Posts Tagged ‘Joseph Henchman’

Tax Roundup, 8/1/14: Links edition. And: no oppression.

Friday, August 1st, 2014 by Joe Kristan

Today is the annual office golf outing.  It’s also the one time I play golf each year.

For some reason golf is supposed to be fun for everyone, not just the three or four people in the office who actually have enough skill to enjoy the game.  I have proposed alternative field days, including all-office chess tournaments, shooting, rock climbing — things where I might be competitive — and have made no progress.  So golf it must be.

But I will wear my New Mexico hat, that’ll show them.

 

20130114-1Roger McEowen, Minority Shareholder in Closely-Held Farming Corporation Had No Reasonable Expectations that Majority Could Violate – Case Dismissed.

This case generated a controversial Iowa Supreme Court decision on the rights of minority shareholders.  The decision covered in Roger’s article was the trial court’s attempt to apply the Supreme Court’s decision to the facts in the case. Roger concludes:

The trial court’s remand decision is welcome relief for closely-held corporations in Iowa from an Iowa Supreme Court decision that is out-of-step with reality.  To find, as the Iowa Supreme Court did, that there can be shareholder oppression (with the likely result of corporate liquidation) where there isn’t even an allegation of a breach of fiduciary duties by the controlling shareholders would result in, as the trial court’s remand decision points out, oppression of the majority and could also result in corporate liquidation anytime a minority shareholder wants to “cash-out” for personal gain (as in the present case).  The trial court’s decision also upholds the use of bylaws that set forth stock valuation upon buy-out.  In this case, the Iowa Supreme Court allowed the minority shareholder to ignore the bylaw setting forth the valuation methodology for a buy-out (which he drafted), but the trial court held him to it.  That’s more welcome news for closely-held corporations.

This, too, can and probably will be appealed.

 

20140801-2Paul Neiffer, Pay Your Kids; It Saves Taxes!:

A farmer who operates as a sole proprietor may pay their children under age 18 wages and be exempt from payroll taxes.  If the farmer operates as a partnership (either regular or a LLC taxed as a partnership), paying wages to children under age 18 is still exempt from payroll taxes if the only partners of the partnership/LLC are parents of the children. 

But grandpa is out of luck.

From Jim Maule’s Tax Myths series, Retired People Do Not Pay Income Tax

Peter Reilly,Don’t Leave Money To Children Buried Under IRS Liens.  “Leaving money to someone who is subject to IRS liens can be like leaving money to IRS.”

Keith Fogg, When Should Bankruptcy Court Hear a Tax Case (Procedurally Taxing).

TaxGrrrl, Guilty Plea In One Of The Largest, Longest Running Tax Fraud Schemes Ever.  Kelly explains how some New York grifters milked the Treasury for years, stealing $65 million under the nose of Doug Shulman.

 

Joseph Henchman, Maryland Argues There’s No Constitutional Bar to Taxing Over 100% of Residents’ Income.  Maryland argues that it doesn’t have to allow a credit against county taxes for taxes paid in other states.  Joseph argues, I think correctly, that Maryland’s position is an unconstitutional burden on interstate commerce.

Howard Gleckman, How REIT Spinoffs Will Further Erode the Corporate Tax Base‘ (TaxVox).

 

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Kay Bell, Seersucker Day returns to Capitol Hill, but lawmakers can’t deduct their special summer duds

TaxProf, The IRS Scandal, Day 449

 

Kelly Davis, ales Tax Holidays = Not Worth Celebrating (Tax Justice Blog).  “In the long run, sales tax holidays leave a regressive tax system basically unchanged.”

Iowa’s sales tax holiday for clothing and footwear is today and tomorrow.
News from the Profession.  Teamsters Get Dynamic With a Giant Rat at Grant Thornton’s Downtown NYC Office (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 7/31/14: Tax Holiday Weekend! And: how defined benefit plans hurt Iowa municipal services.

Thursday, July 31st, 2014 by Joe Kristan

20140731-1You’ve had your calendar’s marked for a long time, and here it is: Iowa’s annual sales tax holiday is tomorrow and Saturday.  From the Iowa Department of Revenue:

If you sell clothing or footwear in the State of Iowa, this law may impact your business.

  • Exemption period: from 12:01 a.m., August 1, 2014, through midnight, August 2, 2014.
  • No sales tax, including local option sales tax, will be collected on sales of an article of clothing or footwear having a selling price less than $100.00.
  • The exemption does not apply in any way to the price of an item selling for $100.00 or more
  • The exemption applies to each article priced under $100.00 regardless of how many items are sold on the same invoice to a customer

“Clothing” means…

  • any article of wearing apparel and typical footwear intended to be worn on or about the human body.

“Clothing” does not include…

  • watches, watchbands, jewelry, umbrellas, handkerchiefs, sporting equipment, skis, swim fins, roller blades, skates, and any special clothing or footwear designed primarily for athletic activity or protective use and not usually considered appropriate for everyday wear.

Stylish tax-savvy shoppers can combine holidays across states.  For example, you can pick up a cute new outfit in Iowa this weekend and wear it to Louisiana for their September firearms tax holiday.

Related:  

Kay Bell, 12 states kick off August 2014 with sales tax holidays

Joseph Henchman, Sales Tax Holidays: Politically Expedient but Poor Tax Policy

 

Robert D. Flach has some sound ADVICE FOR A NEW GRADUATE STARTING OUT IN HIS/HER FIRST FULL-TIME JOB.  One nice bit: “If you have any cash from graduation gifts left over open a ROTH IRA account and use this money to fund your 2014 contribution.”

Jason Dinesen makes it easy to follow his excellent series on one client’s ID theft saga: Find All of My Identity Theft Blog Posts in One Location.

 

 

taxpayers assn logoGretchen TegelerFallout from Iowa public pension shortfalls (IowaBiz.com):

The increase in public spending for pensions has impacted the ability of our state and local governments in Iowa to pay for other services.  The result is a decline in the quality of public services and an increase in property taxes.  For example, all Des Moines libraries have closed an additional day each week just to help cover the cost of police and fire pensions.  Urbandale is raising property taxes.  Some have questioned whether it’s worth the substantial public cost to pay such a generous benefit to so few individuals.  Police and firefighters in our largest 49 cities can retire at age 55, and receive 82 percent of their highest salary each year for the remainder of their lives.  Almost all of the retirees in this system will have a higher standard of living post-retirement than they did during their highest earning years.

This is true even though Iowa’s public-sector pensions are better-funded than those in many other states.  The problem won’t be fixed until public employees go on the same defined contribution model as the rest of us — you get paid the amount that has been funded.  Defined benefit plans are a lie – to the taxpayers about what current public services cost, or to the employees about what they can expect as pension income, or to both.

 

20140731-2Paul Neiffer, Another Cattle Tax Shelter Bites the Dust:

Essentially, Mr. Gardner would issue a promissory note to these entities for the purchase of cattle and/or operating expenses and equipment.  The promissory notes totaled more than a $1 million, however, it appears that Mr. Gardner effectively paid less than $100,000 on any of these promissory notes.  Also, in almost all cases, Mr. Gardner defaulted on all notes and no collection efforts were made to collect.

This is almost quaint.  When I first started working in the 1980s, I saw a few shelters like this.  A cow worth, say, $2,000 would be sold for $50,000, $2,000 down and the rest on a “note” that would never be collected — but the “farmer” would depreciate $50,000, rather than $2,000.  I’m a little surprised it still going on, considering the at-risk rules, passive loss rules, and hobby loss rules against this sort of thing.

 

 

Jim Maule’s “Tax Myths” series includes “Children Do Not Pay Tax.”  He notes “A child of any age, with gross income exceeding whatever standard deduction is available, has federal income tax liability.”

TaxProf, The IRS Scandal, Day 448.  Read this and tell me again how the Tea Party targeting was just a non-partisan, unbiased attempt to clear a backlog of application that was driven by low-level functionaries in Cincinnati.

Jack Townsend notes UBS Continuing Woes, Including Settlement with Germany

 

2140731-3Cara Griffith, Access to Public Records Isn’t a Fundamental Right – But It Should Be (Tax Analysts Blog).  But bureaucrats everywhere prefer to work without witnesses.

Leslie Book, The Tax Law, EITC and Modern Families: A Bad Mix (Procedurally Taxing).  “I read a summary Tax Court case from a few weeks ago that reminds me that the tax laws in general– and the EITC and Child Tax Credit rules in particular– can sometimes lead to unfair results, especially in light of the complicated and at times messy modern family lives.”

Len Burman, What Ronald Reagan Didn’t Say About the EITC (TaxVox).  I bet he didn’t say it was a floor wax or a dessert topping, either.

Peter Reilly, Obamacare Upheld Against Another Challenge – Court Rules Against Sissel.  The origination clause argument was never more than a forlorn hope.

 

Lyman Stone, Kentucky Considers Tax Rebate for Creationist Theme Park (Tax Policy Blog).  Considering how many legislators think they can play God with state economies by means of tax credits, this has a sort of perverse logic going for it.

Adrienne Gonzalez, PwC Report Declares a Future Free From Nine-to-Five Work (Going Concern).  When I worked at PriceWaterhouse, a PwC predecessor, they were already free from nine-to-five work.  Nine-to-five would have been wimp work for a Sunday.

 

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Tax Roundup, 7/30/14: Iowa Illustrated! And: an unhappy take on IRS offshore account enforcement.

Wednesday, July 30th, 2014 by Joe Kristan

iowa-illustrated_Page_01Iowa’s tax system in pictures.  The Tax Foundation yesterday posted “Iowa Illustrated: A Visual Guide to Taxes & the Economy.”  It is a valuable and sobering introduction into Iowa tax policy.  Anybody interested in Iowa’s tax policy mess should start here.

The Tax Foundation summary:

Here are just a few examples of the more than 30 key findings:

  • Iowa relies on federal funding for one-third of its budget
  • Iowa’s sales tax rate has tripled since its creation
  • Iowa’s business taxes rank poorly nationally, and are uncompetitive regionally
  • Iowa has had a net loss of 63,287 people over the last 20 years
  • Effective tax rates in Iowa vary widely across different industries.

By offering a broader perspective of Iowa’s taxes and illustrating some of the lesser-known aspects of Iowa’s business environment, this guide provides the necessary facts for having an honest debate about how to improve the structure of The Hawkeye State’s tax system. 

There’s too much good stuff to summarize, but I will highlight a few items.

This might explain why property tax reform is such a big deal here:

iowa-illustrated_Page_38

 

Raising individual tax rates on “the rich” means taxing employment:

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Despite its highest-in-the-nation corporation tax rate, Iowa’s corporate tax is a sub-par revenue generator:

iowa-illustrated_Page_41

While agriculture is important in Iowa, financial services are a bigger industry:

iowa-illustrated_Page_13

Iowa has a diverse economy, but our tax system still parties like it’s 1983:

iowa-illustrated_Page_40

A lot of the tax receipts go out the back door to the well-connected via tax credits:

iowa-illustrated_Page_42

It’s hard to make a case for the current Iowa tax system.  Maybe the legislature will finally be ready to do something about it next session.  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would be a great place to start.

 

Now to our regular programming:

 

20130419-1Jack TownsendTime for an IRS Ass Kicking? Herein of Lack of Honor and a Dumb Decision in OVDI/P and Streamlined:

So, one could ask, why wouldn’t it be an easy decision for the IRS to let taxpayers in OVDI/P who had not yet signed a Form 906 to proceed fully under Streamlined.  Well, it appears, that the IRS wanted to keep all of the income tax, penalties and interest for closed income tax years and penalties for open years that it was not entitled to, while giving a partial benefit of the Streamlined program (the 5% penalty applied to innocents, many of whom should owe no penalty).  Basically, the IRS wanted something that it was not entitled to. 

Bad faith seems to be a part of the IRS culture in dealing with offshore issues.

 

Peter Reilly, Retailer Can Only Deduct Perks When Redeemed  “I suspect that the accrual is probably not what makes or breaks these programs.”

Jim Maule continued his “Tax Myths” series while I was away.   I like his “The Internal Revenue Code Fills 70,000 Pages” post.

 

David Brunori, Lawyers Whining About Taxes (Tax Analysts Blog):

For the record, I don’t like taxes. But if you’re going to have a government, you should pay for it the right way. Sales tax should be paid by consumers on all their purchases. Business inputs should never be subject to sales tax. Everyone who has ever studied or even thought about consumption taxes knows that. So it makes sense that legal services should be taxed. Lawyers don’t like that because, well, people might use less of their services. That would be a tragedy beyond comprehension.

Not that I’m in a hurry to charge sales taxes to my individual clients, but David is right on the policy.

 

20140730-1Howard Gleckman, Are Tax Inversions Really Unpatriotic? (TaxVox)  “Selling war material to an enemy or financing a terrorist organization is unpatriotic—and illegal. Using legal avoidance strategies to reduce taxes may be distasteful or unseemly, but it is not unpatriotic.”

Kay Bell, Defense Department workers, some with top security clearance, owed $730 million in back federal taxes.  So tell me again about corporate tax “deserters.”

 

Annette Nellen, IRS Voluntary Preparer Regulation System – Worthwhile? Legal?

TaxProf, The IRS Scandal, Day 447

 

Because Hollywood needs more taxpayer money!  29 Members of Congress Ask California to Boost Film Tax Credits (Joseph Henchman, Tax Policy Blog).  In a just world, this would automatically cost all 29 of these critters their seats.

 

Rebecca Wilkins, Stop the Bleeding from Inversions before the Corporate Tax Dies (Tax Justice Blog).  Darn, I’ll have to stroll into town for a Band-aid.

 

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Tax Roundup, 7/8/14: Not in Kansas Anymore edition. And: the latest on bonus depreciation for 2014.

Tuesday, July 8th, 2014 by Joe Kristan

20140409-1What’s the matter with Kansas?  Economist Scott Sumner looks at the controversy over the recent Kansas tax reforms:

The past two years Kansas reduced its state income tax rates. As a result, the top rate of income tax faced by Kansas residents (combined state and federal) rose from 41.45% in 2012 to 48.3% in 2013 and then fell a tad to 48.2% in 2014 (if they don’t itemize.) That’s a pretty tiny drop in the top marginal tax rate in 2014, and a much bigger rise in 2013.


I can’t imagine any serious economist predicting that the Kansas rate cut would boost Kansas GDP by 25% or more. Why did I pick that figure? Because the Kansas state income tax top rate fell from 6.45% in 2012 to 4.8% in 2014, which is roughly a 25% rate cut. In order for that rate cut to boost Kansas tax revenues, you’d have to see Kansas GDP rise by more than 25%. That’s obviously absurd.

The Sumner post is there to refute a straw-man argument made by tax fans:

“Why am I even discussing such crazy ideas? Because Paul Krugman seems to want to convince his readers that lots of supply-siders believe such nonsense…”

Actually, supply-siders do not claim that tax cuts pay for themselves, except in very unusual cases. Kansas is not one of those cases. The Laffer curve effect is typically applied to cases of extremely high marginal tax rates.

kansas flagI have long pushed for a combination of rate cuts for Iowa, combined with comprehensive elimination of deductions and cronyist tax credits.  That would keep the state budget from getting clobbered, while making the tax system much easier and cheaper to run and to comply with.  Kansas couldn’t let go of the loopholes, and in fact added new ones.  Joseph Henchman of the Tax Foundation discusses the Kansas tax changes in Governing.com (my emphasis):

Good tax reform broadens the tax base and lowers rates. That’s what Gov. Brownback wanted to do. But the legislature took out the “broaden-the-base” part. They just passed a tax cut, which can be justifiable if you want to reduce the size of government or expect other revenue sources to go up. But they didn’t cut spending and they don’t expect revenue to grow, so it’s just a hole. With the exemption for pass-through entities, if you’re a wage earner, you’re taxed at the top rate, which is currently 4.9 percent in Kansas. If you’re a partnership, an LLC or any form of recognized business entity with limited liability that’s not a corporation, your income is taxed at zero percent. That’s an incentive to game the tax system without doing anything productive for the economy. They think things like the pass-through exemption will encourage small business, and to be fair, it might. But they are doing it in a way that violates the tax principle of neutrality.

So what would happen if my Quick and Dirty Iowa Tax Reform Plan were enacted in Iowa?  My plan would eliminate corporation taxation and allow S corporation owners to elect to be taxed on distributions, rather than on pass-through income.  Properly structured, it wouldn’t hurt Iowa’s tax revenue, as the rate cuts would be offset by fewer deductions and elimination of tax credit giveaways.  I like to think that without a corporation tax and without a culture of begging for tax credits, Iowa would over time do well, considering that its regulatory and labor environment is already business-friendly.  But I don’t expect miracles, and I would not want the rate cuts to be so deep as to depend on a short-term economic boom to keep the state solvent.

 

20130113-3Richard Borean, House to Consider Bonus Depreciation (Tax Policy Blog). “It turns out that  adding permanent bonus expensing to the Camp Plan would boost GDP, wages, job creation, and federal revenue.”

Bonus depreciation is one of the many perpetually-expiring provisions that get renewed every year or two, after enough lobbyists make their offerings to the congressional fundraising idols.  The congresscritters love enacting proposals temporarily because that way they don’t appear to cost as much as officially-permanent provisions, and because it makes the lobbyists come and visit them regularly to get yet another extender bill passed.

Ways and Means Committee Chairman Camp is calling out this game by trying to get some of these provisions extended permanently, officially.  He notes that they really are permanent, and that pretending that they are temporary isn’t fooling anybody.  His opposition in the Senate wants to keep pretending the provisions are temporary, and that the honest step of treating them as permanent is “budget busting.”

None of this helps businesses pricing investment decisions for 2014.  Anyone buying equipment has to guess at the deduction schedule in order to forecast cash flows from the purchase.  Unfortunately, nothing is likely to happen until after the November elections, when a temporary retroactive extension is likely to pass — but might not.

 

Trish McIntire discusses The New Voluntary Tax Preparer Program.  “I’m interested in seeing the numbers of the Filing Season Program come January 2015. Honestly, I don’t think they are going to be as high as the IRS hopes.”

Roberton Williams, IRS Help Line Is Out Of Service (TaxVox) “I needed to double-check an issue concerning withdrawals from my nonagenarian father’s IRA. IRS Publication 590 wasn’t clear so I decided to call the IRS. The experience was illuminating. Not helpful mind you, but illuminating.”

William Perez, What’s Form W-9?  “Independent contractors and other people who work for themselves will often need to give a Form W-9 to their clients. Clients will then use the information on Form W-9 to prepare Form 1099-MISC to report income paid to the independent contractor.”

Jim Maule continues his Tax Myths series with “I’m Getting a Refund and Not Paying Tax.”  He notes “Whether a person has a tax liability cannot be determined simply from the existence of a refund.”

Kay Bell assigns 5 easy tax tasks to take care of in July.

 

20140708-1Brian Mahany, Are FBAR Penalties Unconstitutional? In Many Cases Yes.  “It’s one thing to assess a 50% or 75% penalty but when penalties exceed the total tax owed by a multiple of 50 times like in the Warner case, we believe the penalties are clearly unconstitutional.”

Martin Sullivan, Will States Get a Multibillion-Dollar Windfall From Corporate Tax Reform? (Tax Analysts Blog).  Only if there is actually corporate tax reform.

TaxGrrrl, The Real Cost Of Summer Vacation: Don’t Get Buried In Taxes

Stephen Olsen, Summary Opinions for 6/27/14. (Procedurally Taxing)  Don’t let the date fool you, this roundup of tax procedure news was posted yesterday.

Peter Reilly, City Taxes Trip Up Investment Advisor Restructuring.  Beware New York City.

Jack Townsend, Convicted Politician Did Not Lay a Proper Foundation For Proferred Indirect Testimony of Lack of Intent.  “How does a defendant unwilling to testify as to his intent — thus invoking his Fifth Amendment privilege — introduce indirect evidence of his lack of intent to blunt the Government’s indirect proof of his intent?”

 

TaxProf, The IRS Scandal, Day 425

 

Robert D. Flach brings the Tuesday Buzz.  I like this:

Item #10 on the new IRS-issued Taxpayer Bill of Rights is “The Right to a Fair and Just Tax system”.

In order to assure this right to taxpayers the Tax Code would need to be totally rewritten and all current members of Congress would have to be replaced by competent and intelligent legislators who actually give a damn about the American public.

It’s right as far as it goes, but some members of the executive branch would also need to go, starting with the Commissioner.

 

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Tax Roundup, 6/26/14: Misdirected e-mail edition. And: 15 years for tax fairy medium Daugerdas.

Thursday, June 26th, 2014 by Joe Kristan
Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The IRS scandal finally found a way to get the Des Moines Register’s attention.  Lois Lerner of IRS sought audit of Grassley, emails say:

The emails show Lerner mistakenly received an invitation to an event that was meant to go to Grassley, a Republican.

The event organizer apparently offered to pay for Grassley’s wife to attend the event.

Instead of forwarding the invitation to Grassley’s office, Lerner emailed another IRS official to suggest referring the matter for an audit, saying it might be inappropriate for the group to pay for his wife.

“Perhaps we should refer to exam?” Lerner wrote.

It was unclear from the emails whether Lerner was suggesting that Grassley or the group be audited — or both.

Grassley-090507-18363- 0032A reader who relies on the Des Moines Register for news might be puzzled over who Lois Lerner is.  A search of the word “Lerner” on the Register’s website only uncovers two other stories related to her role in the scandal: “Steve King calls for abolishing the IRS on Tax Day” (4/15/14) and “Critics: Progress scant after IRS scandal” (3/27/13).  It appears that today’s article would have been the first time Register readers would have learned anything about the mysterious mass deletion of emails relating to the Tea Party scandal.  A devoted Register fan might have been puzzled as to why this seemingly important news hadn’t been mentioned before.

I think there’s a hint down in the article (my emphasis):

Lerner headed the IRS division that processes applications for tax-exempt status. The IRS has acknowledged that agents improperly scrutinized applications by tea party and other conservative groups before the 2010 and 2012 elections. Documents show that some liberal groups were singled out, too.

Nobody buys that last sentence.  While a few “liberal” words were on the list of buzzwords to identify political organizations, no liberal outfits had their donor lists illegally released, or had their exemption applications held up indefinitely with demands for ridiculous detail of the organizations — including the content of their prayers.   Here are the stats:

targetingstats

Now maybe the Register will begin to get its readers up to speed.  If not, the Tax Update is available to Register subscribers at no extra charge!

Meanwhile, the IRS will have to explain to senior Senate taxwriter Grassley just why it needs more resources.  That may be slightly awkward.

TaxProf, The IRS Scandal, Day 413

Russ Fox, Lerner Appears to Have Targeted Iowa Senator Grassley  “Of course, President Obama said earlier this year just that–that there is not even a smidgen of corruption…”

 

tax fairyThe Tax Fairy fails a true believer.  Paul Daugerdas, the Jenkens & Gilchrist attorney who generated over $90 million in fees selling tax shelters, was sentenced to 15 years in federal prison yesterday for his troubles.  Bloomberg reports:

The tax shelters at the center of the case were sold from 1994 to 2004 to almost 1,000 people, creating $7 billion in fraudulent tax deductions and more than $1 billion in phony losses for customers, the U.S. said.

It appears unlikely that Mr. Daugerdas will come out ahead on his tax shelter efforts:

Daugerdas was ordered to forfeit $164.7 million and help pay restitution, with other conspirators, of $371 million. 

While he wasn’t the only Tax Fairy guide during the great turn-of-the-century Tax Shelter frenzy, he was perhaps the most prominent, inventing tax shelters with names like HOMER and COBRA.  The shelters found eager customers among businesses and individuals looking for the Tax Fairy, the legendary sprite believers insist will wave her magic wand and make taxes go away, for a very reasonable fee.    Now Jenkens & Gilchrist is dead, the believers are out their money, plus penalties, and there still is no Tax Fairy.

The Tax Analysts story on the sentencing ($link) had one item that I hadn’t seen before:  “The jurors said that Daugerdas was convicted solely on counts for which the government presented evidence of backdating, when Daugerdas agreed to prepare false tax returns that reported as 2001 losses transactions that occurred in 2002, the defense memo says.”  Way back in 2009, I said this could be his biggest problem at trial: Is backdating the fatal flaw for Daugerdas?:

If the government can prove backdating, it might be much easier for a juror to vote for conviction. Tax is hard, and a good defense lawyer has a lot of opportunities to give jurors a reasonable doubt in a case involving short sales, derivatives and currency options. But anybody can understand backdating.

This sort of thing separates “aggressive tax planning” from plain fraud.

Related: 

Department of Justice Press Release

Jack Townsend, Daugerdas Gets 15 Year Sentence

TaxGrrrl, Daugerdas Sentenced To Prison, Ending Biggest Tax Prosecution Ever

This one is probably coincidental, but Jason Dinesen, 138 Years Ago Today: Custer’s Last Stand

 

IMG_0216Robert D. Flach, A SUMMER TAX TIP FOR SCHEDULE C FILERS

William Perez, Single Filing Status.  “A person is considered unmarried for tax related purposes if on the last day of the year the person is not married to any other person or is legally separated from a spouse under a divorce or separate maintenance decree.”

Kay Bell, Kids, summer camp tax breaks and our personal X Games site

Peter Reilly, Facade Easement Valuation Cannot Be Percentage Rule Of Thumb 

Cara Griffith, Ohio Enacts Legislation Allowing Creation of Captive Insurance Companies (Tax Analysts Blog).

The answer is clearly more tax credits.  The New Jersey Casino That Tax Credits Could Not Save  (Adam Michel, Tyler Dennis, Joseph Henchman, Tax Policy Blog)

Renu Zaretsky, Expanding a Credit, Simplifying a Break, and Cutting Off a Nose to Spite a Face.  Today’s TaxVox headline roundup covers  IRS funding, student debt, and same-sex marriage complications.

 

 

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Tax Roundup, 6/11/14: IRS Bill of Rights: just words? And: when your state got its income tax.

Wednesday, June 11th, 2014 by Joe Kristan

billofrightsTalk is cheap.  The North Korean constitution has a whole bunch of rights,  per Wikisource.  For example:

Article 70. Citizens have the right to work. All able-bodied citizens choose occupations in accordance with their wishes and skills and are provided with stable jobs and working conditions. Citizens work according to their abilities and are paid in accordance with the quantity and quality of their work.

Article 75. Citizens have freedom of residence and travel.

Article 78. Marriage and the family shall be protected by the State. The State pays great attention to consolidating the family, the basic unit of social life.

 

So written declaration of rights are just empty words when there is nothing behind them. That’s why I can’t get too excited about the big Taxpayer Bill of Rights announced by IRS Commissioner Koskinen and Taxpayer Advocate Olson yesterday.

Nothing to disagree with on the list, but what will the IRS do to make it more than empty words?  Going down the list:

The Right to Be Informed.  The IRS is infamously secretive.  Will they no longer require Tax Analysts to sue them to make public their positions and procedures?  Will the required compensation for S corproation employee- shareholders be only known to the whim of the examining agent?

The Right to Quality Service.  The IRS continues to get worse at answering taxpayer questions.  It seems like they are worse than ever at dealing with correspondence.  It has become nearly impossible to reach IRS personnel in D.C. by phone to ask technical questions. Is the Commissioner going to change any of this?

The Right to Pay No More than the Correct Amount of Tax.  The nearly-automatic assertion of penalties for every asserted deficiency will have to end for this to mean anything.

The Right to Challenge the IRS’s Position and Be Heard.  The consolidation of appeals offices and their seeming loss of independence will have to be reversed for this to mean something.

The Right to Appeal an IRS Decision in an Independent Forum.  See you in Tax Court…

The Right to Finality.  Does this mean IRS will enable offshore FBAR foot-faulters to come into compliance without facing financial ruin?

The Right to Privacy and The Right to Confidentiality. These are a big ones, and the IRS hasn’t been doing so well at them lately.

The Right to Retain Representation.  Yet the IRS wants to choose who gets to do this for you. When the IRS can shut down your representative, he may not be a really zealous advocate.

The Right to a Fair and Just Tax System.  This is something that the IRS can’t ultimately reach on its own — Congress designs the system — but it could sure do a lot better.  When the IRS routinely assesses $10,000 penalties for filing Form 5271 one day late, when they effectively loot foreign pension accounts of expats for inconsequential paperwork violations, it’s hard to see the fairness and justice.

Taxpayer Advocate Nina Olsen

Taxpayer Advocate Nina Olsen

Other coverage:

TaxProf has a roundup.

Kay Bell, Would the newly adopted Taxpayer Bill of Rights have prevented the IRS Tea Party scandal?

Robert W. Wood, IRS Reveals Taxpayer Bill Of Rights

Joseph Henchman, IRS Approves List of Taxpayer Rights (Tax Policy Blog).  “My own addition is that much as requiring police to know and inform arrestees of “Miranda” warnings has increased awareness of those rights, so too will this.”

TaxGrrrl,  IRS Releases Much Anticipated ‘Taxpayer Bill Of Rights’  “With the wrap up of filing season, the IRS is now in its peak correspondence mailing season. This was, according to Koskinen and Olson, the perfect time to introduce the rights since they will be mailed out together with those correspondences.”

Russ Fox, IRS Adopts “Taxpayer Bill of Rights;” Will Anything Change?  “Until the IRS comes clean on the IRS scandal, what was released today makes a great sound bite but is otherwise nothing new. The IRS appears to have violated six of the ten rights, and is still stonewalling Congress on the scandal. The IRS’s budget won’t be increased because of today’s press release.”

 

Scott Drenkard, Richard Borean, When Did Your State Adopt Its Income Tax? (Tax Policy Blog):

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No, they haven’t been around forever, it just feels that way.  Wisconsin was first.

 

Jason Dinesen, Same-Sex Marriage and Amending Prior-Year Returns.  “A broader way of asking the question is: if someone who’s in a same-sex marriage amends a prior-year return that they had previously filed as a single person due to the Defense of Marriage Act, must that amended return show a filing status of married?”

Tony Nitti, District Court: Lone Sale Of Undeveloped Land Generates Ordinary Income, Jeopardizing Land Banking Transactions   

William Perez, Home Office Deduction

Keith Fogg, Government Drops Appeal in Rand Case (Procedurally Taxing).  This is the case where the Tax Court ruled that a recovery of refundable credits in excess of income tax was not a “deficiency” for computing penalties.

Jack Townsend, Reminder: Category 2 Banks Will Serve Up Their U.S. Depositors .  Consider banking secrecy dead.

Brian Strahle provides a list of state and local tax blog resources. 

 

20140611-2Alan Cole, Japan’s Tax Reforms and its Blockbuster GDP Growth (Tax Policy Blog):

Paired together, theory would predict that these two tax changes create a structural shift in the Japanese economy; the more favorable corporate tax climate would encourage investment, and some income would be spent on that new investment instead of immediate consumption. Over the long term, this will boost Japanese wealth and productivity, and eventually allow for a higher standard of living than before.

The data fit this theory so far; private nonresidential investment grew at a “blockbuster” rate of 7.6% in the first quarter of 2014. 

 

David Brunori, A Coke and a Smile and a Tax (Tax Analysts Blog). ” It would tax a can of Coke, but if you went to Starbucks and dumped five teaspoons of sugar into your latte, there would be no additional tax.”

TaxProf, The IRS Scandal, Day 398

Going Concern, Ex-BDO Vice Chairman Given 16 Months to Think About His Choices. He will retire to a Bureau of Prisons meditation facility.

He was ashen after the sentence was announced.  Gray man sentenced to 18 months for tax evasion

 

 

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Tax Roundup, 5/23/14: We’re sorry. Can we have our funding now?

Friday, May 23rd, 2014 by Joe Kristan
Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The IRS wants its budget back.  The agency has withdrawn the proposed regs that would institutionalize its mistreatment of Tea Party groups.  Accounting Today reports:

The announcement Thursday came in response to the unprecedented number of comments—over 150,000—the IRS received on the proposed rules, which were supposed to govern the types of political activity that would be permissible for groups to maintain tax-exempt status as “social welfare” organizations under Section 501(c)4 of the Tax Code (see Treasury and IRS Issue Guidance for 501(c)4 Tax-Exempt Social Welfare Organizations). The issue has roiled the IRS since last year, when the former director of the IRS’s Exempt Organizations unit, Lois Lerner, admitted that the IRS had used terms such as “Tea Party” and “Patriot” to screen applications from conservative groups applying for tax-exempt status. Those revelations led to the departures of Lerner and a number of other high-ranking officials at the IRS, along with a series of contentious hearings, subpoenas and contempt of Congress charges against Lerner.

The new commissioner, John Koskinen, indicated back in February that the proposed regulations are not likely to be finalized anytime soon and would be subject to heavy revision in response to the thousands of comments the agency received (see IRS Commissioner Koskinen Says Proposed Tax-Exempt Rules Won’t Be Finalized Soon). Republican lawmakers in Congress introduced legislation in February to block the proposed regulations (see Congress Considers Legislation to Block IRS’s Proposed 501(c)4 Regulations).

I suspect it will be a loooong time before they come out with a new set of proposed regulations — comparable to the wait for the final regulations on self-employment taxation of LLC members, which have been “proposed” now since 1997.  This is probably a necessary first step for the IRS to get its full funding restored, given how much it has done lately to demonstrate that it is institutionally opposed to the GOP.  Maybe it would help also to demonstrate some fiscal discipline by dropping its costly pursuit of preparer regulation by “voluntary” means.

 

Related: TaxProf, The IRS Scandal, Day 379

 

Jim Maule, No Deduction If Entitled to Reimbursement.  “It is a long-established principle of federal income tax law that a taxpayer is not permitted to deduct an otherwise deductible expense to the extent that the taxpayer is entitled to reimbursement from the taxpayer’s employer.”

Kay Bell, Summer travel time is prime tax time

Peter Reilly, American Atheists Denied Standing To Challenge Church Tax Breaks.

Robert D. Flach come’s through with the week’s third Buzz!

 

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Christopher Bergin, The Punishment of Credit Suisse Is Not Enough (Tax Analysts Blog). “People need to start going to jail for these types of abuses.”  No, our tax authorities prefer to shoot jaywalkers so we can gently chastise the international money-launderers.

Jack Townsend, Credit Suisse Update – The Aftermath for Credit Suisse #1.  The Federal Tax Crimes blog rounds up coverage of the Credit Suisse plea.

Stephen Olsen, Summary Opinions for 5/16/14 (Procedurally Taxing). The most interesting item to me in this roundup of tax procedure posts is “IRS is doing limited audits on Section 409A plans, and Winston and Straw has some coverage here.”  The horrible Section 409A rules haven’t triggered many audits.  That may be ending, and 20% penalties, plus income taxes, on funds never received will then be on the way as a result of foot-fault violations of the insanely-complex rules governing non-qualified deferred compensation plan distributions.

 

Joseph Henchman, IRS Considering Change in Tax Treatment of Travel Loyalty Points (Tax Policy Blog). What could go wrong?

Len Burman, Why Not Ditch the Medical Device Excise Tax and Boost Cigarette Taxes? You know, if we really wanted to promote public health, we should consider promoting e-cigarettes to get people off the real thing.  Instead, the government wants to tax and restrict them just like real coffin nails.

 

Adam Weinstein, Why Our Political System’s Screwed, in One Very Basic Chart:

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Via Nick Gillespie.

 

News from the Profession: Ex-KPMG Partner Who Gave Insider Tips to His Former Golf Buddy Is Going to Talk About Ethics Before He Goes to Prison (Going Concern)

 

Have a great Memorial Day Weekend!

 

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Tax Roundup, 4/25/14: Why the move to tax return selfies? And: Iowa’s unhappy high ranking.

Friday, April 25th, 2014 by Joe Kristan


Supply and demand curves

Supply and demand curves

IRS stats show more people are preparing their own returns, reports Tax Analysts ($link):

The IRS’s latest data, released April 11, show electronic filing from paid tax professionals fell 0.3 percent from the same time last year. That follows a 1.8 percent drop in April 2013, and a 1.7 percent drop in April 2012. By contrast, the IRS said, self-prepared e-filing of returns rose 4.5 percent through April 11 compared with last year, 3.1 percent in April 2013, and 5 percent in April 2012.

It seems like an odd trend.  It’s not like the tax law is getting any easier.  One possibility raised in the story is that it’s those wacky youngsters:

 Self-preparation may be a response to a younger generation’s ease with computers and software, said [retired Enrolled Agent Sandra] Martin. “That’s more of a permanent reason why people aren’t using preparers,” she said.

She also raises a much less logical possibility:

Martin said the IRS’s inability to regulate return preparers makes matters worse. Taxpayers are not only uncertain about the qualifications of their preparers, she said; some are afraid, haunted by stories of fraudulent preparers ripping off return filers and deciding the do-it-yourself path may be safest.

I think the failed IRS preparer regulation power grab is a big part of the cause, but not for the reasons cited by Ms. Martin.  As Dan Alban, slayer of the preparer regulations, testified before the U.S. Senate taxwriting committee:

In fact, IRS data released last summer shows a dramatic drop in the number of tax preparers in recent years — a sudden loss of more than 200,000 preparers from 2010 to 2012 — following the recent imposition of a series of burdensome IRS regulations on preparers (the e – file mandate and the Return Preparer Initiative, which included both the PTIN registration requirement and RTRP licensing)

If your preparer gets out of the business, maybe you will stop using a preparer.  With fewer preparers, the law of supply and demand predicts that costs will rise.  As costs rise, consumers seek substitutes.  It’s what I predicted back in 2010:

Rather than pay the increased costs, some taxpayers will stop getting help on their returns altogether and either self-prepare or drop out of the system. These dropouts certainly won’t see improved service, though the regulators will never admit responsibility for that.

Supply and demand: it’s not just a good idea, it’s the law!

 

Supply and Demand

Lyman Stone, Joseph Henchman, Richard BoreanTop State Income Tax Rates in 2014 (Tax Policy Blog):

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The colors on the map get darker as the rates get higher.  You’ll notice that Iowa’s 8.98% top rate gives it quite the purple tan.  It’s misleading, in that the effective rate is closer to 6% taking deductiblility of federal taxes into account; that would give Iowa a more lovely lavender tint, like Missouri and Louisiana.  Yet Iowa refuses to build the federal deductibility into lower rates.  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would address that.

 

Christopher BerginThe IRS and the Tax System: Integrity and Fairness for Whom? (Tax Analysts Blog):

The IRS’s mission statement couldn’t be clearer:

    Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

If some of the tax cops aren’t playing by the rules – and getting bonuses for it – how does that provide us taxpayers “top quality service” and help us understand and meet our tax responsibilities? The two most important words in this mission statement are “integrity” and “fairness.” The one thing largely missing from our tax code is fairness. And the one thing now beginning to disappear from the agency charged with administering that tax code is integrity.   

Nah.  Compliance is for the peons, not the overlords.

 

Howard GleckmanLen Burman’s Brief for a Health Care VAT:

Len, the director of Tax Policy Center (and, thus, my boss), argues that a dedicated—and fully transparent–health care VAT would increase public support for efforts to slow the growth of medical costs. That’s because the VAT would rise, for all to see, with increases in government health spending.

I have another idea: let’s sever the link between employment and healthcare, authorize interstate sales of high-deductible health insurance, and have people pay for routine care out-of-pocket.  We don’t have to resort to a VAT to keep prices down for, say, beer and groceries — or for non-covered health costs, like LASIX procedures.  Removing the layers between consumer and payment just might work for other health costs too.  Seeing increase in your spending from your own pocketbook is a lot better motivator to reduce costs than watching government budget numbers.

 

Gene Steurle, Dave Camp’s Tax Reform Could Kill Community Foundations:

The proposal would effectively eliminate most donor advised funds (DAFs), the major source of revenues to community foundations, so they could no longer provide long-term support for local and regional charitable activities. Instead, those funds would need to pay out all their assets over a period of five years.

Iowa has a special tax credit for gifts to community foundations, which is often oversubscribed.

 

 

20140411-1Kay Bell, Doctors are target of an income tax fraud scheme; the rest of us need to watch out for a new e-file phishing attempt

TaxGrrrl, Payback Is Forever: Tax Refund Offset Law Remains On The Books 

Or anybody else.  Piketty’s Tax Hikes Won’t Help the Middle Class (Megan McArdle)

Tax Justice Blog, Trend Toward Higher Gas Taxes Continues in the States

TaxProf, The IRS Scandal, Day 351

Robert D. Flach brings the Friday Buzz!

 

Going Concern, Now We’re Creatively Interpreting Sarbanes-Oxley to Include Fish.  Well, the whole thing has always been fishy.

Keith Fogg, Collection of Restitution Payments by the IRS (Procedurally Taxing)

 

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Tax Roundup, 3/24/14: Iowa corporate tax, $409 million; Iowa tax credits, $337 million. And: Bozo no-nos!

Monday, March 24th, 2014 by Joe Kristan


20120906-1
How about a trade: Corporate Income Tax for Corporate Welfare.
  Interesting numbers from The Des Moines Register:

The state awarded $278.5 million in tax credits during the 2013 fiscal year, down 9.3 percent from the year before, according to a new revenue report.

The department estimates that Iowa will have to pay a maximum of $436.9 million for fiscal 2014, and $487.9 million in fiscal 2015. Those numbers are considered the state’s “contingent liabilities.” However, the department expects claims on the awards will be less.

The department expects the state will pay about $337.9 million in fiscal 2014, and $366.8 million for fiscal 2015.

The entire net revenue from Iowa’s corporation income tax for 2013 was $403.6 million, with an estimate for fiscal 2014 of about $409 million.  So the entire Iowa corporate tax system takes about $400 million from corporations and then hands over 75-85% of it to other businesses.   Let’s consider the difference to be a fee for administering this system of taking from the productive and giving to the well-connected.  It’s about a wash.

From the outside, the answer seems obvious: no tax credits, no corporation tax.  Iowa would go from having one of the very worst corporation income taxes — and the one with the highest stated rate — to one of the very best.  The downside is that it would displace a little industry of tax credit middlemen and fixers idle economic development officials.   If that’s a downside…

Related: The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Chelsea Keenan, Are tax incentives an effective economic development tool? (Cedar Rapids Gazette). “But an October 2013 study published in the Journal of Regional Science that examined the possible benefits to states that offer manufacturers tax incentives receive, and determined there is no measurable gain.”

Lyman Stone, Illinois Speaker Madigan Proposes 3 Percent High-Earner Tax (Tax Policy Good).  Illinois is doing its best to make Iowa look good.

 

20121120-2Jonathan Adler, Was Delaying the Employer Mandate Legal? Did the IRS Even Check? (Volokh Conspiracyvia the TaxProf):

The legal justification for the employer mandate delay offered by the Treasury Department has been exceedingly weak.  Perhaps this is because the Treasury Department never considered whether it had legal authority to delay the employer mandate until after it made the decision to delay it.

More of the results-driven regulation we’ve been talking about.

 

roses in the snowPeter Reilly, Do Some Looking And Thinking Before Signing Form 1040 .  “I’d like to suggest that you take a deep breath and actually look at your return before you take that final step.”  Excellent advice.

Kay Bell, 4 tax breaks for older filers

William Perez: What to Do if You Get a Call from the IRS Asking for Money.  If they haven’t contacted you by mail, hang up.   It’s a scam.

Kristy Maitre, recently of IRS and now with the ISU Center for Agricultural Law and Taxation, tells how to go about Requesting the Transfer an of IRS Audit.  “Do not simply say that you want to transfer the audit. That will result, in nearly all cases, with a non-transfer.   You must state your case.”

TaxGrrrl, Taxes From A To Z (2014): L Is For Lost Property

Jack Townsend, Another UBS Depositor Indicted; the Russian Connection

Keith Fogg, What is the scope of a tax lien discharge versus the remaining tax lien (Procedurally Taxing)

 

haroldJoseph Henchman, Kevin Spacey at Annapolis Bar Tonight to Lobby Legislators for Subsidies (Tax Policy Blog):

Kevin Spacey is my favorite actor—I spent my entire recent vacation flight watching his movies—so it’s hard for me to say bad things about him. But he’s also a celebrity with an alleged net worth of $80 million lobbying for tax subsidies from Maryland taxpayers.

Sure, asking folks to subsidize Hollywood millionaires may seem odd, but as an Iowan said during the height of our starry-eyed film credit debacle:

But some benefits can’t just be measured on a dollar-for-dollar basis. The movies provide employment to local actors, construction crews, artists, caterers, drivers and a host of others. They expose non-Iowans to what the state has to offer. More intangible is the benefit of interactions in a state that can be cut off from the trends and centers of power. Not to mention the excitement factor. We’ve relied on caucuses every four years to bring action and celebrities to town. Now, sightings are anytime, any place.

So pay up, peasants!  You might see a star!

 

Renu Zaretsky, Tax Talk in the District, the Midwest, and Abroad.  It’s the TaxVox news roundup.

Tax Justice Blog, Big News in Ohio: Governor’s Unfair Tax Cut Plan Unveiled.  

Annette Nellen,Book recommendation – Geezer Rap

TaxProf, The IRS Scandal, Day 319

News from the Profession.  PwC Competing Against Shaving, Toys and Delicious Food for Guinness World Record Award (Going Concern).

 

Sometimes bad examples are the best teachers.  Blogger  Russ Fox provides some with his “Bozo Tax Tips” series for this year, beginning with Bozo Tax Tip #10: Email Your Social Security Number.  Don’t do it!  “As I tell my clients, email is fast but it’s not secure.”

 

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Tax Roundup, 3/13/14: Looming Payday Edition. And: incentives galore!

Thursday, March 13th, 2014 by Joe Kristan

20130104-1Deduction day looms.   March 15 is the deadline for calendar-year corporate return filings and payments.  It’s also an important deadline for accrual-basis taxpayers for another reason:  compensation accrued at year-end by a calendar-year accrual-basis taxpayer has to be paid by March 15 of the following year to be deductible in the year accrued.

As every first-year accounting student learns, accrual accounting tries to match expenses with the period in which the income is earned.  If a bonus is based on calendar-year sales or profits, it normally can’t be paid until after year-end, when the numbers are sorted out; still, the bonus is related to those sales, so accrual accounting counts the expense against that year’s income.

The tax law has many limits on accrual accounting.  For example, accrued expenses to “related parties,” typically owners and their families, can’t be deducted until the expenses are actually paid.  The tax law gives accrual businesses 2 1/2 months after year-end to pay accrued compensation to non-related employees.  Otherwise, the deduction is deferred until the year in which the employee is paid.

Does the compensation have to be paid by Saturday, or can I wait until Monday?  The tax law provides that when tax returns are due on a weekend, the deadline is extended to the following monday.  That’s why 2013 calendar-year corporation returns  are due March 17, 2014 – March 15 is on Saturday this year.

But the IRS says that doesn’t work for compensation.  Rev. Rul. 83-116 holds that it only applies to “acts required to be performed in connection with the determination, collection, or refund of taxes”  – things like filing returns.  So, according to IRS, the March 15 deadline still stands for payment 0f 2013 accrued compensation.  It’s not clear that the IRS would win in court on this — they have lost on a similar issue — but you don’t want to be the test case.  If you want to deduct 2013 accrued compensation on your 2013 return, pay it by Saturday.

 

 

haroldIncentives!  Coralville Likely on the Hook for Large Chunk of Von Maur Taxes.  Coralville marches to the beat of its own drummer, who apparently is heavily medicated.

Hey, let’s pay $34 million to build a Des Moines Convention Hotel!  Brian Gongol reports “The city financed the hotel to help spur convention business…but now it’s in danger of losing money.”  You don’t say.

Tax Justice Blog, Film Tax Credit Arms Race Continues: “Saying “no” to Hollywood can be a difficult thing for states, but here are a few examples of lawmakers and other stakeholders questioning the dubious merits of these credits within the last few weeks”.

Good.  Iowa doesn’t seem to have been badly hurt since it turned from subsidizing filmmakers to jailing them.

Related: Robert Wood, Film Taxes Ensnares Beckhams, Bob Geldof, Andrew Lloyd Webber, Annie Lennox & More

 

TaxGrrrl, Taxes From A To Z (2014): F Is For Foreign Tax Credit.  “For many taxpayers, it’s more advantageous to claim income taxes you paid or accrued during the year to a foreign country or U.S. possession as a credit than as a deduction.”

William Perez, Chart: Total Refundable Credits from 1990 to 2011.  There are more of them now.

Peter Reilly, Hedge Fund, TEFRA And Community Property Give Woman Tax Nightmare

Russ Fox, The IRS Needs Volunteers for the Taxpayer Advocacy Panel

 

Cara Griffith, States’ Perspectives on Federal Tax Reform (Tax Analysts Blog)

Joseph Henchman, Nebraska Legislators Approve Inflation Indexing But Drop Major Tax Overhaul (Tax Policy Blog)

Howard Gleckman, Mike Lee’s Tax Plan: An Intriguing Idea That Would Add $2.4 Trillion to the Deficit (TaxVox)

Kay Bell, House panel finally looking at Internet sales tax legislation

TaxProf, The IRS Scandal, Day 308

News from the Profession.  Tweeting a Lot About Audit Stuff Can Get You a Job at Deloitte.  (Going Concern)

 

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Tax Roundup, 3/12/14: Hundreds of Panthers fear ID-theft. And: more smidgens!

Wednesday, March 12th, 2014 by Joe Kristan

uni-logoID Theft may affect 200 University of Northern Iowa employees.  KWWL.com reports:

In February, when the issue was first discovered, about 50 people had reported issues filing their federal income taxes. Now, University officials say 200 employees have come forward, and but not all of those are fraud. Still, that has psychology department secretary Jan Cornelius concerned. She said her social security number was stolen.

The problem was identified by taxpayers whose returns were rejected because somebody else had already filed under their numbers.  You need to be careful with your Social Security Number, and you should never transmit tax documents as unencrypted email attachments.  Use a secure file transfer portal, like Roth & Company’s Filedrop, to send tax files electronically.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

More Smidgens.  The House Oversight Committee investigating the Tea Party Scandal issued a report yesterday blasting the idea that the IRS stall on right-side 501(c)(4) groups was just a non-political coincidence involving bumblers in Cincinnati.  Using IRS documents and e-mails, the report paints a picture of an effort driven by a highly-political bureaucrat to “do something” through IRS regulation to administratively reverse the Supreme Court’s Citizens United decision.  From the report’s conclusion:

Evidence indicates Lerner and her Exempt Organizations unit took a three pronged approach to “do something about it” to “fix the problem”of nonprofit political speech:

1) Scrutiny of new applicants for tax – exempt status (which began as Tea Party targeting);

2) Plans to scrutinize organizations, like those supported by the “Koch Brothers,” that were already acting as 501(c)(4) organizations; and

3)“[O]ff plan” efforts to write new rules cracking down on political activity to replace those that had been in place since 1959. Even without her full testimony, and despite the fact that the IRS has still not turned over many of her e-mails, a political agenda to crack down on tax-exempt organizations comes into focus. Lerner believed the political participation of tax-exempt organizations harmed Democratic candidates, she believed something needed to be done, and she directed action from her unit at the IRS. Compounding the egregiousness of the inappropriate actions, Lerner’s own e-mails showed recognition that she would need to be “cautious” so it would not be a “per se political project.”

Committee Democrats continue to insist that there is no “political motivation,” and no evidence of White House involvement.  To deny that targeting “Tea Party” and “Koch-funded” organizations is political is to insult our intelligence.  As far as White House involvement, the Chicago Way isn’t for the Boss to pick up the phone and call the Cincinnati service center.  The President’s public in-your-face criticism of the Supreme Court for Citizens United at a State-of-the-Union address gave his supporters in the bureaucracy all the guidance they needed.

The TaxProf has a roundup.

 

roses in the snowWilliam Perez, Deductions for Self-Employed Persons.  “Deductions that go on Schedule C reduce both the self-employment tax and the federal income tax.”

TaxGrrrl, Taxes From A To Z (2014): E Is For EE Bonds   

Russ Fox, The Moral Climate may have Changed but the Law Hasn’t. “Thus, until Congress changes the law a professional gambler cannot deduct gambling losses in excess of wins.”

Kay Bell, Beware tax break bait and switch.  “Yes, gifts to your favorite charity can be deducted, but only if you itemize on Schedule A.”

Paul Neiffer, Permanent Means Permanent:

North Dakota law regarding easements is unique.  It appears to be the only state in the country that limits easements to 99 years by law.  Since the Tax Code requires that the conservation easement be of a permanent nature, the Tax Court ruled in favor of the IRS and disallowed all of the easement charitable donations.

Oops.  Still, I think anything “permanent” should be looked at skeptically.  Nobody knows whether it will seem wise to lock up a parcel 100 years from now.

Tony Nitti, Tax Geek Tuesday: Tackling The Dreaded Section 754 Adjustment   

 

20120906-1David Brunori, Where Is the Outrage? (Tax Analysts Blog):

According to Good Jobs First, there are 514 economic development programs in the 50 states and the District of Columbia. More than 245,000 awards have been granted under those programs. I ask again, where is the outrage? The system is antithetical to the idea of free markets. A quarter of a million times, state governments decided what is best for producers and consumers. That should make us cringe. First, the government is inefficient at providing public goods, and it is terrible at manipulating the markets for private goods. But more importantly, those 514 economic development programs are almost all the result of insidious cronyism. Narrow business interests manipulate government policymakers, and those interests prosper to the detriment of everyone else. Free markets be damned.

And while I’m looking for outrage, where are the liberals? The 965 companies in the report received over $110 billion of public money. Berkshire Hathaway, a company with $485 billion in assets and $20 billion in profits, received over $1 billion of that money. Its chair, William Buffett, is worth about $58 billion. Buffet, by the way, is still a darling of the left. He has some nerve to call for higher taxes. The billion dollars his companies took would pay for a lot of teachers, healthcare, and other public goods. 

They take just a little bit at a time from all of us so we don’t notice, and they give it in big chunks to their well-connected friends, who certainly do notice.   The report David refers to is here.

 

Joseph Henchman, State Sales Tax Jurisdictions Approach 10,000 (Tax Policy Blog).  Small wonder online sellers don’t want to collect everyone’s sales tax.

Elaine Maag, The Many Moving Parts of Camp’s Tax Reform for Low-Income Families (TaxVox)

 

Joseph Thorndike, The Last Time Everyone Gave Up on Tax Reform, It Actually Happened (Tax Analysts Blog).  But not this time:

Ultimately, Reagan agreed to make tax reform a priority. And his support was crucial. No lawmaker, no matter how exalted, well intentioned, or energetic, can move the ball like a president.

Which is one very important reason why 2014 is different from 1984. President Obama has no discernible interest in fundamental tax reform. So conventional wisdom is right: The Camp tax plan is going nowhere fast.

I think that’s right.

 

All it needs is a little pasta and fresh lemon.  Argentina: Authorities investigate tax evasion via garlic exports through shell companies

Career Corner.  It Is Almost Certain You Will One Day Be Replaced by Machines (Going Concern).  

 

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Tax Roundup, 3/11/14: The Taxpayer Hotel Edition. And: private-sector Kristy!

Tuesday, March 11th, 2014 by Joe Kristan

Des Moines public officials think a fancy new convention center hotel is just what we need to hang with the cool kids, reports KCCI.com:

A plan to build a four-star hotel next to Hy-Vee Hall and Wells Fargo Arena won’t happen unless Des Moines city leaders can convince the state’s economic development authority to fork over millions in tax incentives for the project.

Des Moines Assistant City Manager Matthew Anderson said this week is a prime example that proves why a hotel is needed next to the Iowa Events Center.

Fans from across the state are coming to downtown Des Moines in droves to cheer on their favorite teams at the boy’s state basketball tournament.

Cindy Curran said there’s something missing. “Accommodations to stay overnight,” said Curran. “A nice hotel with restaurants in there, amenities to go with that.”

wells fargo arena

A casual reader could be forgiven for thinking that there are no hotels within a few blocks of Wells Fargo Arena.  They might think that the Des Moines Marriot Downtown, with its own nice restaurant and bar, had suddenly vanished.  They might think the historic Renaissance Savery Hotel, home of Bos Restaurant, had closed down.  They might think the new Hyatt Place in the Liberty Building had already failed.  And has the historic Hotel Fort Des Moines and its Django Restaurant disappeared after all these years?

Nope, they’re all going strong, and all still connected to Wells Fargo Arena by an enclosed all-weather skywalk system.  In fact, Downtown Des Moines has more restaurants and places to stay than ever.  They need a new competitor, apparently, but one that can’t happen  without $34 million in subsidies tax incentives.

If a business can’t happen without taxpayer subsidies, that’s a sure sign that it shouldn’t happen in the first place.  Convention centers have been a money pit for governments around the country, as the think tank Heartland Institute reports:

As convention planners seek to have large new hotels and related facilities built for their events, taxpayers are often stuck footing the bill for what could be a building that sits empty much of the year.

It’s always easier to support a new business when you invest somebody else’s money.

Related: The Convention Center Shell Game.

 

KristyMaitreIowa’s IRS stakeholder liaison privatizes herself.   From the Iowa State University Center for Agricultural Law and Taxation:

CALT is pleased to announce that Kristy Maitre, the former IRS Senior Stakeholder Liaison for the State of Iowa, has joined our staff. Kristy brings 27 years of IRS experience to her role as CALT’s new tax specialist.

Practitioners who have attended our seminars are already familiar with Kristy and her vast breadth of practical knowledge of tax and estate planning. Kristy has taught hundreds of continuing education classes to tax practitioners around the country. At CALT, she will continue to offer training through live seminars, but will expand her reach with frequent webinars and other educational offerings through the CALT website. Stay tuned as CALT will soon unveil more exciting changes enabling us to better serve the tax practitioner community.

Great news for Kristy and ISU-CALT, bad news for IRS service.

 

William Perez, Free Tax Software Available Through IRS Free File

Russ Fox, Regulating Tax Preparers Always Prevents Tax Preparer Fraud (Not True, of Course)

potleafTaxGrrrl, It’s No Toke: Colorado Pulls In Millions In Marijuana Tax Revenue.  I think popular support for pot prohibition, with its attendant violence, prison crowding, and other social costs, will continue to decline.  At some point the lure of revenue will overcome the reflexive instinct of politicians to preserve control over things.

Jason DinesenWhat’s So Bad About More People Preparing Their Own Taxes?  “My goal is to have clients who actually need a professional preparer, or at the very least, people who could prepare their own taxes but who like the comfort provided by having a professional take care of it for them.”

One of these is not like the others  Filing season 2014: Death, taxes, root canals and refunds.  (Kay Bell)

 

Carlton Smith, Tax Court dodges CDP record rule ruling (Procedurally Taxing)

Jim Maule, Cracking the Tax Protest Movement.  “The unfortunate thing about the tax protest movement is that most of the people in it are vulnerable folks who fall for the siren song of the ringleaders, just as those who support special tax breaks, even without benefitting from them, have fallen for the siren songs of those who procure special tax breaks for themselves and their clients.”

 

Joseph Henchman,  Idaho Considering Complicated and Gimmicky Job Creation Tax Credit.  (Tax Policy Blog) The best tax incentive is a simple, low-rate tax system without gimmicky incentives.

taxanalystslogoMartin Sullivan, If the Camp Tax Reform Bill Won’t Pass, Why Is It So Important? (Tax Analysts Blog):

The Camp discussion draft has changed the tax policy landscape like no other single document in the last three decades, for two reasons. First, it has burst the bubble of all the feel-good tax reformers who have been wasting our time promoting unrealistic tax plans. The Camp plan is the ultimate reality check on tax reform. It is far more complicated and painful than marketers of tax reform have told the public to expect. It is unlikely that any realistic tax reform would be any shorter or sweeter than the Camp draft.

The second reason the Camp reform is monumentally important is the extensive and detailed workmanship that went into it.   

I’m not convinced — I think the initial draft of a tax reform plan should be a lot more idealistic.  The cynical, politically-necessary modifications will arrive soon enough on their own, and conceding so many of them up front only invites more.

 

Jeremy Scott, Camp Hits Popular Deductions Hard (Tax Analysts Blog).  “The elimination of the state and local tax deduction is one of the larger revenue raisers in Camp’s plan.”

TaxProf, The IRS Scandal, Day 306

 

Quotable:

When the law interferes with people’s pursuit of their own values, they will try to find a way around. They will evade the law, they will break the law, or they will leave the country. Few of us believe in a moral code that justifies forcing people to give up much of what they produce to finance payments to persons they do not know for purposes they may not approve of. When the law contradicts what most people regard as moral and proper, they will break the law–whether the law is enacted in the name of a noble ideal such as equality or in the naked interest of one group at the expense of another. Only fear of punishment, not a sense of justice and morality, will lead people to obey the law.

Milton Friedman, via David Henderson.

 

News from the Profession: The Profession is Really Reaching For the “I Still Let My Mom Pick Out My Outfits” Demographic (Going Concern)

 

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Tax Roundup, 3/10/14: Sioux City $afety Edition. And: rogue dentistry!

Monday, March 10th, 2014 by Joe Kristan

Sioux City Revenue Camera Windfall.  The Des Moines Register today lists the winners from revenue cameras around the state.  Public safety isn’t up there:

Tickets from automatic traffic cameras totaled $19.7 million for nine Iowa cities during the last fiscal year, but more than 34 percent of that money went to out-of-state vendors.

The summary:

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Sioux City benefitted richly from Iowa’s status as the only state allowing revenue cameras on interstate highways:

Iowa is the only state in the country that allows speed cameras to be permanently placed on highways and interstates. The data collected by the DOT shows those cameras are the most lucrative: The two placed in a construction zone on Interstate Highway 29 in Sioux City brought in more than $4.5 million for the fiscal year ending in June.

gatsoThe evident failure of the cameras to stop construction zone speeding tells you how much they help public safety.  If they stopped speeding, there wouldn’t be so much revenue.  Of course, Sioux City also has a big incentive to generously define “construction zones” and leave them in place after construction is completed.  I drove through the I-29 zone on a Sunday night (no ticket for me!);  with no no workers around at the time, the only point of the construction zone speed limits when I drove through was camera revenue.

Some good news from the piece: “The number of red-light cameras nationally is dropping, according to a study by the Reason Foundation, a libertarian-leaning think tank.”  That’s because they’re a crock, a corrupt bargain between the operators and the municipalities, and people hate that.

 

William Perez, Need Extra Time to Finish up Your 2013 Tax Return?:

The IRS will grant a person an additional six months to file their tax return. To request this extra time, file an extension with the IRS on or before the deadline.

Filing an extension provides several benefits. Besides extra time to file the tax return, an extension also provides extra time to fund a self-employed retirement plan and to recharacterize IRA contributions.

And, contrary to myth, it doesn’t increase your chances of getting audited.  In contrast, filing an erroneous return to beat the deadline or get a quicker refund definitely increases your audit risk.

TaxGrrrl, Taxes From A To Z (2014): D Is For DRIP   

Kay Bell, Daylight Saving Time + gas taxes = boon for tax collectors, but some money-saving options for added daylight drivers 

Janet Novack, Pensions Create Yet Another Tax Trap For U.S. Expatriates

Russ Fox, False Checks, Trusts, and Ignoring Taxes Lead to Real Prison.  Indeed they do.

 

 Joseph Henchman, State Tax Reforms Are More Than Just Revenue Changes (Tax Policy Blog):

But more to the point, we consider 2013 one of the most successful years for tax reform we’ve seen in a while. We saw North Carolina cut its taxes but, more importantly, massively restructure them to become flatter, simpler, and more competitive. The real improvement in North Carolina wasn’t just the amount of taxes (though they did cut taxes, as noted above), but the structure of the tax code.

Beyond North Carolina’s landmark reform, Indiana under Governor Mike Pence (R) also moved to cut its personal income taxes and abolish its death tax. Wisconsin also made significant income tax cuts accompanied by positive structural changes authored by Representative Dale Kooyenga. Even in states that couldn’t achieve such sweeping reforms, valuable progress was made. Arizona implemented an important simplification of its sales tax code. Governor Martinez of New Mexico worked with her legislature to cut her state’s corporate tax. Texas made some positive reforms to its damaging gross receipts tax, the margin tax.

Notice one state missing there?  Anyone?  Iowa?  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan is ready to go!  How about a 4% top individual rate, repeal of the Iowa corporation tax, and massive simplification — or do you like massive complexity, special favors for special friends, and the nation’s highest stated corporate rate?

 

Eric Todor, Tax Reform’s Quiet Protectionism (TaxVox): “In effect, income from the sale in the United States of goods manufactured overseas by controlled foreign subsidiaries (CFCs) of U.S.-resident multinational companies would be taxed at a higher U.S. rate than other income from the same factory”

 

William Gale, Alan Auerbach, Forgotten but Not Gone: The Long-Term Fiscal Imbalance (TaxVox):

First, ignoring projections for the future, the current debt-GDP ratio is far higher than at any time in U.S. history except for a brief period around World War II. While there is little mystery why the debt-GDP ratio grew substantially over the last six years – largely the recession and, to a smaller extent, countercyclical measures – today’s higher debt-GDP ratio leaves less “fiscal space” for future policy.

Second, while we clearly face no imminent budget crisis, our new projections suggest the 10-year budget outlook remains tenuous and is worse than it was last year, primarily due to changes in economic projections.

And the rich guy can’t pick up the tab.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

George Will, The IRS’s behavior taxes credulity:

Obama breezily says there was nothing more sinister than “boneheaded decisions” by wayward and anonymous IRS underlings. Certainly boneheadedness explains much about this administration. Still, does he consider it interesting that the consequences of IRS boneheadedness were not randomly distributed but thwarted conservatives?

The rules that Obama says befuddled the IRS boneheads — to his benefit — read today exactly as they have read since 1959. For half a century they did not prevent the IRS from processing applications for tax-exempt status in less than three months. Some conservative group should offer $10,000 to anyone who can identify a liberal group that had the experience scores of conservative groups have had — an application delayed more than three years and receipt of an IRS questionnaire containing at least 60 questions.

Believing that there isn’t a “smidgen of corruption” is about as much of an intellectual leap as, say, believing dinosaurs and humans co-existed.

Via Instapundit

TaxProf, The IRS Scandal, Day 305

 

Jack Townsend has a List of 14 Swiss Banks Under Criminal Investigation

Quotable: 

Many smart people think preparers should be regulated. I just don’t agree. There is no market failure. If you don’t like your preparer, find another one. Or better yet, write your representative and ask for a tax system that doesn’t require low-income people to pay preparers.

David Brunori, State Tax Notes ($link)

 

I suspect he won’t need a preparer for awhile now.  From Going Concern:

Xzavier allegedly beat up a tax preparer when he found out the woman he was with wouldn’t be getting her refund in cash. After a security guard intervened, he is accused of whipping out his heat and shooting both the guard and two women. A fourth person was grazed by a bullet but not shot.

I’m sure that really helped her get that refund sooner.

 

Crazy news from Canada: Rogue dentist fined $33,000 for unpaid tax; Tung Sheng Wu practised dentistry illegally in the tri-cities and Burnaby

I’m pretty sure I’ve never seen the phrase “rogue dentist” before.

 

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Tax Roundup, 2/12/14: Lawless and Unregulated edition. And: Lincoln!

Wednesday, February 12th, 2014 by Joe Kristan

20130121-2As we reported yesterday, the IRS preparer-regulation power grab failed in the D.C. Court of Appeals.  The three-judge panel unanimously ruled that “The IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading” of the law.

One grumpy IRS person told us that we would regret it, that Congress will pass a worse IRS-run preparer regulation regime.  While it’s possible, I don’t think Congress is in any mood to give the IRS more power right now (see TaxProf, The IRS Scandal, Day 279).

It’s a victory for taxpayers, for preparers, and for the rule of law.  One hope it is a good omen for future court decisions on the on-the-fly rewrites of the Obamacare effective dates.

My endzone dance is here.  The Tax Prof has a roundup of coverage, as well as a guest op-ed: Johnson: The D.C. Circuit Rejects the IRS’s Regulation of Tax Return Preparerswhich says “At bottom, Loving stands for the proposition that exigency does not excuse illegality.” 

Other tax bloggers weigh in:

Russ Fox, DC Court of Appeals Rules Against IRS: Loving Decision Upheld.  “The real problem is the huge complexity of the Tax Code, and the biggest villain here is Congress. Rather than regulating tax professionals, we need to regulate (gut) the Tax Code itself.”

Leslie Book, Initial Reactions to the Government’s Loss in Loving (Procedurally Taxing):  “The government may seek to get Supreme Court review of the matter, or may work with Congress to get specific legislative authority. I offer no views on the odds of the government seeking cert, but its sound beating in two opinions leaves the possibility of obtaining cert and a victory in the Supreme Court seemingly small.”

Joseph Henchman, Big Win for Taxpayers: IRS Loses Effort to Expand Power Over Tax Preparers (Tax Policy Blog).  “In May 2013, we filed a brief opposing an IRS appeal of a court decision striking down their regulation of small tax preparers.”  That’s the brief I joined, along with fellow tax bloggers Russ Fox and Jason Dinesen.

Trish McIntire, The IRS Lost!  “I don’t know if there can be any more appeals (not a lawyer) but I bet there will be a tax preparer bill in Congress soon.”

 

20130419-1Paul Neiffer, When Farmers Barter.  While bartering is taxable, Paul muses: “Some of these barter transactions are properly reported, however, my educated guess is that much higher percentage is not.”

William Perez, How to Handle Owing the IRS

Tony Nitti, Tax Geek Tuesday: Allocation of Partnership Liabilities “Admit it. Nobody really understands what’s going on in this remote corner of the K-1; typically, most tax preparers just apply the tried-and-true “same as last year” approach to allocating liabilities, and trust that it won’t matter in the end.”  Oh, it does, it does.

Jana Luttenegger, “Extensive Wait Times” Ahead with the IRS (Davis Brown Tax Law Blog).  And it’s not like they were brief before.

Kay Bell, The pros and cons of tax refunds.  While logically you don’t want to let the taxman sit on your money, clients always seem happiest with a fat refund.  That leads many tax advisors to sandbag a bit on payments.

TaxGrrrl, Yes, Olympic Wins Are Taxable (And Should Stay That Way) 

 

Peter Reilly, Pilot To Black Panther To Pastor Calls For Financial Transparency In Churches 

 

Jack Townsend, Corporate Corruption Case Charged With Swiss Bank Accounts to Hide the Loot 

Tax Trials, The Tax Education of Lauryn Hill

Annette Nellen links to the Video of IRS Commissioner Koskinan on the filing season.

 

The Iowa Department of Revenue has a Facebook page!  It’s a good idea, and they actually answer questions, like this:

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It’s great that they are answering disgruntled taxpayers for everyone to see.  Best thing is that it’s available to anybody, not just Facebookers.  You don’t have to bring yourself to “like” the Department of Revenue to read it.

 

David Brunori, Tax Breaks for Lawyers — No Joke (Tax Analysts Blog):

I read recently in the Kansas City Business Journal that Missouri gave a big law firm $2.8 million in tax incentives to move to Kansas City. I thought there must be some kind of mistake. Certainly, no politician would agree to give citizens’ hard-earned money to lawyers. And certainly, they would not give citizen money to big-firm, wealthy lawyers. But once again, reality trumps good tax policy. The Missouri Department of Economic Development gave the nearly $3 million to attract the international law firm Sedgwick LLP to downtown Kansas City. 

Must be a rough neighborhood if that’s considered an improvement.  Or, more likely, Missouri has completely lost its mind.

 

Tax Justice Blog, The States Taking on Real Tax Reform in 2014.  One blog’s “real tax reform” is another blog’s march to madness.

News from the Profession: Big 4 Dude Says Dudes at His Firm Rewarded For Treating Non-Dudes Like Dudes (Going Concern)

 

LincolnToday is Abraham Lincoln’s birthday.  He was born 205 years ago today in Kentucky, before anybody thought of an income tax.  His presidency saw the first U.S. federal income tax, passed to finance the Civil War.  The Revenue Act of 1861, Section 49, imposed a flat 3% levy “upon the annual income of every person residing in the United States, whether such income is derived from any kind of property, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever” over $800.  It was replaced by a progressive levy in 1862, with a 3% rote on income over $600, with a 5% rate kicking in at $10,000.

The tax expired under its own terms in 1866, after Lincoln’s death.  Lincoln never came back, but the income tax returned to stay in March 1913.

 

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Tax Roundup, 2/10/14: The New Mexico double-dip edition. And: we got it right. We’ll fix that!

Monday, February 10th, 2014 by Joe Kristan

bureauofprisonsTwo bites at the apple were two too many for a New Mexico man.  Evading $25 million in federal taxes is bad enough, but illegally collecting $225,000 in farm subsidies on top of that seems like piling on.  From a Department of Justice Press Release:

Bill Melot, a farmer from Hobbs, N.M., was sentenced to serve 14 years in prison today to be followed by three years of supervised release for tax evasion, program fraud and other crimes, the Justice Department, Internal Revenue Service (IRS) and U.S. Department of Agriculture’s (USDA) Office of Inspector General announced today.  Melot was also ordered to pay $18,469,998 in restitution to the IRS and $226,526 to the USDA. 

Melot was previously convicted of tax evasion, failure to file tax returns, making false statements to the USDA and impeding the IRS following a four-day jury trial in Albuquerque, N.M.  According to court documents and evidence presented at trial and at sentencing, Melot has not filed a personal income tax return since 1986, and owes the IRS more than $25 million in federal taxes and more than $7 million in taxes to the state of Texas.  In addition, Melot has improperly collected more than $225,000 in federal farm subsidies from the USDA by furnishing false information to the agency.  

He had been sentenced to only five years, but the appeals court decided he needed some more time before putting in another crop.

For a little farmer, Mr. Melot got around:

  Additionally, Melot maintained a bank account with Nordfinanz Zurich, a Swiss financial institution, which he set up in Nassau, Bahamas, in 1992, and failed to report the account to the U.S. Treasury Department as required by law.

If the government’s sentencing memorandum is to believed, Mr. Melot isn’t down with this whole paying taxes thing, filing a blizzard of “baseless” motions and attempting to conceal assets.  For example:

Defendant’s disregard for this Court commenced immediately… Within 24 hours of his release, between August 21 to August 24, 2009, Defendant and his immediate family were observed purchasing 19 money orders for $1000 each at a Moneygram counter, which is located at the Walmart in Hobbs, New Mexico.

a. Each money order was for $1,000.
b. Each money order listed “Bill Melot” in the memo line. The money orders also each listed Defendant’s home address, 2805 E. Rose Road.
c. Each money order was payable to Mueller, Inc., a Ballinger, Texas company, which builds outdoor sheds.

Videos from Walmart showed Defendant wearing the same clothing that he wore when he was released from custody. The money orders, along with an additional $5,260.94 in cash, were used to pay off the balance due on a metallic shed for Defendant’s farm, which he claimed not to own in his statement to Pretrial Services. The purchase of this barn flatly contradicted Defendant’s earlier claim of near indigence

The appeals panel seems to have believed the prosecution, as Mr. Melot got the full sentence requested.

Russ Fox has more at Really Big Tax Evasion Leads to Really Long Sentence at ClubFed.

 

Via Wikipedia

Via Wikipedia

Oops.  It appears the Iowa legislature accidentally repealed the state sales tax on heavy equipment purchases in 1998, reports Siouxcityjournal.com:

The inadvertent change – which slipped by the department, the legislative code editors, and lawmakers and their staffs in the vetting process — didn’t come to light until last summer, when an attorney contacted the department about the Iowa Code section. At that time, legal staff at the department and the Iowa Attorney General’s office determined that the 2008 action had “rendered that tax obsolete,” Daniels said.

“It was not the department’s intention, nor do we believe that it was the Legislature’s intention, to remove that tax or repeal that tax,” said Daniels, whose agency has asked lawmakers in Senate Study Bill 3117 to restore the sales tax on heavy equipment retroactive to July 1, 2008. 

Sound tax policy tells the legislature to expand the exemption, rather than repeal it.  The heavy equipment will normally be used in business, and business inputs shouldn’t be subject to sales taxes.  It just shows that the General Assembly can occasionally get it right, but will immediately take corrective action when it finds out.

 

 

William Perez offers An Overview of the Income, Deductions, Tax and Payment Sections of the Tax Return

Kay Bell comes through with 6 steps to help you become the best tax client. She omits step number seven: pay your preparer promptly.  No matter how good you are with the first six steps, omitting step seven disqualifies you from the “best” list.

TaxGrrrl, Delayed Tax Refunds, The EITC & How We’re Getting It Wrong   

 And despite its original intent, if the idea is to encourage taxpayers to work more, the current iteration of the EITC fails miserably. As you earn more, your benefits go down, not up. At some point, the incentive to work more is mitigated by the specter of a lesser credit.

It’s a poverty trap.

The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

 

TaxProf, The IRS Scandal, Day 277

Sounds like a good reason to me.  Broken Tax Code Offered as Reason for Reform (Annette Nellen)

Peter Reilly, Benefit Of Clergy – Why Special Tax Treatment For Ministers Needs To Go.  Constitutional Does Not Equal Sound Tax Policy”

Stephen Olsen, Summary Opinions for 02/07/2014 (Procedurally Taxing).  It’s a roundup of tax procedure cases and posts.

Jack Townsend, Germany Moves Against Offshore Bank Evaders 

An unwarranted meattax approach: Scientist Proposes Discouraging Meat Consumption with New Tax (Joseph Henchman, Tax Policy Blog).

Flicker image courtesy Michael Coghlan under Creative Commons license.

Flicker image courtesy Michael Coghlan under Creative Commons license.

 

Career Corner.  No Shirt, No Shoes, No Accounting Degree, No Probl– Actually, Small Problem (Going Concern).

 

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Tax Roundup, 2/7/14: Love it or leave it edition! And: Coralville tax scam.

Friday, February 7th, 2014 by Joe Kristan


20140207-1
Making America a better place to leave.  
2013 Expatriations Increase by 221% (Andrew Mitchel):

We do not believe that the primary reason for the increase in expatriations is for political purposes or for individuals to reduce taxes.  Instead, we believe that there are likely three principal reasons for the recent increases in the number of expatriations:

  1. Increased awareness of the obligation to file U.S. tax returns by U.S. citizens and U.S. tax residents living outside the U.S.;
  2. The ever-increasing burden of complying with U.S. tax laws; and
  3. The fear generated by the potentially bankrupting penalties for failure to file U.S. tax returns when an individual holds substantial non-U.S. assets.

The increase in expatriations may also be partly due to a 2008 change in the expatriation rules.

When a foot-fault can break you, you might not want to play the game anymore.  When they start shooting you for jaywalking, you might not want to be on that street at all.

 

20140106-1It’s never too cold for a tax scam.  From CBS2Iowa.com:

Coralville police say they’re receiving more reports of a telephone tax scam. CBS 2 News first told you about the scam last month. The IRS says the scam targets taxpayers, especially recent immigrants. A caller claims to be an IRS agent and says the victim owes money. The victim is told to repay the money using a preloaded debit card or a wire transfer. If the victim refuses, the caller threatens to arrest or deport them or suspend his or her drivers license. The scammer uses a fake name and fake IRS badge number. The caller has found a way to make caller IDs show the number as the IRS toll-free line. To appear more legitimate, the scammer may also send a fake email or recite part of the victim’s social security number. After threatening the victim, the caller may hang up. A second scammer may later call the victim, pretending to be from the local police department or DMV.

It sounds like the scam described in this IRS web page.  If they haven’t sent you a letter first, the IRS isn’t going to call you.  Nor will they contact you via e-mail.  The IRS gives this advice:

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
  • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add “IRS Telephone Scam” to the comments of your complaint.

Paying taxes you actually owe is enough fun without sending extra to scammers.

 

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Fiduciary Income Tax Blog, 65-Day Rule — 2014:

Fiduciaries of estates and complex trusts have the option to treat certain distributions as having occurred last year. An election can be made with respect to distributions made within 65 days after the end of a tax year. The 65th day of 2014 is Thursday, March 6.

Think of it as a trust mulligan.  With the 3.8% Obamacare Net Investment Income Tax applying at around $12,000 of trust income, many trusts will want to use the 65-day rule to get the income to beneficiaries whose income is under the thresholds.

 

William Perez, Understanding Personal Exemptions

Jason Dinesen, Financing a Small Business: 4 Items to Remember.  “Don’t spend money just to get tax deductions.”

Kay Bell, Federal itemized deduction claims state-by-state

TaxGrrrl, Looking For Your Tax Refund? What You Need To Know So Far For 2014 

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Christopher Bergin, New IRS Commissioner Wants to Move Forward – We Should Let Him (Tax Analysts Blog):

Koskinen needs the time and space to do what everybody agrees must be done: Fix the IRS. The investigations must continue. But the new commissioner needs to move forward as well. That means not avoiding the problems, but going at them in a positive, not in a negative way. That’s what good leaders do. We should give the man a chance to show us he is one.

He could hardly be worse than the last one.

Howard Gleckman, Individual Income Taxes May Soon Generate Half of All Federal Tax Revenue (TaxVox)

CBO explains much of the rise in individual income taxes by expected increases in real incomes produced by a recovering economy, including higher wages, salaries, capital gains, and income to owners of pass-through firms, who report their taxes on their individual returns. CBO also expects a significant increase in distributions from retirement accounts for at least the next few years, driven in part by higher asset values.

Two other reasons: Higher tax rates for upper-income households (including the surtax in the Affordable Care Act) and the phenomenon known as real bracket creep. Tax brackets are adjusted for inflation but not economic growth. For at least the next few years, CBO figures incomes will grow faster than those inflation-adjusted brackets.

Oddly, these projections assume the expiring provisions actually expire.  Not likely.

Joseph Henchman, Response to Jesse Myerson’s Land Tax Idea (Tax Policy Blog).  Nice effort, but I’m not sure you need to respond to somebody who says Communism gets a bad rap.

TaxProf, The IRS Scandal, Day 274

Jack Townsend, Another Swiss Bank Enabler Indicted in SDNY

J. Richard Harvey, Jr., Surprising Statistics on Corporate Disclosures of Uncertain Tax Positions (UTP) (Procedurally Taxing):

 

The Critical Question: Does the NFL Need a Billion Dollar Subsidy Annually from Taxpayers? (Tax Justice Blog)

Career Corner.  Protip to Government Accountants: If You’re Into Kiddie Porn, You Probably Shouldn’t Watch It At Work (Going Concern)

 

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Tax Roundup, 1/23/2014: Ideas edition. And: why are we taxing pot?

Thursday, January 23rd, 2014 by Joe Kristan

20130117-1Bad idea.  Refundable tax credits are the favorite kind of credit for tax fraudsters because they generate tax refunds even when there is no tax paid or withheld.  The earned income tax credit is refundable, and that feature has something to do with 20-25% of the credits issued annually being improper.

An intrepid group of Iowa legislators isn’t letting that stop them.  They have introduced HF 2027 to create a new refundable tax credit in Iowa — a piggyback credit equal to 25% of the als0-refundable (and fraud-ridden) American Opportunity Tax Credit.

The AOTC is based on a percentage of tuition paid for the first four years of college.  It phases out at higher income levels.

Politicians can’t resist using the tax law to pass out political favors.  But even the best-intended ones make the tax law more complicated and, by creating a class with something to lose, they make it that much harder to reform.  When there already countless tuition aid programs, not to mention state-funded colleges and universities, it’s unwise to just throw in one more program willy-nilly.

 

Good idea.  Republican Party to vote for repeal of U.S. anti-tax dodging law (Patrick Temple-West).  

Approved in 2010 after a tax-avoidance scandal involving a Swiss bank, FATCA requires most foreign banks and investment funds to report to the U.S. Internal Revenue Service information about U.S. customers’ accounts worth $50,000 or more.

Criticized by banks, libertarians and some Americans living abroad as a costly and unneeded government overreach, FATCA is on the books, but its effective date has been delayed repeatedly, with enforcement now set to start on July 1.

I hate the headline on the article.  I would have written it “Republican Party to vote to decriminalize personal finance for Americans abroad.”  FATCA makes outrageous demands of non-U.S. institutions that have made Americans unwelcome at many foreign banks.

Related: Republicans Target FATCA As Another Windmill to Attack  (Jack Townsend)

 

haroldWorse idea: film tax credits.

Accounting Web, Film Credits: Your Tax Dollars at Work Making Movies:

Actor/director Ben Affleck told the Los Angeles Times he’s filming part of Live by Night in Georgia, a state that is popular for its film credit availability.

“It comes down to the fact that you have X amount of money to make your movie in a business where the margins are really thin,” he said.

Understood – but there’s a disconnect here. Affleck and his fellow actor/director, Matt Damon, both advocate and participate in using film credits to reduce taxes so they can make their movies. But both are also on record saying, because they are wealthy, their taxes should be raised.

What’s wrong with this “picture?”

Why is the film business, of all businesses with thin margins, entitled to special breaks?  Because politicians are suckers for celebrities.

Joseph Henchman, The Economist Reviews State Film Tax Credit Programs (Tax Policy Blog):

The report notes that it’s getting tougher to compete with Louisiana’s 30 percent refundable credit or New York’s $420 million annual budget to subsidize film and TV, and that independent analyses find these do little on net for job creation or economic growth.

But you can’t forget the intangibles!  As a Des Moines columnist breathlessly reported at the high point of the Iowa film credit looting spree:

But some benefits can’t just be measured on a dollar-for-dollar basis. The movies provide employment to local actors, construction crews, artists, caterers, drivers and a host of others. They expose non-Iowans to what the state has to offer. More intangible is the benefit of interactions in a state that can be cut off from the trends and centers of power. Not to mention the excitement factor. We’ve relied on caucuses every four years to bring action and celebrities to town. Now, sightings are anytime, any place.

Fortunately, Iowa is sadder but wiser now.

 

20130916-1Russ Fox, More Work for Tax Professionals: Submission IDs for Efiled Returns:

In the past, the taxpayer signs the 8879, the tax professional signs it and files it away. Now, the taxpayer signs it, the tax professional signs it, and the return is filed. Once the IRS accepts the return, the software company will assign the Submission Identification Number (SID) to the return. The tax professional must either print another copy of the Form 8879 (this one would have the SID on it) and attach it to the Form 8879, print a copy of Form 9325 (Acknowledgement and General Information for Taxpayers Who File Returns Electronically), or the tax professional must write the SID on the original 8879.

It doesn’t seem like much, but that extra minute for every tax return probably equates to an additional 500 minutes of time if you efile 500 returns in a tax season.

And anybody who’s been around a tax prep office during tax season knows there aren’t all that many extra minutes lying around.

 

TaxGrrrl, 11 Questions To Ask When Hiring A Tax Preparer .  A good list.

Leslie Book, The Ban on Claiming the EITC: A Problematic Penalty (Procedurally Taxing).  “We have not addressed the special EITC ban that arises when a taxpayer inappropriately claims the EITC.   The following gives some context, with a focus on the two-year ban for reckless or intentional (but not fraudulent) errors.”

William Perez, Which Tax Form to File?

 

Peter Reilly, Is Tax Court Rebelling Against Supreme Court?  Short answer: no.

Tyler Cowen, Income inequality is not as extreme as many citizens think.

TaxProf, The IRS Scandal, Day 259

Cara Griffith, When State Taxes and Interstate Compacts Collide (Tax Analysts Blog).  “But states can’t have their cake and eat it too; a compact cannot be both binding and offer states significant choices on whether to follow its terms.”

Tax Justice Blog calls the IRS budget cut The Dumbest Spending Cut in the New Budget Deal.  It’s bad policy, but it’s asking a lot of Congressional Republicans to fund an organ of their opposition.

 

20130607-2Because they can.  Why Exactly Are We Taxing Pot? (David Brunori, Tax Analysts Blog):

But I must ask: What is the rationale for imposing special taxes on marijuana? Excise taxes are appropriate to pay for externalities – the costs to society of using the product that are not borne by the market. But it is unclear what, if any, externalities are created by smoking pot.

Economic development in the Doritos aisle?

 

Kay Bell, IRS audit results in $862,000 lawsuit award for taxpayer.  Because he tripped over a phone cord.

 

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Tax Roundup, 1/20/14: If it’s not a scandal, it hurts like one. And: S corporation ESOP play in WSJ.

Monday, January 20th, 2014 by Joe Kristan

The U.S. District Court for the Southern District of Iowa didn’t need my services as a juror this week, so  I will be participating in the Iowa Bar Association webinar this afternoon on new developments for 2014.  It starts at noon.  You can register here and find more information here.   I will join Roger McEowen of the ISU Center for Agricultural Law and Taxation, and Kristie Maitre, IRS Stakeholder Liason for Iowa.

 

20130419-1If the Tea Party scandal is not a scandal, why would it be so damaging to the IRS?  The TaxProf’s IRS Scandal Roundup for Day 255 has some eye-opening quotes from a high-powered panel from a Pepperdine/Tax Analysts Symposium last week:

Donald Korb (Partner, Sullivan & Cromwell; former IRS Chief Counsel):  I think it is incredibly damaging.  Frankly, I see it as one of the seeds of the next tax shelter era. … And in terms of scandal, I don’t think we really know. We have not been permitted to understand exactly what happened. So, who knows.

George Yin (Edwin S. Cohen Distinguished Professor of Law and Taxation, Virginia; former Chief of Staff, Joint Committee on Taxation):  I think there has been tremendous damage.  Almost without regard to what actually happened.  And I actually despair of finding out what actually happened. …

Donald Tobin (Frank E. and Virginia H. Bazler Designated Professor in Business Law, Ohio State):  I think it is awful. I agree with Don and George.  7 or 8.  I think this is ultimately going to have huge implications. …

Ellen Aprill (John E. Anderson Chair in Tax Law, Loyola-L.A.):  I agree with all of that.  I have myself avoided the word “scandal” because I just don’t know.  And some of the people I know personally.  I don’t think that was their political motivation.  So I’ve used “controversy” and “brouhaha” and everything but tried not to go all the way to scandal. …

Korb: … This is very, very damaging.  Maybe we are at a 9.5

You can already see effects in the reduction of the IRS funding request in the latest budget deal.  While Congress makes the IRS the Swiss Army Knife of tax policy, it continues to cut back its resources.  That can’t end well.  But the GOP sees that the IRS has acted as a tool for its political opponents, and it’s asking a lot for them to fund their opposition.

 

Robert D. Flach ponders whether the Registered Tax Return Preparer designation could be revived as a voluntary credential.  If any group of preparers can unite behind a voluntary credential with self-administered standards, great.  Just keep the IRS out of it.  It’s a poor use of their resources, and they aren’t to be trusted with that sort of power.

 

S imageS imageS-SidewalkESOP S corporation strategy.  The Wall Street Journal (Laura Saunders, via the TaxProf) reports on an S corporation that may have found a way to funnel all of its income to a tax-exempt ESOP via restricted stock for the non-ESOP owners.  Paul Neiffer suspects it may be too good to be true.

It would be a hard needle to thread, giving the severe 409(p) excise tax that can apply to allocations of ESOP shares to owners of closely-held S corporation.  If the strategy does win in the courts, I would expect to see legislation to change the result quickly.

 

Jack Townsend, Eighth Circuit Affirms Offshore Account Related Conviction

 

Joseph Henchman, What Same-Sex Couples Need to Know This Filing Season  (Tax Policy Blog).  He links to a nice Tax Foundation study that tells how each state is approaching same-sex marriage this filing season.

Roberton Williams, Utah Lets Same-Sex Couples File Joint Tax Returns (TaxVox)

Kay Bell, Girl Scout cookies might be tax deductible.  Unfortunately, only if you don’t eat them.

Russ Fox, The Trouble With Bitcoins: Taxation.  “If you make money with Bitcoins, it is absolutely taxable.”

Jason Dinesen, Issuing 1099s to an Incorporated Veterinarian.  So veterinary services are “medical services.”

So the IRS agrees with Corb Lund.

 

Tax Justice Blog, Oklahoma Shows How Not to Budget.  “The biggest offender here is one we’ve explained before: the growing trend of funneling general tax revenues toward transportation in order to delay having to enact a long-overdue gas tax increase.”

William Perez, In Honor of Martin Luther King, Jr.  “In 1960, Dr Martin Luther King, Jr., was found not guilty of filing fraudulent state tax returns for the years 1956 and 1958.”  That’s why you don’t want politicized tax enforcement.

TaxGrrrl, Why Justice Matters: The Indictment & Trial Of Dr. Martin Luther King Jr. On Tax Charges   

 

Annette Nellen, Real revenue sources for tax reform.  “Where can permanent tax increases be generated to offset the desired permanent tax decrease generated from permanent lower rates?”

Good, we need it.  Bloggers = Media for First Amendment Libel Law Purposes (Eugene Volokh).  “To be precise, the Ninth Circuit concludes that all who speak to the public, whether or not they are members of the institutional press, are equally protected by the First Amendment.”

That’s how it should be.

Peter Reilly, Soldier To Tax Accountant – Rachel Millios EA   

 

News from the Profession.  CPA Exam Pass Rates Basically Went Right Off the Cliff at the End of 2013 (Going Concern).  

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Tax Roundup, 1/7/2014: Koskinen proposes voluntary IRS preparer certification. And: Obamacare, small business incubator?

Tuesday, January 7th, 2014 by Joe Kristan
This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

The new IRS Commissioner, John Koskinen, would like for IRS to oversee a voluntary preparer certification program if their preparer regulation power grab fails in the courts, reports Accounting Today. But he would still prefer the power grab:

“If you could require certification of preparers and some educational requirements, it would help taxpayers feel some level of confidence that preparers actually know what they’re doing, and the vast majority of them do,” Koskinen said during a conference call with reporters after he was sworn in ceremonially Monday by Treasury Secretary Jack Lew with an audience of many IRS employees in attendance. “My sense is that we should be able to provide that same educational training and that background to preparers. If you can’t require it, offer it, and if you complete the information, you get a certificate that says, ‘I have completed the IRS preparer course.’ I think that could be over time very valuable to preparers, and consumers could ask preparers, ‘Have you gone through the IRS training?’ Whatever happens with the court case, we ought to be able to move forward on that and provide taxpayers with as much assurance as we can that the preparers they are dealing with have met some kind of minimum standards.”

Somebody should point out to him that there already is such a program: the Enrolled Agent Program.  If the IRS runs the now-mothballed Registered Tax Return Preparer literacy test as a voluntary program, it will be a crippling blow to the more rigorous and underappreciated EA designation. Before he worries more about the competence of preparers, Commissioner Koskinen should fix his agency first (my emphasis):

“When I look at the impact of the budget and the implications of further cuts or what happens the next time there’s a sequester, the first thing that happens is the waiting time on a phone call goes up and our service goes down,” he said. “We try to get to 70 or 80 percent, but sometimes it gets as low as 50 or 60, which means at 50 percent that half the people who are calling are getting no answer at all and no satisfaction. It just seems to me that’s intolerable. Taxpayers deserve better, so we need to do whatever we can to provide the services that taxpayers need and expect. They ought to be able to dial the IRS number and get an answer promptly, and they ought to be able to get accurate information.”

Even the shabbiest storefront preparer at least processes more than half of its customers.

 

Why Iowa income tax reform will go nowhere this yearvia the Sioux City Journal:

Senate Democratic Leader Mike Gronstal, D-Council Bluffs, said Senate Democrats would formulate a tax-relief approach geared toward income tax cuts for middle-class Iowans, not the two-tiered plan being pushed by Republicans.

“Nobody in my caucus is going to go along with a scheme that leaves middle-class Iowans carrying more than their share of the tax burden in Iowa so rich people can choose whichever one works the best for them,” Gronstal said.

The idea that the state income tax system is somehow a way to fight The Rich Guy is willfully dumb, with zero-income-tax South Dakota right next door.  Oh, and you know what another word for “the rich” is?  Employers. 

Source: The Tax Foundation

Source: The Tax Foundation

 

Megan McCardle poses the question “Will Obamacare Inspire Small-Business Ownership?“:

One theorized benefit of the Patient Protection and Affordable Care Act is that it will unleash a new era of entrepreneurship. Undoubtedly, there are people in the U.S. who wanted to start a business but feared losing their health insurance. Now that they know they can buy it, presumably they’ll be freed to take risks without fearing that they could end up uninsured and uninsurable.

Unfortunately, we just don’t have that much empirical evidence. European nations with more generous social safety nets have lower rates of entrepreneurship than the U.S. does, even though a thought experiment might suggest that generous welfare programs would encourage people to take more risks. Nor did we see a radical unfurling of entrepreneurial energy in Massachusetts after RomneyCare.

She also points out that Obamacare is a kick in the head for businesses that actually succeed:

Meanwhile, of course, the law imposes significant new penalties for growing a company; anyone with more than 50 employees not only has to provide health insurance for their employees, but they also have to meet a substantial regulatory burden to demonstrate that they’re providing affordable coverage. That might discourage people from growing their firms. 

You know, it just might.

 

Russ Fox, Your Mileage Log — Start It Now (2014 Version).  You would not believe how much it helps in an IRS exam.  And doing it retrospectively when the IRS exam notice arrives tends to go badly.

Peter Reilly, Post Divorce Tax Intimacy Can Be Riskier Than Post Divorce Sex   Ewww…

Paul Neiffer, Roger’s Top Ten. “Roger McEowen from Iowa State University and their Center for Agricultural Law and Taxation (CALT) just listed his Top 10 Ag Law and Taxation Developments for 2014.”

William Perez, Resources for Preparing and Filing Form W-2 for Small Businesses

Robert D. Flach tells us WHAT’S NEW FOR NJ STATE TAXES FOR 2013

Kay Bell, Tax Carnival #124: Happy New Tax Year 2014

20120829-1

 

Martin Sullivan, Goodbye Baucus, Hello Wyden (Tax Analysts Blog): “On tax reform the current chair of the Senate Finance Committee has been a laggard. Wyden will be a leader.”

Jeremy Scott, A To-Do List for Wyden (Tax Analysts Blog).  Tax Reform, Extenders, and the Tea Party investigation.

TaxProf, The IRS Scandal, Day 243

 

Joseph Henchman, Parking and Transit Benefits Tax Exclusion Parity Expires Again; Congress Should Consider Permanent Fix.  (Tax Policy Blog).  “The tax code is probably the wrong place to be subsidizing commuters, and the entire provision ought to be eliminated. If Congress wishes to retain it, it ought to consider a non-expiring unified exclusion of all transportation commuting expenses.”

Tax Justice Blog, Corporate Income Tax Repeal Is Not a Serious Proposal.  Stawmen go up in flames.

Ben Harris, Rethinking Homeownership Subsidies (TaxVox).  He wants to revamp them.  I’d prefer to get rid of them.

 

TaxGrrrl, Cracker Barrel Waitress Serves Up Happiness, Gets Tip & More .  $6,000 more.

The Critical Question: Is College That Guy on eBay Who Never Paid For the Crap You Sent Him? (Going Concern)

 

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Tax Roundup, 12/26/2013: Tax loss harvest time! And: people like you to give them money.

Thursday, December 26th, 2013 by Joe Kristan


harvest
Harvest those tax losses.  
Just as millions of disappointed gift recipients rush the retailers to improve on Santa today, investors can get busy over the next few days trying to make the best of their own disappointments.  They can cash out losses on disappointing investments to shelter their 2013 gains.  Some tips to make sure you do it right:

- You have to take the loss in a taxable account. A loss in an IRA or 401(k) plan doesn’t help you.

- Normally the “trade date” is the effective date for tax purposes, so you can sell a stock as late as December 31 this year and still deduct the loss on your 2009 1040.

- If you have a loss on a short sale, the tax law treats it as closing on the settlement date, not the trade date, so you can’t wait to the last minute to close a short sale to get a deduction.

- You don’t need to overdo it.  You can deduct your capital losses only to the extent of your capital gains, plus $3000.  But if you do overdo it, individual capital losses carry forward indefinitely.

- Harvesting losses helps taxpayers subject to the Obamacare/ACA Net Investment Income Tax to the extent it helps for regular taxes.

- Watch out for the wash sale rules. If you buy the same stock within the 30 days preceding or following the sale of a loss stock, your loss is disallowed. This is true even if you sell from a taxable account and buy in an IRA, according to the IRS.

Come back tomorrow for another 2013 year-end tax tip!

 

Paul Neiffer offers Some Quick Year-End Tax Tips

 

20120906-1Give away money and folks will line up.State tax credit program hits a big bump: It’s out of money, and that’s a good sign,”  reports the Des Moines Business Record:

Economic development officials in Des Moines and other Iowa cities have been told to stop sending requests for a state economic development tax credit. The reason: The fund is tapped out.

Greater Des Moines developers were told during a meeting last week with officials from the Iowa Economic Development Authority and the city of Des Moines that a tax credit program used to provide gap financing for multimillion-dollar developments has reached its $3 million annual cap on the ability to transfer the credits, a key element in financing the projects.

“Transferable” tax credits are actually subsidies. It is economically identical to giving the developers a license to factor the state’s receivables at a small discount.

Local developers, the Greater Des Moines Partnership, and state officials will press the Iowa Legislature to at least raise the $3 million cap and make adjustments that could eliminate the ranking system.

So people who want the state to give them more of our money and the state officials that give away our money want the legislature to make it easier to give away our money. What could go wrong?

 

Speaking of the people giving away our money,  State-owned Honey Creek Resort near Moravia continues to struggle financially.  (thegazette.com, via Gongol) What madness led the government to open a resort?  Maybe the same madness that makes people think the government should be allocating investment capital.

 

tf logoJoseph Henchman, Tax Foundation Wins State Tax Notes Honor, Third Year Running:

For three years running now, we have been honored as most influential in state tax policy by State Tax Notes (subscription req’d). This year, they present it as an unranked list of ten recipients. The list is five state officials, three lawyers, one legislator, and us…

Given the response of the Iowa legislature to my suggestions, I am sure that I rank among the ten least influential in state tax policy.  I wonder if there’s a prize for that?

 

Howard Gleckman,  TheTaxVox 2013 Lump of Coal Award: Wait ‘Til Next Year Edition.  He doesn’t think the Tea Party scandal was more than “merely bungling the job on a bipartisan basis.”  Given the overwhelming attention paid to the right, that’s an unsupported statement.   Mr. Gleckman is a man of the center-left; when it’s your opponents being targeted, it’s easier to conclude that it’s all fair.

 

Tony Nitti, Tax Geek Tuesday: When Structuring The Sale Of Your Business Goes Wrong   Tony addresses the related-party debacle of Fish v. Commissioner, where a Kansas City taxpayer generated $9 million in ordinary income when he thought he was going to have capital gains, because a partial cash-out of his business worked out to be a sale of goodwill to a related party.

Margaret Van Houten,  Do My Estate Planning Documents Need to Have Special Language to Deal with My Digital Assets?  (Davis Brown Tax Law Blog)

Russ Fox, Nominations Due for 2013 Tax Offender of the Year.  Sadly, Russ will have plenty of worthy candidates.

 

TreeTreetreetreetreePeter Reilly offers Kind Christmas Wishes To Those Behind Bars And The Tax Collectors Too  “So when you think treeabout it, you realize that one of the reasons that Jesus was born in Bethlehem was that Joseph and Mary were tax compliant.”

Kay Bell, The Christmas tax story

Jason Dinesen, Greatest Hits: Deducting Mileage from a Home Office   

TaxProf, World Giving Index 2013: U.S. Is #1

Me, What’s new in year-end tax planning, my new post at IowaBiz.com, the Des Moines Business Record’s Business Professionals’ Blog.

Career Corner. How to Choose Between Two Big 4 Offers When You Have No Clue What Either Involves (Going Concern)

 

TaxGrrrl, The True Cost Of Christmas: Santa’s Tax Bill:

Compensation is taxed to the elves as income – but Santa has taxes to pay on their behalf. Payroll taxes – at the employer contribution rate of 7.65% – for the elves work out to $1,890,927.

Santa doesn’t pay income taxes on compensation paid to the elves but he does have to manage their withholding according to any forms W-4 provided to him. Fortunately for Santa, there is no withholding requirement for state taxes in Alaska. 

I would argue the residency issue.  Technically, the North Pole is in the middle of the ocean, and I don’t believe there are territorial claims though.  Of course, with his fearsome legendary powers of retaliation, no IRS agent wanting to be on the “nice” list would mess with him.

 

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