Posts Tagged ‘Janet Novack’

Tax Roundup, 7/18/2013: Cincinnati, D.C. edition. And: the Redflex auto dealer tax.

Thursday, July 18th, 2013 by Joe Kristan

chief counsel shieldI didn’t know the IRS Chief Counsel worked out of Cincinnati.  The “nothing to see here” apologists for the IRS harassment of right-wing exempt organizations have always said that nothing wrong happened, and it was the work of rogue employees in the Cincinnati hinterlands anyway.  Perhaps not.  Tax Analysts reports ($link):

Embattled IRS official Lois Lerner directed a multilayered review of Tea  Party groups’ exemption applications that reached all the way to the IRS chief counsel’s office and led to lengthy delays in processing the applications, according to testimony from an IRS attorney released July 17 by House committees investigating the matter.

Carter Hull, a “Washinton IRS tax law specialist,” says the IRS Chief Counsel’s office was involved:

     Hull testified that at the August 2011 meeting, officials from the chief counsel’s office told him they needed updated information on the applications and suggested that a template letter be developed for future processing of applications. He said he told the officials that a template was impractical given the differences in the various applications.

     Hull told investigators that in his 48 years working at the IRS, he had never been asked to send a case he was working to Lerner’s senior adviser or to the chief counsel’s office before he received the request to elevate the Tea Party cases.

Mr. Hull is scheduled to testify at Congressional hearings today.  Nothing to see here, move along.

Wall Street Journal, The IRS Goes to Washington.

 

It’s OK, she’s a witch anyway.  Failed Republican Senate Candidate Christine O’Donnell may have been one of the candidates for political office whose tax records were breached, based on a Washington Times story.  The report says Ms. O’Donnell has been contacted by the Treasury telling her that a Delaware state official improperly accessed her federal tax records.   During her campaign for Senate, she was hit with a false federal tax lien on the day she announced her candidacy.

There has been no prosecution for the illegal access:

Treasury officials have refused to give Mr. Grassley any specifics on the cases or to describe the disposition of Ms. O’Donnell’s case, claiming even people who improperly access tax records have an assumption of privacy under federal tax laws.

That will be news to Dennis Lerner, a former IRS agent who this week received a three-year probation sentence for improperly disclosing confidential tax information.

Instapundit has more.

Christopher Bergin, IRS: Victim, Football, Both? (Tax Analysts Blog)


 

gatsoClive reconsidering its revenue camera auto-dealer tax.  The Des Moines Register reports that the future of the Des Moines suburb’s contract with red-light camera operator Redflex is in doubt, now that City Councilman Michael McCoy has joined another member of the five-person council in opposing the cameras.

Most of the cameras are along a strip of Hickman Road that has some car dealerships.  Guess what happens?

McCoy said businesses have raised concerns about the program to him. He said car dealerships are incurring fees when customers test drive their vehicles — the program mails tickets based on license plates. “That doesn’t seem like a way to be business friendly and invite new business into our community,” McCoy said.

But what good are customers if the local municipality can’t pick their pockets?

 

Tax Justice Blog, Are Special Tax Breaks Worthwhile? Rhode Island Intends to Find Out:

Rhode Island is about to put seventeen of its “economic development” tax breaks under the microscope, thanks to a new law (PDF) signed by Governor Chafee last week.  This reform is a welcome step forward in a national landscape where states often do nothing at all to figure out whether narrow tax breaks are really helping their economies.

After Iowa’s film tax program collapsed in disgrace and scandal, a blue ribbon commission was unable to identify any definite benefit to Iowa’s dozens of targeted corporate welfare tax breaks.  Yet Iowa continues to pass them out like Tootsie Rolls at a parade.

 

Cara Griffith, Break Out the Champagne (Tax Analysts Blog).  State revenues are up.

Jack Townsend, Interview of Swiss Bank Whistleblower

Kay Bell, Werfel does his own tax returns, Lerner still under fire and other tidbits from House hearing on IRS small business audits

Me: Long live the Queen! 21 years for the “Queen of IRS Tax Fraud”

 

Mitch Maahs, Deducting Job Search Expenses (Davis Brown Tax Law Blog)

William Perez, Same-Sex Spouses and Small Business: What’s Changed?

 

‘Merica!  U.S. Tax System Ranks 94th in the World (Andrew Lundeen, Tax Policy Blog)

Career Corner.  If All Else Fails, You Can Still Become an Internal Auditor (Going Concern)

News you can use.  Get Ready To Shop: State Sales Tax Holidays Are Back! (TaxGrrrl)

Reports: he’s not happy any more. Reports: Happy’s Pizza founder, others indicted for fraud, tax evasion (theoaklandpress.com)

 

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Tax Roundup, 7/17/2013: Stories of wounded jaywalkers. And: checking in on Rashia.

Wednesday, July 17th, 2013 by Joe Kristan

taxanalystslogoMarie Sapirie of Tax Analysts has an excellent piece about how the IRS offshore account enforcement program treats the thousands of ordinary Americans abroad — and many green card holders living in the U.S. —  as presumptive tax criminals when they try to remedy foot-fault paperwork violations in reporting offshore accounts.  She tells the stories of four “minnows” who tried to remedy inadvertent minor violations of the foreign account rules.  Get a load of the advice they gave “Taxpayer 3:”

The taxpayer, like many others, sought help from a congressional representative in reaching a satisfactory resolution with the IRS. The response that the lawmaker received from the IRS — that the taxpayer could renounce U.S. citizenship — was disappointing. “I lived in the U.S. for 30 years; I never was treated unfairly for 30 years. I was proud of it. And here the IRS is telling me to renounce my citizenship
because it may be the best solution considering my situation,” the taxpayer said.

When the IRS is telling people to expatriate themselves, something is very wrong.

The article discusses the headaches involved in clearing up FBAR reporting, including the delays caused because IRS agents aren’t allowed to make international phone calls.

The IRS should imitate programs for state non-filers for FBAR violations: allow taxpayers to come in penalty-free anytime if they file disclose their accounts and amend returns for five years back to report any unreported offshore income.  Time to stop shooting the jaywalkers.

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Rashia Wilson in happier times.

While Doug Shulman’s IRS was busy shooting jaywalkers, the grifters were running wild.  TampaBay.com has an update on the woman who boasted on her Facebook page that she was the “queen of IRS tax fraud”: IRS loss to fraud’s ‘first lady’ may have hit $20 million:

Rashia Wilson may have duped the IRS out of as much as $20 million before her arrest on stolen identity refund fraud charges.

That’s according to a court document, filed in advance of her sentencing today, that estimates the government’s loss at $7 million to $20 million.

What kind of criminal mastermind could break through the internal controls at IRS to loot that kind of money?

“YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD,” reads a May posting on her Facebook page described in the affidavits. “IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!”

Well done, Shulman!  Criminal masterminds like Ms. Wilson are robbing the Treasury of $5 billion annually, and you are busy telling taxpayers trying to come into compliance to renounce their citizenship.

Prior tax update coverage: Identity theft tax fraud: women’s work?

Jason Dinesen, Taxpayer Identity Theft — Part 16. “The IRS still has not processed Brian and Wendy’s final joint tax return for 2010.”

 

Inspector General finds “willful” rummaging through political “candidate or donor” records, but Justice Department declines to prosecute.  This is a big deal.  All we know is that it is sometime after 2006.  Failing to prosecute that is shocking; it’s hard to imagine a good excuse.  Tax Analysts reports today ($link) that IRS denies any of its employees were involved.

TaxProf, The IRS Scandal, Day 69

Kay Bell, Justice Department refusal to prosecute IRS disclosure of taxpayer information prompts inquiry from GOP Senator

Janet Novack,  Former IRS Auditor Gets Probation For Taxpayer Info Leak, Conflict Of Interest.  “Dennis Lerner admitted disclosing information about an audit of
Commerzbank AG and seeking a job with the German bank even as he was still negotiating a $210 settlement with it.”

 

William Perez, Same Sex Marriage, the Windsor Case and Estate Planning

Paul Neiffer, Capital Gains Questions on Selling Farmland

Missouri Tax Guy, Choose your tax pro? A rundown on the difference between CPAs, Enrolled Agents and other preparers.

 

Kay Bell, IRS will be fully staffed July 22 as furlough day is canceled

TaxGrrrl, IRS To Remain Open For Business As Furlough Day Is Canceled

 

Joseph Thorndike, Tax Expenditures Should Be Attacked Head On, Not Through the Backdoor (Tax Analysts Blog).

David Brunori, Immigrants are Good for Us (Tax Analysts Blog)

Howard Gleckman, Will Obamacare Delays Encourage Health Exchange Cheating?  (TaxV0x). Just because we can’t verify that you’re not cheating won’t result in massive cheating, according to Mr. Gleckman.  Let’s ask Rashia about that.

Russ Fox, The Most Ridiculous Tax Ever.  He’s talking about the insane “PCORI” fee.

Tax Justice Blog, North Carolina Facing Disastrous New Tax Laws.   The “disatrous” changes include reduction of the individual rate to 5.75% (currently 7.75%) and the corporate rate to 5% (from 6.9%).  If that’s a disaster, here’s hoping for one in Iowa.

Elizabeth Malm, More Details Released on North Carolina Compromise Plan and North Carolina House, Senate, and Governor Announce Tax Agreement (Tax Policy Blog).

 

Jack Townsend,  UBS Client, 78 Years Old, Sentenced to One Year and One Day

There are no athiests in taxholes.  Economist who dodged tax due to ‘religious objection’ gets four years behind bars (New York Post)

 

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Tax Roundup, 7/12/13: We get scam email. And flappers!

Friday, July 12th, 2013 by Joe Kristan

Don’t be stupid.  Yes, you hardly need to consult your CPA for that advice, but I think of it every time I get spam email like this:

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Somewhere I read that email scammers make their pitches stupid on purpose to identify the dumbest marks, as they are easiest to fleece.  This one certainly does so.  Some signs of stupid:

  • The email address: smoggiest@HELP.STATE.TX.US.GOV.    Come on.
  • The salutation:  “Dear Accountant Officer.”  It sounds like it’s addressing somebody who issues parking tickets to CPAs.
  • The English of someone not brought up speaking English: “Hereby you are notified…”
  • The use of “please” by a revenue agency.  Please…

Folks, the IRS and state taxing agencies don’t send notices like this via email.  When you get one, delete it — and never click the links.

 

TaxProf, The IRS Scandal, Day 64

Janet Novack, 4 Steps To Take Now That Stretch IRAs Are Endangered:

But the new stretch IRA limits, which Finance Committee Chairman Max Baucus (D-Mont.)  first floated in the Senate last year, would require most retirement accounts inherited by anyone other than a spouse to be distributed (and in the case of non-Roth accounts taxed) within five years of the owner’s death…

The limit on stretch IRAs, which also appeared in President Obama’s most recent budget proposals, would raise $4.6 billion over 10 years, Congress’ Joint Committee on Taxation estimates.  

Janet explains how this possibility can affect your thinking about beneficiary designations and Roth conversions, among other things.

 

Christopher Bergin, Jaws (Tax Analysts Blog):

Clearly, the IRS did some inappropriate things in handling the applications for exemption for tea-party groups and others. But I would prefer to have congressional committees working on making sure our tax agency operates fairly and efficiently rather than going on witch-hunts.

Christopher is right, and as a practitioner I don’t want to see tax adminstration get any worse.   Still, you can’t ignore the long-term benefit for punishing bureaucratic misbehavior.  It would require a suicidal level of tolerance for GOP legislators to let bygones be bygones after the outrageous behavior of the IRS in the Tea Party scandal.  Maybe some budget haircut is needed to make the IRS less eager to take sides next election.

 

Howard Gleckman,  How Not to Fix the IRS:
Forgive me, but let’s try to apply a dash of common sense to the agency’s problems. After months of looking, the IRS’ most vocal critics have found no evidence that its poor processing of requests by political organizations seeking tax-exempt status was politically-motivated.
It was, however, real. And its cause seems to be a staff that suffered from low skills, poor training, low morale, a shortage of resources, and bad management. It is hard to see how cutting an organization’s budget by one-third will fix any of these problems.

Saying that it wasn’t politically-motivated over and over doesn’t make it so.  As the Treasury Inspector General has reaffirmed, the IRS treated right-side outfits far worse than left-side outfits.  That doesn’t just happen — the thing speaks for itself.   And considering Lois Lerner’s partisan past with the Federal Election Commission, the circumstantial evidence of bias is overwhelming.  The “overworked and underfunded” defense of IRS behavior doesn’t fit these facts.

Still, it would be nice if Congress would use its funding power carefully to punish bad behavior, rather than as a meataxe that will harm innocent taxpayers as much as guilty bureaucrats.

 

Kay Bell, States could get more money by modernizing sales tax laws

Brian Mahany, TICs and REITS – “Accidents Waiting To Happen”  Many REITs are perfectly good investments.  I like them myself.  But illiquid ones can lock up your money while generating big liquid fees to a broker.

Tax Justice Blog, Undocumented Immigrants Pay Taxes, and Will Pay More Under Immigration

TaxGrrrl, Parents Sue School For Art Auction Gone Bad.  Some parents apparently shouldn’t be allowed to run around loose.

 

There’s a new Cavalcade of Risk up at Workerscompensation.com! Don’t miss Hank Stern’s Hunger Games and the MVNHS©, about ingenious health care cost savings innovations across the pond.

Via Wikipedia

Via Wikipedia

Robert D. Flach has your Friday Buzz ready!

Great Grandpa knew this.  Not all flappers are created equal (Rob Smith, IowaBiz.com)

The Critical Question: Is Diet Soda Worse than Regular Soda? (Scott Drenkard, Tax Policy Blog)

 

 

Friday workplace fun.  Let’s Discuss: Big 4 Bullies (Going Concern):

Probably the most irritating thing, according to this study, is that these people get ahead. We’ve all seen it.

That’s about how I remember it.  They rarely get the comeuppance they deserve, but when they do, it’s awesome.

 

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Tax Roundup, 7/3/2013: Effective rate edition. And Pickett’s Charge!

Wednesday, July 3rd, 2013 by Joe Kristan

gao-logoA GAO study of effective tax rates has created some comment in the tax policy blog world.  For example, Howard Gleckman,  Large U.S. Firms Paid a 16.6 Percent Federal Tax Rate (TaxVox):

A new analysis by the Government Accountability Office finds that in 2010 large U.S. corporations paid an average effective tax rate on their worldwide income of 22.7 percent and U.S. federal tax of only about 16.6 percent.  The federal rate was less than half of the 35 percent statutory rate.

Large firms that made a profit that year paid an even lower effective rate—an average of 16.9 percent in worldwide taxes and only 12.6 percent in U.S. federal tax.

The always moderate and restrained Linda Beale chimes in with Corporations Never Had It So Good.

William McBride from the Tax Policy Blog doesn’t see it quite that way in GAO Compares Apples to Oranges to Find Low Corporate Effective Tax Rate:

A new study by the Government Accountability Office (GAO) claims the corporate effective tax rate (ETR) was 12.6 percent in 2010, which is about half the standard estimate found in other studies cited by the GAO and summarized here, here, and here. Based on IRS data, the corporate effective tax rate is about 26 percent  on average, though it dropped in the most recent year of data, 2009, to a little over 22 percent, due to the recession and temporary tax incentives meant to stimulate investment.

Why the difference?

So how did GAO come up with such a low effective tax rate? Mainly by comparing apples and oranges. Particularly, GAO takes the smallest measure of taxes paid and divides it by the largest measure of net income according to financial statements, even though this net income is not the tax base that the corporate tax was meant to apply to. The corporate tax rate applies to taxable income, as defined in the tax code. According to GAO, taxable income in 2010 was $863 billion for profitable corporations, while financial statement income was $1.443 trillion.

It’s true that effective rates on taxable income will never be as high as the stated rate because of tax credits, but the GAO numbers show a misleadingly low burden.

 

The Obamacare employer mandate has been delayed.  My coverage and a roundup: Don’t fire employee #50 just yet: Obamacare employer mandate delayed until 2015

 

Jason Dinesen, Do Iowa Taxes Change as a Result of the DOMA Ruling?  “The answer is: very little changes on Iowa taxes.”

Trish McIntire, DOMA is Dead

 

Joseph Thorndike, Milton Friedman Didn’t Believe in Tax Reform (Tax Analysts Blog).  Getting rid of loopholes, the argument goes, just makes room for new ones.

TaxProf, The IRS Scandal, Day 55 and IRS Hits Tyco With $1 Billion Tax Bill

Janet Novack, IRS Calls Foul Against Estate Of Late Minnesota Twins Owner Carl Pohlad.   “Carl Pohlad’s heirs contend his stake in the MLB club was worth just $24 million. The IRS pegs it at more than 12 times that.”

Zerjav update:  I have updated my post on the St. Louis tax advisor who was sentenced to 18 months in prison to include information from a U.S. Attorneys press release on the details of how the evasion was done.

David Brunori, Cuccinelli’s Corporate Tax Plan Does Not Go Far Enough (Tax Analysts Blog:

The state would be far better off repealing the tax and either 1) reducing spending by $800 million, or 2) finding other sources of revenue. An increase in the personal income or sales tax would be a better idea than trying to tax corporate income.

Amen.

 

Tax Justice Blog, Bad Budgets Become Law in Ohio and Wisconsin.  That probably means the opposite.

Peter Reilly continues to report breaking news from the Battle of Gettysburg:  Did Doris Kearns Goodwin Blow It At Gettysburg ?  I am insanely jealous.  I assume he will torture me with coverage of today’s 150th anniversary of Pickett’s charge.

 

News you can use. The Screaming at EY Has Stopped (Going Concern)

I don’t see what his orientation has do with anything.  Century old barn may’ve been started on fire by flaming raccoon (Radio Iowa)

 

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Tax Roundup, 7/2/2013: Apologies, newlyweds and civil wars!

Tuesday, July 2nd, 2013 by Joe Kristan
Taxpayer Advocate Nina Olsen

Taxpayer Advocate Nina Olsen

Kay Bell doesn’t much care for the Taxpayer Advocate’s “apology payment” proposal,  where the IRS would pay $1,000 as a token of apology to taxpayers who had gotten the runaround from the agency:

In order to avoid spurring an apology payment, employees could be reluctant to challenge taxpayers in situations where such added attention is warranted. The ensuring refusal by workers to aggressively, but fairly, go after taxpayers will make for a less, not more, effective tax enforcement agency.

So instead of establishing an apology payment system, the $1 million should instead go to the IRS for it to do its job, albeit do it better. That’s also recommended by Olson in her report.

So Kay probably wouldn’t much care for my “sauce for the gander” rule, which would impose penalties on the IRS, payable to the taxpayer, anytime the IRS maintains an unreasonable position on audit.  I would also apply it automatically anytime the IRS asserts an accuracy-related penalty and then loses in court on the underlying issue.

 

Jana Luttenegger, IRS Statement on DOMA and Tax Tips for Newlyweds (Davis Brown Tax Law Blog).

The IRS quietly issued a statement on June 27. Quite, likely because it was of little value to any taxpayers. The statement is available from the IRS Newsroom, and essentially states they are reviewing the recent decision, and will “move swiftly to provide revised guidance in the near future.”

In what may or may not be a coincidence, the IRS Summer Tax Tip released today relates to Tax Tips for Newlyweds.

So maybe the IRS does have a sense of humor.

TaxGrrrl, As Taxpayers Scramble To Make Sense Of DOMA, IRS Issues Statement

 

Russ Fox,  Licensing Stops All Tax Preparer Fraud…Well, No.  But it does make it fraud with a government seal of approval.

 

Howard Gleckman,  New Study: Tax Subsidies Do Little To Reduce Greenhouse Gas Emissions.  But they do help keep stray birds out of foreign airspace.

Missouri Tax Guy, Travel Expenses.  Why these expenses are not like the others.

TaxProf, IRS Scandal, Day 54.

Jack Townsend, Depositor Pleads to Failse Return; Depositor in Luxembourg Branch of Israeli Bank

William Perez, “Blank-Slate” Tax Reform Proposed by Baucus, Hatch

Tax Justice Blog, Top Senate Tax-Writers’ Call for “Blank Slate” Approach to Tax Reform Avoids Most Crucial Issue

Martin Sullivan, Tax Reform: Coming Around the Clubhouse Turn? (Tax Analysts Blog)

Clint Stretch, Tax Reform or Shotgun Wedding? (Tax Analysts Blog)

Tax reform, we are told, will encourage economic growth by reducing complexity, inefficiency, and unfairness.  It probably could, but there are no guarantees.  I have had to read most of the tax legislative histories written in the past 40 years.  I cannot recall any instance in which the committee reports confessed that the wrong balance of fairness, economic growth, and simplification was struck.

Yet it would have been true every time.

 

Kyle Pomerleau, Misleading Corporate Tax Talk: (Tax Policy Blog)

When a company pays employees, either through wages or stock options, they are legitimately allowed to deduct that compensation.

It is not like this money is never taxed. This compensation is taxed as ordinary income at the individual level.

A point often overlooked when they talk about stock option “loopholes.”

 

Janet Novack, GAO: Big Companies Paid A 12.6% Effective Federal Income Tax Rate

Jeremy Scott, Obama’s Climate Change Proposals Lack Major Tax Component (Tax Analysts Blog).  They also lack a snowball’s chance in a high-carbon Hades.

TaxDood, GAO: Bitcoin Presents Tax Compliance Risks

It’s Tuesday, so it’s time for a fresh Buzz from Robert D. Flach. 

 

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Grant at work.

Peter Reilly is taking a few days off from his usual tax topics to cover commemorations of the 150th anniversary of the Battle of Gettysburg, which occurred July 1-3, 1863:Hopes of Our Country Were on Our Bayonets

Gettysburg Day 1 – First Shot – Where Fate Meets History

Gettysburg Day 1 – Passing Into Legend And History With The Iron Brigade

I’m sure there will me more great posts.  But remember that this week is also the 150th anniversary of the fall of Vicksburg to General Grant  — a more spectacular campaign and arguably a more important achievement, but not so well-remembered as Gettysburg.

 

 

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Tax Roundup, 6/24/2013: Officially summer edition. And: catching up on the IRS scandal.

Monday, June 24th, 2013 by Joe Kristan
Former IRS Commissioner Shulman, showing how many times he visited the White House.

Former IRS Commissioner Shulman, showing how many times he visited the White House.

As the world slows down for summer, so does the IRS scandal.  The TaxProf has only a half-dozen items in yesterday’s daily roundup of IRS scandal stories.  Where are we at?

There’s no smoking gun, like an e-mail from President Obama to Doug Shulman telling him to thwart the Tea Party.  The mystery now appears to be the level of involvement of IRS personnel in Washington, who appear to have closely monitored the handling of the Tea Party 501(c)(4) applications, while  left-leaning applications flew through the system.  While some folks are in a hurry to bury the issue, there are plenty of remaining issues, as Eliana Johnson recounts:

Who at the IRS, for instance, developed the intrusive and exhaustive  questions that were sent to the tea-party groups? Why did so many of those groups have to wait years for their applications to be processed, and why are many more still waiting? Who specifically were the IRS officials in Washington directing the Cincinnati agents targeting the tea-party organizations?

It’s also become clear that the political culture of the IRS was hostile to Tea Parties at the top levels.  IRS defenders have pointed to Doug Shulman’s status as a Bush appointee as evidence of IRS neutrality, but it turns out that he has a long left-side political historyThe same goes for Holly Paz, a high-ranking IRS lawyer who had a key role in overseeing the non-approval process.   The best argument that can be made on behalf of the agency is that because the political culture was so far to the left, they didn’t realize how biased they were being — they actually could have believed Tea Party applications were political, while “progressive” ones were just good people trying to do good things.  That hardly inspires confidence.

While former Commissioner visited the IRS a lot — the exact number of visits isn’t clear, but it was more than Shulman could precisely remember — it appears his t0p aide went to the White House 2 or 3 times weekly.  It’s hard to imagine that slow-walking Tea Party applications would require that level of Administration involvement, but it does show a disturbing level of day-to-day administration involvement with the workings of the tax agency.  It best, it reflects how the IRS has become a multi-portfolio superagency stretching across the government, which is a terrible thing by itself.

 

Andrew Mitchel,  Mandatory Electronic Filing for FBARs Coming Soon.  Remember, they are due this week.  The Treasury (inexcusably) says the timely-mailed, timely-filed rule doesn’t apply to foreign financial account disclosure filings, so you should mail them by today to beat the June 30 deadline.

Roger McEowen, U.S. Tax Court Says that CRP Payments Are Subject To  Self-Employment Tax In the Hands of a Non-Farmer

- In a  stunning reversal of course, the U.S. Tax Court  has agreed with the IRS that  the signing of a CRP contract coupled with compliance with the contract  provisions (whether personally or via an agent) results in the party signing  the contract being in the business of participating in the CRP and engaging in an “environmentally friendly farming operation.”  The result was  that the CRP payments were subject to self-employment tax.

Paul Neiffer, Your CRP Income May Be Subject to SE Tax: “Under the ruling of this case, it appears that almost any farmland enrolled in CRP will be subject to SE tax (at least in the Eighth Circuit) unless the case gets appealed and overruled which may take a
couple of years to resolve.”

 

Jason Dinesen, Commentary on the IRS’s E-Services Decision:

The IRS says few practitioners are using E-Services (I think they said only 10% of power of attorney requests come through that system).

Still, in the year 2013, it seems more logical to encourage more practitioners to use E-Services instead of closing it down and taking away the electronic option completely.

Yet another bad IRS decision.  Meanwhile, TaxGrrrl reports that  Defying Directive, IRS Set To Pay Out $70 Million In Employee Bonuses.   Priorities.

Russ Fox, Onwards and Upwards into the 20th Century!

Christopher Bergin, Another Bad Day for the IRS (Tax Analysts Blog)

William Perez, Small Business Week: Deducting Health Insurance Benefits

Peter Reilly, Tea Party Patriots — Federalist Papers — Really ?

Tax Policy Blog, Tanning Tax Not So Hot

Tax Justice Blog, A Reminder About Film Tax Credits: All that Glitters is not Gold

Kay Bell, Amazon heading to Florida, leaving Minnesota

Kim Reuben, Andrew Cuomo’s Lesson in What Not to do With Rising Tax Revenues (TaxVox)

Robert D. Flach, TAX RETURN ERRORS:

Using a tax preparation software package is no substitute for knowledge of tax law.  This applies to paid preparers as well as individual taxpayers.  I sometimes wonder how many alleged tax professionals, especially those employed by the “fast food” tax preparation chains, are really nothing more than data entry clerks. 

Garbage in, garbage out.

 

The Cubs losing ways:  IRS Continues Its Scrutiny Of Leveraged Partnerships: 2009 Sale Of Chicago Cubs Finds Itself In Service’s Crosshairs   Fortunately for Cubs fans, it’s the seller’s problem.

Good luck with that. Billionaire Seeks $186 Million Tax Refund, Claims IRS Biased By ‘Politically Charged Atmosphere’ (Janet Novack)

Gee, who saw this coming?  Governor signs bill paying off Honey Creek Resort debt.  Operating resorts is one more thing the State isn’t very good at.

 

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Tax Roundup, 6/6/2013: Omaha Beach edition. And if you like new taxes, you can have Christmas all year!

Thursday, June 6th, 2013 by Joe Kristan

Just in case you’re having a bad day…  They hit Omaha Beach 69 years ago today.

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I don’t know about you, but I’m pretty sure nothing I face today will be hard compared to that.

 

TaxProf, The IRS Scandal, Day 28.

Washington Post,  Two IRS officials put on administrative leave for accepting gifts at Calif. conference.  One is the “director of implementation and oversight”  for Obamacare implementation, so maybe he can say it was just an oversight.  But Going Concern notes “It was $1,100 in free food. Just freaking sayin.”

Robert W. Wood,  Lavish Expenses Are A No-No, Unless You’re The IRS

Kay Bell asks “Can the IRS be saved?”   It would be a lot easier if it functioned only as a revenue collection agency.  Now it is a superagency in charge of health care, industrial policy, historic preservation, welfare… as if just figuring taxable income weren’t enough of a challenge.

 

So what about the things IRS is supposed to be doing?  Jason Dinesen gives us a hint in Taxpayer Identity Theft — Part 15:

I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name.

The IRS still has not processed Brian and Wendy’s final joint tax return for 2010. Wendy is owed a refund from that tax return and we’re still waiting for that refund to be paid.

Good thing they have that line-dancing thing down.

 

Janet Novack,  Don’t Let Fear Of Taxes Or IRS Audits Destroy Your Wealth.  TaxGrrrl is quoted:

“Don’t let the tax tail wag the dog.” In other words, you should think about taxes when you invest, but “don’t be so paralyzed by the tax consequences that you miss out.” That goes for selling, too–don’t keep holding an asset you should get rid of just because you hate paying capital gains tax.

Wise.

 

Ben Harris,  What Changes in the Mortgage Deduction Would Mean for Home Prices (TaxVox):

By contrast, completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied.  Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee.

That seems high to me.

 

Cara Griffith, States’ Misuse of Unclaimed Property Laws (Tax Analysts Blog): “Unclaimed property laws were never meant to be a major revenue raiser for states or a major headache for businesses.”  Unfortunately, politicians think that everything defaults to them.

Brian Strahle,  State and Local Tax Challenges with Leases of Equipment and Other Assets – GUIDE / WEBINAR

 

Peter Reilly, Conservation Easement No Deduction For Hypothetical Vineyard

In other news, bears poop in the woods.  Social Security Still Deep in the Red (Kyle Pomerleau, Tax Policy Blog).

social security fund deficit

William McBride,  Contra Every Major Study, EPI Claims Corporate Tax Does Not Affect Growth (Tax Policy Blog)

Tax Justice Blog,  CTJ Report: Apple Is Not Alone.  Amazing that other companies also want to use legal means to reduce their taxes.

Patrick Temple-West, Calculating Apple’s true U.S. tax rate, and more

TaxGrrrl, As Senate Debates Immigration Reform, Worries Grow Over Tax Amnesty Provisions

 

Christmas in June?  They’re trying to restore the Christmas Tree Tax (Roger McEowen).

 

 

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Tax Roundup, 5/13/2013: Modified limited hangout edition. And a tax blog hijacking!

Monday, May 13th, 2013 by Joe Kristan

20130419-1If the IRS hoped Friday’s “apology” for giving extra special attention to tax-exemption applications of right-side groups would settle things, they’re very disappointed this weekend.  The Washington Post reports that the Treasury Inspector General for Tax Administration will soon issue a report saying Friday’s apologizer, IRS Director, Exempt Organizations, knew this was going on in 2011.  Meanwhile, in 2012 IRS Commissioner Doug Shulman was still testifying that IRS was not picking on the Tea Party.

So not only was the Shulman era at IRS grasping, incompetent and casually cruel, it was dishonest.

The Tax Prof has a fresh roundup, The Deepening IRS Scandal.

Another Washington Post story has this:

At various points over the past two years, Internal Revenue Service  officials singled out for scrutiny not only groups with “tea party” or “patriot” in their names but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution, according to documents in an audit conducted by the agency’s inspector general.

The documents, obtained by The Washington Post from a congressional aide with knowledge of the findings, show that the IRS field office in charge of evaluating applications for tax-exempt status decided to focus on groups making statements that “criticize how the country is being run” and those that were involved in educating Americans “on the Constitution and Bill of Rights.”

Yes, we sure need to keep an eye on those wingnuts who want to educate people on the Constitution and Bill of Rights.  Dangerous lunatics, they are!

There is so much blog coverage of this that I won’t even try to round it all up.  A few links from our blogroll:

Megan McArdle,  Why Did the IRS Target Conservative Groups?

Going Concern, Footnotes: Tea Party Patriots to IRS: Drop Dead

TaxProf,  Schmalbeck on the IRS ‘Targeting’ of Conservative Groups, where an academic gives a “nothing to see here” take, one that is already largely overtaken by events.

 

And some other coverage:

Connor Simpson,  Why the IRS Abruptly Apologized to the Tea Party  (via Instapundit):

The report doesn’t shay whether or not Shulman was informed about the Tea Party questioning, but it does show the IRS’s chief counsel was. It’s standard procedure for the counsel and commissioner to discuss this  sort of thing before a Congressional hearing.

If so, The Worst Commissioner Ever can only plead incompetence instead of lying to Congress.

Reason.com has a bunch of posts at their Hit and Run blog, including  Matthew Feeney,  IRS Scrutiny Extended Beyond Tea Party Groups (Reason.com); Jesse Walker,  A Brown Scare at the IRS?; Matt Welch,  NY Times: IRS Targeting of Tea Party Only Proves Republicans Are Desperate  “It’s the inability to see discrete news events for what they are, rather than what they might mean for the neverending scrum between Teams Red and Blue.”

Jonathan Adler,  IRS Scrutinized Teaching the Constitution (Volokh Conspiracy)

Professor Bainbridge, Wider Problems Found at IRS – Twisting slowly in the wind

William Jacobson,  IRS anti-Tea Party scandal gets real — senior IRS officials aware of targeting (Update – Chief Counsel knew and targets expanded to groups “educating on the Constitution and Bill of Rights”)

Katrina Trinko, Rubio: IRS Commissioner Should Resign Immediately (The Corner)

Ann Althouse has more.

And here’s my take from Friday, if you missed it:   Look at a celebrity return?  You’re fired!  Harass a Tea Party outfit?  Carry on.

 

In other news:

Nina Olson, IRS Taxpayer Advocate, has an article in Tax Analysts (via the TaxProf) affirming her support for taxpayer regulation.  Ms. Olson has done much good work as Taxpayer Advocate, but her support for increased preparer regulation is economically uninformed and hopelessly wrongheaded.

 

Russ Fox,  IRAs and Owning a Business Through an IRA and  What Can Go Wrong?  Nevada Democrats Want to Give Tax Breaks to Movie Industry

Peter Reilly,  Brooklyn Grandmother Wins On Dependency Exemption.   Just in time for Mothers Day!

TaxGrrrl,  IRS Set To Close Next Week.  Bad news: it’s only temporary.

 

Trish McIntire,  Max and Dave Looking for Reform

Nick Kasprak,  Do Tax Cuts Pay for Themselves?

Patrick Temple-West,  Falling deficit alters budget debate, and more

Linda Beale,  Orrin Hatch on tax reform at the ABA–a predictable right-wing rant

 

Andrew Mitchel,  Barnes Group – Structured Repatriation Was a Dividend.  In spite of the best efforts of national tax firms.

Phil Hodgen,  Decline of American Civilization, Form 8938 Edition.  “Let’s just bury the world in useless paperwork, shall we?”  That does appear to be the plan.

 

Kay Bell,  IRS reports gains in criminal tax, other financial investigations

Jack Townsend, Cheating is Cheating, Except When Offshore Accounts Are The Means, followed up with More on Conviction Rates in Tax Cases.

Janet Novack,  Independent Contractor Enforcement: There’s More Than The IRS To Fear.  Plenty of state rules and taxes also come into play.

Jim Maule,  The Complexities of Tax: Is This Really Necessary?  “A recent IRS private ruling, PLR 201318003, illustrates how the special low rates for capital gain adds layer upon layer of complexity to the tax law.”

 

I’d like to report a hijacking.  It looks like somebody at Tax Analysts forgot to renew their ownership of the  tax.com domain name.  Going there this morning gets this:

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Tax.com is (has been?) home to the great group blog featuring, among others, David Brunori, Christopher Bergin, David Cay Johnston, Martin Sullivan, Cara Griffith and Clint Stretch.  I hope this is only a temporary hijacking.

 

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Tax Roundup, 5/9/2013: Gotta start somewhere edition.

Thursday, May 9th, 2013 by Joe Kristan

rand paulGotta start somewhere.  The Hill reports “Rand Paul introduces bill to roll back parts of tax evasion law“:

“FATCA’s harmful impacts cover the spectrum,” Paul said. “It is a violation of Americans’ constitutional protections, oversteps the limits of Executive power, disregards the mutual respect of sovereignty among nations and drains money from the federal treasury under the guise of replenishing it, and discourages overseas investment in the United States.”

“Tax evasion is a problem that should be addressed, but not in such an egregious way,” Paul added.

FATCA has made normal financial life difficult or impossible for many Americans abroad.  Too bad politicians didn’t think of these things before they voted.

Probably related: Lynnley Browning, U.S. Citizens Ditch Passports in Record Numbers (via the TaxProf).  Also this from Phil Hodgen.

Jack Townsend, HSBC India Reported to be Cooperating with DOJ and IRS and Projecting Significant Penalty

 

TaxGrrrl,  Sanctions May Be Least Of ‘Copyright Troll’ Worries As Matter Is Referred To Feds, IRS.  A great article telling the story of an attorney/copyright troll who annoyed a judge enough to get him to call in the IRS to investigate his taxes.  Hilarity ensues.

Cara Griffith, Pot Calling Kettle Black? (Tax.com):

Good Jobs First is just hiding the ball a little bit by trying to get rid of reports on business climate. The Good Jobs First report says that the real issue we should be focusing on is “how to build a tax system that is fair, modern and relevant.” Yes, that’s exactly what needs to be done, but I would argue that reports on business climate add to the debate. And while I do think that such reports must be examined with a critical eye, “business climate” matters.

Related Tax Update coverage here.

 

Tyler Cowen

“When economists are not listened to, that often means strong special interests and/or strong voter sentiment stand on the other side of the equation.  The numerous special deductions in the tax code, most of which have no efficiency justification, are examples.”

True of both federal and Iowa tax laws.

 

Brian Strahle,  MARKETPLACE FAIRNESS ACT:  IMPACT ON NON-INTERNET REMOTE RETAILERS?

Hence, it appears that this Act would apply to any business (not just Internet Retailers) that makes sales into a state in which it does not have nexus.  Therefore, manufacturers or other non-Internet retailers who sell directly to retail customers who do not have sales representatives or any other physical connection with a state may (under this Act) be required to collect sales tax on its remote sales.

It’s not just the e-Bay sellers who would have to deal with this.  If you really want to create “market fairness,” there are two ways that are much simpler: either a straight national sales tax collection regime with uniform rules and rate where the proceeds are allocated to the states based on the sales to the state, or a sales tax based on shipping location.

 

Janet Novack,  Reverse Showrooming: Best Buy, Amazon And The Internet Sales Tax:

Traditional bricks and mortar retailers squander their immediacy edge with indifferent/uninformed sales help, who look even worse compared to the information now available on the web. But they can do well if they integrate their online and in-store services, carry enough inventory and price competitively.

 

Christopher Bergin, No Use for Useless Stances (Tax.com)

Linda Beale,  Senate did the right thing–will the House?

 

Tony Nitti, Boxer Manny Pacquiao Ducks U.S. Taxes, Will Return To Ring In China

Paul Neiffer,  Make Sure to Coordinate Estate Documents with Ag Laws

Kay Bell,  It’s property tax appraisal, and scam, time

 

It’s great to waste money, as long as it’s wasted here.  I dust off my old personal rant blog in response to this.

Going Concern, Groundbreaking CFO.com Survey Reveals Accounting Professionals Desperately Need Communication Skills.  All I can say to that is, pprdrhnt.

 

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Tax Roundup, 5/3/2013: Return of the Glaciers edition.

Friday, May 3rd, 2013 by Joe Kristan

Tax Update World Headquarters is just a few hundred yards north of the Raccoon River, where the last glacial advance ended about 14,000 years ago.

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Downtown Des Moines, Locust St., this morning.

 Today’s weather makes me wonder whether mastodons eat tulips.

 

TaxProf,  Small Business Owners Sue IRS Over ObamaCare.  I don’t think you can stop a train wreck with a lawsuit.

 

Looking for wounded jaywalkers.  Blogger and tax defense attorney Jack Townsend is looking for “Readers of this Blog Willing to Share Their Personal Experiences in the OVDP/I Programs“:

A reporter for a nationally prominent publication has contacted me to help him get in touch with people who have gone through one of the OVDI/P programs to discuss their experiences and thoughts about the programs.  If you are interested and/or willing to do that, please contact me at jack@tjtaxlaw.com and I will put you in touch with the reporter.

So maybe it’s a chance for those of you who’ve been put through the ringer for a foot-fault violation to get a little justice.

 

Janet Novack,  Pritzker Family Baggage: Tax Saving Offshore Trusts.   My theory is that many of wealthy people who favor higher taxes assume they’ll never have to pay them anyway.

Howard Gleckman,  A New Way to Address the International Tax Mess (TaxVox)

 

Peter Reilly,  IRS Troops Will Take To The Street On Seventh Day In May .  I’m guessing that Peter is referring to the 1960’s  “Seven Days in May,” about an attempted military coup in the U.S.  I’m not sure whether the National Treasury Employee’s Union, which will “take to the streets,” can pull off a coup, seeing that they pretty much run things already.

 

Nick Kasprak,  Weekly Map: Inheritance and Estate Tax Rates and Exemption (Tax Policy Blog)

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The opposite of a sales tax holiday:  Retailer Target Jumps The Gun On Sales Tax (TaxGrrrl). A South Carolina Target store probably made few friends when it started charging a higher sales tax rate a month early.

Patrick Temple-West,  State Republicans divided on tax cuts, and more (Going Concern).

Christopher Bergin, Taxes Don’t Matter Until, Well, They Matter  (Tax.com):

 

Roger McEowen, Trusts, S Corporations, The Material Participation Test and the  Medicare Passive Income Surtax

Good news!  Are you a likely tax audit target? Sequester just might save you(Kay Bell).

Paul Neiffer:  Full Season vs. Early Season Corn

Jim Maule,  A Slight Improvement in the Code Length Articulation Problem.  No, the Internal Revenue Code is not 77,000 pages.  It’s no less a monstrosity for that.

Daniel Shaviro,  Tax policy colloquium, week 13: Itai Grinberg’s “Emerging Countries and the Taxation of Offshore Accounts”

Friday Buzz from Robert D. Flach

Me:The REIT way to reduce taxes?  My new post at IowaBiz.com, The Des Moines Business Record group blog for entrepreneurs.

Going Concern,  AICPA Attempts to Tie Expired Payroll Tax Cut to Normal American Behavior.

Are you irritable? Sleeping less? Impatient with your friends? Putting on weight? Thinking about divorce? Yes? Sorry to hear, you must be going through a stressful time.

Oh, wait, are you an American? Yes?! Whew, you’re behaving normally then. If you were to read this AICPA press release, you might be inclined to believe that your take home pay being 2% lower than last year would have been the cause of all those things…

What are these “friends” of which you speak?

 

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Tax Roundup, 5/2/2013: Peter Fisher takes on The Tax Foundation. And I’m a video star.

Thursday, May 2nd, 2013 by Joe Kristan
Peter Fisher

Peter Fisher

Cage Match: Iowan Peter Fisher takes on the Tax Foundation.  Mr. Fisher has written a study for Good Jobs First, a left side advocacy group.  Mr. Fisher who shows up in The Tax Update occasionally, doesn’t care for the Tax Foundation’s Business Tax Climate Index:

The TF, on the other hand, despite claims to the contrary, ignores the consensus approach to assessing business taxes in the economic literature and attempts to portray the effect of state and local tax law on business profits in an entirely different fashion: by stirring together no less than 118 features of the tax law and producing out of that stew a single, arbitrary index number. That number turns out to bear very little relationship to what businesses actually pay.

Here Mr. Fisher makes the same mistake he makes when he defends Iowa’s highest-rate-in-the nation corporate income tax, which collects very little net revenue because it clobbers some taxpayers while paying generous subsidies to the well-connected and well-lobbied.  He concludes that means Iowa’s corporation tax doesn’t matter because of the low net collection.

A good business tax climate, to the Tax Foundation, doesn’t take money from some businesses and give most of it to other businesses; good policy is based on “simplicity, neutrality, transparency, and stability.”  I agree.

As the Tax Foundation explains in its response to Mr. Fisher:

 The problem here is that we do not claim to measure business tax burdens. We measure and rank tax structures, and this because the size of a tax is less important than the economic distortions it creates. This is a fundamental error in Fisher’s understanding of tax policy.

Mr. Fisher seems more focused on “equity,” whatever that means.  But even if you think the tax law should be used to punish the rich and reward low incomes, cross-border mobility makes state tax systems an awful place to to that.

 
Tony Nitti,  Overview Of The New 3.8% Investment Income Tax, Part 3: Gains From The Sale Of Property.   Tony discusses the ridiculous proposed rules on sales of pass-through businesses, among other things.

TaxGrrrl,  IRS Rolls Out More Proposed Regulations On Health Care As “Train Wreck” Comments Continue To Make Rounds.   “Train wreck” is a term that frequently makes the rounds in the vicinity of train wrecks.  This batch of regs covers “minimum value” for determining whether coverage disqualifies individuals from premium credits.

Trish McIntire,  First Time Penalty Abatement.  The IRS will usually abate minor penalties for first-time infractions, but they don’t like to talk about it.

 

Jen Carrigan,  Should You Expect an Audit?  A guest poster at Missouri Tax Guy’s place explains the IRS exam process.

Jason Dinesen,  Another Example of a Tax Scam E-Mail.   The IRS never contacts taxpayers by e-mail.

Kay Bell,  Tax moves to make in May 2013

 

Janet Novack,  U.S. Demands Wells Fargo Records To Identify Tax Cheats Using Caribbean Havens

Cara Griffith, Feeling the Impact of Impact Fees (Tax.com).

 

Paul Neiffer,  From 80 to 45 in 40 miles.  Temperature, not speed.  I get to meet Paul tomorrow, it should be fun.

Catch a Thursday Buzz from Robert D. Flach.

 

Video!  The Iowa Bar Association now is selling DVDs of “Notes from the Fiscal Cliff,” a January webcast I did with Roger McEowen of the ISU Center for Agricultural Law and Taxation.  The outline is here. Supply your own popcorn.

 

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Tax Roundup, 4/19/2013: IRS agents charged with scamming jobless benefits. And post-4/15 thoughts

Friday, April 19th, 2013 by Joe Kristan

More20130419-1 evidence that preparers are out of control and need IRS employees to keep an eye on them:  24 IRS Employees Indicted for Theft of Government Benefits (TaxProf).

24 current and former employees of the Internal Revenue Service have been charged for crimes relating to fraudulently obtaining more than $250,000 in government benefits.
          
          Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare, and housing vouchers. All thirteen, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits.

They may have been right about being unemployed, just wrong about the timing.

 

We have to show the government our returns, so it’s only fair:  Iowa Gov. Branstad plans to show income tax returns to reporters (AP)

Howard Gleckman,  What Ever Happened to State Tax Reform? (TaxVox)

Kay Bell,  Obama’s 2012 effective tax rate was 18.4 percent; Now what do your members of Congress pay in taxes?  Make them do their returns on a live archived webcast, with a rolling comment bar.

Peter Reilly,  How Not To Care About IRS E-mail Snooping

 

William Perez,  IRS Provides Penalty Relief Due to Boston Marathon Explosion and Storms in South and Midwest

Patrick Temple-West,  Tax extension after Boston attack, and more (Tax Break)

Russ Fox, RS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same

TaxGrrrl,  So You Missed Tax Day, What Next?

 

Andrew Mitchel,  Code §911 Foreign Earned Income Exclusion – Adverse Conditions

Freakonomics Blog, The History of Taxes

Megan McArdle,  Our Tax Code is Too Complicated. Here’s How to Simplify It. “Get rid of the corporate income tax. It’s not worth it, and there are better ways to collect the money.”

Janet Novack,  Tax Geeks: Make Tax Filing Easy, Kill The Mortgage Deduction, Tax  CPAs

Jim Maule, Tax Compliance and Non-Compliance: Identifying the Factors

Trish McIntire,  You Need the Numbers Before You Do the Return

Scott Drenkard,  Perry Calls for Reforms of Texas’ Margin Tax (Tax Policy Blog).  It could use it.

Christopher Bergin, It Just Isn’t Fair (Tax.com):

The headline producing data  in the report was that revenue loss – about $181 billion – from corporate tax expenditures in 2011 was “approximately the same size as the amount of corporate income tax revenue the federal government collected that year.” That makes a headline grabber; here would be my version: “Corporations Got More in Tax Breaks Than They Paid in Taxes, Government Says.”

It’s almost like the tax exists only so the politicians can carve loopholes for their friends.

 

Indeed.  It’s Rarely a Good Sign When a Tax Prep Business Closes Its Doors Three Days Prior to April 15th (Going Concern)

Just plead “miseducation” and leave it at that.  Lauryn Hill asks judge for leniency in  upcoming tax evasion sentencing claiming she failed to file taxes due to threats and withdrawal from society (dailymail.com.uk)

Tony Nitti,  Girl, You Know You Better Watch Out: Singer Lauryn Hill To Be Sentenced On Tax Evasion Charges

Jack Townsend, Bank Frey Executive and Swiss Lawyer Indicted

Can you blame them?  U.S. Taxpayers Buy a Lot of Weapons  (Jeremy Scott, Tax.com)
“The sum of the square roots of any two sides of an isosceles triangle is equal to the square root of the remaining side.”  Your tax filing stress probably made you smarter (Kay Bell)

How I spent April 15.  (Marketwatch, via Going Concern).  I approve of the comment at the bottom of the GC post.

Me too.  Tax Season 2013: Mostly Unpleasant, And I’m Glad It’s Over  (Jason Dinesen)

Robert D. Flach returns!  THAT WAS THE TAX SEASON THAT WAS 2013

Me: Back to work.

 

News you can use.  Hone your corporate tax evasion skills (Boston.com)

 

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Tax Roundup, 4/12/2013: Friday frenzy edition

Friday, April 12th, 2013 by Joe Kristan

20130104-1We’re down to the wire, so we’re going with a bare-bones roundup today.  Filing deadline is Monday, kids!

 

Kay Bell, 3 ways to e-pay your tax bill

Peter Reilly,  April 15 What To Do If You Don’t Have The Dough

TaxGrrrl,  Last Minute Tax Filing Tips

Russ Fox,  Bozo Tax Tip #1: Don’t Be Suspicious!

Me: Does my share of partnership debt let me deduct K-1 losses?  Yesterday’s 2013 Filing Season Tip.  One-a-day through Monday.  Today’s goes up later this morning.  Collect them all!

 

Kyle Pomerleau, TPC, What About the “Pass-Throughs?”. (Tax Policy Blog). Measuring business taxes needs to look beyond corporation taxes when most businesses are taxed on 1040s.

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Nanette Byrnes,  Middle class tax hikes loom in Obama proposal despite pledge, and more (Tax Break)

Janet Novack, Could Obama’s Plan To Curb The Boss’ Tax Breaks Hurt Workers’ Retirements?   They want you to save, unless you are too good at it.

Roberton Williams,  Taxing Millionaires: Obama’s Buffett Rule (TaxVox)  “But it turns out that setting a floor on the taxes rich people pay is not so easy.”

David Cay Johnston, Promises, Promises (Tax.com).  “Candidate Obama promised in 2008 to reform the Alternative Minimum Tax, and President Obama promised at least an honest accounting in his first budget, but his proposed budget for Fiscal 2014 is silent on the issue.”

Tax Trials,  Can the IRS Read Your Email?

Jack Townsend,  Restitution, Relevant Conduct, Counts of Conviction.  What gets counted when a judge orders a tax criminal to pay restitution?

 

Unclear on the concept:  When you steal somebody’s identity and claim their tax refund, having the refund check mailed to the victim’s home defeats your purpose.

 

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Tax Roundup, 4/10/13: Return-free filing? Mistakes not to sweat. And: W-2 Donuts?

Wednesday, April 10th, 2013 by Joe Kristan
Flickr image by Samat Jain under Creative Commons license

Flickr image by Samat Jain under Creative Commons license

Should we just get a bill from the IRS, instead of filing returns?  That’s something Janet Novack seems to be thinking about.  She has two guest posts on the issue:

Joseph Bankman, The Case For Easy, Free Tax Filing

Arlene Holen,  Five Fallacies About Return-Free Tax Filing

Some people fear return-free filing will separate citizens further from the costs of government.  I think that is caused by an income tax that now is effectively only on high-income earners.  When 51% can send the bill to the other 49%, bad policy seems inevitable.

 

Mistakes, mistakes.  The IRS has issued a list of “Common Errors to Avoid,” ably covered by Jana Luttenegger (Common Errors to Avoid in Tax Returns) and TaxGrrrl (Eight Common Tax Filing Errors And How To Prevent Them).

It makes me wonder: if there are “Errors to avoid,” are there errors we should seek out, or at least not sweat?  I can’t think of errors I’d want to make on a tax return, but I can think of some that I wouldn’t lose sleep over:

1. Forgetting to check the “presidential election campaign fund” box.  After all, your entire tax bill is basically the federal election campaign fund.

2. Misspelling the name of a stock on Schedule D.

3. Writing a “smiley face” next to the tax refund line.

4. Forgetting to update your “occupation” on the signature line when you change jobs.

Any other ideas?

 

Kay Bell, Tax returns, refunds running behind last year’s levels

Peter Reilly, GLAD Alerts Same Sex Couples To Act Quickly To Preserve Refund Rights

Clint Stretch, Are Roth IRAs Your Best Choice? (Tax.com)  I think that they are if you can’t get a deduction, but not otherwise.

Russ Fox,  Bozo Tax Tip #3: Use a Bozo Accountant!

Day traders have their own April 15 deadline.  Yesterday’s 2013 filing season tip.  Today’s tip goes up later this morning.

 

Jack Townsend, Lies, Dams Lies and Statistics – DOJ’s Promo Stats.

Jim Maule,  How To Protest a Tax: Part Two.  It involves dance.  If it makes Prof. Maule bust a move, it’s worth it!

Tony Nitti,  The Masters: A Tax Break Unlike Any Other.  The tax-free Masters windfall for Augusta homeowners.

David Brunori, Prohibition Through Taxation (Tax.com).  If you jack up taxes beyond reason, people cheat.

Howard Gleckman, An Opportunity to Really Fix Social Security (TaxVox)

 

 

No jest. Shirley man pleads guilty in multimillion-dollar tax fraud scam (Newsday)

No, it’s not me. West Des Moines Man Banned from Bar Until He Can Pay Tab (West Des Moines Patch)

 

Megan McArdle, There’s No Such Thing As A Free Lunch in Taxland.

The core problem is that the IRS cannot look into the hearts of companies and see which of them really needs to provide free lunch to their employees in order to have a healthy, vibrant company, and which of them is doing this in order to provide a tax-free boon to their workers. 

In case anyone asks, donuts are critical to a healthy, vibrant tax practice.

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Tax Roundup, 3/27/2013: Iowa leads the nation! In high corporate tax rates. And: film scam? No prize for you!

Wednesday, March 27th, 2013 by Joe Kristan

We’re number one!  Weekly Map: Top State Corporate Income Tax Rates (Nick Kasprak, Tax Policy Blog):

Via Tax Policy Blog.

Just another dubious leadership role for Iowa.

 

 

Monday Open Thread: The Tax Man Cometh(The Other McCain).  If you were tax dictator, what would be the first bad tax law to go?  I would get rid of (in order) The AMT, Section 409A on deferred compensation, and the new net investment income tax.  But there are so many worthy candidates…

 

Philip Panitz, guest-posting at Janet Novack’s blog,  How Real Estate Investors Can Protect Themselves From The IRS:

So save all your expense receipts, try to keep a log, and try to stay friendly with—and maintain contact information for—workers and tenants. You might, for example, need to call as a witness a gardener who can say he got his instructions directly from you instead of a real estate company.  And maybe the guy who is always grousing about his plumbing needing fixing or the woman who wonders why the gardener missed a spot in his watering will be asked to testify that they kvetched to you —not a real estate agent–when the toilet needed fixing.

 

U.S. film festival cancels award to UK film after tax scamPerhaps the least of actress Aoife Madden’s problems, considering the 54 month prison sentence she got out of it.

 

Jason Dinesen,  Married Filing Separately, Iowa Tax Returns & Itemized Deductions — Am I Missing Something?  On the quirks of Iowa’s separate-combined filing status.

Roberton Williams, DOMA’s Tax Hassles for Same-Sex Couples

 

Clint Stretch,  Which Kind of Imbalanced Solution Do You Want?  (Tax.com).  Mr. Stretch is, or maybe was, a career lobbyist for a national accounting firm that I once worked for.  Considering that his career involved crafting loopholes, this is a fascinating observation (my emphasis):

I am no fan of spending through the tax code. Tax expenditures are government grants with the barest of qualification criteria administered by an agency with no subject matter expertise when it comes to the purpose of the incentive.  The incentives – from business tax credits to mortgage interest deductions – may influence behavior at the margins,
but many of the beneficiaries are rewarded for doing what they were going to do anyway.  Like direct spending; tax expenditures are spending and individuals do benefit.  Although a rate reduction or a fiscally sound government might cushion the blow, reducing tax expenditures will be another spending cut that takes resources away from affected taxpayers.  We should stop talking about spending versus taxes.  Instead, we should work on how to make reasonable, holistic reductions in major areas of government influence. 

That’s why I think he must have retired.  I don’t think he could say stuff like that if he were still lobbying.

 

Joseph Thorndike : Why the Tea Party Should Support Soda Taxes.  Because it would really annoy people, leading to a tax revolt.   It sounds like an underpants gnome approach to me.

Jack Townsend, IRS Identifies Its Dirty Dozen Tax Scams for 2013

Principles of the tax law.  Heads They Win – Tails You Lose (Paul Neiffer).  The Obamacare tax on wage income cannot be offset with farm losses.

TaxGrrrl,  All I Needed To Know About Taxes I Learned From My Kids

 

No, no, that’s not how it works, Senator.  You’re supposed to give them money.  Bored Politicians Taxing Strippers (David Brunori, Tax.com)

Group that stands to benefit from government spending calls for government spending.  (Radio Iowa)

Now the IRS is in trouble. William Shatner ‘appalled’ at IRS Star Trek video spoof (Kay Bell)

News you can use.  If You’re Failing the CPA Exam, You’re Not Making the Most of Bathroom Breaks (Going Concern)

 

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Tax Roundup, 3/25/2013. Three weeks to go. And Cargo Cults!

Monday, March 25th, 2013 by Joe Kristan
Ceremonial cross of John Frum cargo cult, Tanna island, New Hebrides (now Vanuatu), 1967 (via Wikipedia)

Ceremonial cross of John Frum cargo cult, Tanna island, New Hebrides (now Vanuatu), 1967 (via Wikipedia)

Heresies of the Cargo Cult.  When some remote societies encountered the industrial world in World War II, they had trouble grasping what they were seeing.  Wikipedia explains:

Cargo cult activity in the Pacific region increased significantly during and immediately after World War II, when the residents of these regions observed the Japanese and American combatants bringing in large amounts of matériel.   When the war ended, the military bases closed and the flow of goods and materials ceased. In an attempt to attract further deliveries of goods, followers of the cults engaged in ritualistic practices such as building crude imitation landing strips, aircraft and faux radio equipment out of bamboo or whatever materials they had at hand, and mimicking the behavior that they had observed of the military personnel operating there.

While it’s easy to mock an islander for building a refrigerator-like box in hopes of conjuring up an icy six-pack, cargo cult behavior also occurs in modern societies.   Without describing it as such, tax historian Joseph Thorndike writes about the cargo cult of the 1950s, where modern policy wonks try to conjure up 1950s-style growth through a ritualistic process of duplicating tailfin-era totems.  For example, Timothy Noah thinks the crushing stated top marginal rates of that era might help generate those Happy Days results.  Mr. Thorndike sees problems with that approach:

We still don’t know if high statutory rates and (relatively) high average rates were a drag on growth. And we can’t know, because we also can’t know what growth might have been in a different tax climate.

Moreover, a range of nontax factors were probably more important in shaping growth patterns in the 1950s. In particular, the economic disruptions of World War II had left the United States in a uniquely dominant position; by one estimate, U.S. manufacturing output constituted 60 percent of the world’s total in 1950.

In other words, it takes more than a bamboo box to conjure up that beer.

After all, the tax system of the Eisenhower era was not a very good one: It paired notionally sky-high rates with a deeply flawed tax base and created distortions both coming and going.

I understand that progressives like Noah are fighting a different battle: They are trying to beat back the rate-cutting mania that often serves as a definition of tax reform these days. But I think we might take a lesson from the tax experts of the 1950s, who understood the problems bedeviling their own tax system. As economist Harold Groves said at the time, “The impression is widely shared that the Congress deliberately throws a high-rate scale to the public as a demagogic bone and then as deliberately allows escapes from taxes that makes these rates specious.”

Mr. Thorndike is more sympathetic to high rates than I ever will be.  Doing taxes for a living, I see first-hand how high rates affect behavior, and I have no patience for academics who say otherwise.  But he wisely notes that simply trying to recreate the totems of the 1950s, like high tax rates, misses all of the other things that put cold beer in the refrigerator.  Same thing goes for other 1950s fetishes like tail fins, industrial unionism and defined benefit pension plans.

 

 

To serve and protect.  Former Pittsburgh Police Chief Charged with Conspiracy, Failure to File Federal Tax Returns (FBI Press Release):

Former Pittsburgh Police Chief Nathan E. Harper has been indicted by a federal grand jury in Pittsburgh on charges of conspiracy and willful failure to file income tax returns, U.S. Attorney David J. Hickton announced today.

The five-count indictment named Harper, 60, of Pittsburgh.

According to the indictment, Harper was the chief of the city of Pittsburgh Police Department. From 2009 to 2012, he caused at least $70,628.92 in checks and cash received by the special events office of the department to be diverted to two accounts at the Greater Pittsburgh Police Federal Credit Union. Using Visa debit cards, Harper obtained more than $31,000 in ATM withdrawals and debit purchases, all for his personal benefit. Harper also failed to file federal tax returns for the years 2008 through 2011.

If he’s convicted, maybe the special events office can throw a little party for the occasion.

 

What could possibly go wrong?  James Timothy Turner was convicted last week of masterminding a cunning plan.  DothanEagle.com reports:

According to a U.S. Department of Justice press release, Turner was convicted of conspiracy to defraud the U.S., attempting to pay taxes with fictitious financial instruments, attempting to obstruct and impede the Internal Revenue Service, failing to file a 2009 federal income tax return and falsely testifying under oath in a bankruptcy proceeding.                           

The FBI began investigating Turner in 2010 after he and three other people sent packages to all 50 governors demanding they leave office.                           

Turner is the president of a group of what prosecutors called “sovereign citizens” known as the “Republic for the united States of America.”

Send “packages” to all of the governors telling them to resign?  Well, at least they weren’t trying to hide what they were doing.

Turner toured the country in 2008 and 2009 teaching seminars that instructed attendees how to submit bonds to pay off tax debt.                           

According to prosecutors, these bonds were completely fictitious and often written for amounts in excess of $1 billion.

Silly man.  Only the Federal Reserve can do that.  Unless we’re talking about the $1 trillion magic coin

 

Every theater needs a dirctor, including economic development theater.  Economic development director accuses senator of engaging in “political theater” over Orascom deal (O. Kay Henderson, via TheBeanwalker)

 

William Perez,  Penalty Relief Available for Some 2012 Federal Tax Returns

Jack Townsend,  Ethicist Question About Tax Professionals Exploiting Loopholes:

So, for those tax professionals engaging in such transactions that they know violated a known legal duty, their conduct is illegal and unethical.  For those transactions engaging in such transactions where they don’t know (perhaps are willfully ignorant) that the conduct is illegal (ultimately most of the b—-t tax shelters are found to be
illegal), then at least the ethical issues arise.  These are smart professionals, paid (supposedly) to predict what a court will do with the b—–t tax shelter.  Yet, in the prominent civil cases that swat down b—–t tax shelters, they fail miserably in their predictions.

 

Kay Bell,  A tax lawyer has ethical problems with tax loopholes

Janet Novack,  How Much Tax Will You Owe On A $320 Million Powerball Jackpot? A Lot More Than In 2012 .  I knew I should have arranged to win that Powerball last year.

Jim Maule,  Tax Meets the Chicken and the Egg

Trish McIntire,  Extensions

Patrick Temple-West,  Athletes’ tough tax bills, and more

TaxGrrrl,  Senate Passes Budget, Calls For Nearly $1 Trillion In Tax Increases

You are required to go to the party.  The Affordable Care Act Turns 3 (Richard Morrison, TaxVox).

 

The Critical Question: Who Will Play Margaret Fuller When The Movie Comes Out ?  (Peter Reilly)

Tony Nitti, IRS Employees’ Star Trek Parody Is As Wonderfully Awful As It Sounds

Russ Fox,  To Boldly Go Where No IRS Employee Has Gone Before…

You mean it’s not a documentary?  IRS Releases Gilligan’s Island Parody Training Video (TaxProf).

Frankly, they don’t give a dam. Beavers defiant after convicted of tax evasion (Chicago Tribune)

 

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Tax Roundup, 3/15/13: Corporate return day! And: Can you audit a myth?

Friday, March 15th, 2013 by Joe Kristan

Calendar-year corporation returns are due today! They are easy to extend on Form 7004 if you can’t finish them today.  If you don’t extend an S corporation return and you file late, the penalty starts at $195 for each late K-1, and $195 each for every additional month the return is late.

 

If Iowa's tax law were a car, it would look like this.

If Iowa’s tax law were a car, it would look like this.

Joseph Henchman,  Iowa House Passes Alternative Maximum Tax: Income Tax Option Clear of Carveouts (Tax Policy Blog).  Joseph has some good things to say about the Iowa alternative tax that passed the house this week (HF 478):

I’ve never filled out an Iowa income tax form but it looks like one of the harder state tax returns. Iowa allows you to deduct what you pay in federal income tax, which is nice but is that much more calculation work (and probably drives up tax rates). There are lines for the lump-sum tax, the minimum tax, the K-12 textbook credit, the school district surtax, the motor fuel tax credit, and the earned income tax credit. I’m sure each one of these has their explanations of necessity but together it sounds like a lot of paperwork, record-keeping, and Tax Filing Day frustration.

Hence, I’m impressed by a bill passed yesterday (House File 478)  by the Iowa House which would offer an alternative to all Iowa taxpayers: a 4.5 percent tax on all income above about $15,000, which no further deductions or exemptions. It’s not perfect: our friend Joe Kristan pointed out that a credit for taxes paid to another state and a deduction for federal interest are probably constitutionally required, and offsetting deductions to certain kinds of income (allowing gambling losses if you tax gambling winnings) is good policy. But as Joe said, the bill “is a welcome step towards improving Iowa’s income tax.”

I’m hoping it’s a step towards the Tax Update Quick and Dirty Iowa Tax Reform Plan.

 

 

It’s a myth, so they’re cracking down on it!

Huffington Post, The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic.

Bloomberg News, States Crack Down on Top Earners Who Flee as Levies Rise: Taxes

If they feel have to “crack down” on something, maybe there’s something to that myth.

 

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Janet Novack,  Blame Congress, As Well As H&R Block And IRS, For College Tax Credit Mess. Oh, I do!  From the article:

Far be it from me to let either the Internal Revenue Service or tax prep giant H&R Block off the hook for the current mess which has delayed refunds for more than 600,000 taxpayers claiming college tax credits by up to eight weeks. In addition to their operational missteps, both did a poor job (at least  initially) of communicating with taxpayers who desperately need those refunds to pay tuition or other bills.

But let’s put some of the blame where it rightly belongs: on the Washington politicians. For more than two decades, Congress has been expanding  “tax expenditures” with little regard for how complicated such provisions might be for taxpayers to use and for the IRS to administer,  let alone for whether they do enough good to justify their cost and the economic distortions they create.  A new 1065-page Congressional Research Service compendium lists 250 different tax expenditures. Happy reading.

Every little break like this diverts IRS resources from actually collecting income taxes and makes the income tax a little less effective and useful.  Yet Congress still sees the tax law as the Swiss Army Knife of public policy.

 

Jim Maule,  Tax Depreciation: Do the Math:

No matter how well a student in the basic tax course masters the depreciation deduction to the extent it is studied, that student knows that the total depreciation with respect to a property cannot exceed its cost. All of the students would find themselves bewildered by the proposition that depreciation deductions on a property that cost $34,799 would total $56,000.

So was the Tax Court.

 

Tony Nitti,  Golfer Sergio Garcia Comes Up Short In Tax Court, But Is The Decision A Victory For Other Athletes? He won on his endorsement royalty income, so while he may not have had an undisputed win, he did OK, like a PGA golfer who gets second-place prize money.

 

William Perez,  Delays in Issuing Tax Refunds Related to Education Tax Credits

Going Concern,  IRS Won’t Be Sorry If You Never Get Around to Claiming Your Refund.  Over $900 million in 2009 refunds will be out of reach of their rightful recipients after April 15, when the 3-year window for claiming them expires.

Trish McIntire, Don’t Lose Your 2009 Refund

 

Paul Neiffer,  Will Large Farmers Be Able to Use Cash Method in the Future?!  Farmers should get the same tax rules and breaks everyone else does, no less and no more.

Kay Bell,  Will a relationship neutral tax code save traditional marriage?.  Not every problem is a tax problem.

Howard Gleckman, The Ideological Chasm Between the House and Senate Budgets

William McBride, Dave Camp Floats a Rewrite of Small Business Tax Rules (Tax Policy Blog)

 

Jack Townsend, U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation

Brian Mahany, IRS Agent May Be Headed To Prison For Info Leak – Whistleblower Protection

Brian Strahle, State Tax Revenues:  Corporate Income Tax Not That Important?

Oh, Goody.  Applying for Obamacare Subsidies Will Be as Complicated as Doing Your Taxes (Megan McArdle)

 

Argo pay your taxes.  It turns out Iowa isn’t the only government whose film tax credits attract scammers.  From London comes this via Boston.com:

In some ways ‘‘A Landscape of Lies’’ was a typical indie film, with a tiny budget, a B-list cast and an award from an American film festival.           

What made it special is that it was created solely to cover up a huge tax fraud.

In fact, officials say, the project was a sham, set up to claim almost 1.5 million pounds in goods and services tax for work that had not been done, as well as 1.3 million pounds under a government program that allows filmmakers to claim back up to 25 percent of their expenditure as tax relief.

No word on whether Leo Bloom prepared the fraudulent returns.

 

News you can use: Polish Up Your Guccis. (Christopher Bergin, Tax.com).

Will there be tax reform? I think there has to be. But I don’t think it will look like theTax Reform Act of 1986 because, in short, it’s not 1986, and we don’t have the same problems or even the same tax system. That doesn’t mean there aren’t a lot of lessons to be learned from the ’86 experience. But I don’t think tax reform will happen soon. And a few of the reasons I think that come right out of “Gucci Gulch.”

I have a copy of Showdown at Gucci Gulch, the book about how the 1986 tax reforms were enacted.  I haven’t brought myself to open it; it seems too much like reading about my job.

 

TaxGrrrl,  Arrest of Dancing Mascot Puts Liberty Tax Wavers In The Spotlight

He should have hidden the cash across the pond.  Opening statements underway in Beavers tax evasion trial (WGNtv.com)

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Tax Roundup, 3/8/2013: IRS tackles ex-Bear Zorich. And: higher taxes, less compliance.

Friday, March 8th, 2013 by Joe Kristan

1991PacificIllegal procedure.  Former Chicago Bear Chris Zorich has been flagged.  CBS Chicago reports:

Zorich, 43, was charged Thursday with four misdemeanor counts of failing to file federal income tax returns, for the years 2006 through 2009, according to the U.S. Attorney’s office. During that time, he allegedly had an income of more than $1 million.

Federal prosecutors said Zorich was cooperating with the investigation and has agreed to plead guilty.

His lawyer says that he owes no more than $70,000 after withholding on the non-filed years is applied.

I wonder why he was charged.  While it’s a bad idea, it’s not extremely rare for people to just get behind on filing their returns.  It doesn’t usually lead to criminal charges.  Much of his income for the years at issue was W-2 income, so it wasn’t as though the IRS would miss him.

Perhaps he did something to annoy an examiner enough to call in the Criminal Division.  Maybe it’s because he is an attorney [update: he apparently never passed the bar exam].   Or maybe he’s just unlucky to be famous-enough for the IRS to use his celebrity to frighten the rest of us into getting our returns done. (Via Reason 24/7)

Update: This Chicago Tribune report suggests that self-dealing with his charitable foundation may have been a factor.

 

In other tax crime news:

Jack Townsend: Article on Deterrence Through Criminal Enforcement and Defining Tax Shelters

Miami Vice: Two Miami Officers Accused Of Tax Refund Fraud (CBS Miami)

William Perez, Tips for Preparing Form 1040-EZ

Janet Novack, IRS Yanks Criminal Amnesty Deal From Taxpayers With Secret Bank Leumi Accounts. If the IRS turns on taxpayers who turned themselves in under an amnesty, not many folks will participate in another one.

Russ Fox,  When the IRS Changes the Rules Midstream in a Legal Matter…

 

J.D. Tuccile,  As Government Grasps For Taxes, Brace for an Unwinnable War Against You (Reason.com).  It’s a long-form essay on the way getting all sorts of social services from the government doesn’t make people happy to pay their taxes.  This is interesting:

 

20130308-1

 

Those who think tax increases alone can solve our ongoing fiscal disaster are just kidding themselves.

 

Paul Neiffer,  What Are W2 Wages for DPAD?  You have to have paid W-2 wages to use the Section 199 deduction.  But they don’t all work:

These wages cannot include wages paid to your children under age 18 (if a  sole proprietor farmer) and commodity wages.  However, wages paid in cash to spouses and children over age 17 are allowed as part of these wages. 

If you are a schedule F farmer with no employees, the W-2 requirement makes the Section 199 deduction worthless.

 

Jim Maule,  Selecting a Tax Return Preparer.  All sound advice, including this:

Seventh, ask the tax professional about data security. Where and how is paper data stored while in the hands of the preparer? Where is the digital data stored? What precautions are in place to minimize the chances of a third party breaking into the office or the digital servers and obtaining information? If the individual hands over paper records without keeping copies, which is an unwise move, what happens if the tax professional’s office burns down?

Something to think about.

 

Nanette Byrnes, State defections impact U.S. interstate tax compact (Tax Break)

TaxGrrrl,  Taxes From A To Z (2013): D Is For Disaster Relief

William McBride,  Latest IRS Data Shows Taxable Returns Remain Below 1997 Levels (Tax Policy Blog).  The income tax burden falls on fewer and fewer returns.

Howard Gleckman,  Build America Bonds, the Medicaid Expansion, and Trust Between the States and the Feds

Tony Nitti,  Congress Looks To The Wealthy To Bail Out Social Security.  But the rich guy isn’t buying.

 

If you ever wonder why California is the Titanic of state governments, you might want to read Kay Bell’s latest, Tax on email suggested as way to help fund U.S. Postal Service:

Berkeley City Councilman Gordon Wozniak has tossed out the idea of an email tax to help save snail mail.

The financial straits of the U.S. Postal Service became an issue for Berkeley lawmakers when the paper mail delivery system proposed closing that northern California city’s downtown post office and selling the building.

It won’t happen, but a state where somebody who thinks it could happen can be elected to public office is pretty much doomed.

 

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Tax Roundup, 3/7/2013: Consultant says Iowa should do more of what he consults about. Also: how not to file a lawyer’s tax return.

Thursday, March 7th, 2013 by Joe Kristan

http://www.rothcpa.com/misc/20090604-1.JPGAnswering the wrong questions.  The Iowa Chamber Alliance asked a consulting firm that makes money playing the corporate location incentives game whether Iowa should sweeten its corporate location incentives.  Guess how they answered it.

From an Iowa Chamber Alliance press release:

“Iowa has a solid base of state – level economic development incentives tools upon which to build. However, to become more competitive, Iowa may wish to increase the funding level and flexibility of some of the State’s key incentive programs” states Darin Buelow, a Principal with Deloitte Consulting LLP.

It’s hard to imagine the study coming to a different conclusion considering what they were looking for:

At the request of the Iowa Chamber Alliance (ICA), Deloitte Consulting (Deloitte) benchmarked incentives programs in Iowa and in five alternate states, focusing on a high-level analysis of state-level incentive programs, their value, and overall effectiveness in attracting investors.

In other words, they were to look at whether Iowa has more and better giveaways than its neighbors.

I looked for the study in vain for any analysis of the value of Iowa’s tax credits to the economy vs. alternative uses for the funds — like lowering the tax rates of the rest of us who pay for them.  There is no mention of opportunity cost.”  In looking at the “value” of the programs, it makes unsupported conclusions like this one about the “High Quality Jobs Program:”

Considered effective and competitive in providing benefits to mitigate corporate income tax, refunding sales tax for construction and providing a supplemental refundable research credit.

Considered effective by whom?  On what basis?  It doesn’t say.

The study says Iowa should enrich its data center corporate welfare — where the rest of us subsidize the infrastructure of Microsoft and Apple.  They also recomment Iowa “consider allowing sale, refund or transfer” of tax credits.

A few years ago, after the film tax credit disaster, Governor Culver tasked a panel with reviewing the effectiveness of Iowa’s dozens of tax credits.  Their report failed to come up with a clear benefit for any of Iowa’s tax credits.  The panel also had this to say about transferable tax credits: (my emphasis)

Transferability of tax credits complicates the projection of revenues and the tracking of credits, creates uncertainty about when credits will be claimed because the purchasing entity may utilize a different fiscal year than the entity awarded the credit, and siphons resources from awarded entities through brokerage fees… Once tax credits are transferred, it creates limited recourse for the State to recover funds claimed in instances where the business awarded the original credit does not fulfill the contracted obligations or if the credit was awarded in error.  Additionally, transferability has also resulted in abuses in some tax credit programs.

It would be better Iowa to not “compete” in taxing its current taxpayers to lure and subsidize their competitors.  Instead Iowa should enact a tax system good enough that we don’t have to pay people to be our friends.   The Quick and Dirty Iowa Tax Reform Plan would be better for Iowa businesses than any number of pocket-picking tax credits.

 

Poor legal move.  From Bloomberglaw.com:

Former Kirkland & Ellis LP senior partner Theodore Freedman pleaded guilty to fraud in connection with the filing of false tax forms.

Freedman changed his plea yesterday from not guilty to guilty of four counts of tax fraud. U.S. District Judge Deborah Batts in Manhattan accepted the plea and set sentencing for Sept. 17. Freedman’s lawyers reached a plea agreement with U.S. attorneys.

Indicted in July 2011, Freedman misrepresented his income as a partner at the law firm by about $2 million, the U.S. said. He also claimed more than $500,000 in expenses for a sole proprietorship that didn’t exist, the government said.

It’s hard to imagine how he thought this would work.  K-1s get matched against tax returns, at least occasionally.  The IRS matching system is cumbersome and inefficient, but it works well enough that you can’t habitually ignore K-1s with six-figure income.  Furthermore, claiming big bogus Schedule C losses like that is practically an engraved invitation for the IRS to visit your return.

Related:  Former Kirkland & Ellis Partner Pleads to Tax Crimes (Jack Townsend)

 

The Colonel knows why your business might have to file returns in other states.  My new post at IowaBiz.com, The Des Moines Business Record blog for entrepreneurs.

William McBride, The Carried Interest Debate: Funding Government for 3.1 Hours (Tax Policy Blog).

Patrick Temple-West,  Cadbury gets tax bill in India, and more (Tax Break).

Daniel Shaviro,  Skepticism about “fundamental tax reform”

Angie Picardo,  Grads – Filing for First the Time (Missouri Tax Guy guest-post)

Brian Strahle,  D.C. Combined Reporting – Transition Rules for 3/15 and 4/15!

Janet Novack,  New IRS Data: Rich Got Richer, But Paid Lower Tax Rate As Stocks Gained

William Perez,  Child Tax Credit for 2012

 

There’s a new Cavalcade of Risk up at Health Business BlogIt’s always worth the ride at the blog world’s roundup of insurance and risk management!

 

Is that an argument for or against intelligent design?  The Sequester: ‘Designed to be Stupid’ (Cara Griffith, Tax.com).

Because they aren’t in a position to speak for themselves: Ellen DeGeneres Speaks Out For Spanish-American War Widowers (Peter Reilly). 

The Critical Question: Why Is Amy Poehler Going To Hell? And What Does Taylor Swift Have To Do With It? (TaxGrrrl)

 

 

Programming note: This site was pretty much shut down part of yesterday afternoon.  Our valiant hosting service says it was a comment spam attack on the pre-2012 archived posts.  Sorry about that.

 

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Tax Roundup, 3/4/2013: Eight years for tax shelter lawyer. Plus: employee tax fraud, employer tax bill.

Monday, March 4th, 2013 by Joe Kristan

20130304-1A federal judge Friday sentenced a key player in the once-lucrative Jenkens & Gilchrist tax shelter practice to eight years in prison.  From the AP:

U.S. District Judge William H. Pauley III sentenced 52-year-old Donna Guerin, of Scottsdale, Ariz., after she pleaded guilty to conspiracy to defraud the United States and tax evasion. He ordered her to pay $190 million in restitution besides the $1.6 million she agreed to forfeit when she pleaded guilty in September.             

Guerin, a former partner at Jenkens & Gilchrist, a Texas-based law firm with offices throughout the United States, had admitted that she helped market tax shelters from 1994 through 2004 to some of the world’s richest investors, including the late sports entrepreneur Lamar Hunt, trust fund recipients, investors, a grandson of the late industrialist Armand Hammer and one of the earliest investors in Microsoft Corp.

The biggest prosecution target at Jenkens, Paul Daugerdas, faces his second trial on the charges in September.  His 2011 trial was voided because of juror misconduct.

Jenkens was one of the big players in the tax shelter industry that sprung up among big law and accounting firms in the 1990s.  It shut down in 2007 after entering a non-prosecution agreement with the Justice Department.

Sort of related:  Ernst & Young Admits That Some of Its Partners Were Running a Tax Shelter Factory (Going Concern);  Ernst & Young Pays $123 Million, Avoids Tax Shelter Prosecution (Janet Novack)

 

Robert Goulder, Questioning the Longevity of the Income Tax (Tax.com):

Dare we attempt to guess what the income tax might look like in another 100 years? 

Personally I think it will still exist, but it will have company. The big question for policymakers is whether it should operate as a “mass” tax — as it strives to do today —  or whether it will function as a “class” tax that applies only to the upper income strata. Given that roughly 47% of American households currently don’t pay the income tax (distinguished from payroll taxes, which almost everyone pays), one could argue it is already starting to resemble a class tax. Perhaps the future is already here. 

I can state with some confidence that if there is an income tax in 2113, I won’t be preparing returns.

 

Jack Townsend,  Fraud on the Return — Even If Not the Taxpayer’s — Causes an Unlimited Civil Assessment Statute of Limitations to Apply.  This is an ugly result caused by an in-house accountant who stole funds meant for payroll taxes.  The Second Circuit overturned the Tax Court and held that the employee’s fraud meant that the employer’s statute of limitations never closed for tax assessment purposes.

 

Russ Fox has a helpful tip: A Sure-Fire Way to Get Indicted

There are many ways to get in trouble with tax law.  As I have said in the past, if you want to get indicted it’s a bit harder.  It helps to be a celebrity, have a very large tax debt, not report large amounts of funds in foreign financial accounts, or abscond with trust fund taxes.  I need to add another item to that list: File liens against IRS employees  who are investigating you.

For some reason, they respond badly to that.

 

William McBride,  BEA: Personal Income Drops 3.6 Percent in January, the Most since the Clinton Tax Increase of 1993  (Tax Policy Blog).  It wouldn’t be shocking if a lot of folks moved income up to 2012 to avoid the 2013 tax increases.

Kay Bell, Don’t forget about your traditional or Roth 401(k)

Paul Neiffer,  When an UPREIT Might Make Sense

Trish McIntire,  Catching Up On the News, a rundown of issues practitioners are running into during filing season.

TaxGrrrl,  If You Qualify, File Your Taxes For Free

Tony Nitti,  Competing Senate Bills Fail; Sequestration Is Here (For Now)

Howard Gleckman,Sequester, We Hardly Knew Ye (TaxVox)

Kaye Thomas,  The Mindbending World of Wash Sale Calculations.

David Cay Johnston, Good News for Investors and Taxpayers (Tax.com)

Martin Sullivan, Red Hot REITs Fire-up Low Tech (Tax.com)

 

Peter Reilly,  Time To Eliminate Joint Filing ? No, it’s not actually related to the next article.

News you can use.  Leff: Medical Marijuana Providers Can Beat Oppressive Federal Taxes by Operating as Non-Profits (TaxProf)

 

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