Posts Tagged ‘Jason Dinesen’

Tax Roundup, 2/1/2016: Caucus day, and other plagues.

Monday, February 1st, 2016 by Joe Kristan

20160131-1Is there such a thing as snow locusts? Today is the last day Iowa will be plagued by presidential candidates and their relentless ads and emails. Tonight, blizzard and winter storm warnings across the state.

Lots of things go into choosing a candidate. We kid ourselves if we think it is all rational. Many voters put as much thought into their political preferences as they do into choosing a favorite sports team. Most voters are much more informed about their sports teams than their votes.

But Tax Update readers are different!  You especially want to know about candidate tax policies. Fortunately, the Tax Foundation has an excellent Comparison of Presidential Tax Plans and Their Economic Effects. I like this chart they provide:

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You’ll notice that only one plan is projected to have positive economic effects while reducing the budget deficit over 10 years. I like that one.

 

Other Caucus-related links:

Tax Policy Center Major candidate tax proposals, a center-left analysis.

TaxProf, Clinton (47%), Sanders (54%) Propose Highest Capital Gain Tax Rates (Now 24%) In History

Tyler Cowen, My favorite things Iowa (Marginal Revolution). “The bottom line: Who would have thought ‘jazz musician’ would be the strongest category here?” Speak for yourself, buddy!

 

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Russ Fox, The Liberty to Commit Tax Fraud:

This story does show two things. First, requiring every tax professional to obtain a license won’t stop tax fraud. The alleged fraud here was started by an individual with a PTIN, someone who assuredly could obtain the former RTRP designation or the current AFSP “seal of approval.” Second, the Department of Justice news release notes, “In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.” This is absolutely true, and the DOJ should be commended for their work. It also shows that licensing every tax professional isn’t needed to get rid of unscrupulous ones.

Amen.

William Perez, When Does an 83(b) Election Make Sense? 

Paul Neiffer, Pre-1977 Purchases May Get 100% Step-up or Not! Involving old joint interests in property.

Kay Bell, W-2, 1099 forms delivery deadline is here

Jack Townsend, 60 Minutes Exposé on Money Laundering Into the U.S.

Jason Dinesen, Not All Donations to Charity Are Deductible. Time, for example.

Kristine Tidgren, Des Moines Water Works Lawsuit Gets More Complicated (AgDocket)

Peter Reilly, NorCal Tea Party Patriots V IRS – Grassroots Or Astroturf?

Leslie Book, Migraine Caused by Improper IRS Collection Action During Bankruptcy Stay Triggers Damages for Emotional Distress

Robert Wood, Worst Lottery To Win Is IRS Audit Lottery, So Decrease Your Odds

TaxGrrrl, Understanding Your Tax Forms 2016: 1098-T, Tuition Statement

Tony Nitti, IRS Rules On Whether Trade-In Of Private Jet Qualifies For A Tax-Free Like-Kind Exchange

Happy Blogiversary! to Hank Stern for 10 years of Insureblog.

 

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Matt Gardner, International Speedway Reaps Benefits of Revived “NASCAR Tax Break” (Tax Justice Blog). In which the Tax Justice people sctually make a lot of sense: “In the context of our growing budget deficits, the annual cost of the NASCAR giveaway is a drop in the bucket at less than $20 million, making it a small part of the $680 billion extenders package. But because its benefits are narrowly focused on a few privileged companies, the damaging effects of this tax break go way beyond its fiscal cost.”

Donald Marron, What Should We Do with the Money from Taxing “Bads”? (TaxVox)

TaxProf, The IRS Scandal, Day 996Day 997, Day 998. Day 997 links to  IRS’s New Ethics Chief Once Ordered Records Be Illegally Destroyed. These are the people who think they need to regulate tax preparers to keep us in line.

 

Scott Drenkard, David Bowie: Tax Planning Hero (Tax Policy Blog). “Taxes really matter, especially for an artist like Bowie who had a lot of options for where to reside and earn income.”

Robert D. Flach, THE TWELVE DAYS OF TAX SEASON

 

Finally, in honor of the Iowa Caucuses I quote the great Arnold Kling, who captures my feelings about these proceedings perfectly:

To me, political campaigns are not sacred events, to be eagerly anticipated and avidly followed. They are brutal assaults on reason. I look forward to election season about as much as a gulf coast resident looks forward to hurricane season.

Only the beginning of a wise and profound post. Read it all.

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Tax Roundup, 1/29/16: Iowa House passes $500,000 Section 179, but prospects bleak in Senate. And: Iowa may give guy a break.

Friday, January 29th, 2016 by Joe Kristan

Accounting Today visitors: Click here to go directly to the newsletter link on cheaper returns.

coupling20160129Accelerating to a stop. When a household is short of cash, the family usually spends less. Iowa has a different approach. They pick your pocket.

The Iowa House of Representatives yesterday voted 82-14 to retroactively couple with all of the 2015 federal tax law changes except bonus depreciation (HF 2092, formerly HSB 535). This would allow Iowa businesses to deduct up to $500,000 in annual purchases of otherwise-depreciable fixed assets under Section 179. Governor Branstad’s budget would limit the deduction to $25,000 — an unexpected departure from Iowa law for the past several years and a significant tax increase.

You would think that an overwhelming bipartisan vote in favor of the $500,000 version would foreshadow quick passage by the Senate. Alas, no.

I talked to some legislators yesterday when I participated in the Iowa Society of CPAs annual Day on the Hill. It appears that Governor Branstad and Senate Majority Leader Gronstal have a little bipartisan deal of their own to kill Section 179 coupling.

That’s not how Sen. Gronstal explains it. From the Quad City Times:

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said his majority caucus would consider what the House passed, but he expressed doubt about moving ahead with a concept at variance with the governor given a similar course of action last session for education funded ended with a gubernatorial veto.

“I don’t like doing things that I know will get a certain veto,” Gronstal said. “That doesn’t seem to me to make a lot of sense. The governor doesn’t have this in his budget.”

I came away understanding that the voice of the majority caucus is really the voice of Sen. Gronstal, and that Section 179 coupling will never come up for a vote in the Senate. I assume it is because both the Governor and the Majority Leader want the money for their own priorities: more cronyist tax credits for Gov. Branstad, and more spending for Sen. Gronstal.

That’s a crummy deal for the thousands of small businesses that suddenly will see a big unanticipated tax increase. It also seems like a deal that would be vulnerable to an insiders vs. Main Street challenge. The tax credits that the Governor wants to fund go to a narrow set of taxpayers. For example, in 2014 $42.1 million of refundable research credits went to 16 big taxpayers. That’s almost enough to pay for half of Section 179 coupling $90 million cost by itself.

Here is the complete menu of incentive and economic development tax credits in the Governor’s budget:

Iowa credits fy 2017

The refundable sales tax credit goes largely to the big data center companies Facebook, Microsoft and Google. The Enterprise Zone Housing credit and High Quality Jobs credits are big company credits that you have to through the economic development bureaucracy to cash in on. The rest of the credits are mostly for favored industries who get breaks unavailable to the much larger universe of other businesses that have to pay full freight.

It might still be possible to get the Governor and/or the Majority leader to see things differently. That will require taxpayers and practitioners to convince their legislators that small businesses and farmers shouldn’t have to stand in line behind insiders.

It’s not clear to me what form the extension will take under the Governor’s program. I was unable to confirm whether the Senate will skip 2015 conformity entirely, as outlined in Sen. Anderson’s newsletter. I have inquiries in.

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Des Moines Register, Iowa agrees to review man’s $5,000 tax refund request. Some good news in the story we mentioned yesterday of the retired maintenance man who inadvertently conceded to a $5,000 liability he didn’t owe.

 

It’s serious. You know tax season is truly underway when Robert D. Flach posts his last Buzz roundup before disappearing into his hive to make his artisanal hand-crafted 1040s. Im starting to think Robert isn’t Donald Trump’s biggest fan.

TaxGrrrl live-blogged the GOP debate last night. I just did a drive-by, myself. Literally; I drove past the venue on my way home last night. No, I didn’t have it on the radio.

Robert Wood, What To Do If IRS Form 1099 Reports More Than You Received

Peter Reilly, Tax Foundation Analysis Of Sanders Plan Only Shows Downside. On the plus side, you could worry less about your investments, as you wouldn’t have as many.

Jason Dinesen, Having Negative Taxable Income Doesn’t Mean the Government Pays You Extra

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Scott Greenberg, The Sanders Tax Plan Would Make the U.S. Tax Rate on Capital Gains the Highest in the Developed World (Tax Policy Blog).

Renu Zaretsky, No Trump, No Problem. The TaxVox headline roundup today covers Google’s tax travails, “tampon taxes,” and candidate tax plans.

TaxProf, The IRS Scandal, Day 995

News from the Profession. Life at EY Involves Food, Technical Difficulties (Caleb Newquist, Going Concern).

 

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Tax Roundup, 1/26/16: Tempt not your tax pro. And: Airbnb, Buzz, and inspiring emails from the boss!

Tuesday, January 26th, 2016 by Joe Kristan

dimeIf only she had taken an IRS-approved ethics continuing education course. Accountant charged in $1M embezzlement case (Herald-Dispatch.com):

HUNTINGTON – A local accountant is charged with 953 criminal counts accusing her of embezzling more than $1 million from at least one client’s account over a five-year period, according to criminal complaints filed by the West Virginia State Police.

Kimberly Dawn Price, 57, of Huntington, was arraigned Friday on 302 counts of embezzlement, 326 counts of forgery, and 325 counts of uttering at Cabell Count Magistrate Court.

There’s so much that has gone wrong here. For example:

According to criminal complaints, Price, while employed as a staff accountant at the Huntington-based firm Hess, Stewart, and Campbell, PLLC, was directly in charge of the account of Elizabeth Caldwell, a Huntington woman who died in the fall of 2015.

That’s a lot of authority for a staff accountant. I don’t understand, though, why anybody would give their outside accountant full access to their checking accounts. Or why any accounting firm would ever want its employees to deal with that sort of temptation. To be sure, the partners may not have known she had the client checkbook.

When hiring a tax pro, you want them to do a good job of preparing your return, helping you comply with the tax law, and getting you refunds when they are due. It’s not their job to spend it for you. They don’t need your checkbook.

 

Let us operate in your town, you’ll be glad you did. Airbnb, the online facilitator of private short-term rentals, not long ago announced that it would work with states and localities to collect lodging taxes. I suspected that they would use the lure of revenue to convince reluctant municipalities to allow them to operate. Yes, there are silly municipalities, like my own West Des Moines, who prevent people from renting their homes out for, say, the Iowa Caucus crowd.

Now Airbnb seems to confirm my suspicions with their new report, AIRBNB: Generating #2 BILLION IN POTENTIAL TAX REVENUE FOR AMERICA’S CITIES.

Just the sort of argument that carries weigh in city halls everywhere.

 

buzz20150827The bees may be quiet for the winter, but Robert D. Flach is Buzzing! Today’s Buzz covers 1095-Cs, retirement savings, state anti-fraud measures, and a certain national tax prep franchise.

Russ Fox, FTB’s New MyFTB Impresses; Will the IRS Take Heed?:

If you’re a tax professional who deals with California clients or a California taxpayer, I urge you to enroll in MyFTB. I’m very impressed. I may rag on the FTB (especially in the enforcement area) but from my point of view MyFTB is a model to be emulated by the rest of the country.

California has made it easier for practitioners to get powers of attorney online.

Robert Wood, Married Filing Joint Tax Returns? IRS Helps Some Couples With Offshore Accounts. “The new rules are a welcome change. But they should still underscore the importance of deciding which disclosure program is right for you.”

Emily CaubleReforming the Non-Disavowal Doctrine (Procedurally Taxing) “I will refer to courts’ resistance to taxpayers’ attempts to invoke substance-over-form as the ‘Non-Disavowal Doctrine.'”

Jason Dinesen, Glossary: 529 Plan. “The term “529 Plan” is a generic name given to tax-advantaged savings accounts for college expenses.”

William Perez, Tips for a Tax-Efficient Divorce, Plus a List of What to Do First

Annette Nellen, Recent Tax Law Change Cautions

Kay Bell, Arizona proposal: a state tax credit for gun classes. Tax credits. Is there anything they can’t do?

 

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Scott Greenberg, How the Tax Code Discourages Investment, in One Statistic (Tax Policy Blog). “The results are disheartening: over time, U.S. corporations will only be able to deduct 87.14 percent of the cost of investments they made in 2012, in present value terms.”

Renu ZaretskyOutlooks, Deficits, Breaks and Moves. Inversions, deficits forever, and state budget battles.

TaxProf, The IRS Scandal, Day 992

Sebastian Johnson, State Rundown 1/25: State of the States (Tax Justice Blog). “Read all about the latest tax debates in West Virginia, Indiana, Kansas, Massachusetts, and North Carolina. Plus a listing with links to State of the State addresses.”

 

News from the Profession. Confidential to a Certain Deloitte CEO: Millennials Don’t Need Any More Emails (Caleb Newquist, Going Concern)

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Tax Roundup, 1/22/16: Tax scams for tax pros. And: How Des Moines got so cool once I moved here.

Friday, January 22nd, 2016 by Joe Kristan

Accounting Today Visitors:  Click here for the post on Popular wisdom and tax rates.

 

Gone Phishing. It’s not just taxpayers that get scam emails. Scammers also aim at tax pros. For example:

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Of course the message is a fake. It was sent by the sketchy-sounding email address “info@tablerockbelize.com” and the link goes to something called “otadealsbox.com/irs.” Nothing good would happen from following that link. Be careful out there.

 

Nicole Kaeding, Map: State-Local Tax Burden Rankings for FY 2012 (Tax Policy Blog):

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While Iowa’s tax burden isn’t that out of line — it’s actually a little better than average — our business tax climate is one of the worst. It’s a result of how poorly designed Iowa’s tax system is. The good news is that there’s a lot of room to improve our tax system without increasing the overall tax burden.

 

Start your weekend right with fresh Buzz! from Robert D. Flach. Today’s links cover lots of ground on early filing, and a good explanation of why the talk of how “IRS now has six years to audit your taxes” isn’t right.

Jason Dinesen, Do I Need Form 1095-C to File My Tax Return? The next question: how many taxpayers even know to expect one?

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William Perez reminds readers to Communicate Effectively with Your Tax Preparer

Annette Nellen, Filing 2015 tax returns – help for practitioners

Kay Bell has 4 filing tips to ensure you get your tax refund ASAP

Robert Wood, What To Do If Form 1099 Reports More To IRS Than You Received

Paul Neiffer, Mr. Market Wants Its Excess Profits Back. “We know what happened after the 1970s and now Mr. Market is now trying to grab those excess profits back from farmers from the ‘ethanol’ boom.”  Of course, aging corn state politicians are fighting back by yelling at clouds.

Jim Maule, Deductions Arising from Constructive Payments. “The Tax Court explained that payment by an S corporation of a shareholder’s personal expense is a constructive distribution. It pointed out that this principle had previously been articulated by the court. Thus, explained the court, ‘It also follows that for purposes of claiming the deduction, the shareholder is treated as constructively paying the obligation.'”

Peter Reilly, Tax Planning In Bernie Sanders Land Would Feel Familiar To Elderly CPAs. Older than me, even.

E. Martin Davidoff, New Format of Notice of Intent to Levy Fails to Provide Sufficient Notice (Procedurally Taxing)

Russ Fox, Fail, Caesar! An Update. Implications for poker pros.

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TaxProf, The IRS Scandal, Day 988. “Tax Agency Erased Hard Drive Despite Litigation Hold.” Don’t try that with your tax records.

Jeremy Scott, Furor Over Extenders and Rising Deficits Disingenuous (Tax Analysts Blog), my emphasis:

So the new CBO report is something of a bitter pill for Obama. But the president isn’t to blame, according to some observers. In fact, the CBO itself points out that about half the cost of rising deficits is from tax legislation enacted since August 2015. The biggest chunk, of course, comes from the extenders compromise, which made some expiring (or expired) tax provisions permanent. That hurts the budget outlook, which always assumed expiring tax provisions would stay expired.

But extenders have never been allowed to stay expired. They are always renewed — sometimes late and sometimes retroactively, but without significant exception. And that makes the CBO’s observations about extenders deceptive. It also highlights why previous CBO projections about the deficit were always too rosy. By assuming that extenders would go away once they expired, budget forecasters were always showing too much revenue. If the CBO had used a model that assumed Congress would continually renew popular provisions like the research credit, the deduction for state and local sales taxes, and bonus depreciation, the numbers would look almost identical to what the January 19 report is showing now.

Exactly. The extenders were an ongoing accounting scam, pretending provisions that were permanent in reality would go away. “By making some extenders permanent, Congress has finally allowed the CBO to paint a more realistic portrait of the federal deficit and the long-term budget outlook.”

Matt Gardner, After Years of Shrinking, Nation’s Deficit Set to Grow in 2016; Recent Tax Cuts a Contributor (Tax Justice Blog)

 

Howard Gleckman, What Are the Consequences of a Financial Transactions Tax? (TaxVox). Aside from moving exchanges offshore, damaging markets, erasing wealth, and making it harder for the little guy to close transactions, it’s a great idea.

 

Joseph Thorndike, Do Progressives Hate Tax Reform? (Tax Analysts Blog):

The Tax Reform Act of 1986 was far from perfect, but it made good on the lower rates/broader base mantra. Almost immediately, however, both parts of the bargain began to fray; rates began creeping up within a few years, and preferences (never vanquished entirely in the first place) also began to grow. By the mid-1990s, tax reform was starting to look like a disappointment, to both liberals and conservatives.

Today, classic tax reform has little real support outside the wonk community. So it’s fair to say, as Holtz-Eakin does repeatedly, that liberals don’t care about tax reform.

But neither do conservatives.

I think that’s always true, in a way. That doesn’t mean it’s not worth doing.

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News from the Profession. Report: CPAs Exaggerate Their Success at the Bar, Pretty Much Everywhere (Caleb Newquist, Going Concern).

Fun link: How America’s Dullest City Got Cool. I think they overstate how much of the revival of Des Moines was planned by anyone, but they are right to point out home much this town has improved since I moved here in 1985 (proving that correlation is definitely not causation). Thanks to @lymanstoneky for the link on Twitter.

 

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Tax Roundup, 1/20/16: Divorce transfer foot fault wrecks Iowa ESOP. And: efficiency!

Wednesday, January 20th, 2016 by Joe Kristan

tax fairyMarriage explodes, ESOP explodes. S corporations and ESOPs are a tempting mix. To the extent an ESOP holds the shares of an S corporation, it becomes a tax-exempt for-profit business. This is almost like finding a real-life tax fairy. If any other tax-exempt entity holds S corporation stock, it will pay Unrelated Business Income Tax — a form of the regular corporate income tax — on its S corporation earnings.

These features draw tax-fairy seekers to the S corporation ESOP. For a Muscatine, Iowa chiropractor, the quest ended in both tax and romantic failure. The failure reminds us that ESOPs are not to be adopted lightly. It also shows that ESOP failures, unlike some marriages, last forever.

The chiropractor involved incorporated his practice in 1999, made an S corporation election, and immediately established an ESOP. He and his wife were the only shareholders and only ESOP participants.

The marriage broke up in 2007. In 2009, the ex-wife left the company and agreed to give up her ESOP account, then valued at $286,904.53. But they did it wrong. The Tax Court explains (citations omitted):

In addition, once a participant’s benefit becomes vested, it is nonforfeitable under ERISA. In sum, a participant in a section 401(a) plan may not assign or alienate his or her benefit, and at the same time, he or she has a nonforfeitable right to that same benefit.

Pursuant to the May 27, 2009, corporate documents, and relying upon the divorce decree, [Wife] transferred 100% of her ESOP shares and relinquished any rights she had under the ESOP. The ESOP’s June 30, 2009 and 2010, reports [*15] reflect that 100% of the shares allocated to [Wife] on June 30, 2009, were reallocated to {Husband’s] account as of June 30, 2010.

Before April 5, 2007, [Husband] and [Wife]… were also [the corporation’s] sole employees and ESOP participants. Although the 2007 divorce decree dissolved the… marriage, it is insufficient to allow the transfer of plan assets that transpired in this case. Transferring the vested shares from [Wife]’s account to [Husband’s] caused [Wife]’s ESOP account to become alienated from her after it became fully vested. By violating section 401(a)(13), the plan ceased to be qualified. Accordingly, we hold that respondent did not abuse his discretion in disqualifying the ESOP for its 2010 plan year and for subsequent plan years.

Public domain image courtesy Wikipedia

Public domain image of Phoenix courtesy Wikipedia

You might wonder why one mistake in one year wrecked everything. Judge Dawson explains:

In general, a qualification failure pursuant to section 401(a) is a continuing failure because allowing a plan to requalify in subsequent years would be to allow a plan “to rise phoenix-like from the ashes of such disqualification and become qualified for that year.”

That’s the frightening thing about going ESOP. You have to comply with extremely detailed and complex qualification rules every year, every time. This requires significant legal and consulting bills, and even then mistakes can be made. While ESOPs can be useful in the right situations, you have to live with serious compliance costs and risks.

In this case, I’m only surprised that the ESOP lasted as long as it did. Section 409(p) imposes a both the UBIT and a 50% excise tax when “disqualified persons” receive an ESOP allocation. Related taxpayers who own more than 10% of the S corporation, or 20% with family members, are “disqualified persons.” In this case the couple owned 100% of the corporation. The case is silent on this issue, but I don’t understand how this structure could have worked even before the disqualification in light of the Section 409(p) rules. The case does say that they terminated their S corporation in 2005, which would have solved the 409(p) problem after that date.

This is the fourth ESOP disqualification the Tax Court has decided involving the individual named as trustee in this case, who I believe had an Iowa-based practice. This continues Iowa’s unhappy history of involvment in bad ESOPs.

Cite: Family Chiropractic Sports Injury & Rehab Clinic, T.C. Memo 2016-10.

 

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William Perez, Secure Ways to Send Tax Documents to Your Accountant. It is reckless and dangerous to send pdfs of your W-2s, 1099s, etc. as an unencryped e-mail attachment. William offers good advice on how to do it right.

Jason Dinesen, Glossary: Compilation. “In the accounting world, the term “compilation” refers to formal financial statements prepared by a public accountant.”

Robert Wood, IRS Forms 1099 Are Coming, The Most Important Tax Form Of All.

Robert D. Flach, 2015 INFORMATION RETURNS. Robert offers a handy chart of the various information returns, except for K-1s.

Russ Fox, Texas Attorney General: DFS Illegal in Texas. “Texas’s Attorney General, Ken Paxton, issued an opinion today that says that daily fantasy sports (DFS) is illegal under Texas law.”

 

 

Illustration for early draft Bernie Sanders tax plan.

Illustration for early draft Bernie Sanders tax plan.

Water is wet. Bernie Sanders Is Proposing Really Big Tax Increases (Howard Gleckman, TaxVox).

It is hard to grasp the enormity of the tax increases Bernie Sanders is proposing, how far out-of-step he is with recent economic history in the U.S., and what a stunning contrast he presents with Republican presidential hopefuls.

I love when “enormity” is used correctly unintentionally.

While Sanders describes his top rate as 52 percent, top-bracket taxpayers would be paying up to 58 percent rate (the 52 percent base rate, plus the 2.2 percent health premium, plus the Affordable Care Act’s 3.8 percent surtax on investment income, which Sanders would keep).

Be happy he doesn’t take more, kulaks!

Peter Reilly, Bernie Sanders Tax Plan Moderate On Top Income Tax Rate. Well, I suppose compared to beheading high bracket taxpayers, confiscating their estates, and selling their families into slavery, it is.

 

 

Career Corner. Accountant Worked One Day, Allegedly Embezzled $15k (Caleb Newquist, Going Concern). Efficiency!

 

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Tax Roundup, 1/18/15: Popular wisdom and tax rates. And more Monday goodness!

Monday, January 18th, 2016 by Joe Kristan
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Math is hard.

Vox Populi. It’s a slow tax news day, with schools and government offices closed and e-filing not beginning until tomorrow. That enabled me to spend a little time with Peter Reilly’s coverage of Disparate Tax Views At Opening Of Bernie Sanders Worcester Office. Peter chatted up Sanders volunteers about their views on the proper top marginal tax rates. He was surprised by his first conversation:

Deb Bock, my first victim, said 15%.  I hadn’t gotten into the listening groove yet so I failed to hide my shock and asked her why she wasn’t backing Ben Carson – “Because he is an idiot.”

Those of us who live in the tax world can easily forget how poor the knowledge of actual tax law, including rates, is among the general public. The Tax Foundation has printed some fascinating surveys about what people think tax rates should be. Here is some information from their 2009 survey, the most recent available on the Tax Foundation website. It shows that Peter’s friend Ms. Bock is close to the  consensus view of what the effective combined federal, state and local effective rate on taxable income should be: 15.6%:

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Source: Tax Foundation

Of course, effective rates are much higher than this, as The Tax Foundation explains in its 2015 Tax Freedom Day explanation:

In 2015, Americans will pay $3.28 trillion in federal taxes and $1.57 trillion in state and local taxes, for a total tax bill of $4.85 trillion, or 31 percent of national income.

That’s just about twice the average effective rate that people think should apply. Because the tax law is very progressive, many taxpayers pay a much higher percentage.

Still, politicians like Mr. Sanders continue to get votes by convincing us that taxes are too low. Of course, they do so by telling people that those taxes will be paid by somebody else.

Related:

Tony Nitti, Bernie Sanders Releases Tax Plan, Nation’s Rich Recoil In Horror. “Democratic Presidential hopeful Bernie Sanders took a break from yelling at clouds long enough to release his tax plan today, and it’s, how should I put this…aggressive.”

Me, The rich guy can’t pick up the tab.

 

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Kyle Pomerleau, Congressman Nunes Introduces Business Tax Reform (Tax Policy Blog):

Details of the plan:

-Cutting the corporate income tax to 25 percent;

-Limiting the top tax rate on non-corporate business income to 25 percent;

-Allowing businesses to deduct investment costs when they occur (full expensing);

 

-Eliminating most business tax credits and many deductions;

 

-Moving to a territorial tax system like most developed nations;

 

-No longer letting nonfinancial businesses deduct interest costs but no longer taxing them on interest receipts;

 

-Applying the same tax-rate limitation to individuals’ interest income as now applies to their capital gains and dividend income; and

 

-Eliminating the individual and corporate alternative minimum taxes (AMTs).

This would be a big improvement.

 

Russ Fox, Those “Extra Services” Were Great for Business. A massage business.

Jason Dinesen, Choosing a Business Entity: Wrap-up Post

Robert D. Flach, COME IN TO THE OFFICE AND WALK OUT WITH CASH!

Kay Bell, Finding a charity to volunteer with on MLK Day 2016

Jack Townsend, Prosecuting Corporate Employees and Officers, with Focus on Swiss Banks. “Corporations cannot go to jail; individuals can.”

Jim Maule, Birthdays in the Tax Law (and Obituaries?).

Actually, the tax law uses the phrases “attain the age of” and “attain age” far more often that its occasional use of the word “birthday” but few of us talk about “attaining an age” when we are conversing about the anniversaries of our arrival on the planet.

When was the last time you ever said “attain” out loud?

Robert Wood, IRS Lax Controls Enable Targeting Based On Religion + Politics, Claims Report

 

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Len Burman, Ted Cruz’s Business Flat Tax is a VAT. “It’s also important to point out—as Cruz did in the debate—that his plan also repeals the payroll and corporate income tax.”

TaxProf, The IRS Scandal, Day 982Day 983Day 984.

Tax Justice Blog, Obama Policies Curbed Tax Break for 400 Richest Americans; Choice of Next President Will Reverse or Continue This Shift. Once again Tax Justice Blog entirely misses the point that it’s never the same 400 people who pay tax in any given year.

Career Corner. Let’s Review: Side Gigs, Email, Lunches and Logos (Caleb Newquist, Going Concern).

 

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Tax Roundup, 1/8/16: A look at Iowans and their federal income taxes.

Friday, January 8th, 2016 by Joe Kristan

20160108-1aSoak the rich? Iowa’s soaking in it! The Iowa Legislative Service Bureau this week published a report on the federal taxes paid by Iowans in 2013. It’s a useful reminder that the politicians running around Iowa talking about how “the rich” pay no taxes are talking nonsense.

This table covers a lot of ground:

 

 

 

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Source: Iowa Legislative Service bureau. Click to enlarge.

Note that for the >$1 million filers, the biggest category is “other income.” Given that they also pay the highest effective rates, it’s clear that this isn’t tax-preferred capital gains or dividends. It’s K-1 income from partnerships and S corporations, or business income from farms or schedule C businesses. In other words, its taxes paid by employers. When you soak the rich, you are soaking employers.

It’s also clear that “the rich” in Iowa are paying a bigger share of their earnings than everyone else. If we count “the rich” as taxpayers with gross income over $200,000, their average federal tax rate as a percentage of gross income — before any deductions — is 22.4%, compared to 7.3% for all other taxpayers.

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Tax Update Chart using Iowa Legislative Service Bureau data. Dollars in millions.

The taxes paid at the top end are a much larger share of the tax paid than of their share of the income: they have 20.8% of the gross income, but pay 44.7% of the taxes. While some politicians may say that’s not enough, remember that much of that is income earned by employers from their businesses. If they have to pay more to the IRS, that’s money they don’t have to hire people, give raises, or grow their business.

Another lesson is that even with the disparity towards the high end, 59.2% of the taxes paid are paid by those in the $25,000-$200,000 gross income range. When the politicians promise to give you stuff paid for by someone else, they lie. They intend to take your money, give you some back, and expect you to thank them.

 

Last night I gave a presentation to IMA chapters across the state over the Iowa Cable Network, mostly on the newly passed extenders bill. You can download the Powerpoint slides I used here.

 

It’s Friday! It’s Buzz Day! At Robert D. Flach’s place. Links all around, including commentary on Turbo Tax ads.

Russ Fox, Substance Over Form. “So today’s petitioner, who represented himself in Tax Court, won that he was an independent contractor, not an employee”

TaxGrrrl, When It Comes To Taxes, Where Not To Win Powerball.

Robert Wood, To IRS, ‘Willful’ Means Penalties Or Jail

Jason Dinesen, How Often Should a Budget Be Updated?

Kay BellRecently issued tax identity theft PINs are valid for 2015 filings despite wrong date in IRS letters to taxpayers

 

 

Alex Durante, New NBER Paper Underscores Need for Corporate Integration (Tax Policy Blog). By “corporate integration, they mean “stop taxing corporation income twice.”

For the convenience of the politicians all concerned how corporate taxes have declined as a share of all federal taxes, they illustrate the obvious:

c corp share of entities

The high C corporation rate and the second tax imposed when corporate earnings are withdrawn as dividends or cashed out on a share sale explain why people set up their businesses in other ways.

 

Howard Gleckman, If Banning Negligent Low-Income Households From Taking Tax Credits Is Such a Great Idea, Why Stop With Them? (TaxVox). Good point.

TaxProf, The IRS Scandal, Day 974. Today’s link discusses the proposal abandoned by the IRS yesterday to make charities collect social security numbers of their donors.

 

If you are a regular reader, you know better than to click on the link if you get an email like this:

HRscamemail

Be careful out there, people, and be smart.

And have a great weekend.

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Tax Roundup, 1/5/16: Start your year-end planning today! And: private tax audits for fun and profit!

Tuesday, January 5th, 2016 by Joe Kristan

IMG_1182Welcome to 2016. We’ve just finished another round of 2015 year-end planning. It’s too soon for most of us to be working on our 2015 filings, given the need for 1099s, W-2s, K-1s, etc. But it is a good time to start getting things in order for 2016.

Too many people want to know the last day they can do something for their tax planning. It’s better to worry about the first day to do something. Many tax moves are best done at the beginning of the year. If you fund a tax-deferred account at the beginning of the year, you start sheltering the investment income from taxes 15 1/2 months sooner than somebody who waits until the end of the year.

Here are a few 2016 tax planning moves you can make right now:

Fund an IRA. You can fund a 2016 IRA to the extent of the lesser of your 2016 earned income or $5,500 – or $6,500 if you are going to be 50 years old by year-end. You don’t have to wait until you have earned that $5,500 or $6,500; if you are still working, you’ll get there. And don’t forget a spousal IRA, same limits.

Health Savings Accounts for 2016 can be funded up to $6,750, or $7,750 if you will reach age 55 by year-end.

A 55 year-old working couple with a high-deductible health plan can stash $20,750 in tax-deferred IRAs and HSAs today and shift the earnings on those funds to the non-taxable category now, instead of waiting until April 2017. Not only do they start their tax savings right away, but they aren’t tempted to spend that money between now and then.

While Section 529 plans can’t generate deductions like HSAs and traditional IRAs, they do shelter investment earnings like HSAs and IRAs, and they have more flexible contribution limits. The IRS explains:

Contributions can not exceed the amount necessary to provide for the qualified education expenses of the beneficiary. If you contribute to a 529 plan, however, be aware that there may be gift tax consequences if your contributions, plus any other gifts, to a particular beneficiary exceed $14,000 during the year.

Taxpayers filing in Iowa can deduct their contributions to the College Savings Iowa Section 529 plan up to $3,188 per beneficiary, per donor on their Iowa income tax return. A married couple funding plans for their two children can therefore deduct up to $12,752 in 2016 CSI contributions.

So start that 2016 year-end planning right away!

 

Tax Analysts reports ($link) that a Chicago Whistleblower Has Filed 938 FCA Tax Cases, Attorney Says. It quotes the director of the Illinois Department of Revenue, Connie Beard, talking about False Claims Act lawsuit trolling:

Beard told the lawmakers that the suits “are not true whistleblower lawsuits,” wherein an insider who has knowledge of a company’s fraudulent behavior seeks to report it to the state. “These are lawsuits that simply accuse business taxpayers, big and small, of incorrectly collecting and reporting tax,” she said.

As if Illinois wasn’t hopeless enough.

 

nytchart20151229-7Scott Hodge, IRS “Fortunate 400” Report Shows Evidence of Significant Income Shifting to Avoid Fiscal Cliff Tax Rate Hikes (Tax Policy blog). They show how taxpayers shifted income to beat the 2013 tax hikes:

Finally, we get to the bottom line and can see that taxable income declined 23 percent in 2013 to $85 billion from $111 billion in 2012.

So what explains this? Well, the more interesting narrative to come out of the IRS report is the evidence of income shifting in 2012 as the 400 wealthiest taxpayers anticipated the eventual tax increases on personal and investment income that would result from the fiscal cliff tax legislation.

Nearly all the major sources of income for these 400 taxpayers were up significantly in 2012 compared to 2011, as they pulled income from the future into a lower-tax year…

The lesson here is that high-income taxpayers have considerable flexibility as to how and when they report income. Headlines reporting that the rich are paying higher average tax rates as a result of the fiscal cliff deal don’t really tell the whole story.

People aren’t stupid. If they have a choice between recognizing income in a low-tax or a high-tax year, a sensible person picks the low-tax one. As the biggest source of income of the “400” is capital gains, there was a lot of pressure to beat the 2013 rate hikes from 15% to 23.8%.

Related coverage here.

 

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Robert D. Flach gets 2016 started with a bang Buzz! A tremendous link fest to start they year.

William Perez, How Soon Can We Begin Filing Tax Returns?

Andrew Mitchel, Flowchart – Section 267(a)(2) & (3) Related Party Matching Rules (International Tax Blog). Andrew’s charts are a wonderful resource.

Annette NellenTop Ten Items of Tax Policy Interest for 2015 – #10. The “gig economy.”

Kay Bell, 2016’s first tax tip: Filing season starts on Jan. 19

Jason Dinesen, Choosing a Business Entity: LLC. “LLCs provide legal protection much like a corporation, but LLCs are easier to form and are generally easier to administer.”

Jack Townsend, Judge Criticizes Prosecutor’s Use of Language Directing Secrecy for Receipt of Grand Jury Subpoena. “I hope that all readers of this blog know that grand jury proceedings are generally secret and the grand jurors and government actors in the process must keep them secret.  FRCrP 6(e)(2), here.  But the obligation of secrecy is not imposed on witnesses before the grand jury.”

Jim Maule, Taking (Tax Breaks) Without Giving (What Was Promised). “Too many tax breaks are handed out in exchange for promises by the recipients to do something beneficial for the community at large.” Once the politicians issue the press release and cut the ribbon, they have what they want, and they don’t much care what happens next.

Peter Reilly, Family Partnership Valuation Discounts Approved By Tax Court. A big year-end Tax Court case is discussed.

Leslie Book, NY Times Article Today Highlights Why People Pay Taxes as Well as Some of My Favorite PT Posts of 2015 (Procedurally Taxing)

Robert Wood, 2016 Brings IRS Power Over Passports, Use Of Private Debt Collectors

TaxGrrrl, 100 Things You Absolutely Need To Know About Money Before You’re 35

Tony Nitti, Ben Carson Releases Tax Plan, Promises End To Mortgage Interest, Charitable Contribution Deductions.

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TaxProf, The IRS Scandal, Day 967Day 968Day 969Day 970Day 971.

Howard Gleckman, What Can Congress and President Obama Accomplish in 2016? Pray they don’t define “accomplish” the same way.

2015 top news from the profession. Going Concern Editor’s Picks for 2015: Relationships at Work, Bad Auditing, Women in Accounting and More (Caleb Newquist, Going Concern)

Russ Fox, My Day on Jury Duty. Congratulations to Russ on getting it out of the way January 4.

 

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Tax Roundup, 12/29/15: No year-end basis, no S corporation loss. And: ACA 1095 deadlines extended.

Tuesday, December 29th, 2015 by Joe Kristan

S-SidewalkBasis or bust. With the re-enactment of bonus depreciation for 2015, some S corporations find themselves with taxable losses for 2015. That won’t do much for the 2015 tax returns of S corporation shareholders who have no basis in their stock at year-end. While they also have to get by the “at-risk” and “passive loss” limits, they don’t even get to those problems without basis.

A taxpayer’s initial basis in an S corporation is the amount paid for the stock. It is increased by capital contributions and by undistributed income of the S corporation. It is reduced by distributions of S corporation earnings and by S corporation losses. If there have been 2015 distributions, they count before the losses do.

A shareholder with no stock basis can still get deductions by loaning money to the S corporation by year-end. The loan has to meet the at-risk rules (it can’t be funded by another shareholder or by the corporation, for example), but if it meets those requirements, it can create basis for S corporation losses. But don’t do anything hokey like making a loan on December 31 and having the corporation repay it on January 3.

It’s a trap! Well, it doesn’t have to be, but remember that any losses you take against a loan reduce the basis of the loan. That means that if the loan is repaid before the losses are restored by S corporation income, the repayment will be taxable gain to the extent of the unrestored losses.

This is another installment of our 2015 year-end planning tips series running through December 31. Collect them all!

 

1095-C cornerIRS delays due dates for 1095-B and 1095-C reporting2015 is the first year many employers are required to file a new form documenting insurance coverage, or offers of coverage, for their employees. Apparently many employers are still scrambling to figure out how to comply with the complex rules, because yesterday the IRS announced (Notice 2016-4) a delay in the deadlines for providing these forms to employees and to the IRS. A summary:

2016-4 deadlines

Employers are encouraged to file under the old deadlines if they can, but they now have a blanket extension, with no need to file any extension request.

While the IRS will be processing forms starting January 16, this announcement tells us that millions of taxpayers will lack the forms they need to properly report their ACA tax credits or penalties for inadequate coverage. The IRS says that employees can rely upon “other information received” from employers or insurers, and do not have to amend returns if the 1095s they receive later show that their original amounts are incorrect. What could possibly go wrong with this? Aside from rampant errors and outright fraud, I mean.

We are now approaching six years since the enactment of the ACA, and it’s still a mess.

Related: Russ Fox, IRS: We’ll Trust You on Health Insurance for 2015 Because… “We won’t have delays regarding filing returns because taxpayers haven’t received Forms 1095-B or 1095-C as long as they’re aware of their health insurance coverage. That’s a very good thing for all.”

 

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If you are trying to lose weight added by holiday treats, go to Robert D. Flach’s place for a “slender” Tuesday Buzz!

TaxGrrrl, 12 Days Of Charitable Giving 2015: Red Paw Emergency Relief Team

Robert Wood, House Oversight Probes Hillary Speech Fees To Clinton Foundation. The assignment of income rules only apply to little people.

Leslie Book, PATH, CDP Venue and Berglund v Commissioner, A Recent Tax Court Case Where Venue Matters (Procedurally Taxing)

Jason DinesenFrom the Archives: Taxation of Emotional Distress Payments

Kay Bell, 10 tax-saving things to do by December 31

Jana Luttenegger WeilerLast Minute Tax Extenders – 2015 Edition (Davis Brown Tax Law Blog)

William Perez, Protecting Americans from Tax Hikes Act of 2015

Annette Nellen, Top Ten Items of Tax Policy Interest for 2015 – #6 and #7. Includes coverage of the return due date changes enacted this year.

Me, Forget April 15. Well, don’t, actually, but Dec. 31 matters more. My latest at IowaBiz.com, the Des Moines Business Record Business Professionals’ Blog.

 

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TaxProf, The IRS Scandal, Day 964.

Renu Zaretsky, Bans, Subsidies, Searches, and Bubbles. Today’s TaxVox headline roundup covers new EITC restrictions and Nevada’s corporate welfare cornucopia for Tesla, among other morsels.

Stephen Entin, Disentangling CAP Arguments against Tax Cuts for Capital Formation: Part 4 (Tax Policy Blog). “Most major tax bills of the last thirty years have provided serious tax reductions or refundable credits (resulting in negative taxes) for lower income families. These are extraordinarily expensive, but do next to nothing to promote capital formation to raise productivity, wages, and employment.”

 

Caleb Newquist, Opening Day of Tax Season Less Than a Month Away (Going Concern). “Anyone with a PTIN is due to report on January 4.” Haven’t renewed your PTIN yet? Get on it!

 

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Year-end tip: The Iowa Student Tuition Organization Tax Credit

Thursday, December 24th, 2015 by Joe Kristan

20151224-1If you’re in a generous mood on Christmas Eve but want more out of your charitable gift than a straight-up deduction, consider a gift to an Iowa Student Tuition Organization. A gift to an STO yields a 65% non-refundable Iowa tax credit, in addition to the federal charitable deduction. You don’t get an Iowa charitable deduction, but that trades an 8.9-cent benefit for a 65-cent tax benefit, so that works.

Student Tuition Organizations exist to help make private K-12 schools affordable for lower-income families. Iowa has 12 STOs, listed here.

The credit is capped annually, though, so some STOs may have already used up their 2015 credits, and you would have to wait until 2016 to get one. Eligible donors get a certificate with a unique identification number that they use when they claim the credit. 

More information is available from Jason Dinesen or the Iowa Alliance for Choice in Education.

Programming note: The Tax Update is taking it easy the rest of this week. Tax Roundups resume Monday, but check back every day the rest of the year for another installment of our 2015 year-end planning tips series

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Tax Roundup, 12/23/15: The wisdom, or not, of paying taxes by year-end. And: Deep thoughts at Think Progress.

Wednesday, December 23rd, 2015 by Joe Kristan

dimeIs it wise to prepay deductible taxes? Paying 4th quarter estimated taxes before December 31 is a standard piece of the year-end tax planning toolkit. Sometimes taxpayers go further and pay in December all of their taxes that would be due in the following April. Is it wise to pay all of your taxes 3 1/2 months early to move a deduction up a year?

The first question you have to answer, with regard to payments of state and local taxes deductible on your federal return, is whether you will be paying alternative minimum tax this year or next year. For example, a taxpayer with an unusual lump of income this year who waits until next year to pay state taxes may trigger AMT next year, wasting those state tax deductions. On the other side of the coin, taxpayers who are in AMT this year get no value from prepaying deductible taxes, so they might as well put the money to work until the taxes are due.

If the taxes are just as deductible in either year, it’s a time value of money question. What is the present value of spending a dollar now to get a fraction of that back as a tax benefit a year earlier? I’ve run some numbers, using the top Iowa marginal tax rate and the rates at the different federal brackets:

2015 year-end payments pv2

This shows a benefit at all brackets from prepaying estimates due in January, but prepaying taxes due in April only makes sense at higher brackets, and it never works to prepay September property taxes in the prior year if AMT is not a factor.

This is another installment of our 2015 year-end planning tips series

 

Think Progress is an openly partisan agitation outfit, so we shouldn’t expect it to know much about taxes. Still, it is a regular source of talking points for a certain breed of politicians who promise to spend everything on everyone, all to be paid for by someone else. That makes it worthwhile to occasionally correct it for saying something half-baked like this (my emphasis):

There may be some truth to the, as no one has accused Apple of doing anything illegal. But while Cook has advocated for lowering the corporate tax rate and closing loopholes, corporate taxes are already a shrinking portion of the government’s revenue, getting replaced instead by payroll taxes paid by working people.

Yes, corporate taxes are a shrinking portion of government revenue. But it’s not because the corporate tax law has suddenly become lax. It’s because most businesses are no longer taxable as corporations in the first place.

entity forms chart

Source: Tax Foundation

The 1986 tax reforms made it sensible for most closely-held businesses to be partnerships or S corporations. Unlike C corporations, which pay corporation taxes, these “pass-through entities” don’t pay taxes; instead, the income is reported on their owners’ 1040s.

Think Progress says the C corporation taxes are being replaced by “payroll taxes on working people.” That’s demonstrably wrong. C corporation taxes are being supplanted by business taxes paid on 1040s, which are generally paid at high tax brackets. Perhaps Think Progress has developed a strange new respect for hard-working high-bracket individuals.

Tax foundation Distribution of Federal Taxes in 2014

Chart Courtesy Tax Foundation

Cracking down on C corporations, as Think Progress advocates, will do nothing but confirm the trend away from C corporation taxation. I suppose then they’ll just continue the beatings until morale improves.

Related: Individual Tax Rates Also Impact Business Activity Due to High Number of Pass-Throughs (Scott Hodge, Alex Raut)

 

WOWT.com, Former Omaha IRS Agent Arrested for Tax Fraud Scheme. And yet we are told that these people need to regulate preparers to stop tax fraud.

 

Jared Walczak, States Lag Behind Federal Government on Small Business Expensing (Tax Policy Blog). “Forty-five states and the District of Columbia allow first-year expensing of small business capital investment under Section 179. Of those, thirty-four states are in conformity with the now-permanent $500,000 federal expensing level.”

William Perez, How Do You Claim a Sales Tax Deduction on Your Federal Taxes?

Annette Nellen, Top Ten Items of Tax Policy Interest for 2015 – #3. Thoughts on the Quill decision.

Kay Bell, Home energy tax breaks are extended, just in time for the arrival of, for many, an unusually warm winter

Jack Townsend, U.S. Taxpayer Seeks Declaratory Judgment that Goevernment Must Prove Willfulness for the FBAR Willful Penalty by Clear and Convincing Evidence. Given the stakes, it seems only fair, but the IRS prefers to be able to cause financial ruin with cloudy and unconvincing evidence.

 

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Jason Dinesen, From the Archives: Taxpayer Identity Theft, Part 2

Jim Maule asks Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit? I say its a revenue grab combined with moral preening.

Stephen Olsen, Summary Opinions for November (Procedurally Taxing). A roundup of tax procedure headlines.

Robert Wood, 5 Things To Know About Year-End’s Massive Tax Bill

TaxGrrrl, Real Housewife Teresa Giudice Released From Federal Prison

Tony Nitti, Moving? Don’t Forget The Tax Deduction. “At 23 years old I packed up my life, and in a move made popular by members of the witness protection program, fled New Jersey for the quiet of the Colorado mountains.”

Robert D. Flach talks about priorities in A YEAR-END TAX QUESTION FROM A CLIENT

 

Cheer up! Social Security is Still Going Broke (Arnold Kling)

TaxProf, The IRS Scandal, Day 958

Howard Gleckman, Trump Would Slash Taxes for the Top 0.1 Percent By An Average of $1.3 Million, Add Nearly $10 Trillion to the Debt (TaxVox)

 

Thanks a bunch, Prof. Avi-Yonah. CBS News:  Vanguard Investors, Your Fund Fees Could Quadruple If Michigan Tax Prof Reuven Avi-Yonah Is Right (TaxProf). A great example of how with a little corporation-bashing, busybody do-gooders would screw millions of small investors.

 

Holiday Giving News from the Profession. This Flask-Calculator Is the Perfect Gift for the Accountant Who Drinks Everything (Caleb Newquist, Going Concern)

 

 

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Tax Roundup, 12/17/15: President supports extenders; bill stops IRS from taxing political donations as gifts. And: More ACA stuff!

Thursday, December 17th, 2015 by Joe Kristan

whitehouse logoWhite House announces support for extender bill. Things seem to be falling into place for passage of the extender bill with an announcement of support from the White House.

The bill has to pass Congress first, but Tax Analysts reports ($link) that passage is eased by splitting the extender bill from the “omnibus” spending bill:

House Speaker Paul D. Ryan, R-Wis., said he expects the House to vote on the extenders package on December 17 and an omnibus spending bill, also introduced as an amendment to H.R. 2029, on December 18.  GOP leaders apparently decided to split the bills into two separate amendments to generate enough support for passage in the House. The spending bill may lose votes from conservative Republicans while the tax bill may lose votes from House Democrats. Those concerns are not shared in the Senate, where Democrats like both bills.

Losing votes from House Democrats doesn’t threaten the extender bill, as there are so few of them. So House vote tomorrow.

 

20150925-2Extender bill ends attempts to tax political donations as gifts. Before it was chastened by the Tea Party scandal, the IRS made moves to treat contributions to Sec. 501(c)(4) political organizations as taxable gifts. The legal justification for treating contributions to independent organizations was weak to begin with, but a provision in the extender bill (Sec. 408) settles the issue going forward by explicitly excluding such contributions from gift tax effective for gifts made after enactment.

What about old gifts?

Nothing in the amendment made by subsection (a) shall be construed to create any inference with respect to whether any transfer of property (whether made before, on, or after the date of the enactment of this Act) to an organization described in paragraph (4), (5), or (6) of section 501(c) of the Internal Revenue Code of 1986 is a transfer of property by gift for purposes of chapter 12 of such Code.

So the IRS could continue to assert its weak position that pre-enactment gifts are taxable. I don’t think they will.

Related: TaxProf, The IRS Scandal, Day 952. Today’s link goes to an op-ed complaining that the extender bill will make it too difficult for the IRS to restrict First Amendment rights by starting gift tax audits of political donors.

 

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IRS addresses more HRA and ACA questions. Yesterday the IRS issued Notice 2015-87, a 31 page bag of buzzwords addressing ACA issues. Disappointingly, the Notice doesn’t back off the extreme position that reimbursement of individual medical insurance premiums paid by employees will normally trigger a $100 per-day, per-employee penalty.

The bill does clarify that “opt-out” payments are normally not subject to the penalty, though they are taken into account to determine the employee cost in calculating whether an employer’s coverage is “affordable” (Q&A 9 of the Notice).

 

Paul Neiffer, Looks Like $500,000 Section 179 is Now Permanent. “One of the key provisions for farmers is to make Section 179 permanent at the $500,000 level.”

Kay Bell, Tax extenders 2015 winners and losers. “It’s a Christmas miracle! Weeks are left in 2015 and Congress has reached a deal on the 50+ tax breaks known as extenders.”

Howard Gleckman, The Hidden Agenda Behind This Year’s Tax Extender Bill (TaxVox):

What is going on here? Why would House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell put so much effort into making permanent a package of tax breaks that could be back on the chopping block a year from now?

Like much of what happens in Congress, it’s all about budget accounting. And in this case, it turns out you can buy bigger tax rate cuts by repealing permanent tax breaks than by swapping out temporary versions of the same subsidies.

I’d like to think this is all a 3-D chess play by geniuses to move the country closer to a better tax system, but I have nagging doubts, somehow.

Jason Dinesen, Glossary: Casualty and Theft Loss. “A casualty and theft loss is a deduction allowed on tax returns for people who suffer property damage or theft.”

Andy Grewal, The Management Fee Waiver Regulations May Be Doomed (Procedurally Taxing). “Prop. Reg. 1.707-2(b)(i) may reflect a good policy (a debatable point), but it does not square with the law.”

Robert Wood, Michael ‘The Situation’ Sorrentino’s Accountant Admits Tax Fraud Conspiracy. All over America, millions who don’t watch television ask, “who is Michael Sorrentino?”

 

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David Brunori, Some things worth pursuing in 2016 (Tax Analysts Blog). I don’t agrere with his support for the earned income tax credit, but he is correct on the importance of independent state tax tribunals, which Iowa lacks. And I think this is absolutely right:

Oppose tax incentives. I know — incentives are seemingly invulnerable in our political system. But the difficulty of the task should not deter the righteous. Tax incentives violate every principle of sound tax policy. They are unnecessary. They are unfair. Liberals should hate them because they waste money that could be used for schools and healthcare. Conservatives should hate them because they are the antithesis of a free market.

The cronies and insiders partnership of Central Iowa disagrees, which pretty much proves David correct.

 

I’m pretty sure the opposite wouldn’t help. Could Having a ‘Pro-CPA Culture’ Backfire on Accounting Firms Desperate for Talent? (Caleb Newquist, Going Concern).

 

Today is the big Star Wars release day. Blogger Syd Gernstein explains that WE HAVE TAXES TO THANK FOR STAR WARS:

To summarize briefly: This first episode of Star Wars started with a tax dispute. The “trade federation” did not like the fact that the republic had imposed a tax on its trade routes, and protested the tax by staging a blockade, and ultimately an invasion, of the peaceful planet of Naboo. Dissatisfied with the Republic’s inability to defend the planet, Naboo’s queen—at the urging of the planet’s then-Senator Palpatine—moved for a vote of no confidence in the Galactic Senate’s Chancellor. Palpatine then exploited the sense of sympathy for Naboo to get himself elected as Chancellor. Over the course of the next movies, Palpatine would then, essentially, transform the republic into a dictatorship, declare himself Emperor, convince Anakin Skywalker to become Darth Vader, build a couple Death Stars, and, evidently, abolish the galactic yellowpages, because it otherwise surely would have occurred to Darth Vader to streamline his epic quest to find his son, the “young Skywalker,” by looking under “S.” 

It’s a plot line convoluted enough to be worthy of The Code.

 

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Tax Roundup, 12/15/15: Is today the day we see an extender bill? And: carrybacks and other legends.

Tuesday, December 15th, 2015 by Joe Kristan
This happened in 2008. It's raining again.

It’s flooding again!

We may see extender legislation today. Or tomorrow. Or maybe never. Congressional negotiators haven’t given up on passing a “permanent extension” of some of the perpetually-expiring tax breaks. The breaks died at the end of 2014, and Congress needs to re-enact them to enable taxpayers to claim them on 2015 returns.

The only people who really know the status of negotiations are in Washington back rooms. The Hill, a publication whose business is to haunt those back rooms, reports that negotiations on a permanent extender package are coming to conclusion at the same time as a trillion-dollar “omnibus” spending bill:

The debate has become intermingled with the battle over the separate tax extenders proposal. After a series of short-term extensions, lawmakers in both parties want to make many of those tax breaks permanent. But Pelosi and House Democrats say the tax package, in its current form, is both too big and tilts too heavily in favor of corporations at the expense of individuals and federal revenues.

Pelosi has pushed to index the child tax credit to inflation, which Republicans oppose. Even then, Pelosi has warned, the package would have trouble finding support among House Democrats.

Tax Analysts reports ($link)

Senate Finance Committee Chair Orrin G. Hatch, R-Utah, told reporters December 14 that the omnibus bill and the extenders bill could pass Congress by December 18 — or December 17, “if we are lucky.” He added that he thinks the two will remain separate, but that ultimately, that is up to congressional leadership.

Hatch said he was still hoping for a permanent extenders deal. “We are assiduously working on it. I think we will get it done. I think it will be fair to both sides,” he said. “And hopefully it will be a very important bill.”

According to The Hill, House Speaker Ryan promises to offer legislative language three days before any vote. The report that may see such language today, with a vote Thursday or Friday. If a bill becomes available, I will update this post with a link.

Failure is always an option. There seem to be many ways to sink a permanent extender bill. A two-year extender bill has been introduced as a Plan B, but even that isn’t a sure thing. A Senate staff member was at the Ames tax school yesterday, and he said he expects a two-year extender bill, for what that’s worth. I still think that is the most likely result, but I would sure prefer to be proved wrong by a permanent bill.

Related: Paul Neiffer, One Year Later:

We are hearing from various sources that the tax extender bill will not be done until likely this Saturday which will be December 19.  Last year, the bill was signed on December 19, so if Congress passes it on the 19th and heads home, the tax extender bill this year will be even later than last year.  However, the good news that we continue to hear that it will be a two-year extension for both 2015 AND 2016.

A one-year bill is plan C. Complete failure is Plan D.

 

Jared Walczak, Corporate Net Operating Loss Carryforward and Carryback Provisions by State (Tax Policy Blog):

Net operating loss deductions are important because many businesses operate in industries that fluctuate greatly with the business cycle. They might experience considerable profits one year, but then be in the hole the next year. Net operating loss carryforwards and carrybacks help those businesses to “smooth” their income, so that the tax code is more neutral with respect to time.

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Iowa unfortunately doesn’t allow carrybacks. This increases the possibility that a corporation could pay state taxes in excess of its income over its lifetime. An easy example would be a corporation that makes $1 million in year 1, loses $2 million in year 2, and closes. The corporation would have paid around $100,000 to IOwa in year 1 and would never get it back, even though its lifetime income was negative.

Iowa does allow a 20-year loss carryforward, if the loss corporation lives that long.

 

buzz20150827Buzz! Today’s Buzz roundup from Robert D. Flach covers extenders and reasonable comp, and offers a trivia challenge and a Trumpian devotion.

William Perez, Moving? How to Tell the IRS about a Change of Address

Russ Fox, If a Professional Prepares Your Return, Are You Exempt from the Accuracy-Related Penalty? “If you’re signing a return with $1 million of income, isn’t it worth more than a few seconds to review it? I would certainly think so.”

Jason Dinesen, The EIC Isn’t the Only Place Tax Fraud Happens. “EIC clients who are trying to commit fraud are indeed dangerous to us tax pros … but so is the small business client who’s trying to commit fraud.”

 

Robert Wood, Foreign Banks Pay To Avoid Tax Evasion Charges As More Americans Disclose Offshore Accounts.

Peter Reilly, Solid Due Dilgence Shields Trucking Heirs From IRS Attack. “The Tax Court decision in the case of the John Alterman Trust  is one of the best positive examples I have seen of Reilly’s Fourth Law of Tax Planning – Execution isn’t everything, but it’s a lot – in a while.”

Christine SpeidelReview of the First Tax Year of the Affordable Care Act and Look Ahead: Part 1 (Procedurally Taxing).

Matt McKinney, 3 key differences between an Iowa LLC and a corporation (IowaBiz.com)

It’s not just Iowa. Another CO-OP foundering. “As the list of failing CO-OPs continues to grow, it’s beginning to seem like the model may, in fact, be fatally flawed.”

21st Century tax problems. Lawsuit Alleges IRS Denied Deduction For Fertility Treatments Because Being Gay Is A ‘Choice’. (TaxGrrrl)

 

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Donald Marron, Should Governments Tax Unhealthy Foods and Drinks? (TaxVox). “We find that a US tax on sugar-sweetened beverages would be highly regressive, imposing more than four times as much burden, relative to income, on people in the bottom fifth of the income distribution as on those in the top fifth.”

Sin taxes are sacrifices imposed on the poor to flatter the consciences of the nosy rich.

TaxProf, The IRS Scandal, Day 950

Joseph Thorndike, How Profit Sharing Sent Captain Ahab in Search of Moby Dick (Tax Analysts Blog). While Ahab had his problems, ERISA compliance wasn’t one of them.

News from the Profession. Don’t Worry Tax People, You Have a Lame Hashtag, Too (Caleb Newquist, Going Concern).

Every Bride dreams of this. Tax Profs Christine Allie  And Stuart Lazar Find Love At AALS, Marry At Tax Court (TaxProf)

 

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Tax Roundup, 12/11/15: Extender battle extended to next week; efforts to make some breaks permanent continue. And: Tina, Accidental American.

Friday, December 11th, 2015 by Joe Kristan

20151211-1Extending the week. Congress had been scheduled to go home today, but now it looks like the session will drag through the weekend while they try to agree on spending and tax legislation.

Whither the extenders? The Hill reports that hope lives for permanent enactment of several of the important Lazarus provisions that have repeatedly died – most recently at the end of 2014 — and that need to be revived to be used on 2015 returns. From the report:

I understand the current projection is for the House to post the omnibus Monday and vote on it by Wednesday,” Senate Republican Whip John Cornyn (Texas) told reporters. “The goal is to wrap things up by Wednesday evening.”

He said the omnibus would be linked to a package extending expiring tax provisions. Senate negotiators say that package is likely to make several important tax breaks open-ended and place a moratorium on two ObamaCare taxes.

“They seem to be linked, although I can’t tell you whether it will be one vote or two votes, but clearly they’re part of the overall negotiations,” he added.

What would be made permanent? At least the R&D Credit and the $500,000 Section 179 deduction. These would be accompanied by permanent, and maybe increased, earned income credits, child credits, and education credits. How likely is it? The Hill says “Senate sources on Thursday said the chances of reaching a deal on a major tax deal were greater than 50 percent.”

Nothing is certain, though. Tax Analysts reports ($link) Permanent Tax Extenders Deal Continues to Elude Lawmakers. It quotes Rep. Steve Israel (D-N.Y.) as insisting that the child credit be indexed to inflation, and that other obstacles to agreement remain:

Israel noted that ultraconservative Republicans object to including renewable energy tax credits and family credits in the extenders deal, so votes from House Democrats are still essential regardless of what deal Senate Democrats reach with Republicans.

Here I’ll just note that there appear to be no such thing as “ultraliberals” to reporters, while “ultraconservatives” abound.

Rep. Bill Flores, R-Texas, chair of the House Republican Study Committee, said December 2 that his group believes that renewable energy credits should be phased out. “Special interest giveaways like the wind production tax credit and the solar investment tax credit have overstayed their welcome and their usefulness,” he said.

Flores’s group also does not support family credits, which he called “stimulus legacy items” that should not be renewed without heightened verification and oversight.

These obstacles could result in another two-year extension of the expiring provisions, though complete failure remains an option.

Prior coverage:

Ways and Means Chair introduces a Plan B as permanent extender talks continue.

Extender week?

 

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Just how stupid is U.S. foreign taxation? This stupid. A heartbreaking and infuriating piece by Allison Christians shows the brain-dead Kafkaesque nightmare created by Congress and enforced by IRS to “crack down” on overseas taxpayers: Understanding the Accidental American: Tina’s Story. It tells the story of a 62 year-old woman who was born in the U.S. while her parents were students, but has lived all but her first six months in Canada. Ms. Christians makes a powerful case:

Related to that point, I think a taxpayer has a right to learn that her whole financial life is subject to harsh deterrents and penalties solely for the reason that it is not located in the United States, even and especially when she is not located in the United States. Again, I think she has the right to learn that not from blogs or word of mouth, but from the government that seeks to impose these rules on her. I think she’s got a right to be informed about a life-destroying force like PFIC by the government that seeks to unleash that force upon her, and a right to avoid that punishment by making different choices. And if that government can’t or won’t bother to inform her, or address the utter absurdity of stripping a person of their life savings as a consequence of inadequate form filling, I think she’s got a reason to complain that this is a pretty unfair administration of a very complex law — a law designed for millionaires with expensive tax accountants and not for Canadians carefully saving for retirement and not hiding anything from anyone.

When the IRS and the politicians crow about how effective their foreign enforcement efforts are, remember that a lot of it is coming out of the pockets of taxpayers like Tina.

(Via the TaxProf).

 

Kristine Tidgren, Iowa Court of Appeals Says LLC Corporate Veil Properly Pierced (The Ag Docket).

The court found that the trial court’s finding of inadequate capitalization was supported by substantial evidence. In so finding, the court noted the defendants’ history of moving funds between related entities, the lack of LLC assets and employees, and its failure to reduce losses to the plaintiff, despite knowing its funding was inadequate.

This sort of ruling will make businesses leery of using Iowa entities. An appeal to the Iowa Supreme Court is likely.

 

buzz 20151023-1Friday means Buzz day for Robert D. Flach. Today he covers the legislation requiring IRS to use private debt collectors, preparer regulations and more.

Jana Luttenegger Weiler, Delinquent Taxes May Mean No Passport. “ Imagine the problems for a taxpayer who is unaware of this new rule and not finding out until being stranded in the midst of traveling.”

Jason Dinesen, Choosing a Business Entity: Determining S-corporation Reasonable Salary. “A salary that’s considered reasonable for one corporation may not be reasonable for another corporation.”

Leslie Book, Tis the Season For Tax Procedure Legislation (Procedurally Taxing).  “Under the new legislation, the failure to file penalty may not be less than the lesser of $205 or 100 percent of the amount required to be shown as tax on the return (it used to be $135 or 100%).”

Robert Wood, Three Moves In December To Save Taxes Next April

TaxGrrrl, How Answering A Simple Question Makes You An Easy Target For Identity Thieves

 

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TaxProf, The IRS Scandal, Day 946

Nicole Kaeding, Proposed Tax Increases in Alaska. Alaska may get an income tax.

Steven Rosenthal, Hillary Clinton Proposes Tough New Curbs on Corporate Tax Inversions (TaxVox). The “beatings will continue until morale improves” approach.

News from the Profession. Grant Thornton Hoping to Bring Soul-Crushing Disappointment to Charlotte Hornets With New Sponsorship (Caleb Newquist, Going Concern).

 

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Tax Roundup, 12/9/15: Ways and Means Chair introduces a Plan B as permanent extender talks continue.

Wednesday, December 9th, 2015 by Joe Kristan

20151209-1Slow train to Extenderville. The House Ways and Means Chairman has introduced a two-year extender bill (H.R. 34) as Plan B as negotiations for permanent enactment of some temporary tax provisions continue. A summary of the bill is here. The bill would retroactively revive dozens of the Lazarus provisions that expired at the end of 2014. These include:

-The $500,000 limit for Section 179 deductions for otherwise capitalized capital expenditures. The limit will otherwise be $25,000.

-The research credit.

-Bonus depreciation

-The ability to roll up to $100,000 from an IRA directly to charity without it going through the 1040 first.

-The five-year “recognition period” for S corporation built-in gains.

The bill also includes substantial permanent restrictions on the spin-offs of corporate real estate into Real Estate Investment Trusts, along with some minor reform of the special “FIRPTA” withholding tax rules on foreign real estate.

The push for a longer-term extensions isn’t dead yet, though. The Hill reports that Hopes rise for major tax package:

Sen. Ron Wyden (Ore.), the senior Democrat on the Senate Finance Committee, painted an optimistic picture during a private meeting Tuesday of Senate Democrats.

“I think it went through a trough this weekend, and then, maybe, early yesterday afternoon a bit of a breakthrough,” said Sen. Tim Kaine (D-Va.). 

The core of a bigger deal would indefinitely extend the research and development tax credit and the Section 179 deduction for small-business expensing, two Republican priorities that have support from pro-business Democrats.

It would also make open-ended expansions of the child tax credit, the earned income tax credit and the American opportunity tax credit, central pieces of President Obama’s 2009 stimulus package.

The President has not committed to signing a either a permanent bill or a  temporary expiring provisions bill, so there’s no guarantee anything will happen. While they have always eventually passed an extender bill during this administration, failure remains an option.

Related: What are Real Estate Provisions Doing in the Latest Tax Extenders Bill? (Scott Greenberg, Tax Policy Blog). “All in all, there’s not much of a justification for the existence of FIRPTA in the first place.”

 

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Robert D. Flach, FOR MY FELLOW TAX PROFESSIONALS – A SPECIAL REQUEST. Robert would like to see a unified advocacy organization for tax pros.

TaxGrrrl, Cloudy Security: What Your Advisor Doesn’t Know About Cloud Computing Could Hurt You. Using a cloud service provider doesn’t waive your obligations to protect client data.

Kay Bell, California has $28 million in unclaimed state tax refunds

Jason Dinesen, Glossary: Draws. “In tax terminology, the term “draw” refers to money taken out of a sole proprietorship by the proprietor, or out of a partnership by a partner.”

Keith Fogg, Requesting an Offset Bypass Refund and Tracing Offsets to Non-IRS Sources (Procedurally Taxing). “Under the right circumstances the IRS will apply administrative procedures to override the general rule required by IRS 6402 to offset the refund of a taxpayer to satisfy an outstanding liability.”

 

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Hank Stern, UHC Doubles Down on Comp (Insureblog). United Healthcare is losing money on its ACA exchange policies, so it no longer is paying brokers to sell them. I’ve never heard of such a thing, and it is compelling evidence that the economics of Obamacare are unsustainable.

Dave Nelson, The human element of information security (IowaBiz). “Social engineering is nothing more than a hacker attacking a human rather than a computer.  They use their knowledge of human behavior to con a user into giving them information over the phone, clicking links in emails or giving them physical access to systems or data.”

Jack Townsend, One More Bank Obtains NPA under DOJ Swiss Bank Program

TaxProf, The IRS Scandal, Day 944. A fellow law professor shows a thin skin.

Howard Gleckman, Bush’s Tax Plan Would Add $6.8 Trillion to the National Debt, Benefit High-Income Households (TaxVox).

 

Career Corner, Accounting Firms Should Get Rid of Managers (Going Concern). If your firm has some to spare, send them my way.

 

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Tax Roundup, 12/3/15: Bedbugs and Cadillacs, and tax uses for old-fashioned index cards.

Thursday, December 3rd, 2015 by Joe Kristan
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Drive all night. Mr. Charley told me so. An old joke says that you should spend for nice wheels because after all, while you can’t drive a house, you can always sleep in a car.  A case in Tax Court yesterday involves a taxpayer who may have taken that advice to heart. Fortunately, he also took to heart the tax rules that require you to document your business miles.

The taxpayer, a Mr. Charley, had a business (“LubriDyne”) that involved devices used to clean hydraulic oil used by injection molders. He bought a used Cadillac with a trunk big enough to hold his demonstration equipment and traveled in it far and wide, according to Judge Paris (my emphasis):

The most effective way for Mr. Charley to pitch LubriDyne was to drive to clients and demonstrate how the equipment worked. He began most trips from his home where he officed and stored his equipment. All of Mr. Charley’s business trips were made in the Cadillac. Many of LubriDyne’s clients were within a four- to five-hour radius of Mr. Charley’s Missouri home although he also visited clients in Colorado, California, and Wisconsin. If Mr. Charley did not return home at the end of each day, he would either spend the night in his car or drive through the night.6When he did stay overnight somewhere, he stayed with friends at their houses. Mrs. Charley did not accompany Mr. Charley on any of his business trips in 2010.

Footnote six explains the aversion to motels:

6 Mr. Charley testified that petitioners had spent $2,500 to rid their home of bed bugs after one hotel stay. Since then, he does not stay at hotels when he travels.

Whether or not you sleep in your car, the tax law requires extra substantiation for travel expenses. From the Tax Court opinion (citations omitted):

Under section 274(d), a taxpayer must satisfy strict substantiation requirements before a deduction is allowed. To deduct expenses related to travel, meals and entertainment, gifts, or listed property, the taxpayer must “substantiate by adequate records or by sufficient evidence corroborating the taxpayer’s own statement”: (1) the amount of the expense (i.e., mileage); (2) the time and place of the expense; (3) the business purpose of the expense; and (4) in the case of entertainment, the business relationship between the taxpayer and the person being entertained. Listed property includes passenger automobiles. To satisfy the requirements of section 274(d) by adequate records, a taxpayer must maintain records and documentary evidence that in combination are sufficient to establish each element of an expenditure or use.

Flickr image courtesy dave_7 under Creative Commons license.

Flickr image courtesy dave_7 under Creative Commons license.

This means the “Cohan Rule,” which enables courts to estimate expenses that are otherwise inadequately documented, cannot be used for car expenses. The IRS said Mr. Charley’s substantiation fell short. The Tax Court explained the taxpayer travel records:

Mr. Charley recorded the point-of-contact, telephone number, date he visited the client, and the client’s business address on an index card. Each index card was created at the time of the travel to that client. Although the mileage from Mr. Charley’s home to each client was not included on the index cards, most of his client’s business addresses included the city and State where the client was located. Some of the index cards record visits to multiple clients in the same geographical area.

The opinion doesn’t say why the IRS objected to the records — perhaps because he didn’t keep an actual travel log in the car? In any case, Judge Paris said the records were good enough (citations again omitted):

The Court finds that Mr. Charley substantiated that he had business mileage expenses for 2010 through his index cards and testimony — although not the amount reported on petitioners’ return.While Mr. Charley’s travel schedule may have been extreme, such extremity is not a bar to deducting otherwise properly substantiated expenses.

Mr. Charley left from his home office to begin each business trip. He would return home that day, drive through the night to return home the following day, or continue to another client in the same geographic location as the first client on the  business trip. Mr. Charley’s index cards contain the business address for almost every client his visited in 2010. Allowing Mr. Charley the mileage for the shortest routes between his home office and his clients’ addresses, the Court finds that petitioners are entitled to car and truck expenses for 13,731 business miles for 2010.

While fewer miles than claimed on the return, it was 13,731 miles more than the IRS allowed.

The Moral: You have to be able to substantiate your travel to deduct it, but there’s more than one way to skin a Cadillac. While IRS loves auto logs, a detailed calendar  or a smartphone app capturing the same information will work. So will old-fashioned 3×5 cards.

Cite: Charley, T.C. Memo 2015-232.

 

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Gang Truce. Congress Reaches Deal on Five-Year Highway Funding Bill (Kyle Pomerleau, Tax Policy Blog). I find bipartisanship often is as helpful to the rest of us as an agreement to split crime proceeds between rival street gangs. The Highway bill is that sort of bipartisanship, with awful revenue raisers including a provision to revoke passports of “delinquent” taxpayers.

Anybody who has worked with the IRS knows that IRS recordkeeping is only getting worse. It can take years to fix an IRS mistake. Inevitably, some taxpayer will fall victim to a computer burp while overseas and be stranded and unable to sort out the mess for weeks. I just hope it’s a Congressman.

 

Robert D. Flach, YEAR-END AND HOLIDAY CHARITABLE CONTRIBUTIONS. “You can no longer say you put a five or ten dollar bill in the collection plate each week.” Not if you want a deduction, anyway.

Russ Fox, Third Party Transcript Requests Reportedly Will No Longer be Processed by the IRS. ” This policy has not been officially published anywhere by the IRS, but based on IRS actions it appears that this policy was put in place because of identity theft concerns.”

Robert Wood, EU Hunts McDonald’s No-Tax Secret Sauce, Could End Love For Tax-Free Royalties

 

Keith Fogg, Legitimate Claim of 5th Amendment on Tax Return Should not Result in Frivolous Return Penalty (Procedurally Taxing). “Citing the 5th amendment on a tax return is something that a tax protestor might do which is why such an assertion makes the list, but it is also something that someone with a legitimate fear of prosecution should do.”

Jason Dinesen, Glossary: Section 179. “As usual, Congress continues to dither on any tax extender bill for 2015.”

Paul Neiffer, A Slow Slog to the Finish Line on Section 179

Jack Townsend, In Summons Enforcement Proceeding, Court Rejects Taxpayer’s Lack of Possession Defense For Foreign Account Documents

Kay Bell, December! Time for shopping, holiday parties and taxes! A good discussion of some standard year-end planning techniques.

 

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Roberton Williams, The ACA Penalty Tax Is Going Up If You Don’t Get Health Insurance. (TaxV0x).

Peter Reilly, What Art Of The Deal Tells Us About Donald Trump And His Tax Views

TaxProf, The IRS Scandal, Day 938

 

The Critical Question. What’s Next for Microsoft After Some Expensive Table Pounding? (Tax Analysts Blog)

News from the Profession. Fake Occupants Caused Some Problems in Grant Thornton’s Audit of Assisted Living Concepts (Caleb Newquist, Going Concern). Yeah, fake customers are probably not a good thing to find in an audit.

 

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Tax Roundup, 12/2/15: A defender of tax credits makes his case. Also: escalating the war on offshore taxpayers.

Wednesday, December 2nd, 2015 by Joe Kristan

 

20120906-1Bribe them and they will come. The Atlantic asks Why Are There So Many Data Centers in Iowa?. “When I’ve asked data center operations managers, the answer has varied from approximately forty characteristics to a blunt four: ‘Networks, land, power, and taxes'” By “taxes,” that generally means “tax incentives,” or special breaks unavailable to the rest of us.

In a post at IowaBiz.com, Brent Willett makes an unabashed argument for more of the same in Economic development has an image problem (IowaBiz.com). It’s an interesting piece. Its premise is that people think that special tax deals to lure companies are shady, but that we would feel otherwise if incentive boosters just made a better case.

For an attempt to make the case that incentives are a good thing, the post is  short of actual evidence. It instead makes flat assertions that incentives are necessary and proper, and are obviously good because everybody does them. For example (emphasis in original):

Incentives play a fundamental role in securing job- and wealth-creation projects for communities in every corner of this country and in many countries of the world. This is pure, unadulterated fact.

If it were pure unadulterated fact, you might think that it would be easy to marshal some data that says so. Yet in the only attempt ever made by Iowa to quantify the value of its dozens of tax credit giveaways, by a blue-ribbon committee appointed in the wake of the Iowa Film Tax Credit fiasco, failed to identify a single tax credit that clearly was worth more than it cost.

The two magic words omitted by defenders of tax credits are “opportunity cost.” They point to projects that receive tax credits, assert they would not have happened anyway, and ignore the idea that the money used for the credits would have been used elsewhere. They also ignore the cost to all businesses of the tax law complexity and high rates that inevitably accompany special interest tax breaks.

It’s not just accidental that tax incentives have a bad image. They are like a guy who takes his wife’s purse to the bar to buy drinks for the girls. The girls might accept the free drinks (development success!), but it doesn’t help the person who foots the bill. Nor is it impressive, and any of the girls won over by this tactic aren’t likely to be real prizes. In any case, his image is unlikely to be helped by a better explanation when his wife finds out.

Related: Local CPA Firm vows to swallow pride, accept $28 million

 

Best done by not giving them in the first place. States Can Avoid the Fiscal Risks Tax Incentives Create, Pew Report Says (LexisNexis Legal Newsroom).

Jim Maule, Tax Credit Giveaways Don’t Deserve Credit, “If the Michigan tax credit had done what it was promised to do, the increased tax revenues should have more than offset the cost of the credit. But that hasn’t happened, as evidenced by the budget deficits that were spiraling out of control on account of the tax credit giveaway.”

 

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Andrew Mitchel, The Escalation of Offshore Penalties Over the Last 20 Years. An excellent summary of the unconscionable increase in foot-fault penalties for paperwork violations of foreign reporting rules. He describes the same “violations” taking place in 1995 and now.

In 1995, the individual was only required to file two forms (the FBAR and Form 5471) and would be subject to penalties totaling $2,000. In 2011, the same individual was required to file six forms (the FBAR, Forms 3520, 3520-A, 5471, 8865, 8938) and would be subject to penalties totaling $70,000.

Read the whole thing.

Peter Reilly, IRS Trying To Make It Harder To Qualify As Real Estate Pro. An excellent, in-depth discussion of a taxpayer victory in the eternal IRS war against deducting real estate losses.

William Perez, Tips for Green Card Holders and Immigrants Who are Filing a US Tax Return

Kay Bell, Charitable donation tax deduction rules apply on Giving Tuesday and year-round. A good summary of rules on year-end charitable giving.

Amanda Klopp, A Snow Holiday? Not if the IRS Can Help It. (Procedurally Taaxing).

TaxGrrrl, Congress Moves Towards Granting IRS Authority To License Tax Preparers. “Representatives Diane Black (R-TN) and Pat Meehan (R-PA) have introduced H.R. 4141, the Tax Return Preparer Competency Act.”  When taxwriters demonstrate competency, then they can complain about preparers.

Russ Fox, My Love/Hate Relationship with the FTB. “Yet for all the excellence in how the FTB communicates some of the FTB’s practices leave a lot to be desired.”

Robert D. Flach, NEW JERSEY LLC FAQ

Tony Nitti, Top Ten Tax Cases (And Rulings) Of 2015: #6 – More Bad News For The Marijuana Industry.

 

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Jeremy Scott, Congress Gives Up on Paying for Extenders . . . And That’s Fine (Tax Analysts Blog). “Taking a few of the most popular extenders off the table by making them permanent would only help with a limited legislative calendar, which could give some juice to tax reform efforts or at least end the silly end-of-the-year, Mock Turtle-like dance Congress has performed for most of the last 30 years.”

Renu Zaretsky, The Case of the Mislabeled ABLE Account (TaxVox). “Here’s the catch: There’s a good chance that by the time she reaches 18 the value of her account will exceed $102,000. If her nest egg tops that amount, the state would suspend her SSI benefits until her account fell below that threshold.”

TaxProf, The IRS Scandal, Day 937.

Richard Phillips, Congress Should Embrace the International Consensus to Crack Down on Corporate Tax Avoidance (Tax Justice Blog). Um, no.

News from the Profession. Tax Nerds Set Record Straight on Tax Code vs. NFL Rulebook Complexity (Caleb Newquist, Going Concern).

 

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Tax Roundup, 11/30/15: Solar-powered tax fairies, and other signs and wonders.

Monday, November 30th, 2015 by Joe Kristan
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Flickr image courtesy Ashley Van Haeften under Creative Commons license

Tax Fairy signs and wonders. The time is always right for a revival for the Cult of the Tax Fairy, the wonderful mythical being that can make your taxes go away with a wave of her wand, for an entirely reasonable up-front fee. These revivals are often accompanied by signs and wonders, several of which appear in request for a federal injunction filed earlier this month with respect to a solar energy operation. Being alert for these signs and wonders can save would-be Tax Fairy believers from a bad experience when the IRS folds up the revival tent.

The injunction request complaint deals with tax benefits alleged for “solar thermal lenses.” As I understand it, the basic technology is familiar to every little kid who has used a magnifying glass to burn things, but on a bigger scale. The real technical magic lies in the tax breaks.

We’ll discuss the tax breaks are described in the injunction request, which we should remember are the government’s allegations. The defendants may dispute the allegations, which have not been proven in court. The alleged facts do include signs and wonders often seen in Tax Fairy revival tents, though, and may be of instruction to those not wanting to be burned by Tax Fairy false prophets.

Tax benefits as a multiple of the cash paid. Real tax benefits rarely exceed the amount paid out for them. A deduction by definition provides a tax benefit of less than the amount paid — the tax rate times the amount of the expense. A tax credit could in theory provide more than a 100% benefit when combined with a deduction — the Iowa school tuition tax credit can come very close — but even that is a rare creature. By leveraging through borrowings, the up-front payment can be minimized, but real borrowings have to be repaid.

According to the government’s injunction request, the defendants sell solar lenses at a stated price of $3,500. But only $105 is due on the down payment, with $945 due the following year, after the tax fairy has magically provided tax savings from the investors. $3,500 in benefits for $105 would be a sweet deal.

Pretend loans. The remaining $2,450 is supposedly payable over 30-35 years. Most importantly, “the customer is not personally liable for the remaining $2,450. There is no provision for remedy in case a customer defaults, other than ‘repossession’ of the lens…”

This reminds me of cattle shelters of the early 1980s, when a $1,000 cow would be “sold” to Tax Fairy believers for, say, $5,000, or more, with $1,000 down and the rest in super-easy payments. The investors would claim depreciation of the cattle for the state price, but the loan was a wink and a nudge, with no real expectation of repayment. The solar lens shelter described by the injunction complaint would work the same way, promising $3,500 worth of tax benefits for $105 down.

tax fairyCasual Business operations. You can only deduct business expenses for a real business trying to make money. As described in the injunction request, at least, the don’t seem to be trying too hard. The lenses are described as “solar energy” property to generate a tax benefit, yet:

…neither the lenses, nor any other equipment on the installation, are (or have been) generating electricity, heating or cooling a structure, providing hot water for use in a structure, or providing solar process heat.

Also:

47. Defendants’ “lenses” consist of thin sheets of plastic. 
48. There are some lenses mounted on towers at the Installation in Millard County.
49. The thin plastic lenses that have been mounted have been exposed to desert conditions. Many are broken and dangling out of their frames. The ground near the Installation is littered with shards of plastic from lenses which have broken and fallen.
50. In this state, the lenses cannot capture or direct sunlight such that it could be used for any purpose that Congress intended to encourage through tax deductions or credits.
51. The vast majority of lenses purportedly sold – if they even exist – have not been  mounted. Defendants claim the lenses are in storage.

So many signs and wonders. We’ll just note that there is no deduction for an asset unless it’s “placed in service,” which is not the same thing as “placed in storage.”

Tax benefits are all that make the deal profitable. The injunction request says that the investors will get a small annual payment for the use of the lenses, but that the IRS says doesn’t actually get paid. The promotional material instead focuses on the ability to “zero out” taxes, according to the complaint.

Implausibility. Really, if somebody has a revolutionary technology, what’s more likely: that they would find venture capital to ramp it up and syndicate the tax benefits to large investors, or that they would finance it $105 at a time via multi-level marketing?

The web site for at least one defendant company remains up, so you can check it out for yourself.  But when pondering the signs and wonders touted by someone with something to sell, always keep one scientific fact in mind: there is no tax fairy.

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Paul Neiffer, Happy Thanksgiving and CRP reporting:

Roger McEowen of the Center for Agricultural Law and Taxation just posted a brief on whether you need to file a Form 8275 with your tax return if you are reporting CRP payments and not paying self-employment tax on the rents received.  The Morehouse appeal was finalized last year in favor of the taxpayer.  However, the IRS recently issued a non-acquiescence and asserts that it will assess self-employment tax on any CRP payments where the taxpayer is not receiving social security benefits even if they are passive landlord.  Even though they did not appeal the Court’s decision, they still disagree with the Court (typical IRS).

Roger does a good job of breaking down the details of the issue and provides guidance on whether you need to file the form or not. 

I agree with Roger that the IRS is wrong in imposing self-employment tax on non-farmers. I am more willing to disclose than Roger, and I think preparers should discuss disclosure with clients.

 

Russ Fox, De Minimis Rule Change Is Better than I First Thought. “Normally when you read something that’s from the IRS, you expect to find ‘gotchas.'”

William Perez, Year-End Tax Planning Tips for Investors

Robert D. Flach, FINE WHINE! “Forced ethics CPE will not reduce tax fraud!”

Kay Bell, Hunters’ game plan: donating meat to feed the hungry

Peter Reilly, Hobby Lobby Owners Win First Round In $3 Million Tax Refund Case

 

Jason Dinesen, From the Archives: Take the Money and Run? The Tax Consequences of Winning a Home in a Giveaway, Part 2

 

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Alan Cole, Universal Savings Accounts Introduced in Congress (Tax Policy Blog). “The bill, sponsored by Senator Jeff Flake and Representative Dave Brat, would allow Americans age 18 or older to open an account to which they could contribute $5,500 of after-tax money. The money could be invested in bonds and equities, and grow tax free.”

Renu Zaretsky, On Highways and Tax Bases. Today’s TaxVox headline roundup covers efforts to pass an elusive permanent highway funding bill, among other things.

 

TaxProf, The IRS Scandal, Day 931Day 932,Day 934Day 935. Day 934 is probably the best of this holiday weekend’s crop, with discussion of the systematic weakening of inspectors general by the administration. “Last year, 47 of the nation’s 73 federal IGs signed an open letter decrying the Obama administration’s stonewalling of their investigations.”

Robert Wood, Wesley Snipes Sues IRS Over Abusive $17.5M Tax Bill, False Promise Of ‘Fresh Start’. Mr. Snipes has not previously shown good skill with the tax law, and I don’t think he’s starting now.

 

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Tax Roundup, 11/25/15: Don’t bother depreciating things up to $2,500. And: Have a great Thanksgiving!

Wednesday, November 25th, 2015 by Joe Kristan

20141226-1$2,500 is the new $500. The IRS yesterday announced (Notice 2015-82) that it was increasing the maximum “safe harbor” expensing amount from $500 per item to $2,500 for taxpayers without an “applicable financial statement” — that is, most taxpayers. Taxpayers with an AFS can elect to expense items up to $5,000. These safe harbors enable taxpayers to not worry about capitalizing and depreciating items up to these amounts.

The new safe harbor takes effect for years starting January 1, 2016 and later.

The safe harbors are authorized by treasury regulations for taxpayers who have in place at the beginning of the tax year “accounting procedures treating as an expense for non-tax purposes” that expense such “per invoice (or per item as substantiated by invoice)” So make sure you write down somewhere that you have a policy of expensing everything up to $2,500 before December 31.

This is a good, if small, step towards allowing taxpayers to expense capital costs. I object to the “applicable financial statement” requirement for the $5,000 amount, as the tax law shouldn’t care whether you have a CPA-certified audit or that you have to report your financials to a government agency, but at least this closes the gap some.   I should be happy, I suppose, that it gives my auditing brethren a small sales tool.

Related: Russ Fox, IRS Increases De Minimis Expense Threshold to $2,500 from $500 for 2016 OnwardTony Nitti, IRS: Taxpayers May Immediately Deduct The Purchase Of Assets Costing Less Than $2,500.

 

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William Perez, Year End Tax Planning Ideas for Self Employed Persons.

Robert Wood, Passports Required For Domestic Travel In 2016, But IRS Can Revoke Passports For Taxes. Giving IRS control over passports is a horrible idea. They make so many errors, and the errors can be so hard to fix.

Robert D. Flach, MORTGAGE INTEREST LIMITATIONS. “But the Court of Appeals ruled that [unmarried] co-owners of one primary residence can each claim mortgage interest on up to $1 Million in acquisition debt and $100,000 of home equity debt.”

 

Annette Nellen, Sales Tax as a Penalty? “A proposed California initiative may surprise you.  It calls for a 1000% sales tax on ‘political advertisements.'”

Kay Bell, IRS should focus tax audit efforts on richer taxpayers. Willie Sutton might agree. 

Paul Neiffer, FAFSA Reporting Changes. “The Department of Education has issued new rules that make this process be much less of a hassle; however, you have to wait until 2017 to take advantage of it.  Beginning in that year, your required FAFSA income tax return will be a whole year in arrears.” About time.

Jason Dinesen, From the Archives: Home Offices, Principal Place of Business, and Mileage Deductions

Carl Smith, New, Additional Proposed Innocent Spouse Regulations Issued (Part 1), (Part 2) (Procedurally Taxing)

TaxGrrrl, Don’t Try This At Home: Avoid These 10 Money Missteps That Landed Reality TV Stars In Trouble.

 

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TaxProf, The IRS Scandal, Day 930. Today’s link on the “investigation” of the scandal by the Justice Department.

 

Scott Hodge, The Simple Solution to the Pfizer Deal: Cut the Rate and Move to a Territorial Tax System (Tax Policy Blog). So, you could actually do something like this that makes sense, or you could listen to….

Richard Phillips, Congress Must Act Now to Stop Pfizer and Other Companies from Inverting (Tax Justice Blog). The “continue the beatings until morale improves” approach.

News from the Profession. A Surprising Number of Accountants Think Accountants Are Incredibly Corrupt (Caleb Newquist, Going Concern).

 

Programming Note: The Tax Update will be taking the rest of the week off to celebrate Thanksgiving. I am thankful for the many fine tax bloggers I get to read when putting the Tax Roundups together, and I am especially thankful for those of you who stop by to read the Tax Update. Enjoy your Thanksgiving, and maybe start with Jim Maule’s holiday musings: Thanks Again! “For as long as I’ve been writing this blog, I’ve been sharing a Thanksgiving post to express my gratitude for a variety of people, events, and things.”

 

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Tax Roundup, 11/23/15: Maquoketa! And, bought and paid-for at year-end insufficient for golf-cart credit.

Monday, November 23rd, 2015 by Joe Kristan
A Maquoketa Cave. Picture by Iowa Department of Natural Resources.

A Maquoketa Cave. Picture by Iowa Department of Natural Resources.

Maquoketa! The Day 1 team of the  ISU Center for Agricultural Law and Taxation Farm and Urban Tax Schools is in the northeast Iowa town of Maquoketa, known for its cave system and the 61 Drive-in theater, “one of the few remaining outdoor theaters in the United States.” We then get two weeks off before the penultimate session in Denison, on the other side of the state, and our December 14 final session in Ames. Register here for one of the final schools or for the webcast of the Ames session.

 

“Ordered” doesn’t cut it for year-end asset purchases. Among the many silly tax rules enacted in the panicked response to the 2008 financial crisis was the tax credit for “low-speed electric vehicles,” more conventionally known as golf carts. This led to panic buying of golf carts to claim the lucrative tax spiff. Last week the Tax Court disappointed one buyer who tried to get a tax credit purchase in under the wire. It provides a lesson for all taxpayers looking at year-end purchases to get a Section 179 deduction or bonus depreciation.

The credit was available only for carts “placed in service” in 2009. Judge Paris sets the stage (all emphasis mine, footnotes omitted):

Respondent determined a deficiency of $6,253 in petitioners’ Federal income tax for 2009. The issue before the Court is whether petitioners are eligible for a New Qualified Plug-in Electric Drive Motor Vehicle tax credit (PEVC) of $6,253 pursuant to section 30D for 2009. The notice of deficiency did not determine a penalty.

The electric vehicle at issue, a Spark NEV-48 EX, was manufactured by Zone Electric Car, LLC (Zone Electric). Pursuant to Notice 2009-54, 2009-26 I.R.B. 1124 (June 29, 2009), Zone Electric submitted a request on October 1, 2009, to the Internal Revenue Service (IRS) to certify that its electric vehicles were qualified plug-in electric vehicles for purposes of section 30D, which as of the date of the notice allowed a tax credit for qualified plug-in electric vehicles placed in service from January 1 to December 31, 2009. On October 7, 2009, the IRS issued a letter to Zone Electric stating that the Spark NEV-48 EX model “meets the requirements of the Qualified Plug-in Electric Vehicle Credit as a Qualified Plug-in Vehicle.

$6,253 off if delivery taken by December 31, 2009!

$6,253 off if delivery taken by December 31, 2009!

So the Spark NEV-48 EX qualified — if it beat the deadline. Back to Judge Paris:

The electric vehicle was delivered to petitioners on June 8, 2010, even though petitioners placed an order for a low-speed electric vehicle reflecting their choice of color, radio, and size from Drive Electric, LLC (Drive Electric), through its Web site FreeElectricCar.com on December 21, 2009.

On December 21, 2009, petitioners remitted full payment of $7,786.53 for the vehicle with a credit card and promptly commenced insurance on the vehicle on December 28, 2009.

For charitable contributions and cash-basis business expenses, this would normally be all that is necessary, as a credit card transaction is as good as cash to IRS. But not this time:

Petitioners argue they remitted payment and acquired title to a qualified electric vehicle on December 21, 2009. Petitioners assert that legal title passed to them on the date of purchase and therefore they are entitled to a PEVC for 2009 because the vehicle was acquired before December 31, 2009. However, the statute effective on the date of purchase also required a qualified motor vehicle to be placed in service on or before December 31, 2009. 

Petitioners entered into the transaction for purchase of the vehicle just before the close of the year. As previously discussed, they received a bill of sale, which contained a VIN, and a certificate of origin shortly after they remitted full payment. However, a bill of sale containing a description of the vehicle and a VIN is not sufficient to show the vehicle was ready and available for full operation for its intended use. Petitioners have not offered evidence to show the vehicle was available for their use, much less fully manufactured. In fact, the vehicle was not delivered until June 8, 2010, making it impossible for the vehicle to be available for use until that date. Even if the Court were to assume the vehicle was fully manufactured and operational while awaiting shipment to petitioners, Brown and Noell tell us that the vehicle could not be considered placed in service unless and until the vehicle was readily available to serve its assigned function for petitioners’ personal use on a regular basis. The Court finds that the low-speed electric vehicle was not available for its intended use on a regular basis until it was delivered on June 8, 2010. Consequently, petitioners did not place the vehicle in service in 2009 and are not eligible for a PEVC for that year.

So the taxpayer’s golf cart just went up $6,000 or so in price.

The lesson for year-end tax planning is that the same “placed in service” rule applies to year-end fixed asset purchases by taxpayers wanting Section 179 deductions or bonus depreciation. If your business races to buy a big SUV or a new tractor by year-end, it needs to be in your garage or barn by December 31. A new machine has to be on the shop floor, ready to go.  “Bought and paid-for” isn’t enough.

Cite: Podraza, T.C. Summ. Op. 2015-67.

 

 

Peter Reilly, Tax Court Denies Exempt Status To Group Using Trading Card Games To Promote Sobriety. Peter has an in-depth exploration of last week’s Gamehearts Tax Court case. It explains that the organization denied tax exemption in the case was involved in non-casino games, including “Magic: The Gathering and similar games such as Pokemon and World of Warcraft Trading Card Game.” I had assumed that it was more of a gambling thing. I have edited my original post on the case accordingly.

Peter does not agree with the decision:

This is another example to me of the IRS EO group being out of touch with the modern world.  Magic the Gathering has been a thing since 1993.  You will also see IRS giving a hard time to not for profits dedicated to open source software.  It also turned down a sorority that wanted to operate on-line and a group planning to provide free wi-fi.

The whole exempt organization function is in disarray.

 

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Kay Bell, Is Alaska getting closer to enacting a state income tax? The oil bust has clobbered Alaska revenues.

Jason Dinesen, From the Archives: Issuing 1099s to an Incorporated Veterinarian

Jim Maule, Old Tax Returns Have Value. I keep my tax returns forever; Prof. Maule explains why being a tax hoarder can be useful.

Robert Wood, Your Passport Could Be Cancelled If You Owe IRS. Because Congress apparently feels we need one more poorly-considered bill that will hugely inconvenience honest taxpayers and will be impossible to undo.

Russ Fox, The Turf Monster Striketh. With a caution against sending tax ID numbers via e-mail.

TaxGrrrl, Jay Z Loses On Alvarez-Cotto Boxing Bet As Charity Gets Big Win.

Robert D. Flach, YEAR-END TAX UPDATE WORKSHOPS. With some sound year-end planning reminders.

 

Me, How your calendar might help you beat the IRS. My newest post at IowaBiz.com, the Des Moines Business Record’s business professional’s blog, covers the importance of keeping track of your time to document “material participation” to take tax losses and to avoid the 3.8% Obamacare Net Investment Income Tax.

 

TaxProf, The IRS Scandal, Day 926Day 927Day 928, Day 926 discusses the ties between Lois Lerner and the architect of Wisconsin’s Kafkaeske partisan “John Doe” witchhunt.

 

Steven Rosenthal, Treasury Pulls its Punches on Earnings Stripping (TaxVox). “Treasury made only small technical changes to the definition of an inversion.  News reports suggested something much larger—namely limits on earnings stripping, which would have made inversions (and other combinations of U.S. firms with foreign corporations) much less profitable.”

 

Career Corner. Let’s Enjoy Some Intern Reviews of Various Accounting Firms (Caleb Newquist, Going Concern).

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