teach Us About Tax Policy (Tax Policy Blog)

Renu Zaretsky, Funding Tax Breaks, the IRS, and Public Pensions, Safety, and Schools.  The TaxVox headline roundup.

 

News from the Profession.  EY Is Tackling the Important Issue of Dudes’ Need for Flexibility (Going Concern)

 

Clear error is a standard used by appellate courts to review some lower court decisions.  A Tax Court case decided by Judge Paris dealing with horse losses yesterday involved purported destruction of records by an old girlfriend.  Here’s where the clear error comes in:

The wrath of a former girlfriend may be a formidable force, but it is not analogous to a hurricane-like natural disaster, and it does not constitute a reasonable cause outside petitioner’s control.

I’ve met Judge Paris, and I strongly suspect she’s never dealt with a bitter former girlfriend. Anyone who has would never have written such a thing.  But as she pointed out that the petitioner provided no evidence that such destruction occurred, so you oughta know that the case probably still is on solid ground.

 

Cite: Roberts, T.C. Memo 2014-74.  Additional coverage from Paul Neiffer, Partial Taxpayer Victory on Horse Farm Case

 

Share

Tax Roundup, 3/25/14: Shaky foundations can be costly. And: monitors!

Tuesday, March 25th, 2014 by Joe Kristan

20140325-1Not a firm foundation.  A U.S. District Court case out of Texas last week shows why using a tax-exempt entity can be hazardous to your health.  A Mr. Ziegenhals was “manager, director, trustee, and registered agent” of The Le Tulle Foundation, which was “formed in 1991 as a testamentary trust with the stated purpose of operating ‘exclusively for charitable purposes for the benefit of the citizens of Matagorda County, Texas [and] for no other purposes.'”

The court said an IRS audit found that Mr. Ziegnhals “used funds from the Foundation to obtain personal benefits and pay his expenses unrelated to the purported charitable purposes.”  That triggered a revocation of charitable status and taxes on “self-dealing,”  The total amount of “self-dealing” is alleged as $46,266.21.

What did that cost the alleged self-dealer?  From the decision (my emphasis):

The amount allegedly owed by Ziegenhals — $461,125.44 as of November 29, 2013 — is based on the IRS’s calculations of penalties, statutory additions, and interest that have accrued from his unpaid private foundation excise taxes in 2003 and his unpaid federal income taxes in 2007. See Docket Entry Nos. 42-13, 42-14, 42-15. The current amount owed is much larger than the original unpaid taxes of $46,266.21 from 2003 and $6,829.98 from 2007 because the IRS assessed several statutory taxes and penalties on Ziegenhals as both a self-dealer and foundation manager for each year until he was issued the notice of deficiency in 2009 –– an example of what can happen when someone fails to pay his taxes in the first place and then also does not cooperate in repaying the delinquencies in a timely manner.

For example, the IRS imposed a first tier tax of 5 percent for each act of self-dealing, see 26 U.S.C. § 4941(a)(1), a second tier tax of 200 percent of the amount involved for each act of self-dealing that was not corrected within the taxable period, see § 4941(b)(1), a first tier tax of 2.5 percent against Ziegenhals as the foundation manager, see § 4945(a)(2), and a second tier tax of 50 percent of the amount involved for refusing to agree to corrections, see § 4945(b)(2). In addition, the IRS determined that Ziegenhals’ actions constituted willful and flagrant conduct, and thus imposed a penalty equal to the amount of the private foundation excise taxes pursuant to § 6684. 

I don’t recommend private foundations for taxpayers who lack a huge amount of money.  While it can seem attractive to have something named for you that will outlive you, you need a lot of money to make it worth the hassle.  You have to file very detailed and complicated annual reports with the IRS, with $100 daily penalties for late filing.  Those filings are open to the public.  And if you or your heirs get careless in managing the foundation, the taxes and penalties can explode, as the gentleman from Texas now knows.

It’s much easier to use a donor-advised fund run by a competent charity, like The Community Foundation of Greater Des Moines.  They take care of the filings and hassles, and you get at least as good of a tax benefit as you get from having your own foundation.

Cite: Zeigenhals (USDC SD-TX, 3:11-cv-00464)

 

20120906-1Special interest break approaches the checkered flag.  The bill to extend the special sales tax spiff for the Newton racetrack passed the Iowa Senate yesterday.   The bill lets the track keep sales tax it collects from customers, up to a 5% rate.

The break was first passed when the track opened, with requirement that 25% of the ownership be from Iowa and with a 2016 expiration.  When NASCAR bought the track, that ended the deal.  SF 2341 extends the deal through 2025 and lets NASCAR, owned by a wealthy out-of-state family, keep this special deal that is unavailable for any other tourist and entertainment facilities competing for Iowa dollars (though an athletic facility under construction in Dyersville will have a similar break).  I’m sure they have a good story why they needed to pass this, but I don’t buy it; the track isn’t going anywhere, and NASCAR bought it knowing they didn’t qualify.

Like much bad legislation, it had bipartisan support, passing 36-9.  There is a glimmer of good news.  The total of nine “no” votes is the most I’ve seen for an “economic development” giveaway.  Hats off to Senators Behn (R, Boone), Bowman (D, Jackson), Chapman (R, Dallas), Chelgren (R, Wappelo), Guth (R, Hancock) , Quirmbach (D, Story), Schneider (R, Dallas), Smith (R, Scott) and Whitver (R, Polk).

 

Time for Project Oblivion!  The Des Moines Register reports West Des Moines data center project gets $18 million in incentives:

Iowa’s next major data center prospect seeking state-incentive money is headed to the Iowa Economic Development Authority with a stamp of approval from the West Des Moines City Council.

The council on Monday endorsed “Project Alluvion” as a consent agenda item without any discussion, offering up to $18 million in local incentives to land the major project.

Council documents show Project Alluvion would create at least 84 jobs and a minimum of $255 million in taxable valuation.

“People might say, ‘Geez, giving $18 million for only 84 jobs.’ The jobs are important, but it’s more than the jobs,” Councilman Russ Trimble said after Monday’s meeting. “It’s going to help us build the tax base and keep property taxes down.”

That’s 214,285.71 per “job.”   So, if we were to move our firm to West Des Moines, that would qualify us for about $7.5 million.  Hey, we use computers — we’re high-tech!  We’d even call it a cool name, like Project Oblivion!  Or Des Moines can pay us to stay, whatever.

Related:  LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION

 

Joseph Henchman, Wisconsin Approves Income Tax Reduction, Business Tax Reforms (Tax Policy Blog).

 

Kris20140321-3ty Maitre, Changes Coming for IRA Rollovers in 2015. (ISU-CALT)  ” So going forward, advise your client to make only one IRA rollover per tax year, or to be on the safe side one rollover every 366 days.”

Peter Reilly, No Margin For Error When Using IRA Rollover As Bridge Loan   

Kay Bell, IRS offers an easier way to deduct your home office 

TaxGrrrl, Taxes From A To Z (2014): M Is For Medicare Payments   

Paul Neiffer, One More Reason Why Tax Reform is Going After Cash Method:

 I ran across a posting on the net farm income and loss reported by Schedule F farmers for 2011 and 2012.  During each of these years, the USDA estimated that farmers had net farm income in excess of $120 billion.

However, on schedule Fs reported by individual farmers, they showed a net loss in 2011 of about $7.11 billion and for 2012 a net loss of $5.06 billion. 

Yeah, “simplification” is really why farmers need accrual accounting.  Not paying tax is a lot simpler.

 

Jeremy Scott, Portman’s Disappointing Tax Reform Plan (Tax Analysts Blog).

Len Burman, Profiles in Courage at the IRS (Really) (TaxVox).  It’s a good post, once you get past the manifestly false statement that the current scandals are “fake.”  And you’ll notice that Doug Shulman, unlike the hero of the Burman post, left on his own terms.

TaxProf, The IRS Scandal, Day 320

 

 

Going ConcernThe Debate Heats Up Over How Many Computer Monitors You Should Have.  The good folks at GC quote some loser who says nobody needs more than one monitor.  Here’s how I feel about the issue:

monitors

Now if the one monitor was, oh, 3′ x 5′, I’d reconsider.

 

Share

Tax Roundup, 11/12/13: Mason City is cold edition. But: a reprieve!

Tuesday, November 12th, 2013 by Joe Kristan

The ISU Center for Agricultural Law and Taxation Farm and Urban Tax School makes its Mason City stop today.  7 degrees and sunny.

20131112

But we have a sold-out house today to keep us warm!  We are also sold out for Thursday in Ottumwa.  Meanwhile Paul Neiffer helps with the second day of the show today in Sheldon and tomorrow here.  Seats are going fast for our remaining sessions in Waterloo, Red Oak, Denison and Ames, so register today!  And if you come to one of the shows, please come up and say hi!

 

The first chart for any tax policy debate is in this post from Andrew Lundeen at the Tax Policy Blog,  Government at All Levels Redistributed $2 Trillion in 2012

 givers and takers

 From the study referenced in the post:

As Chart 1 illustrates, the typical family in the lowest 20 percent in 2012 (with market incomes between $0 and $17,104) pays an average of $6,331 in total taxes and receives $33,402 in spending from all levels of government. Thus, the average amount of redistribution to a typical family in the bottom quintile is estimated to be $27,071. The vast majority of this net benefit, a total of $21,158, comes as a result of federal policies.

Before considering any more taxes on “the rich,” it’s worth stopping to understand what is already happening, and to consider that if this isn’t solving the problem, maybe more of the same isn’t the answer.

 

You don’t get a “reprieve” from something you should look forward to: “Iowa gets Obamacare reprieve.”  Coming from Press-citizen.com, the party newspaper of the People’s Republic of Iowa City, that’s probably not the sort of headline to cheer up the administration.

 

train-wreck Megan McArdle, Hope Is All Obamacare Has Left :

When the tech geeks raised concerns about their ability to deliver the website on time, they are reported to have been told “Failure is not an option.” Unfortunately, this is what happens when you say “failure is not an option”: You don’t develop backup plans, which means that your failure may turn into a disaster.

Great idea!

 

Peter Suderman, Time to Start Considering Obamacare’s Worst Case Scenarios (Reason.com):

But it’s time to start considering the worst-case scenarios: that the exchanges continue to malfunction, that plan cancellations go into effect, that insurers see the political winds shifting and stop playing nice with the administration, and that significant numbers of people are left stranded without coverage as a result. Rather than reforming the individual market, which was flawed but did work for some people, Obamacare will have destroyed it and left only dysfunction and chaos in its wake. 

None of this makes me optimistic for a repeal of the inane 3.8% net investment income tax enacted to finance the debacle.  Cleaning up the disaster will be costly, and they’ll need the money for it.

 

Trish McIntire, The New January 21st.  “Despite the delay in the start of the tax season, taxpayers won’t get extra time to file their returns.”

 

Check out Robert D. Flach’s Tuesday Buzz!

Jack Townsend,  IRS Authority to Settle After Referral to DOJ Tax, a discussion of Ron Isley’s tax troubles.

Brian Mahany,  IRS Makes Important Changes For FBAR Appeals – FBAR Lawyer Blog

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

Norton Francis, Narrow Tax Hikes Win Support in Several States (TaxVox)

 

All the news that’s fit to print.  NY Times: Estate Planning for Sex Toys (TaxProf)

News from the Profession.  Someone With Lots of Spare Time Has Doodled Big 4 Stereotypes (Going Concern).

 

 

Share

Tax Roundup, 11/11/13: Sheldon edition. And: masterminds!

Monday, November 11th, 2013 by Joe Kristan

 

Greetings to our Veteran readers for Veteran’s day!  Though perhaps “greetings” doesn’t summon the best memories.

The Tax Update comes to you today from sunny Sheldon, Iowa:

20131111-1

Well, it’s sunny indoors at Northwest Iowa Community College, where I am participating in the Sheldon Session of the ISU Center for Agricultural Law and Taxation Farm and Urban Tax School.  I’m the “urban” part.  Seats at the remaining schools are going fast, so register today!

 

Joseph Henchman, FBI Says California State Senator Accepted Bribes to Support Film Tax Credits (Tax Policy Blog).  He cites the LA Times:

 According to the affidavit, posted on Al Jazeera’s website, [State Senator Ronald] Calderon [D-Montebello] allegedly accepted $60,000 in bribes from an undercover FBI agent posing as a movie executive and $28,000 more from a medical company owner in exchange for efforts to affect legislation on tax credits for the film industry and on workers’ compensation claims.

That tells you that California is a little more sophisticated than Iowa.  The California guy (allegedly) required money to deliver the keys to the treasury to the film industry.  All the Iowa legislature required was a few autographs and photo-ops with starlets.  Iowa has learned from its mistakes, a little, and now favors jailing filmmakers to subsidizing them.

More from Russ Fox, Another Film Tax Credit Scandal

 

"Fez" Ogbasion, Instant Tax Service CEO.

“Fez” Ogbasion, Instant Tax Service CEO.

TaxGrrrl, Fourth Largest Tax Prep Business In The Country Shut Down By Feds  “U.S. District Judge Timothy S. Black found that ITS had a culture of “fraud and deception.”

My coverage of Instant Tax Service here.

 

Phil Hodgen,  Distributions from foreign grantor trusts and U.S. paperwork.  “This is a Form 3520 “research in a box” blog post for you, BP. Because you asked.”

William Perez, Social Security Wage Base Increases for 2014

Kay Bell, 12 charitable groups that would love to take your tax-deductible Typhoon Haiyan relief donations

Fiduciary Income Tax Blog, Federal Unified Credit for 2014.  $5,340,000.

Jack Townsend, Swiss Bankers Expect to Share Data for Tax Purposes

Robert W. Wood, Lawyer For NFL Players Sidelined Permanently…True Chicago Style?

Annette Nellen, Growing support for lower corporate rate and territorial system.  Good, but remember that the corporate rate doesn’t even cover most business income.

Tax Justice Blog, GE-Sponsored “Territorial” Study Promotes Agenda of Tax Avoidance

Stephen Olsen, Summary Opinions aka Procedure Roundup for 11/08/13.  Excellent roundup for procedure fans.

 

20130410-1

Robert D. Flach, I HATE K-1s!  Robert adds what I will call Flach’s Iron Law: “All K-1s usually arrive late.”  He then proceeds into a fine rant:

While I have not done any specific calculations, I firmly believe that often the additional costs to properly prepare the federal and state income tax returns for taxpayers with K-1 investments is as much as or more than the actual income, or tax benefits if any, generated from the investment.  If the money invested in these limited partnerships were instead invested in related mutual funds I expect the investor would do better.  His/her tax preparation costs would certainly be less.
 
Of course brokers never tell their clients this when selling them the investment.

While K-1s from closely-held businesses are normal and healthy, Robert is exactly right about the kinds of K-1s often seen in investment accounts.

 

Nicotine withdrawal.  Iowa tobacco tax revenue has declined, report says (KTIV.com)

 

Great moments in economic development.  Miami Replaces Tampa As IRS Tax Fraud Capital

 

The Critical Question.  An Isley Brother In Tax Court – Does Tax Crime Pay?  (Peter Reilly).

 

“Mastermind”?  I think the term is overused.  Example: “Mastermind of tax fraud scheme pleads guilty” (Examiner.net).  How did the prosecutor describe the diabolically clever scheme at issue?

“This scheme was based on a nonsensical formula that any honest person would instantly recognize was patently absurd and fraudulent,” U.S. Attorney Tammy Dickinson said in a statement. “Fortunately, the vast majority of these refund claims were detected by the IRS and denied.”

They need a new term for somebody who organizes a really dumb crime.  Disastermaster? Blunderbrain?  Any ideas are welcome in the comments.

Share

Tax Roundup, 10/28/13: Maquoketa! And the experts in preposterous.

Monday, October 28th, 2013 by Joe Kristan

Today is the first session of the ISU Center for Agricultural Law and Taxation 2013 Farm and Urbane Income Tax Schools.  Once again I am on the Day 1 team with Roger McEowen, the ringleader of the Center, and Kristy Maitre, the Iowa IRS Stakeholder Liaison.

We are starting in Maquoketa this year.  This is our first visit to Maquoketa, the county seat of Jackson County.   This replaces our former Muscatine session; we had to move when the conference center we were using closed.

Most Iowans know Maquoketa for Maquoketa Caves State Park.

Picture by Iowa Department of Natural Resources.

Picture by Iowa Department of Natural Resources.

If the session goes well, we won’t have to hold our next one underground.  If you can’t make it to Maquoketa, register today for one of the seven other farm school sessions!

 

Peter Reilly,  Organizing Junk Mail Does Not Qualify As Manufacturing.  Peter discusses the ADVO case we mentioned last week on the Section 199 “Domestic Production Activities Deduction.”  I like this:

The fact that what was being produced was 90,000 tons of crap, that was going to be quickly thrown away after annoying someone did not seem to be of any significance.  

It’s bad enough that the tax law has to distinguish “production.”  Imagine if the IRS agents had to distinguish crap.

 

Paul NeifferNow Congress is Calling the IRS “Preposterous” (At Least the Delay)!  Well, Congress would know about preposterous.  Paul will be one of the Day 2 speakers at the Farm and Urban Tax Schools in Sheldon, Mason City, Ottumwa and Ames.

 

Kyle Pomerleau, Low and Moderate Income Taxpayers Face High Marginal Tax Rates Too

Yesterday, the CBO released an interesting graphic showing the share of income earners below 450 percent of the federal poverty line. (Incomes up to $87,885 for a family of three).

From a sample of tax returns, they found that nearly 40 percent of those making 450 percent of the FPL and lower face a 30 to 39 percent marginal tax rate.

They also find that a good number of taxpayers face marginal tax rates that are even higher. More than 10 percent face a marginal tax rate between 40 and 49 percent. Some even face rates higher than 80 percent.

 

20131028-2

This marginal rate is part of the poverty trap caused by the phase-out of means-tested welfare benefits like the Earned Income Tax Credit.  These cause programs touted as helping the poor to punish taxpayers who try to stop being poor.

 

Phil Hodgen,  Expatriate without filing FBARs? Sure thing

Kay Bell, Almost 700 IRS contractors owe $5.4 million in back taxes 

TaxProf, WSJ: States You Shouldn’t Be Caught Dead In

Trish McIntire explains her recent blogging silence.  Get well soon, Trish!

 

Jack Townsend,  Outlier Foreign Account Conviction Affirmed; Making a Witness Unavailable to the Defense.  He discusses prosecutorial success via intimidation.

Quotable.  From a comment by Dan Hanson at Marginal Revolution (via Tyler Cowen):

Failure isn’t rare for government IT projects – it’s the norm. Over 90% of them fail to deliver on time and on budget. But more frighteningly, over 40% of them fail absolutely and are never delivered. This is because the core requirements for a successful project – solid up-front analysis and requirements, tight control over requirements changes, and clear coordination of responsibility with accountability, are all things that government tends to be very poor at.

 

Share