Posts Tagged ‘Jason Dinesen’

Tax Roundup, 3/4/16: Discussing tomorrow’s obscure deadline today! And: Iowa think-tanker whiffs on Section 179.

Friday, March 4th, 2016 by Joe Kristan

Accounting Today Newsletter visitors, click here for “One year for you, forever for them.”

20151209-1Today is Day 64. Tomorrow is one of the more obscure deadlines in the tax law. Complex trusts have until tomorrow to make distributions to their beneficiaries that can be considered 2015 distributions under the “65-day rule” of Section 663(b).

“Complex” trusts are those that are taxed as separate entities, and which are not required to distribute all of their income at least annually. That is in contrast with the other two kinds of trusts:

“Simple” trusts, which are treated as separate taxpayers from their beneficiaries but which have to distribute their income at least annually; and

“Grantor” trusts, the earnings of which are taxed directly to the person who funded it, regardless of whether the earnings are distributed. The typical estate planning “living trust” is a grantor trust.

Complex trusts pay their own taxes under a system similar to the individual tax system, but with some important twists:

-The brackets are very compressed. Complex trusts pay the 39.6% top rate starting at $12,300 of taxable income in 2015. Single individuals don’t hit that rate until taxable income reaches $413,200, and joint filers go to $464,850.

-Trusts pay the 3.8% “net investment income tax” on “investment” income to the extent their adjusted gross income exceeds $12,300. The cutoff is $200,000 for single filers and $250,000 for joint filers.

-When complex trusts make a distribution, taxable income follows the distribution. While it’s a little more complicated than this, for this discussion assume that a distribution to a beneficiary of $100 reduces trust taxable income by $100 and increases the recipient beneficiary’s taxable income by the same amount.

Together, this means complex trusts are often highly motivated to distribute their taxable income, at least to the extent that it exceeds $12,300. This is true when beneficiaries are not top bracket taxpayers, and it’s especially true if their AGIs are below the 3.8% NIIT cutoff. Shifting taxable income from the highest trust tax bracket to the lower individual brackets can save taxes overall.

The 65-day rule is a mulligan for complex trusts. It gives them some extra time after the end of the year to distribute some cash — and some of that prior year taxable income — to their beneficiaries.

Of course, some trusts will choose to take the tax hit. Some trusts exist specifically to keep income out of the hands of beneficiaries, perhaps because the person who set up the trust wants the beneficiaries to wait until they are older and wiser before they get the cash. But in many cases, the 65-day rule is a handy after-the-fact trust planning tool.

Related: Overview of Fiduciary Income Taxation (IRS, AICPA)

 

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WrongIn his post Unspoken budget choices for Iowa, Peter Fisher errs on an important fact about coupling Iowa’s Section 179 limit to the $500,000 federal amount. Mr. Fisher is an Iowa City academic with the leftish think tank Iowa Policy Project.* He says (my emphasis):

On the other hand, the bill would reward decisions already made and give those investors a break they had not expected. It’s not an incentive to do something they would not have done anyway — and it’s very costly.

They certainly did expect it. It was clear from early in 2015 that there was powerful motivation in Congress to extend the $500,000 limit for a year, and possibly permanently; the permanent extension is what happened. The $500,000 limit had been renewed year-by-year since 2009, and Iowa had adopted the $500,000 limit every year since 2010. While past performance is no guarantee of future results with politicians, all indications were for a repeat, both at the federal and state level.

There was no indication that Iowa would do anything different until Governor Branstad came out against coupling in January of this year — surprising taxpayers and practitioners all over Iowa. It is simply wrong to say $500,000 Section 179 coupling wasn’t expected. And it’s indisputable that the alternative $25,000 limit represents a year-to-year tax increase for 2015.

One thing Mr. Fisher does get right: failing to couple does represent an unspoken budget choice. He just wants to choose to spend the money on his favored projects. But failure to couple really represents a choice to favor cronies, big businesses and insiders over small businesses across Iowa who lack lobbyists and clout.

Related: Complete Tax Update coverage of coupling issue.

*Disclosure: I have been disagreeing with the Founding Director of IPP since he was an Economics professor at Cornell College and I was a coffee-guzzling history major. 

 

Tony Nitti, Taxation Of Lawsuit Awards And Settlements: Getting To The Origin Of The Claim. “Thus, when determining whether a taxpayer’s award or settlement payment is excludable under Section 104, you’ve got to get to the bottom of the original claim: what caused the taxpayer to sue in the first place?”

Russ Fox, Math Is Hard, IRS Addition. I see what you punned there!  “To my clients and anyone else who receives an IRS notice: IRS statistics show that two-thirds of IRS notices are wrong in whole or in part.”

TaxGrrrl, IRS Reports Fewer Tax Returns Received, Higher Average Refund As Tax Season Rolls. “With about six weeks to go in the 2016 tax filing season, more than a third of all taxpayers expecting to file a tax return have already submitted tax returns.”

Jason Dinesen, Do I Have to Pay Self-Employment/FICA Taxes If I Think Social Security Will Go Bankrupt? Three guesses.

 

Nicole Kaeding, State Gasoline Tax Rates in 2016 (Tax Policy Blog):

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Iowa is higher than most, but Pennsylvania is the worst.

 

TaxProf, The IRS Scandal, Day 1030 “…what we explore here is more subtle, more pervasive, and hence, more invidious and threatening. It is the way in which the unexamined assumption of tax exceptionalism – the idea that tax is different – has produced a situation in which the tax law and its administrators are viewed by tax professionals, and eventually by the taxpaying public, as interpreting and enforcing tax law in ways that are not understood, are therefore misperceived, and are ultimately judged illegitimate.”

Len Burman, TPC Updates  Analysis of Ted Cruz’s Tax Proposal To Reflect a Change in His EITC Proposal. “Senator Cruz’s plan would increase all phase-in and phase-out rates of the credit by 20 percent.”

Kay Bell, Former IRS chief says Trump should release tax returns

 

Career Corner. Is Our Productivity Obsession Counterproductive? (Megan Lewczyk, Going Concern). What is this “productivity” of which you speak?

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Tax Roundup, 3/3/16: IRS sets up ID theft victims for another round. And: if you don’t have kids, there’s Craigslist!

Thursday, March 3rd, 2016 by Joe Kristan
This convicted ID thief likely was a first-day filer.

The kind of criminal mastermind ID thief that continually outwits the IRS.

There is no bottom. Every time I think that the John Koskinen’s IRS couldn’t possibly be less competent, they prove me wrong. Identity Thieves Bypass IRS Protections for Previous Victims (Tom VanAntwerp, Tax Policy Blog):

The IRS provides an Identity Protection PIN (IP PIN) to victims of identity theft with the goal of preventing it going forward. This IP PIN is mailed to individuals at the start of tax season, and is required to file a return. But the IRS also allows taxpayers to retrieve their IP PIN online by answering the same kinds of knowledge-based authentication questions that let thieves take advantage of the older Get Transcript website.

Computer crime reporter Brian Krebs published this account of Becky Wittrock, a previous identity theft victim whose IP PIN was compromised:

“I tried to e-file this weekend and the return was rejected,” Wittrock said. “I received the PIN since I had IRS fraud on my 2014 return. I called the IRS this morning and they stated that the fraudulent use of IP PINs is a big problem for them this year.”

Wittrock said that to verify herself to the IRS representative, she had to regurgitate a litany of static data points about herself, such as her name, address, Social Security number, birthday, how she filed the previous year (married/single/etc), whether she claimed any dependents and if so how many.

“The guy said, ‘Yes, I do see a return was filed under your name on Feb. 2, and that there was the correct IP PIN supplied’,” Wittrock recalled. “I asked him how can that be, and he said, ‘You’re not the first, we’ve had many cases of that this year.’”

Wittrock noted that the IRS representative said that they would be moving away from using the IP PIN in the near future and replacing it with a different system. No details are known about how this new system might function or if it will avoid the insecure knowledge-based approach to authentication.

Through lax IRS controls, the IRS lets a thief file a return in your name. You go through a long, exasperating process to straighten things out. Meanwhile, the IRS sits on your refund, even though it promptly wired cash to the thief. Then they give you an IP-PIN and assurance that it won’t happen again. And it happens again.

I never thought Doug Shulman would lose his crown as Worst Commissioner Ever. I wish I were right about that. And they think they should regulate preparers because we’re incompetent and out-of-control.

More coverage:

TaxProf, The IRS Is Using A System That Was Hacked To Protect Victims Of A Hack—And It Was Just Hacked

Taxable Talk, The Most Terrifying Words in the English Language Strike Again

 

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TaxGrrrl, On Dr. Seuss’ Birthday, Oh, The Taxes You’ll Pay!:

More taxes!
Whether you like it or not,
Taxes will be something
you’ll pay quite a lot.

Oh, but the IRS will take such good care of it, you’ll not mind, not one little bit!

 

Peter Reilly, Tax Losses From Genetically Engineered Deer Allowed. “The purpose of the selective breeding is to get deer with really impressive head gear.”

Kay Bell, Doing the weird and wacky tax deduction dance. Yes, deer.

Leslie Book, Follow up On Clean Hands Post: The Imposition of Penalties and How Using a Preparer Does Not Automatically Constitute Good Faith and Reasonable Cause (Procedurally Taxing). “At the end of the day, the opinion is certainly a warning that merely hiring a preparer is not enough, and proving reliance on an advisor requires perhaps a bit more focus than a taxpayer’s testimony that the accountant prepared the return.”

 

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Scott Drenkard, Philadelphia Mayor Proposes Gigantic Soda Tax (Tax Policy Blog). It’s the tax that’s gigantic, not the pop serving.

Donald Marron, Budgeting for federal lending programs is still a mess (TaxVox). A good reason to not have federal lending programs.

TaxProf, The IRS Scandal, Day 1029

News from the Profession. Accounting as Performance Art? Sure, Why Not? (Caleb Newquist, Going Concern)

 

You can get anything on Craigslist! Even dependents, it seems. From a Department of Justice press release:

Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that an Ozark, Mo., man has been indicted by a federal grand jury for filing false income tax returns after he advertised on Craigslist to purchase identity information for children that he could claim as dependents.

Raheem L. McClain, 37, of Ozark, was charged in a three-count indictment returned under seal by a federal grand jury in Springfield, Mo., on Feb. 23, 2016. That indictment was unsealed and made public upon McClain’s arrest and initial court appearance on Tuesday, March 1, 2016.

The federal indictment alleges that McClain caused an advertisement to be posted on Craigslist on Jan. 16, 2015, stating:

“WANTED: KIDS TO CLAIM ON INCOME TAXES – $750 (SPRINGFIELD,MO)

IF YOU HAVE SOME KIDS YOU ARENT CLAIMING, I WILL PAY YOU A $750 EACH TO CLAIM THEM ON MY INCOME TAX. IF INTERESTED,REPLY TO THIS AD.”

In a way, it makes economic sense. It would let people whose incomes are too high monetize otherwise useless dependents. But as you might have gathered from the word “indictment,” the tax law frowns on this sort of thing.

 

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Tax Roundup, 3/2/16: It’s your fault. You trusted us! And: don’t get phished.

Wednesday, March 2nd, 2016 by Joe Kristan

coupling20160213Insults always convince the insulted. Those dumb small businesses, thinking Congress and the legislature would do what they have been doing every year. That’s apparently the take of Iowa Senator Robb Hogg, reports the Caffeinated Thoughts blog:

State Senator Robb Hogg (D-Cedar Rapids) was very critical of small business owners and farmers who have contacted their legislators urging their support on coupling with federal tax changes which encourage growth in Iowa’s economy. Even worse, Senator Hogg shifted the blame from the inaction of Senate Democrats to Congress.

“I understand there are a lot of big crocodile tears being shed over this issue,” Hogg said. “Congress is to blame.”

“Those investment decisions have been made and maybe people had this belief that it might or would happen, but that doesn’t justify their claim that they were counting on it.”

Congress has renewed the higher Section 179 limit every year since 2009, and Iowa has coupled with the $500,000 limit since 2010. There was no indication that Iowa would do anything different until the Governor said otherwise in January. Either way, it’s still a big tax increase just as the ag economy is sagging.

I’ll also add that Sen. Hogg misuses the term “crocodile tears.” Per phrases.org.uk:

Meaning

To weep crocodile tears is to put on an insincere show of sorrow.

Origin

The allusion is to the ancient notion that crocodiles weep while devouring their prey. Crocodiles do indeed have lachrymal glands and produce tears to lubricate the eyes as humans do. They don’t cry with emotion though. Whatever experience they have when devouring prey we can be certain it isn’t remorse.

There’s nothing insincere about the sorrow of finding your taxes increased. The term is better reserved for someone who says, gee, too bad we need to take more of your money, but we sure do need to spend it.

Still, the tactic of criticizing your constituents is an interesting approach. It does seems to work on a national level lately.

 

Kay Bell, March arrives not as lion or lamb, but as a fish phish:

In this latest phishing ploy, one of several the IRS has seen surging this tax-filing season, the faux corporate execs are asking for payroll data, including W-2 forms that contain Social Security numbers and other personally identifiable information.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data. Now the criminals are focusing their schemes on company payroll departments,” warns IRS Commissioner John Koskinen.

“If your CEO appears to be emailing you for a list of company employees, check it out before you respond,” adds Koskinen. “Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.

Just this morning I got an email from someone I never heard of with a heading: “W2 Information EIN: 13-2655998.” Don’t click on this sort of thing. It’s bad news.

 

Kristine Tidgren, A New Farm Year Begins: Pay Taxes and Perfect Landlord’s Lien! (AgDocket)

Hank Stern, Aetna joins the parade (InsureBlog):

Aetna, and its Coventry affiliate, becomes the next major player to cry “no mas” on new business. In email this morning:

We will not pay commissions for sales with coverage effective dates after March 1, 2016, and continuing through December 31, 2016 effective dates.  This applies to on- and off-exchange business.”

If an insurance company doesn’t pay commissions, it’s a safe bet that they aren’t making money on the product.

Robert Wood, To Fight IRS Tax Bills, Go Step By Step

 

William Perez, Tax Advice for Cannabis Entrepreneurs. Interestingly juxtaposed with another post:

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It’s certainly conceivable that someone could find both posts useful.

 

Jason Dinesen, Sometimes I Wish I Could Just Prepare 1040-EZs.

 

 

Scott Drenkard, Celebrating 75 Years of Facts & Figures (Tax Policy Blog):

Today we released the 2016 edition of Facts & Figures, our pocket- and purse-sized booklet on quick tax facts. This publication has a long history—it dates back to 1941, when our think tank (which was just four years old at the time) published a booklet that was both a source of otherwise hard-to-find government data, and also a treasure trove of infographics to illuminate that information.

The Tax Foundation continues to be a valuable source of tax data and analysis, even though some folks don’t like the math.

TaxProf, The IRS Scandal, Day 1028

Renu Zaretsky, What comes after a big night for Clinton and Trump? The TaxVox headline roundup covers the Super Tuesday results and other tax news.

News from the Profession. FLASH: Sales, Accounting Personnel Face Pressure to Meet Revenue Goals (Caleb Newquist, Going Concern).

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Tax Roundup, 3/1/16: Iowa-only preparer regulation dies unmourned.

Tuesday, March 1st, 2016 by Joe Kristan

20151124-1Bwahahaha! Tax pros across Iowa can continue to pillage their poor unsuspecting clients, and there’s nothing you can do about it!

What? You aren’t being pillaged? You are free to hire and fire a tax preparer or consultant who is incompetent, or who charges more than you want to pay? Then maybe it’s not such a tragedy that a bill to license and regulate tax preparers in Iowa, SSB 3135, died in the Iowa legislature at the “funnel week” deadline. The bill, sponsored by the Chairperson of the Iowa Senate State Government committee, “requires the Iowa accountancy examining board to license all persons who wish to practice as tax consultants or tax preparers.” As Russ Fox and Jason Dinesen note, it would exempt attorneys and CPAs while covering enrolled agents.

The proposal has all of the bad features of the abortive federal tax practice regulation, plus the additional flaw of making tax preparation in Iowa more expensive than in other states.

Occupational licensing is a crony capitalist job killer, and observers across the spectrum, from The Des Moines Register to the Koch Brothers have figured this out. SSB 3135 dies unmourned.

 

Russ Fox, Frivolity Has a Price: $19,837.50. In case you’re wondering why your attorney won’t help you argue that you don’t have to pay taxes because the judge has gold fringe on his flag, Russ can help you.

TaxGrrrlFiguring Out Taxes, Pay And More On Leap Day: Are You Working For Free Today?

Peter Reilly, Colorado Can Force Vendors To Rat Out Residents On Use Tax. Oh, boy.

Keith Fogg, Judge Paige Marvel Will Become New Chief Judge of the Tax Court on June 1 (Procedurally Taxing).

Robert Wood, 9 IRS Audit Tips From The Trump Tax Flap. I’m not sure how universal these tips are.

Kay Bell, Cruz & Rubio release taxes, challenge Trump to do same

Jim Maule, Should Candidates Be Required to Release Tax Returns?  I think they should be required to prepare them by hand on a live webcast.

 

Scott GreenbergThe Most Popular Itemized Deductions (Tax Policy Blog):

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“Out of the 44 million households that itemize deductions, almost 43 million deduct the taxes they pay to state and local governments.”

 

TaxProf, The IRS Scandal, Day 1027

David Henderson, Henderson on the Case Against a VAT (Econlog).

Greg Mankiw, Misunderstanding Marco. “The Rubio plan is essentially the X-tax designed by the late Princeton economist David Bradford.  It is a progressive consumption tax.”

Tyler Cowen, The regulatory state and the importance of a non-vindictive President. That ship sailed seven years ago, and its return isn’t on the horizon, given the polls.

Renu Zaretsky, Disputes, Development, Filing, and FuelToday’s TaxVox roundup covers ground from Google’s international tax issues to lax security protocols from IRS “free file” providers.

 

Career Corner. Crackin’ Under Pressure: Making Mistakes During Busy Season (Caleb Newquist, Going Concern). “Regardless, mistakes are always mortifying to those who make them and, regardless of what you think, EVERYONE MAKES THEM.”

 

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Tax Roundup, 2/29/16: Governor wants to couple Sec. 179 for 2015 only. And: Iowa Farm 1040s due April 30.

Monday, February 29th, 2016 by Joe Kristan

20120906-1One year for you, forever for them. It turns out there’s a catch to Governor Branstad’s change of heart on conforming with the $500,000 federal Section 179 deduction. He only wants it for one year.

O. Kay Henderson reports:

Branstad did not include this recommendation in the plans he submitted to legislators in January. Republicans in the House have voted to make this tax break available to about 177,000 Iowa small business owners and farmers who’re filing their taxes right now and the Republicans in the legislature would like to make it permanent, but Branstad says he’ll only accept a one-year extension.

“We’d lose too much revenue,” Branstad says, “and it would put us in a financial position that we couldn’t sustain it for the long term.”

The Section 179 deduction allows taxpayers to deduct the cost of up to $500,000 of equipment that would otherwise have to be capitalized and depreciated. It is reduced dollar-for-dollar as purchases exceed $2 million, so it only benefits smaller businesses. The Governor would limit the deduction to $25,000, with the phase-out starting at $200,000. With the cost of a combine often in excess of $200,000, the Governor’s plan would increase taxes for many farmers.

The $500,000 has been passed a year or two at a time by Congress, and Iowa has gone along each year since 2010. Congress enacted the $500,000 limit permanently late last year, effective starting in 2015. Many practitioners were surprised when the Governor announced at the beginning of this legislative session that he opposed conforming to the federal limit. The Iowa House overwhelmingly voted for conformity anyway, and it would likely pass in the Senate if Majority Leader Gronstal would allow a vote.

While the Governor says the state can’t afford the $90-95 million cost of Section 179 for smaller businesses, he has plenty of money for tax credits for big companies. Here is what his 2017 budget provides for incentive and economic development tax credits:

Iowa credits fy 2017

So, according to the Governor, while the state can’t afford $90 million for small businesses buying equipment, except maybe for one year, it can afford three times that for big companies and well connected insiders, forever and ever.

People are starting to figure it out, including The Des Moines Register, which ran an editorial yesterday, End subsidy for big companies:

Last year, the state sent checks for $42.1 million to 186 companies under the research activities program, the Iowa Department of Revenue reported.

80% of that went to just eight companies.

Research and development is essential for corporations to compete in a high-tech world. Should taxpayers give big corporations a subsidy for doing this basic business function?

No, concluded a Special Tax Credit Review panel in 2010. Gov. Chet Culver appointed the panel after the film tax credit scandal. The panel recommended eliminating the refundability of the research activities credit for companies with more than $20 million in gross receipts.

“It seems unreasonable for the state to be providing successful, larger corporations refund checks for amounts of the Research Activities Tax Credit over its tax due to the state,” the panel concluded.

Unreasonable, indeed. The panel made other recommendations, including capping tax credits to businesses and providing a five-year sunset on all tax credits, requiring the Legislature to vote to continue them. Lawmakers largely ignored the recommendations.

It’s nice to see someone else remembers the Culver review panel. It found no clear benefit to any tax credit program. But while politicians can issue a press release when a big company gets a $14 million tax credit, nobody gets to cut a ribbon when a farmer buys a new tractor.

Related: Iowa extends Farmer 1040 due date to April 30.

 

Remember when the film credit repeal was going to kill the Iowa film industry? Film, Television Production Thriving in Iowa (KCRG.com). Whenever someone suggests that we kill film credit programs, the economic development people warn that nobody will stay in Iowa if we don’t pay them to.

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Laura Saunders, IRS Says Cyberattacks on Taxpayer Accounts More Extensive Than Previously Reported; Tax data for about 700,000 households might have been stolen (Wall Street Journal). When this first came out, the IRS said 114,000 taxpayers were affected. Then it was 334,000. Are they done yet? The TaxProf has more.

Related: 

Math Is Hard, IRS Edition (Russ Fox). The actual number was more than 700,000. And the unsuccessful attempts didn’t total 10,000; they totaled 500,000!”

IRS: Efforts To Access Taxpayer Accounts Twice As Bad As Originally Thought (TaxGrrrl)

 

Kristine Tidgren, Gifted Assets and Divorce: Nothing is Certain (Ag Docket)

Paul Neiffer, Iowa Farmers Have Until April 30 to File Iowa Tax Returns

Jason Dinesen, Glossary: Iowa Form 126

William Perez, Served Time and Later Found Not Guilty? You Could Be Due a Refund

Annette Nellen, Trailing Nexus – Extra Complexity. “As if it isn’t already difficult enough for a business to know if it has income or sales tax nexus in a state, it might have ‘trailing nexus.'”

Keith Fogg, Private Debt Collection. “Adding non-IRS employees who will contact taxpayers will further confuse taxpayers already receiving calls from scam artist trying to shake them down in the name of the IRS and create other problems as well.”

 

Joseph Thorndike, Forget the Audit: Trump Should Release His Tax Returns Today (Tax Analysts Blog)

Kay Bell, IRS audit doesn’t prevent Trump from releasing taxes

Alan Cole, Why Marco Rubio and Ted Cruz’s Tax Plans Generate More Growth than Donald Trump’s (Tax Policy Blog)

Peter Reilly, Sanders Tax Plan Harder On Millionaires Than Billionaires

TaxProf, The IRS Scandal, Day 1024Day 1025Day 1026.

 

Robert Wood, Oscar Academy Sues Over Racy $230,000 Gift Bags. They want more?

 

 

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Tax Roundup, 2/22/16: DuPont spurns Iowa, as tax rates would predict. And: What Sec. 179 decoupling will cost Iowa farmers.

Monday, February 22nd, 2016 by Joe Kristan

20160222-1Taxes aren’t everything, but they are a thing. With the merger of DuPont and Dow, Iowa hoped the headquarters of the merged company would be in Central Iowa, home of the big DuPont Pioneer seed operation. It didn’t work out that way. It did work out the way you would think it would, though, if you looked only at tax rates.

First, O. Kay Henderson brings us up to date:

DuPont bought Iowa-based Pioneer Hi-bred International in 1999. Now, as the merger of chemical giants DuPont and Dow continues, company executives have decided the corporate headquarters will be in Wilmington, Delaware.

Iowa officials had offered the company millions if it had picked Johnston, where DuPont Pioneer has been based.

An agricultural unit of the newly-merged company will remain in Johnston. State officials are giving the company $14 million in research activities tax credits and a two million dollar forgiveable loan. It appears up to 500 people will work in the research facilities. More than 2600 people currently work at DuPont Pioneer in Johnston.

In short, the corporate headquarters will be in Delaware, but the company will continue to do seed research here, and collect taxpayer money too. That’s precisely the result one would anticipate based on The Tax Foundation’s Location Matters report on effective state taxes on different activities. The key numbers in choosing between Delaware and Iowa:

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Iowa has one of the worst tax structures for corporate headquarters. Iowa’s 20.4% effective rate on a “mature” corporate headquarters is half-again higher than the rate in Delaware. Iowa’s highest-in-the-nation 12% corporate tax rate has something to do with that, as does its bad habit of subjecting business inputs to sales tax.

Because Iowa subsidizes research activities generously through the refundable research activities credit, its taxes on R&D facilities are significantly lower.

I don’t believe that taxes are the only thing corporations look at in location decisions, but to say they don’t matter defies basic economics and common sense. If you think taxing cigarettes and soda pop affects individual choices, it’s weird to say that taxing corporate headquarters doesn’t affect corporate choices.

20120906-1The DuPont decision is the natural consequence of Iowa’s policy of paying to lure and subsidize new companies, using high taxes from existing businesses. It’s like a guy bringing his wife’s purse to the tavern to buy drinks for the girls. The girls may take his money, but they realize he’ll do the same thing to them that he’s doing to his wife, so the smart ones aren’t going home with him. And any girls he “wins” aren’t likely to be great prizes.

Some of the politicians are figuring this out: Senate GOP Leader says DuPont Pioneer move shows need to eliminate income tax (O. Kay Henderson, again):

Bill Dix of Shell Rock, the Republican leader in the Iowa Senate, suggests this should be a wake-up call for state policymakers.

“Really shines a beacon on the fact that we are a very high-tax state,” Dix says, “one of the highest taxing states in the country.”

The State of Iowa is providing the company $14 million in research tax credits for the retention of up to 500 high-paying “R-and-D” jobs in Johnston. Dix says this corporate decision shows it’s time for a discussion of eliminating the state income tax.

“We tend to have had a policy of looking at what we can do to pick winners and losers and bring certain industries to our state and to some degree that has been successful,” Dix says. “…The states that are growing the fastest are the states that recognize that an income tax is a tax on productivity, hard-work, investment.”

Exactly. Unfortunately, the Governor and his unlikely Democratic allies in the state Senate are doubling down on their commitment to fund targeted tax breaks with high taxes on existing businesses. They are surprising Iowa businesses with a 2015 tax increase by refusing to adopt the increased Federal $500,000 Section 179 deduction and other federal tax breaks renewed in December.

Related: 

Corporate giveaways hurt Iowa (Steve Corbin). While I share his feelings about Iowa’s economic development bureaucracy, they don’t control most research credits.

Taxpayers May Lose Deductions Due to Legislative Inaction (Public News Service)

 

Paul Neiffer, How Much Will Farmers Pay to Iowa For Low Section 179:

Therefore, we would estimate that not coupling with federal Section 179 will cost Iowa Farmers between $40 and $75 million in 2015.  Since Iowa says this will be a permanent non-coupling, Iowa Farmers will face similar costs in the future (although it may get smaller each year due to increased depreciation deductions on amounts not allowed for Section 179).

I’m sure they’ll feel better about that when they think of the $14 million going to DuPont.

 

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Institute for Justice, Victory Over the IRS: IRS Returns N.C. Man’s Entire Life Savings After Seizing It Through Civil Forfeiture. Good. But why did he have to fight so hard when the IRS never said that he had cheated on his taxes?

Rose Heaphy, Internal Revenue Service scam haunts Des Moines woman (KCCI.com). If the caller says he’s from the IRS, he isn’t.

Kay Bell, Driving down your tax bill with auto-related deductions

Jason Dinesen, How is the Iowa Trust Fund Tax Credit Calculated?

Jim Maule, Yes, Damages for Emotional Distress Are Gross Income. “It is time for the distinction to be eliminated, but until and unless that happens, taxpayers are caught by it and must file their returns in compliance with what section 104 provides.”

Kenneth Weil, Will Bankruptcy Get Your Passport Back? (Procedurally Taxing).

Peter Reilly, Should enQ Get To Sell Spots In IRS Phone Queue? “Long wait times on calls to the IRS are nothing new.  But now there is something you can do about it – maybe.  Only it will cost you.  And the whole notion has me angry.” Weird and fascinating.

TaxGrrrl, Fraud Allegations At Liberty Tax Franchises Raise Questions

Russ Fox, Where I Became the “Messenger of Doom” (My Final Comments on Turf Rebates). Nice work if you can get it.

Robert WoodCrazy Sounding Tax Deductions That IRS Says Are Legit. “Cosmetic surgery costs are usually non-deductible, but an exotic dancer named Chesty Love tested this rule.”

 

TaxProf, The IRS Scandal, Day 1017Day 1018Day 1019. I’m featured on Day 1016, and Peter Reilly is spotlighted on Day 1018.

Alan Cole, Which Places Benefit Most from State and Local Tax Deductions? ( Tax Policy Blog). It has a wonderful map where you can find the answer county by county:

 

Map by Tax Foundation.

Len Burman, The GOP Proposed Tax Cuts Would be Unprecedented (updated) (TaxVox)

Career Corner. Bonus Watch ’16: Underachievers. (Caleb Newquist, Going Concern). “Good news for the lion’s share of you who are unexceptional: you’re getting paid!”

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Tax Roundup, 2/17/16: Nationwide ‘unregulated’ tax practice regulated out of business. And: Where’s Roger?

Wednesday, February 17th, 2016 by Joe Kristan

20150921-1The Wild West of Unregulated Tax Practice. Well, not entirely: Federal Court Shuts Down Nationwide Tax Preparation Business (Department of Justice):

A federal court in Chicago has ordered Servicios Latinos Inc. to close its nationwide tax preparation business, the Justice Department announced today.  The order comes after the Justice Department filed a civil lawsuit against the business and its owners, Georgina Lopez, Pamela Miranda and Jorge A. Miranda, alleging that the defendants falsely understated their customers’ tax liabilities or overstated their customers’ entitlement to a tax refund.  The injunction also prohibits Lopez, Pamela Miranda and Jorge Miranda from acting as federal tax preparers, owning or operating tax preparation businesses and employing tax preparers.  The defendants agreed to entry of the injunction, but did not admit the allegations in the complaint.

The abortive IRS preparer program had an ethics component. I’m sure that this would never have happened if the barred preparers had attended a one-hour ethics CPE course.

They were successful, until now:

According to the complaint, Servicios Latinos operated out of approximately 84 stores in as many as 30 states, with locations including Kennet Square, Pennsylvania; Kansas City, Missouri; and Las Vegas, Nevada. 

They probably had many clients who were delighted at the big refunds that the stodgy preparers down the street were too timid to claim. The press release says the now-closed firm’s alleged stock in trade included phony child tax credits and earned income tax credits. Sometimes a big refund can turn out to be expensive. Now their satisfied clients can look forward to their “Dear Taxpayer” letters.

This shows that the government has powerful tools to shut down bad actors. Regulation would not improve the conduct of good preparers, but it would saddle them with useless expense and paperwork. It’s just another form of occupational licensing, this time to the benefit of the national tax prep franchise outfits.

 

RMceowenPaul Neiffer, Welcome Aboard Roger McEowen:

Roger just recently left the Center For Agricultural Law and Taxation (CALT) at Iowa State University and I am pleased to let everyone know that he has agreed to join CliftonLarsonAllen as a tax director for our Agribusiness and Cooperative group.  He will be based out of Des Moines and will continue to do his normal seminars around the country and provide additional advice for our clients on income and estate tax and succession planning (along with other advice).

Roger recruited me as a speaker for the CALT Farm Tax Schools for the past several years. Congratulations, Roger, on your move to the private sector!

 

186 companies get refunds under Iowa R&D tax credit (Des Moines Register):

Critics of the program have questioned why so few companies claim such a large part of the tax credits. They’ve also questioned why the state is providing companies with money when it faces tight budgets.

Supporters of the research activities tax credit, however, have said the tax credit helps the businesses decide where to locate and where to conduct their research. Providing the tax credit helps spur investment in Iowa, some have said.

People who get free money always have good reasons why it should keep coming.

Related: What Iowa considers more important than Sec. 179. 

 

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Jason Dinesen. Glossary: Form 8332. “Form 8332 is a tax form signed by a custodial parent to release their claim to a dependency exemption for a child and give it to the non-custodial parent.” It’s a wonderful way to enable parents to continue fighting long after the divorce is final.

TaxGrrrl, Understanding Your Tax Forms 2016: Form 1099-INT, Interest Income. “The ‘FATCA filing requirement’ box is ticked if the information reported on this form is required by rule or statute to comply with the Foreign Account Tax Compliance Act (FATCA). If this box is checked, you may have your own FATCA related reporting requirements, including the filing of a Report of Foreign Bank and Financial Accounts (FBAR).”

Russ Fox, Board of Equalization Excoriated for Ignoring the Law and Binding Precedents, “This is just another reason why the business climate in California is so dreadful.”

Kay Bell, Louisiana budget gap could shut down LSU football. The most important function of the state university system, apparently.

Jack Townsend, The Revenue Rule: Is It Relevant Any More? Should It Be? “Historically, the ‘Revenue Rule’ has been a barrier to one country seeking to collect taxes in another country.”

Keith Fogg, Why is the IRS Collecting Taxes for Denmark? ({rocedurally Taxing)

Peter Reilly, How Valid Is Tax Foundation Dynamic Scoring? It’s all modeling, which is always questionable. Still, taxes do matter. The same people who insist 70% tax rates won’t be ruinous insist soda taxes affect behavior. They’re half right that way.

Robert Wood, Kim Kardashian + Kanye West File Taxes Separately. Maybe You Should Too. If I were married to Kim Kardashian, I absolutely would.

 

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Ajay Gupta, Justice Scalia’s Tax Law Jurisprudence—Just as Acerbic and Prophetic (Tax Analysts Blog). “In cases involving the interpretation of federal tax statutes, Scalia brought to bear his general disdain of legislative history.” And he was not a friend of commerce clause challenges to state taxes.

Michael Schuyler, What Would The Administration’s $10 Oil Tax Do To The Economy And Federal Revenue? (Tax Policy Blog). It would go into, among other things, “high-speed rail.

Howard Gleckman, Cruz’s Flat Tax + VAT Would Cut Revenues By $8.6 Trillion. If only there were a candidate with a plan that would improve the tax system and not increase the deficit

TaxProf, The IRS Scandal, Day 1014

Tax Justice Blog, Tax Justice Digest: Voodoo Economics — Corporate Tax Watch — Social Contract. Check out what the left side of the tax conversation is up to. Oddly, the words “social contract” don’t show up in the post. Maybe because I never signed it?

 

News from the Profession. Would an Accountant Ever Fall for a Phony IRS Call? “And if a CPA did get duped, it’s not like he or she could tell anyone about it. If they did, they’d literally die from the embarrassment.”

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

Monday, February 15th, 2016 by Joe Kristan

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

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

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

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

Toby Miles, IRS.

Toby Miles, IRS.

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

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

James Taranto puts it well:

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

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

 

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

 

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

 

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Tax Roundup, 2/11/16: C corporation law firm hammered for bonusing all income. And: PTIN class action certified.

Thursday, February 11th, 2016 by Joe Kristan

20150403-3Incorporated professional businesses are darned if they do, darned if they don’t. If they do elect S corporation treatment, the IRS pushes them to treat as much of the business income as possible as salaries, to maximize employment tax receipts. If they don’t, and operate as C corporations, the IRS likes to argue that the salaries are excessive, triggering tax on the “excessive” part at the highest corporation tax rate.

A Tax Court case yesterday reminds us that of these risks, the C corporation has the most to lose. A big Chicago intellectual property firm routinely paid its year-end earnings as bonuses, running its income down to zero. Professional C corporations like to do this because the “personal service corporation” rules deny professional corporations the benefit of the lower corporate tax rates; they pay a flat 35% on dollar one. Any dividends paid are non-deductible and are taxed again at a 20% individual rate.

S corporations typically make the reasonable argument that some of their income is from invested capital and accumulated goodwill, and therefore can properly be treated as corporate distributable earnings – which, incidentally, aren’t subject to FICA or Medicare taxes. The IRS turned this argument against the Chicago firm, arguing that a C corporation law firm with 65 shareholders and 150 attorneys would have such earnings not strictly attributable to the shareholder wage compensation.

The law firm conceded the tax, but argued that it shouldn’t have to pay penalties because it had “substantial authority” for bonusing out all the income. The court found otherwise:

We do not doubt the critical value of the services provided by employees of a professional services firm. Indeed, the employees’ services may be far more important, as a factor of production, than the capital contributed by the firm’s owners. Recognition of those basic economic realities might justify the payment of compensation that constitutes the vast majority of the firm’s profits, after payment of other expenses — as long as the remaining net income still provides an adequate return on invested capital. But petitioner did not have substantial authority for the deduction of amounts paid as compensation that completely eliminated its income and left its shareholder attorneys with no return on their invested capital.

The Moral? Professional corporations should usually be S corporations. The few additional fringe benefits available to C corporations don’t pay for the chance that you will get hit with 35% tax on a big chunk of corporate income.

Cite: Brinks Gilson & Lione A Professional Corporation,  T.C. Memo. 2016-20

 

IRS certifies class action for suit on excessive PTIN fees. Text here. Still pushing back on the IRS preparer regulation power grab.

 

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Is there anything they can’t do? Tax credit could spur biochemical revolution (Sen. Rita Hart, Rep. Mary Ann Hanusa, Des Moines Register). Presumably just like they spurred the Iowa film industry revolution. And who better than statehouse politicians to pick  the next great industry? My thoughts here.

 

Tony Nitti, Just Three Years Later, President Seeks To Expand Obamacare Tax On Business Owners. It’s going nowhere for now, but Tony cautions: “As a reminder, Hillary Clinton has not offered much of a tax plan of her own, and has shown a willingness to leverage off of proposals posited by the President. Which means this might not be the last we see of a mulligan on the net investment income tax.”

Jason Dinesen, Can Married Same-Sex Couples Claim Their Spouse as a Dependent?

TaxGrrrl, Understanding Your Tax Forms 2016: Form 1099-C, Cancellation of Debt

Robert Wood, Lawyer Fees Soar To $1,500 An Hour, But Tax Write-Offs Cut It To $900

Kay Bell, Hackers try, but fail, to get into IRS e-filing PIN system

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David Brunori, Base-Broadening and Rate-Lowering Remains a Good Idea (Tax Analysts Blog). “Whether you’re a liberal, a conservative, or a Martian, you must admit that net worth taxes are horrible tax policy.”

Scott Greenberg, More Americans than Ever are Renouncing Their Citizenship, and Taxes are to Blame (Tax Policy Blog)

Howard Gleckman, The White House Quietly Rolls Out Its Last Tax and Budget Plan (TaxVox).

TaxProf, The IRS Scandal, Day 1008

 

Career Corner. Reminder: Don’t Let Inside Information Turn Into a Career Limiting Move (Leona May, Going Concern). “Regardless of how you learn the inside information, don’t trade on it. Regardless of whether or not you’ll explicitly benefit, Don’t share the information -– especially not with your greedy brother-in-law.”

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Tax Roundup, 2/9/16: Cam Newton lost more than a game in California. And: cats with pink bows!

Tuesday, February 9th, 2016 by Joe Kristan

20130819-1Welcome to California, Cam! The quarterback for the losing team in this year’s Super Bowl earned a $51,000 bonus for his trouble. Did he really lose money on the deal, after taxes? K. Sean Packard reports that he loses money on the deal. Is that even possible?

Before we get into the numbers, let’s do a quick review of the jock tax rules applied to professional athletes (similar tax rules apply to anyone doing business across state lines, but they are rarely enforced). States tax a player based on their calendar-year income. They apply a duty day calculation which takes the ratio of duty days within the state over total duty days for the year. That ratio is then multiplied by the player’s salary to arrive at a state’s allocable income.

According to the story, Cam Newton will have about 206 “duty days” this year. Cam Newton’s 2016 salary is $20 million. The Super Bowl gave Mr. Newton 7 California duty days. So, the numbers, as I compute them:

7/206=.0339805825.

$20 million x 0339805825 = 679,612 income allocated to California

California’s tax on $679,612 x 13.3% 90,388. Add the 13.3% on his $51,000 allocated to California, which is not included in the $20,000,000 base, and he owes another $230, for a total California hit of $90,618. That will reduce his federal taxes by about $35,885 (39.6% x 90,618), so his net California hit for the 7 Super Bowl days is $54,733. Considering the 40.5% federal tax on his additional $51,000 of wages ($20,655), Mr. Newton takes a $75,388 net tax hit on his $51,000 earned — a combined 147.8% marginal rate.

If Mr. Newton is a North Carolina resident, he would have paid some of that money in resident state taxes. If he is a tax-savvy Florida resident, it’s all loss. Sort of like the game Sunday.

20141208-2We are all Cam Newton. Not all of us can play football at a high level, but all of us can face similar issues working in another state. Contrary to what the article above says, taxes on cross-border visits aren’t just “rarely” enforced. Some states, including California and New York, enforce these taxes with vigor. Entertainers and corporate executives are the easiest targets, but improved data-mining has allowed states to go downmarket in pursuit of income from workers in-state on short assignments — whether on a consulting or accounting job, or on a sales call.

This creates a potential compliance nightmare for employees who work in multiple states. And if you are a resident of a high-tax state, it’s a nightmare that may not even cost you additional tax, because of credits allowed for non-resident state taxes. Just additional time and prep fees — and potentially ugly penalties if you fail to file in a state you visit briefly.

That’s why the Mobile Workforce State Income Tax Simplification Act would be a good thing. By limiting state taxes on most employees to situations where they spend at least 30 days in a state,  H.R. 2315 would save employees and employers a great deal of pointless compliance hassle. By going to http://www.mobileworkforcecoalition.org/contact-congress/#/ you can tell your Senator to get behind the bill. As Senator Grassley is on the Senate taxwriting committee, he especially needs to hear about it.

Unfortunately for Mr. Newton, it wouldn’t apply to athletes (an unfair exemption, apparently required politically), but it at least H.R. 2315 would keep itinerant accountants out of multi-state tax purgatory.

 

Seventh Avenue, Des Moines, this morning.

 

Russ Fox, IRS Must Pay Fees in Civil Forfeiture Case. “I am not a fan of civil forfeiture as currently practiced: It’s being abused widely by the government. Indeed, some government police agencies consider it a part of their normal funding!” Institute for Justice is also pursuing fees in the case of the Northwest Iowa restaurant owner whose cash was confiscated by IRS. Russ encourages contributions to IJ; I’m a donor.

William Perez, Free Tax Preparation and Tax Problem Resolution Services

Kay Bell, Previous Year of the Monkey stamp offers collectors a nice profit, but a higher capital gains tax rate

Jason Dinesen, Why Yes, I Am “Just” An Enrolled Agent. The EA designation is impressive, and contrary to the attitude of an accountant Jason encountered, CPAs have no cause to be snotty to EAs.

Robert Wood, Hillary’s Wall Street Speech Fees: Hers Or Clinton Foundation’s?. I think that’s a distinction without a difference.

TaxProf, The IRS Scandal, Day 1006

Joseph Thorndike, Bernie Sanders Wants to Soak the Poor — Just Like FDR (Tax Analysts Blog). “Ultimately, however, the most revealing linkage between Sanders and FDR resides not in a shared impulse to tax the rich, but in a common willingness to soak the poor.” You can’t have a mass welfare benefit paid for only by a class tax.

 

What the Northwest Iowa Community College looked like on my visit two years ago.

 

I can’t find this tax rule in the code. A taxpayer brought a novel approach to determining his income to Tax Court in a case released yesterday. The gentleman is of the tax defier persuasion, feline variation (my emphasis):

The Court inquired whether he had any evidence to submit regarding his receipt of income during 2011 from BDL Films, Partizan Entertainment, Avatar Films, or Western Federal Credit Union. He replied: “I don’t even know what you mean by ‘income.’ I have my own definition of income.” Asked what that definition was, he replied: “It’s a cat with a pink bow. I earned no income. I’m in my own jurisdiction. * * * I am not part of the legal society; I have my own society.”

I suspect that his earnings were not routinely paid in cat, with bows of any color. The Court wasn’t persuaded, either:

The petition that petitioner filed in this Court consists solely of frivolous arguments. We warned petitioner four times — twice in advance of trial and twice during trial — that he risked incurring a significant penalty if he persisted in advancing frivolous arguments. He persisted. He has deluged this Court with gibberish and has wasted the resources of respondent’s counsel and this Court. We will accordingly require that he pay to the United States under section 6673(a) a penalty of $3,500.

$3,500 is a lot of kitty litter.

Cite: Bruhwiler, T.C. Memo. 2016-18

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