Posts Tagged ‘Kay Bell’

Tax Roundup, 2/25/15: Iowa gas tax boost goes to Governor. And: an appointment with Sauron.

Wednesday, February 25th, 2015 by Joe Kristan

IMG_1284Both houses of the Iowa General Assembly approved a 10-cent per gallon gas tax increase yesterday. The Des Moines Register reports:

The fuel tax increase has had strong support from a coalition representing farm groups, business organizations and local government officials. Iowa Farm Bureau members flooded the Capitol last week to lobby legislators to encourage a vote in favor of the gas tax increase. They contended better roads are crucial to the state’s economy and that gas taxes — 20 percent of which are paid by out-of-state motorists — offered the best solution.

The legislation was opposed by Iowans for Tax Relief and Americans for Prosperity, a conservative advocacy group, as well as truck stop operators and convenience store owners who worry retailers on Iowa’s borders will lose business to competitors in neighboring states. Opponents suggested lawmakers needed to better prioritize state spending, and proposed tapping revenues from the state’s general fund to pay for highway projects.

While I think gas taxes are a good way to pay for roads — they put the cost on the users — I am unconvinced that the state uses the funds wisely. By ramming the bill through committee by stacking it with yes votes, the legislature leadership made sure such concerns would not be addressed.

I expect the Governor to sign the bill. The legislature wouldn’t have gone through the trouble if they had any doubt. I have predicted that his approval of a gas tax increase means he won’t run for another term. But I also predicted the gas tax wouldn’t pass.

Somewhat related: Jim Maule, So Who Should Pay for Roads?

 

IMG_0543Why not exempt everyone? Tax Analysts reports ($link) that taxpayers who have filed returns based on incorrect ACA 1095-A forms will not have to pay any additional tax based on the corrected forms:

Tax return filers who purchased health insurance from federal marketplaces set up under the Affordable Care Act and who then filed tax returns based on erroneous information contained in Forms 1095-A will not need to file amended returns with the IRS to stay compliant, the Treasury Department said in a February 24 statement.

“The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected [1095-A] forms,” the Treasury statement said.

It’s yet another example of the IRS making up rules for Obamacare when its flaws become too obvious. I’m not one to complain when the IRS fails to enforce a dumb tax, but does anybody think the IRS would be as understanding for, say, failing to amend based on a corrected K-1?

Related: Robert Wood, Wrong Obamacare Form Tax Filers Get Relief From IRS. “Unfortunately, the 750,000 people who were sent erroneous form but who haven’t yet filed their taxes are being told to wait until the corrected forms arrive in March.”

 

TaxGrrrl, IRS Testing Taxpayer Appointments At Some Taxpayer Assistance Centers. Why appointments?

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Tax season is saved! Majority of Taxpayers with Obamacare Premium Tax Credits Need to Pay Back Portion (Accounting Today). I’m sure that’s popular.

Howard Gleckman, So Far, Affordable Care Act Users Are Managing Tax Filing, Many Uninsured May Use New Enrollment Period (TaxVox)

Jason Dinesen, Is Iowa Filing Status Tied to Federal Filing Status When You’re Married?

Annette Nellen explains Bitcoin transaction reporting. If you use Bitcoins regularly, you’ll need a bigger tax return.

Kay Bell, New York city, state lawmakers seek pet adoption tax credit. Not every problem is a tax problem, folks.

Leslie Book, Taxpayer Rights: A Look Back to Congressional Testimony of Michael Saltzman and Nina Olson

Jack Townsend, Cono Namorato to Be DOJ Tax AAG.

 

Enjoying a short Des Moines winter commute.

Snow warning today!

 

Scott Drenkard, Utah Is Eyeing An E-Cigarette Tax, But Its Reasoning Is Faulty (Tax Policy Blog). States have a pretty sweet deal with the tobacco devil, getting a cut of tobacco revenues. They hate the idea of e-cigs cuttting into that.

 

David Brunori, Sorry Folks — Clothes Should Be Taxable (Tax Analysts Blog):

The sales tax should fall on all final personal consumption. Everything you buy, be it tangible personal property or services, should be subject to the tax. Such a broad base minimizes economic distortions, allows for overall lower rates, and makes both administration and compliance easier.

But it minimizes the opportunities for legislators to do favors for friends.

TaxProf, The IRS Scandal, Day 657

 

Caleb Newquist, Accountants vs. Lawyers: A Pointless Debate (Going Concern). “A lawyer and an accountant walk into a bar. Everyone else in the bar doesn’t care.”

 

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Tax Roundup, 2/24/15: Iowa gas tax boost vote may be today. And: are tax credit subsidies on the way out?

Tuesday, February 24th, 2015 by Joe Kristan

It looks like the gas tax increase will come to a vote today, reports the Des Moines Register:

Rep. Josh Byrnes, R-Osage, who chairs the Iowa House Transportation Committee, said Monday he expects a tight vote. He added that talks were continuing among House Republicans.

“I don’t think we’d bring it up for debate if we didn’t think we had the votes,” Byrnes said.

It sounds like a done deal. At least that’s what they want everyone to think.

 

20120906-1Iowa has just announced a big new set of tax breaks for an out-of-state company, in the name of  “economic development.” But are “targeted” tax subsidies on the way out? Ellen Harpel says they might be in Beyond tax credits: creating winning incentive packages (smartincentives.org):

 

Tax credits have become problematic for several reasons:

  • Tax credits are often presented as no-cost incentives. That is, tax credits are not taken (incentives “paid out”) until the company has met certain thresholds and has started paying the taxes against which the credit is taken. However, as this article in the Wall Street Journal points out, the fiscal costs are substantial. It is not clear to us that other taxes expected to be generated by incentivized projects either materialize or are sufficient to fill the budget gap.
  • One reason might be that tax credits are more important to existing businesses than firms new to a location, based on our review of major incentive deals, so an incentivized project may not generate as much new tax revenue as anticipated.
  • Once the tax credits have been granted, states do not know when businesses will choose to take the credit, wreaking havoc on state budgets, possibly for decades depending on the terms of the tax credit arrangement.
  • Some tax credits are refundable (paid back to the company if their tax liability is not high enough to take the credit) or transferable (sold to another taxpaying entity). Film tax breaks often fall into this category, lowering the taxes paid by other taxpayers that are not the direct target of the incentive.

Using tax credits in this manner is not sustainable. To the extent economic development organizations continue to use tax credits, caps and limits will become the norm.

As long as politicians can get media outlets to run headlines like “New $25 million plant will bring 120 jobs to Iowa,” tax credits remain “sustainable” for vote-buying politicians. If they really wanted to help everybody — not just chase smokestacks — they would enact something like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Related:

IF TRUTH IN ADVERTISING APPLIED TO ECONOMIC DEVELOPMENT AGENCIES

WSJ, Tax-Subsidy Programs Fuel Budget Deficits

 

If Iowa’s tax climate is so bad, why do businesses locate here? A hint may be found here: J.D. Tucille, Florida, the Freest State in the Country? “California, New York, and New Jersey always rank near the bottom of these lists as intrusive, red tape-bound hellholes.”

 

Via the John Locke Foundation

Via the John Locke Foundation

Iowa is #13.

The First in Freedom Index actually draws from a lot of the sources that have been cited here before, including the Fraser Institute’s Economic Freedom of North America as well as Mercatus Center’s Freedom in the 50 States, the Tax Foundation’s State Business Tax Climate Index, and measures put together by the Center for Education Reform, among others. To this, the North Carolina group adds its own weight and emphasis. 

Imagine how attractive Iowa could be without a bottom-10 tax climate.

 

Russ Fox, “Ripping Off Your Refunds” In the Miami Herald. “There is an excellent article in the Miami Herald on the identity theft tax fraud crisis. ”

TaxGrrrl, Tax Professionals Targeted In Latest Bogus IRS Email Scam. You can fool all of the people some of the time.

Robert Wood, Can IRS Seize First, Ask Questions Later? ‘Yes We Can’.

Kay Bell, NASCAR Hall of Fame and homeowner tax breaks collide. Another subsidized municipal boondoggle.

Peter Reilly, Estate Intended For Charity Depleted By Litigation And Income Tax. A sad story, and a cautionary tale for estate planning.

 

20121120-2Hank Stern, More Delays on HRAs:

For example, pre-ACA, small employers could fund “standalone” HRAs that allowed employees to pay for privately purchased health insurance (among other things). This encouraged employees to buy the plan best suited to their needs, and employers could control costs because they weren’t beholden to a group carrier’s annual rate in creases.

Sadly, those days are gone.

Everybody must be forced into the exchanges to participate in the ACA’s cross-generational subsidies.

 

William Perez, Problems with Form 1095-A

Jared Walczak, Will Mississippi Eliminate Its Antiquated Franchise Tax? (Tax Policy Blog). It’s a tax that can be a nasty surprise to a business entering that state.

 

Alan Cole ponders The President’s Revenue Problem (Tax Policy Blog):

It’s popular to claim that you’ll fund a big new government program through a tax on investors. The strong ideological priors of the political press tell us that investors are earning huge amounts of money, and that’s where the income is.

But the math tells us otherwise. Here’s what the tax bases for wage income and capital income actually look like in practice, from my recent report on sources of personal income.

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Tax Update regular readers already know that the rich can’t pick up the tab.

 

Jim PagelsNumber of American Corporations Declines for 17th Straight Year (Reason.com):

The report claims that the reduction in the number of incorporated firms is not so much due to inversions, mergers, or bankruptcy, but rather more firms classifying themselves as S Corporations, in which profits pass directly to owners and are taxed as individual income. Individual rates are typically lower than the U.S. corporate tax rate, currently the highest among members of the Organisation for Economic Co-operation and Development at 35 percent federal plus an additional 4.1 percent average rate levied by individual states.

This is why you can’t do a “corporate-only” tax reform.

 

Jeremy Scott, Does the United States Really Need a Tax Revolution? (Tax Analysts Blog): “Those who say that tax reform doesn’t go far enough and that the nation needs a revolutionary change are probably overstating the problem.”

Martin Sullivan, The Tax Reform Supermarket (Tax Analysts Blog). “Slowly but surely, members of Congress are coming to the painful realization that conventional, Reagan-style tax reform is going nowhere.”

 

Howard Gleckman, Better Ways to Link the Affordable Care Act with Tax Filing Season (TaxVox). “But since the ACA insurance is so closely linked to tax filing, it only makes sense to synch that sign-up period with tax season.”  I have a better idea: have health insurance purchases be totally unrelated to tax season, by getting rid of the whole misbegotten ACA.

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TaxProf, The IRS Scandal, Day 656, quoting the Washington Times:

The White House told Congress last week it refused to dig into its computers for emails that could shed light on what kinds of private taxpayer information the IRS shares with President Obama’s top aides, assuring Congress that the IRS will address the issue — eventually. The tax agency has already said it doesn’t have the capability to dig out the emails in question, but the White House’s chief counsel, W. Neil Eggleston, insisted in a letter last week to House Committee on Ways and Means Chairman Paul Ryan that the IRS would try again once it finishes with the tea party-targeting scandal.

Just like it couldn’t possibly find the 30,000 emails that TIGTA dug up from the back-up tapes.

 

News from the Profession. The PwC Partner Who (Sorta) Looks Like Matt Damon and Other Public Accounting Doppelgangers (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 2/23/15: 800,000 blown ACA reporting forms; tens of thousands of already-filed returns are wrong. And more!

Monday, February 23rd, 2015 by Joe Kristan
The Younkers Building ruins, morning, March 29, 2014.

Be calm. All is well.

Tax Season is Saved! 800,000 Taxpayers Received Wrong Tax Info from Health Insurance Marketplace (Accounting Today):

“About 20 percent of the tax filers who had Federally-facilitated Marketplace coverage in 2014 and used tax credits to lower their premium cost —about 800,000 (< 1% of total tax filers) —will soon receive an updated Form 1095-A because the original version they were issued listed an incorrect benchmark plan premium amount,” said a blog post on the Web site of the Centers for Medicare and Medicaid Services. “Based upon preliminary estimates, we understand that approximately 90-95% of these tax filers haven’t filed their tax return yet. We are advising them to wait until the first week of March when they receive their new form or go online for correct information before filing. For those who have filed their taxes—approximately 50,000 (< 0.05% of total tax filers) —the Treasury Department will provide additional information soon.”

It says something about how screwed up this tax season is that the IRS can issue:

– A blanket waiver for the $100 per-day penalty for health insurance reimbursement arrangements;

– A small business waiver the Form 3115 filing requirement for “repair reg” accounting method changes;

– A blanket waiver for late payment penalties for advanced Obamacare tax credit clawbacks;

And still have a filing season full of “mayhem.”

Related: 

Caleb Newquist, You Won’t Mind if Your Tax Refund Is a Little Late, Will You? (Going Concern)

Ellen Steele, The Affordable Care Act Tax Filing Season: A View From the Trenches (TaxVox). “Filing is not simple, even for our volunteers who all undergo rigorous training in tax law.”

Paul Neiffer, Perhaps 800,000 or More Form 1095-A Are Wrong

 

Tax Season is saved! Ripping off your refunds: One little number fuels South Florida’s tax-fraud explosion (MiamiHerald.com

Tax Season is saved! Wow! The IRS Will Pay Out This Much in Fraudulent Tax Refunds By 2016 (Motley Fool)


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Iowa Public Radio, Administration Grants Tax Time Reprieve For Obamacare Procrastinators:

The Obama administration said Friday it will allow a special enrollment period from March 15 to April 30 for consumers who realize while filling out their taxes that they owe a fee for not signing up for coverage last year.The special enrollment period applies to people in the 37 states covered by the federal marketplace, though some state-run exchanges are also expected to follow suit.People will have to attest that they first became aware of the tax penalty for lack of coverage when they filled out their taxes.

Megan McArdle called it. So once again they bend the ACA rules because following the law as enacted would be unpalatable. It’s as if the entire legislation is optional. Here are other made-up-on-the-fly amendments to ACA decreed by the Administration that I can think of off the top of my head:

– Waiving the $100/day penalty for employer insurance reimbursement arrangements.

– Waiving tax penalties for failure to pay the premium credit clawbacks.

– Rolling back the employer mandate penalty by a whole year — two for smaller employers.

– Allowing premium tax credits in states using federal exchanges when the statute only allows them where there is an exchange “established by a state.”

You almost might conclude that they didn’t really think things through very well when they enacted ACA.

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William Perez, Social Security Benefits are Partially Taxable: How Much Depends on Your Other Income.

Roger McEowen, Primer on the Income Taxation of Trusts and Estates (ISU-CALT)

Peter Reilly, You And Your Shadow Do Not A Partnership Make. “I don’t think it is news that you can’t create a partnership with yourself and a disregarded entity, but it is a point that bears repeating.”

Russ Fox, Solely a Way to Go to ClubFed. “As always, the usual warning applies: If it sounds too good to be true, it probably is. If you use a corporation sole as a vehicle to avoid taxes, you’re heading down a road that leads to ClubFed.”

Jack Townsend, Another UBS Customer Pleads

Rashia says "thanks, Commissioner!"

Someday this may seem quaint.

TaxGrrrl, What If Tax Refund Theft Isn’t Really About Refund Theft?:

In the case of Anthem, the hack was massive. Potentially 80 million customers had their data compromised, prompting the state of Connecticut to warn taxpayers that it might be to their advantage to file their taxes early.

That, security experts say, isn’t the work of a small time hack. It’s not folks working out of a van with stolen laptops or a teenage kid in a basement. It’s bigger. It’s been suggested that the hack could be related to an international crime group or perhaps even an international government. I spoke with experts in tech and security arenas – who, like Jim, wished to remain anonymous – and they’ve suggested that they would not be surprised to find that the hacks were orchestrated by the Chinese government.

Have a nice day.

David Henderson, From 2007 to 2012-13, The Income Share of Top 1% Fell (EconLog).

Andrew Lundeen, A Cut in the Corporate Tax Rate Would Provide a Significant Boost to the Economy (Tax Policy Blog). “The corporate tax rate is, in effect, a tax on corporate investment; a high corporate tax rate discourages investment, whereas a low corporate tax rate encourages investment.”

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David Brunori ($link): 

A California company that makes cans is demanding a 20-year, 100 percent property tax exemption in return for opening a plant in Iowa. The plant will employ 120 people. The company, Silgan Containers, makes metal cans (think the containers that hold vegetables and dog food). I’m sure it’s a great company. But why should it be relieved of paying its just share of taxes? And if its demand is met, what does the Iowa government say to the companies that are already in place and employing 120 or more people? There is nothing good about this.

“Economic development” is pretty much taking money from you and your employees to lure and subsidize your competitors.

 

TaxProf, The IRS Scandal, Day 653The IRS Scandal, Day 654The IRS Scandal, Day 655

Kay Bell, All of 2015’s best picture Oscar nominees got tax break help. We would like to thank all of the chumps, er, taxpayers of the various states that help us buy these $168,000 swag bags. We wouldn’t want to do it without you.

 

 

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Tax Roundup, 2/19/15: Health insurance reimbursement relief and other cold-day links.

Thursday, February 19th, 2015 by Joe Kristan

The Tax Update is on a road trip across the frozen prairies. Just a few quick items today.

The big news item is handled in a separate post: Small employers, S corporations get relief from $100 per day premium reimbursement penalty. Other coverage:

20140106-1Kristine Tidgren, IRS Notice 2015-17 Provides Some Limited ACA Penalty Relief to Small Employers

Tony Nitti, In Last Minute Move, IRS Spares Small Employers Big Obamacare Penalties For 2014. “You’ve got to hand it to the IRS. It may improperly target political groups, inexplicably lose critical email evidence, abusively attempt to govern tax preparers in an overreaching manner, and callously refuse to answer the phone when we are in desperate need of assistance, but when the tax industry is struggling with complicated law changes, the Service sure as heck knows how to provide some last minute relief.”

Paul Neiffer, Here We Go Again.

In other news:

Robert Wood, TurboTax, Phishing, E-Filing, And IRS Security

Kay Bell, Tax pros are the latest tax scam phishing targets

William Perez, Tax Planning for Clergy

 

TaxProf, The IRS Scandal, Day 651

Greg Kyte, TurboTax Got Hacked Because of Course They Did (Going Concern)

 

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Tax Roundup, 2/18/15: Smishing, Stonewalling, and Checking the Chickadees Edition

Wednesday, February 18th, 2015 by Joe Kristan

Just links today, but good links!

 

20150218-1Kay Bell, Look out for smishing tax identity thieves:

Smishing is the text messaging cousin of phishing. It gets its name from the Short Message Service (SMS) systems used for texting; sometimes it’s written as SMiShing.

Like fake phishing emailers, smishers try to get you to reveal personal financial data.

They try to get the info directly by pretending to be someone else, say your bank or tax accountant or even an official tax agent. Or they tell you to click on a URL that will load malware onto your smartphone or tablet with which the crooks can then access the info on your device.

Be careful out there.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

Robert Wood, Remember IRS Stonewalling When Filing Your Taxes:

At a hearing Rep. Jim Jordan, R-Ohio, noted a letter that Mr. Koskinen sent the Senate Finance Committee saying the IRS had handed over everything. Curiously, the letter didn’t even mention that the former Exempt Organizations chief Lois Lerner’s emails had been lost. Mr. Koskinen defended his actions: “Absolutely not. We waited six weeks to tell while trying to find as many of the emails as we could. We gave you all of Ms. Lerner’s emails we had. We couldn’t make up Lois Lerner emails we didn’t have.”

Of course, it took the Inspector General to find the emails, proving they weren’t destroyed. Yet there, too, Mr. Koskinen remained defiant. The IRS chief took criticism from Rep. Tim Walberg, R-Mich., about a recent TIGTA report showing that the IRS re-hired poor performing employees. Some were guilty of misconduct, even tax delinquency. Koskinen deflected responsibility and said they were just seasonal or temporary workers.

It is another disappointment in the long and sordid story of the Lerner e-mail information.

And Commissioner Koskinen tells us that there is nothing wrong with his agency that giving him more money won’t fix.

 

20150218-2What, no checkoff to fund the Department of Revenue? Chickadee Checkoff benefits wildlife in Iowa (Radio Iowa) and Iowa fair encourages donations at tax time (Hamburg Reporter) Iowans can voluntarily increase their income tax to three government programs. Wouldn’t it be fun if all government programs worked that way? More here.

 

Jason Dinesen, What to Do When a Management Company Issues a Wrong 1099 to Rental Owner.

TaxGrrrl, Filing Your Tax Return In 2015? You Might Want To Leave Those Medical Receipts At Home. “Hitting 10% of your AGI in medical expenses is a steep hill to climb.”

Janet Novack, American Tax Informant Going To Paris To Sing About Swiss Bank UBS. Road trip for Brad Birkenfeld.

Peter Reilly, Good Execution Protects Sellers From IRS Transferee Liability. “I think this will be Reilly’s Fourth Law.  It goes ‘Execution isn’t everything, but it is a lot’.”

Keith Fogg, Expanding Ex Parte (Procedurally Taxing). “The ex parte rules seek to insulate Appeals from other parts of the IRS that might taint their opinion by providing insights about a taxpayer that the taxpayer has no ability to counter.”

 

TaxProf, The IRS Scandal, Day 650

Clint Stretch, Tax Policy Is Really About Our Grandchildren (Tax Analysts Blog):

Every vendor says that its tool, finish, or accessory is the best. Similarly, every advocate for a tax incentive says it will increase jobs and GDP. Few of the claims in either set are true.

At least a vendor’s claim can be true.

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David Brunori, Goodlatte’s Idea Is No Good (Tax Analysts Blog):

Under Goodlatte’s plan, a vendor in a no-tax state like New Hampshire would either collect tax at a minimum rate and forward it to the clearinghouse or forward details regarding sales to nonresidents to the clearinghouse, which in turn would forward it to the destination state and take steps to collect. Again, New Hampshire decides not to tax sales, but the Goodlatte plan would require its vendors to collect tax for other states.  

I’m sure that would be popular with the no-tax state’s voters.

 

Career Corner. #BusySeasonProblems: Avoiding Scurvy (Adrienne Gonzalez, Going Concern). I hope they add vitamin C to Girl Scout Cookies.

 

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Tax Roundup, 2/17/15: Iowa 2014 code conformity bill set to become final this week. And: tax season saved again!

Tuesday, February 17th, 2015 by Joe Kristan

IMG_1291Iowa Code Conformity Update. The bill updating Iowa’s 2014 tax law to include December’s retroactive “extender” bill, SF 126,  was officially transmitted to the Governor yesterday. He has three days to act; if he doesn’t sign within three days, the bill becomes law automatically. That means it will be official this week, unless the Governor shocks everyone with a veto.

The bill adopts almost all of the “extender” items, including the $500,000 Section 179 deduction, but it does not adopt 50% bonus depreciation for Iowa.

Update, 2:30 pm. The bill is signed.

 

 

The tax season is saved!  Covered California Sends Out Nearly 100,000 Tax Forms Containing Errors, Others Deal With Missing Forms (CBS San Francisco):

Stacy Scoggins gets plenty of mail from Covered California, but the one tax form the agency was required to send her by February 2nd still hasn’t arrived.

“After being on hold for 59 minutes, told me that the 1095-A was never generated,” Scoggins told KPIX 5 ConsumerWatch.

When they finally do get their forms, many of them will find out that they have to repay advanced premium tax credits, as Insureblog’s Bob Vineyard reports in Paybacks are hell, quoting a MoneyCNN report:

Some 53% of Jackson Hewitt clients who received subsidies have to repay part or all of it, with the largest being $12,000, said Mark Steber, chief tax officer. 

Clients love to hear that they owe.

Related: Oops (Russ Fox).

 

Kay Bell serves up 6 ways to get electronic tax help from the IRS

Accounting Today, IRS Eases Repair Regulations for Small Businesses

Josh Ungerman, IRS Expected To Issue Hundreds Of Deficiency Notices TO USVI Residents.

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Tony Nitti, Lance Armstrong Ordered To Repay $10 Million Of Prior Winnings: What Are The Tax Consequences?  They could be ugly.

Kristine Tidgren, Value of Closely Held Corporation Increased in Dissolution Proceeding (ISU Center for Agricultural Law and Taxation).

Robert Wood, Marijuana Tax Up In Smoke? Don’t Worry, Feds Plot 50% Tax.

Peter Reilly, Islamic Teaching On Usury Kills Property Tax Exemption In Tennessee

Jack Townsend, ABA Tax Lawyer Publication Comment on FBAR Willful Penalty

 

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Matt Welch, Record Number of Americans Renounce Citizenship in 2014 (Reason.com). “Terrible tax law produces predicted results”

TaxProf, The IRS Scandal, Day 649

 

Norton Francis, State Revenue Growth Will Remain Sluggish (TaxVox)

Sebastian Johnson, State Rundown 2/13: Snow Way Forward (Tax Justice Blog). Developments in Oklahoma, Arizona, North Carolina, Mississippie and Massachusetts, from a left-side view.

 

Things that are better now. From Don Boudreaux, a reminder of one area where a dollar goes a lot further than it used to:

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I dare you to access taxupdateblog.com from the Olivetti.  More at HumanProgress.org.

 

 

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Tax Roundup, 2/16/15: Titanic saved! Well, except for the iceberg thing. Or, the regs are dead, long live the repair regs!

Monday, February 16th, 2015 by Joe Kristan

20140925-2So is the tax season saved? The IRS gave us a big “never mind” Friday afternoon with the issuance of Rev. Proc. 2015-20, letting taxpayers of the hook for countless Forms 3115 under the “repair regs.”

The main points:

“Small” trades or businesses — those with either average 3-year gross receipts under $10 million or assets under $10 million — can adopt the most common methods under the repair regulations without having to file an accounting method change. In fact, the Rev. Proc. requires no special statement or disclosure to adopt the new methods.

The “Small” tests are based on the size of the “trade or business,” not the size of the taxpayer. This means taxpayers who exceed these limits may still qualify if their component “trades or businesses” qualify.

Taxpayers may pay a price for not filing a 3115. If you skip the 3115 for the common method changes, you aren’t allowed to get the most lucrative one – the “late partial disposition election” for real estate and machinery improvements. This is the one Peter Reilly notes as having the potential to generate “biblical” deductions. That means if you want to claim this biblical deductions for any trade or business, you need to file the most common method changes for all of them, regardless of whether they qualify otherwise under Rev. Proc. 2015-20

For the details of the new rules, I have two dedicated posts:

IRS drops “Form 3115″ requirement for smaller taxpayers under tangible property rules, and

List of Rev. Proc. 2015-20 method changes.

No Walnut STPeter Reilly says John Koskinen Saves Tax Season With Form 3115 Relief For Small Business. Well sure.  Except maybe for the entirely out-of-control epidemic of identity theft refund fraud, the continuing confusion and almost certain widespread inicidence of the new individual mandate penalty, the sticker shock that millions will face when they recompute their ACA exchange plan tax credits, and the financial disaster looming for small businesses for the horrible crime of reimbursing employee health insurance. But other than that, yes, it’s all hunky-dory.

Other Coverage: 

Russ Fox, IRS Announces Small Business Relief for Form 3115 (Property Regulation Issue)

Tony Nitti, Repair Regulation Relief: What Does It Really Mean? (Not As Much As You Think):

You don’t have to file a Form 3115. But remember, the three safe harbors that we started with 4,000 words ago — the $5,000/$500 de minimus, small building, and routine maintenance exceptions — are annual elections that apply only on a go forward basis. These still must be attached to the returns.

Paul Neiffer, You Don’t Need to File Those Form 3115s After All

 

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William Perez has Your Helpful Guide to Capital Gains Tax Rates and Losses

Jason Dinesen, Handling Franchise Fees on a Tax Return. He gives an example involving a $5,000 franchise fee: “The $5,000 franchise fee is considered an asset. The $5,000 is deducted over 180 months (15 years). This is true even though the franchise agreement is only 5 years long.”

Annette Nellen, Taxable income of a marijuana business. That’s pretty much the same as gross income.

Jana Luttenegger Weiler, Facebook Allows Users to Designate “Legacy Contact”

Kay Bell, 5 things to check when hiring a tax preparer

Stephen Olsen has his newest Summary Opinions, rounding up recent developments in tax procedure (Procedurally Taxing).

"Boris Johnson -opening bell at NASDAQ-14Sept2009-3c cropped" by Boris_Johnson_-opening_bell_at_NASDAQ-14Sept2009-3c.jpg: *Boris Johnson -opening bell at NASDAQ-14Sept2009.jpg: Think Londonderivative work: Snowmanradio (talk)derivative work: Off2riorob (talk) - Boris_Johnson_-opening_bell_at_NASDAQ-14Sept2009-3c.jpg. Licensed under CC BY 2.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Boris_Johnson_-opening_bell_at_NASDAQ-14Sept2009-3c_cropped.jpg#mediaviewer/File:Boris_Johnson_-opening_bell_at_NASDAQ-14Sept2009-3c_cropped.jpg

Via Wikipedia.

Robert Wood, Savvy London Mayor Boris Johnson Paid IRS, Is Now Renouncing U.S. Citizenship. Considering what it costs him, it’s not surprising.

TaxGrrrl, Filing As Single Or Married: When ‘It’s Complicated’ Isn’t A Choice On Your Tax Return. As a filing status, that is.

 

TaxProf, The IRS Scandal, Day 648

Renu Zaretsky, No Hitting the Brakes for Tax Breaks… Today’s TaxVox headline roundup covers early movement on extending the “expiring tax provisions.”  Remember, they only got extended through the end of last year. Also links to discussions on Section 529 deductions, tax reform, and the romantic side of spreadsheets.

 

News from the Profession. Nearly Half of Accountants Surveyed Hooked Up With a Colleague (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 2/13/15: Gas tax advances, tax system declines.

Friday, February 13th, 2015 by Joe Kristan

Accounting Today visitors: click here for the post on the updated auto depreciation limits.

 

IMG_1284It looks more likely that I was wrong in predicting no gas tax increase. Subcommittees in both the House and Senate Ways and Means committees approved a 10-cent per gallon increase this week, advancing the increase to the full committes. KCRG.com reports:

A group of top lawmakers from both parties and Gov. Terry Branstad have proposed the 10-cent gas tax increase, which is expected to generate more than $200 million annually.

Supporters say the gas tax is the most fair and equitable way to generate funds for road construction.

At least it looks like my backup bet — that a gas tax increase would indicate that Governor Branstad won’t run for another term — is looking better.

 

taxanalystslogoChristopher Bergin, Reform What? (Tax Analysts Blog). It has a great teaser line: “Yes, it sure is fun thinking about tax reform. And doing nothing about it could be fun as well. We might get to watch this colossal structure collapse soon.”

Christopher goes on to explain:

But all this talk has me thinking about other things, too. Which tax system will we reform – or at least start with? Should it be the one most of us are struggling to comply with -– the one that about half of us “regular” taxpayers still have to pay taxes under? You know, the one with deductions for charitable contributions that we’d make anyway — the one that discriminates between people who own a house and rent a house. The one that’s so confusing, many of us just turn our taxes over to a paid preparer or a paid-for program to figure out. Let’s not forget that if you’re doing well under this tax system, you win a prize: the alternative minimum tax (which is sort of a booby prize).

Or maybe we should start by reforming the IRS, which has become so broke and inept that it can’t afford to help your grandmother find the line on her Form 1040 for the dependents she can no longer claim. That’s the agency that is also supposed to enforce the law so that none of us “regular” taxpayers are the true suckers in all this. (How’s that working out for you?)

Lots of that sort of cheerful stuff. In some ways the system is already collapsing before our eyes. A system that wires $21 billion annually to thieves — and it’s getting worse quickly — isn’t built to last.

 

Des Moines Register, 16 companies claim 82 percent of Iowa’s R&D tax credits. “In all, 265 companies claimed about $51 million in credits for research and development last year, the report shows. Of that, 16 companies claimed $42.1 million.”

My coverage of the story from yesterday is here: The Federal $21 billion thief subsidy; the Iowa $37 million corporation subsidy.

 

William Perez, If You Drive for Uber, Lyft or Sidecar, These Tax Tips are Just for You

20150105-2Kay Bell, IRS drops some features in latest app upgrade

Jim Maule, Self-Employment Income Not Offset by NOL Carryforward

Carl Smith, The Eight Circuit Gives Both Sides a Hard Time on What is a “Separate Return” for Section 6013(b) Purposes (Procedurally Taxing). ” Does the limit on changing from a “separate return” to an MFJ return after filing a Tax Court petition only apply where a taxpayer initially filed an MFS return (as the taxpayer argues), or does it also apply where a taxpayer initially filed a “single” or HOH return (as the government argues)?”

Robert Wood, Nine Habits of Exceptionally Tax-Averse People. Numbers 5 and 6 are key.

TaxGrrrl, Are You Insured? Obamacare Deadline Quickly Approaching

Tony Nitti, Republicans, Democrats Agree On Tax Issue; Winter Storm Warning Issued For Hell. Tony, gang truces are more common than you’d think.

Jack Townsend, Structuring 20150119-1Forfeitures Again in the News (my emphasis):

After taking considerable heat on which we reported before, the IRS has hunkered back to a policy that generally (that’s a fuzz word) will allow seizure only where the IRS has proof of illegal income.  So, under the new law, generally the innocents (meaning those without illegal income) can intentionally violate the structuring law without being subject forfeiture and presumably without being subject to structuring prosecution. It seems to me that Congress should change the law rather than have the IRS not enforce the law as Congress wrote it or to signal to citizens that they can violate the law with impunity so long as they do use illegal funds.

I think Jack gives too much credit to the IRS, as if they have only been taking money when there was “intentional” structuring. The news reports have shown there are plenty of reasons to make deposits before you have $10,000 on hand, including insurance policy restrictions and the common sense idea that you don’t leave too much cash sitting around. But IRS didn’t inquire as to whether there was any actual intent to keep deposits low; they just took the money.

While the IRS has plenty to answer for in its seizure policy, I agree that Congress is just as guilty, passing laws allowing asset seizures without barely a nod at due process and without a hearing.

 

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TaxProf, The IRS Scandal, Day 645

Amber Erickson of Tax Justice Blog boldly makes The Case for Keeping the Medical Device Tax,

Health insurance providers, pharmaceutical companies, and the medical device industry are all expected to gain from the ACA by earning greater profits as more people enter the healthcare marketplace. The tax is intended to reciprocate those benefits by tacking on a small flat rate to a firm’s revenue.

But that tax is only on the medical deveisces, not “health insurance providers,” the big winner, and not on pharmaceuticals. It really isn’t on the device industry; it is on the people who need them.

 

Eric Cedarwell, Senator Bernie Sanders’s New Deal for America (Tax Policy Blog).

 Inspired by Roosevelt’s New Deal in many regards, Senator Bernie Sanders (I-VT) recently outlined his vision for America, featuring expansionary government spending policies. A major federal jobs program, a hike in the minimum wage to at least $15, expansion of Social Security, Medicare, Medicaid, increased regulation of Wall Street, and protectionist trade policies are examples of initiatives Sanders emphasized. However, Sen. Sanders provided little information on how he might finance his vision.

In other words, a reprise of the policies that put the “great” in the Great Depression.

Howard Gleckman, Lawmakers Talk Tax Reform But Keep Pushing New Tax Subsidies (TaxVox). Of course they do.

 

Caleb Newquist, When Is the Right Time to Start Your Own Accounting Firm? (Going Concern). December 19, 1990 worked for us. I think it was about 8:30 am.

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Tax Roundup, 2/12/15: The Federal $21 billion thief subsidy; the Iowa $37 million corporation subsidy.

Thursday, February 12th, 2015 by Joe Kristan

Lincoln

Accounting Today visitors: click here for the post on the updated auto depreciation limits.

Happy Lincoln’s Birthday. President Lincoln signed the first U.S. income tax into law in August, 1861, to cope with costs of the Civil War and the loss of income from customs collections in the rebellious states.  Wikipedia says the tax was initially 3% on income over an $800 exemption. Right away they started tinkering, and adding expiring provisions:

The income tax provision (Sections 49, 50 and 51) was repealed by the Revenue Act of 1862. (See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 ($12,742 in 2009 dollars) and 5% on incomes above $10,000 ($212,369 in 2009 dollars) or those living outside the U.S., and perhaps more significantly it was explicitly temporary, specifying termination of income tax in “the year eighteen hundred and sixty-six“).

The rates were increased again in 1864 to a top rate of 10%, but it actually was allowed to expire after the end of the war.

For some reason, this early version of the income tax isn’t a big topic in history books. Something else must have been going on then.

 

Rashia says "thanks, Commissioner!"

Rashia says “thanks, Commissioner!”

April 15, the thieves holiday Tax-refund fraud to hit $21 billion, and there’s little the IRS can do (CNBC):

Tax-refund fraud is expected to soar again this tax season, and hit a whopping $21 billion by 2016, from just $6.5 billion two years ago, according to the Internal Revenue Service.

And the problem—which the agency admits is growing quickly—is compounded by an outdated fraud-detection system that has trouble identifying many attempts to trick it.

$21 billion. The entire tax system of the state of Iowa raises maybe $8 billion, and the IRS issues $21 billion annually to thieves. Not counting earned income credit fraud, of course.

I’m no IT expert, but saying the IRS is helpless sounds like a cop-out. Even with obsolete technology, the IRS has been slow to stop obvious fraud, such as multiple (say, hundreds of) refunds going to a single bank account. The agency allowed this crisis to spin out of control years ago. Practitioners certainly knew about it during Doug Shulman’s execrable term as IRS commissioner, but he spent his efforts trying to regulate practitioners and harass the Tea Party, while grossly failing at the more basic duty of not wiring money to theives. Commissioner Koskinen obviously hasn’t solved the problem. I think it’s fair to conclude that they just haven’t considered it their biggest problem.

This should be the highest IRS priority, certainly more so than the “voluntary” preparer program. It should also be the highest oversight priority of the tax writing committees in Congress, who should be able to find a way to find the necessary funding in a way that keeps the Commissioner from diverting it to pet projects. Of course, the history of IRS technology upgrades isn’t very encouraging.

It’s possible that the solution will also require taxpayers to wait longer for refunds. It takes a lot longer to get a refund when your identity is stolen anyway, so it’s probably worth taking a little more time. But when technology exists to enable the credit card company to call me when my wife is buying an expensive dress in Chicago, the IRS ought to be able to notice someone like Rashia Wilson before she fills her purse with Benjamins.

Related: TurboTax Fraud May Impact Federal Returns Too, FBI Investigating (Robert Wood)

 

Iowa’s $37 million corporate subsidy programNot everybody knows that the State of Iowa mails subsidy checks to business taxpayers, including $11.7 million just to one. Iowa’s research credit is “refundable,” which means once it wipes out your Iowa tax, the state sends you a check for any remaining credit.

The total 2014 Iowa research credits claimed was $56,918,030 for 2014, according to the newly-issued Iowa Research Activities Tax Credit Annual Report for 2014. (Hat tip: Iowa Fiscal Partnership). Sixteen companies claimed $42 million of the credit, according to the report:

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I know everybody thinks they have earned whatever cash they have coming from the state, and I’m not shy about claiming refundable credits for my clients. When the state offers you cash, you’d be foolish not to take it. Still, there’s no way this makes any sense from a tax policy perspective.  The money sent to a few taxpayers should be used to lower rates for everyone, or to help eliminate the futile Iowa corporation income tax.

 

William Perez, Last Year’s State Refund Might be Taxed on Your Federal Return

TaxGrrrl, IRS Releases Latest Version Of Its Mobile App – And Something’s Missing. Service!

Russ Fox, A Bipartisan Tax Bill? I’ll Drink to That! “It’s to end age discrimination against bourbon and whiskey.”

Peter Reilly, Lois Lerner’s Old IRS Team Looking Anti-tech. “…now I’m thinking there might be a full blown Luddite cult operating in there.”

Jason Dinesen, Tips For Financing a Small Business: Part 1 of 5 — There’s Going to Be Paperwork, Deal With It

Kay Bell, Got your tax refund yet? IRS issued 7.6 million in January

 

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Principal Park, home of the Iowa Cubs. About 2 months until opening day!

 

Andrew Lundeen, Proposed Tax Changes in President Obama’s Fiscal Year 2016 Budget (Tax Policy Blog). “In total, the plan includes $2.4 trillion in proposed tax increases offset by $713 billion in new credits, deductions, and other offsets, for a total tax increase of nearly $1.7 trillion over the next ten years.”

Cara Griffith, Series LLCs: The Next Generation of Passthrough Entities? (Tax Analysts Blog). I think they will continue to be the wave of the future, as they have been for years now.

TaxProf, The IRS Scandal, Day 644

 

Career Corner. Interruptions at the Office: Good or Bad? (Adrienne Gonzalez, Going Concern). Bad, unless cookies are implicated.

 

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Tax Roundup, 2/11/15: Iowa Code Conformity, America’s more selective appeal, and your tax dollars at work in the $1 DVD bin.

Wednesday, February 11th, 2015 by Joe Kristan

IMG_1284The Iowa Code Conformity bill goes to the Governor. The Iowa House yesterday approved the Senate-passed bill, SF 126, to update Iowa’s 2014 tax law for the federal “Extender” legislation approved in December. Iowa will conform to the federal legislation, including the $500,000 Section 179 limit, but will not adopt the federal bonus depreciation.

The Governor is expected to sign the bill.

 

Our appeal is just getting more selective. 2014 – More Expatriations Than Ever (Andrew Mitchel):

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the fourth quarter of 2014. 

The number of published expatriates for the quarter was 1,062 (second highest quarter ever), bringing the total number of published expatriates in 2014 to 3,415.  The total for the year breaks last year’s record number of 2,999 published expatriates. The number of expatriates for 2014 is a 14% increase over 2013.  

Chart by Andrew Mitchel LLC

Chart by Andrew Mitchel LLC

Expatriation is often an inconvenient and expensive process. The willingness of so many to go through the hassle is disgraceful evidence of the burden the “shoot the jaywalker” penalties of the foreign account reporting rules and FATCA impose — on top of America’s unique worldwide taxation regime.

Related: Thousands Renounce U.S. Citizenship Hitting New Record, Not Just Over Taxes (Robert Wood)

 

haroldYour tax dollars at work in HollywoodWhen Sony’s emails were hacked, the companies executives were embarrassed by the emails complaining about “spoiled brat” starlets and other insider dish that was exposed. But Tax Analysts’ Brian Bardwell shows that the state legislators who have approved taxpayer funding around the country for filmmakers also have plenty to be embarrassed about. From the subscriber-only story:

While the broader topic of film incentives comes up daily, it appears that top executives — at Sony, at least — are not usually involved in finding credits for individual projects, but when they are, it may be because the film is unlikely to bring in enough money to justify producing it without a government subsidy.

In other words, taxpayers are financing the marginal direct-to-DVD projects for Hollywood. That comes as no surprise to those of us who followed Iowa’s disastrous Film Tax Credit story. In a story line right out of “The Producers,” inflated expense claims allowed awful films to be made without the need to ever get a paying customer — the sale of the resulting transferable tax credits covered the expenses and generated a profit — not counting the attorney fees and jail time, of course.

 

Kay Bell, Tax fraud concerns in Minnesota, Connecticut & now Florida:

“The personally identifiable information apparently hacked at Anthem is exactly what tax fraud thieves use to make false refund claims that appear to be legitimate,” said Department of Revenue Services Commissioner Kevin Sullivan. Sullivan is suggesting that residents beat tax ID thieves to the punch.

Great.

 

Peter Reilly, Breaking – Repair Regs – AICPA Says Help On The Way – Maybe. “The only thing that I find really encouraging about the AICPA announcement is that I can show it to my partners and justify my wait and see approach, which now apparently has the imprimatur of the AICPA.”

TaxGrrrl, UNRETIREMENT. “The Social Security and tax laws hold hidden traps and rewards for the growing army of well-off folks who just keep on working.”

Leslie Book, Congress Considering Procedural Legislation (Procedurally Taxing).

Jack Towensend, Judge Jed Rakoff Reviews Brandon Garrett’s Book on Too Big to Jail: How Prosecutors Compromise with Corporations

 

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David Brunori, It’s Time to End Property Tax Exemptions — for Everyone (Tax Analysts Blog).

City governments are usually looking for payments in lieu of taxes rather than ending exemptions. And the nonprofits — particularly universities and hospitals — tenaciously oppose paying. To be sure, some municipalities and exempt organizations have reached a compromise on payments in lieu of taxes, particularly in Boston. But in the vast majority of the nation, universities, nonprofit hospitals, and property owned by religious organizations are exempt from tax.

I propose we end those exemptions. First, let’s be honest — if you narrow the tax base by exempting some property, everyone else pays more. So in Brunswick, Maine, people and businesses pay more property taxes because Bowdoin College doesn’t. And sometimes they pay a lot more.

Sometimes it can be confusing. Des Moines officials will freely complain about the big hospitals not paying property taxes, but they lacked enthusiasm when the two big non-profit hospitals in town opened new hospitals in the suburbs.

 

Scott Drenkard, Richard Borean, How Many Cigarettes Are Smuggled Into Your State Each Year? (Tax Policy Blog). A lot more since they jacked up the cigarette tax a few years ago.

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The threat of lost cigarette revenue is the real reason state officials are so horrified by the vaporous health risks of e-cigarettes.

 

Renu Zaretsky, Tax Preferences, Investigations, and Settlements. Today’s TaxVox headline roundup covers Senator Hatch on tax reform, financial supergenius Bernie Sanders on Social Security, and more Swiss bank tax troubles.

Sebastian Johnson, State Rundown 2/10: Semi-Encouraging News (Tax Justice Blog)

Joseph Thorndike, When It Comes to Tax Reform, History Tells Us What Might Happen – And Why It Probably Won’t (Tax Analysts Blog). “The 1986 reform happened not because it was wise and prudent and necessary, but because it worked politically. And even then, only barely.”

TaxProf, The IRS Scandal, Day 643

 

News from the Profession. The Annual Close: The Year in Adverse Accounting Jokes (Adrienne Gonzalez, Going Concern).

 

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Tax Roundup, 2/9/15: New York questions its tax incentives. And: where’s the ‘no anthrax’ sign?

Monday, February 9th, 2015 by Joe Kristan

New York FlagNew York Comptroller: nobody tracks whether the state’s corporate welfare tax incentives do any good. Tax Analysts’ Jennifer DePaul reports ($link):

It’s unclear whether the $1.3 billion in incentives and credits doled out annually by New York is creating jobs, a February 5 report by State Comptroller Thomas DiNapoli concluded.

The ESDC, which administers more than 50 economic development programs, provides little public information on taxpayer-funded investments in its initiatives, the report said.

“ESDC makes no public assessment of whether its disparate programs work effectively together, whether such initiatives have succeeded or failed at creating good jobs for New Yorkers, or whether its investments are reasonable in relation to jobs created and retained,” the report said.

Naturally the politicians disagree:

On February 5 Gov. Andrew Cuomo (D) told reporters that he disagreed with the comptroller “fundamentally and on his concept of economic development” and said New York has lost its effectiveness to attract businesses over the past decade.

“We’ve come a long way in the past four years in terms of reversing that and bringing jobs back to New York,” Cuomo said. “To the extent that the comptroller thinks we should go back to the old way where we saw New York losing jobs, I couldn’t disagree more strongly.”

To politicians, the only job creation that matters is the kind that lets them hold issue press releases, hold press conferences, and cut ribbons.

For a brief shining moment in the Iowa’s Culver administration, the film tax credit fiasco made our politicians look at the Iowa’s tax credit programs. A panel of state officials issued a report finding no clear evidence that the tax credits do any good. So Iowa replaced them all and lowered individual and corporate tax rates with the savings.

Actually, no. They just continued enacting new credits. I can dream, though.

Link: The Comptroller Report.

 

dirtyThe Journal of Taxation has a summary of this year’s IRS “Dirty Dozen” tax scams. Number 1 with a bullet are phone call scams from people saying they are IRS agents. Just remember, if the caller claims to be from the IRS, he (or she) isn’t, unless you have been in touch with a specific agent by mail already.

 

Puzzling over the tangible property regulations and the 3115 requirements? The ISU Center for Agricultural Law and Taxation wants to help solve the puzzles. They have scheduled a webinar on on the regs February 18Roger McEowen and Paul Neiffer will host. Registration info available here.

 

Russ Fox celebrates 10 — the tenth anniversary of his excellent Taxable Talk. Congratulations, Russ!

William Perez, How Is Interest Income Taxed and Reported?

Annette Nellen discusses the new IRS Directory of preparers and Annual Filing Season Program (AFSP). Another useless effort by the supposedly impoverished agency.

IMG_1271Leslie Book, Preparers and Due Diligence (Procedurally Taxing)

Kay Bell, Additions to the tax law name roll of [dis]honor? We at Roth & Company would like to claim rights to the name “Roth IRA,” but alas, we had nothing to do with it.

Jason Dinesen, I Like Mowing My Lawn and Shoveling Snow; Do You Like Preparing Your Tax Return?

I see no value in hiring someone else to mow my lawn or shovel my snow.

The same principle holds true for people who choose to prepare their own taxes. If they know what they’re doing and they enjoy doing it, then I encourage people to do it themselves because they won’t see value in the work of a tax professional.

I see no value in hiring someone else to do my lawn and driveway either. That’s what the teen-ager is for.

TaxGrrrl, Brady Passes On Super Bowl Prize As Butler Hauls In Truck & Tax Bill

Jim Maule, So Who Gets Taxed on the Super Bowl Truck?

Peter Reilly, Oil Rig Manager Does Not Qualify As Foreign Resident

Robert Wood, On-Demand Workers: It’s Tax Time, You’re Self-Employed, Audits Are Inevitable

Me, IRS issues 2015 vehicle depreciation limits, updates 2014 limits for Extension of Bonus depreciation

 

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TaxProf, The IRS Scandal, Day 641. Judicial Watch says it has received emails showing the IRS Office of Chief Counsel delayed the investigation into the Tea Party scandal.

The tax law is obese. So the supergenius behind Obamacare, Jonathan Gruber, has floated the idea of taxing folks based on body weightArnold Kling is comments wisely: ” I know that many of my progressive friends would be disgusted by the obesity, but that does not make it a public policy problem.”

That’s right, not every problem is a tax problem. Or even the government’s problem.

David Henderson has more: Jonathan Gruber on Sin Taxes (Econlog)

 

Kyle Pomerleau, Worldwide Taxation is Very Rare (Tax Policy Blog):

At the beginning of the 20th century, 33 countries had a worldwide tax system. That number slowly dropped to 24 countries by the 1980s. By the 2000s, the number of countries switching to territorial systems accelerated, with more than 10 countries switching in 10 short years. Nearly all developed countries have moved to the superior territorial tax system. Today there are only 6 countries that tax corporations on their worldwide income. The President’s proposal would double-down on the U.S.’s current system and push the United States further out of line with the rest of the developed world.

The U.S. is even more of an outlier on worldwide taxation of individual income, with only Eritrea joining us in taxing citizens abroad.

Tracy Gordon, Go Team: Score 1 for Obama on Ending Tax Subsidies for College Sports (TaxVox).

Sebastian Johnson, State Rundown 2/5: State of the States (Tax Justice Blog).

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Career Corner. Let’s Discuss: The Worst of Eating in the Audit Room (Marty, Going Concern)

Brian Gongol says “You’re not allowed to carry a bag of anthrax spores through a mall.” My bad. It won’t happen again.

 

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Tax Roundup, 2/6/15: Iowa pass-through top rate: 47.2%. And: a forgiving IRS!

Friday, February 6th, 2015 by Joe Kristan

Accounting Today visitorsThe post about the convicted filmmaker is here.

 

Taxing employers at high rates? That’s OK, they’re rich! Pass-through Businesses can Face Marginal Tax Rates over 50 percent in Some States (Kyle Pomerleau, Richard Borean, Tax Policy Blog):

Today, Pass-through businesses pay a significant role in the United States Economy. They account for 95 percent of all businesses, more than 60 percent of all business income, and more than 50 percent of all employment.

Iowa ranks at about the middle, with a 47.2% combined top rate on pass-through income.

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When lazy politicians think they can cover their incontinent spending just by sending the bill to the rich guy, they don’t tell you that they’re talking about leaving your employer that much less money to hire and pay you.

 

TIGTAI’m sure they’ll be just as forgiving to the rest of us. Accounting Today reports: IRS Rehired Hundreds of Misbehaving Employees with Conduct Problems:

The Internal Revenue Service rehired hundreds of former employees with prior conduct or performance issues, including employees who failed to file their taxes, falsified official forms and misused IRS property, according to a new report. 

The report, from the Treasury Inspector General for Tax Administration, acknowledged that most rehired employees do not have performance or conduct issues associated with prior IRS employment. However, TIGTA said it identified hundreds of former employees with prior substantiated conduct or performance issues ranging from tax issues, unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct.

I like this “second chance” policy. I hope they roll it out to the rest of us.  Robert Wood has more: IRS Rehires Hundreds Of Problem Former Employees.

 

Conformity update: The Iowa House of Representaties went home for the weekend without approving SF 126. The Iowa Senate approved the bill this week. SF 126 continues through 2014 Iowa’s practice of conforming to the extender provisions other than bonus depreciation. This will mean Iowans will be able to claim the $500,000 maximum Section 179 deduction on their state returns. I expect the House to pass it next week.

 

1099-CTax Pros, the IRS isn’t your collection agentThat seems to be the implication of this item sent as an email by the IRS Office of Professional Responsibility to practioners yesterday. It addressed the idea of sending a 1099-C, reporting cancellation of debt income, to deabeats who fail to pay a tax return prep fee:

It is difficult to conceive of a situation in which a tax professional, principally engaged in providing tax services will be an “applicable entity” justifying the use of Form 1099-C to attribute income to an arguably scofflaw client for the nonpayment.

So it’s back to old standbys like cyberstalking and prank phone calls, then.*

*I kid! I kid!

 

TaxGrrrl, Minnesota Stops Accepting Returns Filed With TurboTax, Cites Fraud Concerns. It may be that Turbotax is just too popular with the wrong kind of customer. “Banned in Minnesota” can’t be good for Turbotax sales.

 

IMG_1232William Perez, Tax Refunds by Direct Deposit: How to Do It and Problems to Prevent. Some sage advice: “Triple Check Your Bank Account Information Before Filing Your Tax Return”

Kay Bell, Don’t forget local levies when adding up sales tax deduction

Paul Neiffer, Excessive Claims for Fuel Tax Credits Makes the IRS “Dirty Dozen List”. You mean you didn’t use 1000 gallons in your lawn tractor this summer?

 

Clint Stretch, Defining Tax Reform (Tax Anlaysts Blog):

To date, nearly everyone describing tax reform, from the U.S. Chamber of Commerce to the White House, has called for “a simpler tax code.” Not so the Senate Democrats. When they use the words “tax reform,” those words do not mean simplification but do mean many things conservatives would leave out of their own definition, such as progressive taxation.

It is tempting to think that whoever drafted the letter merely forgot simplification, or assumed it to be understood. But the Democrats’ proposal to have tax incentives “take into account the varying cost of living differences among States and regions” makes it clear: Simplification is not one of their core values.

Oddly, Mr. Stretch doesn’t seem to be a fan of simplification. He spent many years as a lobbyist for a national accounting firm I once worked for, so I suppose that’s unsuprising.

 

TaxProf, The IRS Scandal, Day 638

Howard Gleckman asks, How Will Jeb Bush Turn His Vision of Government into Tax Policy? Maybe by writing letters to his Congressman. It won’t be by becoming President, I’m pretty sure.

 

Peter Reilly has what seems to me an unnatural interest in the tax problems of “young earth creationist” Kent Hovind. In a long piece Peter explains his interest. It’s long, but this is worth noting:

Whenever I think about disputes that are really passionate, there is one thing that I never forget.  If something really awful were to happen in my community there would be an outpouring of support from people across the country.  Many of them would have views that I consider preposterous and dangerous.  Regardless, we are still in it together.

I’m still puzzled at the interest in this particular sad case, but Peter comes across as thoughtful and humane all the way through.

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Career Corner (?). Ex-Crazy Eddie CFO Now Judging Fellow Criminals on Their Criminal Talents or Lack Thereof (Adrienne Gonzalez, Going Concern), quoting Sam Antar on conviction of New York representative Michael Grimm:

My former bosses running Crazy Eddie would never have let an amateur like Grimm participate in our tax-evasion schemes! If you are to engage in any scheme to skim money and evade taxes, there is one golden rule: Never leave an audit trail.

Michael Grimm left behind a body of evidence in the most convenient places for the federal investigators to help bury him.

We discussed that very issue in our discussion of the Arrow Trucking tax plea yesterday. I hate to think I’m starting to think like Mr. Antar.

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Tax Roundup, 2/3/15: President announces fresh new hopeless tax proposals!

Tuesday, February 3rd, 2015 by Joe Kristan

Economic supergenius

160 tax proposals. Close to 160 doomed tax proposals. The President released the details of the tax proposals for his 2015 budget yesterday. Tax Analysts Reports ($link):

The added details on international reforms the administration is seeking serve as “a significant step forward” to flesh out its business tax reform framework and see if there is an “opportunity for movement” on business reform with Congress, a senior Treasury official told reporters at a February 2 briefing on the release of the Treasury’s green book explanation of the revenue proposals in the budget.

Overall, the fiscal 2016 budget includes roughly 160 tax proposals, of which about 30 are new, 45 are modifications or combinations of old proposals, and 85 are the same or similar to the administration’s fiscal 2015 budget, the Treasury official said.

Almost all of these proposals are doomed for this Congress. As most of these couldn’t pass when Democrats controlled the Senate, they’re hardly likely to pass now that they don’t. A GOP Congress is also not about to pass some of the more publicized class warfare proposals, like the increase in the capital gain rate, the taxation of capital gains at death, increase the estate tax rate to 45% (from 40$) and lowering the estate and gift tax lifetime exclusion to $1 million (from $5+ million).

No Walnut STA few proposals might get a sympathetic hearing on their own from GOP taxwriters. These include:

– Cash basis accounting and repeal of Section 263A inventory capitalization for companies with up to $25 million in gross receipts.

– Permanent extension of the Section 1202 exclusion for qualifying small C corporation stock gains.

– Permanent extension of the refundable Child Tax Credit.

– Increasing the maximum Section 179 deduction from $500,000 to $1 million.

A few other corporate welfare gimmicks that might get a hearing include permanent research credits and permanent New Markets Tax Credits.

While there are a few items that might attract GOP support, overall this batch of proposals is more extreme than the ones that went nowhere before. The President probably won’t let Congress just pick out the tasty bits from his proposals, so I expect little to none of this to actually pass.

Flicker image courtesy Michael Coghlan under Creative Commons license.

Flicker image courtesy Michael Coghlan under Creative Commons license.

Other Coverage:

TaxProf, Tax Provisions in President Obama’s FY2016 Budget

WSJ, Obama Would Block Strategies to Pump Up Roth IRAs

Accounting Today, Obama Proposes Sweeping Tax Changes in 2016 Budget

Jeremy Scott, Obama’s Foreign Earnings Tax: 19 Percent Minimum DOA but Deemed Repatriations Key (Tax Analysts Blog)

Kyle Pomerleau, The President’s Tax on Offshore Earnings Represents the Worst of Retroactive Policy (Tax Policy Blog)

Len Burman, Are Accrued Capital Gains Income in the Year You Die? (TaxVox). “But reclassifying exceptionally thrifty middle-class families to the top of the income distribution by counting a lifetime of unrealized gains in income when they die clearly overstates their well-being.”

Tony Nitti, Tax Aspects Of The President’s FY2016 Budget

TaxGrrrl, Obama Budget Proposal Tackles Small Business, Changes To IRS

Kay Bell, Tax highlights in Obama’s FY2016 budget proposal

Annette Nellen, President Obama’s 2015 Tax Proposals

 

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Megan McArdle, Government Blinks Again on Obamacare, a discussion of the IRS announcement that it won’t impose the failure-to-pay penalty on exchange policy purchasers who have to repay some subsidy:

The IRS emphasizes that this is a one-time-only deal, just for 2014. But I’m not sure if you should believe that. This emphasizes one of the problems we’ve spoken about a lot in this space: The political will to impose the costs of the Affordable Care Act is a lot less strong than the will to distribute the benefits.

It also telegraphs that the IRS expects that a lot of taxpayers who are anticipating a refund will be instead writing a check on April 15.

 

20140925-2Peter Reilly, Repair Regs And Tax Pros Are Like Headlights And Deer:

For the most part, the people who have been really looking at these regulations have had a large firm perspective.  To be a just a little cynical, they actually kind of like all this complexity, since they can make a case for sending out big bills to entities that can afford to pay them.  My brief time at the national level, not Big 4, but with many former Big 4 people made me realize there is a radically different perspective at that level.  They are used to having a very small number of competitors for any client who more or less sing from the same hymn book.  The client people that they deal with are quite likely fellow members of the Big 4 cult rather than tight fisted entrepreneurs who resent every penny they spend on professionals.

Regulation always favors the big, and the “repair regulations” are no exception.

 

Russ Fox, Fake Interest Income, Fake Withholding, Real Fraud at the Tax Court. “What is amazing to me is that the petitioner has not, as far as I can tell, been criminally indicted.”

Robert Wood, The Truth About Lying On Your Tax Return.  “…as with your resume, making up something on your tax return is a terrible idea.”

Martin Sullivan, JCT Report Provides New Insight on Competitiveness (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 635

 

News from the Profession: How Internal Controls Will Keep You Safe From Velociraptors (Leona May, Going Concern).

 

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Tax Roundup, 2/2/15: Film trial sequel ends badly for a main character. And: Iowa conformity bills advance.

Monday, February 2nd, 2015 by Joe Kristan
Dennis Brouse

Dennis Brouse

They got him for the trailer. The filmmaker who got more transferable tax credits under the Iowa film tax credit program than anyone else was convicted Friday of first degree fraud with respect to the program. From the Des Moines Register:

Dennis Brouse, 64, could face up to 10 years in prison at a sentencing hearing scheduled for March 23. Brouse owned Changing Horses Productions, a company that received $9 million in tax credits from the scandal-ridden Iowa Film Office. Brouse starred in the company’s main series, “Saddle Up With Dennis Brouse.”

Prosecutors claim Brouse bought a 38-foot camper trailer from an elderly couple, Wayne and Shirley Weese, for $10,500 in cash. But prosecutors charged that Brouse claimed the trailer cost twice that much in a statement for tax credits that he turned in to the state.

The State Auditor’s Report on the program reported that Changing Horses claimed 50% tax credits for many other doubtful items. For example, they claimed a $1 million value for a “sponsorship” awarded to a feed company that had refused to sign a document with that value on the grounds that it was “grossly overvalued.” This enabled the company to get tax credits that likely were more than 100% of the money spent in Iowa by the filmmaker.

Mr. Brouse had a prior conviction on charges related to the film program overturned, and his attorney says he will appeal this conviction.

While Iowa’s film credit program was spectacularly mismanaged, it was only one extreme example of the unwisdom of the state legislature attempting to manage Iowa’s economy via the tax law.

 

Via Wikipedia

Via Wikipedia

Iowa conformity bills advance The bill to update Iowa’s income tax to reflect the December federal “extenders” bill cleared both the House and Senate taxwriting committees. I think than means the bills won’t be delayed, and we can get on with Iowa’s tax season. Both bills conform for pretty much everything in the federal tax law, including the increased Section 179 deduction, but do not conform to federal bonus depreciation.

 

Dahls checks outThe central Iowa grocery chain was broken up Friday in a bankruptcy liquidation. Seven stores will re-open under another name.

Perhaps the greatest victims of the failure are longtime Dahls employees who owned the company through their Employee Stock Ownership Plan. They get nothing, or close to it.

Iowa passed a special break for sales of companies to ESOPs in 2012. Proponents pointed to the employee ownership of Dahl’s major competitor, Hy-Vee, in support of the bill.

The Dahls example shows a dark side of employee ownership — the way it concentrates a large portion of employee retirement assets in a single vulnerable asset.

 

Jason Dinesen, Do I Have to Have Form 1095-A Before I Can File? “Yes, you need the Form 1095-A if you got premiums through an insurance exchange.”

William Perez, Need More Time? How to File for a Tax Extension with the IRS

20150105-1Jim Maule, When Is A Building Placed in Service? “Because the taxpayer presented undisputed evidence that certificates of occupancy had been issued, that the buildings were substantially complete, and that the buildings were fully functionally to house the shelving and merchandise, they had been placed in service within the required time period.”

Jana Luttenegger Weiler, Sharing Financial Responsibility at Tax Time (Davis Brown Tax Law Blog). “Whatever your situation, it is important to keep good records so that someone else can pick up where you left off, if needed.

Kay Bell, Is Belichick’s coaching style like tax avoidance or tax evasion?

Paul Neiffer, $500,000 Permanent Section 179 Could be Coming Soon! “The House Ways and Means Committee is expected to vote on seven expired tax provisions on February 4, including making permanent Section 179 expensing at the $500,000 level.” Given the politics involved, I’m not holding my breath.

Robert Wood: Receipts Rule IRS Keeps Quiet: They’re Optional. Well, sometimes they aren’t optional, and they always help.

TaxGrrrl, Salaries, Ads & Security: What’s The Real Cost Of Super Bowl XLIX?

Russ Fox, This Never Works…:

Patrick White is the owner of R & L Construction in Yonkers, New York. He liked his home and he liked to gamble. There’s nothing wrong with that. He took payroll taxes withheld from his business and used that money for his homes and for gambling. There’s a lot wrong with that, especially when it totals $3,758,000. Mr. White pleaded guilty to one count of failing to pay over payroll taxes to the government. He’ll be sentenced in May.

Russ throws in some good advice about using EFTPS.

Robert D. Flach regales us with THE TWELVE DAYS OF TAX SEASON

Stephen Olsen, “Summary Opinions for 1/6/15-1/23/15” (Procedurally Taxing). News from the tax procedure world.

 

IMG_0543Christopher Bergin, Robin Hood and Other Fables (Tax Analysts Blog):

When it comes to taxation, President Obama has his own particular points of view. He may use terms such as “middle-class economy” or say things like “the rich can pay a little more,” but at the core he views the tax system as either a mechanism that helps the rich hang on to their ill-gotten gains or as a “honey pot” to fund his political ideas and base. It’s all politics. And that’s why we will see no progress – regarding the gas tax, taxation of businesses, or any other kind of real tax reform – until there has been a change in administrations.

In fact, the major lesson we’ve learned from this latest episode is that when it comes to of tax reform, the Obama administration has the “tinnyist” of tin ears. Whether the merry men and women at the White House believe that section 529 tuition savings plans benefit the ”rich,” they should know that when American voters actually recognize and identify with a tax break by its code section number (in this case, 529), be careful — very, very careful. You usually can’t sneak a fast one into the tax code when taxpayers know the section by number.

Hard to argue with this.

 

Arnold Kling, 529: Popular != Good Policy. “529 plans subsidize affluent people for doing what they would have done anyway–send their kids to exclusive, high-priced colleges.” Maybe, but it still is better than rewarding borrowing by subsidizing it.

Howard Gleckman, Obama’s Failure to Kill 529 Plans May Say Less About Tax Reform Than You Think (TaxVox). “But the survival of these education subsidies does not mean that a rate-cuts-for-base-broadening swap will never be possible.”

 

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TaxProf, The IRS Scandal, Day 634

Matt Gardner, Facebook’s Record-Setting Stock-Option Tax Break (Tax Justice Blog). 595 words on the evils of the deduction for stock option compensation without one word noting that every dollar of “phantom” deduction for the issuing corporation is also a dollar of “phantom” income to the employees — and usually at higher rates than the corporation pays.

Scott Drenkard, Gov. Kasich’s Plan May Be A Tax Cut, But It’s Still Poor Policy. (Tax Policy Blog) “Unfortunately, the plan which is set to be announced next Monday by Governor Kasich isn’t going to address any of these problems and will probably make them worse.”

 

Career Corner. You Should Take a Nap This Afternoon Because Science (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 1/30/15: Earned Income Tax Credit Awareness Day Edition! And: judging your golf score

Friday, January 30th, 2015 by Joe Kristan

daydrinkersDid you know that today is “Earned Income Tax Credit Awareness Day“? Most of us don’t get the day off, but as it is Friday, we can celebrate after work into the wee hours.

What are we celebrating? Well, the EITC is a refundable tax credit designed for poor working families with children. A “refundable” credit generates a tax refund if there is no tax to offset, so the EITC works as a welfare payment for poor families with some earned income. It phases out as incomes increase.

Some economists praise the EITC as a useful anti-poverty program that doesn’t kill jobs the way minimum wage laws do. Others look at it as a way to achieve “tax justice” by redistributing taxes to the poor.

Still, if you really want to be fully aware of how the EITC works, you should know about a few things that aren’t on the IRS EITC Awareness Day web page.

For example, you should know that the EITC phase-outs make it a poverty trap. The effect of the phase-out of the credit as income rises is to impose a marginal rate on additional earnings of EITC recipients as high as that imposed on some of the top income earners. The Federal-Iowa combined rate, taking into account phaseouts and payroll taxes, can exceed 50%.

eic 2014

This is a serious disincentive for EITC recipients to improve their earnings. Combined with the loss of other benefits, it can make self-improvement an unrewarding pastime.

 

Up to 25% of the EITC goes to people who shouldn’t get it, according to TIGTA. Part of it is because taxes are complicated and math is hard. A significant part, running into the billions, goes to fraudsters. Even in a good cause, you have to question the value of a program that misdirects so much money.

EITC error chart

Like all refundable credits, the EITC is a fraud magnet. Any time the government will write a check just for the effort of filling out a form, fraud happens. Just a few random instances:

Waterloo, Iowa preparer get 30 months for earned income tax credit fraud. A preparer invented earnings to get Iowa clients EITC refunds.

Tax Preparer Sentenced For Fraud Scheme. “The fraudulent returns sought refunds of $354,000 based on bogus expense deductions and refundable credits, such as entitlement to the First Time Home Buyers Credit and the Earned Income Tax Credit when the filer had little, if any, taxes withheld from income in that year.”

Tax preparer who bilked IRS out of $4M for poor clients: Fraud a ‘spiritual calling’. “As it turned out, Reed was inflating the incomes of his clients – generally unemployed women with children – so that they could claim an earned income tax credit.”

So as you observe this festive day in your own way, you can ponder whether the guy celebrating at the next table is buying because he just got his fraudulent EITC refund.

 

20140826-1Get your Buzz now! Because Robert D. Flach has posted his final Buzz for this tax season, with a kind shout-out to the Tax Update Blog. Don’t miss his thoughts on choosing a tax pro.

Kay Bell, What would you pay for professional help in filing your taxes?

William Perez, Head of Household Filing Status, Explained

Accounting Today, Obamacare Penalty to Be Owed by as Many as 6 Million Taxpayers. That will make it popular.

Robert Wood, Senators Blast IRS Commissioner Over Waste, Bonuses, Bad Service, More. Well, shooting fish in a barrel can be fun.

TaxProf, The IRS Scandal, Day 631. More government stonewalling. Well, it’s worked so far.

 

William McBride, Federal Government Lost Money from 2013 Tax Increases on Investors (Tax Policy Blog):

As President Obama prepares to roll out another tax increase proposal targeting capital gains and dividends, it’s instructive to look at what happened the last time he did that. Fortunately, the IRS just released preliminary data on tax year 2013, the year the top tax rate on capital gains and dividends went from 15 percent to 23.8 percent. The fiscal cliff deal raised the top rate to 20 percent and the Obamacare investment surtax added 3.8 percentage points.

From the IRS data, we can see that investors didn’t just sit there and pay the higher tax rate. Qualified dividend income dropped 25 percent, from $189 billion in 2012 to $141 billion in 2013. Capital gains dropped 12 percent, from $475 billion to $416 billion. Recall this was in the midst of a historic stock market boom.

Not all tax increases lose money, and not all tax cuts make money. This shows, thought that increases in capital gains rates can backfire. The realization of many capital gains is discretionary, and many taxpayers will discreetly hold on to gains, rather than cash them out, when rates rise.

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Perhaps this might not have been the best way to impress the sentencing judge. The Denver Post reports Convicts in $100 billion tax fraud skipped sentencing to play golf

The three Colorado Springs defendants were arrested Thursday after they failed to appear for sentencing Wednesday. They were escorted into court Thursday afternoon in handcuffs, all wearing street clothes.

“We did go golfing. I shot a 49, which was pretty good for me,” Pawelski told the judge after she emphasized the seriousness of the felony charges he faced.

Judges always understand you skipping a court date if you have a tee time.

Arguello reset sentencing for all three tax fraud convicts for Feb. 10. The judge brought each offender into the courtroom separately. Brokaw and Pawelski each told the judge they are a “natural man.”

“I am a natural man, a legal person, a legal man; something I didn’t know before,” Pawelski said.

Good thing he figured that out. He’ll likely have plenty of time to ponder that starting about February 11.

 

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Tax Roundup, 1/29/15: Iowans, fill ‘em up now. And: lessons from the Obama Sec. 529 retreat.

Thursday, January 29th, 2015 by Joe Kristan

dimeFill me up. ‘Overall consensus’ toward 10-cent hike in state gas tax O. Kay Henderson reports:

 Key legislators say a 10-cent increase in the state gas tax has a good chance of passing the legislature in February and going into effect as early as March.

“I think the overall consensus is to go 10 cents now…We’re so far behind that we need to implement it right away,” Senator Tod Bowman, a Democrat from Maquoketa who is chairman of the Senate Transportation Committee, said this morning.

At the opening of this session of the General Assembly, I guessed that there would be no gas tax boost. It’s looking more likely every day that I was wrong. I asked a few legislators and lobbyists about it when I attended the Iowa ABI Legislative Reception, and they all said a 10-cent gas tax boost was a done deal.

That would test my alternative forecast – that if there was a gas tax boost, it meant Governor Branstad will not run for a seventh term.

 

csi logoAlan Cole, President’s Plan to Tax 529s Was Not a Distraction (Tax Policy Blog):

While the issue was, perhaps, a distraction from the administration’s priorities on community college, it was not at all a distraction from the administration’s priorities on tax policy. It is deeply philosophically consistent with virtually every tax policy proposal, proposed or enacted, from the administration.

The administration’s proposals all tend to follow a particular blueprint for tax policy: simply put, that when Americans save by investing in some kind of asset, that they should be taxed at ordinary income rates on both the initial value of the asset and all the future returns on the asset. (For example, with 529 plans, the initial investment is taxed, and the Obama Administration’s proposal is to tax the returns as well.) This view is mistaken, in that a financial asset’s value is precisely in its future returns. The value of the financial asset, then, is taxed twice. 

The difference here is that the administration has dressed up its tax grabs by saying only “the rich” would have to pay. That’s never really true, but it was so obviously wrong here that even the President’s allies couldn’t support it with a straight face.

 

IRAJoseph Thorndike, What Obama’s 529 Flip-Flop Says About Your Roth IRA (Tax Analysts Blog):

The bursting of the 529 trial balloon should serve as an object lesson for anyone hoping to rein in other tax preferences. In particular, proposals to scale back Roth IRAs – popular among liberal analysts – seem hopeless in the extreme.

I think the dumbest thing was pairing the elimination of a tool to enable people to save for education costs with the unwise “free” community college proposal. That was pretty much saying those who want to pay their own way through college without government grants are chumps.

TaxProf, The IRS Scandal, Day 630. It has become an issue in the hearings for the Attorney General nominee.

 

Jason Dinesen, What I’m Asking My Clients Regarding the ACA. Pretty much what we are asking our clients.

TaxGrrrl, Form 3115 Adds Confusion & Cost – But May Be Required For 2015. “Since there’s no user fee – and virtually no risk – I tend to agree with those who suggest that businesses owning real and/or tangible property err on the side of caution and file form 3115 to obtain automatic consent.”

Robert Wood, Missing A Form 1099? Why You Shouldn’t Ask For It “Nevertheless, if you don’t receive a Form 1099 you expect, don’t ask for it. Just report the income.”

Tony Nitti, Super Bowl XLIX Tax Tale Of The Tape: Who Ya’ Got? Meh. My football rooting interest ended in Seattle. But for socially-awkward tax nerds (but I repeat myself) who are going to Super Bowl gatherings, Tony has a lifeline.

 

20140512-1Peter Reilly, Don’t Use The IRS To Address Koch Political Spending. Whether it’s Tom Steyer, George Soros, or the Brothers Who Must Not Be Named, the government has no business telling them what causes they can fund.

Russ Fox, Caesars Wins Round One: Chicago, not Delaware. Caesars Entertainment’s bankruptcy litigation, that is.

Carl Smith, Unpublished CDP Orders Dwarf Post-trial Bench Opinions in Uncounted Tax Court Rulings (Procedurally Taxing). Insight on what Tax Court judges do that those of us who don’t do that sort of litigation for a living don’t see.

Jack Townsend, Unreported Offshore Accounts Remains on IRS Dirty Dozen” List

Kay Bell, Illinois shoppers to start paying state sales tax on Amazon purchases on Feb. 1; federal online tax bill still stalled

 

Tax Trials: Georgia Tax Tribunal Rules that Electric Utility’s Machinery and Equipment Used in Transmission and Distribution System Not Exempt from Georgia Sales & Use Tax. Bad tax policy all over. Business inputs should not be subject to sales tax.

Cara Griffith, Tax Appeal Reform May Be a Possibility in Washington State (Tax Analysts Blog)

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David Brunori, Regressive Taxes Are Neither New Nor Good (Tax Analysts Blog): “States should also broaden the sales tax base to tax things rich folks buy, while lowering the tax rates on the things the poor consume the most. But the rich will remain rich.”

Steven Rosenthal, Is Obama Closing Retirement Savings Loopholes or Just Curbing Congress’ Generosity? (TaxVox). How about another choice – he’s just looking to increase taxes on “the rich” any way he can get away with?

Richard Phillips, Congress Should Pass the Stop Tax Haven Abuse Act to Combat International Tax Avoidance. (Tax Justice Blog). I have a better idea: a less onerous tax system that would make international tax avoidance less attractive.

 

Career Corner. The Public Accountant’s Definitive Guide to Disclosure of Past Convictions (Adrienne Gonzalez, Going Concern)

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Tax Roundup, 1/28/15: President scurries away from plan to tax college savings. And: more hard-hitting journalism!

Wednesday, January 28th, 2015 by Joe Kristan

csi logoAccounting Today reports: Obama Said to Drop Proposal to Repeal 529 College Tax Break. Good.

This was perhaps the most obnoxious of the proposals in the President’s budget, and that’s saying something. Promoting “free” community college tuition, while punishing those who actually save for college to avoid government loans, is a model of awful incentives and policy.

I can’t let pass this item from the Accounting Today report (my emphasis):

The administration’s quick retreat on the proposal emphasizes the difficulty of changing popular tax breaks, even in ways that lower the overall tax burden.

Yes, hard-hitting journalism in the form of making excuses for the President. It what way does repealing the exclusion for Section 529 plan withdrawals from taxation help “lower the overall tax burden?” The CBO estimates the President’s proposals would increase taxes by over $1 trillion over ten years.

Speaking of hard hitting journalism, we have this from the Des Moines Register today:

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For those who no longer take the print edition, be assured that this important story is also available to internet readers.

Related: Annette Nellen, President Obama’s 2015 Tax Proposals

 

William Perez, Tips for Green Card Holders and Immigrants Who are Filing a US Tax Return. “Being a resident for tax purposes doesn’t necessarily mean you actually live here full time. As long as you have a green card, for example, you are responsible for reporting and paying tax on your worldwide income.”

Jason Dinesen, Iowa Trust Fund Tax Credit for 2014 Tax Returns. $15 per person this year.

Kay Bell, New IRS Form 1095-A among tax docs that are on their way. ACA adds a new wrinkle to this year’s filings.

Robert D. Flach, OBAMACARE AND 2014 TAX RETURNS

 

1099misc2014TaxGrrrl, Where Are My Tax Forms? Due Dates For Forms W-2, 1099, 1098 & More. Including a reminder that K-1s from S corporations, partnerships and trusts are not due when 1099s and W-2s are.

Leslie Book, Thumbs Up on No Income Even When IRS Serves up 1099 DIV: Ebert v Commissioner (Procedurally Taxing)

Robert Wood, Disagree With An IRS Form 1099? Here’s What To Do. “What happens if the issuer won’t cooperate?”

 

Jim Maule on The Taxation of Egg Donations. “The Court’s conclusion makes sense, and not simply because it reaches the conclusion I advocated for reasons I suggested relying on cases on which I relied.”

Russ Fox, One Good Crime Deserved Another:

Let’s say you’re involved in a 20-year scheme that has successfully evaded millions of dollars in payroll and income taxes for your largest client. However, you’ve only had minor profits from the scheme. So why not embezzle millions of dollars from that client?

Russ offers some pretty good reasons why not.

 

cooportunity logoHank Stern, CoOpportunity assumes room temp (InsureBlog). More on the demise of Iowa’s sole SHOP provider, set up with millions in government grants and loans. Underwriting is hard.

Jack Townsend asks Why the Lenient Sentencing for Offshore Account Tax Crimes. “But, from my perspective, it seems to me that one can fairly question the notion that commission of tax crimes via offshore accounts is any less blameworthy — i.e., punishable — than commission of tax crimes in other contexts.”

 

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Kyle Pomerleau, Richard Borean, Pass-through Businesses Account for More than $1.6 Trillion of Payroll (Tax Policy Blog):

Today, Pass-through businesses pay a significant role in the United States Economy. They account for 95 percent of all businesses, more than 60 percent of all business income, and more than 50 percent of all employment.

These are businesses taxed on owner 1040s. Remember that when politicians want to raise rates on “the rich” even more — they are hammering employers when they do this.

Richard Auxier, Pitching, Defense, and State Tax Policy (TaxVox): “So is Max Scherzer saving money in DC? Yes. Are the District’s tax laws a big reason why he signed with the Nationals? I doubt it.”

TaxProf, The IRS Scandal, Day 629

News from the Profession. Jilted Girlfriend Has Totally Had It With Cheap Accountant Boyfriend and His Stupid Spreadsheet (Adrienne Gonzalez, Going Concern).

 

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Tax Roundup, 1/26/15: Is Iowa 2014 tax season in jeopordy? And: how “trust fund tax” encourages trusts.

Monday, January 26th, 2015 by Joe Kristan

Accounting Today visitors: Here is the accounting method post mentioned by “in the blogs.”

 

20130117-1Uh-oh. Is there a holdup on passing the annual “conformity” bill at the statehouse? This from Republican State Senator Bill Anderson in the Sioux City Journal is a bad sign:

Senate Democrats are playing politics with the issue. The Department of Revenue is recommending accountants tell clients to delay filing their taxes until a decision is made. Senate Democrats’ indecisiveness to pass legislation in a timely manner creates uncertainty for taxpayers and tax professionals, preventing them from filing returns.

I had not heard there was any difficulty here. I hope it’s not serious, but I will be watching it more closely now.

This is another example of why Iowa should have a “floating conformity” rule. I don’t understand why they can’t say they will automatically adopt federal extender changes. If they want to leave out bonus depreciation, that could be done with language excluding that from the automatic conformity. We shouldn’t have to go into February without knowing what the state tax law is for the prior year.

 

Janet Novack, Obama Attack On “Trust Fund Loophole” Could Increase Tax Advantage Of Trusts. “Without step-up, there would, for example, be an even greater tax advantage to putting assets that are likely to explode in value—such as founders’ stock in a hot start-up—into an irrevocable trust for children or grandchildren.”

 

Kay Bell, Capital gains gain in income reporting, but tax hike unlikely

Jack Townsend, Fifth Circuit Rejects Attempt on Direct Appeal to Withdraw Guilty Plea in False Claims Conspiracy Case

Jim Maule, No Agreement? No Alimony Deduction. In divorce, paperwork is everything.

Robert Wood, 10 Crazy Sounding Tax Deductions IRS Says Are Legit. My favorite is “free beer.”

20130607-2Anthony Nitti, IRS Futher Limits Deductions For State-Legal Marijuana Facilities:

Most notably, Section 280E provides that “no deduction is allowed for any amount incurred in a business that consists of trafficking in controlled substances.” Because marijuana finds itself on Schedule I of the Controlled Substances Act, the IRS has the ammunition necessary to deny the deductions of any facility that sells the drug.

And it does. Regularly.

I hope nobody really believes this actually prevents any drug crimes. What it does is add a crushing tax debt that helps ensure that anybody who gets involved in drug traffic can never reform and become a productive member of society.

 

Robert Goulder, Should the Mayor of London Pay U.S. Taxes? (Tax Analysts Blog):

True, there are tax treaty protections at play and foreign tax credits available. But the point of the story isn’t double taxation; it’s jurisdictional overreach. Many will argue that a citizenship-based tax regime is unfair and heavy-handed.

The U.S. is the only country that does it. Oh, Eritrea, too.

Stephen Olsen, The Gift that Keeps on Taking–Does Section 6324(b) Limit Gift Tax to the Value of the Gift or Can the IRS Take More? (Procedurally Taxing)

 

The income tax, the Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The income tax, the Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

Alan Cole, The IRS Has Too Many Responsibilities (Tax Policy Blog):

On one hand, the IRS’s basic responsibilities have gotten less onerous over the years. More and more taxpayers file electronically, which means that everything just zips straight into the IRS’s computer system with little need for human oversight. This should mean that the IRS really doesn’t need to grow, and if anything it could stand to shrink.

But on the other hand, the IRS has been overloaded with all sorts of additional responsibilities. It’s acting as an extension of the Department of Health and Human Services in enforcing the Affordable Care Act. It’s acting as an extension of the Federal Election Commission and regulating political speech (an authority it has perhaps not used so well.) It’s acting as an extension of the Department of Energy with its residential energy credits, and it’s acting as an extension of the Department of Education in offering deductions and credits for teachers and students. It has to figure out who has health insurance and who has children and where the children live. It even has to try to get data from foreign banks, due to the complexity of our worldwide system of taxation. The more arbitrary things find their way into the tax code, the more verification systems the IRS has to put in place.

These are only a few of the non-revenue responsibilities dumped on the IRS that uses the tax law as the Swiss Army Knife of public policy. Beyond the bottle opener and the screwdriver, every gadget you add makes it harder to use it as a knife, and now we have a Swiss Army Knife the size of a railcar.

 

20140919-2Gretchen Tegeler, Benefits and Costs of DARTing Forward  (IowaBiz.com), on the troubling financial structure behind Des Moines’ public tansportaiton:

Despite a nearly 20 percent increase in ridership over this period, there has been no associated increase in fare-based revenue.  If more millennials are riding the bus, why aren’t we seeing an increase in operating revenue?  The absence of growth in operating revenue suggests that all of the recent improvements in service and ridership have been funded by non-users, i.e. from increases in property taxes.  Are we okay with this model? How far should we go with it?

Maybe if they had to rely more on farebox revenue, they would spend less on things like the downtown Palace of Transit.

 

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TaxProf, The IRS Scandal, Day 627

Glenn Reynolds, Middle-class Savings Like Blood in the Water. Paying for “free” college and student loan subsidies by taking money out of the pockets of those who save for college sets up a strange incentive structure.

Megan McArdle, Uncle Sam Is Coming After Your Savings. They need it to buy you “free” stuff.

 

Career Corner. The Public Accountant’s Definitive Guide to Disclosure of Past Convictions (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 1/23/2015: Egg donor compensation taxable payment for services. Meanwhile, kidney donor compensation is a felony.

Friday, January 23rd, 2015 by Joe Kristan
"White-&-Brown-Eggs" by Evan-Amos - Own work. Licensed under Public Domain via Wikimedia Commons

“White-&-Brown-Eggs” by Evan-Amos – Own work. Licensed under Public Domain via Wikimedia Commons

The big news in the tax world today is a Tax Court case ruling that payments to an egg donor were compensation for services. The case turned on the language of the contract of between the egg donor and the agency that procured the eggs. Tax Court Judge Holmes ruled that the payments were not excludible as payments for physical damages because there was no tort claim involved.

There are plenty of places you can read more details on this case, including Russ Fox and Tony Nitti. The TaxProf has a roundup.

So there is an organized and legal market for donor eggs, which, if all goes well, turn into an entire new human. That’s a good thing. But if an agency paid you for one of your kidneys to save the life of an already-born child on the kidney donor list, they would face a $50,000 fine and five years in prison under the Gore-Hatch National Organ Transplant Act of 1984.

The National Kidney Foundation reports that 12 people die daily waiting for a donor kidney, and that 4,453 died waiting for a kidney transplant in 2013.  It’s a felony to save any of those lives by buying a kidney from a healthy, willing and fully-informed seller. Meanwhile, nobody dies waiting for a donated egg.

Cite: Perez, 144 T.C. No. 4

Related: The Case for Paying Organ Donors (Sally Satel)

 

Kyle Pomerleau, Richard Borean, More than Half of all Private Sector Workers are Employed by Pass-through Businesses:

53.7% of Iowans work for pass-through businesses taxed on 1040s.

53.7% of Iowans work for pass-through businesses taxed on 1040s.

“Pass-through” income is income earned by S corporations and partnerships, including LLCs. This income is taxed on 1040s. Those who favor ever-increasing individual taxation of “the rich” by definition favor increasing the tax on employment.

 

buzz20140923Robert D. Flach has your Friday Buzz, including thoughts on avoiding scammers claiming to be from IRS and on Wal-Mart’s cash tax refund program: “My advice – avoid this program.”

Kay Bell, IRS gets $1.3 million for Darryl Strawberry’s Mets annuity

Paul Neiffer, IRS Scammers Net $14 Million from 3,000 Victims. If the e-mail says it’s from the IRS, it’s not. If you aren’t expecting a call from the IRS, the caller isn’t from the IRS.

Jason Dinesen, Ridiculous IRS Situations I’ve Recently Dealt With. A continuing series.

Leslie Book, Tax Court Addresses Verification Requirement in Trust Fund CDP Case (Procedurally Taxing)

Robert Wood, Washington Nationals $210M Pitching Contract For Max Scherzer Is About Taxes. “The Home Rule Act prohibits the District from imposing a commuter tax on non-residents.”

Peter ReillyExclusive – Kent Hovind Claims Congressmen Are Looking Into His Case. All you could possibly want to know about the case of the guy who thinks the Flintstones was actually a documentary series.

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Robert Goulder, Reading the Tea Leaves: China’s Jurisdictional Tax Claims (Tax Analysts Blog). Contrary to some reports, even Communist China doesn’t plan to tax worldwide income of non-resident Chinese. The U.S. stands alone in doing that.

Howard Gleckman, A Look at the Territorial Tax Systems in Four Countries Finds No Magic Bullets (TaxVox). No magic beans, either, I’ll bet.

TaxProf, The IRS Scandal, Day 624

 

Career Corner. Here Are Just a Few Questions You’ll Be Asked in a Big 4 Interview (Adrienne Gonzalez, Going Concern).

 

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Tax Roundup, 1/22/15: Business-only tax reform: do-able, or doomed? And: Are Iowa taxes all that bad?

Thursday, January 22nd, 2015 by Joe Kristan
paul ryan

Paul Ryan

Business-only tax reform? Tax Analysts reports ($link) that the chief taxwriter in the GOP-controlled House is exploring tax reform ideas with the Obama administration:

As Republican taxwriters look for a way to advance tax reform in the face of White House ambivalence, House Ways and Means Committee Chair Paul Ryan, R-Wis., said he would explore a business-only compromise with the Obama administration, as long as it includes passthroughs.

“I’d like to think that there is perhaps an area for common ground there,” Ryan said on Fox News January 20 after President Obama’s State of the Union address. “We’re going to try to explore it and see if we can find something.”

Ryan said Obama’s recent tax proposals, which involve increasing capital gains taxes and implementing a tax on financial institutions to pay for new and expanded middle-income tax incentives, as well as new spending programs, show he is disinterested in comprehensive reform.

I think “as long as it includes passthoughs” is absolutely the right approach. I also think it will be fatal to the reform effort. A majority of businesses and business income is taxed on 1040s as a result of the increased popularity of passthrough structures like S corporations and limited liability companies.

Source: The Tax Foundation

Source: The Tax Foundation

Any tax reform effort worthy of the name would bring down rates in exchange for a broader base. As the President seems firmly committed to ever-higher rates on “the rich,” I don’t see how this can happen.

 

Is Iowa’s business tax climate really that bad? (Me, IowaBiz.com). Is Iowa ready for tax reform? Ready or not, it’s overdue for it:

Even after all of the explaining, the Tax Foundation’s main points remain true. Iowa’s corporation tax rate is the highest in the U.S. (even taking the deduction for federal income taxes into account). In fact, it is the highest in the developed world. Our individual tax rate is high, even considering the federal tax deduction. All of the special breaks make Iowa’s income tax very complex. And while Iowa has many tax credits, they are often narrowly tailored and require consulting and string-pulling to obtain. Many small businesses don’t qualify for the wonderful tax breaks, but they still have to pay their accountants to comply with the resulting complex and confusing tax system.

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

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

The post begins an exploration of Iowa tax reform options I will be running at IowaBiz.com, the Des Moines Business Record’s Business Professional’s Blog. While longtime readers know my fondness for massive changes to the Iowa tax system, I will also be exploring changes on the margin that would improve and simplify Iowa’s tax system in its existing structure that might be easier to pass.

 

David Brunori, Bad State Tax Ideas Abound – Nebraska, Virginia, and Missouri (Tax Analysts Blog):

Special taxes — those on narrow bases — should be imposed sparingly and only for good reason. The best reason is to pay for externalities. But unlike, say, cigarettes, 99 percent of gun purchases produce no externalities. So they should not be subject to special taxes — unless you really hate guns, gun owners, and the guys from Duck Dynasty.

Not every problem is a tax problem.

 

Via Wikipedia

Via Wikipedia

TaxGrrrl, Taxpayers Urged To Be On ‘High Alert’ For Fraud During Filing Season:

This week, the Treasury Inspector General for Taxpayer Administration (TIGTA) issued a reminder to taxpayers to beware of scammers making calls claiming to represent the Internal Revenue Service (IRS). The scam, which heated up last year, has continued to plague taxpayers.

If you aren’t expecting a call from the IRS, it’s not the IRS.

 

William Perez, Understanding Form W-2, the Annual Wage and Tax statement

Robert Wood, 10 Surprising Items IRS Says To Report On Your Taxes. As a listicle, it will probably generate traffic to crush Forbes’ servers.

Tax Trials, Fourth Circuit Affirms the Tax Court on Conservation Easement Donation.  “In the end, the Fourth Circuit held that while the conservation purpose of the easement was perpetual, the use restriction on the’ real property is not in perpetuity because the taxpayers could remove land from the defined parcel and replace it with other land.”

Robert D. Flach, ONE WAY RETIREES ARE SCREWED ON THE NJ-1040.

Keith Fogg, How Long Does a CDP Case Toll the Statute of Limitations on Collection? (Procedurally Taxing)

Peter Reilly, Bitter CPA Fight Good For Attorneys And Nobody Else. The U.S. Sixth Circuit picks up the tale of one of the worst accounting firm breakups I’ve come across.

Jack Townsend, USAO SDNY Announces Another Offshore Account Client Plea

 

20141201-1Glenn Hubbard, Obama’s Bad Economic Ideas (Via the TaxProf): “Piling up child tax credits and subsidies for health care over narrow household income ranges, as the president proposes, leads to high rates of taxation on earnings from work as assistance is phased out.” In other words, a poverty trap.

Kay Bell, Obama’s ‘won both’ elections State of the Union quip, Republicans’ many responses to the speech (and gibe)

 

The Tax Policy Blog has lots on the Presidents’ doomed tax proposals:

Kyle Pomerleau, Andrew Lundeen, The Basics of President Obama’s State of the Union Tax Plan

Scott A. Hodge, Michael SchuylerWhat Dynamic Analysis Tells Us About the President’s Tax Hike on Capital Gains and Dividends

Stephen J. Entin, President Obama’s Capital Gains Tax Proposals: Bad for the Economy and the Budget

 

TaxVox is also flooding the SOTU zone:

William Gale, David John, Retirement Security a Priority in the 2015 State of the Union

Gene Steuerle, President Obama’s Middle-Class Tax Message in the State of the Union

William Gale, Adjusting the President’s Capital Gains Proposal

 

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TaxProf, The IRS Scandal, Day 623. Today’s installment features an e-mail where scandal figure Lois Lerner shows she’s well aware her unit was under suspicion, and was desparately discouraging further inquiry.

Matt Gardner, Adobe Products’ Acrobatic Tax-Dodging Skills (Tax Justice Blog). I would read that as “skills in meeting their fiduciary duty towards their shareholders.”

 

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