Posts Tagged ‘J.D. Tuccille’

Tax Roundup, 3/15/16: Deadline Day, Coupling Vote Day. And: Arnold Palmer’s worst golf partner goes to Tax Court. (Updates)

Tuesday, March 15th, 2016 by Joe Kristan

coupling20160129Coupling day in the General Assembly. The bills to couple Iowa’s 2015 tax law with federal 2015 tax changes (HF 2433 and SF 2303) are scheduled for debate today in the Iowa House and Senate. I expect them to pass easily. The Governor is on vacation in Florida, but GlobeGazette.com reports that he “is expected to return to Iowa later this week” and sign the bill. We will update this post if and when the votes come down.

Update, 3:40 p.m.: The Senate passes the House bill without amendment, 50-0. On to the Governor.

Update, 1:09 p.m.: A glitch? The Iowa Society of CPAs twitter feed reports:

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I know nothing more, but if they approve an amended version, it has to go back to the House for a re-vote. I’ll monitor and update if I learn more.

Update, 10:26 am: coupling bill HF 2433 passes Iowa House, 78-17. On to Senate later today.

 

Deadline day! Corporation returns are due today. Also due are two key international tax forms, for trusts and withholding on interest, dividend and other non-business income paid to foreign taxpayers. Russ Fox has more on that.

e-file logoTake care to document that you are filing your returns or extensions timely. E-file is best if you can, as you have no worries about mail truck mishaps. If you file on paper, Certified Mail, Return Receipt Requested, is the tried-and-true way to prove you filed your returns on time.

If you don’t get to the post office on time, you can file up until midnight at the UPS Store or Fed-ex store, but be careful. Make sure you use one of the IRS-approved shipping services (for example, UPS Ground doesn’t qualify, but “Next-Day Air does). Make sure that you shipping slip has a pre-midnight time stamp. And you have to use the street addresses of the IRS service centers, rather than their P.O. boxes.

Related: William Perez, How to Mail Tax Returns to the Internal Revenue Service

 

(also see [1]). Direct image URL [2], Public Domain, https://commons.wikimedia.org/w/index.php?curid=2199960

By U.S. Coast Guard – U.S. Coast Guard historical photo

Worst Golf Partner Ever. Arnold Palmer, the famous golfer, did less well in the auto business, thanks to a partner involved in a Tax Court case released yesterday. The companies, BOH and APAG, were funded in part by Mr. Palmer. Judge Nega sets the stage:

Petitioner began siphoning money from Arnold Palmer Motors, Inc., as early as October 1985. When one dealership ran short on cash, petitioner transferred money from another dealership to cover the shortfall. Rather than transferring funds directly between dealership accounts, petitioner routed transfers through his personal bank account. Petitioner routinely kept some of the transferred funds in his own account instead of transferring them to the appropriate dealership. Messrs. Palmer and McCormack did not authorize petitioner to take money from the dealerships.

The bad partner diversified into stealing from other S corporations funded by Mr. Palmer and others, but in which he held a 1/3 interest. After some time he was caught, and the tax man came calling.

The taxpayer took a bold tax return position. You need basis in an S corporation to take losses. Loans you make to an S corporation can create basis for taking losses. The taxpayer said that he made loans to the corporations he was stealing from, giving him basis.

The Tax Court found this improbable (my emphasis):

The record contains no evidence reliably establishing petitioners’ bases, if any, in the Arnold Palmer dealerships or their entitlement to NOLs arising therefrom. Petitioners have not provided any Forms 1120S, U.S. Income Tax Return for an S Corporation, or Forms 1065, Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., for any of the Arnold Palmer dealerships in which petitioner was a one-third shareholder. They contend that he contributed “significant funds” to the dealerships but do not identify any specific dollar amounts contributed. In contrast, the record reflects that petitioners misappropriated amounts in excess of $6 million from the Arnold Palmer dealerships during the late 1980s which they did not report on their 1988 or 1989 income tax return.

As you may guess, the Tax Court ruled against the taxpayer, big time, with 75% civil fraud penalties.

I assume, dear reader, that you aren’t stealing from your employer. If you are, you should be reading another tax blog. But even non-thief readers can draw a lesson. You need basis to take an S corporation loss, and you need the records to show it. The taxpayer here was claiming losses from net operating loss carryforwards created by alleged S corporation losses. He failed to provide sufficient records from the loss years to convince the Tax Court.

The Moral? If you are claiming loss carryforwards, you need to preserve the tax records for the years in which the losses arise, and all intervening years, to document your right to the losses. That’s true even though the statute for limitations for the loss years has expired. Net operating losses carry forward for 20 years. That means you may need to maintain the records for the loss years for 23 years — and for all of the years in between — if you take 20 years to use them up.

Cite: O’Neal, Jr., T.C. Memo 2016-49.

 

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TaxGrrrl, IRS Alerts Taxpayers To New Tax Season Related Phone Scam:

Here’s how the new scam works. The scammer calls you and says that are with the IRS and have your tax return. They then say they need to verify some information to process your return. Those details generally involve asking for your personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

To make the scam appear legitimate, scammers often alter caller ID numbers to make it look like the IRS or another government agency is calling. The callers may refer to IRS titles, fake names and fake badge numbers. They may know your name, address and other personal information that they offer to make the call sound official.

Be careful, and remember: if the caller says he’s from the IRS, he’s lying.

 

Peter Reilly, Sales Tax Collection By Out Of State Vendors May End Up At Supreme Court Again. “The reporting requirements may have created a situation illustrative of Reilly’s Second Law of Tax Planning – Sometimes it’s better to just pay the taxes.”

David Vendler, Can a Receiver Take Advantage of the Claim of Right Provisions to Benefit Defrauded Consumers? (Procedurally Taxing)

Paul Neiffer, When Not To Take A Discount? “When a farmer has a taxable estate, we usually try to obtain a discount by splitting up land ownership into “fractional” ownership.”

Kay Bell, How long are you willing to wait for your tax refund? I.D. theft has forced tax agencies to slow down refunds to keep them from going to thieves.

 

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TaxProf, The IRS Scandal, Day 1041.

J.D. Tucille, Poor Americans Will Be Stuck With the Tab for Bernie Sanders’ Generous Promises (Reason.com). “At the end of the day, grandiose promises of massive government programs are cheap. But paying for them has a high price tag—and it will be shouldered by those with the fewest means to afford the cost.” In other words, the rich guy isn’t picking up the tab, because he can’t.

Kyle Pomerleau, It Was Not A Good Week For The Patent Box (Tax Policy Blog):

A patent box, or “innovation box,” is a tax policy that provides a lower tax rate on income related to intellectual property. The stated goal of a patent box is to promote research and development, encourage companies to locate intellectual property in the country with the incentive, and to make a country’s tax code more internationally competitive.

Just as the research credit is an incentive to call more of what you do “research,” the patent box would end up broadening the definition of intellectual property income. The only innovation it would generate would be on the part of the same sort of specialty companies that make their living doing research credit studies.

Renu Zaretsky, Only Thirty-three days till Tax Day! Today’s TaxVox headline roundup covers tax refund statistics so far this season and the hiring by H&R Block of a former senator as a lobbyist for increasing barriers to competition and H&R Block profits through regulation of (other) tax preparers.

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Tax Roundup, 5/27/15: 104,000 taxpayers compromised by IRS transcript app breach. And: EITC is no free lunch!

Wednesday, May 27th, 2015 by Joe Kristan

20130419-1That took some work. The IRS disclosed yesterday that 104,000 taxpayer accounts have been compromised by identity thieves who did it the hard way. The Wall Street Journal reports:

The IRS said that to access the information, crooks had to clear a multistep authentication process that required prior personal knowledge about the taxpayer, including Social Security information, date of birth, tax filing status and street address before accessing IRS systems. The process also involved answering personal identity-verification questions, such as “What was your high school mascot?”

Mr. Koskinen, when asked how impostors obtained answers to these so-called “out-of-wallet” questions, suggested social media might have played a role.

“This is not a hack or data breach. These are impostors pretending to be someone who has enough information” to get more, said Mr. Koskinen, who said thieves might be using sophisticated programs to aggregate and mine data.

This is much more difficult than your standard ID theft, where all you need is a Social Security number to go with a name, and maybe a birth date. Getting through the IRS transcript access system requires a fair amount of data entry and outside information.

The breach will complicate filing for the 104,000 taxpayers whose data was accessed, and possibly for another 96,000 taxpayers whose records the thieves failed to breach. Tax Analysts reports ($link):

The IRS will provide credit monitoring and protection to the 104,000 victims at the agency’s expense, Koskinen said. Victims will also be given the IRS’s identity protection personal identification numbers so they are not targeted again, he said. All 200,000 of the taxpayers affected by the raid will be sent notification letters from the IRS and will have their accounts flagged on the agency’s core processing systems, he added.

The IRS has been losing the IT security wars for some time. It’s a shame, because the transcript service has been very useful for taxpayers needing return information for loans or to resolve IRS notices. I think the IRS will eventually have to delay refunds and processing so that it will be able to match third-party information — W-2s and 1099s — with returns before issuing refunds. The era of “rapid refunds” is coming to an end.

Lots of coverage of this. The TaxProf has a roundup. Other coverage:

William Perez, IRS Data Breach: Hackers Gain Access Through ‘Get Transcript’ Web App. “The IRS emphasized that taxpayers don’t need to do anything further. The agency will be sending letters to affected taxpayers explaining what to do next.”

TaxGrrrl, IRS Says Identity Thieves Accessed Tax Transcripts For More Than 100,000 Taxpayers “IRS was alerted to the problem when its monitoring systems noted an unusual amount of activity related to the [transcript] application.”

Russ FoxIRS “Get Transcript” Application Hacked; 104,000 Tax Returns Illegally Accessed. ” It would be time consuming but entirely possible for a stranger who had my social security number and date of birth to answer all the other verification questions.”

Accounting Today, IRS Detects Massive Data Breach in ‘Get Transcript’ Application

J.D. Tucille, Details About 100,000 Taxpayer Accounts Stolen From IRS (Reason.com)

“[T]he vast databases held by the IRS, HHS, security agencies, etc, will be leaked on purpose, leaked because of bureaucrat sloppiness, or be hacked. The more they collect, the more that will eventually leak.” Chris Edwards, director of tax policy studies at the Cato Institute, predicted to me last year. That “eventually”—at least, the latest round of it—is now.

Oh, goody.

 

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Kay Bell, Winners of meet-the-candidate contests face tax costs:

True, you won’t pay from your own pocket for the flights, hotel stay, chauffeur or meal with a future president. But the value of those things, like all prizes, is considered taxable by the Internal Revenue Service.

The winners can’t simply ignore the potential tax bill. The political contest organizers should send them, and the IRS, 1099 forms stating the value of the prize.

Well, that’s one tax problem I won’t be having, unless they start paying voters enormous amounts to talk to us. I will meet any candidate who will pay me $100,000 for 10 minutes of my time. Meet me at the Timbuktuu on the EMC Building skywalk.

 

Jason Dinesen, From the Archives: You Won the Dream Home, Part 4 — Changing My Mind

Jack Townsend, Switzerland Publishes Certain Identifying Information of Certain Foreign Depositors in Swiss Banks

Bob Vineyard, Bad Moon Rising (Insureblog). “Obamacare news isn’t good.”

 

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David Brunori, Scalia is Right (Tax Analsyts Blog). “The dormant commerce clause is here to stay, with precedent and established expectations and all, but it would be nice if we just admitted that we made it up.”

Robert Wood, Why Aren’t Those $26.4M Speech Fees Taxable To Bill & Hillary Clinton?

James Kennedy,Pennsylvania Senate Considers Hiking Income and Sales Taxes (Tax Policy Blog). They’re pretty high already.

TaxProf, The IRS Scandal, Day 748

 

Howard Gleckman, Marco Rubio Wasn’t the Only One Who Cashed Out an IRA Last Year (TaxVox). “Substantial assets leak because people under age 59 ½ take early withdrawals or borrow against their IRAs or 401(k). And the problem raises an important and challenging policy question:  Should the money in these accounts be available for non-retirement purposes?”

 

eic 2014Leslie Book offers thoughful consideration of Warrren Buffet’s support for an expanded Earned Income Tax Credit (Procedurally Taxing). You should read the whole thing, I’ll highlight this part:

As Mr. Buffet knows, there is no such thing as a free lunch. Using the tax system to deliver benefits is no silver bullet when it comes to addressing inequality. To administer the tax system as we know it today is no easy task. When Congress asks the IRS to do more, there are costs to taxpayers and the system overall. As Congress considers whether to ratchet up EITC, it should do so with the absence of rhetoric. It should also consider the tools it wants to give IRS to combat errors as well as address what costs it wants to impose on claimants and third parties. The current system passes costs on others, many of which are hidden. As with lunch, someone has to pick up the tab.

Among the costs is the 20-25% improper payment rate. Another cost is the high hidden marginal tax rate caused by the phase-out of the credit as incomes increase — a combined federal and state rate that can exceed 50%. And there is a cost to an already-stressed tax system of administering a social program.

Sebastian Johnson, Some States Support Earned Income Tax Credits for Working Families, Others Fall Short. (Tax Justice Blog) A piece that is oblivious to the issues raised by Leslie Book.

 

News from the Profession. EY Law Continues to Not Threaten Law Firms By Poaching Lawyers (Caleb Newquist, Going Concern).

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Tax Roundup, 2/24/15: Iowa gas tax boost vote may be today. And: are tax credit subsidies on the way out?

Tuesday, February 24th, 2015 by Joe Kristan

It looks like the gas tax increase will come to a vote today, reports the Des Moines Register:

Rep. Josh Byrnes, R-Osage, who chairs the Iowa House Transportation Committee, said Monday he expects a tight vote. He added that talks were continuing among House Republicans.

“I don’t think we’d bring it up for debate if we didn’t think we had the votes,” Byrnes said.

It sounds like a done deal. At least that’s what they want everyone to think.

 

20120906-1Iowa has just announced a big new set of tax breaks for an out-of-state company, in the name of  “economic development.” But are “targeted” tax subsidies on the way out? Ellen Harpel says they might be in Beyond tax credits: creating winning incentive packages (smartincentives.org):

 

Tax credits have become problematic for several reasons:

  • Tax credits are often presented as no-cost incentives. That is, tax credits are not taken (incentives “paid out”) until the company has met certain thresholds and has started paying the taxes against which the credit is taken. However, as this article in the Wall Street Journal points out, the fiscal costs are substantial. It is not clear to us that other taxes expected to be generated by incentivized projects either materialize or are sufficient to fill the budget gap.
  • One reason might be that tax credits are more important to existing businesses than firms new to a location, based on our review of major incentive deals, so an incentivized project may not generate as much new tax revenue as anticipated.
  • Once the tax credits have been granted, states do not know when businesses will choose to take the credit, wreaking havoc on state budgets, possibly for decades depending on the terms of the tax credit arrangement.
  • Some tax credits are refundable (paid back to the company if their tax liability is not high enough to take the credit) or transferable (sold to another taxpaying entity). Film tax breaks often fall into this category, lowering the taxes paid by other taxpayers that are not the direct target of the incentive.

Using tax credits in this manner is not sustainable. To the extent economic development organizations continue to use tax credits, caps and limits will become the norm.

As long as politicians can get media outlets to run headlines like “New $25 million plant will bring 120 jobs to Iowa,” tax credits remain “sustainable” for vote-buying politicians. If they really wanted to help everybody — not just chase smokestacks — they would enact something like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Related:

IF TRUTH IN ADVERTISING APPLIED TO ECONOMIC DEVELOPMENT AGENCIES

WSJ, Tax-Subsidy Programs Fuel Budget Deficits

 

If Iowa’s tax climate is so bad, why do businesses locate here? A hint may be found here: J.D. Tucille, Florida, the Freest State in the Country? “California, New York, and New Jersey always rank near the bottom of these lists as intrusive, red tape-bound hellholes.”

 

Via the John Locke Foundation

Via the John Locke Foundation

Iowa is #13.

The First in Freedom Index actually draws from a lot of the sources that have been cited here before, including the Fraser Institute’s Economic Freedom of North America as well as Mercatus Center’s Freedom in the 50 States, the Tax Foundation’s State Business Tax Climate Index, and measures put together by the Center for Education Reform, among others. To this, the North Carolina group adds its own weight and emphasis. 

Imagine how attractive Iowa could be without a bottom-10 tax climate.

 

Russ Fox, “Ripping Off Your Refunds” In the Miami Herald. “There is an excellent article in the Miami Herald on the identity theft tax fraud crisis. ”

TaxGrrrl, Tax Professionals Targeted In Latest Bogus IRS Email Scam. You can fool all of the people some of the time.

Robert Wood, Can IRS Seize First, Ask Questions Later? ‘Yes We Can’.

Kay Bell, NASCAR Hall of Fame and homeowner tax breaks collide. Another subsidized municipal boondoggle.

Peter Reilly, Estate Intended For Charity Depleted By Litigation And Income Tax. A sad story, and a cautionary tale for estate planning.

 

20121120-2Hank Stern, More Delays on HRAs:

For example, pre-ACA, small employers could fund “standalone” HRAs that allowed employees to pay for privately purchased health insurance (among other things). This encouraged employees to buy the plan best suited to their needs, and employers could control costs because they weren’t beholden to a group carrier’s annual rate in creases.

Sadly, those days are gone.

Everybody must be forced into the exchanges to participate in the ACA’s cross-generational subsidies.

 

William Perez, Problems with Form 1095-A

Jared Walczak, Will Mississippi Eliminate Its Antiquated Franchise Tax? (Tax Policy Blog). It’s a tax that can be a nasty surprise to a business entering that state.

 

Alan Cole ponders The President’s Revenue Problem (Tax Policy Blog):

It’s popular to claim that you’ll fund a big new government program through a tax on investors. The strong ideological priors of the political press tell us that investors are earning huge amounts of money, and that’s where the income is.

But the math tells us otherwise. Here’s what the tax bases for wage income and capital income actually look like in practice, from my recent report on sources of personal income.

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Tax Update regular readers already know that the rich can’t pick up the tab.

 

Jim PagelsNumber of American Corporations Declines for 17th Straight Year (Reason.com):

The report claims that the reduction in the number of incorporated firms is not so much due to inversions, mergers, or bankruptcy, but rather more firms classifying themselves as S Corporations, in which profits pass directly to owners and are taxed as individual income. Individual rates are typically lower than the U.S. corporate tax rate, currently the highest among members of the Organisation for Economic Co-operation and Development at 35 percent federal plus an additional 4.1 percent average rate levied by individual states.

This is why you can’t do a “corporate-only” tax reform.

 

Jeremy Scott, Does the United States Really Need a Tax Revolution? (Tax Analysts Blog): “Those who say that tax reform doesn’t go far enough and that the nation needs a revolutionary change are probably overstating the problem.”

Martin Sullivan, The Tax Reform Supermarket (Tax Analysts Blog). “Slowly but surely, members of Congress are coming to the painful realization that conventional, Reagan-style tax reform is going nowhere.”

 

Howard Gleckman, Better Ways to Link the Affordable Care Act with Tax Filing Season (TaxVox). “But since the ACA insurance is so closely linked to tax filing, it only makes sense to synch that sign-up period with tax season.”  I have a better idea: have health insurance purchases be totally unrelated to tax season, by getting rid of the whole misbegotten ACA.

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TaxProf, The IRS Scandal, Day 656, quoting the Washington Times:

The White House told Congress last week it refused to dig into its computers for emails that could shed light on what kinds of private taxpayer information the IRS shares with President Obama’s top aides, assuring Congress that the IRS will address the issue — eventually. The tax agency has already said it doesn’t have the capability to dig out the emails in question, but the White House’s chief counsel, W. Neil Eggleston, insisted in a letter last week to House Committee on Ways and Means Chairman Paul Ryan that the IRS would try again once it finishes with the tea party-targeting scandal.

Just like it couldn’t possibly find the 30,000 emails that TIGTA dug up from the back-up tapes.

 

News from the Profession. The PwC Partner Who (Sorta) Looks Like Matt Damon and Other Public Accounting Doppelgangers (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 12/30/14: Is prepaying taxes a good bet even without AMT? And: CoOportunity failure ripples.

Tuesday, December 30th, 2014 by Joe Kristan

I’ll gladly pay you today for part of a hamburger tomorrow. In our zeal to pile deductions into this year’s return, it’s easy to overdo it. If you aren’t subject to alternative minimum tax, you can get a 2014 tax benefit by mailing your estimated 2014 state balance due by tomorrow. But does it really make sense to pay a dollar of tax now to get a 35-cent benefit on April 15? at the 35% bracket, the answer would be yes, but for lower brackets, the numbers don’t work as well.

The chart below shows compares the time value lost by sending $1,000 to the government early to the present value of the tax benefit received, using a 2% discount rate.

Green numbers show a present value benefit for prepaying 12/31/14 vs. the statutory due date indicated.

Green numbers show a present value benefit for prepaying 12/31/14 vs. the statutory due date indicated.

Every situation differs. This table should be used with caution. It does provide some tentative rules of thumb for individuals, assuming you will be in the same bracket in 2014 and 2015, that you itemize, and that AMT does not apply:

– It always makes sense to pay your fourth quarter state estimates in December instead of January.

– If you are an Iowa taxpayer, it makes sense to prepay fourth quarter federal payments at any bracket, but it never makes sense to pay your April 15 balance due in December.

– It only makes sense to prepay your state balance due for April 15 2015 by tomorrow only if you are in at least the 33% bracket, which kicks in for joint filers and $226,850 of taxable income, and for single taxpayers at $$186,350. For Iowa taxes due April 30, it’s about a push, or even a small present value loss.

– It makes sense for taxpayers in the 25% bracket ($73,500 joint, $36,900 single) to prepay their March 1 property tax installments.

– It never makes sense to prepay your September property taxes nine months ahead.

As we discussed yesterday, AMT can make prepayments a much larger blunder, so don’t do anything without running some numbers.

 

cooportunity logoThe failure of Iowa’s federally-funded CoOportunity health care insurance company is drawing national attention. The Wall Street Journal opines in Fannie Med Implodes: “Call it the Solyndra of ObamaCare.”

Meanwhile, Iowans covered by CoOportunity have to deal with the consequences. Des Moines Register, CoOportunity’s crisis could cost members thousands:

Customers who switch out of CoOportunity coverage won’t be able to start their new policies until Feb. 1, because Dec. 15 was the national deadline for obtaining insurance policies that start Jan. 1. In the meantime, many customers would have to start meeting CoOportunity’s annual deductibles and out-of-pocket maximums for 2015. Then, when they switch insurers in February, “they would have to start over, unfortunately,” Commissioner Nick Gerhart said Monday.

If you like your plan…

CoOportunity Health’s troubles could affect whether small Iowa employers can qualify for 2015 tax credits toward workers’ insurance premiums.

Employers with fewer than 25 full-time workers making an average of less than $50,000 are supposed to be eligible for the tax credits, which can amount to 50 percent of the cost of premiums. However, starting in 2015, those credits are to be applied only to policies that are sold on the employer side of the public marketplace, healthcare.gov. In Iowa, CoOportunity was the only carrier selling health policies to Iowa employers on the marketplace. The company has ceased selling new policies because of its financial crunch.

Iowa Insurance Commissioner Nick Gerhart said he’s checking with federal officials to see if there’s another way to let small Iowa employers obtain the tax credit.

The IRS has let taxpayers in some counties without a SHOP provider take the credit. We will see if they grant a similar waiver here.

Related: Hank Stern, SHOP Chop.

 

Robert Wood, 3 Quick Year End Steps Pay Off Big April 15old walnut

Kay Bell, 5 tax-saving moves you can make by Dec. 31

Tony Nitti, The Top Ten Tax Cases (And Rulings) Of 2014: #1-Obamacare Endures Additional Attacks. Aw, poor thing.

Russ Fox, IRS Announces Tax Season to Start on January 20th

Robert D. Flach, THE YEAR IN TAXES 2014. “Once again the year ended with the idiots in Congress waiting until literally the last minute to pass an extension of all of the expired ‘tax extenders’.”

Melanie Migliaccio, 9th Cir. Rejects IRS’s Transferee Status Recharacterization Argument (Tax Litigation Survey)

 

Iowa Public Radio, Rep. Grimm To Resign After Guilty Plea On Tax Charge.

TaxProf, The IRS Scandal, Day 600

Alan Cole, Au Revoir to the Millionaire’s Tax (Tax Policy Blog). “The French government will quietly allow its millionaire’s tax to expire.”

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If you think I’m unsympathetic to Commissioner Koskinen’s pleas of IRS povertycheck out No Fat to Cut at the IRS? So Take a Chainsaw to the Rest of the Beast. (J.D. Tuccille, Reason.com):

Of course, Koskinen framed it in terms of customer service, and friendly media outlets immediately parroted the message that a $346 million cut, bringing the IRS budget down to $10.9 billion, inevitably means longer wait times on the phone for distraught taxpayers seeking answers for their pressing tax questions.

This is an all-hands-on-deck spin on IRS cuts, with National Taxpayer Advocate Nina Olson (who is theoretically on the victims’ side, despite her government paycheck) recruited to caution that the IRS is “chronically underfunded” with unfortunate implications for taxpayer service and assistance.

Then again, that might not be so horrible an outcome, given that IRS assistance involved giving taxpayers bad advice 22 percent of the time back in 1987, 41 percent of the time in 1989, 22 percent of the time in 2002, and 43 percent of the time in 2003. And no matter the advice dispensed by the tax collectors themselves, taxpayers are on the hook for getting it right.

Via Wikipedia

Via Wikipedia

I can’t help thinking that the cuts to service are an IRS version of the Washington Monument Strategy, where the government responds to budget cuts by closing the most popular and visible tourist attractions. I would find Commissioner Koskinen’s pleas of poverty more convincing if he weren’t spending money on the new “voluntary” preparer program to end-run the Loving decision that shut down the preparer regulation power-grab. It would also be a good signal to put the 200 IRS employees who spend their working days doing union work on the phones instead.

Related: Cromnibus cuts IRS budget, delays extender vote.

 

Career Corner. What If Your Job Title Were Brutally Honest? (Adrienne Gonzalez, Going Concern). I don’t suppose it would be easy to fit “Chronic Blogger Who Does Taxes to Finance It” on a business card.

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Tax Roundup, 9/30/14: IRS handling of uncollected taxes slammed. And: ISU TaxPlace goes live!

Tuesday, September 30th, 2014 by Joe Kristan

Priorities.  While allowing billions of false refunds to go to two-bit grifters via ID-theft refund fraud, the IRS also manages to not correctly follow up on billions of unpaid assessed taxes, according to a new report by the Treasury Inspector General for Tax Administration.  “Of a stratified sample of 250 cases reviewed, there was no evidence that employees completed all of the required research steps for 57 percent of the cases prior to their closing.”

How much money was potentially involved?  A chart from the report:

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This is what happens when the tax law is treated as the Swiss Army Knife of public policy, rather than as a simple tax collection and enforcement mechanism. It doesn’t help when successive commissioners are more concerned with expanding the agency’s power and suppressing political opponents than with collecting revenue and properly issuing refunds.

The TaxProf has more.

 

20130114-1TaxPlace goes liveThe ISU Center for Agricultural Law and Taxation has launched TaxPlace:

We are very excited to introduce TaxPlace, a 24-7 resource for tax professionals, especially those preparing farm tax returns. For a limited time, we are offering a yearly subscription for the low introductory price of $150. 

What does that include?

This one-year subscription to TaxPlace entitles you and your staff to one calendar year of unlimited access to all TaxPlace materials and services, including:

A searchable database of timely articles and seminar materials explaining basic, new, and complex tax issues, with a particular emphasis on issues impacting farmers, ranchers, and ag-businesses.

Unlimited replays of recorded seminars and webinars addressing timely and challenging farm and urban tax and estate and business planning concepts.

Access to “Ask a Question,” a personal connection with a professional knowledgeable in farm tax requirements. (“Ask a question” is not a gateway for legal advice and does not substitute for services from a legal or accounting professional.)

Tables, charts, explanations of procedures and forms, and contact information to simplify your interaction with the Internal Revenue Service or state tax departments.

Access to a weekly blog and to future archives of “the Scoop,” a bi-monthly live webinar addressing new tax laws and procedures as they develop and providing attendees with an opportunity to ask questions.

A bargain for $150.

 

TaxGrrrlHow To Get Away With Tax Fraud. No, she hasn’t gone over to the dark side. She is outlining some rookie mistakes made by a Ms. Jackson, who tried to cash a $94 million tax refund check she received. Revenue agents were waiting for her at the grocery store where she tried to cash the check:

Among the basic mistakes TaxGrrrl points out is this:

 Unless you are due a lot of refundable tax credits (more on that later), you’ll want to make sure that your math makes sense. I didn’t see Jackson’s tax return. And I’m not licensed in Georgia. But even I can figure from peeking at the Georgia Department of Revenue’s web site that the highest income tax rate for individuals is 6%. To have paid in $94 million of tax, the amount of her refund claim, you’d have to have earned about $1.56 billion in income – in one year (assuming no carry forward or carry back). That kind of money should have landed Jackson on the newly released Forbes’ 400 Richest Americans list. Spoiler alert: she’s not on the list.

And no, it doesn’t appear that she sandbagged a little too much on her estimated tax payments.  Another basic mistake: real tax thieves prefer direct deposit. But, as a man once said to police here in Des Moines, “You don’t spend your days chasing geniuses, do you?’

 

Peter Reilly, New York Springs Sales Tax Trap On Passive LLC Members. Apparently New York is holding LLC members personally liable for sales taxes owed by the LLC. If the Empire State wants businesses and investors to stay far away, this is a pretty good step. Oddly, S corporation owners don’t have this problem.

 

Fresh Buzz is available from Robert D. Flach, including links to stories on retiree taxation and Roberts side project, The Tax Professional.

Carl Smith discusses The Congressman James Traficant Memorial Code Section at Procedurally Taxing.  Well, if it’s like most code sections, it will outlast all of us.

 

J.D. Tuccille, Yet More IRS Employees Busted for Stealing Taxpayers’ Identities (Reason.com):

Have I mentioned that people signing for health coverage under the Affordable Care Act are supposed to update the government on any major life changes, including marriage status, employment, finances…? Oh wait, yes I have.

I wonder if that information will be better protected.

Remain calm, all is well.

 

20130111-1Andrew Lundeen, Kyle PomerleauEstonia has the Most Competitive Tax System in the OECD. (Tax Policy Blog). The posts tells of a fascinating feature of the Estonian tax law:

Additionally, Estonia only taxes distributed profits and at a 21 percent tax rate. This means that if a business in Estonia earns $100 and pays that $100 to its shareholders, the business would be required to pay a tax of $21 on the distributed profit. Instead, if that business decides to reinvest that $100, the business would not have to pay tax on that $100.

Compare that to the U.S., where the corporations pay tax on income when it is earned, and potentially another tax if earnings are not distributed.  Still another tax is paid when the earnings are distributed; in Estonia, there is no second tax.

If you were designing a tax system to actually make sense, it would look a lot more like the Estonian setup than the U.S. income tax.  You also wouldn’t have the inversion problem people fret about so.

Martin Sullivan, Can Congress Pass Tax Reform That Would Stop Inversions? (Tax Analysts Blog). “Right now the U.S. tax system favors foreign owned corporations over U.S. owned corporations.”

 

Donald Marron, The $300 billion question: How should we budget for federal lending? (TaxVox)

 

TaxProf, The IRS Scandal, Day 509

 

Liz Malm, Businesses Paid Nearly $671 Billion in State and Local Taxes Last Year (Tax Policy Blog)

 

Career Corner. Let’s Waste Some Chargeable Hours Comparing Chargeable Hour Goals (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, May 1, 2013: Brittannia gets behind filmmakers in a big way. Also: IRS power grab takes a new direction.

Wednesday, May 1st, 2013 by Joe Kristan

hh44.jpgNew U.K. film tax credit indictments.  It appears that the Brits are slowly moving towards the Iowa approach of jailing filmmakers instead of subsidizing them.  Ic.Scotland.co.uk reports:

Five people are to be charged in connection with a film industry tax relief fraud which cost the public purse around £125 million, the Crown Prosecution Service said.

The group allegedly abused a tax relief that allows investors in the British film industry to offset losses against other tax liabilities in order to cheat the public revenue.

“Around £125 million” translates to around $194 million.  And in Iowa film producers are serving time for stealing merely single digits of millions.  It just goes to show what you can accomplish with a national effort.

 

Boo.  House bill would give IRS authority to regulate tax pros (Kay Bell)  The power grabbers at IRS and their buddies at the national franchise tax prep firms have been thwarted by the courts.  Now they are using their congresscritter friends to put in the fix.

Kay sadly falls for it:

The quality independent tax professionals are following tax law changes, staying up to date and providing their clients with reliable tax services. Down the  street, however, an inept preparer is undercutting their prices and mucking up the system for all of us — the IRS, tax pros and taxpayers alike.

The IRS can’t regulate anybody into competency.  They can make people pass a “competency” test that really is a literacy test.  They can make people pay for CPE.  But they can’t make anybody competent who wouldn’t be otherwise.    What they can do is drive little preparers out of the business with nagging paperwork, red tape and hassles that the big boys can just assign to their compliance departments, and, when necessary, to their lobbyists.  This reduces the supply of preparers, increasing the cost of preparation for taxpayers.

The real problem with tax errors isn’t preparers; it’s the horrendous tax law and the inept legislators who make it happen.

 

Jacob Sullum on the Burden of Online Sales Taxes (Reason.com):

In a 2011 paper published by the Mercatus Center at George Mason University, Veronique de Rugy and Adam Thierer recommended “an ‘origin-based’ sourcing rule for any states seeking to impose sales tax collection obligations on interstate vendors.” Under that rule, which mirrors what happens when you buy something while visiting another state, each business collects sales tax on behalf of the state where it is based, no matter where the customer happens to be.

The beauty of this approach is that it treats all retailers equally, eliminates the daunting challenge of dealing with many different taxing authorities, and respects state policy choices while encouraging tax competition between jurisdictions. Evidently the idea makes too much sense for Congress to consider.  

 That would motivate online sellers to locate in low tax jurisdictions, which is why congresscritters from high-tax places will never allow it to happen.

 

Scott Drenkard,  California Considers Soda Tax in 2013, Forgetting Resounding Defeat in 2012 (Tax Policy Blog)

Joseph Thorndike, When Tax Reform Means Soaking the Rich (Tax.com)

Eric Toder,  How to Improve the Tax Subsidy for Home Ownership.  (TaxVox).  Maybe by eliminating it?

Jack Townsend,  John Doe Summons Issued to Wells Fargo for Records of CIBC FirstCaribbean International Bank Correspondent Account

Patrick Temple-West,  FATCA hurts Americans abroad, and more (Tax Break)

 

J.D. Tuccille, If High Cigarette Taxes Fuel a Booming Black Market, What Will High Marijuana Taxes Do?  (Reason.com).

David Brunori, Pancho Villa and Three Hundred Million Joints (Tax.com)

 

News you can use:  How Not to Deduct 85,491 Miles (Russ Fox)

 The Critical Question:  Has Microsoft Excel Ruined the World? (Going Concern)

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