Posts Tagged ‘Jeremy Scott’
Tuesday, June 4th, 2013 by Joe Kristan
Lois Lerner, IRS, Class of 2013?
Sometimes life seems like high school continued. One of my high school classmates apparently has an unpleasant history with a central figure in the IRS scandal. Investors.com reports:
Perhaps not surprisingly, the IRS scandal may have its roots in Illinois politics with the 1996 targeting of Illinois conservative Al Salvi by a familiar name, Lois Lerner, then head of the Enforcement Division of the Federal Elections Commission.
That year, Democrat U.S. Rep. Dick Durbin and Republican State Rep. Al Salvi were locked in a battle for the U.S. Senate seat Durbin would eventually win.
As the journal Illinois Review details, Salvi was confronted with an “October surprise,” not one, but two, FEC complaints filed against him — one by Illinois Democrats about the way he reported a loan he made to himself, and another by the Democratic Senatorial Committee about a reported business donation.
Al Salvi, Carmel High School for Boys, Class of 1978
Mr. Salvi says Ms. Lerner played hardball, reports Illinois Review, demanding that he promise to never run for office again if the FEC dropped their complaint:
During that call, Salvi said, he explained to Lerner exactly what happened — that while the loan to himself was legal, there may be a difference of opinion on how the loan was reported to the FEC. Salvi explained it was a simple matter and said he thought Lerner would suggest an agreeable solution and dismiss the Democratic National Committee’s complaint.
But that was not Lerner’s reaction. Instead, that’s when she said to Salvi, “Promise me you’ll never run for office again, and we’ll drop the case.”
Salvi said he asked Lerner if she would be willing to put the offer into writing.
“We don’t do things that way,” Salvi said Lerner replied.
Salvi queried how then could such an agreement be enforced.
According to Salvi, Lerner replied: “You’ll find out.”
A judge dismissed the FEC complaint after the election, which Mr. Salvi lost to Dick Durbin, who still holds the seat.
If the Salvi account holds up, it certainly doesn’t help the case that Ms. Lerner was just a dedicated civil servant trying to enforce Sec. 501(c)(4) impartially. In any case, it’s clear just by the job she held at the FEC that she had to be aware of the politics involved in the Tea Party applications while employees under her supervision improperly targeted anti-administration groups. She has stated that she tried to stop the targeting.
Disclosure: I have an electoral history with Al Salvi, but no FEC intervention was needed.
So-called Scandal Watch There is a mini-backlash against the idea that there is anything scandalous about what the IRS did; Linda Beale and Iowa political commentator Ed Fallon are on that bandwagon. Testimony yesterday by Russel George, Treasury Inspector General for Tax Administration, is relevant to the issue:
The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention. Because of ineffective management by IRS officials: 1) inappropriate criteria were developed and stayed in place for a total of more than 18 months, 2) there were substantial delays in processing certain applications, and 3) unnecessary information requests were issued to the organizations.
That seems like plenty of scandal right there, even if the only villain is “ineffective management.” The behavior towards the Tea Party groups is also consistent with effective but ill-intentioned management.
Martin Sullivan leans to the “no scandal here” school in More than 80% of “Tea Party” Applications Should Have Been Reviewed Anyway (Tax Analysts Blog). That still doesn’t justify the intrusive nature of the questions asked or the extensive delays. It’s also like saying it would be OK to, say, frisk everyone at a drug legalization rally, as long as many of them are found to be carrying dope.
TaxProf, The IRS Scandal, Day 26.
Kay Bell, IRS Acting Commissioner Daniel Werfel survives his first Capitol Hill hearing on troubled agency problems
Jeremy Scott, IRS Missteps Will Hurt Tax Administration (Tax Analysts Blog): “As sympathetic as the IRS can seem on one hand, its absurd expenditures on conferences and training videos, along with the appearance of political bias resulting from the exempt organization scandal, have made it almost inconceivable that it will receive more funding anytime soon.”
Clint Stretch, The IRS Exempt Org Debacle: An Easy Fix (Tax Analysts Blog): “Anyone who wants to form a social welfare organization should be allowed to do it.”
Patrick Temple-West, Republican donors drew IRS scrutiny, and more. Related Tax Update coverage: Can political contributions really be taxable gifts?
Linda Beale, Another False Media-Generated IRS “Scandal”
Jim Maule, Does a Mandatory Compensation Deduction Reduction Make a Credit Mandatory?
Fiduciary Income Tax Blog, Are Self-Settled Special Needs Trusts on the Horizon?
It’s Tuesday, so Robert D. Flach has your Buzz! Meanwhile, Kay Bell posts Tax Carnival #117: Summer Tax Time
Breaking: The Donut Sandwich Is Here, So…Are Weight-Loss Costs Tax Deductible? (Tony Nitti).
Tags: Al Salvi, Anthony Nitti, Clint Stretch, Ed Fallon, Fiduciary Income Tax Blog, IRS disclosure scandal, Jeremy Scott, Kay Bell, Linda Beale, Lois Lerner, Martin Sullivan, maule, Patrick Temple-West, Robert D Flach, So-called Scandal Watch, TaxProf
Posted in Tax Roundup | No Comments »
Tuesday, May 14th, 2013 by Joe Kristan
Acting Commissioner Steven T. Miller
Steven Miller, acting head of the IRS since Doug Shulman left office, apparently hasn’t been any more honest than The Worst Commissioner Ever about IRS harassment of right-side political groups. AP reports:
Miller was first informed on May, 3, 2012, that applications for tax-exempt status by tea party groups were inappropriately singled out for extra scrutiny, the IRS said Monday.
At least twice after the briefing, Miller wrote letters to members of Congress to explain the process of reviewing applications for tax-exempt status without disclosing that tea party groups had been targeted.
We’re supposed to tell the truth when we file our returns. It’s not asking too much for them to return the favor.
Not just harassment, but leaking confidential information. IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups (ProPublica.org)
No, too late. White House: Too early to talk about firing IRS employees (Examiner.com)
So it’s the Supreme Court’s Fault? Pelosi: IRS Scandal “An Opportunity” To Scrutinize 501(c)(4)s And “Overturn Citizens United” All right, then.
TaxProf, The IRS Scandal, Day 5
Russ Fox, Drip, Drip, Drip: The IRS Scandal Continues to Grow
Jeremy Scott, Lerner’s Admission and Apology Ring Hollow (Tax Analysts):
The incompetence boggles the mind. It’s also bewildering how the Service could sit in front of GOP lawmakers and chastise them for underfunding tax enforcement when employees were using some of those supposedly precious funds to conduct a politically charged vendetta against conservative exempt organizations.
I think the perpetrators were quite competent in doing what they set out to do. The only incompetence was in getting caught. But he’s absolutely right that the agency’s poor-mouthing, including next week’s furloughs, will no longer convince anybody.
TaxGrrrl, Congress And The President Want You To Get Mad At IRS Over Tax Exempt Targets (Just Not At Them):
It’s clear that those at the top knew something (it has been reported that Shulman was alerted to the issue in 2012) and that it wasn’t the work of a handful of rogue operatives. It was a plan. And then IRS lied about it. And they should be held accountable.
But it still disturbs me that no one in Washington really seemed to care until the behavior went public.
Many of us didn’t believe the IRS would really do something so outrageous. I had seen some of the questions that IRS was asking Tea Party outfits, and they seemed out of line, but I figured the IRS was being an equal-opportunity annoyance. That they did it politically is what is triggering the outrage.
Howard Gleckman, The IRS Was Wrong to Single Out Tea Parties, But Many Political Groups Should Not be Tax-Exempt. Yes, let’s change the subject.
Going Concern, Here Are Some of Things People Are Saying About the IRS Scandal, An excellent roundup of the state of play, but with too much emphasis on the “incompetence” slant and not enough on “evil.”
Patrick Temple-West, IRS targeted groups critical of government, and more (Tax Break)
Kay Bell, Rubio demands resignation of nonexistent IRS commissioner; Obama vows to ‘find out exactly what happened’. He can get some sleuthing tips from O.J.
Linda Beale, More on the IRS’s “targeting of conservative groups”. She tries to play down the issue. It shows how slim are the pickings for those who don’t want to think this is a big deal.
In other news:
Tax.com has moved. For reasons that elude me, Tax Analysts has apparently given up the handy Tax.com domain and moved their excellent group blog to a tab on their home page, Tax.org. I think that’s a mistake, but it’s worth going out of your way to find it.
Martin Sullivan, Do U.S. Multinationals Have It Tough? (Tax Analysts).
Russ Fox, Leisure Suit Larry Goes to Tax Court
Peter Reilly, Electing To Capitalize Expenses Can Pay Off On Sale
Kyle Pomerleau, Another Year, another Obamacare Tax (Tax Policy Blog)
Jack Townsend, The Dangers of the Unrecorded Interview by Criminal Agents — FBI or IRS
It’s Tuesday, so it’s Buzz Day at Robert D. Flach’s place.
Career Advice. Protip: Threatening to Kill Your Colleagues, Even in the Midst of a Brutal Busy Season, Is Never Cool (Going Concern). OK, I take it back. Mistakes were made. There was no threat intended in my overzealous pursuit of tax return excellence. It was just an administrative shortcut. OK, incompetent, but not evil. I vow to find out exactly what happened. If I threatened anyone, it was outrageous.
Tags: Going Concern, Howard Gleckman, IRS disclosure scandal, Jack Townsend, Jeremy Scott, Kay Bell, Kyle Pomerleau, Linda Beale, Martin Sullivan, Patrick Temple-West, Peter Reilly, Robert D Flach, Russ Fox, Steven Miller, TaxGrrrl, TaxProf
Posted in Tax Roundup | 1 Comment »
Tuesday, May 7th, 2013 by Joe Kristan
Lauryn Hill’s parents are 150 years old! The singer received a three-month prison sentence yesterday for failing to file tax returns, but the New Jersey native still may struggle with math, according to the reliable source of tax news, TMZ.com:
“I was put into a system I didn’t know the nature of. … I’m a child of former slaves. I got into an economic paradigm and had that imposed on me,” Hill said.
She continued, “I sold 50 million units … now I’m up here paying a tax debt. If that’s not likened to slavery, I don’t know what is.”
As slavery was eliminated nearly 150 years ago with the passage of the
13th Amendment, Ms. Hill either has difficulty with arithmetic or remarkable parents. The slavery analogy is interesting. So if tax is slavery, is President Obama the chief slave driver? The IRS Commissioner? Can we be sold down the river? To who?
Ideas that would work perfectly well in song lyrics can sound so wrong in court. The artist describes feelings, impressionistically. It’s in no way an excuse or justification. But sometimes artists/politicos use court as a forum for expression without any expectation that it will advance their legal cause. One can intelligently and consciously eschew persuasion and victory.
Perhaps. Still, sometimes celebrities just say strange things.
It’s Tuesday, so it’s Buzz day at Robert D. Flach’s place!
Area cat lady ridicules cat tax proposal (Going Concern)
Tags: Anthony Nitti, Going Concern, Jacka Townsend, Jen Carrigan, Jeremy Scott, Kay Bell, Ken Lay, megan mcardle, Patrick Temple-West, Peter Reilly, Robert D Flach, Russ Fox
Posted in Tax Roundup | No Comments »
Tuesday, April 30th, 2013 by Joe Kristan
Via Wikipedia
Legislator insists that thieves get $11 million as price of property tax deal. As Iowans pay their 2012 balances due on today’s state income tax deadline, they may want to take a moment to ponder how careful the legislature is about spending the money they are sending in.
The Des Moines Register reports that Senator Joe Bolkcom demands an increase in the Iowa earned income credit as the price of a property tax bill:
Sen. Joe Bolkcom, D-Iowa City, chairman of the tax-writing Senate Ways and Means Committee, spoke at a Statehouse news conference sponsored by The Coalition for a Better Iowa, which released a booklet with the stories of Iowans who have been helped by the earned income tax credit. About 200,000 Iowa working families receive the tax credit, which assists households with incomes under $45,000.
Senate Democrats want to raise the earned income tax credit from 7 percent now to 20 percent at a cost of about $55 million annually.
Both Sen. Bolkcom and the Register fail to mention the massive fraud rate of the earned income tax credit. The Treasury Inspector General for Tax Administration this month reported:
The IRS estimates that 21 to 25 percent of EITC payments were issued improperly in Fiscal Year 2012. The dollar value of these improper payments was estimated to be between $11.6 billion and $13.6 billion.
Applying that fraud percentage to Sen. Bolkcom’s proposal will result in $11.5 million to $13.75 million in “improper” — mostly fraudulent — Iowa EITC payments. Remember that the EITC is a “refundable” credit, which means that if it exceeds your tax, the state writes you a check. It’s a spending program, a welfare program.
I would say it takes a special kind of legislator to demand $55 million in spending knowing that it’s an appropriation of at least $11 million to thieves, but really it just takes a run-of-the-mill legislator spending your money instead of his own.
The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.
Only somebody who doesn’t prepare tax returns would say something this stupid. The TaxProf links to this from a University of Wisconsin academic:
This Article analyzes the ongoing structural transformation by observing and explaining the advantages that accrue from pursuing social and regulatory objectives through the tax code. In particular, this Article identifies a number of legislative and normative advantages that tax-embedded policies offer.
The tax law has one important job: to raise revenue. If this author had ever done business tax returns for a living, she would know what a challenge it is to simply determine taxable income. If she had ever helped a client through an IRS audit, she would know how difficult it is for the agents to simply work through the accounting, let alone run a bunch of social programs on the side. The author should be made to spend three years working at a storefront tax prep business to learn the chaos her views cause outside the faculty lounge.
Tony Nitti, Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities
Jeremy Scott, Baucus, the Marketplace Fairness Act, and Tax Reform (Tax.com):
Baucus’s shift to the right in the last few months (which people had assumed was positioning for the election next year) has antagonized more than just progressives. It seems his Senate colleagues are growing frustrated as well.
And that will severely hamper the chances that a major tax reform bill will make it to the Senate floor.
Judge Sentences Widow to Less Than a Minute of Probation in Tax Case (Accounting Today)
TaxGrrrl, Willie Nelson, Who Saved His Career And His House With The IRS Tapes, Turns 80
Nanette Byrnes, Republicans pursue tax reform, and more (Tax Break)
Brian Strahle, STATE TAXES: WHAT WILL MAKE YOUR COMPANY CHANGE – CHOICE or AUDIT NOTICE? On not being in denial about your exposure to business taxes in other states.
Jack Townsend, a criminal tax defense attorney, offers some wise advise in Tips to Avoid an IRS Criminal Investigation or, Worse, a Tax Grand Jury Investigation
It’s time for Robert D. Flach’s Tuesday Buzz!
Always heed tax policy advice from a violent cannibal boxer. Boxer Mike Tyson TKOs Fox host with talk pro-tax talk (Kay Bell)
Martin Sullivan, To Balance the Budget: Tax Sex Appeal (Tax.com) Yes. by all means cut my taxes.
Tags: Accounting Today, Anthony Nitti, Brian Strahle, EITC, iowa tax policy, Jack Townsend, Jeremy Scott, Joe Bolkcom, Kay Bell, Martin Sullivan, Nanette Byrnes, Robert D Flach, TaxGrrrl, TaxProf, TIGTA
Posted in Eye on the Legislature, Eye on the Legislature 2013, Tax Roundup | No Comments »
Tuesday, April 23rd, 2013 by Joe Kristan
The legal business must really be getting tough, if lawyers have to resort to the lamest lame tax fraud scheme out there. A Monroe, Louisiana attorney named Francis Broussard has pleaded guilty to attempting to claim over $9 million through the “1099-OID” fraud. From thenewsstar.com:
According to the Stipulated Factual Basis in the plea agreement, Broussard, who has been licensed to practice law in Louisiana since 1986, had his accountant prepare his 2005 through 2007 tax returns, but the defendant never filed them. Broussard did present the documents to various financial institutions in efforts to obtain personal loans and other types of financing. In 2009, the defendant went to a different tax preparer to have his personal tax returns prepared for 2005 through 2008. The defendant brought already prepared federal tax returns along with a separate piece of paper with a set of numbers on it. The defendant instructed the preparer to use the set of numbers on Forms 1099-Original Issue Discount (OID) and on the Schedule B, Interest Income section of the form. The defendant’s fraudulent claim is based on the OID interest income.
The 1099-OID scheme is, to the extent it is coherent at all, based on the idea that government has a big cash stash for each of us. They don’t want us to know about it, goes the theory, but we can tap into it if we just fill out the right tax forms. It’s not surprising that people fall for it — heck, we fall for big delusions every time we vote — but it is surprising that a lawyer would give such a preposterous scheme a try.
TaxProf, TIGTA: IRS Fails to Comply With Mandated Reduction in Improper Payments — 25% EITC Fraud Costs $14 Billion/Year. The earned income tax credit is a fraud magnet because it is “refundable” — if it exceeds your tax for the year, the IRS writes you a check. That makes it a welfare program run through the tax system. EIC advocates say it is a critical help for struggling families, but when that much is stolen from the program in a year, you have to think there is a better way.
Howard Gleckman, High Income Households Would Pay Most—But Not All—of the New Taxes in Obama’s 2014 Budget (TaxVox). Just more evidence of the unseriousness of the budget. The rich guy isn’t picking up the tab. He can’t.
Jeremy Scott, How Important Is Deferral to Multinationals? (Tax.com)
Tax Trials, Mark Your Calendars: IRS Closes for 5 Days Under Sequestration
Patrick Temple-West, Businesses become REITs to avoid taxes, and more. That works great if you can live with at least 100 shareholders, and no five together own over 50%.
Robert D. Flach, MORE ON THE NEW “SAFE HARBOR” HOME OFFICE DEDUCTION
Trish McIntire, Do Overs. You can amend a tax return if you need to.
William Perez, Obama’s and Biden’s Tax Returns for 2012
Kay Bell, Celebrate Earth Day by exploring environmental tax breaks
Tags: Howard Gleckman, Jeremy Scott, Kay Bell, Patrick Temple-West, Robert D Flach, Tax Trials, TaxProf, Trish McIntire, William Perez
Posted in Tax Roundup | No Comments »
Friday, April 19th, 2013 by Joe Kristan
More
evidence that preparers are out of control and need IRS employees to keep an eye on them: 24 IRS Employees Indicted for Theft of Government Benefits (TaxProf).
24 current and former employees of the Internal Revenue Service have been charged for crimes relating to fraudulently obtaining more than $250,000 in government benefits.
Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare, and housing vouchers. All thirteen, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits.
They may have been right about being unemployed, just wrong about the timing.
We have to show the government our returns, so it’s only fair: Iowa Gov. Branstad plans to show income tax returns to reporters (AP)
Howard Gleckman, What Ever Happened to State Tax Reform? (TaxVox)
Kay Bell, Obama’s 2012 effective tax rate was 18.4 percent; Now what do your members of Congress pay in taxes? Make them do their returns on a live archived webcast, with a rolling comment bar.
Peter Reilly, How Not To Care About IRS E-mail Snooping
William Perez, IRS Provides Penalty Relief Due to Boston Marathon Explosion and Storms in South and Midwest
Patrick Temple-West, Tax extension after Boston attack, and more (Tax Break)
Russ Fox, RS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same
TaxGrrrl, So You Missed Tax Day, What Next?
Andrew Mitchel, Code §911 Foreign Earned Income Exclusion – Adverse Conditions
Freakonomics Blog, The History of Taxes
Megan McArdle, Our Tax Code is Too Complicated. Here’s How to Simplify It. ”Get rid of the corporate income tax. It’s not worth it, and there are better ways to collect the money.”
Janet Novack, Tax Geeks: Make Tax Filing Easy, Kill The Mortgage Deduction, Tax CPAs
Jim Maule, Tax Compliance and Non-Compliance: Identifying the Factors
Trish McIntire, You Need the Numbers Before You Do the Return
Scott Drenkard, Perry Calls for Reforms of Texas’ Margin Tax (Tax Policy Blog). It could use it.
Christopher Bergin, It Just Isn’t Fair (Tax.com):
The headline producing data in the report was that revenue loss – about $181 billion – from corporate tax expenditures in 2011 was “approximately the same size as the amount of corporate income tax revenue the federal government collected that year.” That makes a headline grabber; here would be my version: “Corporations Got More in Tax Breaks Than They Paid in Taxes, Government Says.”
It’s almost like the tax exists only so the politicians can carve loopholes for their friends.
Indeed. It’s Rarely a Good Sign When a Tax Prep Business Closes Its Doors Three Days Prior to April 15th (Going Concern)
Just plead “miseducation” and leave it at that. Lauryn Hill asks judge for leniency in upcoming tax evasion sentencing claiming she failed to file taxes due to threats and withdrawal from society (dailymail.com.uk)
Tony Nitti, Girl, You Know You Better Watch Out: Singer Lauryn Hill To Be Sentenced On Tax Evasion Charges
Jack Townsend, Bank Frey Executive and Swiss Lawyer Indicted
How I spent April 15. (Marketwatch, via Going Concern). I approve of the comment at the bottom of the GC post.
Me too. Tax Season 2013: Mostly Unpleasant, And I’m Glad It’s Over (Jason Dinesen)
Robert D. Flach returns! THAT WAS THE TAX SEASON THAT WAS 2013
Me: Back to work.
News you can use. Hone your corporate tax evasion skills (Boston.com)
Tags: Andrew Mitchel, Anthony Nitti, Christopher Bergin, Freakonomics, Going Concern, Howard Gleckman, Jack Townsend, Janet Novack, Jason Dinesen, Jeremy Scott, Kay Bell, Lauryn Hill, maule, megan mcardle, Patrick Temple-West, Peter Reilly, Robert D Flach, Russ Fox, Scott Drenkard, tax crime, TaxGrrrl, Trish McIntire, William Perez
Posted in Tax Roundup | No Comments »
Tuesday, April 9th, 2013 by Joe Kristan
Radio Iowa runs with this headline ”$8.7 million from “Development Fund” creates 600+ jobs.” This headline arises out a “study” paid for by the economic development bureaucracy (meaning: taxpayers) to demonstrate the tremendous job-creating skills of people who give your money to other people. How did this study demonstrate this job creation?
By assuming it.
From the “study”:
A survey of past recipients of Demonstration Fund investments was conducted by the Iowa Innovation Corporation to determine, among other things, how large these companies are now as compared to their pre-investment levels. This growth in size – in annual revenues and in head count – can be attributed in part to the involvement of and investment by the Demonstration Fund.
Furthermore, the resulting economic impact is greater than the direct increase in expenditures and head count, since those increases lead to a series of spillover effects, whereby the impact of new company spending and employee earnings ripples through local economies and supports additional economic activity and job creation. Job impact estimates are determined by using standard input-output methodologies and multipliers, as provided by the US Department of Commerce.
In other words, they assumed:
- that multipliers work – a shaky assumption.
- that the businesses and jobs wouldn’t happen without the wonderful effects of your money being directed by politicians to those businesses.
- that the money wouldn’t have also generated jobs if it had been spent elsewhere.
That’s the same kind of thinking behind the 2009 stimulus spending spree. The results were less than assumed. The dark line is what government projected that spending would do to unemployment, using “standard multipliers.” The lighter blue line was the grim fate awaiting us absent a government binge. The red dots are the actual post-binge unemployment rates.
The study does not have the two words that could have given it credibility: “opportunity cost.” They assume that the money left in the hands of taxpayers would have done nothing. But it would have been spent elsewhere, undirected by politicians; it would have bought things, creating profits and jobs. But as they would have gone unclaimed by economic development officials, no press conference could have been called, so they don’t count.
Jeremy Scott, What Should Be in the Obama Budget (Tax.com):
Obama consistently ignores the statutory timeline for releasing his budget, and this year is the latest he has ever put forward a fiscal proposal. On all things administrative, the president is frequently dilatory. But those waiting with bated breath for Obama’s proposals will be disappointed — the budget will be more of the same and has little chance of actually being passed or even taken up by Congress.
Good news.
Does President Obama Want To Tax Your Retirement? His budget proposes a cap on the size of retirement accounts, but see the item above.
TaxProf, WSJ: Taxing Lunch at Google and Facebook?. Will the IRS start putting free meals for techies on their W-2s? Just don’t tax my busy season office donuts.
Tax Trials, New York’s Highest Court Affirms Constitutionality of Click-Through Nexus
Nostalgia. Today in History: Income Tax Ruled Unconstitutional in Pollock v. Farmers Loan Trust Co. (Joseph Henchman, Tax Policy Blog)
William Gale, Tax Policy Should Consider New Business, Not Small Business (TaxVox)
Martin Sullivan, How Should the U.S. Stop Profit Shifting? (Tax.com)
Trish McIntire, One Week Warning
Kay Bell, Taxes are due in a week! Don’t panic. Use 7-day filing plan
William Perez, What to Do if You Owe Taxes for 2012
Russ Fox, Bozo Tax Tip #4: Procrastinate!
Jim Maule, How Not to Litigate a Tax Case
Peter Reilly, Wesley Snipes Raises Creationist Hopes For Kent Hovind
Definitely not a problem for me this year: Bragging About Winning Your NCAA Pool On Facebook May Cost You Come Tax Time (Tony Nitti)
News you can use: The Definitive ‘I’m Quitting Public Accounting’ Checklist (Going Concern)
Tags: Branstad economic policy, corporate welfare, economic development, Going Concern, Jeremy Scott, Jim Maule, Joseph Henchman, Kay Bell, Martin Sullivan, Peter Reilly, Russ Fox, Tax Trials, TaxProf, Tony Nitti, Trish McIntire, William Gale, William Perez
Posted in Tax Roundup | No Comments »
Tuesday, April 2nd, 2013 by Joe Kristan
Not your corporate welfare. Just ours. Iowa Senate taxwriters have been eloquent in criticizing the corporate welfare famously doled out to fertilizer companies over the last year. It turns out, though, that not all corporate welfare is bad, to them. Just that proposed by the other party. The Senate Ways and Means Committee advanced a set of its own welfare programs yesterday, including:
SF 238, which would provide a 30% tax credit (subsidy) “for persons who construct, install, and place in service an electric vehicle facility or a natural gas vehicle facility.” So if you buy a Chevy Volt, Senate Ways and Means wants to pay 30% of the cost of installing special plug-ins.
SSB 1240, which “increases to $50 million from $45 million the amount of historic preservation and cultural and entertainment district tax credits.” These are a cash cow for well-connected developers and rehabbers.
SF 205, which opens up an existing program to divert withheld employee taxes “to create economic incentives that can be directed towards business.” The bill “removes the requirement that an employer…be located in an urban renewal area.” In other words, it makes it just another “incentive” slush fund to pay people to be our friends.
So it’s not a principled opposition to business subsidies. They just want different ones.
Far better to get the state out of the subsidy business and make the tax system good for everyone — not just those with the pull and the consultants to game the system. Far better to enact The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.
Related: New Jersey corporate tax breaks surge, but economy lags: study
The courts haven’t been kind to the IRS preparer regulation power grab, but some preparers welcome our new preparer regulation overlords. An example is Three reasons why the IRS will persist in its mission to regulate tax return preparers (Jim Buttonow)
The article takes for granted that the costs the regulations will impose will exceed the benefits:
Knowledgeable tax return preparers—who are reminded each year through education requirements to conduct effective due diligence on small businesses—can have a much greater impact on compliance than IRS auditors.
That makes an unwarranted assumption: that the IRS can create “knowledgeable tax return preparers.” It can’t. It can make people fill out paperwork, go through the motions of paying for CPE, and take meaningless open book literacy competency tests, but it can’t make anybody competent.
The IRS has limited resources. Semi-literate South Florida grifters are stealing billions through fraudulent refunds. Yet the IRS seems to think its problem is honest preparers.
Smoke ‘em if you can afford ‘em. Monday Map: State Cigarette Tax Rates, 2013 (Nick Kasprak, Tax Policy Blog).
Ben Harris, Hiking Dividend Taxes to Pay for a Corporate Rate Cut (TaxVox):
Finland will lower the corporate rate to 20 percent in 2014, down from the current rate of 24.5 percent (and 26.0 percent in 2011)…
Finland plans to pay for part of the rate cut by boosting the effective investor tax rate on dividends paid by companies listed on the Finnish stock exchange.
Why not instead create a full dividends-paid deduction. It would eliminate the need for a rate preference for dividend inocme while eliminating the destructive double-tax on corproate earnings.
Russ Fox, Bozo Tax Tip #9: Foreign Trusts
Paul Neiffer, The Two Week Check List
Missouri Tax Guy, Residential Energy Tax Credits 2012
William Perez, Tips for SEP-IRA Contributions
Kay Bell, Tax Carnival #115: Final filing crunch 2013
Jeremy Scott, Tim Johnson, Kristi Noem, and the Importance of Moderates to Tax Reform (Tax.com)
The Myth of Crumbling Highways (David Hartgen). A useful counterpoint to the construction interests lobbying for higher gas taxes.
Peter Reilly, Taxpayer Beats Idaho On Domicile But Loses On Community Property
Going Concern had fun yesterday for April Fools day. This one puzzled me, though: Twilight Remake to Feature Auditors Instead of Vampires. Isn’t that like saying the Daytona 500 will feature automobiles instead of cars?
Tags: Ben Harris, Carnival of Taxes, corporate welfare, David Harten, Economic develpment, Going Concern, iowa tax policy, Jeremy Scott, Jim Buttonow, Kay Bell, Missouri Tax Guy, Nick Kasprak, Paul Neiffer, Peter Reilly, preparer regulation, Quick and Dirty Iowa Tax Reform Plan, Russ Fox, William Perez
Posted in Eye on the Legislature, Eye on the Legislature 2013, Tax Roundup | No Comments »
Wednesday, March 20th, 2013 by Joe Kristan
Iowa cracking down on RV tax scofflows? Southwestiowanews.com reports:
Iowa lawmakers are putting the brakes on those who avoid paying registration fees when buying expensive vehicles.
Under a bill recently approved by the Senate, tax evaders using so-called out-of-state shell corporations to avoid paying registration fees on RVs or other luxury vehicles will face criminal charges and penalties.
Going to jail to save a few bucks on your vehicle registration seems like a bad bet.
More fertilizer! TheGazette.com reports Iowa, Illinois may have bidding war to land new fertilizer plant:
The (Decatur) Herald & Review reports that, according to Illinois officials, Iowa is offering Cronus Chemical LLC an estimated $35 million in taxpayer subsidies to build a plant in Mitchell County near the Minnesota border.
Illinois lawmakers are considering tax breaks in a proposal by state Rep. Adam Brown, a Republican from Champaign. The plant would be built near Tuscola in the east central part of the state.
Hey, Iowa Economic Development people: Illinois is broke. Busted. Played out. They’re not bidding. We don’t need to be bribing fertilizer plants to come here. Instead give us a tax system that’s not so awful that we have to pay people to like us.
Jason Dinesen, Why Would Any Enrolled Agent Support the RTRP Program? :
It baffles me that the National Association of Enrolled Agents is so in love with the RTRP program.
In their weekly newsletter to EAs last week, NAEA bizarrely referred to the unlicensed preparers who brought suit against the IRS over the RTRP program as people who want “the right to remain incompetent.”
NAEA also kissed the government’s butt by praising the “serious and vigorous” IRS attorneys who are appealing the court ruling that struck down the RTRP program. The flowery kissing-up continued as NAEA went on to opine that the government “delivered its A-game” in the appeal.
I have never seen anything good for enrolled agents in the IRS preparer regulations. Enrolled Agents have been around a long time, and they have to meet much higher standards than the RTRPs would. Yet the EA designation is not well understood by the public, and having the IRS officially sanction a lesser credential will probably make it even harder for EAs to get their story out.
William McBride, Tax Policy Center Espouses Minority View on Capital Income Taxes (Tax Policy Blog):
The preponderance of evidence points to corporate taxes being the most harmful to economic growth, followed by personal income taxes, consumption taxes, and property taxes. Notice a pattern? The corporate tax is the largest tax on capital income in most countries, while the personal income tax is the largest tax on labor although it also taxes
capital.
He’s referring to this post we linked on Monday.
Jeremy Scott, Paul Ryan Borrows a Page From Obama’s Playbook (Tax.com): “ Much like Obama, Ryan keeps releasing the same budget every year, knowing full well that it has no chance of becoming law.”
Howard Gleckman, What the Tax Policy Center Really Said About the Ryan Budget (TaxVox). “To the Democrats who so enthusiastically embraced our analysis, thank you for your support. However, we did not say what you wish we had said.”
Jana Luttenegger, Does the IRS Have Your 2009 Refund? (Davis Brown Tax Law Blog)
Kay Bell, 13-plus ways to cut your taxes without itemizing
Paul Neiffer, Don’t Forget Farm Income Averaging. Another break for farmers that nobody else gets.
Jim Maule, The Aggravation of Tax Paperwork
Peter Reilly, Only Modest Valuation Discounts Allowed On Estate Artwork
TaxGrrrl, States, Local Governments Consider Aggressive Tax Collection Efforts To Plug Budget Holes
Joseph Thorndike, It’s Not Too Late for a War Tax (Tax.com)
The Ellen DeGeneres constituency. I thought it funny to see Peter Reilly’s Ellen DeGeneres Speaks Out For Spanish-American War Widowers . But it’s not as far-fetched as I thought. From today’s Des Moines Register:
There are 10 living recipients of benefits tied to the 1898 Spanish-American War at a total cost of about $50,000 per year.
The Civil War payments are going to two children of veterans — one in North Carolina and one in Tennessee — each for $876 per year.
Remember the Maine!
Tags: corporate welfare, economic development, Howard Gleckman, Jana Luttenegger, Jason Dinesen, Jeremy Scott, Joseph Thorndike, Kay Bell, maule, Paul Neiffer, Peter Reilly, TaxGrrrl, William McBride
Posted in Tax Roundup | 2 Comments »
Wednesday, March 13th, 2013 by Joe Kristan
I will fight for the right to tax you to subsidize other people. Governor Branstad is touchy about criticism of the massive tax breaks for the Southeast Iowa Orascom fertilizer plant. Radio Iowa reports:
“I’m here to make it clear that the chief executive of this state is on your side and we will fight for these jobs and I want to make it clear that when we make a promise to Lee County — or to any county in Iowa for that matter — it’s a promise we’re going to keep, no matter what they might say in Des Moines in any committee meeting,”
Never mind the high possibility that the plant would have been built without our tax money. Never mind the moral problem of taxing existing businesses and taxpayers to lure and subsidize outsiders. Never mind that political allocations of investment capital are always and everywhere unwise. Forget the lost opportunities for taxpayers to spend the money on their own projects. Jobs!
The Governor also hinted at darker forces opposing the tax credits, reports KCCI.com:
And he said he believed the Koch brothers were behind some opposition to the plant because it would hurt their fertilizer business.
So Iowa Democrats opposing the subsidies are tools of the libertarian Koch brothers. Who knew?
The EITC is a refundable credit, which means the tax man writes checks to folks with no taxes. Naturally EITC fraud is rampant.
TaxGrrrl, Hundreds Of Thousands Of Taxpayers Thought To Be Impacted By Education Credit Snafu
IRS agent pleads guilty to charges resulting form selling out a whistleblower. Jack Townsend has the scoop.
Kay Bell, 2013 tax filing season gets crazier for some H&R Block, TurboTax customers
Jason Dinesen, Small Business Health Insurance Credit, Part 2
Elizabeth Malm, Texas Considering Drastic Modifications to Margin Tax (Tax Policy Blog). Good.
Patrick Temple-West, Yankees embrace frugality to dodge tax, and more. Who says taxes don’t influence behavior?
Jeremy Scott, Carl Levin Changed the Face of Tax Enforcement (Tax.com)
Howard Gleckman, Taxes and Paul Ryan’s Budget (TaxVox)
William Gale, A Carbon Tax is a Win-Win for the Economy and the Environment (TaxVox)
David Brunori, Things to Read, Sites to Visit. (Tax.com). He shares some online resources, but tragically fails to mention the Tax Update.
Peter Reilly, No Fans Of Sister Wives At The IRS ? As far as I’m concerned, the possibility of consolidated individual returns should be all the argument needed against polygamy.
The Critical Question: Why Is My Refund Short? (Trish McIntire)
News you can use. Note to Drivers: All Wheel Drive Does Not Give You Superpowers, Just a Dangerous Overconfidence (Megan McArdle).
So you think you’re having a bad busy season? It could be worse: Upstanding San Leandro Accountant Finds Himself on Oakland’s Most Wanted List. Going Concern has the news of law enforcement gone awry.
Tags: Branstad tax policy, corporate welfare, David Brunori, Earned Income Tax Credit, economic development, Elizabeth Malm, Going Concern, Howard Gleckman, Jack Townsend, Jason Dinesen, Jeremy Scott, Joe Bolkcom, Kay Bell, megan mcardle, Patrick Temple-West, Peter Reilly, TaxGrrrl, The Critical Question, Trish McIntire, William Gale
Posted in Eye on the Legislature, Eye on the Legislature 2013, Uncategorized | 1 Comment »
Tuesday, March 5th, 2013 by Joe Kristan
“Ultimate Swiss Army Knife” image courtesy redjar under Creative Commons license.
The Iowa income tax as Swiss Army Knife. The Iowa Senate Veterans Affairs Committee yesterday sent to the floor a proposal for up to $1,500 in tax credits for hiring an Iowa resident who is “a member of the national guard, reserve, or regular omponent of the armed forces of the United States” for a job of at least 30 hours a week. The bill would also give an additional $500 tax credit for each year the employee is called to active service for at least 30 days.
SSB 1064 cleared the committee unanimously. After all, who would vote against the “Hire a Hero Tax Credit?” But this is a classic example of a feel-good tax provision that clutters the tax law, is very difficult to enforce, and would not accomplish enough to be worth the trouble.
Nobody will hire an employee just to get a $1,500 tax credit. You hire somebody because you have work to do. Because it’s so hard to find and keep good employees, you hire the person you think is most likely to work out; the cost of a hiring mistake can be a lot more than $1,500. It will be hard to enforce — especially the provision saying the credit is unavailable if the new employee replaces another “eligible employee.” Will the state really examine that? Like many credits, it won’t change behavior; it will just be harvested by taxpayers who would have hired the same military people anyway.
Still, why not make a nice gesture to show our voters how much we care? Because every feel-good tax break has a cost. It costs money to comply with and enforce. It also creates a new anti-tax reform interest group; any attempt to clear away expensive and ineffective tax breaks to make a better tax system for everyone will be fought by those few that collect it. It makes a good tax system for everyone just a little bit harder.
The primary purpose of the tax law is to finance government operations. When it become a Swiss Army Knife of public policy, it becomes a little less effective at its real job every time you add a new gadget.
Swiss Bank corpse fined $58 million for tax cheating. The Wegelin Bank, which is closing as a result of its legal troubles, was sentenced yesterday to pay a $58 million tax evasion fine for helping clients evade U.S. taxes. Robert W. Wood has more.
Patrick Temple-West, Wegelin withers under U.S. tax scrutiny, and more (Tax Break)
While whistleblower Bradley Birkenfeld had a big role in bringing down the Swiss bank tax evasion industry, the IRS continues to resist paying out whistleblower awards. While Mr. Birkenfeld scored $104 million for his snitching, Lynnley Browning reports that the IRS remains loath to pay for information:
In January, Sen. Charles Grassley, the 79-year-old Iowa Republican, chastised acting IRS commissioner Steven Miller over his recent proposal to restrict the agency’s whistleblower program, already an object of criticism since its creation in 2006. The proposed curbs, Grassley wrote in a letter to Miller, showed one thing: that the IRS and its boss, the Treasury Department, “view whistleblowers with hostility.”
What exactly is at issue? The current whistleblower rules say a tipster can collect a reward of 15%-30% of proceeds brought in as a direct result of a tip. The dirt has to involve tax evasion of at least $2 million or tax fraud by an individual making at least $200,000 a year.
Miller’s proposed restrictions will likely shrink payouts. Among the curbs: making it nearly impossible for whistleblowers to share in rewards stemming from a company’s inflation of losses, and excluding from rewards any money brought in from so-called Fbar fines.
Apparently the IRS would rather spend its time making experienced preparers take stupid open book tests for permission to continue what they have been doing for years than to actually pursue tax cheats. Only two whistleblower claims have been paid out, but the IRS feels it has plenty of time and resources to appeal the shutdown of its preparer regulation program.
William McBride, How do Taxes and Spending Affect Economic Growth? (Tax Policy Blog) “The worst option of all, according to a huge preponderance of evidence, is to replace the sequester spending cuts with higher income taxes.”
Russ Fox, IRS Opens for All. We can e-file all the forms.
TaxGrrrl,IRS Now Accepting All Individual Returns
Paul Neiffer, IRS Announces They Are Processing All Remaining Tax Forms
Jeremy Scott, Is the U.S. Tax Gap as Big as Italy’s? (Tax.com). “But numbers from a New York Times article about Italian tax evasion suggest that the United States isn’t doing much better than one of Europe’s most notoriously inefficient tax collectors.”
Jack Townsend, Second Circuit Holds That Fraud on the Return — Even If Not the Taxpayer’s — Causes an Unlimited Civil Assessment Statute of Limitations to Apply
Linda Beale, Jenkins & Gilchrist attorney sentenced to 8 years for tax shelter work
Yes. Minnesota Tax Reform: Poorly Designed?? (Brian Strahle).
Kay Bell, Tax Carnival #114: March 2013 Tax Lions and Lambs
Good. Pennsylvania Is Trying to Ditch the Attest Hour Requirement for New CPAs (Going Concern). If you want to do tax work for a living, why waste two years doing audit work that you hate?
I don’t condone the behavior, but I bet every bus driver dreams it. From WQAD.com:
Two Iowa bus drivers lost their jobs after being accused of racing school buses filled with students.
According to police the two drivers were returning with students from a Valentine’s Day field trip when one driver turned the ride into a race.
The students were first graders from Iowa Falls. Nobody was hurt.
I might not make a very good bus driver. I’d probably always be racing…
Tags: Brad Birkenfeld, Brian Strahle, Going Concern, Grassley, iowa tax policy, Jack Tomwsend, Jeremy Scott, Kay Bell, Linda Beale, Patrick Temple-West, Paul Neiffer, Robert Wood, Russ Fox, Swiss Army Knife, TaxGrrrl, William McBride
Posted in Eye on the Legislature, Eye on the Legislature 2013, Tax Roundup | No Comments »
Tuesday, February 26th, 2013 by Joe Kristan
Close enough to zero. Monday Map: Corporate Income Tax Revenue as a Percentage of All State/Local Tax Revenue (Nick Kasprak, Tax Policy Blog):
IRS Field Attorney Advice: Bank must capitalize indirect costs of holding ”OREO” property under inventory capitalizetion rules. From FAA 20123201F (my emphasis)
Section 263A applies to property that is acquired for resale. If § 263A applies, the taxpayer must capitalize both the direct costs of acquiring the property and the property’s allocable share of indirect costs.
…
In this case, X clearly acquires OREO in foreclosure (or in lieu of foreclosure) with an intent to resell the property. Bank regulators restrict the holding period for OREO and expect banks to exercise good faith efforts to sell the property. As required by applicable state and federal policies and regulations, it is our understanding that X advertises its OREO properties for sale, including those properties which it rents out. X’s Year6 Annual Report confirms that assets acquired through (or in lieu of) foreclosure are held for sale. In addition, OREO is acquired and held in the ordinary course of X’s trade or business. X’s Year6 Annual Report acknowledges as much when it states that X may foreclose on and take title to properties securing loans “during the ordinary course of business.” X engages in OREO transactions with frequency, regularity, and according to an “OREO disposition strategy.” (Year6 Annual Report, p.17). Thus, the OREO held by X constitutes property held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business.
“OREO” is “other real estate owned,” for you non-bankers. Bankers don’t care to hold much of that.
Joseph Henchman, Nebraska Governor Withdraws Tax Reform Proposal; Legislature Look to Commission to Develop Alternatives (Tax Policy Blog). But they aren’t giving up on tax reform. So should Iowa. The Quick and Dirty Iowa Tax Reform Plan is tanned, rested and ready!
Paul Neiffer, Must Have W2 Wages to Deduct DPAD. A hidden tax trap for the Schedule F farmer.
Great minds think alike:
TaxGrrrl, How Will Your State Be Impacted By Sequestration?
Kay Bell, How would your state fare under sequestration?
TaxProf, 3d Circuit Denies CARDS Tax Shelter. Another turn-of-the-century tax shelter fails.
Elaine Maag, Education Tax Credits Rival Pell Grant Program in Size: Reforms Proposed (TaxVox). The more you subsidize it, the more it costs.
Jeremy Scott, Taxing the Rich, Thenardier-Style (Tax.com):
But the influence of Les Miserables doesn’t just extend to the silver screen and stage. President Obama seems to be taking tax policy advice from the musical’s comical antagonist, Thenardier.
Well, that would explain many things.
Trish McIntire, Referrals – A Double Edged Sword.
Peter Reilly, What Were They Thinking ? Another example of the unwisdom of failing to remit payroll taxes.
Linda Beale, Private equity and real estate managers get a “costly and unjust [tax] perk”. Not really, but some people really hate carried interests.
Me: Identity theft tax fraud: women’s work?
Put the champaign back on ice. The Income Tax is NOT Turning 100 – Yet. (Joseph Thorndike, Tax.com).
One less metal home in town. Demise of Another Lustron House. (IowaBiz.com) These are funky steel houses, not mobile homes. They don’t build ‘em like that anymore.
Tags: Elaine Maag, iowabiz.com, Jeremy Scott, Joseph Thorndike, Kay Bell, Linda Beale, Lustron homes, Nick Kasprak, OREO, Paul Neiffer, Peter Reilly, Quick and Dirty Iowa Tax Reform Plan, TaxGrrrl, TaxProf, Trish McIntire
Posted in Tax Roundup | No Comments »
Wednesday, February 20th, 2013 by Joe Kristan
Flickr Image courtisy Llima under Creative Commons license
If you are going to say the dog ate your tax records, make sure you have a dog. A New Jersey man was having a hard time coming up with records supporting his deductions in Tax Court. He blamed a fire. The success of the argument can be guessed from the Tax Court’s discussion of “Petitioner’s Alleged Fire”:
The circumstances surrounding petitioner’s purported fire are vague, and he has offered no evidence, apart from his testimony, that a fire occurred and that his 2006 tax records were destroyed in such a fire. Significantly, he failed to introduce insurance documentation or third-party testimony describing the alleged events or the extent of any fire.
The Tax Court said the man couldn’t support his deductions.
The Moral? Back up your work. And if you are going to have a fire, something needs to actually burn. (Cite: Mears, T.C. Memo 2013-54)
It looks like the dreaded automatic “sequestration” spending cuts are going to happen, so there is a flurry of proposals to stop this sliver of random spending discipline:
Martin Sullivan, A Proposal to Get Tax Reform Back on Track:
Before earmarking what we will do with the money from limits on chimerical loopholes, our leaders need to clear the path for the painful process of broadening the tax base. President Obama has now poisoned the well by turning Republicans’ tax reform instincts against them. If they were to put any revenue increases on the table, the President would claim the proposals have the Republican seal of approval and incorporate them into his tax hike plans.
At the same time Republicans tax reform strategy is wearing thin. Their extravagant claims about cutting the top individual rates below 30 percent are just hollow speechifying as long as they refuse to put specific revenue-raisers on the table.
Inspiring leadership.
Jeremy Scott, Simpson-Bowles Try Again (Tax.com):
Simpson-Bowles is just another deficit reduction plan — and a politically infeasible one at that. Its authors want to make it seem grander by attaching tax reform to it, just like Obama wanted his own proposals (which simply include ways to raise revenue that Democrats have proposed ad infinitum over the years) to sound better when he mentioned tax reform at least three times during the State of the Union. But what they are offering isn’t comprehensive enough to qualify as true tax reform. Deficit reduction has its place, but conflating it with tax reform will stall whatever momentum people like Camp are trying to create for a true tax system overhaul.
They just aren’t serious yet.
Also:
Howard Gleckman, Bowles-Simpson II: A New Plan to Avoid the Sequester (TaxVox)
Patrick Temple-West, Simpson, Bowles revive deficit plan, and more
Jacob Sullum on Obama’s Misguided Vision of Tax Reform (Reason.com)
High taxes are good for us, so infinite taxes will make us perfect. The high-tax advocacy group Citizens for Budget and Policy Priorities has generated a paper that says that state tax cuts do no good:
This paper argues that state personal income tax cuts won’t help small businesses create jobs, and in fact could harm the ability of the small-business sector to contribute to economic growth. For all the reasons stated in this paper, the converse is also true: personal income tax increases, including those on the highest earners, won’t harm small-business job creation.
Really? There is no level of taxation that would discourage economic activity? There is no level of tax increase that would cause economic activity to be located in a neighboring state with lower taxes?
The paper makes the same mistake as the guy who drowned trying to wade across the river that was only two feet deep, on average. You can see it on the headings of the paper: “The vast majority of those who would get a personal income tax cut are in no position to create small-business jobs.” “Most small businesses make too little money for tax cuts to produce enough income to pay new employees.” “Most small business owners are not significant ‘job creators’ and have no plans to be.”
This is the same logic we heard when we were told that individual tax increases wouldn’t hurt business because most small businesses wouldn’t be affected. When you define “small business” to include your office Avon Lady and a manufacturer with dozens or hundreds of employees, of course “most” businesses won’t hire more if taxes are lower. Just the ones that matter.
When you measure by amount of income, the amount of business affected by individual rates is huge:
Sure, relatively few businesses achieve enough success to hire a lot of employees. Yet some do, and they do a lot of hiring. And, contrary to the CBPP paper, their ability to expand does shrink if they have to pay more taxes. As a tax accountant, it’s part of the world I live in. Prices matter in making decisions — including the price of living, doing business and paying taxes in a state. Any argument to the contrary has to overcome the basic rule of economics that incentives matter.
Paul Neiffer, 1031 Tax-Deferred Exchange Does Not Always Defer All Taxes!
Jack Townsend, Another Plea Agreement and Sentencing for HSBC and Bank Woori Depositor
Tax Trials, Petition for Writ of Certiorari Filed in Historic Boardwalk Hall Tax Credit Case
Trish McIntire, FASFA?
Kay Bell, Tax Carnival #113: Presidents Day 2013 or maybe you, too, can one day be Acting President of the United States
Breaking news from 1147: Tax Havens: The Second Crusade (Robert Goulder, Tax.com)
Going Concern, The IRS Is Wasting Millions on Unused Blackberrys and Aircards Because Of Course It Is. Meanwhile they prepare to lay off their useful employees when sequestration hits.
Tags: CBPP, Going Concern, Howard Gleckman, Jack Townsend, Jacob Sullum, Jeremy Scott, Judge Thornton, Kay Bell, Martin Sullivan, Patrick Temple-West, Paul Neiffer, Robert Goulder, tax court, Tax Trials
Posted in Tax Roundup | No Comments »
Tuesday, February 12th, 2013 by Joe Kristan
Meanwhile, somewhere an ID thief is trying to get cash from an ATM with a peanut butter sandwich. TBO.com reports:
A 6-year-old pupil at Symmes Elementary School in Riverview was asked to take her homework out of her backpack, according to Cpl. Bruce Crumpler of the Hillsborough County Sheriff’s Office.
The girl reached into her bag and pulled out a baggie containing 52 debit cards, Crumpler said.
The cards, which can be used as accounts for depositing tax refunds are commonly used by people who use stolen personal identities to file tax returns to obtain fraudulent refunds.
Maybe she’s the little princess of tax fraud. Meanwhile, the same TBO.com has an update on Rashia Wilson, who allegedly proclaimed herself the “Queen of IRS Tax Fraud:”
Wilson may not have been the biggest player in Tampa’s income tax fraud explosion, but she was one of the most brazen — “flashy,” a sheriff’s investigator called her, “in your face about it.”
The affidavits show Wilson even had a picture of herself with a cool smile on her face, wearing an oversized jewel-encrusted pendant spelling out her first name as she held bundles of cash.
“YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD,” reads a May posting on her Facebook page described in the affidavits. “IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!”
Easier than she thought, apparently. She has been indicted on 57 federal tax fraud charges for collecting $1.3 million through fake tax returns, apparently claiming earned income credits and refundable education credits. That should make the politicians think twice before they expand these fraud-ridden credits, but it won’t.
How many lawyers does it take to lose a tax case? 15. At least that’s how many lawyers were listed on the losing side yesterday in Bank of New York Mellon Corp., a Tax Court case disallowing foreign tax credits in a tax shelter case. Six lawyers are listed on the IRS side, for a total of 21. The losing side was led by former IRS Chief Counsel B. John Williams. If nothing else, the legal expense deductions should take a bite out of the losing side’s tax bill. The TaxProf has more.
Iowa’s push for a 4.5% optional flat tax — which I call an “alternative maximum tax” – puzzles David Brunori ($link)
Many liberals in Iowa are complaining that a flat tax wouldn’t require the rich to pay their fair share, whatever that means. But a lot of those people seem more interested in soaking the rich than in helping the poor. Personally, I am much more in favor of reducing the tax burdens on the poor and dispossessed than I am in making rich people suffer.
I think a flat income tax with few deductions (and a sizable exemption for low-income people) is the way to go. I’m unsure why the state would continue its horribly complicated personal income tax system that benefits return preparers, tax lawyers, and tax accountants.
It’s because of a peculiarity of Iowa politics. The powerful lobbying group Iowans for Tax Relief opposes a repeal of the Iowa deduction for federal taxes paid. ITR has shown that it can provoke successful primary challenges of Republican legislators who displease the Muscatine-based lobby. Yet significant rate reduction is impossible if the deduction is retained. Making the lower rate an “alternative” rather than a replacement appeases Muscatine, though at a cost in incoherence.
Will we see a revival in enforcement of the accumulated earnings tax? The obscure depression-era tax on C corporations that retain cash in excess of their “needs,” as second-guessed by the IRS, is rarely asserted. With left-side economists like Paul Krugman asserting that corporate cash-hoarding is one reason why the economy remains weak, don’t be surprised if his friends in the Obama administration try to revive enforcement of this archaic and foolish penalty tax. (Via Tyler Cowen).
William McBride, CBO Projections of Spending and Tax Credits (Tax Policy Blog):
As the chart below shows, mandatory spending represents the majority of the federal budget, and the part that has grown most dramatically in recent years. Mandatory spending was about 10 percent of GDP for most of the 30 years prior to 2008. It leapt to 15 percent of GDP in 2009 and now remains at 13.1 percent. It is projected to increase to 14.1 percent of GDP by 2023. Meanwhile, discretionary spending, on programs like defense, roads, and other infrastructure, is on a steady decline. Discretionary spending is now 8.3 percent of GDP and set to go to a 50 year low of 5.5 percent of GDP by 2023.
No spending is really “mandatory.” Congress and the President can always change the “mandatory” programs. And they will, or we will face fiscal disaster and crushing taxes.
Paul Neiffer, Farmer Filing Due Date Update
Yes. Will Obama’s Call for Tax Reform Ring Hollow? (Jeremy Scott, Tax.com).
TaxGrrrl, A Beginner’s Guide To Taxes: Do I Need To Hire A Tax Preparer Or Can I Do My Return Myself?
William Perez, Finding the Right Filing Status
Patrick Temple-West, Sandy damage leads to tax trouble, and more (Tax Break)
Peter Reilly, Co-op Owner Wins Casualty Loss Appeal
Missouri Tax Guy, Safeguarding Financial Records
Brian Strahle, Delaware’s NEW Voluntary Disclosure Program for Unclaimed Property: Should You Utilize It?
Jack Townsend, Good Faith as a Defense to Tax Crimes
The Critical Question: Would a Carbon Tax and Corporate Tax Reform Taste Great Together? (Donald Marron, TaxVox).
Kay Bell, Man gets $161,392 erroneous tax refund. And in this case he didn’t even ask for it.
Tags: Brian Strahle, David Brunori, Donald Marron., identity theft, iowa tax policy, Iowans for Tax Relief, Jack Townsend, Jeremy Scott, Kay Bell, Missouri Tax Guy, Patrick Temple-West, Paul Krugman, Paul Neiffer, Peter Reilly, tax crime, TaxGrrrl, TaxProf, Tyler Cowen, William McBride, William Perez
Posted in Tax Roundup | 3 Comments »
Tuesday, February 5th, 2013 by Joe Kristan
The Iowa Senate approved the Iowa tax code conformity bill, SF 106, yesterday. The bill was approved 48-0, which is a good sign that it will pass quickly — enabling Iowans to get on with filing their 2012 business returns.
The bill updates Iowa’s income tax for the Fiscal Cliff tax bill changes passed last month by Congress. Key items updated to match federal rules include:
- Conforming with the $500,000 federal Section 179 deduction limit for 2012 and 2013.
- Allowing the optional deduction for state and local sales taxes for 2012 and 2013.
- Conforming to federal research credit rule changes
- Continuing the IRA charitable distribution exclusion
- Adopting the federal “above the line” deductions for college tuition and for out-of-pocket expenses of educators.
The bill does not adopt federal bonus depreciation for 2012 and 2013. The bill does not show up yet on the calendars for the House Ways and Means Committee or for House floor debate, so it may not get to the Governor this week. Update, 9:00 am: An e-mail from the House floor manager for the bill says the House may take it up as soon as tomorrow.
More boffo reviews for the shutdown of the IRS preparer regulation program!
The Weekly Standard raves:
It’s hard to choose just one IRS knee-slapper, but here goes. The agency insists IJ’s “suggestion that the return preparer program is the product of a tainted lobbying effort is belied by support for the program from the Taxpayer Advocate, the Electronic Tax Administration Advisory Committee, numerous consumer advocacy groups, and comments from individual practitioners.”
The ETAAC is an IRS-administered panel whose members include lawyers and CPAs—who weren’t subject to the regulations—and people with connections to H&R Block and Jackson Hewitt, big businesses happy to help the government force the little guys out of the industry.
Protecting the taxpayers has never been the point.
The Wall Street Journal weighs in:
Rather than continuing to fight in court, the agency would do better to cashier the rules on legal and economic grounds. They are a classic example of big business harnessing government power to aid the powerful at the expense of small-business competitors. Meantime, won’t someone in Congress tell the IRS to stop exceeding its legal authority?
Sadly, no.
Meanwhile, the IRS has re-opened its PTIN registration system. It appears the IRS will still charge for them, though it’s not clear why anymore.
Nick Kasprak, Weekly Map: Sources of State and Local Tax Revenue: Sales, Excise, and Gross Receipts Tax:
Leave Gennifer Flowers Alone! Clinton woman pleads guilty to false tax returns. Clinton, Iowa, that is. From the Clinton Herald:
Regina Jimenez, 60, of Clinton pleaded guilty to two counts of filing
false tax returns. She faces up to three years of prison, a fine of up
to $1 million and costs of prosecution on each count.
According to court documents, Jimenez operated AA Accounting & Tax
Services, Inc. in Clinton from approximately 2007 through 2011. Jimenez
used the business to facilitate the theft of more than $200,000 from a
client who believed that Jimenez would use the money to pay the client’s
taxes.
There’s never a good reason to have your tax preparer pay your income taxes for you. If your preparer tries to get cash from you “to give to the IRS,” ask many questions.
Paul Neiffer, Hedging Versus Speculation:
Remember, if the farmer purchases a corn call option as part of this hedging strategy, this no longer qualifies as a hedge (even though is a normal strategy of selling actuals and buying the “board”, for tax purposes, it is not a hedge) and is considered speculation. In many cases, the tax treatment can be harsh since if the option produces income, the IRS will treat it as ordinary and if it produces a loss, it will be considered a capital loss (the worst of both).
Because partnership tax isn’t screwed up enough? Why the IRS Should be Taxing the Profits of Private Equity Funds as Ordinary Income (Steven Rosenthal, TaxVox).
Robert D. Flach, tax man of La Mancha New Jersey Pennsylvania, chases his favorite windmill: BEFORE I GO – MY “CRUSADE”
Windmills everywhere! Carl Levin Continues to Play the Role of Don Quixote (Jeremy Scott, Tax.com)
Patrick Temple-West, Democrats target corporate tax breaks, and more
TaxGrrrl, Guess What Turned 100 This Weekend?
Kay Bell, Happy 100th birthday federal income tax
Brian Strahle, The Maryland Wynne Case is Decided, Will The State Appeal Further? A possible refund for Maryland residents with taxes in other states.
Brian Mahany, OVDI – It’s Not Just For Unreported Foreign Accounts
Why you should spring for a good GPS unit. You might get lost otherwise, like a star-crossed couple in my home town of West Des Moines. The Des Moines Register reports:
The incident occurred at about 2:12 a.m. Friday, when a car pulled into a police station driveway at 250 Mills Civic Parkway marked for “Authorized Personnel,” according to a police report.
Police said the car passed two patrol cars and drove up a private drive before turning around when it reached a garage. An officer in one of the patrol cars then turned on his top lights and stopped the car.
The driver told officers they were trying get to Beach Girls, an adult entertainment venue at 6220 Raccoon River Dr., West Des Moines, according to the report.
The two officers reported that both the driver and passenger had bloodshot, watery eyes and that the vehicle smelled of marijuana.
If they mistook the West Des Moines cop shop for a strip club, either they already had enough fun for the night, or strip joints have changed a lot since my bachelor days.
Tags: Brian Mahany, Brian Strahle, iowa tax policy, Jeremy Scott, Kay Bell, Nick Kasprak, Patrick Temple-West, Paul Neiffer, preparer regulation, Robert D Flach, SF106, Steven Rosenthal, tax crime, TaxGrrrl
Posted in Eye on the Legislature, Eye on the Legislature 2013, Tax Roundup | No Comments »
Tuesday, January 29th, 2013 by Joe Kristan
Flickr image courtesy Pasa47 under Creative Commons license
A Tax I can support! Tax the Revolving Door (Glenn Reynolds)
In short, I propose putting a 50% surtax — or maybe it should be 75%, I’m open to discussion — on the post-government earnings of government officials. So if you work at a cabinet level job and make $196,700 a year, and you leave for a job that pays a million a year, you’ll pay 50% of the difference — just over $400,000 — to the Treasury right off the top. So as not to be greedy, we’ll limit it to your first five years of post-government earnings; after that, you’ll just pay whatever standard income tax applies.
Plus make them wear clown clothes to work. (Via the TaxProf)
Allysia Finley, Mickelson and the Sports Star Tax Migration (Wall Street Journal):
About 3.5 million Californians have migrated to other states over the past two decades. Almost anywhere they chose to go would allow them to enjoy greater returns on their labor. Is it really surprising that athletes like Mr. Mickelson might be keeping an eye on the leaderboard?
It would be surprising if they didn’t.
Kyle Pomerleau and William McBride: EITC Awareness Day (Tax Policy Blog)
Research has shown that the EITC is associated with higher workforce participation among certain populations. However, Casey Mulligan’s research shows there is no free lunch here, since the EITC creates disincentives to work over the income range in which it phases out (roughly $20,000 to $50,000). And because the EITC is one of many overlapping anti-poverty programs, such as unemployment insurance, they all add up to huge disincentives to work among the poor.
And some Iowa politicians want to increase the Iowa EITC, making it a bigger poverty trap.
Steven Rosenthal, Chairman Camp Agrees: Too Many Choices Burden our Tax System (TaxVox)
Jeremy Scott, Huffington Post Draws Tenuous Link Between Camp Plan, Fix the Debt Group (Tax.com)
Robert D. Flach, GUIDELINES FOR TAX REFORM:
Recognize and acknowledge that the purpose of the federal income tax is to raise the money necessary for the administration of the government and government sponsored programs. It is not to be used to “redistribute income” or as a method for delivery of social welfare and other government benefits.
If that principal were vigorously applied to the tax law, the 1040 would fit on a postcard.
Climb in the Cavalcade! Worker’s Comp Insider hosts the latest Cavalcade of Risk roundup of insurance and risk-management posts, including Insureblog on the Curly Bulb Menace.
Russ Fox, Form 8863 Added to Returns that the IRS Won’t Accept Just Yet. The form for tuition credits.
William Perez, When Can You Begin Filing Your 2012 Federal Tax Return?
Jason Dinesen, Taxpayer Identity Theft, Part 11. In which the IRS ignores the change-of-address filing and mails a long-delayed refund to the wrong address.
Martin Sullivan, Taxing Financial Pollution. On the futility of a financial transactions tax. (Tax.com)
Missouri Tax Guy, What you’ll Need. A guide to gathering your tax return information.
TaxGrrrl, Tax Season Kicks Off January 30th: Here’s What’s On Tap
Jack Townsend, IRS Issues John Doe Summons to UBS (All Over Again)
Kay Bell, Deducting sales tax on your new car … or boat or airplane or home
Tags: Allysia Finley, Beavers, cavalcade of risk, Instapundit, Jack Townsend, Jason Dinesen, Jeremy Scott, Kay Bell, Kyle Pommerleau, Martin Sullivan, Missouri Tax Guy, Phil Mickelson, Robert D Flach, Russ Fox, Steven Rosenthal, tax crime, TaxGrrrl, TaxProf, William McBride, William Perez
Posted in Tax Roundup | No Comments »
Tuesday, January 15th, 2013 by Joe Kristan
Via Wikipedia
Might the Iowa legislature lead on income tax reform? If it’s going to happen, they will have to, as Governor Branstad only wants to talk about property taxes this year. O. Kay Henderson reports:
During a recent interview with Radio Iowa, Governor Branstad made it clear he is focused on cutting property taxes.
“Sure, I’d like to see the income tax reduced, too, but in terms of my priority — and I’ve been working on this for a couple of years and we’re really trying to perfect it — our focus is going to be on significant property tax reduction and replacement,” Branstad said a month ago.
Some legislators are more ambitious, reports Henderson:
Representative Tom Sands, a Republican from Wapello, is the chairman of the House Ways and Means Committee that writes tax policy.
“I think there is some pressure building from Iowans to cut both income taxes — look at some reform as well as a cut to the individual income tax,” Sands says. “We’re hearing from corporations as well, on the income side.”
I doubt anything good will happen with income taxes this session. The Iowa Chamber Alliance even wants to to go the wrong way, pushing more tax credits for the well-connected. No organization seems to be pushing for the rest of us. But The Quick and Dirty Iowa Tax Reform Plan is ready to go if the legislature needs some ideas.
Russ Fox, Estimated Tax Payment Deadline Is January 15th. For 1040 and 1041 filers. Kay Bell has more.
Nick Kasprak, Monday Map: State Gasoline Tax Rates, 2013 (Tax Policy Blog):
Robert D. Flach, CHOOSING A TAX PREPARER. I suppose I should be upset by this:
Contrary to the popular “urban tax myth” perpetuated by uninformed journalists, just because a person has the initials “CPA” after his/her name does not mean that he/she knows his arse from a hole in the ground when it comes to preparing 1040s.
But I’m not. It’s true, if roughly stated.
Robert goes astray in his next paragraph:
Only those individuals who possess the “EA” (Enrolled Agent) or “RTRP” (Registered Tax Return Preparer) designations have demonstrated competency in 1040 preparation by taking an IRS-sponsored test, and are required to remain current in 1040 law by taking a minimum number of hours in continuing professional education (CPE) in federal income taxes each year.
False. The RTRP test is open book. It demonstrates that somebody can read. It’s a literacy test, an empty exercise to justify the IRS power grab over the preparer industry. It’s different with Enrolled Agents, like Jason Dinesen and Russ Fox, who have to meet much stricter standards than RTRPs. One of the underreported nasty consequences of the RTRP designation is that it damages the EA brand.
I also disagree with the implied conclusion that CPAs who prepare returns are less competent as a group than EAs or RTRPs. Some are incompetent, no doubt, but many tax CPAs are highly-skilled. I think the competency curve for non EA preparers vs. CPAs would look something like this:
Substitute “RTRP” for “unenrolled preparer.”
There are excellent non-CPAs and there are incompetent CPAs. Still, I think as a group the CPAs who do tax for a living will tend to be more competent.
My rule of thumb for choosing a preparer: buy as much preparer as you need, but no more. Many taxpayers who only have wage and investment income and routine itemized deductions will do fine with an RTRP (and would have done fine with an unenrolled preparer without the new IRS preparer regulations). If you have business income, a multistate return, or a complicated financial life, your needs go up; you need a high-end RTRP like Robert, or an EA, or a CPA. As your business gets bigger, you are more likely to want to hire a good CPA. And when Robert gets to the bottom line of his post, I think he agrees.
But be careful which one you hire: Lawyer, Accountant Implicated in Estate Fraud Case (Brian Mahany)
Trish McIntire, Preparer Conflict of Interest
Jack Townsend, The Big Boys Get Better Treatment in Our Tax System Than Do Minnows.
I speak again on the basic relative unfairness of the treatment of many, if not most, in the IRS’s offshore voluntary disclosure initiatives.
They have to shoot the jaywalkers so they can slap the real offenders on the wrist.
You pay more in taxes this year than last year. How do you like your tax cut? At Tax.com, Jeremy Scott tries to convince us that we just got a tax cut:
The income tax rates, the estate tax, and the alternative minimum tax patch are all here to stay. And, according to the Tax Policy Center’s (TPC’s) preliminary study on distributional effects, the act essentially provided a big tax cut for almost everyone.
Funny, everybody’s taking home less. How does that work? My emphasis:
Using the Congressional Budget Office’s old baseline (which assumed that the Bush tax cuts would expire for everyone) and looking at the effects of the tax cut in 2018, the TPC says that the average taxpayer will receive a $2,335 tax cut under ATRA.
I see. Because the tax increase could have been bigger, we got a tax cut. I’ll see if I can cut staff accountant pay and convince them they got a raise because we didn’t cut more.
Janet Novack, Obama Vows Republicans Won’t Collect ‘Ransom’ For Raising Debt Limit. No, they’ll ultimately let the President continue the insane spending pace.
Paul Neiffer, We Wonder What the Investment Income Tax Form Will Look Like
Avoiding Excess Credit Card Interest Should Not Be A Taxable Event. But it can be, if you get the bank to forgive unpaid interest that would be non-deductible.
IRS Releases Additional Inflation-Adjusted Figures for 2013
Robert Goulder, Taxes & Corruption: Another Greek Tragedy (Tax.com)
TaxGrrrl, Ask the taxgirl: IRS Delayed Tax Filing Season Applies To Everybody
Martin Sullivan, IRS: Women At Work (Tax.com):
According to the latest IRS Data Book 60,623 of the agency’s 104,402 employees in 2011 were women. That 66 percent is far more than the 44-percent figure for government’s total civilian labor force and the 47-percent figure for the overall US civilian workforce.
Ben Harris, Should Louisiana Dump Its Income Tax for a Bigger Sales Tax? (TaxVox)
News you can use. FYI: Attorneys Think Auditors’ Legal Confirmation Letters Are a Giant Waste of Time (Going Concern)
Tags: Ben Harris, Branstad tax policy, Brian Mahany, Going Concern, Jack Townsend, Janet Novack, Jeremy Scott, Kay Bell, Martin Sullivan, Nick Kasprak, O Kay Henderson, Paul Neiffer, Peter Reilly, Quick and Dirty Iowa Tax Reform Plan, Robert D Flach, Robert Goulder, RTRP. Enrolled Agents, Russ Fox, shooting jaywalkers, TaxGrrrl, Tom Sands, Trish McIntire, William Perez
Posted in Tax Roundup | 5 Comments »
Tuesday, January 8th, 2013 by Joe Kristan
Dave Jamison
Iowa issuing new certificates for federal mortgage interest tax credits. The Iowa Finance Authority yesterday announced that it will issue mortgage credit certificates that enable Iowans to qualify for the federal mortgage interest credit. O. Kay Henderson reports:
The Iowa Finance Authority is offering a new tax credit for new homeowners who fall under limits on annual income and the purchase price of their home. Iowa Finance Authority director Dave Jamison says it’s a credit linked to the mortgage interest new homeowners are paying.
“Yet another way that Iowans who meet our program guidelines can experience the many benefits of home ownership,” Jamison says.
Iowans with the certificates may be able to claim the federal credit on Form 8396. The IRS describes the credit here. They note that interest that qualifies for the credit does not qualify for the home mortgage deduction. You only qualify for the credit if you have a mortgage credit certificate from a qualifying agency; in Iowa, that agency is the Iowa Finance Authority.
The credit isn’t for everyone; there are limits based on income and home price. From the O. Kay Henderson story:
Eligibility guidelines are different for each Iowa county. In the state’s largest county, Polk County, a couple with an annual income of up to $75,000 could qualify for the credit on a home that was purchased for $250,000 or less.
More from WHOTV.com.
Nick Kasprak, Monday Map: Percentage of Taxpayers with AGI over $500,000 (Tax Policy Blog)
Fiscal Cliff Notes
TaxGrrrl, IRS Issues Statement On Tax Legislation, Makes No Promises About Start Of Tax Season:
The delay means that now, there are a lot of new forms to be printed, a lot of software programs to finagle. I’d be surprised – and wildly impressed, mind you – to see tax season kick off on time this year for all taxpayers. But fingers crossed, right?
I think the federal tax season won’t be too bad. With all of the retroactive conformity problems in the new law, though, a lot of states are likely to give taxpayers fits.
Kevin D. Williamson, You Cannot Raise Taxes on the Rich:
Tax hikes on the so-called rich may decrease the private sector’s share of income, but they probably will not do much to decrease the real income of high-wage workers and may in reality increase government revenue at the expense of low-wage workers in the long term, though it is very difficult to disaggregate the complex relationships between taxes, wages, and prices. But those who say that they are most interested in economic inequality would do well to follow Kenworthy’s example and look at transfers rather than taxes.
James Pethokoukis, New study undercuts Obama’s income inequality argument
Washington’s tax hike on wealthier Americans won’t accelerate economic growth, won’t create jobs, and won’t lower the debt by an more than a rounding error. So what was the point of all that debate about the fiscal cliff? Why did President Obama insist on those upper-income tax increases, especially when the economy continues to struggle?
Simple: It was a way — even if mostly symbolic — of addressing what President Obama views as America’s biggest problem: rising income inequality.
A falling tide lowers all boats.
Freakonomics, How Much Financial Inequality Is Due to Financial Illiteracy? Is that illiteracy of the people who are unequal, or those who think it’s a big deal.
Jeremy Scott, Both Parties Should Have Pushed Payroll Tax Cut (Tax.com)
Hani Sarji, More Estate Tax Changes Could Follow Fiscal Cliff Deal (via the TaxProf)
Patrick Temple-West, More tax revenue to IRS before cliff, and more
All the talk about the fiscal cliff and the inadequacy of the last-minute deal to avert it obscures one fact: It probably provided the government with tens of billions of dollars in unexpected tax receipts.
Many taxpayers accelerated income and deferred deductions anticipating the rate increases.
Wall Street Journal, The Stealth Tax Hike: Why the New $450,000 Income Threshold Is a Political Fiction:
Paul Neiffer, Fiscal Cliff Tax Bill May Increase Divorce Rate!
Russ Fox, The Problem with PEOs. No, not these PEOs.
Trish McIntire, More ITIN Info
Missouri Tax Guy, Married Filing ….
Jack Townsend, HSBC Depositor Pleads Guilty to Conspiracy
Kay Bell, Tax moves to make in January 2013
I like the first half. Let There Be Wine (And Taxes) (Jason Dinesen)
The Critical Question: Can You Distinguish a Tax from a Ransom Payment? (Robert Goulder, Tax.com)
I wasn’t serious about her anyway. Ex-KPMG Chief to Auditors: You Are All Flirting With Irrelevance (Going Concern)
Hope and change. A lot of change, if you use it to buy coffee. Should the President Mint a $1 Trillion Platinum Coin? (Megan McArdle)
Tags: Dave Jamison, Freakonomics, Going Concern, Hani Sarji, Iowa Finance Authority, Jack Townsend, James Pethokoukis, Jason Dinesen, Jeremy Scott, Kay Bell, Kevin Williamson, megan mcardle, Missouri, Nick Kasprak, O Kay Henderson, Patrick Temple-West, Paul Neiffer, Robert Goulder, Russ Fox, The Critical Question, Trish McIntire
Posted in Tax Roundup | No Comments »
Tuesday, December 18th, 2012 by Joe Kristan
The “Fiscal Cliff” negotiations seem to be heating up. The inane haggling over the final version of the inevitably awful tax law that we will have for this year and next year seems to have heated up a bit yesterday. Details are cloudy and could change, but here’s what it looks to me like they are talking about for taxes:
- An increase of the top ordinary income tax rate to 39.6%, but at a level of $400,000 or higher; the President had been holding out for a $250,000 threshold.
- Some stupid restriction in the tax benefits of itemized deductions — perhaps capping the value of the deductions at 28%.
- An AMT patch retroactive to last year and extension of all of the “expiring provisions.”
The President’s most recent offer includes some surprisingly good tax policy in the midst of the general awfulness of the tax increase plans. From the Wall Street Journal:
On the tax side, the administration’s biggest proposal would permanently
extend relief from the alternative minimum tax. That’s a provision
designed decades ago to target the wealthiest Americans that now hits
tens of millions of middle-class households, in part because it wasn’t
indexed for inflation.
That would be great news. The politicians play with fire by temporarily increasing the AMT exemption every year or two as a cheap ploy to pretend they will receive additional AMT revenue after the temporary “patch” expires — allowing them to appear slightly less irresponsible.
Also:
The administration’s new proposal also would permanently extend a raft
of temporary tax breaks that Congress has passed over the years,
benefiting businesses as well as individuals. Notable examples include
the research and experimentation credit for businesses, as well as the
deduction for state and local sales tax for individuals.
While I would prefer just letting these expiring provisions expire, I’d rather they be made permanent than going through the charade of re-enacting them every year or two just to play stupid budget games.
Fiscal Cliff Notes:
Nick Gillespie & Veronique de Rugy, Obama and Boehner, Both Reckless Spenders
New York Times, Obama’s New Offer on Fiscal Crisis Could Lead to Deal
Russ Fox, Fiscal Cliff Deal Near?
Kay Bell, Boehner offers Obama a $1 million top income tax bracket in fiscal cliff talks
Ashlea Ebeling, Millionaires Are Doing Roth Conversions Before The Fiscal Cliff Hits, Should You Too? (Forbes)
Jason Dinesen, An Example of What Could Happen if an AMT Patch Isn’t Passed
IRS extends employee – independent contractor settlement program. The IRS yesterday announced (Announcement 2012-46) that it is extending its program to resolve the classification of workers as employees or independent contractors.
Rudy Penner, How Eisenhower and Congressional Democrats Balanced a Budget (TaxVox). They spent a lot less, that’s for sure.
Dan Alban, IRS Rule Threatens Tax-Preparing Entrepreneurs
Jeremy Scott, Democrats Should View Japan as a Warning (Tax.com)
Joseph Henchman, IRS Reverses Course, Will Continue Providing Migration Data (Tax Policy Blog)
Paul Neiffer, What Does Unified Credit Mean?
Robert D. Flach, WHAT’S NEW FOR NEW YORK STATE INCOME TAXES FOR 2012
TaxGrrrl, Actor Called Out As Unpatriotic For Move Over Taxes Fires Back. So patriotism means letting them pick your pocket?
Tags: Ashlea Ebeling, Dan Alban, Fiscal Cliff, Jason Dinesen, Jeremy Scott, Joseph Henchman, Kay Bell, Nick Gillespie, Obama Tax Policy, Paul Neiffer, Robert D Flach, Rudy Penner, Russ Fox, TaxGrrrl, Veronique De Rugy
Posted in Tax Roundup | 2 Comments »
Tuesday, December 4th, 2012 by Joe Kristan
Iowa Department of Revenue blocks Lohaus shot at refund. Ex-Iowa basketball star Brad Lohaus is remembered for, among other things, taking a ball in the face while guarding against an inbounds pass. That feeling might have come back when Mr. Lohaus was recently denied a tax refund by the Department of Revenue.
According to a newly released letter denying a protest filed by Mr. Lohaus, he didn’t get around to filing Iowa income tax returns for 2001 through 2005 until July 2010. The department of Revenue began collection action, including wage garnishment, in 2007. The returns filed in 2010 showed some overpayments, but the Department denied refunds on the grounds that the statue of limitations had expired. From the protest denial letter (my emphasis):
In their protest, taxpayers raise the following points to support their position.
1. The Department did not notify them that there was a one-year statute of limitations at the time the wage garnishment began.
2. Normal Iowa taxpayers have no way of knowing the rule of the one-year postdate matter with the Department disclosing the implication of the effects of lost payments.
3. Taxpayers filed their returns in good faith that the Department would refund any overpayments of the garnished funds to them.
4. Due to the trust the taxpayers had in the State of Iowa together with personal circumstances, taxpayers are petitioning that the Department refund overpayment of $36,379.66 to them.
Pro tip: never trust the State. Especially when the rules are on their side. From the denial letter:
Telephone conversations with Mr. Lohaus show that he was repeatedly advised to file returns. These returns were not filed with the Department until July 12, 2010.
Notification of the statute of limitations concerning Iowa income tax refunds is found in both Departmental rule 701 IAC 43.3 (8) and Iowa Code §422.73. Both the Iowa Code and the Department’s administrative rules are published and available for public review. Every citizen is presumed to know the law.
The statute on refunds in Iowa reads:
A claim for refund or credit that has not been filed with the department within three years after the return upon which a refund or credit claimed became due, or within one year after the payment of the tax upon which a refund or credit is claimed was made, whichever time is the later, shall not be allowed by the director.
The taxpayer was eligible for amounts garnished within one year of the filing, but not older payments.
The moral? File your returns, even if you have an overpayment. If you let the statute of limitations expire, they get to keep it. And they don’t have to warn you that they will.
TaxProf, IRS Releases 159-Page Proposed Regs on New ObamaCare Medicare Taxes. Just in time for me to teach them to the Iowa Bar tax school Thursday. Thanks, IRS.
Paul Neiffer, IRS Issues Proposed Regs on 3.8% Medicare Surtax
Anthony Nitti, The Elf On A Shelf Will Haunt Your Kid’s Dreams, And More Thoughts On The Obamacare Investment Tax
White House rejects GOP fiscal cliff counteroffer (AP)
Wrong. They feel they need a distraction. Democrats Needlessly Insisting on Rate Hikes (Martin Sullivan, Tax.com)
Concern Trolling: Why the Tea Party Is Bad for Conservative Tax Policy. (Jeremy Scott, Tax.com). When you see Todd Akin listed as a Tea Party candidate (he was more a creature of the social conservative wing of the GOP, not the Tea Party wing), somebody is being lazy.
Linda Beale, Republican “fiscal cliff” proposal
Please please please: Ohio Considers Changes to Complex Municipal Tax Codes. (Julia Morriss, Tax Policy Blog) If you have to have something as stupid as a municipal income tax, at least do it like Iowa, as an add-on to the state filing.
Please no! It’s Beginning to Look a Lot Like… Tax Season (Trish McIntire)
Kay Bell, Tax moves to make in December 2012
While doing their best to prevent them: France Struggles to Tax Corporate Profits (Robert Goulder, Tax.com)
Actually, writing big checks can cause poverty, for those writing them. There’s More To Fighting Poverty Than Writing Big Checks And Claiming Tax Deductions (Janet Novack)
Robert D. Flach posted his Saturday Buzz right on time over the weekend. Catch it!
Maybe people could file forms reporting their fraud so they can measure it? IRS Tax Fraud On The Rise But Actual Size Of Problem Hard To Pin Down: Report (Huffington Post)
Muskrats exempt from service on this jury. Jury selection to begin in Beavers tax evasion trial
Tags: Anthony Nitti, Beavers, Brad Lohaus, Huffington Post, Janet Novack, Jeremy Scott, Julia Morriss, Kay Bell, Linda Beale, Martin Sullivan, Paul Neiffer, Robert D Flach, Robert Goulder, TaxProf, Trish McIntire
Posted in Tax Roundup | No Comments »
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to
