Posts Tagged ‘Kaye Thomas’

Tax Roundup, 8/13/2013: New Hampshire thanks you for smoking. And bad news about the tooth fairy.

Tuesday, August 13th, 2013 by Joe Kristan

Live free or die smoking.  The Tax Foundation has released its Monday Map: Tobacco Tax Revenue as a Percentage of Total State & Local Tax Revenue (Richard Borean).  The Granite State, which has no personal income tax, gets 4.4% of its revenue from smokers.  Iowa, which is 18th on the list, gets only 1.8% of its revenue.


As states boost their taxes on smokers, they increase their dependence on coffin nails for funding.


Iowa gets tough on RVs with Montana Registrations (Des Moines Register):

Lawyers from Big Sky Country have publicized Montana since the 1990s as a place for out-of-state residents to set up a shell company and register a recreational vehicle under the firm’s name. By doing so, RV owners have avoided paying millions of dollars of taxes in Iowa and other states because Montana residents do not pay general sales taxes.

But a crackdown has begun on recreational vehicle owners trying to escape Iowa taxes under state legislation signed in June by Gov. Terry Branstad. 

I don’t think that ever really was legal, just hard to detect.  The new rules don’t make detection easier, but by making it a potential felony, it becomes a lot less attractive to take the chance.


Tony Nitti,  S Corporation Shareholder-Employee Loses Reasonable Compensation Case, Sun Rises In East.   Tony discusses some recent taxpayer defeats when the IRS reclasses K-1 income as compensation subject to payroll taxes:

It is no coincidence that each case cited in this discussion involves a professional services corporation, such as sales, accounting, and consulting firms. It is the view of the IRS that in these businesses, profits are generated primarily by the personal efforts of the employees, and as a result, a significant portion of the profits should be paid out in compensation rather than distributions.

It the owner of a professional business is still working full time but draws less pay than his employees, that’s a red flag.


Jason Dinesen, Same-Sex Marriage and Wrong Filing Statuses on the Iowa Return:

The person is married in Iowa but they filed as a single person (or head of household). What is the fix?

The proper thing to do is file amended Iowa tax returns as a married couple.

Jason also explains how Iowa taxes for married folks are “kind of weird.”


Paul Neiffer is visiting Des Moines, and he has some advice for young farmers who might have trouble Letting Go.  His blog, Farm CPA Today!, also is sporting a  shiny new look.


Kaye Thomas,  Key Tax Question on Gay Marriage: “What happens if a couple has been married in a state where same sex-marriage is legal but now resides in a state where such marriages are not recognized?”


Russ Fox, Nite Moves Asks Supreme Court to Rule on Constitutionality of Taxing Pole Dances in New York.  The case turns on whether pole dancing is “art.”  It can’t be art, it makes money!

TaxProf,  The IRS Scandal, Day 96

Kay Bell, Lucrative loos’ change leads to toilet tips tax evasion charges

tax fairyI don’t think we have enough teeth.  Getting the Tooth Fairy to Pay for Tax Reform (Clint Stretch, Tax Analysts Blog).  The longtime lobbyist doesn’t think Congress has the stomach for the intrusive legislation needed to collect more taxes via stricter enforcement:

The solutions most likely to be effective would be hard for politicians and taxpayers to swallow. They would include:

    • Mandatory withholding on interest, dividend, pensions, and other income now subject only to 1099 reporting;
    • Mandatory segregation of small business accounts from personal accounts;
    • 1099 reporting of payments to contractors as a prerequisite to deduction or addition to basis;
    • Tightening independent contractor rules and withholding on payments to contractors for personal services; and
    • Dramatic increases in audit resources devoted to examining small retail businesses and farms.

Recent compliance improvement efforts haven’t stuck

If it were easy, they’d have already done it.


Robert D. Flach has his Tuesday Buzz up, including a tribute to Eydie Gorme.



Tax Roundup, 4/25/2013: Internet sales taxes and Red Vines

Thursday, April 25th, 2013 by Joe Kristan N scale Ventilated Boxcar N scale Ventilated Boxcar

Megan McArdle,  The Real Problem With the Internet Sales Tax:

Few of the commentators I’ve read have asked themselves what happens to the money after the software has collected the money. Do the sales tax fairies simply whisk it off to the nice folks at the state tax department?

Sadly, no. Rather, as an SBA guidebook for small businesses points out, you have to file a tax return with each and every locality for which you have collected tax. The bill streamlines this a bit, but you’ve still got to keep 50 states’ worth of records and file 40-odd states worth of returns.

For Amazon—the actual target of these laws—this is trivial. Its staff of  crack accountants can probably roll these things out before their Monday-morning coffee break. For a small vendor, however, that’s a whole lot of paperwork.

Speaking as a cracked accountant, I am sure that while Amazon can handle its sales tax burden, it is far from trivial.  It takes an expensive staff and a good organization with excellent systems in place to do reasonably well — and I expect they still get inexplicable notices from states quibbling over obscure tax issues.  Good sales tax compliance functions are expensive, affordable only in a large organization.   For some guy selling handmade N-scale boxcars out of his basement, it could be painfully expensive, if not ruinously so.   Like any expanded regulation, requiring online sellers to collect Internet sales taxes inherently favors the big.


Kaye Thomas, Taxing Internet Sales

Brian Strahle,  The “Pause” Button and the Marketplace Fairness Act (kind of)


Cara Griffith, Things That Make You Nuts (

According to the Streamlined Sales Tax agreement, the definition of candy  is a “preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. ‘Candy’ shall not include any preparation containing flour and shall require no refrigeration.”

So pursuant to that definition, a sweet with flour is not candy, while a sweet without flour is. For example, a Hershey’s chocolate bar is candy, while a Twix bar is not. Ditto for Kit Kat bars. Makes sense, right? But what about Twizzlers? Seems a solid bet that licorice is candy, but it isn’t because flour is a top ingredient.

So Red Vines are good for you, then.

Robert D. Flach,  LEARNING FROM YOUR 2012 FORM 1040:

In the past when a client got too big a refund I would scold him/her and say that he/she was making an interest free loan to the government.  While this is still true, I do not scold any more, considering the pitiful amount of interest being paid on savings account today. 

I’m not a big fan of excess withholding, but it’s a lot easier for a client to deal with a refund that’s too big than a tax bill they can’t pay.


Kay Bell,Where’s My Amended Tax Return?


David Brunori, Let’s Stop with the Revenue Neutrality (

Increasingly, I hear stories of relatively wealthy people contemplating moving to states that do not tax their assets upon death. These are not people with private jets or suites at Yankee Stadium. They are just people who had the good fortune to do better financially than most. Do New Jersey or Maryland or the other states with pretty onerous estate taxes really want their elderly wealthy to move?

While motivations for moving are complicated, taxes are one of them.  Why do the same people who want higher cigarette taxes to discourage smoking believe that higher income and estate taxes don’t also affect behavior?


Patrick Temple-West,  Congress looks at REIT tax exemption, and more

News you can use:  Leff Presents Tax Planning for Marijuana Dealers Today at Harvard (TaxProf)


Tax Roundup, 3/4/2013: Eight years for tax shelter lawyer. Plus: employee tax fraud, employer tax bill.

Monday, March 4th, 2013 by Joe Kristan

20130304-1A federal judge Friday sentenced a key player in the once-lucrative Jenkens & Gilchrist tax shelter practice to eight years in prison.  From the AP:

U.S. District Judge William H. Pauley III sentenced 52-year-old Donna Guerin, of Scottsdale, Ariz., after she pleaded guilty to conspiracy to defraud the United States and tax evasion. He ordered her to pay $190 million in restitution besides the $1.6 million she agreed to forfeit when she pleaded guilty in September.             

Guerin, a former partner at Jenkens & Gilchrist, a Texas-based law firm with offices throughout the United States, had admitted that she helped market tax shelters from 1994 through 2004 to some of the world’s richest investors, including the late sports entrepreneur Lamar Hunt, trust fund recipients, investors, a grandson of the late industrialist Armand Hammer and one of the earliest investors in Microsoft Corp.

The biggest prosecution target at Jenkens, Paul Daugerdas, faces his second trial on the charges in September.  His 2011 trial was voided because of juror misconduct.

Jenkens was one of the big players in the tax shelter industry that sprung up among big law and accounting firms in the 1990s.  It shut down in 2007 after entering a non-prosecution agreement with the Justice Department.

Sort of related:  Ernst & Young Admits That Some of Its Partners Were Running a Tax Shelter Factory (Going Concern);  Ernst & Young Pays $123 Million, Avoids Tax Shelter Prosecution (Janet Novack)


Robert Goulder, Questioning the Longevity of the Income Tax (

Dare we attempt to guess what the income tax might look like in another 100 years? 

Personally I think it will still exist, but it will have company. The big question for policymakers is whether it should operate as a “mass” tax — as it strives to do today —  or whether it will function as a “class” tax that applies only to the upper income strata. Given that roughly 47% of American households currently don’t pay the income tax (distinguished from payroll taxes, which almost everyone pays), one could argue it is already starting to resemble a class tax. Perhaps the future is already here. 

I can state with some confidence that if there is an income tax in 2113, I won’t be preparing returns.


Jack Townsend,  Fraud on the Return — Even If Not the Taxpayer’s — Causes an Unlimited Civil Assessment Statute of Limitations to Apply.  This is an ugly result caused by an in-house accountant who stole funds meant for payroll taxes.  The Second Circuit overturned the Tax Court and held that the employee’s fraud meant that the employer’s statute of limitations never closed for tax assessment purposes.


Russ Fox has a helpful tip: A Sure-Fire Way to Get Indicted

There are many ways to get in trouble with tax law.  As I have said in the past, if you want to get indicted it’s a bit harder.  It helps to be a celebrity, have a very large tax debt, not report large amounts of funds in foreign financial accounts, or abscond with trust fund taxes.  I need to add another item to that list: File liens against IRS employees  who are investigating you.

For some reason, they respond badly to that.


William McBride,  BEA: Personal Income Drops 3.6 Percent in January, the Most since the Clinton Tax Increase of 1993  (Tax Policy Blog).  It wouldn’t be shocking if a lot of folks moved income up to 2012 to avoid the 2013 tax increases.

Kay Bell, Don’t forget about your traditional or Roth 401(k)

Paul Neiffer,  When an UPREIT Might Make Sense

Trish McIntire,  Catching Up On the News, a rundown of issues practitioners are running into during filing season.

TaxGrrrl,  If You Qualify, File Your Taxes For Free

Tony Nitti,  Competing Senate Bills Fail; Sequestration Is Here (For Now)

Howard Gleckman,Sequester, We Hardly Knew Ye (TaxVox)

Kaye Thomas,  The Mindbending World of Wash Sale Calculations.

David Cay Johnston, Good News for Investors and Taxpayers (

Martin Sullivan, Red Hot REITs Fire-up Low Tech (


Peter Reilly,  Time To Eliminate Joint Filing ? No, it’s not actually related to the next article.

News you can use.  Leff: Medical Marijuana Providers Can Beat Oppressive Federal Taxes by Operating as Non-Profits (TaxProf)



Tax Roundup, 2/7/2013: Iowa Code Conformity Bill goes to Governor. And: West Des Moines denture tax evasion

Thursday, February 7th, 2013 by Joe Kristan

20130117-1The Iowa House of Representatives  passed without changes SF 106, the bill updating Iowa’s income tax to incorporate last month’s Fiscal Cliff tax bill.  The bill conforms to all federal changes except for bonus depreciation, which remains unavailable on Iowa returns.

Now the bill goes to Governor Branstad.  The Governor vetoed a prior conformity bill because it adopted bonus depreciation; he is expected to sign this one.

The early passage of these bills is a relief to taxpayers affected by the federal changes.  Now they know how to file their Iowa 2012 returns.  Among the items affected by the bill:

– Section 179 depreciation.  Iowa now adopts the federal $500,000 limit for 2012 and 2013.

– IRA charitable distributions up to $100,000

– The above-the-line deductions for educator expenses and college tuition

– The optional deduction for state and local sales taxes.

No word yet on when the Governor will act on the bill.


West Des Moines denture-maker pleads to tax evasion.  The West Des Moines Patch reports:

Charles R. Barbour, who entered his plea to one count of income tax evasion in a proceeding before U.S. Magistrate Judge Celeste F. Bremer, will be sentenced on May 9.

In it, Barbour admitted that he understated tax year 2006 income in the amount of nearly $81,000, tax year 2007 income in the amount of nearly $51,000, tax year 2008 income in the amount of nearly $52,900 and tax year 2009 income in the amount of $11,300.

From the plea agreement it appears that the charges involve diversion of business receipts from his denture-making business to a personal bank account, and improper deductions:

Barbour willfully claimed false business expenses on the Schedules C for tax years 2007, 2008 and 2009; deducting internet and cable expenses for his residence as advertising expense; rent payments on a condominium and an apartment as rent expense; loan repayments to his parents as equipment repairs and maintenance expense; payments for his daughter’s medical expenses as medical supplies; payments to a local country club as professional development; and child support payments as professional fees and contract labor expenses.

The standard IRS audit programs for business expenses look for personal expenses disguised as business expenses, and an experienced examiner knows where to look.  That makes sneaking personal expenses onto a business return a bad bet — and if you make a habit of it, it can become a much bigger problem than back taxes and penalties.


Tyler Cowen,  Will health insurance premia rise for young males?

 Look at Table 1– where it says that the average premium for young healthy males will go from $2,000 to a little over $5,000. Yikes.

When the largely-optional penalty for not buying insurance is $695, it doesn’t seem likely that healthy young males will buy a lot of insurance — especially when they can buy it when they get sick because of the rules against pre-existing condition limits.  It’s hard to imagine this working well.


Jack Townsend,  Article for Canadians with Unreported Canadian Retirement Plans and Accounts.  More news from the foreign tax compliance jaywalker-shooting front.

Linda Beale,  Soon-to-be Google litigation with IRS over 2003-4 returns?  A disclosure in their 10-K.

Kaye Thomas,  Gaps in Cost Basis Reporting.  Don’t just take as gospel what the broker tells you.

Ellen Kant, Super Bowl Loophole (Tax Policy Blog).  On how the hugely-profitable NFL, and other sports leagues, are tax-exempt.

Elaine Maag, The Immigration Debate: Another Reason We Ought to Separate Work and Family Credits (TaxVox).

Have you ever tried to shoot one?  Oh, I thought you said “Quail.”  There Is Nothing Perplexing About Quill (Cara Griffith,

By saying that Quill created a perplexing inquiry gives credence to the idea that states can get around the physical presence requirement, but they can’t.

Try telling that to Iowa.


Russ Fox has a new book out, Tax Strategies for the Small Business OwnerCool!

Yeah, that will solve the deficit. Obama repeats call to end tax break for corporate jets, and more. (Patrick Temple-West, Tax Break).  I’m sure that will be wonderful news at the HondaJet North Carolina production facility that is newly up and running.

TaxGrrrl, Taxpayer Alleges IRS Agent Offered Sex In Exchange For Lower Tax Penalties On Audit.  Sounds far-fetched, but based on what I have seen of IRS agents, it would be a human rights offense.


You expected “Days of Our Lives?” The Situation Around the Registered Tax Return Preparer Program Has Become a Really Bad Soap Opera (Going Concern)


Tax Roundup, 1/24/2013: Tax increases for everyone, anyone? And more bad news for tax season!

Thursday, January 24th, 2013 by Joe Kristan


Tax Foundation graphic.

TaxProf,  NY Times: it Is Time to Raise Taxes on Everybody — Including the Middle ClassPaul Caron links to a New York Times Op-ed:

To make ends meet, both parties agree, spending must be drastically cut. Under the White House budget proposal, discretionary spending on everything except the military is projected to shrink to its smallest share of the economy since the Eisenhower administration by the beginning of the next decade. Though he has resisted Republican demands to slash entitlements, President Obama remains willing to look for further savings from Medicare.

This is not, however, the only option we have. There is an alternative: raising more money from all taxpayers, including the middle class.

Nobody wants to talk about this. … Yet Americans would benefit from a discussion of this possibility.

It’s not true that “both parties agree” that spending must be drastically cut.  It’s not clear that either party, as a whole, admits it, and at least one party remains in firm denial.  The President’s campaign was all about spending money and sending the bill to the rich guy.  Still, it’s nice that finally somebody at the New York Times admits that the rich guy isn’t buying.  He can’t.


Janet Novack,  As IRS Tax Filing Season Begins, Bad News For Honest Taxpayers.  She20130121-2 speaks with Taxpayer Advocate Nina Olson.  The article has some depressing truth:

Customer service at the Internal Revenue Service is dismal and deteriorating. (Only 68% of telephone callers who wanted to talk to a human at the IRS last tax filing season eached one, and then only after an average 17 minute wait.)  The epidemic of identity theft refund fraud hasn’t yet been contained.  Hope for a major reform that might simplify the tax code is waning.

The article also has some serious nonsense about last week’s ruling shutting down the IRS preparer regulation power grab:

“If the injunction stands, the taxpayers of the United States will be grievously harmed,” IRS National Taxpayer Advocate Nina E. Olson told Forbes. “The practical effect of not having some kind of consumer protection for taxpayers going to return preparers is enormous. And I say that seeing all the return preparer fraud, and the return preparer negligence, and the return preparer inadvertent mistakes that happen.”

Enormous?  More like what we did forever until two years ago.  If anybody has evidence that last year’s tax preparers were significantly more accomplished and accurate than they were before the regulations, they haven’t shared it.  And the idea that the RTRP literacy competency test and minimal CPE requirement would have changed that is silly.

Ms. Olson believes that depriving consumers of choices in preparers is in their interest because the diminished choices would be better.  That flies in the face of all we know about regulation.  The net result would be higher prices, driving more taxpayers to do their returns and driving some on the margins out of the system altogether, while sending more business to the big franchise tax prep outfits.


Robert D. Flach, TAX RETURN PREPARER REGULATION, LICENSURE, AND/OR CERTIFICATION.  Robert’s magnum opus on how tax preparers should be regulated.

While I agree that having the Internal Revenue Service regulate tax preparers is not the best option – it is without a doubt a far superior option to having Congress legislate regulation.  My opinion of the intelligence, competence, and ability, or rather lack of intelligence, competence, and ability, of the current members of Congress is well known.
The optimal source of tax preparer regulation/licensure/certification, whether mandatory or voluntary, would be an independent industry-based organization, not unlike the AICPA or ABA, such as the National Institute of Registered Tax Return Preparers that I have proposed.

Robert also calls me out:

As I have asked in response to Joe’s assertion, would you want a “casual” electrician wiring your kitchen, or a “casual” dentist filling a cavity, or a “casual” architect designing your home?

If I do, what business is it of anybody else?  If I want to pay a talented handyman neighbor or cousin to install a ceiling fan for me, why is it anybody’s business?  Why should he be not allowed to take my money just because he doesn’t have an electrician card from the Bureau of Electrical and Mortuary Science?  As TaxGrrrl noted yesterday, occupational licensing is taking over the economy, and that’s not a good thing.


TaxGrrrl, With A Week To Go, IRS Talks Opening Day and Refunds


Cara Griffith, Have State Income Taxes Run Their Course? (

The corporate income tax is inefficient and a not sufficiently stable source of revenue for states. It should be eliminated. The individual income tax is likewise not a particularly stable source of revenue for states, and while counterintuitive, progressive tax systems do not work well at the state-level. Income redistribution, to the extent that it should be a goal at all, should not be undertaken at the state-level. So  in a perfect world, yes, the state individual income tax should be eliminated as well.

Christopher Bergin agrees.


Good. Another bid to ban traffic enforcement cameras in Iowa. (O. Kay Henderson, via The Beanwalker).  Traffic cameras are your local government’s most sincere way of showing their contempt for you.


Trish McIntire,  Form 8332 and Fairness.  How the IRS enables bitter ex-spouses.

Paul Neiffer,  Why Imputed Interest Matters For 2013 (And Beyond)

Kaye A. Thomas,  Another Demutualization Case

Robert W. Wood, Golfer Phil Mickelson Is Not Alone In Fleeing Taxes (Via Kerry Kerstetter)

Peter Reilly, Why Phil Mickelson’s Remark Was Really Dumb

Brian Mahany, Is FATCA In Trouble? Unfortunately, NO

Joseph Henchman,  CBPP’s Misleading Chart on Debt Stabilization (Tax Policy Blog).  A study in cherry-picking.

Jen Carrigan, Should Capital Gains Be Taxed Differently? (Guest post at The Missouri Taxguy blog).

Patrick Temple-West,  Firms keep stockpiles of ‘foreign’ cash in U.S., and more

Tax Trials,  District Court Decision Prevents IRS from Regulating Certain Tax Return Preparers

Kay Bell,  Fiscal cliff tax provision could help stem fraudulent refund claims by prisoners


News you can use:  Passing the CPA Exam While Billing Over 2500 Hours in a Year Is Way Harder Than Having a Baby(Going Concern).  Also less useful and not as smart.


Tax Roundup, 1/7/2013: Economist says Iowa’s problem is income tax, not property tax. And: thieves don’t report all of their income?

Monday, January 7th, 2013 by Joe Kristan

O. Kay Henderson reports that maybe the Branstad focus on property taxes is misplaced in Economist: Iowa income taxes not competitive:

A Midwestern economist says Iowa policymakers should focus on cutting income taxes rather than property taxes. Ernie Goss, an economist at Creighton University in Omaha, says Iowa’s income tax rates are fifth highest in the country.

“In terms of what Iowa needs to look at, in my judgement, given what’s going on in Kansas, what’s about to go on in Nebraska — Iowa’s neighbors — you need to look at income taxes, in terms of being more competitive,” Goss says.

Iowa property taxes are too high, but income taxes  matter more for many taxpayers.  While property taxes are a big deal to companies that own real estate, like a manufacturer or a big insurance company, income taxes can mean a lot more to a start-up or a tech company.  Fortunately the Tax Update’s Quick and Dirty Iowa Tax Reform Plan is ready to go!


Making a dent in the deficit!  A chart shows how much the tax increases on “The Rich” will reduce the $1.2 trillion federal deficit (new taxes in green, deficit in red)

Fiscal cliff taxes vs deficit

Either the government spends a lot less, or taxes go up a lot for everyone. The rich guy isn’t buying


The IRS isn’t buying, either.   Tax Analysts reports Better IRS Enforcement Could Net $1 Billion More a Year, Says GAO ($link).   $1 billion is less than 1/1000 of the deficit.  They won’t audit their way to solvency.


Breaking tax news from the Eisenhower administration:

Amity Shlaes,   Think Obama’s Tax Hikes Are Low Compared With Rates Of The 1950s? Think Again.  (Via Instapundit)

Andrew Biggs,  Were taxes really higher in the 1950s?



It’s Monday.  Do you know if your payroll taxes have been remitted?  Another sad story of a payroll service provider who decided he needed taxes withheld from his clients more than the IRS did. reports that Arthur Weiss of Winston-Salem, North Carolina is going away for 15 years:

Case documents show Weiss operated professional employer organizations (PEOs), which provided payroll-related services to client companies. For his client companies, Weiss agreed to pay the employees, withhold and remit federal and state taxes, prepare and file the federal and state employment tax returns  and provide workers compensation insurance (WCI).

Weiss did pay the employees and withhold the employment taxes, but he failed to remit the employment taxes, keeping them for his personal use.

PEOs that file taxes under their own names and ID numbers have a hidden danger: their clients can’t verify that the IRS has received their payments via the Electronic Federal Tax Payment System (EFTPS).  Employers can use EFTPS to monitor payments when they use a payroll service that reports employee taxes under the employer’s own name and Tax ID number.  This makes it necessary for taxpayers to investigate PEO-type providers very carefully before trusting them with payroll services.  If your payroll taxes are stolen by your payroll provider, the IRS will come after you to collect.  Not many employers can afford to pay payroll taxes twice.

Russ Fox has more.


Few thieves report their income honestly.  From

Disgraced former Peregrine Financial CEO Russell Wasendorf Sr. is in jail awaiting sentencing for embezzling over $200-million in customer funds, fraud, and lying to federal regulators.

Now the state says he may have also cheated on his taxes.

Records show the [Iowa Department of Revenue] filed an assessment in November against Russ  and Connie seeking $14.1-million in unpaid taxes and penalties to Iowa.

Good luck collecting anything.


Fiscal Cliff Notes:

TaxProf,  WSJ: The Stealth Tax Hike — Why the New $450,000 Income Threshold Is a Political Fiction

Elected representatives at work.  Tim Carney: Baucus rewards ex-staffers with tax breaks for their clients:

Tax breaks for Hollywood, NASCAR, windmills, algae and multinational corporations ended up in the “fiscal cliff” bill thanks to President Obama, according to Senate Republican sources. But they were spawned by a web of lobbyists, donors and staffers surrounding Democratic Sen. Max Baucus of Montana.

Baucus’ Finance Committee passed a bill in August extending 50 expiring deductions and credits for favored industries. At Obama’s insistence, the Baucus bill was cut and pasted word for word into the cliff legislation.

But it’s all for our own good, I’m sure.

William Perez, President Signs the American Taxpayer Relief Act into Law

The ‘fiscal cliff’ bill and Iowa entrepreneursMy new post at, the Des Moines Business Record blog for entrepreneurs.

Paul Neiffer,  Up to Ten Capital Gains Tax Rates for 2013!

Janet Novack,  The Forbes Guide To The Fiscal Cliff Tax Deal

TaxGrrrl,  10 Things You Should Know About The Fiscal Cliff Deal


Kay Bell,  Ravens, Redskins and tax revenue

Brian Strahle,  Minimize Restructuring Costs with State Tax Due Diligence

Peter Reilly,  War Tax Resisters – Don’t Call Them Frivolous.

Patrick Temple-West,  Inquiry into tech giants’ tax strategies nears end, and more (Tax Break)

Kaye A. Thomas,  American Taxpayer Relief Act

Tax Trials,  Senate Confirms Two New Tax Court Judges

Robert D. Flach ponders whether he should rename his Buzz roundup of tax news.  Don’t do it, Robert!


Make up your minds!

Tax Analysts, New Congress’s Partisanship, Inexperience May Hurt Chances for Tax Reform 

The Hill:  Tax reform more likely after ‘fiscal cliff’ agreement, say House Republicans. (Via Instapundit)



Tax Roundup, 7/26/2012: public employee accountability edition.

Thursday, July 26th, 2012 by Joe Kristan

That’ll teach ’em. The Oregon state employees who issued a $2.1 million fraudulent refund to the world’s thriftiest tax cheat have been disciplined, says the Huffington Post:

Two employees have been reassigned to jobs in which they will no longer have the authority to approve cash refunds, spokesman Derrick Gasperini said Wednesday. Two others received unspecified disciplinary action for the blunder, but can stay in their current positions.

Not bad.  I wonder how many private sector employees  would keep their  jobs after clearing a $2 million improper vendor claim?  They should also have to share a ride to work in the 1999 Dodge Caravan the tax cheat bought with her loot.  She added new tires, after all.

PwC Forensic Experts to Determine How Much Money PFGBest Customers Won’t Be Getting Back (Going Concern).  “The bright side in all this is…oh, let’s face it: when your broker’s auditor is in jorts, the situation is hopeless”

In the alternate universe in which such a bill could pass: What the Dueling Senate Bills on Expiring Tax Cuts Would Mean for Taxpayers (Howard Gleckman, TaxVox)

Anthony Nitti: You Can’t Exclude COD Under the Insolvency Exception if You Can’t Prove You’re Insolvent

Kay Bell: Does shaming taxpayers work? 

Kaye Thomas: Demutualization Soup: Another Ruling

Or self-torture. Cat Breeding – “Trade or Business” or Hobby? (Jana Luttenegger, DavisBrown Tax Law Blog).




Tax Roundup, 6/27/2012: IRS secret shoppers and illegal hillbilly handfishing!

Wednesday, June 27th, 2012 by Joe Kristan

Another reason to file honest tax returns:Trying To Sell Bar To Undercover IRS Agents Gets Owner Free Federal Housing,” reports Peter Reilly.  A Chicagoan got ready to sell his bar, but he had to explain a little discrepancy between how profitable he told potential buyers that the business was, and what he told the IRS:  

 A couple showed significant interest in the place and met with him three times.  Mr. Psihos’s tax saving plan was elegant in its simplicity.  He simply did not report his entire gross income.  Besides not being a legitimate strategy, the plan has another flaw.  If you decide to sell the business, it will not appear to be worth nearly as much as it really is.  Mr. Psihos addressed that contingency by keeping extremely detailed records of his actual cash receipts.  He told the couple that he had the records that showed what he was “actually getting”.

Unfortunately for Mr. Psihos, the “couple” were really IRS agents.  As you might imagine, things went downhill quickly for Mr. Psihos, and now the Seventh Circuit Court of Appeals has upheld his two-year prison sentence.  Related: I lie to the IRS, but of course I’m telling you the truth!

75 years of pushing that rock uphill.  The Tax Foundation is celebrating its 75th anniversary of pushing for simple tax systems with low rates and without special interest breaks.  Much has been accomplished, but much work remains:

The tax structure of the 1950s was complex and over-burdensome, with a top marginal rate of 91 percent. 

Thankfully we have managed to move away from such a high marginal rate, yet many of the other issues mentioned persist, and in many ways our contemporary tax code is even more inefficient and stifling than it was in the late 1950s. Our concern over the growing “distorting effects” of taxation was well-founded; today, federal, state and local governments implement a host of taxes that exist primarily to alter individual and family behavior, often to the detriment of taxpayers.

Use the tax law to collect revenue, and forget using it to accomplish your wildest dreams.  Measuring income is hard enough to do by itself.

Look, Mom, no hands!  Iowa DNR cracks down on hillbilly handfishers.

 Anthony Nitti: If You Want To Argue A Home is Your Primary Residence, Perhaps You Shouldn’t Claim a Home Office Deduction on A Different Residence

Margaret Van Houten: Farmer’s Markets May Not Be Tax Exempt Organizations.  Banding together to sell things isn’t considered a charitable activity.  (Davis Law Firm Tax Blog)

Ways & Means members demand data on failed, costly debit card tax refund test  (Kay Bell)

It’s Wednesday, so it’s a Buzz Day for Robert D. Flach!

Kaye A. Thomas: Estate Exclusion Portability Regs Confirm Critical Deadline 

That casino buffet isn’t really free, high rollers: Nevada Tax Commission Votes to Approve Regulations to Tax Complementary Meals (

Tax policy nerds having too much fun: Bowles-Simpson Budget Reform and Ecstatic Memory (Howard Gleckman, TaxVox)